-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, TSL1aElOqxyhZA/bfzc1h4xqgnQyp1VBFQ1uVw0IpzZRfwdbgRMjTBj9DFu/zVW+ Jn0F1ZUDQZ4/LJGl+t5mAg== 0000912057-97-001665.txt : 19970127 0000912057-97-001665.hdr.sgml : 19970127 ACCESSION NUMBER: 0000912057-97-001665 CONFORMED SUBMISSION TYPE: SC 14D9 PUBLIC DOCUMENT COUNT: 6 FILED AS OF DATE: 19970124 SROS: NASD SUBJECT COMPANY: COMPANY DATA: COMPANY CONFORMED NAME: NORAND CORP /DE/ CENTRAL INDEX KEY: 0000886034 STANDARD INDUSTRIAL CLASSIFICATION: COMPUTER COMMUNICATIONS EQUIPMENT [3576] IRS NUMBER: 421323151 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC 14D9 SEC ACT: 1934 Act SEC FILE NUMBER: 005-44847 FILM NUMBER: 97510225 BUSINESS ADDRESS: STREET 1: 550 SECOND ST S E CITY: CEDAR RAPIDS STATE: IA ZIP: 52401 BUSINESS PHONE: 3193693100 FILED BY: COMPANY DATA: COMPANY CONFORMED NAME: NORAND CORP /DE/ CENTRAL INDEX KEY: 0000886034 STANDARD INDUSTRIAL CLASSIFICATION: COMPUTER COMMUNICATIONS EQUIPMENT [3576] IRS NUMBER: 421323151 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC 14D9 BUSINESS ADDRESS: STREET 1: 550 SECOND ST S E CITY: CEDAR RAPIDS STATE: IA ZIP: 52401 BUSINESS PHONE: 3193693100 SC 14D9 1 SC 14D9 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ------------------------ SCHEDULE 14D-9 Solicitation/Recommendation Statement Pursuant to Section 14(d)(4) of the Securities Exchange Act of 1934 ------------------------ NORAND CORPORATION (Name of Subject Company) NORAND CORPORATION (Name of Person(s) Filing Statement) COMMON STOCK, PAR VALUE $0.01 PER SHARE (Title of Class of Securities) 655421 10 5 (CUSIP Number of Class of Securities) ------------------------ JAMES I. JOHNSON, ESQ. GENERAL COUNSEL AND SECRETARY NORAND CORPORATION 550 SECOND STREET, S.E. CEDAR RAPIDS, IOWA 52401 (319) 369-3100 (Name, address and telephone number of person authorized to receive notices and communications on behalf of the person(s) filing statement) ------------------------ COPY TO: JOHN R. SAGAN MAYER, BROWN & PLATT 190 SOUTH LASALLE STREET CHICAGO, ILLINOIS 60603-3441 (312) 782-0600 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- ITEM 1. SECURITY AND SUBJECT COMPANY. The name of the subject company is Norand Corporation, a Delaware corporation (the "Company"), and the address of the principal executive offices of the Company is 550 Second Street, S.E., Cedar Rapids, Iowa 52401. The title of the class of equity securities to which this statement relates is the common stock, par value $0.01 per share (the "Common Stock"), of the Company. ITEM 2. TENDER OFFER OF THE BIDDER. This statement relates to the tender offer by WAI Acquisition Corp., a Delaware corporation ("Purchaser"), a wholly owned subsidiary of Western Atlas Inc., a Delaware corporation ("Parent"), disclosed in a Tender Offer Statement on Schedule 14D-1 (the "Schedule 14D-1"), dated January 24, 1997, to purchase all outstanding shares of Common Stock at $33.50, net to the seller in cash, upon the terms and subject to the conditions set forth in the Offer to Purchase, dated January 24, 1997 (the "Offer to Purchase"), and the related Letter of Transmittal (which, together with the Offer to Purchase and any amendments or supplements thereto, collectively constitute the "Offer"). According to the Schedule 14D-1, the address of the principal executive offices of the Purchaser is 360 North Crescent Drive, Beverly Hills, California 90210. The Offer is being made by the Purchaser pursuant to an Agreement and Plan of Merger, dated as of January 21, 1997 (the "Merger Agreement"), among the Company, Purchaser and Parent. The Merger Agreement is filed as an exhibit to this statement and is incorporated herein by reference. A copy of the press release issued by Parent and the Company on January 22, 1997 is filed as an exhibit to this statement and is incorporated herein by reference. ITEM 3. IDENTITY AND BACKGROUND. (a) The name and business address of the Company, which is the person filing this statement, is set forth above under Item 1. (b)(1) Certain contracts, agreements, arrangements and understandings between the Company and its directors and executive officers are described on pages 2-12 of the Company's Proxy Statement dated December 23, 1996 for its 1997 Annual Meeting of Stockholders (the "Proxy Statement"). Pages 2-12 of the Proxy Statement are filed as an exhibit to this Statement and are incorporated herein by reference. On January 21, 1997, N. Robert Hammer, the Company's Chairman, President and Chief Executive Officer entered into a Consulting and Separation Agreement with the Company (the "Separation Agreement"). Pursuant to the Separation Agreement, Mr. Hammer's employment with the Company will terminate upon the effective time (the "Effective Time") of the merger of Purchaser with and into the Company (the "Merger"). The Separation Agreement includes an agreement by Mr. Hammer to maintain the confidentiality of certain information and an agreement by Mr. Hammer not to compete with the Company for a period of three years following the Effective Time. Under the Separation Agreement, at the Effective Time Mr. Hammer will receive a payment of $1,000,000 and all unvested Company stock options granted to Mr. Hammer under the Norand Corporation Long Term Incentive Program and the Norand 1989 Stock Option Plan will become fully vested. The Separation Agreement also provides for the continuation of medical, life and accidental death and dismemberment insurance coverage for Mr. Hammer and his dependents for a period of three years following the Effective Time (which period may be extended by mutual agreement of the parties). The Separation Agreement also provides that for a period of one year commencing at the Effective Time, the Company will retain Mr. Hammer as a consultant for a fee of $800,000 payable at the Effective Time. The Separation Agreement also provides for payment to Mr. Hammer of a tax gross-up payment equal to the amount of excise tax that may be payable by Mr. Hammer under Section 4999 of the Internal Revenue Code of 1986, as amended (relating to taxes on excess parachute payments) due to payments under the Separation Agreement and other 1 payments and benefits that may be subject to such taxes. The gross-up payment would also include an amount for interest and penalties relating to payment of the excise tax and such other payments. In consideration for his services as Lead Director in connection with the discussions with Parent and the negotiation and execution of the Merger Agreement, Charles G. Moore, a director of the Company will receive a payment of $100,000. (b)(2) THE MERGER AGREEMENT. The following summary description of the Merger Agreement is qualified in its entirety by reference to such agreement, which has been filed as an exhibit to the Schedule 14D-9. The Merger Agreement provides that in accordance with the provisions thereof and the General Corporation Law of the State of Delaware (the "DGCL"), at the date and time when the Merger shall become effective pursuant to Section 2.02 of the Merger Agreement (the "Effective Time"), the Purchaser will be merged with and into the Company, and the Company will be the surviving corporation (hereinafter sometimes called the "Surviving Corporation") and continue its corporate existence under the laws of the State of Delaware. At the Effective Time the separate existence of the Purchaser shall cease. Pursuant to the Merger Agreement, as of the Effective Time, by virtue of the Merger and without any action on the part of the holders thereof, each share of Common Stock issued and outstanding immediately prior to the Effective Time (other than any shares of Common Stock held by Parent, the Purchaser, any subsidiary of Parent or the Purchaser or in the treasury of the Company, which shares, by virtue of the Merger and without any action on the part of the holder thereof, shall be cancelled and retired and shall cease to exist with no payment being made with respect thereto, and other than shares, if any, held by stockholders who perfect their appraisal rights under Delaware law ("Dissenting Shares")) will be converted into the right to receive $33.50 net to its holder in cash or any higher price per Share paid in the Offer (the "Merger Price"), payable to the holder thereof, without interest thereon, upon surrender of the certificate formerly representing such share. For a description of certain appraisal rights available to stockholders under the DGCL in connection with the Merger, see "--Appraisal Rights" below in this Item 3(b)(2). As of the Effective Time, by virtue of the Merger and without any action on the part of the holders thereof, each share of capital stock of the Purchaser issued and outstanding immediately prior to the Effective Time will be converted into and become one fully paid and nonassessable share of Common Stock, par value $0.01 per share, of the Surviving Corporation. Under the Merger Agreement, the Company and Parent have agreed to take all actions necessary to provide that immediately prior to consummation of the Offer (i) each outstanding option to purchase Shares (the "Options") granted under any of the Company's 1989 Stock Option Plan, the Company's Long-Term Performance Program or the Company's 1994 Stock Option Plan for Non-Employee Directors (collectively, the "Option Plans") will, by virtue of the Merger and without any further action on the part of the Company or the holder of such Option, be assumed by Parent in a manner which complies with certain provisions of the Internal Revenue Code of 1986, as amended (the "Code"). At the Effective Time, all references in the Option Plans to the Company will be deemed to refer to Parent, and Parent will issue to each holder of an Option a document evidencing the assumption of such option by Parent. Each Option assumed by Parent will be exercisable upon the same terms and conditions including, without limitation, vesting, as under the applicable Option Plan and the applicable option agreement issued thereunder, except that (a) each such Option will be exercisable for the number of shares of Common Stock, par value $1.00 per share, of Parent ("Parent Common Stock") (rounded to the nearest whole share) obtained by multiplying the number of shares subject to such Option immediately prior to the Effective Time by $33.50 and dividing the result by the average of the closing prices for the Parent Common Stock reported on the New York Stock Exchange Consolidated Tape for the 10 consecutive trading days immediately prior to the Effective Time; and (b) the option price per share of Parent Common Stock shall be an amount equal to 2 the aggregate exercise price of such Option prior to adjustment divided by the number of shares of Parent Common Stock subject to such Option after adjustment (the option price per share, as so determined, being rounded upward to the nearest full cent). The date of grant of each Parent Option will be the date on which the corresponding Option was granted. No payment will be made for fractional interests. Except as provided in the Merger Agreement or as otherwise agreed to by the parties and to the extent permitted by the Option Plans (i) the Option Plans will terminate as of the Effective Time and the provisions in any other plan, program or arrangement providing for the issuance or grant by the Company or any of its subsidiaries of any interest in respect of the capital stock of the Company or any of its subsidiaries will be deleted as of the Effective Time and (ii) the Company will use all reasonable efforts to ensure that following the Effective Time no holder of Options or any participant in any Option Plan or any other such plans, programs or arrangements shall have any right thereunder to acquire any equity securities of the Company, the Surviving Corporation or any subsidiary thereof. The Merger Agreement provides that the Certificate of Incorporation and By-Laws of the Purchaser will be the Certificate of Incorporation and By-Laws of the Surviving Corporation until thereafter amended as provided by law, except that the name of the Surviving Corporation will be "Norand Corporation." Under the Merger Agreement the directors of the Purchaser immediately prior to the Effective Time will be the initial directors of the Surviving Corporation and will hold office until their respective successors are duly elected and qualified, or their earlier death, resignation or removal. The officers of the Company immediately prior to the Effective Time will be the initial officers of the Surviving Corporation and will hold office until their respective successors are duly elected and qualified, or their earlier death, resignation or removal. AGREEMENTS OF THE COMPANY, PARENT AND THE PURCHASER. The Merger Agreement provides that, if required by applicable law in order to consummate the Merger, the Company, acting through its Board of Directors, shall, in accordance with applicable law, duly call, give notice of, convene and hold a special meeting of its stockholders (the "Special Meeting") as soon as practicable following the purchase of and payment for shares of Common Stock by the Purchaser pursuant to the Offer for the purpose of considering and adopting the Merger Agreement and such other matters as may be necessary to consummate the transactions contemplated by the Merger Agreement. Under the Merger Agreement, in the event that Parent, the Purchaser or any other subsidiary of Parent acquires at least 90% of the outstanding shares of Common Stock pursuant to the Offer or otherwise, at the request of Parent or the Purchaser, Parent, the Purchaser and the Company will take all necessary and appropriate action to cause the Merger to become effective as soon as practicable after the acceptance for payment and purchase of shares of Common Stock by the Purchaser pursuant to the Offer without a meeting of stockholders of the Company in accordance with Section 253 of the DGCL. In the Merger Agreement, the Company has covenanted and agreed that, except as contemplated by the Merger Agreement or as expressly agreed to in writing by Parent, during the period from the date of the Merger Agreement to the Control Date (as defined in "--Directors" below in this Item 3(b)(2)), each of the Company and its subsidiaries will conduct its operations according to its ordinary course of business consistent with past practice and will use commercially reasonable efforts to preserve intact its business organization, to keep available the services of its key employees and to maintain satisfactory relationships with material suppliers, distributors, customers and others having business relationships with it and will take no action not required by law that would materially adversely affect the ability of the parties to consummate the transactions contemplated by the Merger Agreement or be inconsistent with such transactions. In the Merger Agreement, the Company has covenanted and agreed that prior to the Effective Time it will keep Parent advised of the status of all discussions and negotiations concerning possible acquisitions 3 and divestitures by it or any of its subsidiaries of any corporations or businesses, and has further agreed that without the prior written consent of Parent it will not make, or agree to make, any such acquisition or divestiture. Under the Merger Agreement, the Company has agreed that prior to the Effective Time it will not, and will not authorize or permit any of its subsidiaries or any of its or its subsidiaries' directors, officers, employees, agents or representatives, directly or indirectly, to solicit, initiate, facilitate or encourage (including by way of furnishing or disclosing nonpublic information) any inquiries or the making of any proposal with respect to any merger, consolidation or other business combination involving the Company or its subsidiaries or acquisition of all or substantially all of the assets or capital stock of the Company and its subsidiaries taken as a whole (an "Acquisition Transaction") or negotiate or explore with any person (other than Parent, the Purchaser or their respective directors, officers, employees, agents and representatives) any Acquisition Transaction or enter into any agreement, arrangement or understanding requiring it to abandon, terminate or fail to consummate the Merger or any other transactions contemplated by the Merger Agreement; provided that the Company may in response to an unsolicited written proposal with respect to an Acquisition Transaction from a third party furnish information to such third party, and negotiate, explore or otherwise communicate with such third party, in each case only if the Board of Directors of the Company determines in good faith by a majority vote, after consultation with its financial advisors and outside legal counsel, and after the receipt of the advice of outside legal counsel to the Company that failing to take such actions would constitute a breach of the fiduciary duty of the Board, that failing to take such action would constitute a breach of the fiduciary duties of the Board. The Company has agreed to advise Parent as promptly as practicable in writing of the receipt of any inquiries or proposals relating to an Acquisition Transaction and any actions described in this paragraph. Pursuant to the Merger Agreement, from the date of the Merger Agreement until the Effective Time, and subject to any limitations imposed by applicable law or the terms of any of the Company's or its subsidiaries' classified contracts, the Company has agreed to give Parent and its authorized representatives (including counsel, environmental and other consultants, accountants and auditors) access during normal business hours to all facilities, personnel and operations and to all books and records of the Company and its subsidiaries, and to permit Parent to make such inspections as it may reasonably require and to cause its officers and those of its subsidiaries to furnish Parent with such financial and operating data and other information with respect to its business and properties as Parent may from time to time reasonably request. Pursuant to the Merger Agreement, Parent has agreed that any information furnished to Parent, its subsidiaries or its authorized representatives will be subject to the provisions of the Confidentiality Agreement. See--"Other Agreements" below in this Item 3(b)(2). The Merger Agreement provides that, subject to the terms and conditions therein provided and applicable law, each of the Company, Parent and the Purchaser will use its reasonable best efforts promptly to consummate the transactions contemplated by the Merger Agreement, including, without limitation using such reasonable best efforts to (i) obtain all necessary consents, approvals or waivers under its material contracts and (ii) lift any legal bar to the Merger; provided, however, that the foregoing will not require Parent, the Purchaser or any other affiliate of Parent to agree to any action or restriction which, if imposed by a governmental entity, would constitute a condition described in paragraph (A) of Section 14 of the Offer to Purchase. Under the Merger Agreement, before issuing any press release or otherwise making any public statements with respect to the Merger Agreement, the Offer or the Merger, Parent, the Purchaser and the Company will consult with each other as to its form and substance and will not issue any such press release or make any such public statement prior to such consultation, except in either case as may be required by law. Under the Merger Agreement, each of the Company and Parent have agreed to give prompt notice to the other party of (i) the occurrence, or non-occurrence, of any event the occurrence, or non-occurrence, 4 of which would be likely to cause (A) any representation or warranty contained in the Merger Agreement to be untrue or inaccurate in any material respect at any time from the date hereof to the acceptance for payment of shares of Common Stock pursuant to the Offer, (B) any condition set forth in Section 14 of the Offer to Purchase to be unsatisfied in any material respect at any time from the date of the Merger Agreement to the date the Purchaser purchases shares of Common Stock pursuant to the Offer or (C) any conditions set forth in Section 14 of the Offer to Purchase to be unsatisfied in any material respect at any time from the date of the Merger Agreement to the Effective Time, and (ii) any material failure of the Company or Parent, as the case may be, or any officer, director, employee or agent thereof, to comply with or satisfy any covenant, condition or agreement to be complied with or satisfied by it under the Merger Agreement; provided, however, that the delivery of any notice pursuant to this paragraph will not limit or otherwise affect the remedies available under the Merger Agreement to the party receiving such notice. Under the Merger Agreement, from and after the Effective Time, Parent will indemnify, defend and hold harmless the present and former officers, directors, employees and agents of the Company and its subsidiaries against all losses, claims, damages, expenses or liabilities arising out of or related to actions or omissions or alleged actions or omissions occurring at or prior to the Effective Time, including without limitation the transactions contemplated by the Merger Agreement, to the same extent and on the same terms and conditions (including with respect to advancement of expenses) provided for in the Company's Certificate of Incorporation and By-Laws and agreements in effect at the date of the Merger Agreement (to the extent consistent with applicable law). Pursuant to the Merger Agreement, for a period of five years after the Effective Time, Parent has agreed to maintain in effect the current policies of directors' and officers' liability insurance maintained by the Company (provided that Parent may substitute therefor policies with reputable and financially sound carriers of at least the same coverage and amounts containing terms and conditions which are no less advantageous) with respect to claims arising from or related to facts or events which occurred at or before the Effective Time; provided, however, that Parent is not obligated to make annual premium payments for such insurance to the extent such premiums exceed 150% of the annual premiums paid as of the date of the Merger Agreement by the Company for such insurance. Parent has agreed pursuant to the Merger Agreement that following consummation of the Offer, it will cause the Company to honor in accordance with their terms certain existing employment contracts and employee benefits in effect on the date of the Merger Agreement. In addition, Purchaser has agreed in the Merger Agreement to provide or cause the Company to provide to individuals who are employed by the Company or any of its subsidiaries until the first anniversary of the Effective Time employee benefits that are in the aggregate no less favorable than those provided to them as of the date of the Merger Agreement, other than the Company's Employee Stock Purchase Plan. Parent will make its employee stock purchase plan available to employees of the Company as promptly as practicable following the Effective Time. Pursuant to the Merger Agreement, the Company has agreed that prior to the Effective Time, it will use its reasonable best efforts to cause the Consulting Agreement between the Company and Donald W. Rowley, dated February 12, 1996, as amended, and the Consulting Agreement between the Company and Jay Alix dated January 16, 1996, as amended, to be amended to provide that in lieu of the warrants to purchase shares of Common Stock granted pursuant to such agreements, Mr. Rowley and Mr. Alix each be entitled to receive from the Company an immediate cash payment from the Company equal to the Merger Price multiplied by the number of shares of Common Stock for which their respective warrants are exercisable, minus the aggregate exercise price of such warrants. Under the Merger Agreement, Parent has agreed to use its reasonable best efforts to assist the Company in obtaining from The Bank of New York Financial Corporation ("BONYFC") a written commitment to the Company extending through at least May 31, 1997 to lend up to $75 million to the Company on commercially reasonable terms that are no less favorable to the Company than the terms of 5 the latest written proposal made by BONYFC to the Company as of the date hereof; provided, however, that such agreement will not obligate Parent to incur any fees or expenses payable to BONYFC or to guarantee, directly or indirectly, any obligations or indebtedness of the Company. If, notwithstanding the foregoing, BONYFC does not extend such written commitment to the Company on or before March 15, 1997, then, at the Company's option, Parent will purchase from the Company, and the Company will sell to Parent, shares of a newly created Series A Convertible Preferred Stock of the Company ("Series A Convertible Preferred Stock") for an aggregate purchase price of $25,000,000 payable to the Company by wire transfer in immediately available funds with the closing of such purchase and sale to take place no later than March 31, 1997. If this provision becomes effective and the Series A Convertible Preferred Stock is issued, it will have substantially the following terms. The Series A Convertible Preferred Stock will have a liquidation preference of $25,000,000 and will be convertible after the first anniversary of the issue date, at the option of the holder into Common Stock at the rate of one share of Common Stock for each $23.00 of liquidation preference, subject to antidilution provisions substantially identical to those in the Company's Series A and Series B Warrants. The dividend will be 6 1/2% per annum of the liquidation preference and will be payable at the option of the Company in shares of Series A Convertible Preferred Stock or cash. The Company will be required to redeem the Series A Convertible Preferred Stock at the request of the holder upon the earlier to occur of (i) consummation of a transaction resulting in a change in control of the Company and (ii) the tenth anniversary of the date of issuance. The Company may redeem the Series A Convertible Preferred Stock at the option of the Company (i) during the first year after the date of issuance at 110% of the liquidation preference and (ii) after the first year from the date of issuance at 100% of liquidation preference as long as the Company's common stock has traded in excess of $25.30 for any 10 consecutive trading days. If the Company defaults on its mandatory redemption obligation, the dividend rate will increase by 25 basis points, and will thereafter increase by an additional 25 basis points for each 91-day period the default continues, up to a maximum dividend rate of 10 1/2%. During continuance of the default, the holder will be entitled to appoint one member of the Company's Board of Directors. DIRECTORS. In the Merger Agreement, the Company has agreed that, subject to compliance with applicable law, promptly upon the payment by the Purchaser for shares of Common Stock purchased pursuant to the Offer representing not less than a majority of the outstanding shares of Common Stock on a fully diluted basis, and from time to time thereafter, the Company will, upon request of Parent, promptly take all actions necessary to cause a majority of the directors of the Company to consist of Parent's designees, including by accepting the resignations of those incumbent directors designated by the Company or increasing the size of the Company's Board of Directors and causing Parent's designees to be elected. The Company's obligations to appoint Parent's designees to the Board are subject to Section 14(f) of the Exchange Act and Rule 14f-1 thereunder, if applicable. Following the election or appointment of Parent's designees as described in this paragraph and prior to the Effective Time, any amendment or termination of the Merger Agreement by the Company or the Company's Board of Directors, any extension by the Company or the Company's Board of Directors, of the time for the performance of any of the obligations or other acts of Parent or the Purchaser or waiver of any of the Company's rights under the Merger Agreement or any other action by the Company concerning the Merger Agreement or any of the transactions contemplated thereby, will require the concurrence of a majority of the directors of the Company then in office who were not designated by Parent. REPRESENTATIONS AND WARRANTIES. The Merger Agreement contains certain representations and warranties by the Company, including representations and warranties concerning: the organization and qualification of the Company and its subsidiaries; the capitalization of the Company; the authority of the Company relative to the execution and delivery of, and consummation of the transactions contemplated by, the Merger Agreement and approval by the Board regarding certain related matters; the absence of any violations of the corporate documents and certain instruments of the Company or its subsidiaries or of any statute, rule, regulation, order or decree, subject to certain exceptions; the accuracy of reports and 6 documents filed by the Company with the Securities and Exchange Commission (the "Commission") since January 1, 1994 and certain financial statements of the Company; the absence since November 30, 1996 (except as amended or supplemented in filings prior to the date of the Merger Agreement with the Commission) to the date of the Merger Agreement of any event or occurrence (including the incurrence or existence of any liability) which, individually or in the aggregate, would have a Company Material Adverse Effect (as defined in the Merger Agreement); the absence of litigation which could have a Company Material Adverse Effect; compliance by the Company with applicable laws, regulations, and similar matters; payment by the Company of taxes; compliance with certain laws relating to employee benefit plans; the possession of right, title and interest by the Company and its subsidiaries in certain intellectual property; the absence of ongoing infringement by the Company of intellectual property rights belonging to a third-party, indemnification by the Company for any such infringement or claims or demands against the Company for any such infringement; the absence of pending or threatened challenges, or grounds for a challenge, to the rights of the Company to use certain trade secrets or proprietary or confidential information; the absence of any material defect in the programming and operation of the Company's software; the absence of material rights of third parties to use the Company's software; the taking by the Board of all appropriate and necessary action such that the provisions of Section 203 of the DGCL will not apply to the transactions contemplated by the Merger Agreement; and incurrence of broker's and similar fees. The Merger Agreement also contains certain representations and warranties by Parent and the Purchaser, including that Parent or the Purchaser has and will have at the time of acceptance for payment and purchase of Shares under the Offer and at the Effective Time the funds necessary to consummate the Offer and the Merger and the transactions contemplated thereby and to pay related fees and expenses. CONDITIONS TO THE MERGER. Under the Merger Agreement, the respective obligations of each party to effect the Merger are subject to the fulfillment of each of the following conditions: (i) the Purchaser shall have accepted for payment and paid for shares of Common Stock pursuant to the Offer in accordance with the terms thereof; (ii) the vote of the stockholders of the Company necessary to consummate the transactions contemplated by the Merger Agreement shall have been obtained, if required by applicable law; and (iii) no statute, rule, regulation, judgment, writ, decree, order or injunction shall have been promulgated, enacted, entered or enforced, and no other action shall have been taken, by any domestic, foreign or supranational government or governmental, administrative or regulatory authority or agency of competent jurisdiction or by any court or tribunal of competent jurisdiction, domestic, foreign or supranational, that in any of the foregoing cases has the effect of making illegal or directly or indirectly restraining, prohibiting or restricting the consummation of the Merger. TERMINATION. The Merger Agreement may be terminated at any time prior to the Effective Time: (i) by mutual written consent of the Boards of Directors of Parent and the Company; (ii) by either Parent or the Company if, without any material breach of the terminating party of its obligations under the Merger Agreement, the purchase of shares of Common Stock pursuant to the Offer shall not have occurred on or before September 30, 1997 (which date may be extended by mutual written consent of the parties to the Merger Agreement); (iii) by Parent or the Company if the Offer expires or is terminated or withdrawn pursuant to its terms without any shares of Common Stock being purchased thereunder; or (iv) by either Parent or the Company if any court of competent jurisdiction in the United States or other governmental body in the United States shall have issued an order (other than a temporary restraining order), decree or ruling or taken any other action restraining, enjoining or otherwise prohibiting the purchase of Shares pursuant to the Offer or the Merger, and such order, decree, ruling or other action shall have become final and nonappealable; provided that the party seeking to terminate the Merger Agreement shall have used its reasonable best efforts, subject to certain limitations, to remove or lift such order, decree or ruling. The Merger Agreement may be terminated and the Offer and the Merger may be abandoned by action of the Board of Directors of Parent at any time prior to the purchase of shares of Common Stock 7 pursuant to the Offer if (i) the Board shall withdraw, modify or change its recommendation or approval in respect of the Merger Agreement or the Offer in a manner adverse to Parent, (ii) the Board shall have recommended any proposal other than by Parent or the Purchaser in respect of an Acquisition Transaction, or (iii) a proposal for an Acquisition Transaction other than by Parent or the Purchaser shall be publicly disclosed and at the scheduled expiration of the Offer the condition that a number of shares of Common Stock representing at least a majority of the number of shares of Common Stock outstanding on a fully diluted basis be validly tendered and not withdrawn at the expiration of the Offer shall not have been satisfied. Upon termination of the Merger Agreement, Parent has agreed to return to the Company all copies of non-public information supplied to Parent by the Company in Parent's possession at the time of such termination. The Merger Agreement may be terminated and the Merger may be abandoned by action of the Board at any time prior to the Effective Time (i) if there shall be a material breach of any of Parent's or the Purchaser's representations, warranties or covenants under the Merger Agreement, which breach shall not be cured within ten days of notice thereof, or (ii) to allow the Company to enter into an agreement in respect of an Acquisition Transaction which the Board has determined is more favorable to the Company and its stockholders than the transactions contemplated by the Merger Agreement (provided that such termination shall not be effective unless and until the Company shall have paid to Parent the fee described in the second paragraph under "--Fees and Expenses" below). FEES AND EXPENSES. Except to the extent Parent becomes entitled to an expense reimbursement fee as described in the following paragraph, Parent and the Company will bear their respective expenses incurred in connection with the Merger Agreement, the Offer and the Merger, including, without limitation, the preparation, execution and performance of the Merger Agreement and the transactions contemplated thereby, and all fees and expenses of investment bankers, finders, brokers, agents, representatives, counsel and accountants. If (i) Parent shall have terminated the Merger Agreement as described in the second paragraph of "--Termination" above or (ii) the Company shall have terminated the Merger Agreement as described in clause (ii) of the fourth paragraph of "--Termination" above, then the Company shall promptly, but in no event later than two business days after the date of such termination or event, pay Parent a termination fee of $9,000,000. If Parent shall have terminated this Agreement pursuant to clause (iii) of the second paragraph of "--Termination" above and, within one year after such termination, the Company shall have entered