EXHIBIT 7(c)(2)
SECURITIES PURCHASE AGREEMENT
by and among
P-COM, Inc.
and All Securityholders of Technosystem S.p.A.
dated as of
February 5, 1997
TABLE OF CONTENTS
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ARTICLE I PURCHASE, SALE AND SURRENDER OF SECURITIES............................ 1
1.1 Purchase, Sale and Surrender of Securities............................ 1
1.2 Purchase Price........................................................ 1
ARTICLE II REPRESENTATIONS AND WARRANTIES OF SECURITYHOLDERS..................... 3
2.1 Representations and Warranties of each Securityholder................. 3
(a) Organization of the Company.................................... 3
(b) Capital Structure.............................................. 3
(c) Authorization of the Securityholders........................... 4
(d) Conflict....................................................... 4
(e) No Consent Required............................................ 5
(f) Financial Information.......................................... 5
(g) Absence of Certain Changes and Events.......................... 6
(h) Conduct of Business............................................ 7
(i) Undisclosed Liabilities........................................ 7
(j) Inventory...................................................... 7
(k) Taxes.......................................................... 8
(l) Compliance With Law............................................ 9
(m) Intellectual Property Rights................................... 9
(n) Service Provider Agreements.................................... 11
(o) Restrictive Documents or Orders................................ 11
(p) Contracts and Commitments...................................... 12
(q) Title to the Property.......................................... 12
(r) Title to Securities............................................ 13
(s) Litigation..................................................... 13
(t) Labor Relations................................................ 14
(u) Personnel...................................................... 14
(v) Brokers' and Finders' Fees/Contractual Limitations............. 14
(w) Related Party Transactions..................................... 14
(x) Certain Payments............................................... 15
(y) Products Liability............................................. 15
(z) Product Warranties............................................. 15
(aa) Returns........................................................ 15
(ab) Customers...................................................... 15
(ac) Suppliers...................................................... 15
(ad) Books and Records.............................................. 16
i.
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(ae) Complete Disclosure........................................... 16
(af) Performance of Agreement...................................... 16
(ag) Absence of Governmental or Other Objection.................... 16
(ah) Insurance..................................................... 16
(ai) Environmental Matters......................................... 17
(aj) Backlog....................................................... 17
(ak) Accounts Receivable........................................... 17
(al) Subsidiaries.................................................. 18
(am) Exports to Certain Countries.................................. 18
(an) Foreign Corrupt Practices Act................................. 18
ARTICLE III REPRESENTATIONS AND WARRANTIES OF PURCHASER.......................... 19
3.1 Representations and Warranties of Purchaser.......................... 19
(a) Organization.................................................. 19
(b) Authority..................................................... 19
ARTICLE IV COVENANTS OF THE SECURITYHOLDERS..................................... 20
4.1 Maintenance of Business.............................................. 20
4.2 Conduct of Business.................................................. 20
4.3 Necessary Consents................................................... 22
4.4 Access to Information................................................ 23
4.5 Best Efforts......................................................... 23
4.6 Exclusivity; Acquisition Proposals................................... 23
4.7 Breach of Representations, Warranties, Agreements and Covenants...... 24
4.8 Legal Conditions to the Sale or Surrender of the Securities.......... 24
4.9 Public Announcements................................................. 25
4.10 Non-Competition...................................................... 25
4.11 Shareholders' Meeting................................................ 27
4.12 No Transfer.......................................................... 27
4.13 Elettronica Cooperatio............................................... 27
4.14 Bank Guarantees...................................................... 27
4.15 Net Asset Determinatin............................................... 28
4.16 No Further Exports To Certain Countries.............................. 28
ARTICLE V COVENANTS OF PURCHASER............................................... 29
5.1 Necessary Consents................................................... 29
5.2 Access to Information................................................ 29
5.3 Best Efforts......................................................... 29
5.4 Public Announcements................................................. 29
5.5 Breach of Representations, Warranties, Agreements and Covenant....... 29
5.6 Legal Conditions to the Sale or Surrender of Securities.............. 30
5.7 Bank Guarantees; Intercompany Debts.................................. 30
ii.