into a definitive agreement providing for an Acquisition Transaction, the Company shall promptly, but in no event later than two days after the date of such definitive agreement, pay Parent a termination fee of $9,000,000. Any termination fee payable as described in this paragraph shall be paid by the issuance to Parent of shares of a newly issued series of preferred stock of the Company (the "Series B Convertible Preferred Stock") having substantially the following terms. The Series B Convertible Preferred Stock will have a liquidation preference of $9,000,000 and will be convertible after the expiration of six months from the issue date, at the option of the holder into Common Stock at the rate of one share of Common Stock for each $23.00 of liquidation preference, subject to antidilution provisions substantially identical to those in the Company's Series A and Series B Warrants. The dividend will be 6% per annum of the liquidation preference and will be payable at the option of the Company in shares of Series B Convertible Preferred Stock or cash. The Company will be required to redeem the Series B Convertible Preferred Stock at the request of the holder upon the earlier to occur of (i) consummation of a transaction resulting in a change in control of the Company and (ii) the third anniversary of the date of issuance. The Company may redeem the Series A Convertible Preferred Stock at the option of the Company (i) during the first year after the date of issuance at 110% of the liquidation preference and (ii) after the first year from the date of issuance at 100% of liquidation preference as long as the Common Stock has traded in excess of $25.30 for any 10 consecutive trading days. If the Company defaults on its mandatory redemption obligation, the dividend rate will increase by 25 basis points, and will thereafter increase by an additional 25 basis points for each 8 91-day period the default continues, up to a maximum dividend rate of 10%. During continuance of the default, the holder will be entitled to appoint one member of the Board. AMENDMENT. At any time prior to the Effective Time, subject to applicable law and the provisions of the Merger Agreement, the Merger Agreement may be amended, modified or supplemented only by written agreement of Parent, the Purchaser and the Company with respect to any of the terms contained therein; provided, however, that after any approval and adoption of the Merger Agreement by the stockholders of the Company, no such amendment, modification or supplementation shall be made which reduces the amount of per-share consideration paid in the Merger or the form of consideration therefor or which in any way materially adversely affects the rights of such stockholders without the further approval of such stockholders. Following the election or appointment of Parent's designees as Directors of the Company as described above and prior to the Effective Time, any amendment or termination of the Merger Agreement by the Company, any extension by the Company of the time for the performance of any of the obligations or other acts of Parent or the Purchaser or any other action by the Company concerning the Merger Agreement or any of the transactions contemplated thereby, will require the concurrence of a majority of the directors of the Company then in office who were not designated by Parent. WAIVERS. At any time prior to the Effective Time, Parent and the Purchaser, on the one hand, and the Company, on the other hand, may (i) extend the time for the performance of any of the obligations or other acts of the other, (ii) waive any inaccuracies in the representations and warranties of the other contained herein or in any documents delivered pursuant hereto and (iii) waive compliance by the other with any of the agreements or conditions contained herein which may legally be waived. Any such extension or waiver shall be valid only if set forth in an instrument in writing specifically referring to this Agreement and signed on behalf of such party. Following the election or appointment of Parent's designees as Directors of the Company as described above and prior to the Effective Time, any waiver of any of the Company's rights under the Merger Agreement will require the concurrence of a majority of the directors of the Company then in office who were not designated by Parent. OTHER AGREEMENTS. The following summary description of the Original Equipment Manufacturer Agreement (the "OEM Agreement") is qualified in its entirety by reference to such agreement, which has been filed as an exhibit to the Schedule 14D-9. The OEM Agreement gives Parent and its subsidiaries the non-exclusive right to sell and license pen-based data collection terminals and computers, charge coupled device products, and radio products of the Company and the accessories, software and spare parts for such products, for use in healthcare, manufacturing, warehouse and distribution applications worldwide in such geographic locations where such products are certified. The OEM Agreement is in effect as of January 21, 1997 and will expire on January 21, 1999; provided, however, that the term of the OEM Agreement will automatically be extended for successive one-year periods ending on the anniversary of January 21, 1999, unless either party has, on or before 60 days prior to the next scheduled renewal date, given notice to the other of its intention not to renew the term of the OEM Agreement. The OEM Agreement provides that the Company will sell the specified products to Parent at a price based on the volume of purchases by Parent during the twelve-month period ending on the preceding January 19, such price being no less favorable than the lowest price then being charged by the Company for sales of such products to other purchasers with sales volumes similar to Parent's volume purchases during such twelve-month period. For the period beginning January 21, 1997 and continuing through January 19, 1998, the Company will sell products to Parent at a price based on the sales forecast covering the twelve-month period beginning on April 1, 1997, such price being no less favorable than the lowest price then being charged by the Company for sales of such products to other purchasers based on sales volumes similar to such forecast. In February 1996, the Company and Parent (together with Intermec) entered into the Confidentiality Agreement relating to (1) the mutual exchange of confidential information concerning the business and affairs of each party and (2) the agreement of each party to refrain from certain actions affecting control of 9 the other party. Pursuant to the Confidentiality Agreement, the Company and Parent exchanged certain financial, technical, commercial and other information concerning their respective businesses and affairs and agreed, among other things, to use the confidential materials solely for the purpose of evaluating a possible business combination or strategic relationship between the Company and Parent. The Confidentiality Agreement prohibits disclosure of the following, without prior written consent of the other party, (a) the contents of the confidential materials, (b) the existence of the Confidentiality Agreement, and (c) the existence of and status of negotiations over a possible business combination or strategic relationship. Pursuant to the Confidentiality Agreement, the Company and Parent also agreed, for a period of three years following the date of the Confidentiality Agreement, not to directly or indirectly, without prior written consent of the other party, (i) acquire, or offer, propose or agree to acquire, any shares of the other party's common stock, or securities convertible or exchangeable into, or the rights to acquire, such stock, (ii) solicit proxies or consents with respect to such stock, become a participant in any election contest relating to the election of directors of the other party or initiate, propose or otherwise solicit holders of such stock with respect to any such proposal, (iii) form, join or participate in a group within the meaning of Section 13(d)(3) of the Exchange Act with respect to such stock, (iv) arrange or participate in any arranging of financing for the purchase of such stock, (v) propose, disclose any intent to propose or contact any officers, employees, directors, stockholders or agents of the other party or any other person or entity with respect to any acquisition, business combination, recapitalization or similar transaction with respect to the other party or any material amount to its assets, or request any waiver, amendment or termination of certain provisions of the Confidentiality Agreement or (vi) attempt in any way to control the other party. The Confidentiality Agreement also prohibits any direct or indirect solicitation, negotiation or hiring of employees of one party by the other party for a period of three years following the date of the Confidentiality Agreement, except through or in response to general advertisement. Pursuant to the Merger Agreement, Parent was released from the restrictions described in the preceding paragraph. ITEM 4. THE SOLICITATION OR RECOMMENDATION. At a special meeting held on January 21, 1997, the Board of Directors of the Company (the "Board"), unanimously approved the Merger Agreement and determined that the Merger Agreement and the transactions contemplated thereby, including the Offer and the Merger are fair to and in the best interests of the holders of shares of Common Stock and recommends that stockholders accept the Offer and tender their shares of Common Stock. In making such recommendation and approving the Merger Agreement and the transactions contemplated thereby, the Board considered a number of factors, including, but not limited to, the following; (i) the financial and other terms and conditions of the Merger Agreement; (ii) the Company's business, financial condition, results of operations, assets, liabilities, business strategy and prospects, as well as various risks and uncertainties associated with those prospects, including the Company's competitive environment, new product development efforts and the status of other business initiatives; (iii) the Company's capital requirements, the terms of the Company's existing credit facility, which the Board considered to be unfavorable, the status of the Company's efforts to replace such credit facility and the terms upon which the Company anticipated that new financing would be available to it; (iv) the fact that the $33.50 per share cash price to be received by the Company's stockholders in both the Offer and the Merger represented a 74% premium over the last executed trade price of $19.25 per share on January 21, 1997, the last full trading day prior to the announcement of the execution of the Merger Agreement, and premiums of 87.4% and 97.1% over the last executed trade 10 prices of $17.88 per share and $17.00 per share on January 15, 1997 and December 23, 1996, respectively, the dates seven days and thirty days, respectively, prior to the announcement of the execution of the Merger Agreement; (v) the fact that the Offer and the Merger would not be subject to any financing condition, that Parent has represented that it has sufficient financing to provide the funds necessary to consummate the Offer and the Merger and the transactions contemplated thereby and to pay the related fees and expenses; (vi) the written opinion received by the Company from Donaldson, Lufkin & Jenrette Securities Corporation ("DLJ") on January 21, 1997 to the effect that as of that date and based upon its review and analysis and subject to the assumptions, limitations and qualifications set forth therein, the $33.50 per share cash consideration to be received by the Company's stockholders in the Offer and the Merger is fair to the stockholders of the Company from a financial point of view. A copy of the written opinion dated January 21, 1997 of DLJ, which sets forth the assumptions made, procedures followed, other matters considered and limits of the review by DLJ is filed as an exhibit to this Schedule 14D-9 and is also attached hereto as Annex II. STOCKHOLDERS ARE URGED TO READ SUCH OPINION IN ITS ENTIRETY; (vii) the fact that other potential acquirors had declined invitations by the Company to explore a business combination with the Company and the Board's view that there was not likely to be another financially capable potential acquiror who would be interested in acquiring the Company on more attractive terms; and (viii) the fact that, to the extent required by the fiduciary obligations of the Board under Delaware law, the Company may terminate the Merger Agreement in order to approve another proposed business combination by a third party upon the payment of a $9,000,000 termination fee, which termination fee would not be required to be paid in cash, but rather in the form of the issuance of shares of a new class of preferred stock of the Company. See "Item 3. Identity and Background-- Merger Agreement--Termination." The Board's approval and recommendation was based on the totality of the information considered by it. The Board did not assign relative weights to the factors considered by it or determine that any one factor was of primary importance. BACKGROUND OF THE OFFER; CONTACTS WITH PARENT AND PURCHASER Initial contacts between the Company and Parent concerning a possible business combination or other strategic relationship began in January 1996. In February 1996, the Company and Parent entered into a mutual confidentiality/standstill agreement (the "Confidentiality Agreement") and began exchanging certain non-public information concerning the Company. This process continued through May 1996. In early 1996, the Company, through its representatives and advisors, approached several other entities regarding a possible acquisition of the Company by such entities. None of the entities so approached expressed an interest in acquiring the Company. In June 1996, the Company and Parent agreed to defer further consideration of a possible transaction pending the resolution of certain stockholder litigation against the Company. An agreement providing for the settlement of such litigation was reached in August 1996 and confirmed by the court in December 1996. In the fall of 1996, the Company approached two of the entities which it had approached in early 1996 to further explore the possibility of an acquisition of the Company by such entities. The two entities so approached again expressed no interest in acquiring the Company. On January 6 and 7, 1997, representatives of the Company and Parent met to discuss a possible business combination and the Company's financial outlook. Additional discussions were held by telephone 11 over the period between January 8 and January 16. On January 16, 1997, Parent proposed to the Company, subject to completion of its review and analysis of the Company and the negotiation of a definitive agreement, to acquire the Company for $33.75 per share in cash through a tender offer and a merger. On January 19, 1997, the Company's Board of Directors held a special meeting at which the Company's directors discussed with the Company's legal and financial advisors the terms of a proposed acquisition of the Company by Parent. Meetings among representatives of the Company and Parent and their advisors took place on January 19 through January 21 at which the significant terms of the Merger Agreement were negotiated. On January 21, 1997, Parent indicated that as a result of the conclusions reached from its review and analysis of the Company to date, Parent was unwilling to proceed with an acquisition of the Company at $33.75 per share and Parent requested a significant reduction in the per share price. After consultation with certain of its directors and its management and legal and financial advisors, the Company proposed, subject to the approval of its Board of Directors, to proceed with a transaction with Parent at a price of $33.50 per share in cash provided that Parent agree to the Company's remaining requirements concerning the terms of the definitive transaction agreement. Parent's representatives accepted these terms subject to the approval of the Executive Committee of the Board of Directors of Parent. On January 21, 1997, the Merger Agreement was presented to, and approved by, the Board and the Executive Committee of the Board of Directors of Parent (acting with the authority of the full Board of Directors of Parent), and the Merger Agreement was executed by the parties. 12 ITEM 5. PERSONS RETAINED, EMPLOYED OR TO BE COMPENSATED. The Company and DLJ have entered into a letter agreement dated January 7, 1997 (the "Engagement Letter"). Pursuant to the Engagement Letter, DLJ was engaged to act as the exclusive financial advisor to the Company for a period of 12 months with respect to the sale, merger, consolidation or any other business combination, in one or a series of transactions, involving all or a substantial amount of the business, securities or assets of the Company (each, a "Transaction"). The Engagement Letter provides that the Company will pay to DLJ for its services (i) a fee of $600,000 at the time DLJ notifies the Board of Directors of the Company that it is prepared to deliver its opinion as to the fairness from a financial point of view of any proposed Transaction with Parent and an additional fee of $100,000 for each update of a prior opinion delivered by DLJ with respect to a Transaction with Parent and (ii) additional cash compensation in an amount equal to the sum of (x) $2,250,000 plus (y) five percent (5.0%) of any increase in the Share Value (as defined below) in excess of $30.00 per share of Common Stock less (z) any amounts previously paid by the Company; provided, however, that in no event will the compensation payable pursuant to the Engagement Letter exceed one percent (1.0%) of the Transaction Value (as defined below). Such additional compensation is contingent upon and payable in cash promptly upon consummation of a Transaction. The Company has also agreed to reimburse DLJ for its out-of-pocket expenses, including the reasonable fees and expenses of its counsel, but not to exceed $15,000 without the prior approval of the Company, and to indemnify DLJ and certain related parties against certain liabilities, including liabilities under the federal securities laws. As used in the foregoing paragraph, (1) the term "Share Value" means the price per share received by the Company and/or its stockholders multiplied by the number of shares of Common Stock outstanding (treating any shares issuable upon the exercise of options, warrants or other rights of conversion as outstanding) and (2) the term "Transaction Value" means the aggregate amount of consideration received by the Company and/or its stockholders (treating any shares issuable upon the exercise of options, warrants or other rights of conversion as outstanding.) Except as set forth above, neither the Company nor any person acting on its behalf has employed, retained, or compensated any person to make solicitations or recommendations to the Company's stockholders with respect to the Offer. ITEM 6. RECENT TRANSACTIONS AND INTENT WITH RESPECT TO SECURITIES. The Company, and to the knowledge of the Company, none of its executive officers, directors, affiliates or subsidiaries has effected any transaction in the Company's securities in the past 60 days. To the knowledge of the Company, all of its executive officers, directors, affiliates or subsidiaries who are also stockholders intend to either tender their Shares in the Offer or vote in favor of the Merger. ITEM 7. CERTAIN NEGOTIATIONS AND TRANSACTIONS BY THE SUBJECT COMPANY. (a) Except as set forth above, the Company is not engaged in any negotiation in response to the Offer which relates to or would result in (i) an extraordinary transaction, such as a merger or reorganization involving the Company; (ii) a purchase, sale or transfer of a material amount of assets by the Company, (iii) a tender offer for or other acquisition of securities by or of the Company, or (iv) any material change in the present capitalization or dividend policy of the Company. (b) Except as described in Item 3 or 4 above, there are no transactions, Board resolutions, agreements in principle or signed contracts in response to the Offer that relate to or would result in one or more of the events referred to in Item 7(a) above. 13 ITEM 8. ADDITIONAL INFORMATION TO BE FURNISHED. The Information Statement attached hereto as Annex I is being furnished in connection with the contemplated designation by Parent, pursuant to the Merger Agreement, of certain persons to be appointed to the Board other than at a meeting of the Company's stockholders, following the purchase by Purchaser of the number of Shares pursuant to the Offer necessary to satisfy the Minimum Condition. ITEM 9. MATERIAL TO BE FILED AS EXHIBITS. EXHIBIT INDEX
EXHIBIT NO. DESCRIPTION - ----------- ---------------------------------------------------------------------------------------- Exhibit 1 Agreement and Plan of Merger dated as of January 21, 1997 among Parent, Purchaser and the Company. Exhibit 2 Pages 2-12 of the Proxy Statement. Exhibit 3 Press Release dated January 22, 1997. Exhibit 4 Letter to stockholders of the Company dated January 24, 1997. Exhibit 5 OEM Agreement dated as of January 21, 1997 between Parent and the Company.
14 SIGNATURE After reasonable inquiry and to the best of my knowledge and belief, I certify that the information set forth in this statement is true, complete and correct. Norand Corporation By: /s/ N. ROBERT HAMMER ----------------------------------------- N. Robert Hammer CHAIRMAN, PRESIDENT AND CHIEF EXECUTIVE OFFICER Dated: January 24, 1997 15 ANNEX I NORAND CORPORATION 550 Second Street, S.E. Cedar Rapids, Iowa 52401 ------------------------ INFORMATION STATEMENT PURSUANT TO SECTION 14(F) OF THE SECURITIES EXCHANGE ACT OF 1934 AND RULE 14F-1 THEREUNDER ------------------------ NO VOTE OR OTHER ACTION OF THE COMPANY'S STOCKHOLDERS IS REQUIRED IN CONNECTION WITH THIS INFORMATION STATEMENT. NO PROXIES ARE BEING SOLICITED AND YOU ARE REQUESTED NOT TO SEND THE COMPANY A PROXY. ------------------------ This Information Statement, which is being mailed on or about January 24, 1997 to the holders of shares of the common stock, par value $0.01 per share (the "Common Stock") of Norand Corporation, a Delaware corporation (the "Company"), is being furnished in connection with the designation by Western Atlas Inc., a Delaware corporation ("Parent"), of persons (the "Parent Designees") to the Board of Directors of the Company (the "Board"). Such designation is to be made pursuant to an Agreement and Plan of Merger dated as of January 21, 1997 (the "Merger Agreement") among the Company, Parent and WAI Acquisition Corp., a Delaware corporation and a wholly owned subsidiary of Parent ("Purchaser"). Pursuant to the Merger Agreement, among other things, the Purchaser commenced a tender offer on January 24, 1997 to purchase all of the issued and outstanding shares (the "Shares") of the Common Stock at a price of $33.50 per Share, net to the seller in cash, as described in the Purchaser's Offer to Purchase dated January 24, 1997 and the related Letter of Transmittal (which Offer to Purchase and related Letter of Transmittal together constitute the "Offer"). The Offer is scheduled to expire at 12:00 midnight, New York City time, on Friday February 21, 1997, unless extended. The Offer is subject to, among other things, the condition that a number of Shares representing not less than a majority of the Company's outstanding Shares on a fully diluted basis being validly tendered prior to the expiration of the Offer and not withdrawn (the "Minimum Condition"). The Merger Agreement also provides for the merger (the "Merger") of Purchaser with and into the Company as soon as practicable after the consummation of the Offer. Following the consummation of the Merger (the "Effective Time"), the Company will be the surviving corporation and a wholly owned subsidiary of Parent. In the Merger, each Share issued and outstanding immediately prior to the Effective Time (other than Shares held by Parent, Purchaser, in the treasury of the Company or by any subsidiary of Parent, Purchaser or the Company, all of which will be cancelled, and other than Shares, if any, held by stockholders who have perfected rights as dissenting stockholders under Delaware law) will be converted into the right to receive cash in the amount of $33.50. Following the election or appointment of the Parent Designees and prior to the Effective Time, any amendment or termination of this Agreement by the Company, any extension by the Company of the time for the performance of any of the obligations or other acts of Parent or the Purchaser, waiver of any of the Company's rights under the Merger Agreement or any other action by the Company concerning this Agreement or any of the transactions contemplated by the Merger Agreement, will require the concurrence of a majority of the directors of the Company then in office who were not designated by Parent. The terms of the Merger Agreement, a summary of the events leading up to the Offer and the execution of the Merger Agreement and other information concerning the Offer and the Merger are contained in the Offer to Purchase and in the Solicitation/Recommendation Statement on Schedule 14D-9 AI-1 of the Company (the "Schedule 14D-9") with respect to the Offer, copies of which are being delivered to stockholders of the Company contemporaneously herewith. Certain other documents (including the Merger Agreement) were filed with the Securities and Exchange Commission (the "SEC") as exhibits to the Tender Offer Statement on Schedule 14D-1 of Purchaser and Parent (the "Schedule 14D-1"). The exhibits to the Schedule 14D-9 and the Schedule 14D-1 may be examined at, and copies thereof may be obtained from, the regional offices of and public reference facilities maintained by the SEC (except that the exhibits thereto cannot be obtained from the regional offices of the SEC) in the manner set forth in Sections 8 and 9 of the Offer to Purchase. No action is required by the stockholders of the Company in connection with the election or appointment of the Parent Designees to the Board. However, Section 14(f) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), requires the mailing to the Company's stockholders of the information set forth in this Information Statement prior to a change in a majority of the Company's directors otherwise than at a meeting of the Company's stockholders. The information contained in this Information Statement concerning the Parent, the Purchaser and the Parent Designees has been furnished to the Company by such persons, and the Company assumes no responsibility for the accuracy or completeness of such information. The Schedule 14D-1 indicates that the principal executive offices of the Purchaser and the Parent are located at 360 North Crescent Drive, Beverly Hills, California 90210-9867. GENERAL The Shares of Common Stock are the only class of voting securities of the Company outstanding. Each Share is entitled to one vote. As of January 17, 1997, there were 7,842,905 Shares outstanding. The Board currently consists of five (5) members. Each director holds office until his successor is elected and qualified or until his earlier death, resignation or removal. RIGHT TO DESIGNATE DIRECTORS; THE PARENT DESIGNEES The Merger Agreement provides that, promptly upon the purchase by Purchaser of Shares representing at least a majority of the Shares then actually outstanding, the Company shall, upon the request of Parent, take all actions necessary to cause a majority of the directors of the Company to consist of the Parent Designees, including by accepting the resignations of those incumbent directors designated by the Company or increasing the size of the Board and causing the Parent Designees to be elected. Parent has informed the Company that each of the Parent Designees listed below has consented to act as a director of the Company. It is expected that the Parent Designees may assume office at any time following the purchase by Purchaser of such number of Shares that satisfies the Minimum Condition, which purchase cannot be earlier than February 21, 1997, and that, upon assuming office, the Parent Designees will thereafter constitute at least a majority of the Board. Biographical information concerning each of the Parent Designees and the Company's directors and executive officers is presented below. PARENT DESIGNEES ALTON J. BRANN. Mr. Brann has been a director, Chairman of the Board and Chief Executive Officer of Parent since 1994. Mr. Brann was the Chairman of the Board of Litton Industries, Inc. from 1994 to 1995, the Chief Executive Officer of Litton from 1992 to 1994, and President of Litton from 1990 to 1994. AI-2 MICHAEL E. KEANE. Mr. Keane has been Senior Vice President and Chief Financial Officer of Parent since 1996. Prior to assuming his present position, Mr. Keane served as Vice President and Treasurer from 1994 to 1996, and as Director of Pensions and Insurance of Litton Industries, Inc. from 1991 to 1994. NORMAN L. ROBERTS. Mr. Roberts has been Senior Vice President and General Counsel of Parent since 1994. Prior to assuming his present position, Mr. Roberts served as Senior Vice President and General Counsel of Litton Industries, Inc. from 1990 to 1994. CURRENT DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY
BUSINESS EXPERIENCE DURING THE PAST FIVE YEARS NAME AGE AND OTHER INFORMATION - ----------------------------------------------- --- ----------------------------------------------------------- N. Robert Hammer............................... 54 Mr. Hammer has been Chairman, President and Chief Executive Officer of the Company since 1988. Mr. Hammer received a Bachelor of Science degree from Columbia University in 1965, and a Master of Business Administration degree from Columbia University in 1967. Keith B. Geeslin............................... 43 Mr. Geeslin has been a director of the Company since 1988. Mr. Geeslin is a General Partner of the Sprout Group, a division of DLJ Capital Corporation, where he has been employed since 1984. In addition, he is a General Partner of the general partner of a series of investment funds managed by the Sprout Group. In addition to the Company, Mr. Geeslin is a director of Actel Corporation, SDL, Inc., and several privately-held companies. Mr. Geeslin received a Bachelor of Science, Electrical Engineering degree from Stanford University in 1975, a Master of Arts, Philosophy, Politics and Economics degree from Oxford University in 1977, and a Master of Science, Engineering-Economic Systems degree from Stanford University in 1978.
AI-3
BUSINESS EXPERIENCE DURING THE PAST FIVE YEARS NAME AGE AND OTHER INFORMATION - ----------------------------------------------- --- ----------------------------------------------------------- Charles G. Moore III........................... 53 Mr. Moore has been a director of the Company since 1988 and Senior Director since January 1996. Since March 1994, Mr. Moore has been president of Little Diamond Island Enterprises, a venture capital investment firm. Mr. Moore was Chairman and Chief Executive Officer of Digital Communications Associates, Inc., a manufacturer of hardware and software products for the personal computer networking environment, from November 1993 to March 1994. From January 1982 to June 1993 Mr. Moore was a General Partner of Welsh, Carson, Anderson & Stowe, a venture capital investment firm. Mr. Moore serves on the board of directors of one privately-held company. Mr. Moore received a Bachelor of Arts, Mathematics degree from Dartmouth College in 1965 and Master of Science and Ph.D., Computer and Communications degrees from the University of Michigan in 1967 and 1971, respectively. From 1972 to 1975, Mr. Moore served on the faculty of Cornell University in the Department of Computer Science. Fred W. Wenninger.............................. 57 Mr. Wenninger has been a director of the Company since 1989. Since August 1995, Mr. Wenninger has served as President and Chief Executive Officer of Keytronic Corp., a manufacturer of computer keyboards. From May 1989 to December 1993, Mr. Wenninger was President and from May 1989 to October 1993 he was also Chief Executive Officer of Iomega Corporation, a computer disk drive manufacturer. Mr. Wenninger is also a director of Keytronic Corp. and Hach Company. Mr. Wenninger received a Bachelor of Science, Physics degree and Master of Science and Ph.D., Engineering degrees from Oklahoma State University in 1959, 1962 and 1964, respectively.
AI-4
BUSINESS EXPERIENCE DURING THE PAST FIVE YEARS NAME AGE AND OTHER INFORMATION - ----------------------------------------------- --- ----------------------------------------------------------- Hatim A. Tyabji................................ 51 Mr. Tyabji has been a director of the Company since March 1995. Mr. Tyabji is Chairman, President and Chief Executive Officer of VeriFone, Inc., a global provider of transaction automation solution for the delivery of electronic payment services; he has been President and CEO since 1986 and Chairman since 1992. Mr. Tyabji earned a Bachelor of Science, Electrical Engineering degree from the College of Engineering in Porrna, India, in 1967, a Master of Science, Electrical Engineering degree from the State University of New York at Buffalo in 1969, and a Master of Business Administration from Syracuse University in 1975. Mr. Tyabji is also a graduate of the Stanford Executive Program.
MEETINGS AND COMMITTEES OF THE BOARD The Board of Directors has two standing committees: the Audit Committee and the Compensation Committee. The Board of Directors does not have a Nominating Committee. During the fiscal year ended August 31, 1996, the Board of Directors met eight times, the Audit Committee met three times, and the Compensation Committee met four times. During 1996, all directors attended at least 75% of the meetings of the Board of Directors and the committees thereof on which they served. The duties of the Audit Committee are to review the scope of the annual audit and interim procedures with the independent auditors; consult with the auditors during any annual audit or interim procedures on any situation that the auditors deem advisable for resolution prior to the completion of the audit or procedures; meet with the auditors to appraise the effectiveness of the audit effort; determine that no restrictions were placed by management on the scope of the examination or its implementation; inquire into the effectiveness of the Company's accounting and internal control functions; review with the auditors and management any registration statement in connection with the public offering of securities and such other financial reports as the committee or the Board of Directors deems advisable; report to the Board of Directors on the results of the committee's activities; and recommend to the Board of Directors any changes in the appointment of independent auditors that the committee deems to be in the best interest of the Company and its stockholders. The members of the Audit Committee are Messrs. Geeslin and Moore. The duties of the Compensation Committee are to make recommendations to the Board of Directors concerning the salaries of the Company's officers; to exercise the authority of the Board of Directors concerning the Company's benefit plans, including those plans limited in application to the Company's officers and senior management; to serve as the administration committee of the Company's compensation plans; and to advise the Board of Directors on other compensation and benefit matters. The members of the Compensation Committee are Messrs. Geeslin, Moore, and Tyabji. OWNERSHIP OF THE CAPITAL STOCK OF THE COMPANY The following table sets forth information with respect to the number of shares of Common Stock beneficially owned by (i) each director of the Company, (ii) the five executive officers of the Company named in the table under "Compensation of Directors and Executive Officers--Summary Compensation Table," (iii) all directors and executive officers of the Company as a group, and (iv) based on information available to the Company and a review of statements filed with the Commission pursuant to Section 13(d) and 13(g) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), each person that owns beneficially (directly or together with affiliates) more than 5% of the Common Stock, in each case as AI-5 of November 8, 1996 (unless otherwise noted). The Company believes that each individual or entity named has sole investment and voting power with respect to shares of Common Stock indicated as beneficially owned by them, except as otherwise noted.
COMMON STOCK BENEFICIALLY PERCENTAGE NAME OWNED(1) OWNERSHIP(1) - ----------------------------------------------------------------------------------- -------------- --------------- N. Robert Hammer (2)............................................................... 386,509 4.98% Keith B. Geeslin (3)............................................................... 9,600 * Charles G. Moore III (4)........................................................... 20,382 * Fred W. Wenninger (5).............................................................. 7,665 * Hatim A. Tyabji (6)................................................................ 1,700 * Scott D. Mercer (7)................................................................ 5,139 * Alan G. Bunte (8).................................................................. 25,842 * John A. Niemzyk (9)................................................................ 8,048 * Thomas O. Miller (10).............................................................. 36,880 * All directors and executive officers as a group (11 persons) (11).................. 407,671 6.56% Kopp Investment Advisors, Inc. (12)................................................ 2,265,014 29.55%
- ------------------------ * Represents less than 1% of the outstanding shares of Common Stock. (1) Calculated pursuant to Rule 13d-3(d) under the Exchange Act. Under Rule 13d-3(d), shares not outstanding which are subject to options, warrants, rights, or conversion privileges exercisable within 60 days are deemed outstanding for the purpose of calculating the number and percentage owned by such person, but not deemed outstanding for the purpose of calculating the percentage owned by each other person listed. (2) Includes 225,010 shares of Common Stock issuable upon exercise of options, Also includes 1,566 shares of Common Stock owned by members of Mr. Hammer's immediate family that may be deemed to be beneficially owned by Mr. Hammer. (3) Includes 3,800 shares of Common Stock issuable upon exercise of options. (4) Includes 10,800 shares of Common Stock issuable upon exercise of options. (5) Includes 6,065 shares of Common Stock issuable upon exercise of options. Also includes 100 shares of Common Stock held by Mr. Wenninger's wife that may be deemed to be beneficially owned by Mr. Wenninger. (6) Includes 1,700 shares of Common Stock issuable upon exercise of options. (7) Includes 5,139 shares of Common Stock issuable upon exercise of options. (8) Includes 21,700 shares of Common Stock issuable upon exercise of options. (9) Includes 7,470 shares of Common Stock issuable upon exercise of options. (10) Includes 26,748 shares of Common Stock issuable upon exercise of options. (11) Includes 218,136 shares of Common Stock issuable upon exercise of options. (12) Kopp Investment Advisor, Inc. ("Kopp") filed a Schedule 13G with the Commission indicating beneficial ownership of shares of Common Stock. According to the Schedule 13G and to information supplied to the Company by Kopp, (i) Kopp has shared dispositive power with respect to 2,215,014 AI-6 shares of Common Stock it beneficially owns and sole dispositive power with respect to 50,000 shares of Common Stock it beneficially owns and (ii) Kopp has sole voting power with respect to 181,000 shares of Common Stock beneficially owned. The number of shares beneficially owned by Kopp is indicated as of October 24, 1996. The address of Kopp is 6600 France Ave. S., #672, Edina, MN 55435. Section 16(a) of the Exchange Act requires the Company's directors and executive officers, and persons who own more than the percent of a registered class of the Company's equity securities, to file with the Commission initial reports of ownership and reports of changes in ownership of Common Stock and other equity securities of the Company. Officers, directors, and greater than ten-percent stockholders are required by Commission regulation to furnish the Company with copies of all Section 16(a) forms they file. To the Company's knowledge, based solely on a review of the copies of such reports furnished to the Company and written representations that no other reports were required, during the Company's 1996 fiscal year all Section 16(a) filing requirements applicable to its officers, directors, and greater than ten- percent beneficial owners were complied with except that Mr. John A. Niemzyk and Mr. Scott D. Mercer each filed one report late. COMPENSATION OF DIRECTORS AND EXECUTIVE OFFICERS SUMMARY COMPENSATION TABLE The following table sets forth a summary of the annual, long-term, and other compensation for services rendered to the Company for the fiscal year ended August 31, 1996, and the prior two fiscal years paid or awarded to those persons who were, at August 31, 1996: (i) the Company's chief executive officer, and (ii) the Company's four most highly compensated executive officers other than the chief executive officer (collectively, including the Company's chief executive officer, the "Named Executive Officers").
LONG-TERM COMPENSATION --------------------------- ANNUAL COMPENSATION AWARDS ----------------------------------------- --------------------------- OTHER ANNUAL RESTRICTED OPTIONS/ NAME AND SALARY BONUS COMPENSATION STOCK AWARDS SARS PRINCIPAL POSITION YEAR ($) ($) ($)(1) ($) (#) - -------------------------------------- --------- --------- --------- ------------------- --------------- ---------- N. Robert Hammer 1996 340,000 -- -- 0 35,100 Chief Executive Officer 1995 313,333 -- -- 0 20,000(2) 1994 300,000 143,000 -- 0 12,000 Thomas O. Miller 1996 200,000 -- -- 0 22,975 Senior Vice President 1995 160,113 17,341 -- 0 8,500(4) 1994 141,251 80,000 -- 0 8,800 Scott D. Mercer 1996 152,838 50,760 -- 0 16,760 Vice President, Norand International 1995 93,684 61,260 -- 0 4,700(6) Corporation 1994 74,448 18,485 -- 0 500 Alan G. Bunte 1996 139,833 -- -- 0 14,285 Vice President, Strategic Planning 1995 129,833 20,000 -- 0 7,000(7) 1994 121,500 41,000 -- 0 -- John A. Niemzyk 1996 133,752 -- -- 0 25,415 Vice President, Operations and 1995 117,153 28,000 -- 0 4,400(9) Information Technology and Chief 1994 98,208 26,000 -- 0 1,300 Information Officer PAYOUTS ------------- ALL OTHER NAME AND LTIP PAYOUTS COMPENSATION PRINCIPAL POSITION ($) ($) - -------------------------------------- ------------- ------------- N. Robert Hammer 0 8,269(3) Chief Executive Officer 0 7,540(3) 0 6,924(3) Thomas O. Miller 0 5,592(5) Senior Vice President 0 5,588(5) 0 5,546(5) Scott D. Mercer 0 0 Vice President, Norand International 0 0 Corporation 0 0 Alan G. Bunte 0 4,635(8) Vice President, Strategic Planning 0 5,465(8) 0 3,657(8) John A. Niemzyk 0 5,491(10) Vice President, Operations and 0 4,883(10) Information Technology and Chief 0 4,820(10) Information Officer
(1) During the fiscal years covered, no Named Executive officer received any other annual compensation in an aggregate amount exceeding the lesser of either $50,000 or 10% of his total annual salary and bonus reported in the preceding two columns. (2) Represents 20,000 options originally authorized pursuant to the Company's Long-Term Performance Program on March 31, 1995, at an exercise price of $35.00, and subsequently cancelled and reissued on May 3, 1995, at a repriced exercise price of $30.25. AI-7 (3) Represents the Company's matching contribution to the Company's Section 401(k) deferred compensation plan of $4,750 in 1996, $4,620 in 1995, and $4,620 in 1994, and represents the value of term life insurance provided in excess of $50,000 of $3,519 in 1996, $2,920 in 1995, and $2,304 in 1994. (4) Represents 8,500 options originally authorized pursuant to the Company's Long-Term Performance Program on March 31, 1995, at an exercise price of $35.00, and subsequently cancelled and reissued on May 3, 1995, at a repriced exercise price of $30.25. (5) Represents the Company's matching contribution to the Company's Section 401(k) deferred compensation plan of $4,724 in 1996, $5,058 in 1995, and $5,171 in 1994, and represents the value of term life insurance provided in excess of $50,000 of $867 in 1996, $530 in 1995, and $375 in 1994. (6) Represents 700 options originally authorized pursuant to the Company's Long-Term Performance Program on March 31, 1995, at an exercise price of $35.00, and subsequently cancelled and reissued on May 3, 1995, at a repriced exercise price of $30.25 plus an additional 4,000 options issued on May 17, 1995, at an exercise price of $33.00. (7) Represents 7,000 options originally authorized pursuant to the Company's Long-Term Performance Program on March 31, 1995, at an exercise price of $35,00, and subsequently cancelled and reissued on May 3, 1995, at a repriced exercise price of $30.25. (8) Represents the Company's matching contribution to the Company's 401(k) deferred compensation plan of $4,219 in 1996, $5,142 in 1995, and $3,453 in 1994, and represents the value of term life insurance provided in excess of $50,000 of $416 in 1996, $322 in 1995, and $204 in 1994. (9) Represents 1,400 options originally authorized pursuant to the Company's Long-Term Performance Program on March 31, 1995, at an exercise price of $35.00, and subsequently cancelled and reissued on May 3, 1995, at a repriced exercise price of $30.25 plus an additional 3,000 options issued on June 12, 1995, at an exercise price of $36.13. (10) Represents the Company's matching contribution to the Company's 401(k) deferred compensation plan of $5,198 in 1996, $4,620 in 1995, and $4,620 in 1994, and represents the value of term life insurance provided in excess of $50,000 of $293 in 1996, $263 in 1995, and $200 in 1994. OPTION/SAR GRANTS IN LAST FISCAL YEAR The following table summarizes the grants of stock options awarded to the Named Executive Officers during the fiscal year ended August 31, 1996, under the Company's 1989 Stock Option Plan and the Company's Long-Term Performance Program.
POTENTIAL REALIZABLE VALUE AT ASSUMED ANNUAL RATES OF INDIVIDUAL GRANTS STOCK PRICE ------------------------------------------------------------ APPRECIATION FOR % OF TOTAL OPTION TERM(2) OPTIONS/SARS OPTIONS/ SARS EXERCISE PRICE EXPIRATION -------------------- NAME GRANTED(#) GRANTED ($/SH)(1) DATE 5%($) 10%($) - ---------------------------------- ------------- --------------- --------------- ----------- --------- --------- N. Robert Hammer.................. 35,100 6.31% 16.50 03/28/06 364,224 923,016 Thomas O. Miller.................. 7,500 1.35% 18.00 02/05/06 84,901 215,155 Thomas O. Miller.................. 15,475 2.78% 16.50 03/28/06 160,580 406,943 Alan G. Bunte..................... 5,000 0.90% 18.00 02/05/06 56,600 143,437 Alan G. Bunte..................... 9,285 1.67% 16.50 03/28/06 96,348 244,165 Scott D. Mercer................... 10,000 1.80% 18.00 02/05/06 113,201 286,874 Scott D. Mercer................... 6,760 1.22% 16.50 03/28/06 70,147 177,766 John A. Niemzyk................... 20,000 3.60% 13.25 01/24/06 166,657 422,342 John A. Niemzyk................... 5,415 0.97% 16.50 03/28/06 56,190 142,397
(1) The exercise price equals the last reported sale price of the Common Stock on the Nasdaq National Market System on the date of grant of the options. (2) The potential realizable dollar value of a grant is the product of: (a) the difference between (i) the product of the per share market price at the time of the grant and the sum of 1 plus the stock appreciation rate compounded annually over the term of the option (here, 5% and 10%), and (ii) the per-share exercise price of the option, and (b) the number of securities underlying the grant at fiscal year-end. AI-8 AGGREGATED OPTIONS/SAR EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION/SAR VALUES The following table provides information concerning options exercised by the Named Executive Officers during the fiscal year ended August 31, 1996, and the value at August 31, 1996, of unexercised options.
VALUE ($) OF NUMBER OF UNEXERCISED UNEXERCISED IN-THE-MONEY OPTIONS AT OPTIONS AT AUGUST 31, 1996 AUGUST 31, 1996 ---------------- --------------- SHARES ACQUIRED VALUE EXERCISABLE/ EXERCISABLE/ NAME ON EXERCISE (#) REALIZED($) UNEXERCISABLE UNEXERCISABLE - --------------------------------------------------- ----------------- --------------- ---------------- --------------- N. Robert Hammer................................... 0 0 112,629/69,971 658/12,504 Thomas O. Miller................................... 0 0 23,422/39,153 290/5,513 Alan G. Bunte...................................... 0 0 19,193/20,014 10,033/3,308 Scott D. Mercer.................................... 0 0 3,996/19,484 127/2,408 John A. Niemzyk.................................... 0 0 5,914/27,245 39,595/67,179
COMPENSATION OF DIRECTORS Non-employee members of the Board of Directors, except Mr. Moore, receive an annual fee of $12,000 (payable $3,000 per quarter) as compensation for their services as directors, a fee of $1,000 for each board meeting attended in person and $750 for each committee meeting attended in person. Mr. Moore serves as Lead Director of the Board of Directors. Mr. Moore receives an annual fee of $24,000 (payable $6,000 per quarter) as compensation for his services as Lead Director, a fee of $2,000 for each board meeting attended in person and $750 for each committee meeting attended in person. Directors are also reimbursed for reasonable costs associated with attendance at board and committee meetings. Non-employee members of the Board of Directors also participate in the Company's Stock Option Plan for Non-Employee Directors (the "Plan"), which was adopted by the Board of Directors effective March 16, 1994 (the "Effective Date"), and approved by the stockholders as of December 16, 1994. Pursuant to the Plan, each individual who was a non-employee director as of the Effective Date (Messrs. Geeslin, Moore, and Wenninger) was granted an option to purchase 6,000 shares of Common Stock as of the Effective Date, and each individual who became a non-employee director after the Effective Date was granted an option to purchase 5,000 shares of Common Stock as of the date of his initial appointment as a non-employee director (in each case, the "Initial Grant"). Each non-employee director who continues as a director is automatically granted an option to purchase 2,000 shares of Common Stock on each anniversary of his Initial Grant. In addition, Mr. Moore is automatically granted an additional option to purchase 2,000 shares of Common Stock on each anniversary of his Initial Grant. Options awarded under the Plan become exercisable with respect to one-twentieth of the total shares as of the last day of each quarter anniversary of the date of the award, with the exception of the options awarded in the Initial Grant to non-employee directors who became directors after the Effective Date, which become exercisable with respect to one-fifth of the shares on the first anniversary date of the award and thereafter as to one-twentieth of the total shares as of the last day of each quarter anniversary. Each such option awarded under the Plan bears an exercise price per share of Common Stock equal to the greater of par value or the fair market value of Common Stock on the date the option is granted. EMPLOYMENT CONTRACTS, TERMINATION OF EMPLOYMENT AND CHANGE-IN CONTROL ARRANGEMENTS The Company's employment policy provides that upon termination, with certain exceptions, each of the Company's vice presidents is entitled to severance pay in the amount of six months pay plus one additional month's pay for each year of service to the Company, not to exceed a combined total of 18 AI-9 months. In the event of a change in control, enhanced severance may be payable in the event of termination following a change in control on account of certain events, such as elimination of a position, adverse change in duties or compensation, or change in job location. The enhanced severance for vice- presidents is generally equal to two times the employee's annual salary plus bonus, continuation of employee benefits and outplacement services. The Company has entered into an employment agreement with each Named Executive Officer. Each of the agreements contain provisions for payment of a base salary plus bonus, an automobile allowance and reimbursement of certain expenses relating to relocating to Cedar Rapids, Iowa. In addition, pursuant to his employment agreement, Mr. Hammer was granted options for 129,156 shares of Common Stock vesting over a 55-month period beginning April 18, 1989. Mr. Hammer is also entitled pursuant to his employment agreement to termination payments of six months' salary, subject to certain exceptions. The Company and Mr. Hammer are also parties to a Change in Control Benefit Agreement pursuant to which Mr. Hammer is entitled to certain benefits in the event of a change in control. Mr. Hammer may be entitled to accelerate up to 100,000 options upon the occurrence of a change in control, if such acceleration does not have an adverse effect on the pooling-of-interest method of accounting. The agreement generally provides that if it is determined that the accelerated vesting upon a change in control of a stock option awarded to Mr. Hammer on September 24, 1996 would be subject to the excise tax imposed by section 4999 of the Internal Revenue Code of 1986, as amended (the "Code") (relating to excess parachute payments), Mr. Hammer will be entitled to a tax-gross up payment in an amount equal to the amount of the excise tax attributable to the accelerated vesting of the option, taxes incurred by Mr. Hammer on the excise tax and any interest or penalties incurred by Mr. Hammer with respect to such excise tax. Pursuant to the Company's Long-Term Performance Program, Mr. Hammer was awarded 100,000 options at an exercise price of $16.00 on September 24, 1996. On January 21, 1997, the Company and Mr. Hammer entered into a Consulting and Separation Agreement (the "Separation Agreement"). Pursuant to the Separation Agreement, Mr. Hammer's employment with the Company will terminate at the Effective Time. The Separation Agreement includes an agreement by Mr. Hammer to maintain the confidentiality of certain information and an agreement by Mr. Hammer not to compete with the Company for a period of three years following the Effective Time. Under the Separation Agreement, at the Effective Time Mr. Hammer will receive a payment of $1,000,000 and all unvested Company stock options granted to Mr. Hammer under the Company's Long-Term Incentive Program and the Company's 1989 Stock Option Plan will beome fully vested. The Separation Agreement also provides for the continuation of medical, life and accidental death and dismemberment insurance coverage for Mr. Hammer and his dependents for a period of three years following the Effective Time (which period may be extended by mutual agreement of the parties). The Separation Agreement also provides that for a period of one year commencing at the Effective Time, the Company will retain Mr. Hammer as a consultant for a fee of $800,000 payable at the Effective Time. The Separation Agreement also provides for payment to Mr. Hammer of a tax gross-up payment equal to the amount of excise tax that may be payable by Mr. Hammer under Section 4999 of the Code due to payments under the Separation Agreement and other payments and benefits that may be subject to such taxes. The gross-up payment would also include an amount for interest and penalties relating to payment of the excise tax and such other payments. BOARD OF DIRECTORS COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION The Compensation Committee approves all of the policies under which compensation is paid or awarded to the Company's executive officers. Under the direction of the Compensation Committee, the Company has implemented compensation practices that seek to enhance the performance of the Company and increase its value to all stockholders. In order to provide information on the compensation practices of the Company, the Compensation Committee has furnished the following report on executive compensation: AI-10 COMPENSATION PHILOSOPHY The Compensation Committee has devoted considerable attention to developing the Company's compensation philosophy which embodies four primary objectives: 1. to provide incentives based on value delivered to the Company's stockholders and customers; 2. to connect individual executive pay action with performance; 3. to maintain a system of rewards that is competitive with industry standards; and 4. to attract, motivate, and retain executives of the highest quality. The Company's compensation programs reflect the Compensation Committee's commitment to the mission, values, and performance of the Company. Continual review and refinement of the Company's compensation practices in response to the changing business environment will serve to reinforce this commitment. The most important performance yardstick in the Company's compensation program is the Company's ability to deliver value to stockholders through appreciation in share price. On an ongoing basis, the Compensation Committee will test and refine the compensation program to ensure a high correlation between level of compensation and return to stockholders. The Compensation Committee measures the correlation between executive compensation and return to stockholders as a function of Company operating income levels, the performance of operating divisions, and individual performance. Certain goals are set, reviewed, and approved by the Chairman and CEO, and weighted. Achievement of goals triggers executive compensation. Goals include Company operating income threshold levels, sales levels, business and product strategy development, cycle time, total project cost, development and implementation of global support strategies, net contributions margin, expense reduction, and days' sales outstanding objectives. Achieving desirable stockholder returns over a sustained period of time requires management's attention to a number of financial and non-financial strategic elements which enables the Company to focus on the current and long-term requirements of the customer. The Company's compensation program, therefore, focuses executives on actions that directly impact stockholder return in the short-term and long-term and serve the needs of the Company's customers. The impact of executives' actions is measured in terms of profit growth, earnings per share, asset management, and strategic product development and positioning. The Compensation Committee uses multiple sources of information to evaluate and establish appropriate compensation practices. While using multiple sources, the Compensation Committee relies on data from benchmark companies within the computer/peripherals industry to assess the Company's relative performance and compensation levels. Benchmark companies were selected by matching multiple criteria including product lines, markets served, revenue size, revenue source, and comparable operations. Consistent with the Compensation Committee's objectives, the Compensation Committee will position its executive compensation targets competitively with the benchmark companies. Annual executive compensation will be below, at or above the competitive target depending on individual and Company performance. Company and individual performance is measured primarily as a function of Company operating income, with thresholds set at the beginning of each fiscal year by the Board of Directors, through the planning and budgeting process. The Company's executive compensation program has three components--base salary, annual incentives, and long-term incentives. Base salary and annual incentives are primarily designed to reward current and past performance. Long-term incentives are primarily designed to provide strong incentives for long-term future performance. The Compensation Committee strongly believes that incentive compensation should only be awarded with commensurate performance. The Compensation Committee has approved compensation plans which include high minimum levels of performance to ensure that incentives are paid only when truly earned. AI-11 DESCRIPTION OF COMPENSATION PROGRAMS The following briefly describes the role of each element of compensation: BASE SALARY Base salary will be at levels sufficient to attract and retain qualified executives. To accomplish these goals, the Compensation Committee has generally targeted base salaries within a competitive range of average base salaries for similar positions in benchmark companies within the computer/peripheral industry. Aggregate base salary increases are intended to parallel increases in the pay levels of the computer/peripheral industry as a whole. Individual executive salary increases will strongly reflect the individual's level of performance as measured against the individual and Company goals discussed above and, to a lesser extent, trends within the industry which reflect salary and total compensation trends in a growth industry. ANNUAL INCENTIVE The Company's executive annual incentive plan serves to recognize and reward executives for taking actions that build the value of the Company, generate competitive total returns to stockholders, and provide value-added solutions to the Company's customers. The formula for annual incentive awards recognizes operational and financial goals of significance to the Company. Payments are made based on a combination of corporate and individual performance. Achieving a minimal Company operating income goal is a pre-condition for the awarding of any incentive awards. Individual annual incentive awards are conditioned on achieving certain pre-set objectives. LONG-TERM INCENTIVES The Company's Long-Term Performance Program serves to reward executive performance in successfully executing the long-term business strategy and building stockholder value. The program allows for the awarding of incentive stock options, non-qualified stock options, and performance restricted stock. During fiscal year 1996, only stock options were granted to the Company's executive officers. Participation and target awards are determined by the Compensation Committee by benchmarking the Company's performance against other companies within the computer/peripheral industry and against companies providing similar products and services. Awards are based on performance and individual responsibility. Criteria include: performance expectations versus results, significant and strategic contributions towards performance of the Company, and unique core competencies essential to the achievement of the Company's business mission. Awards may exceed targets if all criteria are met. COMPENSATION ADMINISTRATION The Compensation Committee follows an annual cycle to administer each of the three components of executive compensation. The integrity of the Company's compensation program relies on an annual performance evaluation process. DISCUSSION OF CEO COMPENSATION Consistent with the Company's compensation philosophy, the Compensation Committee managed Mr. Hammer's total compensation during fiscal year 1996 based on overall performance of the Company and on relative levels of compensation for CEOs within the benchmark companies in the computer/peripheral industry. In particular, Mr. Hammer's compensation is based on achievement of goals relating to earnings per share, profit and revenue growth, strategic product development and positioning, and asset management. Mr. Hammer is eligible for an annual incentive award of 50% of his base salary, provided that the Company achieves certain revenue and operating income growth thresholds. In fiscal year 1996, Mr. Hammer received no annual incentive award. AI-12 The Compensation Committee took the following fiscal year 1996 compensation actions for Mr. Hammer: 1. effective September 1, 1995, the Compensation Committee approved a base salary of $340,000 per year. 2. granted on May 29, 1996, an incentive stock option to purchase 35,100 shares of Common Stock at $16.50 per share. The option will vest 1/20th each quarter through May 29, 2001. The primary purpose of this grant was to motivate Mr. Hammer to successfully execute the Company's long-term business strategy and to build stockholder value. COMPENSATION COMMITTEE, Keith B. Geeslin Charles G. Moore III Hatim A. Tyabji AI-13 PERFORMANCE GRAPH The following line graph compares the Company's cumulative total stockholder return on its Common Stock since February 2, 1993, the date that the Common Stock began trading, with the cumulative total return of Standard & Poor's 500 Composite Stock Price Index and the Standard & Poor's Technology Sector Index. These comparisons assume the investment of $100 on January 31, 1993, in each index and on February 1, 1993, in the Company's Common Stock and reinvestment of dividends. COMPARISON OF CUMULATIVE TOTAL RETURN EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
COMPARISON OF 43 MONTH CUMULATIVE TOTAL RETURN* AMONG NORAND CORPORATION, THE S & P 500 INDEX AND THE S & P TECHNOLOGY SECTOR INDEX NORAND CORPORATION S & P 500 S & P TECHNOLOGY SECTOR 02/01/1993 100 100 100 Feb-93 116 101 103 May-93 126 104 108 Aug-93 152 108 109 Nov-93 160 106 114 Feb-94 202 110 126 May-94 237 108 122 Aug-94 215 113 131 Nov-94 216 108 133 Feb-95 253 118 146 May-95 213 130 175 Aug-95 248 138 199 Nov-95 95 149 203 Feb-96 116 159 214 May-96 132 167 232 Aug-96 106 164 222 * $100 INVESTED ON 3/01/96 IN STOCK OR ON 1/01/83 IN INDEX - INCLUDING INVESTMENT OF DIVIDEND. FISCAL YEAR ENDING AUGUST 31.