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ARTICLE VI CONDITIONS PRECEDENT TO OBLIGATIONS OF PURCHASER..................... 30
6.1 Certificates for Securities.......................................... 30
6.2 Representations and Warranties True.................................. 31
6.3 Covenants Performed.................................................. 31
6.4 Certificates......................................................... 31
6.5 Opinions of Counsel for the Company and the Securityholders.......... 31
6.6 No Violations; No Actions............................................ 31
6.7 No Material Adverse Effect........................................... 31
6.8 Proceedings and Documents............................................ 31
6.9 Schedules............................................................ 32
6.10 Required Consents.................................................... 32
6.11 Proprietary Information Agreements................................... 32
6.12 Tax Forms............................................................ 32
6.13 Due Diligence Review................................................. 32
6.14 Board Approval....................................................... 32
6.15 Other Matters........................................................ 32
ARTICLE VII CONDITIONS PRECEDENT TO OBLIGATIONS OF THE SECURITYHOLDERS........... 33
7.1 Representations and Warranties True.................................. 33
7.2 Covenants Performed.................................................. 33
7.3 No Violations; No Actions............................................ 33
7.4 Proceedings and Documents............................................ 34
7.5 Required Consents.................................................... 34
7.6 Certificate.......................................................... 34
7.7 Board Approval....................................................... 34
ARTICLE VIII CLOSING.............................................................. 34
8.1 Time and Place....................................................... 34
8.2 Deliveries of the Securityholders.................................... 34
(a) Certificates and Instruments.................................. 34
(b) Corporate Minute Books........................................ 34
(c) Certificate of Good Standing.................................. 34
(d) Closing Documents............................................. 35
(e) Books and Records............................................. 35
(f) Consents...................................................... 35
(g) Opinion of Counsel............................................ 35
(h) Securityholder Certificate.................................... 35
(i) FIRPTA........................................................ 35
(j) Proprietary Information and Inventions Agreement.............. 35
(k) Other Documents............................................... 35
8.3 Deliveries of Purchaser.............................................. 35
iii.
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(a) Payment of the Consideration................................... 35
(b) Resolutions.................................................... 36
(c) Consents....................................................... 36
(d) Purchaser Certificate.......................................... 36
(e) Other Documents................................................ 36
ARTICLE IX INDEMNIFICATION...................................................... 36
9.1 Survival of Representations, Warranties, Covenants and Agreements..... 36
9.2 Securityholder Indemnification........................................ 37
9.3 Procedure for Indemnification with Respect to Third-Party Claims...... 38
9.4 Procedure For Indemnification with Respect to Non-Third Party Claims.. 39
9.5 Itelco and Related Damages............................................ 40
9.6 Defense of Covered Claims for the Itelco and Related Damages.......... 40
(a) Notification; Cooperation...................................... 40
(b) Legal Counsel.................................................. 41
9.7 Purchaser Indemnification............................................. 41
9.8 Duty to Mitigate...................................................... 42
ARTICLE X TERMINATION........................................................... 42
10.1 Termination........................................................... 42
ARTICLE XI MISCELLANEOUS PROVISIONS.............................................. 43
11.1 Notice................................................................ 43
11.2 Entire Agreement...................................................... 44
11.3 Binding Effect; Assignment............................................ 45
11.4 Expenses of Transaction............................................... 45
11.5 Waiver; Consent....................................................... 45
11.6 Third-Party Beneficiaries............................................. 45
11.7 Counterparts.......................................................... 45
11.8 Severability.......................................................... 45
11.9 Governing Law......................................................... 46
11.10 Arbitration; Attorneys' Fees.......................................... 46
11.11 Remedies.............................................................. 47
11.12 Mutual Drafting....................................................... 47
iv.