AI-14 ANNEX II [DLJ LETTERHEAD] January 21, 1997 Board of Directors Norand Corporation 550 Second Street, SE Cedar Rapids, IA 52420-2033 Dear Sirs: You have requested our opinion as to the fairness from a financial point of view to the stockholders of Norand Corporation (the "Company") of the consideration to be received by such stockholders pursuant to the terms of the Agreement and Plan of Merger dated as of January 21, 1997 (the "Agreement"), by and among the Company, Western Atlas Inc. ("Western"), and WAI Acquisition Corp., a wholly owned subsidiary of Western ("Purchaser"). Pursuant to the Agreement, Western will commence a tender offer (the "Tender Offer") for any and all outstanding shares of the Company's common stock, par value $0.01 per share ("Company Common Stock"), at a price of $33.50 per share in cash. The tender offer is to be followed by a merger (the "Merger") in which the shares of Company Common Stock not tendered would be converted, subject to certain exceptions, into the right to receive $33.50 per share in cash and the Purchaser would be merged with and into the Company. The Tender Offer, together with the Merger, are herein referred to as the "Acquisition". In arriving at our opinion, we have reviewed the Agreement. We also have reviewed financial and other information that was publicly available or furnished to us by the Company including information provided during discussions with management. Included in the information provided during discussions were certain financial projections of the Company for the period beginning September 1, 1996 and ending August 31, 2001 prepared by the management of the Company. In addition, we have compared certain financial and securities data of the Company with various other companies whose securities are traded in public markets, reviewed the historical stock prices and trading volumes of the Company Common Stock, reviewed prices and premiums paid in certain other business combinations and conducted such other financial studies, analyses and investigations as we deemed appropriate for purposes of this opinion. We were not requested to, nor did we, solicit the interest of any other party in acquiring the Company. In rendering our opinion, we have relied upon and assumed the accuracy and completeness of all of the financial and other information that was available to us from public sources, that was provided to us by the Company or its representatives, or that was otherwise reviewed by us. With respect to the financial projections supplied to us, we have assumed that they have been reasonably prepared on a basis reflecting the best currently available estimates and judgments of the management of the Company as to the future operating and financial performance of the Company. We have not assumed any responsibility for making an independent evaluation of the Company's assets or liabilities or for making any independent verification of any of the information reviewed by us. We have relied as to certain legal matters on advice of counsel to the Company. Our opinion is necessarily based on economic, market, financial and other conditions as they exist on, and on the information made available to us as of, the date of this letter. It should be understood that, although subsequent developments may affect this opinion, we do not have any obligation to update, revise or reaffirm this opinion. Our opinion does not address the relative merits of the Acquisition and any other business strategies being considered by the Company's Board of Directors, nor does it address the Board's decision to proceed with the Acquisition. Our opinion does not constitute a recommendation to any holder of Company Common Stock as to whether such stockholder should tender its shares pursuant to the Tender Offer. Donaldson, Lufkin & Jenrette Securities Corporation ("DLJ"), as part of its investment banking services, is regularly engaged in the valuation of businesses and securities in connection with mergers, acquisitions, underwritings, sales and distributions of listed and unlisted securities, private placements and valuations for estate, corporate and other purposes. DLJ has performed investment banking and other services for the Company in the past including an initial public offering of common stock in 1993 and has been compensated for such services. In addition, employees and affiliates of DLJ own in the aggregate less than 4% of Company Common Stock. Furthermore, an employee of a DLJ affiliate is a member of the Board of Directors of the Company. Based upon the foregoing and such other factors as we deem relevant, we are of the opinion that the consideration to be received by the holders of Company Common Stock pursuant to the Agreement is fair to such stockholders from a financial point of view. Very truly yours, DONALDSON, LUFKIN & JENRETTE SECURITIES CORPORATION By: /s/ LAWRENCE N. LAVINE ----------------------------------------- Lawrence N. Lavine MANAGING DIRECTOR EX-1 2 EXHIBIT 1 AGREEMNT AND PLAN OF MERGER Exhibit (c)(1) AGREEMENT AND PLAN OF MERGER AGREEMENT AND PLAN OF MERGER, dated as of January 21, 1997 (the "Agreement"), by and among NORAND CORPORATION, a Delaware corporation (the "Company"), WAI ACQUISITION CORP., a Delaware corporation (the "Purchaser"), and WESTERN ATLAS INC., a Delaware corporation ("Parent"). The Company and the Purchaser are hereinafter sometimes collectively referred to as the "Constituent Corporations." RECITALS WHEREAS, the Boards of Directors of Parent, the Purchaser and the Company have each approved the acquisition of the Company by Parent upon the terms and subject to the conditions set forth herein; WHEREAS, in furtherance of such acquisition, the Boards of Directors of Parent, the Purchaser and the Company have each approved the merger of the Purchaser with and into the Company in accordance with the terms of this Agreement and the General Corporation Law of the State of Delaware (the "DGCL") and with any other applicable law; and WHEREAS, the Board of Directors of the Company (the "Board") has, in light of and subject to the terms and conditions set forth herein, (i) determined that the consideration to be paid for each Share in the Offer and the Merger (as hereinafter defined) is fair to the stockholders of the Company, and the Offer and the Merger are otherwise in the best interests of the Company and its stockholders, and (ii) resolved to approve and adopt this Agreement and the transactions contemplated hereby and to recommend acceptance of the Offer and approval and adoption by the stockholders of the Company of this Agreement and the Merger. NOW, THEREFORE, in consideration of the premises and the mutual representations, warranties, covenants, agreements and conditions contained herein, the parties hereto agree as follows: ARTICLE I THE OFFER Section 1.01. The Offer. (a) Provided that this Agreement shall not have been terminated in accordance with Article IX hereof and none of the events set forth in Annex I hereto shall have occurred, as promptly as practicable (but in no event later than five business days from the date hereof) Purchaser shall commence (within the meaning of Rule 14d-2 under the Securities Exchange Act of 1934, as amended (including the rules and regulations promulgated thereunder, the "Exchange Act")) an offer to purchase all outstanding shares of Common Stock, par value $0.01 per share (the "Shares"), of the Company, at a price of $33.50 per Share net to the seller in cash (the "Offer") and, subject to the conditions of the Offer, shall use reasonable best efforts to consummate the Offer. The obligation of the Purchaser to consummate the Offer and to accept for payment and to pay for any Shares tendered pursuant thereto shall be subject to only those conditions set forth in Annex I hereto, including the condition that a number of Shares representing at least a majority of the number of Shares outstanding on a fully diluted basis (assuming the exercise of all outstanding Options and Warrants) be validly tendered and not withdrawn at the expiration of the Offer (the "Minimum Condition"). (b) Without the prior written consent of the Company, the Purchaser shall not decrease the price per Share or change the form of consideration payable in the Offer, decrease the number of Shares sought, impose additional conditions to the Offer or amend any other term of the Offer in any manner adverse to the holders of Shares. Without the prior written consent of the Company, the Purchaser will not waive the Minimum Condition if, as a result, the Purchaser would acquire less than a majority of the Shares actually outstanding. Upon the terms and subject to the conditions of the Offer, the Purchaser will accept for payment and purchase, as soon as permitted under the terms of the Offer, all Shares validly tendered and not withdrawn prior to the expiration of the Offer. (c) Each of Parent and the Purchaser, on the one hand, and the Company, on the other hand, agrees promptly to correct any information provided by it for use in the documents filed by Parent and the Purchaser with the Securities and Exchange Commission (the "SEC") in connection with the Offer (the "Offer Documents") if and to the extent that it shall have become false or misleading in any material respect, and Parent and the Purchaser further agree to take all steps necessary to cause the Offer Documents as so corrected to be filed with the SEC and to be disseminated to stockholders of the Company, in each case as and to the extent required by applicable federal securities laws. (d) Parent and the Purchaser agree that, without the prior written consent of the Company, the Purchaser shall not -2- terminate or withdraw the Offer or extend the expiration date of the Offer unless at the expiration date of the Offer the conditions to the Offer described in Annex I hereto shall not have been satisfied or earlier waived; provided that, if the number of Shares that have been validly tendered and not withdrawn prior to the initial expiration date of the Offer represent less than 90% of the Shares on a fully diluted basis, the Purchaser shall have the right, in its sole discretion, to extend the Offer for up to a maximum of 10 additional business days, notwithstanding the prior satisfaction of such conditions, so long as the Purchaser waives all conditions to the Offer other than the Minimum Condition and the conditions set forth in paragraphs (a)(i) or (f) of Annex I hereto. If at the expiration date of the Offer, the conditions to the Offer described in Annex I hereto shall not have been satisfied or earlier waived but, in the reasonable belief of Parent, may be satisfied prior to September 30, 1997, the Purchaser shall extend the expiration date of the Offer for an additional period or periods of time until the earlier of (i) the date such conditions are satisfied or earlier waived and the Purchaser becomes obligated to accept for payment and pay for Shares tendered pursuant to the Offer or (ii) this Agreement is terminated in accordance with its terms; provided that this sentence shall not be applicable in the event the conditions set forth in paragraph (d)(ii) of Annex I hereto shall not have been satisfied or earlier waived at the expiration date of the Offer. Section 1.02. Company Actions. (a) The Company hereby approves of and consents to the Offer and represents that (i) the Board, by vote of all directors at a meeting duly called and held, has, in light of and subject to the terms and conditions set forth herein, unanimously (x) determined that the consideration to be paid in each of the Offer and the Merger is fair to the stockholders of the Company and the Offer and the Merger are otherwise in the best interests of the Company and its stockholders and (y) approved and adopted this Agreement and the transactions contemplated hereby, including the Offer and the Merger, and resolved to recommend acceptance of the Offer and approval and adoption of this Agreement and the Merger and the other transactions contemplated hereby by the stockholders of the Company and (ii) Donaldson, Lufkin & Jenrette Securities Corporation, the Company's financial advisors, have rendered to the Board their opinion that the consideration to be received by the stockholders of the Company pursuant to the Offer and the Merger is fair to such stockholders from a financial point of view. (b) The Company hereby agrees promptly to prepare and, after review by the Purchaser, to file with the SEC and to -3- mail to its stockholders, a Solicitation/Recommendation Statement on Schedule 14D-9 with respect to the Offer (together with any amendments or supplements thereto, the "Schedule 14D-9") containing the recommendation described in Section 1.02(a) hereof and to disseminate the Schedule 14D-9 as required by Rule 14d-9 promulgated under the Exchange Act; provided, however, that, subject to the provisions of Article IX, such recommendation may be withdrawn, modified or amended only to the extent that the Board deems it necessary to do so in the exercise of its fiduciary obligations after being so advised by outside counsel. Each of the Company, on the one hand, and Parent and the Purchaser, on the other hand, agree promptly to correct any information provided by either of them for use in the Schedule 14D-9 if and to the extent that it shall have become false or misleading in any material respect, and the Company further agrees to take all steps necessary to cause the Schedule 14D-9 as so corrected to be filed with the SEC and to be disseminated to the stockholders of the Company, in each case as and to the extent required by applicable federal securities laws. (c) In connection with the Offer, the Company will furnish the Purchaser with such information (which subject to applicable law, shall be held in confidence) and assistance as the Purchaser or its agents or representatives may reasonably request in connection with the preparation of the Offer and communicating the Offer to the record and beneficial holders of the Shares. Section 1.03. Directors. (a) Subject to compliance with applicable law, promptly upon the payment by the Purchaser for Shares purchased pursuant to the Offer representing not less than a majority of the outstanding Shares on a fully diluted basis, and from time to time thereafter, the Company shall, upon request of Parent, promptly take all actions necessary to cause a majority of the directors of the Company to consist of Parent's designees, including by accepting the resignations of those incumbent directors designated by the Company or increasing the size of the Board and causing Parent's designees to be elected. (b) The Company's obligations to appoint Parent's designees to the Board shall be subject to Section 14(f) of the Exchange Act and Rule 14f-1 thereunder, if applicable. The Company shall promptly take all actions required pursuant to such Section and Rule in order to fulfill its obligations under this Section 1.03 and shall include in the Schedule 14D-9 such information with respect to the Company and its officers and directors as is required under such Section and Rule in order to fulfill its obligations under this Section 1.03. Parent -4- will supply any information with respect to itself and its officers, directors and affiliates required by such Section and Rule to the Company. (c) Following the election or appointment of Parent's designees pursuant to this Section 1.03 and prior to the Effective Time (as hereinafter defined), any amendment or termination of this Agreement by the Company, any extension by the Company of the time for the performance of any of the obligations or other acts of Parent or the Purchaser, waiver of any of the Company's rights hereunder or any other action by the Company concerning this Agreement or any of the transactions contemplated hereby, will require the concurrence of a majority of the directors of the Company then in office who were not designated by Parent. ARTICLE II THE MERGER Section 2.01. The Merger. (a) In accordance with the provisions of this Agreement and the DGCL, at the Effective Time, the Purchaser shall be merged with and into the Company (the "Merger"), and the Company shall be the surviving corporation (hereinafter sometimes called the "Surviving Corporation") and shall continue its corporate existence under the laws of the State of Delaware. At the Effective Time the separate existence of the Purchaser shall cease. (b) The name of the Surviving Corporation shall be "Norand Corporation." (c) The Merger shall have the effects on the Company and the Purchaser as Constituent Corporations of the Merger as provided under the DGCL. Section 2.02. Effective Time. The Merger shall become effective at the time of filing of, or at such later time specified in, a certificate of merger (the "Certificate of Merger") (or, if applicable, a certificate of ownership and merger), in the form required by and executed in accordance with the DGCL, filed with the Secretary of State of the State of Delaware (the "Delaware Secretary of State") in accordance with the provisions of Section 251 of the DGCL (or in the event Section 3.04 hereof is applicable, Section 253 of the DGCL). The date and time when the Merger shall become effective is herein referred to as the "Effective Time." -5- Section 2.03. Certificate of Incorporation and By-Laws of Surviving Corporation. The Certificate of Incorporation and By-Laws of the Purchaser shall be the Certificate of Incorporation and By-Laws of the Surviving Corporation until thereafter amended as provided by law. Section 2.04. Directors and Officers of Surviving Corporation. (a) Subject to applicable law, the directors of the Purchaser immediately prior to the Effective Time shall be the initial directors of the Surviving Corporation and shall hold office until their respective successors are duly elected and qualified, or their earlier death, resignation or removal. (b) The officers of the Company immediately prior to the Effective Time shall be the initial officers of the Surviving Corporation and shall hold office until their respective successors are duly elected and qualified, or their earlier death, resignation or removal. Section 2.05. Further Assurances. If, at any time after the Effective Time, the Surviving Corporation shall consider or be advised that any deeds, bills of sale, assignments, assurances or any other actions or things are necessary or desirable to vest, perfect or confirm of record or otherwise in the Surviving Corporation its right, title or interest in, to or under any of the rights, properties or assets of either of the Constituent Corporations acquired or to be acquired by the Surviving Corporation as a result of, or in connection with, the Merger or otherwise to carry out this Agreement, the officers of the Surviving Corporation shall be authorized to execute and deliver, in the name and on behalf of each of the Constituent Corporations or otherwise, all such deeds, bills of sale, assignments and assurances and to take and do, in the name and on behalf of each of the Constituent Corporations or otherwise, all such other actions and things as may be necessary or desirable to vest, perfect or confirm any and all right, title and interest in, to and under such rights, properties or assets in the Surviving Corporation or otherwise to carry out this Agreement. ARTICLE III CONVERSION OF SHARES Section 3.01. Effect on Shares and the Purchaser's Capital Stock. (a) As of the Effective Time, by virtue of the Merger and without any action on the part of the holders thereof, each Share issued and outstanding immediately prior to the -6- Effective Time (other than any Shares held by Parent, the Purchaser or any subsidiary of Parent or the Purchaser, in the treasury of the Company or by any subsidiary of the Company, which Shares, by virtue of the Merger and without any action on the part of the holder thereof, shall be cancelled and retired and shall cease to exist with no payment being made with respect thereto, and other than any Dissenting Shares (as hereinafter defined)) shall be converted into the right to receive $33.50 in cash or any higher price per Share paid in the Offer (the "Merger Price"), payable to the holder thereof, without interest thereon, as set forth in Section 4.02 hereof. (b) As of the Effective Time, by virtue of the Merger and without any action on the part of the holders thereof, each share of capital stock of the Purchaser issued and outstanding immediately prior to the Effective Time shall be converted into and become one fully paid and nonassessable share of Common Stock, par value $0.01 per share, of the Surviving Corporation. Section 3.02. Company Option Plans. (a) Prior to the consummation of the Offer, the Company and Parent shall take all actions necessary to provide that, at the Effective Time, each outstanding option to purchase Shares (the "Options") granted under any of the Company's 1989 Stock Option Plan, the Company's Long-Term Performance Program or the Company's 1994 Stock Option Plan for Non-Employee Directors (collectively, the "Option Plans") shall, by virtue of the Merger and without any further action on the part of the Company or the holder of such Option, be assumed by Parent in such manner that Parent (a) is a corporation (or a parent or a subsidiary corporation of such corporation) "assuming a stock option in a transaction to which Section 424(a) applied" within the meaning of Section 424 of the Internal Revenue Code of 1986, as amended (the "Code"); or (b) to the extent that Section 424 of the Code does not apply to any such Options, would be such a corporation (or a parent or a subsidiary corporation of such corporation) were Section 424 applicable to such Option. At the Effective Time, (i) all references in the Option Plans to the Company shall be deemed to refer to Parent and (ii) Parent shall issue to each holder of an Option a document evidencing the assumption of such option by Parent in accordance herewith. Each Option assumed by Parent (as assumed, the "Parent Options") shall be exercisable upon the same terms and conditions including, without limitation, vesting, as under the applicable Option Plan and the applicable option agreement issued thereunder, except that (x) each such Option shall be exercisable for the number of shares of Common Stock, par value $1.00 per share, of Parent ("Parent Common Stock") (rounded to the nearest whole share) obtained by multiplying the number of Shares -7- subject to such Option immediately prior to the Effective Time by $33.50 and dividing the result by the average of the closing prices for the Parent Common Stock reported on the New York Stock Exchange Consolidated Tape for the 10 consecutive trading days immediately prior to the Effective Time; and (y) the option price per share of Parent Common Stock shall be an amount equal to the aggregate exercise price of such Option prior to adjustment divided by the number of shares of Parent Common Stock subject to such Option after adjustment (the option price per share, as so determined, being rounded upward to the nearest full cent). The date of grant of each Parent Option shall be the date on which the corresponding Option was granted. No payment shall be made for fractional interests. Parent shall take all corporate actions necessary to reserve for issuance such number of shares of Parent Common Stock as will be necessary to satisfy exercises in full of all Options after the Effective Time. (b) Except as provided herein or as otherwise agreed to by the parties and to the extent permitted by the Option Plans, (i) the Option Plans shall terminate as of the Effective Time and the provisions in any other plan, program or arrangement, providing for the issuance or grant of any interest in respect of the capital stock of the Company or any of its subsidiaries shall be deleted as of the Effective Time and (ii) the Company shall use all reasonable efforts to ensure that following the Effective Time no holder of Options or any participant in the Option Plans or any other plans, programs or arrangements shall have any right thereunder to acquire any equity securities of the Company, the Surviving Corporation or any subsidiary thereof. Section 3.03. Stockholders' Meeting. (a) If required by applicable law in order to consummate the Merger, the Company, acting through the Board, shall, in accordance with applicable law: (i) duly call, give notice of, convene and hold a special meeting of its stockholders (the "Special Meeting") as soon as practicable following the purchase of and payment for Shares by the Purchaser pursuant to the Offer for the purpose of considering and adopting this Agreement and such other matters as may be necessary to consummate the transactions contemplated herein; (ii) prepare and file with the SEC a preliminary proxy statement relating to the matters to be considered at the Special Meeting pursuant to this Agreement and use its reasonable best efforts (x) to obtain and furnish the information required to be included by the SEC in the -8- Proxy Statement (as hereinafter defined) and, after consultation with Parent, to respond promptly to any comments made by the SEC with respect to the preliminary proxy statement and to cause a definitive proxy statement (the "Proxy Statement") to be mailed to its stockholders and (y) to obtain the necessary approvals of the Merger, this Agreement and such other matters as may be necessary to consummate the transactions contemplated hereby by its stockholders; and (iii) subject to the fiduciary obligations of the Board under applicable law as advised by outside counsel, include in the Proxy Statement the recommendation of the Board that stockholders of the Company vote in favor of the approval of the Merger, the adoption of this Agreement and such other matters as may be necessary to consummate the transactions contemplated hereby. (b) Parent agrees that it will vote, or cause to be voted, all of the Shares then owned by it, the Purchaser or any of its other subsidiaries in favor of the approval and adoption of this Agreement and such other matters as may be necessary to consummate the transactions contemplated hereby. Section 3.04. Merger Without Meeting of Stockholders. Notwithstanding Section 3.03 hereof, in the event that Parent, the Purchaser or any other subsidiary of Parent shall acquire at least 90% of the outstanding Shares pursuant to the Offer or otherwise, the parties hereto agree, at the request of Parent or the Purchaser, to take all necessary and appropriate action to cause the Merger to become effective as soon as practicable after the acceptance for payment and purchase of Shares by the Purchaser pursuant to the Offer without a meeting of stockholders of the Company in accordance with Section 253 of the DGCL. Section 3.05. Consummation of the Merger. As soon as practicable after the satisfaction or waiver of the conditions set forth in Article VIII hereof, the Surviving Corporation shall execute in the manner required by the DGCL and file with the Delaware Secretary of State the Certificate of Merger (or, in the event Section 3.04 hereof is applicable, the Purchaser shall execute in the manner required by the DGCL and file with the Delaware Secretary of State a certificate of ownership and merger), and the parties shall take such other and further actions as may be required by law to make the Merger effective as promptly as is practicable. -9- ARTICLE IV DISSENTING SHARES; PAYMENT FOR SHARES Section 4.01. Dissenting Shares. Notwithstanding anything in this Agreement to the contrary, Shares outstanding immediately prior to the Effective Time and held by a holder who has not voted in favor of the Merger or consented thereto in writing and who has demanded appraisal for such Shares in accordance with Section 262 of the DGCL, if such Section 262 provides for appraisal rights for such Shares in the Merger ("Dissenting Shares"), shall not be converted into the right to receive the Merger Price, as provided in Section 3.01 hereof, unless and until such holder fails to perfect or withdraws or otherwise loses his right to appraisal and payment under the DGCL. If, after the Effective Time, any such holder fails to perfect or withdraws or loses his right to appraisal, such Dissenting Shares shall thereupon be treated as if they had been converted as of the Effective Time into the right to receive the Merger Price to which such holder is entitled, without interest or dividends thereon. The Company shall give Parent prompt notice of any demands received by the Company for appraisal of Shares and Parent shall have the right to participate in all negotiations and proceedings with respect to such demands. The Company shall not, except with the prior written consent of Parent, make any payment with respect to, or settle or offer to settle, any such demands. Section 4.02. Payment for Shares. (a) From and after the Effective Time, a bank or trust company to be designated by Parent shall act as paying agent (the "Paying Agent") in effecting the payment of the Merger Price for certificates (the "Certificates") formerly representing Shares and entitled to payment of the Merger Price pursuant to Section 3.01 hereof. At the Effective Time, Parent or the Purchaser shall pursuant to irrevocable instructions deposit, or cause to be deposited, in trust with the Paying Agent the aggregate Merger Price to which holders of Shares shall be entitled at the Effective Time pursuant to Section 3.01 hereof. (b) The Merger Price shall be invested by the Paying Agent as directed by Parent, provided such investments shall be limited to direct obligations of the United States of America, obligations for which the full faith and credit of the United States of America is pledged to provide for the payment of principal and interest, commercial paper rated of the highest quality by Moody's Investors Service, Inc. or Standard & Poor's Corporation or certificates of deposit issued by a commercial bank having at least $10,000,000,000 in assets. -10- (c) As soon as practicable after the Effective Time, the Paying Agent shall mail to each record holder of Certificates that immediately prior to the Effective Time represented Shares (other than Certificates representing Shares held by Parent or the Purchaser, any subsidiary of Parent or the Purchaser, in the treasury of the Company or by any subsidiary of the Company) a form of letter of transmittal which shall specify that delivery shall be effected, and risk of loss and title to the Certificates shall pass, only upon proper delivery of the Certificates to the Paying Agent and instructions for use in surrendering such Certificates and receiving the Merger Price therefor. Upon the surrender of each such Certificate, the Paying Agent shall pay the holder of such Certificate the Merger Price multiplied by the number of Shares, as appropriate, formerly represented by such Certificate, in consideration therefor, and such Certificate shall forthwith be cancelled. Until so surrendered, each such Certificate (other than Certificates representing Dissenting Shares and Certificates representing Shares held by Parent or the Purchaser, any subsidiary of Parent or the Purchaser, in the treasury of the Company or by any subsidiary of the Company) shall represent solely the right to receive the aggregate Merger Price relating thereto. No interest shall be paid or accrued on the Merger Price. (d) Promptly following the date which is one year after the Effective Time, the Paying Agent shall deliver to Parent all cash, Certificates and other documents in its possession relating to the transactions described in this Agreement, and the Paying Agent's duties shall terminate. Thereafter, each holder of a Certificate formerly representing a Share (other than Certificates representing Dissenting Shares and Certificates representing Shares held by Parent or the Purchaser, any subsidiary of Parent or the Purchaser, in the treasury of the Company or by any subsidiary of the Company) may surrender such Certificate to Parent and (subject to applicable abandoned property, escheat and similar laws) receive in consideration therefor the aggregate Merger Price relating thereto, without any interest or dividends thereon. (e) The Merger Price shall be net to each holder of Certificates in cash, subject to reduction only for any applicable federal back-up withholding or stock transfer taxes payable by such holder. (f) If payment of cash in respect of any Certificate is to be made to a person other than the person in whose name such Certificate is registered, it shall be a condition to such payment that the Certificate so surrendered shall be properly endorsed or shall be otherwise in proper form for transfer and that the person requesting such payment shall have paid any -11- transfer and other taxes required by reason of such payment in a name other than that of the registered holder of the Certificate surrendered or shall have established to the satisfaction of Parent or the Paying Agent that such tax either has been paid or is not payable. (g) After the Effective Time, there shall be no transfers on the stock transfer books of the Surviving Corporation of any Shares which were outstanding immediately prior to the Effective Time. If, after the Effective Time, Certificates formerly representing Shares (other than Certificates representing Shares held by Parent or the Purchaser, any subsidiary of Parent or the Purchaser, in the treasury of the Company or by any subsidiary of the Company) are presented to the Surviving Corporation or the Paying Agent, they shall be surrendered and cancelled in return for the payment of the aggregate Merger Price relating thereto, without interest, as provided in this Article IV, subject to applicable law in the case of Dissenting Shares. ARTICLE V REPRESENTATIONS AND WARRANTIES OF THE COMPANY The Company represents and warrants to Parent and the Purchaser as follows: Section 5.01. Organization. The Company and each of its Significant Subsidiaries (as defined below) is a corporation duly organized, validly existing and in good standing under the laws of their respective jurisdictions of incorporation and the Company and each of its Significant Subsidiaries has all requisite corporate power and authority to own, lease and operate their respective properties and to carry on their respective businesses as now being conducted. The Company and each of its subsidiaries is duly qualified or licensed and in good standing to do business in each jurisdiction in which the property owned, leased or operated by it or the nature of the business conducted by it makes such qualification necessary, except in such jurisdictions where the failure to be so duly qualified or licensed and in good standing would not, individually or in the aggregate, have a material adverse effect on the business, operations, assets, financial condition or results of operations of the Company and its subsidiaries taken as a whole (a "Company Material Adverse Effect"). The Company owns directly all of the outstanding capital stock of each of its Significant Subsidiaries. As used in this Agreement a -12- "Significant Subsidiary" means a corporation which is a "significant subsidiary" within the meaning of Rule 1-02(v) of Regulation S-X. Section 5.02. Capitalization. The authorized capital stock of the Company consists of 15,000,000 Shares and 15,000,000 shares of preferred stock, par value $0.01 per share ("Company Preferred Stock"). As of January 17, 1997, there were 7,842,905 Shares and no shares of Company Preferred Stock issued and outstanding, and there are no Shares or shares of Company Preferred Stock held in the Company's treasury. As of the date hereof, there were outstanding options to purchase 1,252,347 Shares under the Option Plans at a weighted average exercise price of $20.409163. As of the date hereof, a total of 250,000 Shares are subject to issuance upon exercise of Series A Warrants at an exercise price of $21.15 per Share and a total of 300,000 Shares are subject to issuance upon exercise of Series B Warrants at an exercise price of $21.15 per Share and a total of 27,079 Shares are subject to issuance upon the exercise of warrants granted to two consultants to the Company at a weighted average exercise price of $17.394006 per Share (collectively, with the Series A Warrants and Series B Warrants, the "Warrants"). Except for Options under the Option Plans and Warrants, there were not as of the date hereof, and at all times thereafter through the Effective Time there will not be, any existing options, warrants, calls, subscriptions, or other rights or other agreements or commitments obligating the Company or any of its subsidiaries to issue, transfer or sell any shares of capital stock of the Company or any of its subsidiaries or any other securities convertible into or evidencing the right to subscribe for any such shares. All issued and outstanding Shares are duly authorized and validly issued, fully paid, non-assessable and free of preemptive rights with respect thereto. Schedule 5.02 lists each outstanding Option or Warrant, its exercise price, expiration date and vesting or exercisability schedule. Section 5.03. Authority. The Company has full corporate power and authority to execute and deliver this Agreement and, subject to the approval of its stockholders, if required, to consummate the transactions contemplated hereby. The execution and delivery of this Agreement and the consummation of the transactions contemplated hereby have been duly and validly authorized and approved by the Board, and other than the approval by its stockholders, if required, no other corporate proceedings are necessary to authorize this Agreement or the consummation of the transactions contemplated hereby. This Agreement has been duly and validly executed and delivered by the Company and, assuming this Agreement constitutes a legal, valid and binding agreement of the other parties hereto, it -13- constitutes a legal, valid and binding agreement of the Company, enforceable against it in accordance with its terms. Section 5.04. No Violations; Consents and Approvals. (a) Neither the execution and delivery of this Agreement nor the consummation of the transactions contemplated hereby nor compliance by the Company with any of the provisions hereof will (i) violate any provision of its certificate of incorporation or by-laws, (ii) except as set forth in Schedule 5.04(a)(ii), result in a violation or breach of, or constitute (with or without due notice or lapse of time or both) a default, or give rise to any right of termination, cancellation or acceleration or any right which becomes effective upon the occurrence of a merger, consolidation or change in control or ownership, under, any of the terms, conditions or provisions of any note, bond, mortgage, indenture or other instrument of indebtedness for money borrowed to which the Company or any of its subsidiaries is a party, or by which the Company or any of its subsidiaries or any of their respective properties is bound, or (iii) except as set forth in Schedule 5.04(a)(iii), result in a violation or breach of, or constitute (with or without due notice or lapse of time or both) a default, or give rise to any right of termination, cancellation or acceleration or any right (including any right to receive any payment) which becomes effective upon the occurrence of a merger, consolidation or change in control or ownership, under, any of the terms, conditions or provisions of any license, franchise, permit or agreement to which the Company or any of its subsidiaries is a party, or by which the Company or any of its subsidiaries or any of their respective properties is bound, or (iv) violate any statute, rule, regulation, order or decree of any public body or authority by which the Company or any of its subsidiaries or any of their respective properties is bound, excluding from the foregoing clauses (iii) and (iv) violations, breaches, defaults or rights under the laws of any jurisdiction outside the United States or which, either individually or in the aggregate, would not have a Company Material Adverse Effect or materially impair the Company's ability to consummate the transactions contemplated hereby or for which the Company has received or, prior to the consummation of the Offer, shall have received appropriate consents or waivers. (b) No filing or registration with, notification to, or authorization, consent or approval of, any governmental entity is required in connection with the execution and delivery of this Agreement by the Company, or the consummation by the Company of the transactions contemplated hereby, except (i) expiration of the waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR Act"), (ii) in connection, or in compliance, with the provisions of -14- the Exchange Act, (iii) the filing of the Certificate of Merger with the Delaware Secretary of State, (iv) such filings and consents as may be required under any environmental law pertaining to any notification, disclosure or required approval triggered by the Merger or the transactions contemplated by this Agreement, (v) filing with, and approval of, the National Association of Securities Dealers, Inc. and the SEC with respect to the delisting and deregistration of the Shares, (vi) such consents, approvals, orders, authorizations, notifications, registrations, declarations and filings as may be required under the corporation, takeover or blue sky laws of various states, (vii) compliance with any applicable requirements of any laws or regulations relating to the regulation of monopolies or competition in Germany and (viii) such other consents, approvals, orders, authorizations, notifications, registrations, declarations and filings not obtained prior to the consummation of the Offer the failure of which to be obtained or made would not, individually or in the aggregate, have a Company Material Adverse Effect, or materially impair the Company's ability to perform its obligations hereunder or prevent the consummation of any of the transactions contemplated hereby. Section 5.05. SEC Documents; Financial Statements. (a) The Company has made available to Parent and the Purchaser copies of each registration statement, report, proxy statement, information statement or schedule filed with the SEC by the Company since January 1, 1994 (the "SEC Documents"). As of their respective dates, as amended or supplemented by subsequent SEC Documents prior to the date hereof, the Company's SEC Documents complied in all material respects with the applicable requirements of the Securities Act of 1933, as amended, and the Exchange Act, as the case may be, none of such SEC Documents, as amended or supplemented by subsequent SEC Documents prior to the date hereof, contained any untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading. (b) Neither the Company nor any of its subsidiaries, nor any of their respective assets, businesses, or operations, is as of the date of this Agreement a party to, or is bound or affected by, or receives benefits under any contract or agreement or amendment thereto, that in each case would be required to be filed as an exhibit to a Form 10-K as of the date of this Agreement that has not been filed as an exhibit to an SEC Document filed prior to the date of this Agreement. -15- (c) As of their respective dates, the consolidated financial statements included in the Company's SEC Documents, as amended or supplemented by subsequent SEC Documents prior to the date hereof, complied as to form in all material respects with then applicable accounting requirements and the published rules and regulations of the SEC with respect thereto, were prepared in accordance with generally accepted accounting principles applied on a consistent basis during the periods involved (except as may be indicated therein or in the notes thereto) and fairly presented the Company's consolidated financial position and that of its consolidated subsidiaries as at the dates thereof and the consolidated results of their operations and statements of cash flows for the periods then ended (subject, in the case of unaudited statements, to the lack of footnotes thereto, to normal year-end audit adjustments and to any other adjustments described therein). Section 5.06. Absence of Certain Changes; No Undisclosed Liabilities. (a) Since November 30, 1996, except as disclosed in the SEC Documents prior to the date hereof, the Company has not (i) incurred any liability, whether or not accrued, contingent or otherwise, or suffered any event or occurrence which, individually or in the aggregate, could reasonably be expected to have a Company Material Adverse Effect, (ii) made any changes in accounting methods, principles or practices, (iii) declared, set aside or paid any dividend or other distribution with respect to its capital stock, (iv) issued, or agreed to issue, any capital stock except pursuant to outstanding Options or Warrants or (v) materially revalued any of its assets, including but not limited to materially writing down its inventory or accounts receivable. Since November 30, 1996 to the date of this Agreement, each of the Company and its subsidiaries has conducted its operations according to its ordinary course of business consistent with past practice, subject to the transactions contemplated by this Agreement. (b) Except as and to the extent disclosed by the Company in the SEC Documents, as of November 30, 1996, neither the Company nor any of its subsidiaries had any liabilities or obligations of any nature, whether or not accrued, contingent or otherwise, that would be required by generally accepted accounting principles to be reflected on a consolidated balance sheet of the Company and its subsidiaries (including the notes thereto) or which could reasonably be expected to have, individually or in the aggregate, a Company Material Adverse Effect. (c) Since August 31, 1996, except as disclosed on Schedule 5.06(c), the Company has not made any changes to any -16- employee benefit plan or program or any agreement or arrangement providing compensation or benefits to any of its officers or directors. Section 5.07. Litigation. Except as disclosed by the Company in the SEC documents, there is no suit, claim, action, proceeding or investigation pending or, to the knowledge of the Company, threatened against the Company or any of its subsidiaries or any of their respective properties or assets before any court or governmental entity which, individually or in the aggregate, could reasonably be expected to have a Company Material Adverse Effect or could reasonably be expected to prevent or delay the consummation of the transactions contemplated by this Agreement. Except as disclosed by the Company in the SEC Documents, neither the Company nor any of its subsidiaries is subject to any outstanding order, writ, injunction or decree which, insofar as can be reasonably foreseen, individually or in the aggregate, in the future could reasonably be expected to have a Company Material Adverse Effect or could reasonably be expected to prevent or delay the consummation of the transactions contemplated hereby. Section 5.08. Compliance with Applicable Law. (a) Except as disclosed by the Company in the SEC Documents, the Company and its subsidiaries hold all permits, licenses, variances, exemptions, orders and approvals of all governmental entities necessary for the lawful conduct of their respective businesses (the "Company Permits"), except for failures to hold such permits, licenses, variances, exemptions, orders and approvals which could not, individually or in the aggregate, reasonably be expected to have a Company Material Adverse Effect. Except as disclosed by the Company in the SEC Documents, the Company and its subsidiaries are in compliance with the terms of the Company Permits, except where the failure so to comply would not have a Company Material Adverse Effect. Except as disclosed by the Company in the SEC Documents, the businesses of the Company and its subsidiaries are not being conducted in violation of any law, ordinance or regulation of any governmental entity except for violations or possible violations which individually or in the aggregate do not, and, insofar as reasonably can be foreseen, in the future could not, have a Company Material Adverse Effect. Except as disclosed by the Company in the SEC Documents, no investigation or review by any governmental entity with respect to the Company or any of its subsidiaries is pending or, to the best knowledge of the Company, threatened nor, to the best knowledge of the Company, has any governmental entity indicated an intention to conduct the same, other than, in each case, those which the Company reasonably believes could not have a Company Material Adverse Effect. -17- (b) To the best knowledge of the Company, except as set forth on Schedule 5.08(b), all proceedings or investigations concerning the practices of the Company's Italian subsidiary have been concluded, and all penalties, fines or other payments required to be made by the Company or any of its subsidiaries in connection therewith have been reflected in the Company's financial statements included in the SEC Documents or otherwise disclosed in the SEC Documents. To the Company's knowledge, no employee of the Company or any of its subsidiaries is the subject of any continuing proceeding or investigation by any domestic or foreign governmental entity relating to these matters. Section 5.09. Taxes. Each of the Company and its subsidiaries has filed, or caused to be filed, all federal, state, local and foreign income and other material tax returns required to be filed by it, has paid or withheld, or caused to be paid or withheld, all taxes of any nature whatsoever, with any related penalties, interest and liabilities (any of the foregoing being referred to herein as a "Tax"), that are shown on such tax returns as due and payable, or otherwise required to be paid, other than such Taxes as are being contested in good faith and for which adequate reserves have been established and other than such Taxes for which adequate reserves have been established and reflected in the November 30, 1996 financial statements and in the books and records of the Company, and other than where the failure to so file, pay or withhold would not have a Company Material Adverse Effect. Adequate reserves have been established in the November 30, 1996 financial statements and in the books and records of the Company for deferred Taxes applicable to all differences between book and taxable income. There are no material claims or assessments pending against the Company or its subsidiaries for any alleged deficiency in any Tax, and the Company does not know of any threatened Tax claims or assessments against the Company or any of its subsidiaries which if upheld could have a Company Material Adverse Effect. Neither the Company nor any of its subsidiaries has made an election to be treated as a "consenting corporation" under Section 341(f) of the Code. There is no material deferred inter-company gain within the meaning of the Treasury Regulations promulgated under Section 1502 of the Code. Except as set forth on Schedule 5.09, there are no waivers or extensions of any applicable statutes of limitations to assess any United States federal state or local Taxes. All returns filed with respect to Taxes are true and correct in all material respects. Except as set forth on Schedule 5.09, there are no outstanding requests for any extension of time within which to file any return or within which to pay any United States federal, state or local Taxes shown to be due on any return. To the best knowledge of the Company's Director -18- of Corporate Taxes, there are no (i) outstanding requests for any extension of time within which to file any return or within which to pay any foreign Taxes shown to be due on any return or (ii) waivers or extensions of any applicable statutes of limitations to assess any foreign Taxes. Section 5.10. Certain Employee Plans. Each "employee benefit plan," as defined in Section 3(3) of the Employee Retirement Income Security Act of 1974, as amended ("ERISA"), maintained by the Company or any of its subsidiaries or under which they have any liability, contingent or otherwise (the "Plans"), complies in all material respects with all applicable requirements of ERISA (to the extent required to so comply) and the Code and other applicable laws, and no "reportable event" (as such term is defined in ERISA) or termination has occurred with respect to any Plan under circumstances which present a risk of liability to any governmental entity or other person which could reasonably be expected to have a Company Material Adverse Effect. None of the Plans is a multiemployer plan, as such term is defined in ERISA, and none of the Plans is subject to Title IV of ERISA. Neither the Company and its subsidiaries, nor any of their respective directors, officers, employees or agents has, with respect to any Plan, engaged in any "prohibited transaction", as such term is defined in Section 4975 of the Code or Section 406 of ERISA, nor has any Plan engaged in any such prohibited transaction which could result in any taxes or penalties or prohibited transactions under Section 4975 of the Code or under Section 502(i) of ERISA, which in the aggregate could have a Company Material Adverse Effect. Except as set forth on Schedule 5.10, no Plan provides benefits, including, without limitation, death or medical benefits (whether or not insured), with respect to current or former employees of the Company or its subsidiaries or any Company ERISA Affiliate beyond their retirement or other termination of service, other than (A) coverage mandated by applicable law, (B) death benefits or retirement benefits under any "employee pension plan" (as such term is defined in Section 3(2) of ERISA), (C) deferred compensation benefits accrued as liabilities on the books of the Company, its subsidiaries or the Company ERISA Affiliates or (D) benefits the full cost of which is borne by the current or former employee (or his beneficiary). Copies of all of the Company's Plans covering United States employees of the Company and any related trusts and summary plan descriptions have been made available to the Purchaser. Except as specifically contemplated by this Agreement or as set forth on Schedule 5.10, neither the execution and delivery of this Agreement nor the consummation of the transactions contemplated hereby will result in, cause the accelerated vesting or delivery of, or increase the amount or -19- value of, any payment or benefit to any employee or former employee of the Company or any of its subsidiaries. "Company ERISA Affiliate" means any trade or business which would together with the Company be deemed a "single employer" within the meaning of Section 4001 of ERISA. Section 5.11. Patents, Trade Names, Trademarks, Service Marks, Copyrights and Chip Registrations. (a) Set forth on Schedule 5.11(a) is a list and description of all material patents, patent applications, trade names, trademark registrations and trademark applications, service mark registrations and service mark applications, copyright registrations and copyright registration applications, both domestic and foreign, which are owned by the Company or any of its subsidiaries. The assets described on Schedule 5.11(a), all patent disclosures, common law trademarks and service marks, certification marks and their registrations and applications, chip registrations and their applications, and all "Software" (as defined in Section 5.14(a)), trade secrets, know-how, industrial property, technology or other proprietary rights which are owned or used by the Company or any of its subsidiaries are referred to as the "Intellectual Property." Except as otherwise indicated on Schedule 5.11(a), the Company and its subsidiaries own all right, title and interest in and to the Intellectual Property validly and beneficially, free and clear of all material liens or encumbrances of title, with the sole and exclusive right to use the same, subject to those licenses listed on Schedule 5.11(b). None of the Intellectual Property is the subject of any material claim or challenge asserted by any third party, except as specifically identified on Schedule 5.11(a). (b) Set forth on Schedule 5.11(b) is a list and description of (i) all material licenses, assignments and other transfers of Intellectual Property granted to others by the Company or any of its subsidiaries, and (ii) all material licenses, assignments and other transfers of material patents, trade names, trademarks, service marks, copyrights, chip registrations, Software, trade secrets, know-how, technology or other proprietary rights granted to the Company or any of its subsidiaries by others. Except as set forth in Schedule 5.04(a)(iii), none of the licenses described above is subject to termination or cancellation or material change in its terms or provisions as a result of this Agreement or the transactions provided for in this Agreement. (c) To the knowledge of Company without making inquiry of any third party, no person or entity is infringing, or has misappropriated, in any material respect, any Intellectual Property. -20- (d) The Company has paid all material maintenance, renewal or similar fees required by the applicable governmental agencies to maintain the Intellectual Property. Section 5.12. Patent, Trade Name, Trademark, Service Mark, Copyright or Chip Registration Indemnification and Infringement. Except as set forth on Schedule 5.12, neither the Company nor any of its subsidiaries has given or granted any significant indemnification for, and there are no pending written or, to the best knowledge of the Company, oral claims or demands against the Company for, patent, trade name, trademark, service mark, copyright, chip registration or Software infringement. To the knowledge of the Company, the present conduct of the business of the Company and its subsidiaries does not infringe in any material respect, any material patents, trade names, trademarks, service marks, copyrights, chip registrations or other proprietary rights of others. Section 5.13. Confidential Information or Trade Secrets. Except as set forth on Schedule 5.13, there are no material claims or demands of any person pertaining to, or any material proceedings which are pending or, to the Company's knowledge, threatened, which challenge the rights of the Company or any of its subsidiaries in respect of any material proprietary or confidential information or trade secrets used in the conduct of its business, and, to the Company's knowledge without making inquiry of any third party, no methods, processes, procedures, apparatus or equipment used by the Company or any of its subsidiaries use or include any material proprietary or confidential information or trade secrets misappropriated from any person or entity. To the Company's knowledge without making inquiry of any third party, neither the Company nor any of its subsidiaries has any material proprietary or confidential information or trade secrets owned or claimed by third parties not rightfully in its possession, and the Company and its subsidiaries have complied in all material respects with all material agreements, understandings and licenses governing the use of such proprietary or confidential information or trade secrets. Section 5.14. Software. (a) For purposes of this Agreement, "Software" shall mean any material computer program or any part of such computer program, whether in source code, object code or in any other form, whether recorded on tape or on any other media, and all material modifications, enhancements or corrections made to such program, and all material documentation relating to such program, including any flow charts, designs, instructions, job control procedures and manuals relating to such program in printed or machine readable -21- form. All Software that is included in the Intellectual Property or under development for use by the Company and its subsidiaries is referred to as the "Company Software". To the knowledge of the Company, the Company Software is not subject to any material defect in programming and operation. (b) The Company is not aware of any material breach by any third parties of any material confidentiality agreement in favor of the Company or any of its subsidiaries relating to such Software. Except as disclosed in the licenses listed on Schedule 5.11(b) or as otherwise disclosed on Schedule 5.11(a), neither the Company nor any of its subsidiaries has conveyed or granted to any third parties any other material rights to Company Software, nor is it obligated to grant or convey any material rights to license, market, incorporate in other Software, sell or otherwise use any such Software, and to the knowledge of the Company without making inquiry of any third party, no third party has unauthorized access to the documentation, source code or similar material for such Software. Section 5.15. Information. None of the Schedule 14D-9, the Proxy Statement, if any, or any other document filed or to be filed by or on behalf of the Company with the SEC or any other governmental entity in connection with the transactions contemplated by this Agreement contained when filed or will, at the respective times filed with the SEC or other governmental entity and, in addition, in the case of the Proxy Statement, if any, at the date it or any amendment or supplement is mailed to stockholders and at the time of any Special Meeting, contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary in order to make the statements made therein, in light of the circumstances under which they were made, not misleading; provided that the foregoing shall not apply to information supplied by Parent or the Purchaser specifically for inclusion or incorporation by reference in any such document. The Schedule 14D-9 and the Proxy Statement, if any, will comply as to form in all material respects with the provisions of the Exchange Act and the rules and regulations thereunder. None of the information supplied by the Company specifically for inclusion or incorporation by reference in the Offer Documents or in any other document filed or to be filed by or on behalf of Parent or the Purchaser with the SEC or any other governmental entity in connection with the transactions contemplated by this Agreement contains any untrue statement of a material fact or omits to state any material fact required to be stated therein or necessary in order to make the statements made therein, in light of the circumstances under which they were made, not misleading. -22- Section 5.16. Delaware Section 203. The Board has taken all appropriate and necessary action such that the provisions of Section 203 of the DGCL will not apply to any of the transactions contemplated by this Agreement. Section 5.17. Broker's Fees; Transaction Expenses. (a) Except for Donaldson, Lufkin & Jenrette Securities Corporation, neither the Company nor any of its subsidiaries or any of its directors or officers has incurred any liability for any broker's fees, commissions, or financial advisory or finder's fees in connection with any of the transactions contemplated by this Agreement, and neither the Company nor any of its subsidiaries or any of its directors or officers has employed any other broker, finder or financial advisor in connection with any of the transactions contemplated by this Agreement. (b) Schedule 5.17(b) lists all financial advisory, legal, accounting, consulting and similar fees for services that will be payable by the Company in connection with the negotiation and execution of this Agreement and the consummation of the Offer and the Merger. ARTICLE VI REPRESENTATIONS AND WARRANTIES OF PARENT AND THE PURCHASER Parent and the Purchaser represent and warrant to the Company as follows: Section 6.01. Organization. Each of Parent and the Purchaser is a corporation duly organized, validly existing and in good standing under the laws of Delaware and each of Parent and the Purchaser has all requisite corporate power and authority to own, lease and operate its properties and to carry on its business as now being conducted. Purchaser is an indirect wholly owned subsidiary of Parent. Section 6.02. Authority. Each of Parent and the Purchaser has full corporate power and authority to execute and deliver this Agreement and to consummate the transactions contemplated hereby. The execution and delivery of this Agreement and the consummation of the transactions contemplated hereby have been duly and validly authorized and approved by the Board of Directors of each of Parent and the Purchaser and by Parent (or another wholly owned subsidiary of Parent) as the sole stockholder of the Purchaser and no other corporate proceedings are necessary to authorize this Agreement or the consummation of the transactions contemplated hereby. This Agreement has -23- been duly and validly executed and delivered by each of Parent and the Purchaser and, assuming this Agreement constitutes a legal, valid and binding agreement of the Company, it constitutes a legal, valid and binding agreement of each of Parent and the Purchaser, enforceable against them in accordance with its terms. Section 6.03. No Violations; Consents and Approvals. (a) Neither the execution and delivery of this Agreement nor the consummation of the transactions contemplated hereby nor compliance by Parent or the Purchaser with any of the provisions hereof will (i) violate any provision of their respective certificates of incorporation or by-laws, (ii) result in a violation or breach of, or constitute (with or without due notice or lapse of time or both) a default, or give rise to any right of termination, cancellation or acceleration or any right which becomes effective upon the occurrence of a merger, under, any of the terms, conditions or provisions of any note, bond, mortgage, indenture or other instrument of indebtedness for money borrowed to which Parent or the Purchaser is a party, or by which Parent or the Purchaser or any of their respective properties is bound, (iii) result in a violation or breach of, or constitute (with or without due notice or lapse of time or both) a default, or give rise to any right of termination, cancellation or acceleration or any right which becomes effective upon the occurrence of a merger, under, any of the terms, conditions or provisions of any license, franchise, permit or agreement to which Parent or the Purchaser is a party, or by which Parent or the Purchaser or any of their respective properties is bound, or (iv) violate any statute, rule, regulation, order or decree of any public body or authority by which Parent or the Purchaser or any of its respective properties is bound, excluding from the foregoing clauses (ii), (iii) and (iv) violations, breaches, defaults or rights which, either individually or in the aggregate, would not have a material adverse effect on Parent's or the Purchaser's ability to perform their respective obligations pursuant to this Agreement or consummate the Offer and the Merger (a "Parent Material Adverse Effect") or for which Parent or the Purchaser has received appropriate consents or waivers. (b) No filing or registration with, notification to, or authorization, consent or approval of, any governmental entity is required by Parent or the Purchaser in connection with the execution and delivery of this Agreement, or the consummation by Parent or the Purchaser of the transactions contemplated hereby, except (i) expiration of the waiting period under the HSR Act, (ii) in connection, or in compliance, with the provisions of the Exchange Act, (iii) the filing of the Certificate of Merger with the Delaware Secretary of State, (iv) -24- such filings and consents as may be required under any environmental law pertaining to any notification, disclosure or required approval triggered by the Merger or the transactions contemplated by this Agreement, (v) such consents, approvals, orders, authorizations, notifications, approvals, registrations, declarations and filings as may be required under the corporation, takeover or blue sky laws of various states [or non-U.S. change-in-control laws or regulations] and (vi) such other consents, orders, authorizations, registrations, declarations and filings not obtained prior to the Effective Time the failure of which to be obtained or made would not, individually or in the aggregate, have a Parent Material Adverse Effect. Section 6.04. Information. Neither the Offer Documents nor any other document filed or to be filed by or on behalf of Parent or the Purchaser with the SEC or any other governmental entity in connection with the transactions contemplated by this Agreement contained when filed or will, at the respective times filed with the SEC or other governmental entity, contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary in order to make the statements made therein, in light of the circumstances under which they were made, not misleading; provided that the foregoing shall not apply to information supplied by the Company specifically for inclusion or incorporation by reference in any such document. None of the information supplied by Parent or the Purchaser specifically for inclusion or incorporation by reference in the Schedule 14D-9, the Proxy Statement, if any, or any other document filed or to be filed by or on behalf of the Company with the SEC or any other governmental entity in connection with the transactions contemplated by this Agreement contains any untrue statement of a material fact or omits to state any material fact required to be stated therein or necessary in order to make the statements made therein, in light of the circumstances under which they were made, not misleading. Section 6.05. Financing. Parent currently has in effect and will have at the time of acceptance for payment and purchase of Shares under the Offer and at the Effective Time, lines of credit and sufficient unused borrowing capacity thereunder to provide the funds necessary to consummate the Offer and the Merger and the transactions contemplated thereby and to pay related fees and expenses. -25- ARTICLE VII COVENANTS Section 7.01. Conduct of Business of the Company. Except as contemplated by this Agreement or as expressly agreed to in writing by Parent, during the period from the date of this Agreement to the Effective Time, each of the Company and its subsidiaries will conduct its operations according to its ordinary course of business consistent with past practice, and will use all commercially reasonable efforts to preserve intact its business organization, to keep available the services of its employees and to maintain satisfactory relationships with suppliers, distributors, customers and others having business relationships with it and will take no action which would materially adversely affect the ability of the parties to consummate the transactions contemplated by this Agreement or be inconsistent with such transactions. Without limiting the generality of the foregoing restriction, neither the Company nor any of its subsidiaries shall, without the written consent of Parent (which consent will not be unreasonably withheld) (i) amend any employee benefit plans or change the compensation or benefits due to any employee (other than normal merit increases in accordance with past practice), (ii) hire any officer at the vice president level or higher, (iii) enter into any license of intellectual property, whether as licensee or licensor, (iv) incur indebtedness for borrowed money in any amount over $1,000,000, (v) enter into any lease having a term in excess of one year, (vi) incur any capital expenditure in excess of $100,000, (vii) sell or otherwise dispose of any capital assets for consideration in excess of $100,000 or any real property, (viii) permit the creation of any lien on any of its, except in the ordinary course of business or in connection with its contemplated refinancing or (ix) enter into any sales contract or purchase order or related group of contracts or orders calling for aggregate payments in excess of $500,000 or having a term in excess of one year. Section 7.02. Acquisitions and Divestitures. Prior to the Effective Time, the Company shall keep Parent advised of the status of all discussions and negotiations concerning possible acquisitions and divestitures of any corporations or businesses, and the Company agrees that without the prior written consent of Parent it shall not make, or agree to make, any such acquisition or divestiture. Section 7.03. No Solicitation. (a) The Company agrees that, prior to the Effective Time, it shall not, and shall not authorize or permit any of its subsidiaries or any of its or its subsidiaries' directors, officers, employees, agents -26- or representatives (including financial advisors), directly or indirectly, to solicit, initiate, facilitate or encourage (including by way of furnishing or disclosing non-public information) any inquiries or the making of any proposal with respect to any merger, consolidation or other business combination involving the Company or its subsidiaries or acquisition of any kind of all or substantially all of the assets or capital stock of the Company and its subsidiaries taken as a whole (an "Acquisition Transaction") or negotiate or explore with any person (other than Parent or the Purchaser) any Acquisition Transaction or enter into any agreement, arrangement or understanding requiring it to abandon, terminate or fail to consummate the Merger or any other transactions contemplated by this Agreement; provided that the Company may, in response to an unsolicited written proposal with respect to an Acquisition Transaction from a third party that the Board believes to be capable of obtaining financing for such proposal, (i) furnish or disclose non-public information to such third party and (ii) negotiate, explore or otherwise communicate with such third party, in each case only if the Board determines in good faith by a majority vote, after consultation with its legal and financial advisors, and after receipt of the advice of outside legal counsel of the Company that failing to take such action would constitute a breach of the fiduciary duties of the Board, that failing to take such action would constitute a breach of the Board's fiduciary duties. (b) The Company shall as promptly as practicable advise Parent in writing of the receipt of any inquiries or proposals relating to an Acquisition Transaction and any actions taken pursuant to Section 7.03(a). Section 7.04. Access to Information. From the date of this Agreement until the Effective Time, the Company will give Parent and its authorized representatives (including counsel, environmental and other consultants, accountants and auditors) full access during normal business hours, subject to applicable law, to all facilities, personnel and operations and to all books and records of the Company and its subsidiaries, will permit Parent to make such inspections as it may reasonably require and will cause its employees and those of its subsidiaries to furnish Parent with such financial and operating data and other information with respect to its business and properties as Parent may from time to time reasonably request. The Company shall use its best efforts to make available to Parent and its authorized representatives the Company's accountants to facilitate Parent's investigation. Other than as required by applicable law, Parent agrees that any information -27- furnished to it, its subsidiaries or its authorized representatives pursuant to this Section 7.04 will be subject to the confidentiality provisions of the letter agreement dated February 16, 1996 between Parent and the Company. Section 7.05. Best Efforts; Other Actions. Subject to the terms and conditions herein provided and applicable law, each of the Company, Parent and the Purchaser shall use its reasonable best efforts promptly to take, or cause to be taken, all other actions and do, or cause to be done, all other things necessary, proper or appropriate under applicable laws and regulations to consummate and make effective the transactions contemplated by this Agreement, including, without limitation, (i) the obtaining of all necessary consents, approvals or waivers under its material contracts and (ii) the lifting of any legal bar to the Merger; provided, however, that the foregoing shall not require Parent, the Purchaser or any other affiliate of Parent to agree to any action or restriction which, if imposed by a governmental entity, would constitute a condition described in paragraph (a) of Annex I to this Agreement. Section 7.06. Public Announcements. Before issuing any press release or otherwise making any public statements with respect to this Agreement, the Offer or the Merger, Parent, the Purchaser and the Company will consult with each other as to its form and substance and shall not issue any such press release or make any such public statement prior to such consultation, except as may be required by law; provided, however, that neither Parent nor the Company shall be required to consult with the other concerning any portion of such a press release or public statement that relates to matters other than the transactions contemplated by this Agreement. Section 7.07. Notification of Certain Matters. Each of the Company and Parent shall give prompt notice to the other party of (i) the occurrence, or non-occurrence, of any event the occurrence, or non-occurrence, of which would be likely to cause either (A) any representation or warranty contained in this Agreement to be untrue or inaccurate in any material respect at any time from the date hereof to the acceptance for payment of Shares pursuant to the Offer, (B) any condition set forth in Annex I to be unsatisfied in any material respect at any time from the date hereof to the date the Purchaser purchases Shares pursuant to the Offer or (C) any condition set forth in Article VIII hereof to be unsatisfied in any material respect at any time from the date hereof to the Effective