Exhibits
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Exhibit 4.7 Company Letter
Schedules
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Schedule A List of Securityholders
Schedule 1.2(a) Cash Payment Schedule to Securityholders
Schedule 1.2(b)(i) Schedule of Purchase Shares Payable to
Securityholders
Schedule 1.2(b)(ii) Schedule of Milestones
Schedule 2.1(b) List of all holders of outstanding Company
Capital Stock
Schedule 2.1(j) List of all Inventory owned by Company
Schedule 2.1(l) List of Governmental Permits
Schedule 2.1(m) Schedule of Intellectual Property Rights
Schedule 2.1(p) List of Outstanding Contracts
Schedule 2.1(q) List of Leases of Property
Schedule 2.1(t)A List of Special Benefit Plans
Schedule 2.1(t)B List of Temporary Reductions in Social
Security Charges
Schedule 2.1(ab) Schedule of Customers
Schedule 2.1(ac) List of Suppliers
Schedule 2.1(ah) List of Insurance Policies
Schedule 2.1(aj) Backlog Schedule
Schedule 2.1(ak) Schedule of Accounts Receivable
v.
SECURITIES PURCHASE AGREEMENT
THIS PURCHASE AGREEMENT (this "Agreement") as of this 5th day of
February, 1997, by and among P-COM, Inc., a Delaware corporation whose
registered office is at 0000 X. Xxxxxxxxxx Xxxxxxxxx, Xxxxxxxx, Xxxxxxxxxx,
00000, X.X.X. ("Purchaser"), and the securityholders of Technosystem S.p.A. (the
"Company"), whose registered office is at Xxx Xxxxxx Xxxxxxxx 00, Xxxx, Xxxxx,
listed on Schedule A to this Agreement (collectively, the "Securityholders").
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WHEREAS, Purchaser desires to acquire all of the rights of equity
ownership of the Securityholders through the purchase by Purchaser of all of the
issued and outstanding shares of capital stock and all other equity interest and
by payment for the surrender of all outstanding options and all other rights to
acquire shares of capital stock of the Company; and
WHEREAS, in furtherance thereof, Purchaser will pay to each
Securityholder cash consideration for their securities;
NOW, THEREFORE, in consideration of the mutual promises and covenants
set forth herein, the parties hereto agree as follows:
ARTICLE I
PURCHASE, SALE AND SURRENDER OF SECURITIES
1.1 Purchase, Sale and Surrender of Securities. Upon the terms and
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subject to the conditions of this Agreement, the Securityholders shall sell to
Purchaser and Purchaser shall purchase from the Securityholders all of the
shares of capital stock and all other equity interest of the Company held by the
Securityholders, and the Securityholders shall surrender all options and other
rights to purchase such shares held by the Securityholders (collectively, the
"Securities") at the Closing (as defined in Section 8.1 hereof).
1.2 Purchase Price.
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(a) Consideration. Purchaser shall pay to the Securityholders in cash
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by check or by wire transfer for such Securityholders' equity interests in the
Company an aggregate of United States $3,300,000 (collectively, the
"Consideration"), which Consideration shall be distributed to the
Securityholders set forth on Schedule 1.2(a) in the respective amounts set forth
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next to each such Securityholder's name on such schedule;
The Consideration shall consist of the following:
(i) An aggregate of United States $2,591,325 to be paid at
the Closing; and
(ii) An aggregate of United States $708,675 to be paid out
on March 31, 1998 subject to Section 1.2(c) below.
(b) For purposes of determining the allocation of the Consideration
pursuant to subparagraphs (i) and (ii) above, Mr. Biscarini shall receive at the
Closing sixty percent (60%) of the Consideration payable to him. The remaining
forty percent (40%) of the Consideration payable to Mr. Biscarini shall be
released based upon the achievement of milestones as set forth on the attached
Schedule 1.2(b); provided, however, that of such amount held subject to the
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achievement of milestones, an amount equal to fifteen percent (15%) of the
aggregate Consideration payable to Mr. Biscarini shall be subject to the
additional obligations set forth in Section 1.2 (c) below. Each Securityholder
other than Mr. Biscarini shall receive eighty five percent (85%) of the
Consideration payable to such Securityholder at the Closing and fifteen percent
(15%) of such Consideration shall be payable subject to Section 1.2 (c) below.
(c) Pursuant to paragraphs (a) and (b) above, an amount equal to
fifteen percent (15%) of the total aggregate consideration to be paid to the
Securityholders shall be withheld from payment until March 31, 1998, subject to
the terms of this Agreement (the "Deferred Payment"). The Deferred Payment
shall bear interest at a rate per annum equal to 5.5%. All such interest shall
be considered part of the Deferred Payment, to be paid out on March 31, 1998
subject to the terms of this Agreement. The Deferred Payment shall serve as
collateral in part for the indemnity obligations of the Securityholders for any
and all amounts determined by the mutual consent of the parties, subject to the
prompt arbitration pursuant to Section 11.10 hereof of any dispute not resolved
by the parties within ten (10) days, to be payable or owing to Purchaser and/or
its affiliates (which for purposes of this Agreement is defined to include the
subsidiaries of Purchaser and any officers or directors of the Purchaser or its
subsidiaries) for Damages (as defined below) under the provisions and procedures
of Article IX hereof, including but not limited to the Itelco and Related
Damages (as defined below) (collectively, "Indemnifiable Amounts"). Purchaser
hereby agrees that any portion of the Deferred Payment not in dispute on the
Release Date shall be released to the Securityholders subject, in the case of
Mr. Biscarini, to the satisfactory completion of the milestones set forth in
Schedule 1.2(b).
(i) If there are existing on March 31, 1998 (the "Release Date"),
any Indemnifiable Amounts due and owing to Purchaser and/or its affiliates,
according to the procedure set forth in this Agreement, the Purchaser shall upon
five (5) days' prior notice from the Purchaser, cause that amount of the
Deferred Payment sufficient to fully cover
2.
such Indemnifiable Amounts (the "Excluded Consideration") to be deducted from
the amount of Deferred Payment otherwise transferrable to the Securityholders on
the Release Date (or, in the case of Mr. Biscarini, on the completion of the
ensuing milestone) to be cancelled, and all right, title, and interest of the
Securityholders in and to such Excluded Consideration shall immediately
terminate. Purchaser shall use its best efforts to notify the Securityholders of
any anticipated Indemnifiable Amounts known to Purchaser at least ten (10) days
prior to the Release Date; however, Purchaser's right to the Indemnifiable
Amounts shall not be invalidated or otherwise affected by failure to so notify
the Securityholders.
(ii) Unless otherwise agreed to by the parties, the use of
Excluded Consideration for indemnification hereunder shall be in proportion to
the respective equity interests in the Company held by the Securityholders prior
to the Closing.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF SECURITYHOLDERS
2.1 Representations and Warranties of each Securityholder. For
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purposes of Articles II and IX of this Agreement, the Company shall be deemed to
include and refer to the Company's wholly and/or partially owned subsidiaries,
investments in other business enterprises and joint ventures.
Except as specifically set forth in the relevant Schedules attached
hereto delivered by the Securityholders to Purchaser, each Securityholder does
hereby, severally and not jointly, in accordance with their respective equity
interests in the Company prior to the Closing, represent and warrant to
Purchaser that:
(a) Organization of the Company. The Company is a company duly
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organized, validly existing and functioning under the laws of Italy and has all
requisite corporate right, power and authority to own, operate and lease its
assets and to conduct its business in the manner in which it is now conducted.
All of the formalities required under Italian law have been complied with, and
the Company is not in default under any applicable statutory or regulatory
provision. True and complete copies of the current charter documents of the
Company have been furnished to Purchaser and its counsel. The Company does not
own or lease any assets or conduct any business in any jurisdiction other than
Italy.
(b) Capital Structure.