Time, and (ii) any material failure of the Company or Parent, as the -28- case may be, or any officer, director, employee or agent thereof, to comply with or satisfy any covenant, condition or agreement to be complied with or satisfied by it hereunder; provided, however, that the delivery of any notice pursuant to this Section 7.07 shall not limit or otherwise affect the remedies available hereunder to the party receiving such notice. Section 7.08. Indemnification. (a) From and after the Effective Time, Parent shall indemnify, defend and hold harmless the present and former officers, directors, employees and agents of the Company and its subsidiaries against all losses, claims, damages, expenses or liabilities arising out of actions or omissions or alleged actions or omissions occurring at or prior to the Effective Time, including without limitation the transactions contemplated by this Agreement, to the same extent and on the same terms and conditions (including with respect to advancement of expenses) provided for in the Company's Certificate of Incorporation and By-Laws and agreements in effect at the date hereof (to the extent consistent with applicable law). (b) For a period of five years after the Effective Time, Parent shall cause to be maintained in effect the current policies of directors' and officers' liability insurance maintained by the Company (provided that Parent may substitute therefor policies of at least the same coverage and amounts containing terms and conditions which are no less advantageous) with respect to claims arising from facts or events which occurred before the Effective Time; provided, however, that Parent shall not be obligated to make annual premium payments for such insurance to the extent such premiums exceed 150% of the premiums paid as of the date hereof by the Company for such insurance (the "Maximum Premium"). If the amount of the annual premiums necessary to maintain or procure such insurance coverage exceeds the Maximum Premium, Parent shall maintain the most advantageous policies of directors' and officers' insurance obtainable for an annual premium equal to the Maximum Premium. (c) The provisions of this Section 7.08 are intended to be for the benefit of, and shall be enforceable by each indemnified party hereunder, his or her heirs and his or her representatives. Section 7.09. Expenses. Except as set forth in Section 9.05(b) hereof, Parent and the Company shall bear their respective expenses incurred in connection with this Agreement, the Offer and the Merger, including, without limitation, the preparation, execution and performance of this Agreement and the transactions contemplated hereby, and all fees and expenses -29- of investment bankers, finders, brokers, agents, representatives, counsel and accountants. Section 7.10. State Takeover Laws. The Company shall, upon the request of Parent or the Purchaser, take all reasonable steps to assist in any challenge by Parent or the Purchaser to the validity or applicability to the transactions contemplated by this Agreement, including the Offer and the Merger, of any state takeover law. Section 7.11. Employee Benefits. Following the Effective Time, Purchaser shall cause the Company to honor in accordance with their terms the employment contracts set forth on Schedule 7.11, as in effect on the date hereof. Until the first anniversary of the Effective Time, Parent shall provide or cause the Company to provide to individuals who are employed by the Company or any of its subsidiaries as of the Effective Time employee benefits that are in the aggregate no less favorable than those generally provided to employees of the Company on the date hereof, other than the Company's Employee Stock Purchase Plan. Parent will make its employee stock purchase plan available to employees of the Company as promptly as practicable following the Effective Time. Section 7.12. Warrants. Prior to the Effective Time, the Company shall use its reasonable best efforts to cause the Consulting Agreement between the Company and Donald W. Rowley ("Rowley") dated February 12, 1996, as amended (the "Rowley Agreement"), and the Consulting Agreement between the Company and Jay Alix ("Alix") dated January 16, 1996, as amended (the "Alix Agreement"), to be amended to provide that each of the Warrants to purchase Shares granted to Rowley pursuant to the Rowley Agreement and each of the Warrants to purchase Shares granted to Alix pursuant to the Alix Agreement shall, at the Effective Time, be cancelled and each of Rowley and Alix, respectively, shall be entitled to receive from the Company in lieu thereof an immediate cash payment from the Company equal to the Merger Price multiplied by the number of Shares for which their respective Warrants are exercisable, minus the aggregate exercise price of such Warrants. Section 7.13. Credit Commitment. Parent shall use its reasonable best efforts to assist the Company in obtaining from The Bank of New York Financial Corporation ("BONYFC") a written commitment to the Company extending through at least May 31, 1997 to lend up to $75 million to the Company on commercially reasonable terms that are no less favorable to the Company than the terms of the latest written proposal made by BONYFC to the Company as of the date hereof; provided, however, that the foregoing shall not obligate Parent to incur any fees -30- or expenses payable to BONYFC or to guarantee, directly or indirectly, any obligations or indebtedness of the Company. If, notwithstanding the foregoing, BONYFC does not extend such written commitment to the Company on or before March 15, 1997, then, at the Company's option, Parent shall purchase from the Company, and the Company shall sell to Parent, shares of a newly created series of preferred stock of the Company having the terms set forth in Annex II hereto for an aggregate purchase price of $25,000,000 payable to the Company by wire transfer in immediately available funds with the closing of such purchase and sale to take place no later than March 31, 1997. ARTICLE VIII CONDITIONS TO THE OBLIGATIONS OF PARENT, THE PURCHASER AND THE COMPANY The respective obligations of each party to effect the Merger shall be subject to the satisfaction or, if permissible, waiver at or prior to the Effective Time of each of the following conditions: Section 8.01. Purchase of Shares. The Purchaser shall have accepted for payment and paid for Shares pursuant to the Offer in accordance with the terms thereof. Section 8.02. Stockholder Approval. The vote of the stockholders of the Company necessary to consummate the transactions contemplated by this Agreement shall have been obtained, if required by applicable law. Section 8.03. No Legal Impediments. No statute, rule, regulation, judgment, writ, decree, order or injunction shall have been promulgated, enacted, entered, enforced or deemed applicable to this Agreement or the Merger, and no other action shall have been taken, by any domestic, foreign or supranational government or governmental, administrative or regulatory authority or agency or by any court or tribunal, domestic, foreign or supranational, that has the effect of making illegal or directly or indirectly restraining, prohibiting or restricting the consummation of the Merger. -31- ARTICLE IX TERMINATION AND ABANDONMENT Section 9.01. Termination. This Agreement may be terminated at any time prior to the Effective Time: (a) by mutual consent of the Boards of Directors of Parent and the Company; (b) by either Parent or the Company if, without fault of such terminating party, the purchase of Shares pursuant to the Offer shall not have occurred on or before September 30, 1997, which date may be extended by mutual written consent of the parties hereto; (c) by Parent or the Company if the Offer expires or is terminated or withdrawn pursuant to its terms without any Shares being purchased thereunder; or (d) by either Parent or the Company if any court of competent jurisdiction in the United States or other governmental body in the United States shall have issued an order (other than a temporary restraining order), decree or ruling or taken any other action restraining, enjoining or otherwise prohibiting the purchase of Shares pursuant to the Offer or the Merger, and such order, decree, ruling or other action shall have become final and nonappealable; provided that the party seeking to terminate this Agreement shall have used its reasonable best efforts, subject to Section 7.05, to remove or lift such order, decree or ruling. Section 9.02. Termination by Parent. This Agreement may be terminated and the Offer and the Merger may be abandoned by action of the Board of Directors of Parent, at any time prior to the purchase of Shares pursuant to the Offer, if (a) the Board shall withdraw, modify or change its recommendation or approval in respect of this Agreement or the Offer in a manner adverse to Parent, (b) the Board shall have recommended any proposal other than by Parent or the Purchaser in respect of an Acquisition Transaction, or (c) a proposal for an Acquisition Transaction other than by Parent or the Purchaser shall be publicly disclosed and at the scheduled expiration of the Offer the Minimum Condition shall not have been satisfied. Section 9.03. Termination by the Company. This Agreement may be terminated and the Merger may be abandoned by action of the Board, at any time prior to the Effective Time, (a) if there shall be a material breach of any of Parent's or -32- the Purchaser's representations, warranties or covenants hereunder, which breach shall not be cured within ten days of notice thereof, or (b) provided the Company is not in breach of any obligation under this Agreement, to allow the Company to enter into an agreement in respect of an Acquisition Transaction which the Board determines is more favorable to the Company's stockholders from a financial point of view than the transactions contemplated hereby (provided that such termination shall not be effective unless and until the Company shall have paid to Parent the fee described in Section 9.05(b) hereof). Section 9.04. Procedure for Termination. In the event of termination and abandonment of the Merger and the Offer by Parent or the Merger by the Company pursuant to this Article IX, written notice thereof shall forthwith be given to the other. Section 9.05. Effect of Termination and Abandonment. (a) In the event of termination of this Agreement and abandonment of the Merger pursuant to this Article IX, no party hereto (or any of its directors or officers) shall have any liability or further obligation to any other party to this Agreement, except as provided in this Section 9.05 and except that nothing herein shall relieve any party from liability for any breach of this Agreement. (b) If (i) Parent shall have terminated this Agreement pursuant to clause (a) or (b) of Section 9.02 hereof or (ii) the Company shall have terminated this Agreement pursuant to Section 9.03(b) hereof, then in any such case the Company shall promptly, but in no event later than two days after the date of such termination or event, pay Parent in the manner set forth in the last sentence of this paragraph a termination fee of $9,000,000. If Parent shall have terminated this Agreement pursuant to clause (c) of Section 9.02 hereof and, within one year after such termination, the Company shall have entered into a definitive agreement providing for an Acquisition Transaction, the Company shall promptly, but in no event later than two days after the date of such definitive agreement, pay Parent in the manner set forth in the last sentence of this paragraph a termination fee of $9,000,000. Any termination fee payable under this paragraph shall be paid by the issuance to Parent of shares of preferred stock of the Company having the terms set forth in Annex III. (c) Upon termination of this Agreement, Parent will return to the Company all copies in Parent's possession of all non-public information supplied to Parent by the Company. -33- ARTICLE X DEFINITIONS Section 10.01. Terms Defined in the Agreement. The following terms used herein shall have the meanings ascribed in the indicated sections. Acquisition Transaction ......................................... 7.03(a) Agreement........................................................ Preamble Alix............................................................. 7.12 Alix Agreement .................................................. 7.12 Board ........................................................... Recitals BONYFC........................................................... 7.13 Certificate of Merger ........................................... 2.02 Certificates .................................................... 4.02(a) Code............................................................. 3.02(a) Company ......................................................... Preamble Company ERISA Affiliate.......................................... 5.10 Company Material Adverse Effect ................................. 5.01 Company Permits ................................................. 5.08 Company Preferred Stock.......................................... 5.02 Company Software................................................. 5.14(a) Constituent Corporations......................................... Preamble Delaware Secretary of State ..................................... 2.02 DGCL ............................................................ Recitals Dissenting Shares ............................................... 4.01 Effective Time .................................................. 2.02 ERISA ........................................................... 5.10 Exchange Act..................................................... 1.01(a) Intellectual Property ........................................... 5.11(a) Maximum Premium ................................................. 7.08(b) HSR Act ......................................................... 5.04(b) Merger .......................................................... 2.01(a) Merger Price .................................................... 3.01 Minimum Condition ............................................... 1.01(a) Offer ........................................................... 1.01(a) Offer Documents ................................................. 1.01(c) Option Plans .................................................... 3.02(a) Options ......................................................... 3.02(a) Parent .......................................................... Preamble Parent Common Stock ............................................. 3.02(a) Parent Material Adverse Effect .................................. 6.03(a) Parent Options .................................................. 3.02(a) Paying Agent .................................................... 4.02(a) Person .......................................................... 11.09 Plans ........................................................... 5.10 Proxy Statement ................................................. 3.03(a)(ii) Purchaser ....................................................... Preamble Rowley .......................................................... 7.12 Rowley Agreement ................................................ 7.12 Schedule 14D-9 .................................................. 1.02(b) -34- SEC ............................................................. 1.01(c) SEC Documents ................................................... 5.05(a) Shares .......................................................... 1.01(a) Significant Subsidiary .......................................... 5.01 Software ........................................................ 5.14(a) Special Meeting ................................................. 3.03(a)(i) Subsidiary ...................................................... 11.09 Surviving Corporation ........................................... 2.01(a) Tax ............................................................. 5.09 Warrants ........................................................ 5.02 ARTICLE XI MISCELLANEOUS Section 11.01. Amendment and Modification. At any time prior to the Effective Time, subject to applicable law and the provisions of Section 1.03(c) hereof, this Agreement may be amended, modified or supplemented only by written agreement (referring specifically to this Agreement) of Parent, the Purchaser and the Company with respect to any of the terms contained herein; provided, however, that after any approval and adoption of this Agreement by the stockholders of the Company, no such amendment, modification or supplementation shall be made which reduces the Merger Price or the form of consideration therefor or which in any way materially adversely affects the rights of such stockholders, without the further approval of such stockholders. Section 11.02. Waiver. At any time prior to the Effective Time, Parent and the Purchaser, on the one hand, and the Company, on the other hand, may (i) extend the time for the performance of any of the obligations or other acts of the other, (ii) waive any inaccuracies in the representations and warranties of the other contained herein or in any documents delivered pursuant hereto and (iii) waive compliance by the other with any of the agreements or conditions contained herein which may legally be waived. Any such extension or waiver shall be valid only if set forth in an instrument in writing specifically referring to this Agreement and signed on behalf of such party. Section 11.03. Survivability; Investigations. The respective representations and warranties of Parent, the Purchaser and the Company contained herein or in any certificates or other documents delivered prior to or as of the Effective Time shall not be deemed waived or otherwise affected by any investigation made by any party hereto and shall not survive the Merger. The covenants and agreements of the Surviving Corporation and Parent and the Purchaser, including those contained in Section 7.08 hereof, shall survive the Effective Time without limitation. -35- Section 11.04. Notices. All notices and other communications hereunder shall be in writing and shall be delivered personally or by next-day courier or telecopied with confirmation of receipt, to the parties at the addresses specified below (or at such other address for a party as shall be specified by like notice; provided that notices of a change of address shall be effective only upon receipt thereof). Any such notice shall be effective upon receipt, if personally delivered or telecopied, or one day after delivery to a courier for next-day delivery. (a) if to the Company, to Norand Corporation 550 Second Street S.E. Cedar Rapids, Iowa 52401 Telecopy: (319) 369-3630 Attention: James I. Johnson with a copy to: Mayer Brown & Platt 190 South LaSalle Street Chicago, Illinois 60603 Telecopy: (312) 701-7711 Attention: John R. Sagan (b) if to Parent or the Purchaser, to Western Atlas Inc. 360 North Crescent Drive Beverly Hills, California 90210 Telecopy: (310) 888-2913 Attention: General Counsel with a copy to: Wachtell, Lipton, Rosen & Katz 51 West 52nd Street New York, New York 10019 Telecopy: (212) 403-2000 Attention: Elliott V. Stein, Esq. Section 11.05. Assignment; Third-Party Beneficiaries. This Agreement and all of the provisions hereof shall be binding upon and inure to the benefit of the parties hereto and their respective successors and permitted assigns, but neither this Agreement nor any of the rights, interests or obligations -36- hereunder shall be assigned by any of the parties hereto without the prior written consent of the other parties. This Agreement is not intended to confer any rights or remedies hereunder upon any other person except the parties hereto and, with respect to Section 7.08, the present and former officers, directors, employees and agents of the Company. Section 11.06. Governing Law. This Agreement shall be governed by the laws of the State of Delaware (regardless of the laws that might otherwise govern under applicable Delaware principles of conflicts of law) as to all matters, including but not limited to matters of validity, construction, effect, performance and remedies. Section 11.07. Counterparts. This Agreement may be executed in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. Section 11.08. Severability. In case any one or more of the provisions contained in this Agreement should be invalid, illegal or unenforceable in any respect against a party hereto, the validity, legality and enforceability of the remaining provisions contained herein shall not in any way be affected or impaired thereby and such invalidity, illegality or unenforceability shall only apply as to such party in the specific jurisdiction where such judgment shall be made. Section 11.09. Interpretation. The article and section headings contained in this Agreement are solely for the purpose of reference, are not part of the agreement of the parties and shall not in any way affect the meaning or interpretation of this Agreement. As used in this Agreement, (i) the term "person" shall mean and include an individual, a partnership, a joint venture, a corporation, a trust, an unincorporated organization and a government or any department or agency thereof; and (ii) the term "subsidiary" of any specified corporation shall mean any corporation of which a majority of the outstanding securities having ordinary voting power to elect a majority of the board of directors are directly or indirectly owned by such specified corporation or any other person of which a majority of the equity interests therein are, directly or indirectly, owned by such specified corporation. Section 11.10. Guarantee. Parent hereby guarantees the due performance by the Purchaser of all of the Purchaser's obligations incurred in connection with the Offer and the Merger. -37- Section 11.11. Confidentiality Agreement. The letter agreement dated February 16, 1996 between Parent and the Company is hereby amended by deleting the eighth paragraph thereof. Section 11.12. Entire Agreement. This Agreement, including the schedules, annexes and exhibits hereto and the documents and instruments referred to herein and therein, embodies the entire agreement and understanding of the parties hereto in respect of the subject matter contained herein and therein and supersedes all prior agreements and understandings between the parties with respect to such subject matter. There are no representations, promises, warranties, covenants, or undertakings in respect of such subject matter, other than those expressly set forth or referred to herein and therein. IN WITNESS WHEREOF, Parent, the Purchaser and the Company have caused this Agreement to be signed by their respective duly authorized officers as of the date first above written. WESTERN ATLAS INC. By: /s/ Michael E. Keane --------------------- Name: Michael E. Keane Title: Senior Vice President and Chief Financial Officer WAI ACQUISITION CORP. By: /s/ Michael E. Keane --------------------- Name: Michael E. Keane Title: President NORAND CORPORATION By: /s/ N. Robert Hammer --------------------- Name: N. Robert Hammer Title: Chairman, President and Chief Executive Officer -38- ANNEX I Conditions to the Offer. Notwithstanding any other provision of the Offer, the Purchaser shall not be required to accept for payment or, subject to any applicable rules and regulations of the SEC, including Rule 14e-1(c) promulgated under the Exchange Act (relating to the Purchaser's obligation to pay for or return tendered Shares promptly after termination or withdrawal of the Offer), pay for, and may delay the acceptance for payment of any tendered Shares and amend or terminate the Offer as to any Shares not then paid for if (i) there shall not be validly tendered and not withdrawn prior to the expiration of the Offer a number of Shares which represents at least a majority of the number of Shares outstanding on a fully diluted basis (assuming the exercise of all outstanding Options and Warrants) or (ii) any applicable waiting period under the HSR Act or other applicable laws or regulations shall not have expired or been terminated prior to the expiration of the Offer or (iii) at any time after the date of this Merger Agreement and before the time of payment for any such Shares (whether or not any Shares have theretofore been accepted for payment or paid for pursuant to the Offer), any of the following conditions exists: (a) there shall be in effect an injunction or other order, decree, judgment or ruling by a court of competent jurisdiction or by a governmental, regulatory or administrative agency or commission or a statute, rule, regulation, executive order or other action shall have been promulgated, enacted, taken or threatened by a governmental authority or a governmental, regulatory or administrative agency or commission which in any such case (i) restrains or prohibits the making or consummation of the Offer or the consummation of the Merger, (ii) prohibits or restricts the ownership or operation by Parent or the Purchaser (or any of their respective affiliates or subsidiaries) of any portion of its or the Company's business or assets which is material to the business of all such entities taken as a whole, or compels Parent or the Purchaser (or any of their respective affiliates or subsidiaries) to dispose of or hold separate any portion of its or the Company's business or assets which is material to the business of all such entities taken as a whole, (iii) imposes material limitations on the ability of the Purchaser effectively to acquire or to hold or to exercise full rights of ownership of the Shares, including, without limitation, the right to vote the Shares purchased by the Purchaser on all matters properly presented to the stockholders of the Company, (iv) imposes any material limitations on the ability of Parent or the Purchaser or any of their respective affiliates or subsidiaries effectively to control in any material respect the business and operations of the Company and its subsidiaries, or (v) which otherwise would materially adversely affect the Company and its subsidiaries taken as a whole; or (b) there shall be pending any litigation or other proceeding brought by any governmental entity or agency that seeks to impose any of the effects referred to in paragraph (a) above or seeks material damages from the Company or Parent in connection with the Offer or the Merger; or (c) this Agreement shall have been terminated by the Company, Parent or the Purchaser in accordance with its terms; or (d)(i) any of the representations and warranties of the Company set forth in this Agreement that are qualified as to materiality shall not be true and correct, or any such representations and warranties that are not so qualified shall not be true and correct in any material respect, when made, or as of the Expiration Date (as defined in the Offer Documents) as if made as of such date, or (ii) as of the Expiration Date the Company shall not in all material respects have performed its obligations and agreements and complied with its covenants to be performed and complied with by it under this Agreement; or (e) there shall have occurred (i) any general suspension of, or limitation on prices for, trading in securities on any national securities exchange or the over-the-counter market, (ii) a declaration of a banking moratorium or any suspension of payments in respect of banks in the United States (whether or not mandatory), (iii) the commencement of a war, armed hostilities or other international or national calamity directly involving the United States, (iv) from the date of this Merger Agreement through the date of termination or expiration of the Offer, a decline of at least 25% in the Standard & Poor's 500 Index, or (v) in the case of any of the foregoing existing at the time of the commencement of the Offer, a material acceleration or worsening thereof; or (f) Parent, the Purchaser and the Company shall have agreed that the Purchaser shall amend the Offer to terminate the Offer or postpone the payment for Shares pursuant thereto. The foregoing conditions are for the sole benefit of Parent and the Purchaser and may be asserted by Parent or the Purchaser regardless of the circumstances (including any action or inaction by Parent or the Purchaser) giving rise to any such conditions and may be waived by Parent or the Purchaser in whole or in part at any time and from time to time, in each -2- case, in the good faith judgment of Parent and the Purchaser and subject to the terms of this Agreement. The failure by Parent or the Purchaser at any time to exercise any of the foregoing rights shall not be deemed a waiver of any such right and each such right shall be deemed an ongoing right which may be asserted at any time and from time to time. -3- ANNEX II Term Sheet for Series A Convertible Preferred Stock Issuer: Norand Corporation (the "Company") Liquidation Preference: $25,000,000 Conversion: After the first anniversary of issue date, convertible at the option of holder into common stock of the Company at the rate of 1 share of common stock for each $23.00 of liquidation preference, subject to antidilution provisions substantially identical to those in the Company's Series A and Series B Warrants. Dividend: 6-1/2% per annum of liquidation preference amount payable at the option of the Company in shares of Series A Convertible Preferred Stock or cash. Mandatory Redemption: Upon request of holder on earlier to occur of (i) consummation of a transaction resulting in a change in control of the Company and (ii) tenth anniversary of date of issue. Optional Redemption: At the option of the Company (i) during first year of issuance at 110% of liquidation preference and (ii) after first year from issuance at 100% of liquidation preference as long as the Company's common stock has traded in excess of $25.30 for any 10 consecutive trading days. Default: If the Company defaults on its mandatory redemption obligation, the dividend rate will increase by 25 basis points, and will thereafter increase by an additional 25 basis points for each 91-day period the default continues, up to a maximum dividend rate of 10-1/2%. During continuance of the default, the holder will be entitled to appoint one member of the Company's board of directors. -2- ANNEX III Term Sheet for Series B Convertible Preferred Stock Issuer: Norand Corporation (the "Company") Liquidation Preference: $9,000,000 Conversion: After the expiration of six months from issue date, convertible at the option of holder into common stock of the Company at the rate of 1 share of common stock for each $23.00 of liquidation preference, subject to antidilution provisions substantially identical to those in the Company's Series A and Series B Warrants. Dividend: 6% per annum of liquidation preference amount payable semi-annually and at the option of the Company in shares of Series B Convertible Preferred Stock or cash. Mandatory Redemption: Upon request of holder on earlier to occur of (i) consummation of a transaction resulting in a change in control of the Company and (ii) third anniversary of date of issue. Optional Redemption: At the option of the Company (i) during first year of issuance at 110% of liquidation preference and (ii) after first year from issuance at 100% of liquidation preference so long as Target's common stock has traded in excess of $25.30 for any 10 consecutive trading days. Default: If the Company defaults on its mandatory redemption obligation, the dividend rate will increase by 25 basis points, and will thereafter increase by an additional 25 basis points for each 91-day period the default contin- ues, up to a maximum dividend rate of 10%. During continuance of the default, the holder will be entitled to appoint one member of the Company's board of directors. -2- EX-2 3 EXHIBIT 2 CURRENT DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY
BUSINESS EXPERIENCE DURING THE PAST FIVE YEARS NAME AGE AND OTHER INFORMATION - ----------------------------------------------- --- ----------------------------------------------------------- N. Robert Hammer............................... 54 Mr. Hammer has been Chairman, President and Chief Executive Officer of the Company since 1988. Mr. Hammer received a Bachelor of Science degree from Columbia University in 1965, and a Master of Business Administration degree from Columbia University in 1967. Keith B. Geeslin............................... 43 Mr. Geeslin has been a director of the Company since 1988. Mr. Geeslin is a General Partner of the Sprout Group, a division of DLJ Capital Corporation, where he has been employed since 1984. In addition, he is a General Partner of the general partner of a series of investment funds managed by the Sprout Group. In addition to the Company, Mr. Geeslin is a director of Actel Corporation, SDL, Inc., and several privately-held companies. Mr. Geeslin received a Bachelor of Science, Electrical Engineering degree from Stanford University in 1975, a Master of Arts, Philosophy, Politics and Economics degree from Oxford University in 1977, and a Master of Science, Engineering-Economic Systems degree from Stanford University in 1978. Charles G. Moore III........................... 53 Mr. Moore has been a director of the Company since 1988 and Senior Director since January 1996. Since March 1994, Mr. Moore has been president of Little Diamond Island Enterprises, a venture capital investment firm. Mr. Moore was Chairman and Chief Executive Officer of Digital Communications Associates, Inc., a manufacturer of hardware and software products for the personal computer networking environment, from November 1993 to March 1994. From January 1982 to June 1993 Mr. Moore was a General Partner of Welsh, Carson, Anderson & Stowe, a venture capital investment firm. Mr. Moore serves on the board of directors of one privately-held company. Mr. Moore received a Bachelor of Arts, Mathematics degree from Dartmouth College in 1965 and Master of Science and Ph.D., Computer and Communications degrees from the University of Michigan in 1967 and 1971, respectively. From 1972 to 1975, Mr. Moore served on the faculty of Cornell University in the Department of Computer Science.
BUSINESS EXPERIENCE DURING THE PAST FIVE YEARS NAME AGE AND OTHER INFORMATION - ----------------------------------------------- --- ----------------------------------------------------------- Fred W. Wenninger.............................. 57 Mr. Wenninger has been a director of the Company since 1989. Since August 1995, Mr. Wenninger has served as President and Chief Executive Officer of Keytronic Corp., a manufacturer of computer keyboards. From May 1989 to December 1993, Mr. Wenninger was President and from May 1989 to October 1993 he was also Chief Executive Officer of Iomega Corporation, a computer disk drive manufacturer. Mr. Wenninger is also a director of Keytronic Corp. and Hach Company. Mr. Wenninger received a Bachelor of Science, Physics degree and Master of Science and Ph.D., Engineering degrees from Oklahoma State University in 1959, 1962 and 1964, respectively. Hatim A. Tyabji................................ 51 Mr. Tyabji has been a director of the Company since March 1995. Mr. Tyabji is Chairman, President and Chief Executive Officer of VeriFone, Inc., a global provider of transaction automation solution for the delivery of electronic payment services; he has been President and CEO since 1986 and Chairman since 1992. Mr. Tyabji earned a Bachelor of Science, Electrical Engineering degree from the College of Engineering in Porrna, India, in 1967, a Master of Science, Electrical Engineering degree from the State University of New York at Buffalo in 1969, and a Master of Business Administration from Syracuse University in 1975. Mr. Tyabji is also a graduate of the Stanford Executive Program.
MEETINGS AND COMMITTEES OF THE BOARD The Board of Directors has two standing committees: the Audit Committee and the Compensation Committee. The Board of Directors does not have a Nominating Committee. During the fiscal year ended August 31, 1996, the Board of Directors met eight times, the Audit Committee met three times, and the Compensation Committee met four times. During 1996, all directors attended at least 75% of the meetings of the Board of Directors and the committees thereof on which they served. The duties of the Audit Committee are to review the scope of the annual audit and interim procedures with the independent auditors; consult with the auditors during any annual audit or interim procedures on any situation that the auditors deem advisable for resolution prior to the completion of the audit or procedures; meet with the auditors to appraise the effectiveness of the audit effort; determine that no restrictions were placed by management on the scope of the examination or its implementation; inquire into the effectiveness of the Company's accounting and internal control functions; review with the auditors and management any registration statement in connection with the public offering of securities and such other financial reports as the committee or the Board of Directors deems advisable; report to the Board of Directors on the results of the committee's activities; and recommend to the Board of Directors any changes in the appointment of independent auditors that the committee deems to be in the best interest of the Company and its stockholders. The members of the Audit Committee are Messrs. Geeslin and Moore. The duties of the Compensation Committee are to make recommendations to the Board of Directors concerning the salaries of the Company's officers; to exercise the authority of the Board of Directors concerning the Company's benefit plans, including those plans limited in application to the Company's officers and senior management; to serve as the administration committee of the Company's compensation plans; and to advise the Board of Directors on other compensation and benefit matters. The members of the Compensation Committee are Messrs. Geeslin, Moore, and Tyabji. OWNERSHIP OF THE CAPITAL STOCK OF THE COMPANY The following table sets forth information with respect to the number of shares of Common Stock beneficially owned by (i) each director of the Company, (ii) the five executive officers of the Company named in the table under "Compensation of Directors and Executive Officers--Summary Compensation Table," (iii) all directors and executive officers of the Company as a group, and (iv) based on information available to the Company and a review of statements filed with the Commission pursuant to Section 13(d) and 13(g) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), each person that owns beneficially (directly or together with affiliates) more than 5% of the Common Stock, in each case as of November 8, 1996 (unless otherwise noted). The Company believes that each individual or entity named has sole investment and voting power with respect to shares of Common Stock indicated as beneficially owned by them, except as otherwise noted.
COMMON STOCK BENEFICIALLY PERCENTAGE NAME OWNED(1) OWNERSHIP(1) - ----------------------------------------------------------------------------------- -------------- --------------- N. Robert Hammer (2)............................................................... 386,509 4.98% Keith B. Geeslin (3)............................................................... 9,600 * Charles G. Moore III (4)........................................................... 20,382 * Fred W. Wenninger (5).............................................................. 7,665 * Hatim A. Tyabji (6)................................................................ 1,700 * Scott D. Mercer (7)................................................................ 5,139 * Alan G. Bunte (8).................................................................. 25,842 * John A. Niemzyk (9)................................................................ 8,048 * Thomas O. Miller (10).............................................................. 36,880 * All directors and executive officers as a group (11 persons) (11).................. 407,671 6.56% Kopp Investment Advisors, Inc. (12)................................................ 2,265,014 29.55%
- ------------------------ * Represents less than 1% of the outstanding shares of Common Stock. (1) Calculated pursuant to Rule 13d-3(d) under the Exchange Act. Under Rule 13d-3(d), shares not outstanding which are subject to options, warrants, rights, or conversion privileges exercisable within 60 days are deemed outstanding for the purpose of calculating the number and percentage owned by such person, but not deemed outstanding for the purpose of calculating the percentage owned by each other person listed. (2) Includes 225,010 shares of Common Stock issuable upon exercise of options, Also includes 1,566 shares of Common Stock owned by members of Mr. Hammer's immediate family that may be deemed to be beneficially owned by Mr. Hammer. (3) Includes 3,800 shares of Common Stock issuable upon exercise of options. (4) Includes 10,800 shares of Common Stock issuable upon exercise of options. (5) Includes 6,065 shares of Common Stock issuable upon exercise of options. Also includes 100 shares of Common Stock held by Mr. Wenninger's wife that may be deemed to be beneficially owned by Mr. Wenninger. (6) Includes 1,700 shares of Common Stock issuable upon exercise of options. (7) Includes 5,139 shares of Common Stock issuable upon exercise of options. (8) Includes 21,700 shares of Common Stock issuable upon exercise of options. (9) Includes 7,470 shares of Common Stock issuable upon exercise of options. (10) Includes 26,748 shares of Common Stock issuable upon exercise of options. (11) Includes 218,136 shares of Common Stock issuable upon exercise of options. (12) Kopp Investment Advisor, Inc. ("Kopp") filed a Schedule 13G with the Commission indicating beneficial ownership of shares of Common Stock. According to the Schedule 13G and to information supplied to the Company by Kopp, (i) Kopp has shared dispositive power with respect to 2,215,014 shares of Common Stock it beneficially owns and sole dispositive power with respect to 50,000 shares of Common Stock it beneficially owns and (ii) Kopp has sole voting power with respect to 181,000 shares of Common Stock beneficially owned. The number of shares beneficially owned by Kopp is indicated as of October 24, 1996. The address of Kopp is 6600 France Ave. S., #672, Edina, MN 55435. Section 16(a) of the Exchange Act requires the Company's directors and executive officers, and persons who own more than the percent of a registered class of the Company's equity securities, to file with the Commission initial reports of ownership and reports of changes in ownership of Common Stock and other equity securities of the Company. Officers, directors, and greater than ten-percent stockholders are required by Commission regulation to furnish the Company with copies of all Section 16(a) forms they file. To the Company's knowledge, based solely on a review of the copies of such reports furnished to the Company and written representations that no other reports were required, during the Company's 1996 fiscal year all Section 16(a) filing requirements applicable to its officers, directors, and greater than ten- percent beneficial owners were complied with except that Mr. John A. Niemzyk and Mr. Scott D. Mercer each filed one report late. COMPENSATION OF DIRECTORS AND EXECUTIVE OFFICERS SUMMARY COMPENSATION TABLE The following table sets forth a summary of the annual, long-term, and other compensation for services rendered to the Company for the fiscal year ended August 31, 1996, and the prior two fiscal years paid or awarded to those persons who were, at August 31, 1996: (i) the Company's chief executive officer, and (ii) the Company's four most highly compensated executive officers other than the chief executive officer (collectively, including the Company's chief executive officer, the "Named Executive Officers").
LONG-TERM COMPENSATION --------------------------- ANNUAL COMPENSATION AWARDS ----------------------------------------- --------------------------- OTHER ANNUAL RESTRICTED OPTIONS/ NAME AND SALARY BONUS COMPENSATION STOCK AWARDS SARS PRINCIPAL POSITION YEAR ($) ($) ($)(1) ($) (#) - -------------------------------------- --------- --------- --------- ------------------- --------------- ---------- N. Robert Hammer 1996 340,000 -- -- 0 35,100 Chief Executive Officer 1995 313,333 -- -- 0 20,000(2) 1994 300,000 143,000 -- 0 12,000 Thomas O. Miller 1996 200,000 -- -- 0 22,975 Senior Vice President 1995 160,113 17,341 -- 0 8,500(4) 1994 141,251 80,000 -- 0 8,800 Scott D. Mercer 1996 152,838 50,760 -- 0 16,760 Vice President, Norand International 1995 93,684 61,260 -- 0 4,700(6) Corporation 1994 74,448 18,485 -- 0 500 Alan G. Bunte 1996 139,833 -- -- 0 14,285 Vice President, Strategic Planning 1995 129,833 20,000 -- 0 7,000(7) 1994 121,500 41,000 -- 0 -- John A. Niemzyk 1996 133,752 -- -- 0 25,415 Vice President, Operations and 1995 117,153 28,000 -- 0 4,400(9) Information Technology and Chief 1994 98,208 26,000 -- 0 1,300 Information Officer PAYOUTS ------------- ALL OTHER NAME AND LTIP PAYOUTS COMPENSATION PRINCIPAL POSITION ($) ($) - -------------------------------------- ------------- ------------- N. Robert Hammer 0 8,269(3) Chief Executive Officer 0 7,540(3) 0 6,924(3) Thomas O. Miller 0 5,592(5) Senior Vice President 0 5,588(5) 0 5,546(5) Scott D. Mercer 0 0 Vice President, Norand International 0 0 Corporation 0 0 Alan G. Bunte 0 4,635(8) Vice President, Strategic Planning 0 5,465(8) 0 3,657(8) John A. Niemzyk 0 5,491(10) Vice President, Operations and 0 4,883(10) Information Technology and Chief 0 4,820(10) Information Officer
(1) During the fiscal years covered, no Named Executive officer received any other annual compensation in an aggregate amount exceeding the lesser of either $50,000 or 10% of his total annual salary and bonus reported in the preceding two columns. (2) Represents 20,000 options originally authorized pursuant to the Company's Long-Term Performance Program on March 31, 1995, at an exercise price of $35.00, and subsequently cancelled and reissued on May 3, 1995, at a repriced exercise price of $30.25. (3) Represents the Company's matching contribution to the Company's Section 401(k) deferred compensation plan of $4,750 in 1996, $4,620 in 1995, and $4,620 in 1994, and represents the value of term life insurance provided in excess of $50,000 of $3,519 in 1996, $2,920 in 1995, and $2,304 in 1994. (4) Represents 8,500 options originally authorized pursuant to the Company's Long-Term Performance Program on March 31, 1995, at an exercise price of $35.00, and subsequently cancelled and reissued on May 3, 1995, at a repriced exercise price of $30.25. (5) Represents the Company's matching contribution to the Company's Section 401(k) deferred compensation plan of $4,724 in 1996, $5,058 in 1995, and $5,171 in 1994, and represents the value of term life insurance provided in excess of $50,000 of $867 in 1996, $530 in 1995, and $375 in 1994. (6) Represents 700 options originally authorized pursuant to the Company's Long-Term Performance Program on March 31, 1995, at an exercise price of $35.00, and subsequently cancelled and reissued on May 3, 1995, at a repriced exercise price of $30.25 plus an additional 4,000 options issued on May 17, 1995, at an exercise price of $33.00. (7) Represents 7,000 options originally authorized pursuant to the Company's Long-Term Performance Program on March 31, 1995, at an exercise price of $35,00, and subsequently cancelled and reissued on May 3, 1995, at a repriced exercise price of $30.25. (8) Represents the Company's matching contribution to the Company's 401(k) deferred compensation plan of $4,219 in 1996, $5,142 in 1995, and $3,453 in 1994, and represents the value of term life insurance provided in excess of $50,000 of $416 in 1996, $322 in 1995, and $204 in 1994. (9) Represents 1,400 options originally authorized pursuant to the Company's Long-Term Performance Program on March 31, 1995, at an exercise price of $35.00, and subsequently cancelled and reissued on May 3, 1995, at a repriced exercise price of $30.25 plus an additional 3,000 options issued on June 12, 1995, at an exercise price of $36.13. (10) Represents the Company's matching contribution to the Company's 401(k) deferred compensation plan of $5,198 in 1996, $4,620 in 1995, and $4,620 in 1994, and represents the value of term life insurance provided in excess of $50,000 of $293 in 1996, $263 in 1995, and $200 in 1994. OPTION/SAR GRANTS IN LAST FISCAL YEAR The following table summarizes the grants of stock options awarded to the Named Executive Officers during the fiscal year ended August 31, 1996, under the Company's 1989 Stock Option Plan and the Company's Long-Term Performance Program.
POTENTIAL REALIZABLE VALUE AT ASSUMED ANNUAL RATES OF INDIVIDUAL GRANTS STOCK PRICE ------------------------------------------------------------ APPRECIATION FOR % OF TOTAL OPTION TERM(2) OPTIONS/SARS OPTIONS/ SARS EXERCISE PRICE EXPIRATION -------------------- NAME GRANTED(#) GRANTED ($/SH)(1) DATE 5%($) 10%($) - ---------------------------------- ------------- --------------- --------------- ----------- --------- --------- N. Robert Hammer.................. 35,100 6.31% 16.50 03/28/06 364,224 923,016 Thomas O. Miller.................. 7,500 1.35% 18.00 02/05/06 84,901 215,155 Thomas O. Miller.................. 15,475 2.78% 16.50 03/28/06 160,580 406,943 Alan G. Bunte..................... 5,000 0.90% 18.00 02/05/06 56,600 143,437 Alan G. Bunte..................... 9,285 1.67% 16.50 03/28/06 96,348 244,165 Scott D. Mercer................... 10,000 1.80% 18.00 02/05/06 113,201 286,874 Scott D. Mercer................... 6,760 1.22% 16.50 03/28/06 70,147 177,766 John A. Niemzyk................... 20,000 3.60% 13.25 01/24/06 166,657 422,342 John A. Niemzyk................... 5,415 0.97% 16.50 03/28/06 56,190 142,397
(1) The exercise price equals the last reported sale price of the Common Stock on the Nasdaq National Market System on the date of grant of the options. (2) The potential realizable dollar value of a grant is the product of: (a) the difference between (i) the product of the per share market price at the time of the grant and the sum of 1 plus the stock appreciation rate compounded annually over the term of the option (here, 5% and 10%), and (ii) the per-share exercise price of the option, and (b) the number of securities underlying the grant at fiscal year-end. AGGREGATED OPTIONS/SAR EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION/SAR VALUES The following table provides information concerning options exercised by the Named Executive Officers during the fiscal year ended August 31, 1996, and the value at August 31, 1996, of unexercised options.
VALUE ($) OF NUMBER OF UNEXERCISED UNEXERCISED IN-THE-MONEY OPTIONS AT OPTIONS AT AUGUST 31, 1996 AUGUST 31, 1996 ---------------- --------------- SHARES ACQUIRED VALUE EXERCISABLE/ EXERCISABLE/ NAME ON EXERCISE (#) REALIZED($) UNEXERCISABLE UNEXERCISABLE - --------------------------------------------------- ----------------- --------------- ---------------- --------------- N. Robert Hammer................................... 0 0 112,629/69,971 658/12,504 Thomas O. Miller................................... 0 0 23,422/39,153 290/5,513 Alan G. Bunte...................................... 0 0 19,193/20,014 10,033/3,308 Scott D. Mercer.................................... 0 0 3,996/19,484 127/2,408 John A. Niemzyk.................................... 0 0 5,914/27,245 39,595/67,179
COMPENSATION OF DIRECTORS Non-employee members of the Board of Directors, except Mr. Moore, receive an annual fee of $12,000 (payable $3,000 per quarter) as compensation for their services as directors, a fee of $1,000 for each board meeting attended in person and $750 for each committee meeting attended in person. Mr. Moore serves as Lead Director of the Board of Directors. Mr. Moore receives an annual fee of $24,000 (payable $6,000 per quarter) as compensation for his services as Lead Director, a fee of $2,000 for each board meeting attended in person and $750 for each committee meeting attended in person. Directors are also reimbursed for reasonable costs associated with attendance at board and committee meetings. Non-employee members of the Board of Directors also participate in the Company's Stock Option Plan for Non-Employee Directors (the "Plan"), which was adopted by the Board of Directors effective March 16, 1994 (the "Effective Date"), and approved by the stockholders as of December 16, 1994. Pursuant to the Plan, each individual who was a non-employee director as of the Effective Date (Messrs. Geeslin, Moore, and Wenninger) was granted an option to purchase 6,000 shares of Common Stock as of the Effective Date, and each individual who became a non-employee director after the Effective Date was granted an option to purchase 5,000 shares of Common Stock as of the date of his initial appointment as a non-employee director (in each case, the "Initial Grant"). Each non-employee director who continues as a director is automatically granted an option to purchase 2,000 shares of Common Stock on each anniversary of his Initial Grant. In addition, Mr. Moore is automatically granted an additional option to purchase 2,000 shares of Common Stock on each anniversary of his Initial Grant. Options awarded under the Plan become exercisable with respect to one-twentieth of the total shares as of the last day of each quarter anniversary of the date of the award, with the exception of the options awarded in the Initial Grant to non-employee directors who became directors after the Effective Date, which become exercisable with respect to one-fifth of the shares on the first anniversary date of the award and thereafter as to one-twentieth of the total shares as of the last day of each quarter anniversary. Each such option awarded under the Plan bears an exercise price per share of Common Stock equal to the greater of par value or the fair market value of Common Stock on the date the option is granted. EMPLOYMENT CONTRACTS, TERMINATION OF EMPLOYMENT AND CHANGE-IN CONTROL ARRANGEMENTS The Company's employment policy provides that upon termination, with certain exceptions, each of the Company's vice presidents is entitled to severance pay in the amount of six months pay plus one additional month's pay for each year of service to the Company, not to exceed a combined total of 18 months. In the event of a change in control, enhanced severance may be payable in the event of termination following a change in control on account of certain events, such as elimination of a position, adverse change in duties or compensation, or change in job location. The enhanced severance for vice- presidents is generally equal to two times the employee's annual salary plus bonus, continuation of employee benefits and outplacement services. The Company has entered into an employment agreement with each Named Executive Officer. Each of the agreements contain provisions for payment of a base salary plus bonus, an automobile allowance and reimbursement of certain expenses relating to relocating to Cedar Rapids, Iowa. In addition, pursuant to his employment agreement, Mr. Hammer was granted options for 129,156 shares of Common Stock vesting over a 55-month period beginning April 18, 1989. Mr. Hammer is also entitled pursuant to his employment agreement to termination payments of six months' salary, subject to certain exceptions. The Company and Mr. Hammer are also parties to a Change in Control Benefit Agreement pursuant to which Mr. Hammer is entitled to certain benefits in the event of a change in control. Mr. Hammer may be entitled to accelerate up to 100,000 options upon the occurrence of a change in control, if such acceleration does not have an adverse effect on the pooling-of-interest method of accounting. The agreement generally provides that if it is determined that the accelerated vesting upon a change in control of a stock option awarded to Mr. Hammer on September 24, 1996 would be subject to the excise tax imposed by section 4999 of the Internal Revenue Code of 1986, as amended (the "Code") (relating to excess parachute payments), Mr. Hammer will be entitled to a tax-gross up payment in an amount equal to the amount of the excise tax attributable to the accelerated vesting of the option, taxes incurred by Mr. Hammer on the excise tax and any interest or penalties incurred by Mr. Hammer with respect to such excise tax. Pursuant to the Company's Long-Term Performance Program, Mr. Hammer was awarded 100,000 options at an exercise price of $16.00 on September 24, 1996. On January 21, 1997, the Company and Mr. Hammer entered into a Consulting and Separation Agreement (the "Separation Agreement"). Pursuant to the Separation Agreement, Mr. Hammer's employment with the Company will terminate at the Effective Time. The Separation Agreement includes an agreement by Mr. Hammer to maintain the confidentiality of certain information and an agreement by Mr. Hammer not to compete with the Company for a period of three years following the Effective Time. Under the Separation Agreement, at the Effective Time Mr. Hammer will receive a payment of $1,000,000 and all unvested Company stock options granted to Mr. Hammer under the Company's Long-Term Incentive Program and the Company's 1989 Stock Option Plan will beome fully vested. The Separation Agreement also provides for the continuation of medical, life and accidental death and dismemberment insurance coverage for Mr. Hammer and his dependents for a period of three years following the Effective Time (which period may be extended by mutual agreement of the parties). The Separation Agreement also provides that for a period of one year commencing at the Effective Time, the Company will retain Mr. Hammer as a consultant for a fee of $800,000 payable at the Effective Time. The Separation Agreement also provides for payment to Mr. Hammer of a tax gross-up payment equal to the amount of excise tax that may be payable by Mr. Hammer under Section 4999 of the Code due to payments under the Separation Agreement and other payments and benefits that may be subject to such taxes. The gross-up payment would also include an amount for interest and penalties relating to payment of the excise tax and such other payments. BOARD OF DIRECTORS COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION The Compensation Committee approves all of the policies under which compensation is paid or awarded to the Company's executive officers. Under the direction of the Compensation Committee, the Company has implemented compensation practices that seek to enhance the performance of the Company and increase its value to all stockholders. In order to provide information on the compensation practices of the Company, the Compensation Committee has furnished the following report on executive compensation: COMPENSATION PHILOSOPHY The Compensation Committee has devoted considerable attention to developing the Company's compensation philosophy which embodies four primary objectives: 1. to provide incentives based on value delivered to the Company's stockholders and customers; 2. to connect individual executive pay action with performance; 3. to maintain a system of rewards that is competitive with industry standards; and 4. to attract, motivate, and retain executives of the highest quality. The Company's compensation programs reflect the Compensation Committee's commitment to the mission, values, and performance of the Company. Continual review and refinement of the Company's compensation practices in response to the changing business environment will serve to reinforce this commitment. The most important performance yardstick in the Company's compensation program is the Company's ability to deliver value to stockholders through appreciation in share price. On an ongoing basis, the Compensation Committee will test and refine the compensation program to ensure a high correlation between level of compensation and return to stockholders. The Compensation Committee measures the correlation between executive compensation and return to stockholders as a function of Company operating income levels, the performance of operating divisions, and individual performance. Certain goals are set, reviewed, and approved by the Chairman and CEO, and weighted. Achievement of goals triggers executive compensation. Goals include Company operating income threshold levels, sales levels, business and product strategy development, cycle time, total project cost, development and implementation of global support strategies, net contributions margin, expense reduction, and days' sales outstanding objectives. Achieving desirable stockholder returns over a sustained period of time requires management's attention to a number of financial and non-financial strategic elements which enables the Company to focus on the current and long-term requirements of the customer. The Company's compensation program, therefore, focuses executives on actions that directly impact stockholder return in the short-term and long-term and serve the needs of the Company's customers. The impact of executives' actions is measured in terms of profit growth, earnings per share, asset management, and strategic product development and positioning. The Compensation Committee uses multiple sources of information to evaluate and establish appropriate compensation practices. While using multiple sources, the Compensation Committee relies on data from benchmark companies within the computer/peripherals industry to assess the Company's relative performance and compensation levels. Benchmark companies were selected by matching multiple criteria including product lines, markets served, revenue size, revenue source, and comparable operations. Consistent with the Compensation Committee's objectives, the Compensation Committee will position its executive compensation targets competitively with the benchmark companies. Annual executive compensation will be below, at or above the competitive target depending on individual and Company performance. Company and individual performance is measured primarily as a function of Company operating income, with thresholds set at the beginning of each fiscal year by the Board of Directors, through the planning and budgeting process. The Company's executive compensation program has three components--base salary, annual incentives, and long-term incentives. Base salary and annual incentives are primarily designed to reward current and past performance. Long-term incentives are primarily designed to provide strong incentives for long-term future performance. The Compensation Committee strongly believes that incentive compensation should only be awarded with commensurate performance. The Compensation Committee has approved compensation plans which include high minimum levels of performance to ensure that incentives are paid only when truly earned. DESCRIPTION OF COMPENSATION PROGRAMS The following briefly describes the role of each element of compensation: BASE SALARY Base salary will be at levels sufficient to attract and retain qualified executives. To accomplish these goals, the Compensation Committee has generally targeted base salaries within a competitive range of average base salaries for similar positions in benchmark companies within the computer/peripheral industry. Aggregate base salary increases are intended to parallel increases in the pay levels of the computer/peripheral industry as a whole. Individual executive salary increases will strongly reflect the individual's level of performance as measured against the individual and Company goals discussed above and, to a lesser extent, trends within the industry which reflect salary and total compensation trends in a growth industry. ANNUAL INCENTIVE The Company's executive annual incentive plan serves to recognize and reward executives for taking actions that build the value of the Company, generate competitive total returns to stockholders, and provide value-added solutions to the Company's customers. The formula for annual incentive awards recognizes operational and financial goals of significance to the Company. Payments are made based on a combination of corporate and individual performance. Achieving a minimal Company operating income goal is a pre-condition for the awarding of any incentive awards. Individual annual incentive awards are conditioned on achieving certain pre-set objectives. LONG-TERM INCENTIVES The Company's Long-Term Performance Program serves to reward executive performance in successfully executing the long-term business strategy and building stockholder value. The program allows for the awarding of incentive stock options, non-qualified stock options, and performance restricted stock. During fiscal year 1996, only stock options were granted to the Company's executive officers. Participation and target awards are determined by the Compensation Committee by benchmarking the Company's performance against other companies within the computer/peripheral industry and against companies providing similar products and services. Awards are based on performance and individual responsibility. Criteria include: performance expectations versus results, significant and strategic contributions towards performance of the Company, and unique core competencies essential to the achievement of the Company's business mission. Awards may exceed targets if all criteria are met. COMPENSATION ADMINISTRATION The Compensation Committee follows an annual cycle to administer each of the three components of executive compensation. The integrity of the Company's compensation program relies on an annual performance evaluation process. DISCUSSION OF CEO COMPENSATION Consistent with the Company's compensation philosophy, the Compensation Committee managed Mr. Hammer's total compensation during fiscal year 1996 based on overall performance of the Company and on relative levels of compensation for CEOs within the benchmark companies in the computer/peripheral industry. In particular, Mr. Hammer's compensation is based on achievement of goals relating to earnings per share, profit and revenue growth, strategic product development and positioning, and asset management. Mr. Hammer is eligible for an annual incentive award of 50% of his base salary, provided that the Company achieves certain revenue and operating income growth thresholds. In fiscal year 1996, Mr. Hammer received no annual incentive award. The Compensation Committee took the following fiscal year 1996 compensation actions for Mr. Hammer: 1. effective September 1, 1995, the Compensation Committee approved a base salary of $340,000 per year. 2. granted on May 29, 1996, an incentive stock option to purchase 35,100 shares of Common Stock at $16.50 per share. The option will vest 1/20th each quarter through May 29, 2001. The primary purpose of this grant was to motivate Mr. Hammer to successfully execute the Company's long-term business strategy and to build stockholder value. COMPENSATION COMMITTEE, Keith B. Geeslin Charles G. Moore III Hatim A. Tyabji PERFORMANCE GRAPH The following line graph compares the Company's cumulative total stockholder return on its Common Stock since February 2, 1993, the date that the Common Stock began trading, with the cumulative total return of Standard & Poor's 500 Composite Stock Price Index and the Standard & Poor's Technology Sector Index. These comparisons assume the investment of $100 on January 31, 1993, in each index and on February 1, 1993, in the Company's Common Stock and reinvestment of dividends. COMPARISON OF CUMULATIVE TOTAL RETURN EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
COMPARISON OF 43 MONTH CUMULATIVE TOTAL RETURN* AMONG NORAND CORPORATION, THE S & P 500 INDEX AND THE S & P TECHNOLOGY SECTOR INDEX NORAND CORPORATION S & P 500 S & P TECHNOLOGY SECTOR 02/01/1993 100 100 100 Feb-93 116 101 103 May-93 126 104 108 Aug-93 152 108 109 Nov-93 160 106 114 Feb-94 202 110 126 May-94 237 108 122 Aug-94 215 113 131 Nov-94 216 108 133 Feb-95 253 118 146 May-95 213 130 175 Aug-95 248 138 199 Nov-95 95 149 203 Feb-96 116 159 214 May-96 132 167 232 Aug-96 106 164 222 * $100 INVESTED ON 3/01/96 IN STOCK OR ON 1/01/83 IN INDEX - INCLUDING INVESTMENT OF DIVIDEND. FISCAL YEAR ENDING AUGUST 31.