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(i) The capital stock of the Company consists solely of 1,500,000
shares, Lit. 1,000 (one thousand) par value per share, all of which are issued
and outstanding. There are no outstanding shares of the Company's capital stock
or any other
3.
equity securities or rights to purchase equity securities of the Company
(collectively, "Company capital stock"), other than as described in the
preceding sentence.
(ii) All outstanding shares of the Company capital stock are duly
authorized, validly issued, fully paid and nonassessable and not subject to
preemptive rights created by statute, the Company's charter documents or any
agreement to which the Company is a party or by which the Company may be bound.
All outstanding common stock or other securities have been issued in compliance
with applicable Italian securities laws. There are no options, warrants, calls,
conversion rights, commitments or agreements of any character to which the
Company is a party or by which the Company may be bound that or may obligate the
Company to issue, deliver or sell, or cause to be issued, delivered or sold,
additional shares of the Company capital stock or that do or may obligate the
Company to grant, extend or enter into any such option, warrant, call,
conversion right, commitment or agreement, other than those described in Section
2.1(b)(i) above, if any.
(iii) Schedule 2.1(b) contains a complete and accurate list
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of, and the number of shares owned of record by, the holders of outstanding
Company capital stock and their state or country of residence.
(iv) Except for any restrictions imposed by applicable laws,
there is no right of first refusal, co-sale right, right of participation, right
of first offer, option or other restriction on transfer applicable to any shares
of Company capital stock.
(v) The Company is not a party or subject to any agreement or
understanding, and there is no agreement or understanding between or among any
persons that affects or relates to the voting with respect to any outstanding
security of the Company.
(c) Authorization of the Securityholders. Each Securityholder has
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full power and authority to enter into this Agreement, to perform its respective
obligations hereunder and thereunder, and to consummate the transactions
contemplated hereby and thereby, including, without limitation, the execution
and delivery of this Agreement, general conveyances, assignments, and other
documents and instruments evidencing the conveyance of the Securityholders'
equity interests or delivered pursuant to Section 6.2 hereunder (the "Closing
Documents"). Each of the Securityholders has taken all necessary and
appropriate action with respect to the execution and delivery of this Agreement
and the Closing Documents. This Agreement constitutes a valid and binding
obligation of each of the Securityholders, enforceable in accordance with its
respective terms, except as limited by applicable bankruptcy, insolvency,
moratorium, reorganization, or other laws affecting creditors' rights and
remedies generally.
(d) Conflict. Subject to satisfaction of the conditions set forth in
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this Agreement, the execution, delivery and performance of this Agreement does
not and the
4.
performance and consummation of the transactions contemplated hereby will not,
conflict with or result in any violation of any material statute, law, rule,
regulation, judgment, order, decree, or ordinance applicable to the Company or
its properties or assets, or conflict with or result in any conflict with,
breach or violation of or default (with or without notice or lapse of time, or
both) under, or give rise to a right of termination, cancellation, forfeiture or
acceleration of any material obligation or the loss of a material benefit under,
or result in the creation of a lien or encumbrance on any of the properties or
assets of the Company pursuant to (i) any provision of the charter documents of
the Company or (ii) any agreement, contract, note, mortgage, indenture, lease,
instrument, permit, concession, franchise or license to which the Company is a
party or by which the Company or any of its properties or assets may be bound or
affected.
(e) No Consent Required. No consent, approval, order or authorization
-------------------
of, or registration, declaration of, or qualification or filing with, any court,
administrative agency, commission, regulatory authority or other governmental or
administrative body or instrumentality, whether Italian or of any other country
(a "Governmental Entity"), is required by or with respect to the Company in
connection with the execution, delivery and performance of this Agreement by the
Securityholders or the consummation by the Securityholders of the transactions
contemplated hereby. No consent, approval or authorization of the Company's
Board of Directors (or any committee thereof), Securityholders or of any third
party is required in connection with the Securityholders' consummation of the
transactions contemplated hereunder that has not been obtained or waived by the
Closing.
(f) Financial Information. The Company has furnished to Purchaser a
---------------------
complete and accurate copy of its balance sheets and its profit and loss
accounts as of and for each of the twelve (12)-month periods ending December 31,
1993, 1994 and 1995, prepared by the Company, audited by Ernst & Young, and
reviewed by Price Waterhouse, Rome ("PW") in accordance with the generally
accepted accounting principles provided by the Italian Civil Code and fiscal law
as integrated by the "Xxxxxxxxx Nazionale dei Dottori Commercialisti e dei
Ragionari," and, in the absence thereof, as provided by the International
Accounting Standards Committee ("GAAP"), consistently followed throughout the
period (collectively, the "Company's Audited Financial Statements"). The
Company's Audited Financial Statements at and for the periods ended December 31,
1995 fairly present the financial position of the Company as and at the dates
thereof and the Company's results of operations and cash flows for the periods
then ended. The notes to the Company's Audited Financial Statements as at and
for such period set forth in reasonable detail the Company's accounting
policies, principles and methods with respect to the calculation of its accounts
receivable (including policies for its warranty and bad debt reserves, revenue
recognition and capitalized software development costs). The projections of the
Company provided to Purchaser were prepared in good faith and are based on
reasonable assumptions. The Company has furnished to Purchaser a complete and
accurate copy of its unaudited balance sheet and profit and loss accounts as of
September
5.
30th, 1996 reviewed by Price Waterhouse Rome, and will furnish to Purchaser
prior to the Time of Closing a complete and accurate copy of its unaudited
balance sheet and profit and loss account as of December 31, 1996, also reviewed
by Price Waterhouse, Rome which will include the alterations in an amount not to
exceed Italian Lire 6.497 Million, as indicated in the columns "proposed
adjustment" and "area of uncertainty" in the report issued by Price Waterhouse,
Rome, which columns have been attached hereto in Schedule 2.1(f) (collectively,
the "Company's Unaudited Financial Statements", collectively with the Company's
Audited Financial Statements and the Closing Date Balance Sheet (as defined
herein), the "Company's Financial Statements"). The Company's Unaudited
Financial Statements have been and shall be prepared in accordance with GAAP
consistently applied, subject to normal year-end adjustments and except for the
absence of footnotes, and fairly present the financial position of the Company
as and at the dates thereof and the Company's results of operations and cash
flows for the periods then ended.
(g) Absence of Certain Changes and Events. Since September 30, 1996,
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there has not been (except for potential alterations to the Company's Financial
Statement in an amount not to exceed Italian Lira 6.497 million, as indicated in
the columns "proposed adjustment" and "area of uncertainty" in the report issued
by Price Waterhouse, which columns have been attached hereto in Schedule
2.1(f)):
(i) Any material adverse change in the financial condition,
results of operations, assets, liabilities, business, or prospects of the
Company or any occurrence, circumstance, or combination thereof which reasonably
could be expected to result in any such material adverse change;
(ii) Any event, including, without limitation, shortage of
materials or supplies, fire, explosion, accident, requisition or taking of
property by any governmental agency, flood, drought, earthquake, or other
natural event, riot, act of God or a public enemy, or damage, destruction, or
other casualty, whether covered by insurance or not, which has had a material
adverse effect on the business or assets of the Company or any such event which
reasonably could be expected to have such an effect on the business or the
assets of the Company;
(iii) Any material transaction relating to the business of
the Company (other than the transactions contemplated herein) which was entered
into or carried out by the Company other than in the ordinary and usual course
of business;
(iv) Any change made by the Company in its method of operating
its business or its accounting practices relating thereto;
(v) Any mortgage, pledge, lien, security interest,
hypothecation, charge or other encumbrance imposed or agreed to be imposed on or
with
6.