EX-3 4 EXHIBIT 3 PRESS RELEASE Exhibit (a)(7) For Immediate Release Contacts: Dirk Koerber (310) 888-2575 (Western Atlas) Donald Rowley (319) 369-3250 (Norand) Keith Everett (206) 348-2686 (Intermec) Western Atlas Acquisition of Norand Creates A Leader in High-Growth Data Collection and Mobile Computing Industries BEVERLY HILLS, Calif./CEDAR RAPIDS, Iowa - January 22, 1997 - Western Atlas Inc. (NYSE: WAI) and Norand Corporation (NASDAQ: NRND) announced today that the companies have entered into a definitive agreement under which Western Atlas will acquire Norand Corporation, a designer and developer of mobile computing systems and wireless data communications networks. The acquisition has been unanimously approved by the Boards of Directors of both companies. When completed, this acquisition will further strengthen the position of Western Atlas' Seattle-based Intermec division in the automated data collection (ADC) and mobile computing solutions industry. Under the agreement, Western Atlas will offer $33.50 per share for all 7.8 million shares of Norand common stock outstanding through a cash tender offer. The offer will be subject to receipt of a majority of the common stock of Norand and satisfaction of Hart-Scott-Rodino and other customary approvals and requirements. "This acquisition will establish Western Atlas--through its Intermec division -- as the company with the broadest technology range and most extensive distribution network in the industrial automated data collection and mobile computing solutions industry. The combined company will offer superior value and solutions to its customers," said Alton J. Brann, Chairman and CEO of Western Atlas. "The overall ADC industry has shown consistent annual growth rates of 12 to 17 percent." Norand's strong positions in wireless technology, pen-based systems, and in inventory tracking, route accounting and mobile computing solutions for the transportation, car rental, automotive and food/beverage industries, directly complement Intermec's expertise in rugged ADC systems for the industrial, government and distribution industries. Customers for all these applications increasingly are requiring the integration of products and services that the two organizations provide. "This is a combination of two companies with complementary technologies, distribution channels and application know-how," Brann continued. "Both sales organizations will benefit from a broader range of products and services, while the resulting larger production runs should generate economies of scale and major cost advantages. The acquisition is expected to be nondilutive to earnings in 1997 and additive to cash flow. These positive impacts will accelerate as we go forward." Norand's Chairman and CEO, N. Robert Hammer, said, "The merger of our company with Intermec combines two leaders in the global ADC industry that have complementary product and service lines, and this provides the base for excellent long-term growth. We fully support this transaction with Western Atlas. Brann added, "The acquisition represents an outstanding opportunity and it is adding to our growing information technology activities in the energy and industrial fields. Western Atlas is well on its way toward creating the prototype for a fast-growing global 'solutions' company whose success is based on information and systems integration technology." Norand's mobile computing systems and wireless data networks use radio frequency (RF) technology to automate the collection, processing and communication of information. Major products used in the systems solutions are hand-held computers, including pen-based units, radio-frequency terminals and communication networks. Over the past few years, Norand has invested heavily to move from a product orientation to an integrated systems solution provider in mobile data collection, and has established one of the premier application engineering capabilities in the industry. "The timing of this acquisition is excellent," said Michael Ohanian, a Western Atlas Vice President and President of Intermec. "Intermec already is an important supplier of automated data collection systems for industrial applications. Together with Norand, we will have the product offering, market-specific applications experience, and sales and service capability to become the leader in ADC for the emerging global logistics automation marketplace. We expect to build significantly on this foundation." Western Atlas, headquartered in Beverly Hills, California, is a global supplier of oilfield information services and industrial automation systems with annual revenues of more that $2.5 billion. Norand designs, manufactures and markets mobile computing systems and wireless data communications networks using radio frequency technology. NORAND-Registered Trademark- systems allow businesses worldwide to apply information technology to industrial and field automation settings. Typical applications include route accounting, field-sales automation, and inventory database management in manufacturing, warehouse and retail settings. Norand and its partners provide hardware, application software, systems integration and support to thousands of customers in dozens of industries to improve accountability, productivity and management control. Corporate offices are at 550 Second Street Southeast in Cedar Rapids, Iowa. Norand's World Wide Web home page is located at http://www.norand.com. # # # WAI083 ------ ------ EX-4 5 EXHIBIT 4 LETTER TO STOCKHOLDERS [NORAND CORPORATION LETTERHEAD] January 24, 1997 Dear Stockholder, I am pleased to report that, on January 21, 1997, Norand Corporation entered into an Agreement and Plan of Merger (the "Merger Agreement") with Western Atlas Inc. that provides for the acquisition of Norand by Western Atlas at a price of $33.50 per share in cash. Under the terms of the proposed transaction, a Western Atlas subsidiary is today commencing a cash tender offer (the "Offer") for all outstanding shares of Norand common stock at $33.50 per share. Following the successful completion of the Offer, the Western Atlas subsidiary will be merged into Norand (the "Merger") and all Norand shares not purchased in the Offer will be converted into the right to receive $33.50 per share in cash in the Merger. YOUR BOARD OF DIRECTORS HAS UNANIMOUSLY APPROVED THE MERGER AGREEMENT AND DETERMINED THAT THE MERGER AGREEMENT AND THE TRANSACTIONS CONTEMPLATED THEREBY, INCLUDING THE OFFER AND THE MERGER ARE FAIR TO AND IN THE BEST INTERESTS OF THE HOLDERS OF SHARES OF NORAND COMMON STOCK AND RECOMMENDS THAT NORAND STOCKHOLDERS ACCEPT THE OFFER AND TENDER THEIR SHARES. In arriving at its recommendation, the Board of Directors gave careful consideration to a number of factors. These factors included the opinion of Donaldson, Lufkin & Jenrette Securities Corporation, financial advisors to Norand, that the consideration to be received by Norand's stockholders pursuant to the Merger Agreement is fair to such stockholders from a financial point of view. Accompanying this letter is a copy of Norand's Solicitation/Recommendation Statement on Schedule 14D-9 including Norand's Rule 14f-1 Information Statement. Also enclosed is Western Atlas' Offer to Purchase and related materials, including a Letter of Transmittal for use in tendering shares. I urge you to carefully read the enclosed materials, including Donaldson, Lufkin & Jenrette's fairness opinion which is attached to the Schedule 14D-9. The management and directors of Norand thank you for the support you have given the company. Sincerely, N. Robert Hammer Chairman, President and Chief Executive Officer EX-5 6 EXHIBIT 5 OEM AGREEMENT Exhibit (c)(2) Contract Expiration Date: January 21, 1999 ORIGINAL EQUIPMENT MANUFACTURER AGREEMENT This Agreement is between Norand Corporation ("NORAND"), 550 Second Street S.E., Cedar Rapids, IA 52401, and Western Atlas, Inc., including its subsidiaries ("WESTERN ATLAS"), located at 360 North Crescent Drive, Beverly Hills, California 90210. BACKGROUND A. Norand is in the business of selling computer hardware and associated hand held terminal equipment, software and services for use with such computer hardware. B. Western Atlas is in the business of selling integrated manufacturing systems, automated data collection systems and material management systems. C. Western Atlas wishes to purchase computer hardware and systems software from Norand for resale in the Territory (defined in Section 1.1 below). AGREEMENT 1. APPOINTMENT OF WESTERN ATLAS 1.1 TERRITORY On a non-exclusive basis, Western Atlas may sell and license Products (as defined in Section 2) for use in healthcare, manufacturing, warehouse and distribution applications worldwide in such geographic locations where the Products are certified (the "TERRITORY"). Norand reserves the right to appoint other original equipment manufacturers, distributors and resellers in the Territory to sell Products and support customers using Products if Norand determines that is advisable. In addition, Norand reserves the right to make sales and provide service directly through its own employees, sales representatives and other original equipment manufacturers, distributors and resellers. 1.2 NOT AN AGENT Western Atlas is not Norand's agent for any purpose. This Agreement is not to be construed as a joint venture, partnership, agency, employer/employee relationship or any other form of business obligation between Norand and West- ern Atlas to share profits or bear any losses of the other. Western Atlas is acting solely as an independent contractor. 2. PRODUCTS The products which may be purchased pursuant to this Agreement ("PRODUCTS") are those listed on Schedule A, as may be amended from time to time by the parties hereto. Any Products sold to Western Atlas pursuant to this Agreement shall bear the "Intermec" name and/or logo as specified from time to time by Western Atlas. Norand reserves the right, without incurring any liability, to change prices, change the design or to discontinue the manufacture or sale of any Products. Norand will give Western Atlas thirty (30) days notice of any price changes or design changes to be made that change form, fit or function of such products and ninety (90) days notice of discontinuance of any Products. Norand will notify Western Atlas when any product listed on Schedule A, but not yet released for sale, is so released. 3. WESTERN ATLAS RESPONSIBILITIES 3.1 REASONABLE EFFORTS Western Atlas agrees to use reasonable efforts to service customers in the Territory. 3.2 VALUE ADDED Western Atlas represents that it is a reseller of computer systems and products and that it will purchase Products under this Agreement which it will then remarket to third-party end-users in the regular course of its business. The systems that Western Atlas sells will include additions or integration of other equipment or software which Western Atlas manufactures, acquires or develops. 3.3 SALES PROMOTION Western Atlas will maintain a sales organization knowledgeable in the Products. All Western Atlas sales personnel shall be certified by Norand in accordance with Section 3.4. -2- 3.4 CUSTOMER SUPPORT Western Atlas will provide the appropriate personnel, facilities and equipment necessary to provide support in the use and sale of Products to customers in the Territory. Western Atlas will have its personnel attend product, sales and service training courses as may be offered by Norand from time to time or as required by Norand of its sales employees, including but not limited to, the requirements set forth in Schedule B hereto. Western Atlas will make available adequate and competent technical resources to promptly answer technical start-up questions, to counsel end-users regarding the selection, integration and use of Products and available software programs; to assist end-users with obtaining appropriate FCC licenses; to survey the customer's facilities to determine the appropriate quantity and configuration of Products for that facility; install Products at the customer's facilities and act as the primary resource for end-user's support requirements. 3.5 MAINTENANCE Western Atlas shall have the right to sell its maintenance services to purchasers of Products. Norand will also make available to Western Atlas for sale to its customers that purchase Products Norand's maintenance services in the Territory in accordance with Norand's then current Value Added Reseller Maintenance Incentive Program. 3.6 SALES FORECAST Western Atlas will participate and cooperate with Norand fully in a monthly forecast system to provide good faith qualitative and quantitative details by month of projected sales and purchases of Products for the following twelve calendar months. The forecast will include such information and be in such form as Norand will from time to time require, including but not limited to, the quantity and type of Products to be sold, projected delivery dates and an assessment of the likelihood that the transaction will be completed. The first such forecast to be provided by Western Atlas pursuant to this Section shall be provided to Norand on or before April 1, 1997. 3.7 MONTHLY SALES AND SHIPMENT STATEMENT Western Atlas will provide Norand with written reports each -3- month detailing sales by location and monthly shipment information, including the serial numbers of the Products sold. This report will be used to initiate the warranty period hereunder, and, while delay in such report will not serve to lengthen the warranty period, failure or delay in making such report may diminish the warranty coverage. The report will include such information and be in such form as Norand will from time to time require. All such records will be maintained by Western Atlas for a period of three years from the date of termination of this Agreement. 3.8 FUNCTIONAL REQUIREMENTS Western Atlas agrees that it is responsible for the selection of the Products and the determination of the suitability of the Products for the purpose for which Western Atlas intends to use them. 3.9 INSPECTION Western Atlas agrees to inspect the Products upon receipt to ascertain that they are operable and function properly prior to resale. 3.10 INDEMNITY Western Atlas agrees to defend and hold Norand, its employees, agents, successors and assigns harmless from any liability, loss, damage, claims and expense whatsoever, including but not limited to judgments and attorneys fees, caused or alleged to be caused directly or indirectly by the products or services, or both, sold by Western Atlas or by the negligent, grossly negligent or willful acts of any agent, employee or subcontractor of Western Atlas; provided, however, that Western Atlas' obligations hereunder shall not arise to the extent that the claim or damage is caused solely by: (a) the Products; or (b) the negligent, grossly negligent or willful acts of Norand or its agents or employees. 4. NORAND RESPONSIBILITIES 4.1 SALES ASSISTANCE Norand may provide sales assistance in the Territory (as mutually agreed upon) and will provide brochures and materials at Norand's standard prices for such items then in -4- effect. 4.2 NORAND TRAINING, SUPPORT AND INTEGRATION Norand shall make available to Western Atlas training programs, support services and programs and system integration consulting at Norand's standard prices for such services then in effect. 5. ORDERS AND RETURNS 5.1 AUTHORIZED ORDER FORM The terms and conditions of this Agreement will be the only terms and conditions which apply to all orders Western Atlas makes for Products, unless Norand specifically agrees otherwise in writing. Any additional or conflicting terms Western Atlas may propose with its orders will not apply. All orders are subject to written acceptance by Norand. 5.2 ORDER INFORMATION Western Atlas' orders must be in writing and identify the product or service ordered, the shipping instructions, the requested delivery dates, and the system number if applicable. Requested delivery dates must be within one hundred and eighty (180) days of the date of order. 5.3 RESCHEDULING SHIPMENT Western Atlas may reschedule shipment of an accepted order one time if Western Atlas gives Norand written notice at least thirty (30) days before the scheduled ship date; provided that, the requested rescheduling date is within ninety (90) days of the original order date and Norand accepts the new ship date requested. Such acceptance will not be unreasonably withheld. Western Atlas may cancel shipment of an accepted order if it gives Norand written notice at least fifteen (15) business days before the scheduled shipment date. Cancellations, rescheduling and reconfigurations are subject to the following charges: Cancellation/Reconfiguration/ ----------------------------- If Notice is Received Rescheduling Charges --------------------- -------------------- -5- More than 60 days 0% 31 to 60 days 5% 16 to 30 days 10% 15 days 15% Prior to Date of Scheduled Shipment An accepted order may be rescheduled or reconfigured no more than once. Except as permitted by Norand in its sole and absolute discretion, cancellation, reconfiguration or rescheduling is not permitted less than fifteen (15) business days before the scheduled shipment date. 6. PRICES 6.1 PRICES For the period beginning on the date hereof and continuing through January 19, 1998, Norand will sell Products to Western Atlas at a price based on the sales forecast provided pursuant to Section 3.6 covering the twelve-month period beginning on April 1, 1997, such price being no less favorable than the lowest price then being charged by Norand for such Products for sales to other purchasers based on sales volumes similar to such forecast. For each period beginning on January 20 and ending on the following January 19, commencing January 20, 1998, Norand will sell Products to Western Atlas at a price based on the volume of purchases by Western Atlas during the twelve-month period ending on the preceding January 19, such price being no less favorable than the lowest price then being charged by Norand for such Products for sales to other purchasers with sales volumes similar to Western Atlas' volume purchases during such twelve-month period. Prices are F.O.B. point of shipment and exclude all transportation charges, duties and taxes. Western Atlas is responsible to reimburse Norand for all duties and taxes (other than taxes on Norand's income) which arise from the purchase and sale of Products, unless Western Atlas provides Norand with written evidence that is satisfactory to Norand of an exemption from such duties and taxes. Western Atlas is also responsible for all transportation charges. Risk of loss shall pass to Western Atlas F.O.B. point of shipment. -6- 6.2 PRICE CHANGES Norand will use reasonable efforts to provide Western Atlas written notice of any price changes ninety (90) days before the new prices become effective. If the change is an increase, orders placed within ninety (90) days of the written notice will be at the old price; provided Western Atlas accepts shipment within sixty (60) days from date of order. Orders for shipment more than sixty (60) days after the date of order will be at the new prices. In addition, the old price will apply to shipments made under an order accepted before the notice of the price increase is given; provided that, the agreed upon scheduled ship dates are within one hundred and eighty (180) days of the order date and Western Atlas does not reschedule shipment. If a shipment under such an order is rescheduled, the new prices will apply to all subsequent shipments under that order. If the change is a price decrease, Norand will apply the new lower price to all shipments made under orders accepted, but not shipped, before the date of notice of the price change. 7. INVOICING AND PAYMENT Prices and other charges will be invoiced on shipment. Subject to prior credit approval by Norand, payment will be due within thirty (30) days from the date of invoice. If deliveries are made in installments, each shipment will be paid for when due without regard to the other scheduled deliveries. Failure to make payment when due may result in delay of scheduled shipments. All amounts not paid when due will be subject to the lesser of: (a) a 1-1/2% per month delinquency charge and (b) the highest interest rate permitted under applicable law. Norand reserves the right to withhold shipment and to require prepayment or other payment arrangements on all future shipments if Western Atlas does not pay any invoice when due. To assist Norand in establishing and updating credit limits and payment terms, Western Atlas agrees to provide Norand with financial information relating to Western Atlas' business, including audited financial statements and other credit related information as Norand may reasonably request. Western Atlas also agrees to provide updated financial information prior to renewal of this Agreement for any additional term. To secure any indebtedness now or hereafter owed by Western Atlas to Norand, Western Atlas hereby grants to Norand a continuing security interest in -7- the Products whether now existing or hereafter acquired by Western Atlas and all additions to, improvements on and substitutions for the Products and all proceeds of the foregoing to secure any and all amounts owed Norand by Western Atlas. Western Atlas authorizes Norand to file this Agreement as a nonuniform financing statement and also agrees, upon request from Norand, to sign and file appropriate documentation to perfect this security interest. 8. ADVERTISING Western Atlas agrees not to advertise Products in a false, misleading or derogatory fashion and agrees to indemnify, defend and hold Norand harmless for any claim, cause of action, suit, loss or liability (including court costs and attorneys fees) based upon Western Atlas' advertisements. Western Atlas will provide Norand with a copy of any advertisement upon request and will cease and desist using any advertisement or forth of advertisement which is not consistent with the requirements of this Section. 9. LIMITED WARRANTIES AND REMEDIES 9.1 WARRANTY FOR NORAND EQUIPMENT Norand warrants that Hardware will be free from defects in manufacturing materials and workmanship for the warranty period applicable to the Hardware as set forth in the Price Guide in effect when Western Atlas places its order for such Hardware. The warranty period begins to run on the date Norand ships the Hardware to Western Atlas. If an item of Hardware has such a defect, Norand will repair it without charge or, if Norand is not able to repair it, Western Atlas may return it to Norand and Norand will credit the purchase price to Western Atlas' account for the original price paid. Warranty repairs will be completed within 10 working days and then returned to Western Atlas by prepaid surface freight carrier. As used herein, the term "HARDWARE" means the Products excluding the Software. For this warranty to apply: a. Western Atlas must obtain a Repair Return Authorization from the Norand Service Center within the warranty period; -8- b. Norand must be given a written, detailed description of the defect; c. The item of Hardware must be promptly returned to the designated Norand service center, freight prepaid by Western Atlas; and d Upon examination of the item, Norand must agree that the defect exists and is covered by this warranty. 9.2 WARRANTY FOR NORAND SOFTWARE Norand warrants that Software will function in accordance with the user manual provided with the Norand Software Products for one hundred eighty (180) days from the date Norand ships to Western Atlas. If an item of Software does not function as warranted, Norand will, without charge, attempt to provide information to correct the program or the user manual. If Norand is not able to provide this information, Western Atlas may return the item of Software to Norand and Norand will credit the purchase price to Western Atlas' account. For this warranty to apply: a. Norand must be given a written, detailed description of the problem, within the warranty period; and b. Norand must be able to reproduce the reported problem. 9.3LIMITATION OF WARRANTIES AND REMEDIES The warranties set forth in Sections 9.1 and 9.2 do not apply to: a. expendable items such as customer replaceable batteries and the like, nor b. defects or problems caused by causes outside of Norand's control; such as, but not limited to, accident, misuse, neglect, alteration, adjustments or repairs made by persons other than authorized Norand personnel, unauthorized testing, use not within specifications, or a product for which Norand is not responsible. -9- The remedies set forth in Section 9.1 and 9.2 are the only remedies that apply. THE WARRANTIES IN THIS SECTION REPLACE AND ARE IN LIEU OF ALL OTHER WARRANTIES, EXPRESS OR IMPLIED, INCLUDING THE IMPLIED WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE AND ALL OTHER WARRANTIES ARE DISCLAIMED. Norand does not warrant uninterrupted or error-free operation of products provided under this Agreement. Non-Norand hardware and software is provided by Norand without warranty on an "AS IS, WITH ALL FAULTS" basis. However, the manufacturers, suppliers or publishers of the non-Norand hardware or Software may provide their own warranties. 9.4 LIMITATION ON PATENT INFRINGEMENT SUITS Western Atlas agrees not to assert any claims during the term of this Agreement against Norand alleging that any of the Products infringe any patent owned or controlled by Western Atlas or any of its subsidiaries. 10. LIMITATIONS OF LIABILITY Norand does not guarantee delivery of Products by any particular date. If Norand accepts Western Atlas' order and fails to deliver ordered Products, Western Atlas' sole remedy will be limited to refund of money paid to Norand for the undelivered products. NEITHER NORAND NOR WESTERN ATLAS WILL HAVE ANY LIABILITY OR RESPONSIBILITY TO WESTERN ATLAS OR NORAND, AS THE CASE MAY BE, OR ANY OTHER PERSON OR ENTITY FOR ANY CONSEQUENTIAL, INDIRECT, SPECIAL, PUNITIVE OR INCIDENTAL DAMAGES OR LOST PROFITS, WHETHER FORESEEABLE OR UNFORESEEABLE, BASED ON CLAIMS OF NORAND, WESTERN ATLAS OR WESTERN ATLAS' CUSTOMERS, AS THE CASE MAY BE, (INCLUDING, BUT NOT LIMITED TO, CLAIMS FOR LOSS OF DATA, GOODWILL, PROFITS, USE OF MONEY OR USE OF PRODUCT, INTERRUPTION IN USE OR AVAILABILITY OF DATA, STOPPAGE OF OTHER WORK OR IMPAIRMENT OF OTHER ASSETS), ARISING OUT OF BREACH OR FAILURE OF EXPRESS OR IMPLIED WARRANTY, BREACH OF CONTRACT, MISREPRESENTATION, NEGLIGENCE, STRICT LIABILITY IN TORT OR OTHERWISE, EXCEPT -10- ONLY IN THE CASE OF DEATH OR PERSONAL INJURY WHERE AND TO THE EXTENT THAT APPLICABLE LAW REQUIRES SUCH LIABILITY. IN NO EVENT WILL THE AGGREGATE LIABILITY INCURRED BY NORAND OR WESTERN ATLAS, AS THE CASE MAY BE, IN ANY ACTION OR PROCEEDING EXCEED THE TOTAL AMOUNT ACTUALLY PAID TO NORAND BY WESTERN ATLAS OR BY WESTERN ATLAS TO NORAND, AS THE CASE MAY BE, FOR THE PURCHASE OF THE PRODUCT(S) THAT ACTUALLY CAUSED THE DAMAGE OR LOSS. 11. INTERNATIONAL SALES Western Atlas represents and warrants that the Products and all other software and technical data which Western Atlas receives under this Agreement is for resale within the Territory, subject, where applicable, to the consent of the United States government. 12. TERM 12.1 INITIAL TERM The initial term of this Agreement will commence upon the Effective Date hereof, and, subject to Section 12.2, will expire on the date set forth on the face page of this Agreement, unless sooner terminated or extended as provided herein. The expiration or earlier termination of this Agreement will not relieve either party of obligations incurred prior thereto. 12.2 EXTENSION OF TERM The term of this Agreement shall automatically be extended for successive one-year periods ending on the anniversary of the date set forth on the cover page of this Agreement, provided that neither party has, on or before 60 days prior to the next scheduled renewal date, given notice to the other of its intention not to renew the term of this Agreement. 12.3 TERMINATION This Agreement may be terminated: A. Immediately, if Western Atlas assigns this Agreement or any of its rights hereunder; the -11- term "assign" to include, without limiting the generality thereof, a transfer of a majority interest in Western Atlas' business, or a sale of substantially all of Western Atlas' assets. B. By either party upon one (1) day's written notice in the event the other party ceases to function as a going concern or to conduct its operations in the normal course of business, or a receiver for it is appointed or applied for, or a Petition under the Federal Bankruptcy Act is filed by or against it, or it makes an assignment for the benefit of creditors. C. By written notice from Norand to Western Atlas effective immediately if Western Atlas violates Section 1.1, Section 13, or Section 17.2 of this Agreement. D. By written notice from Western Atlas to Norand effective immediately if Norand violates Section 17.2. E. By either party, upon thirty (30) days written notice if the other party fails in any material respect to perform or observe any of its obligations (except those obligations otherwise specifically addressed in this Section 12.3) under this Agreement and such party has failed to cure such default within thirty (30) days after the date of such notice of default. Orders which are accepted but not shipped on the date of such notice shall be deemed canceled as of the date of such notice. 13. SOFTWARE PRODUCT LICENSING Products consisting of software programs ("SOFTWARE") are licensed, not sold. Norand authorizes Western Atlas to offer end-users, in conjunction with Western Atlas' resale of other Products, a limited license for the use of Software with the Products sold by Western Atlas to the end-user. Western Atlas agrees to distribute such Software only in conjunction with the sale of Western Atlas' proprietary products, upon a signed, written license agreement containing provisions substantially in the form of Schedule C of this Agreement and payment in accordance with this Agreement. Software will be distributed in object code only. Western Atlas may not otherwise distribute the Software. Norand shall have the right during normal -12- business hours and upon reasonable notice to audit Western Atlas' relevant books and records for the sole purpose of verifying performance of Western Atlas' obligations under this Agreement. Norand reserves the right to change the terms and conditions of Schedule C from time to time upon giving Western Atlas notice of such changes. 14. PATENT AND COPYRIGHT INDEMNIFICATION If an action is brought against Western Atlas claiming that a Product infringes a patent or copyright within the Territory, Norand will defend Western Atlas at Norand's expense and, subject to this Section and Section 10, above, will pay the damages and costs finally awarded against Western Atlas in the infringement action, but only if (a) Western Atlas notifies Norand promptly upon learning that the claim might be asserted, (b) Norand has sole control over the defense of the claim and any negotiation for its settlement or compromise; and (c) Western Atlas takes no action, that in Norand's judgment, is contrary to Norand's interest. If a claim described in this Section 14 may be or has been asserted, Western Atlas will permit Norand, at Norand's option and expense, to (a) procure the right to continue using the Product, (b) replace or modify the Product to eliminate the infringement while providing functionally equivalent performance, or (c) accept the return of the Product in exchange for a refund of the price that Western Atlas actually paid to Norand for such Product, less depreciation based on a 3-year straight-line depreciation schedule, and a pro rata share of any maintenance fees that Western Atlas actually paid to Norand for the then-current maintenance period of the product. Notwithstanding the above, Norand will have no duty to indemnify Western Atlas if the patent or copyright infringement claim contemplated in this Section 14 results from (a) a correction or modification of the Product not provided by Norand, (b) the failure to promptly install any update which Norand may have provided to Western Atlas, or (c) the combination of the Product with other software or hardware not provided by Norand. 15. INTEGRATED LASER SCANNING TERMINALS Norand is authorized by license to sell the integrated laser scanning terminals Norand offers for use as a one- -13- piece unit to read bar codes and process data. Western Atlas agrees not to make any changes to these terminals and to use them for only these purposes. The licensor under Norand's license has the sole right to enforce these provisions. If Western Atlas makes an authorized transfer of these terminals to another party, that party must agree to these conditions in writing. 16. PUBLIC ANNOUNCEMENTS Neither party to this Agreement may make any public announcements with respect hereto without the approval of such announcement by the other party hereto, which consent shall not be unreasonably withheld. 17. GENERAL 17.1 GOVERNING LAW This Agreement and performance hereunder will be governed by and construed in accordance with the laws of the State of Iowa, U.S.A. 17.2 CONFIDENTIALITY Western Atlas and its employees and Norand and its employees each agree to not directly or indirectly, use, divulge or reveal to any person any Confidential Information without the prior written consent of Norand or Western Atlas, as the case may be. For purposes of this Agreement, the term "CONFIDENTIAL INFORMATION" shall mean information which is not known outside of Norand's business or Western Atlas' business, as the case may be, and from which Norand or Western Atlas, as the case may be, obtains an economic benefit because it is not known outside of Norand's business or Western Atlas' business, as the case may be, and which is disclosed by Norand to Western Atlas or Western Atlas to Norand, as the case may be, or becomes known to Western Atlas or Norand, as the case may be, as a consequence of this Agreement or any actions taken under this Agreement, including but not limited to all drawings, specifications, parts lists, lists of other resellers of Products, the Price Guide and other price lists, channel marketing programs and other types of information or data relating to Norand's business or Western Atlas' business, as the case may be. -14- Western Atlas also agrees not to reverse engineer, disassemble or decompile any of the Products. Western Atlas and Norand also each agree to comply with all reasonable regulations which Norand may ask Western Atlas to follow or Western Atlas may ask Norand to follow, as the case may be, to preserve the confidential nature of such Confidential Information and to enforce such regulations against their respective officers, employees and agents and otherwise assure that the Confidential Information is protected. In the event of a breach or a threatened breach by Western Atlas or Norand of any provision of this Section, Norand or Western Atlas, as the case may be, will be entitled to an injunction restraining Western Atlas or Norand, as the case may be, from any use or disclosure, or threatened use or disclosure, in whole or in part, of the other's Confidential Information. Nothing herein will be construed as prohibiting Norand or Western Atlas from pursuing any other remedies for such breach or threatened breach, including the recovery of damages. In addition, Western Atlas and Norand each agree not to disclose the financial terms of this Agreement, including discounts, without the prior written consent of the other, except as required by law. Upon termination of this Agreement, Western Atlas and Norand each agree to promptly return all Confidential Information belonging to the other or to certify to the other that such information has been destroyed. 17.3 NOTICES Notices required or allowed to be given hereunder will be deemed given on the date deposited, postage prepaid, for delivery by the U.S. Postal Service, to the parties at the following respective addresses: IF TO NORAND: IF TO WESTERN ATLAS: Norand Corporation Western Atlas, Inc. 550 Second Street S.E. 360 North Crescent Drive Cedar Rapids, IA 52403 Beverly Hills, CA 90210 Attention: Legal Services Attn: General Counsel with copy to: -15- Intermec Corporation 6001 36th Avenue West Everett, Washington 98203 Attn: Michael Ohanian Addresses may be from time to time modified by like notice. Routine periodic notices (such as price and product changes and the like) may be given by first class mail, all other notices must be given by certified mail, return receipt requested. 17.4 ENTIRE AGREEMENT Each party acknowledges that it has read this Agreement, fully understands it, and agrees to be bound by its terms and further agrees that it, including the Schedules, Price Guide and any addenda hereto, is the complete and exclusive statement of the agreement between the parties, which supersedes and merges all prior proposals, understandings and all other agreements, oral and written, between the parties, relating to the subject matter of this Agreement. This Agreement cannot be modified or altered except by a written instrument duly executed by both parties. In the event of any conflict between the provisions of this Agreement, the Schedules, the Price Guide and any addenda hereto, the following order or precedence will apply: Addenda, if any, the Agreement, Schedules, and then the Price Guide. 17.5 ENFORCEABILITY If any provision of this Agreement will be held to be invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions will in no way be affected or impaired thereby. 17.6 NO WAIVER The failure of either party to exercise in any respect any right provided for herein will not be deemed a waiver of any right hereunder. 17.7 SURVIVAL The provisions of Sections 7, 8, 10, 14 and 15 of this Agreement will survive termination hereof. -16- 17.8 EFFECTIVE DATE This Agreement will be effective on the date when it is accepted by Norand and signed by Norand's authorized representative (the "EFFECTIVE DATE"). -17- IN WITNESS WHEREOF, the parties have caused this Agreement to be signed below by their authorized representatives. Accepted By: NORAND CORPORATION WESTERN ATLAS INC. BY: BY: ------------------------------- ------------------------------- Signature Signature Name: N. Robert Hammer Name: Michael E. Keane --------------------------------- ------------------------- Title: Chairman, President and Title: Senior Vice President and Chief Executive Officer Chief Financial Officer Date: Date: --------------------------------- ---------------------------- -18- __________________________________SCHEDULE "A" PRODUCTS 1. PEN*KEY 6100 PEN*KEY 6600 OWL Radio Network, including - 6700 Access Point - Radio Network Software - Gateway hardware and software - Emulation software, if required - 900 radio cards - Norand 2.4 radio cards, when available - Norand Synthetic UHF radio cards, when available Any charge coupled device product modular engines Accessories, software and spare parts ____________________ 1 Including improvements, upgrades, replacements and enhancements of any Product. A-1 SCHEDULE "B" TRAINING PROGRAM REQUIREMENTS 2. I. LEVEL ONE CERTIFICATION -- CERTIFIED WIRELESS SPECIALIST I.A. Western Atlas must complete the following courses: 1. Introduction to Products (RF101) 2. UHF Systems 3. SST Systems 4. Hands-on Configuration 5. Troubleshooting RF Systems 6. TCP/IP or 3270/5250 7. PEN*KEY-TM- II. LEVEL TWO CERTIFICATION -- CERTIFIED WIRELESS ENGINEER II.A. Western Atlas must complete the following courses in addition to completion of the courses set forth in Paragraph A above: 1. UHF Site Survey 2. SST Site Survey 3. Local Area Networking 4. Ethernet From A to Z 5. Taken Ring 6. TCP/IP and 3270/5250 ____________________ 2. Courses and course content are subject to change at the sole discretion of Norand. B-1 SCHEDULE "C" Western Atlas agrees that it will obtain written agreements containing substantially the following provisions before delivering any Norand Software to another person. 1. Certain software programs provided under this Agreement are provided under license from Norand Corporation ("Norand Corporation"). Norand Software is licensed, not sold. Western Atlas, Inc. ("Western Atlas") hereby grants ________________________ (Buyer) a non-exclusive right and license to use Norand Software on the Products covered by this Agreement. No other right or license is granted nor implied. ________________________ (Buyer) agrees to not modify, copy, distribute or otherwise disclose Norand Software without the prior written consent of Norand. Buyer further agrees not to reverse engineer, disassemble, or decompile the Products, including but not limited to the Norand Software. This license shall expire when ________________________ (Buyer) no longer owns or ceases to use the Products with which ________________________ (Buyer) is licensed to use. 2. Western Atlas warrants that Norand Software will function in accordance with the user manual provided with the Norand Software for ninety (90) days from date of shipment. If an item of Norand Software does not function as warranted, Western Atlas will, without charge, attempt to provide information to correct the program or the user manual. If Western Atlas is not able to provide this information, ________________________ (Buyer) may return the item of Norand Software to Western Atlas and Western Atlas will refund ________________________ (Buyer's) money. THE WARRANTIES IN THIS SECTION REPLACE ALL OTHER WARRANTIES OF NORAND SOFTWARE, EXPRESS OR IMPLIED, INCLUDING THE IMPLIED WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE. 3. IN NO EVENT WILL WESTERN ATLAS NOR NORAND BE LIABLE FOR ANY SPECIAL, INCIDENTAL OR CONSEQUENTIAL LOSS OR DAMAGE, INCLUDING WITHOUT LIMITATION, ANY LOST PROFITS OR SAVINGS, AND ANY LOSS OR DAMAGE CAUSED BY THE LOSS OF USE OF ANY DATA OR INFORMATION OR ANY INACCURATE DATA OR INFORMATION. C-1 -----END PRIVACY-ENHANCED MESSAGE-----