respect to the assets of the Company other than liens arising with respect to
taxes not yet due and payable, and such minor liens and encumbrances, if any,
which arise in the ordinary course of business and are not material in nature or
amount either individually or in the aggregate, and which do not detract from
the value of the Company or impair the operations conducted thereon or any
discharge or satisfaction thereof;
(vi) Any sale, lease, or disposition of, or any agreement to
sell, lease, or dispose of any of the assets of the Company, other than sales,
leases, or dispositions in the usual and ordinary course of business and
consistent with prior practice;
(vii) Any modification, waiver, change, amendment, release,
rescission, accord and satisfaction, or termination of, or with respect to, any
material term, condition, or provision of any contract, agreement, license, or
other instrument to which the Company is a party and relating to or affecting
the business or the assets of the Company, other than any satisfaction by
performance in accordance with the terms thereof in the usual and ordinary
course of business and consistent with prior practice;
(viii) Any labor disputes or disturbances materially affecting
in an adverse fashion the business or the financial condition of the Company;
(ix) Any notice (written or unwritten) from any employee of the
Company who provides any services to the Company that such employee has
terminated, or intends to terminate, such employee's employment with the
Company;
(x) Any notice (written or unwritten) from any of the Company's
suppliers that any such supplier will not continue to supply the current level
and type of goods currently being provided by such supplier to the Company on
similar terms and conditions;
(xi) Any adverse relationships or conditions with vendors or
customers that may have a material adverse effect on the business, prospects or
assets of the Company; or
(xii) Any other event or condition of any character which
materially adversely affects, or may reasonably be expected to so affect, the
assets or the results of operations, prospects or financial condition of the
Company.
(h) Conduct of Business. At all times since September 30, 1996, the
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Company has conducted its business in the ordinary course thereof and used
reasonable commercial efforts to preserve intact the organization of its
business and the good will of its customers, suppliers, and others having
business relations with the Company.
7.
(i) Undisclosed Liabilities. There are no debts, liabilities, or
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obligations with respect to the Company, whether liquidated, unliquidated,
accrued, absolute, contingent, known or unknown or otherwise, that are not
identified in the relevant schedules or in the Company's Closing Date Balance
Sheet as provided to Purchaser pursuant to Section 4.15 of this Agreement.
(j) Inventory. Schedule 2.1(j) lists all inventory owned by the
--------- ---------------
Company, including goods supplied to the Company by suppliers, goods on
consignment, and all other goods customarily sold by the Company (whether
located on the business premises of the Company, in transit to or from such
business premises, in other storage facilities, or otherwise) (collectively, the
"Inventory"), and identifies whether such Inventory is owned by the Company or
held on consignment. The Inventories are valued at cost (determined on a last-in
first-out basis) or market, whichever is lower, with adequate allowances for
excess and obsolete materials and materials below standard quality in accordance
with GAAP consistently applied. The quality and quantity of the Inventories are
such that the Inventories are readily usable and saleable in the ordinary course
of business of the Company, except such amounts as are reserved in accordance
with GAAP consistently applied. All Inventories materially in excess of
reasonable estimated requirements for the Company based on current operations as
of the date hereof are set forth in Schedule 2.1(j). Except as disclosed
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in Schedule 2.1(j), the Company holds no Inventories manufactured to customer
---------------
specifications effectively rendering the Inventories saleable only to that
customer. The Company has continued to replenish the Inventory in a normal and
customary manner consistent with past practices.
(k) Taxes.
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(i) All declarations, returns and reports to be filed by the
Company with respect to all foreign, national and local or provincial taxes,
duties, imposts and governmental levies (hereinafter collectively referred to as
"Taxes") have been timely filed.
(ii) The Company is not delinquent in payment of any taxes and no
deficiency in payment of any taxes is claimed by any tax authority for any of
the Company's taxable years. There are no pending or threatened actions, suits,
proceedings, investigations or claims by any governmental agency for assessment
or collection of Taxes from the Company.
(iii) The Company has no liability or obligation for Taxes
for any period of up to and including the Closing Date other than current and
deferred income taxes accrued in the Financial Statements and the provision for
Taxes made therein is sufficient for the payment of all unpaid Taxes of the
Company for the fiscal year ended December 31, 1996 and all periods prior
thereto.
8.
(iv) No interest, fines or penalties are or shall be due in
respect of any Taxes up to and including the Closing Date.
(v) The Company has complied with all, and has not omitted to
comply with any, laws, rules and regulations relating to Taxes with regard to
any transaction entered into or any conduct of the Company's business up to and
including the Closing Date. There is no basis for assessment of any deficiency
in income taxes or any other Taxes against the Company.
(vi) All security transfer taxes, payable in connection with the
transfer of any securities of the Company relating to transactions prior to the
transactions contemplated by this Agreement, have been duly paid.
(l) Compliance With Law. Schedule 2.1(l) sets forth all of the
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Company's franchises, licenses, permits, use permits, consents, authorizations,
and approvals of any Italian, state or local or provincial and, to the best
knowledge of the Securityholders after due inquiry, other foreign, regulatory,
administrative or other governmental or zoning agency or body (collectively
referred to herein as "Governmental Permits"). The Company has complied and is
in compliance with all applicable Italian and state and local or provincial and,
to the best knowledge of the Securityholders after due inquiry, other foreign,
laws, statutes, licensing requirements, rules and regulations, and judicial or
administrative or zoning decisions. The Company has been granted all licenses,
permits (temporary and otherwise), authorizations and approvals from all
Italian, state and local or provincial and, to the best knowledge of the
Securityholders after due inquiry, other foreign, governmental regulatory or
zoning bodies necessary to carry on the business of the Company and maintain the
assets of the Company, all of which are currently valid and in full force and
effect. All such licenses, permits, authorizations and approvals shall remain
valid and in full force and effect following the Closing and shall not be
adversely impacted upon by the change in ownership of the Company capital stock
provided under this Agreement. To the best of the knowledge of the
Securityholders, after due inquiry, there is no order issued, investigation, or
proceeding pending or threatened, or notice served with respect to any violation
of any law, ordinance, order, writ, decree, rule, or regulation issued by any
Italian, state, local or provincial and, to the best knowledge of the
Securityholders after due inquiry, other foreign, court or governmental agency
or instrumentality applicable to the Company. The Company has valid use permits
for its business.
(m) Intellectual Property Rights.
----------------------------
(i) The Company owns, or is licensed or otherwise entitled to
exercise, without restriction all rights to, all patents, trademarks, trade
names, service marks, copyrights, trade secret rights and other intellectual
property rights, and any applications or registrations therefor, and all net
lists, schematics, technology, source code, know-how,
9.
computer software programs and all other tangible and intangible information or
material used, usable or proposed to be used in the Company's business
(collectively, the "Intellectual Property Rights") without any conflict or
infringement of the rights of others. All of such Intellectual Property Rights
are set forth in Schedule 2.1(m).
---------------
(ii) Schedule 2.1(m) also lists (i) all patents and patent
---------------
applications and all copyrights, trade dress, trade names, trademarks, service
marks and other company, product or service identifiers included in the
Intellectual Property Rights, and specifies the jurisdictions in which each such
Intellectual Property Right has been registered, including the respective
registration numbers; and (ii) all licenses, sublicenses and other agreements as
to which the Company is a party and pursuant to which the Company or any
other person is authorized to use any Intellectual Property Right. Copies of
all licenses, sublicenses, and other agreements identified pursuant to clause
(ii) above have been delivered by the Company to Purchaser and/or its counsel.
(iii) The Company is not, or as a result of the execution and
delivery of this Agreement or the performance of the Company's obligations
hereunder will not be, in violation of, or lose or in any way impair any rights
pursuant to any license, sublicense or agreement described in Schedule 2.1 (m).
----------------
(iv) The Company is the absolute owner or licensee of, with all
necessary right, title and interest in and to (free and clear of any liens,
encumbrances or security interests), the Intellectual Property Rights and has
rights to the use, sale, license or disposal thereof or the material covered
thereby in connection with the services or products in respect of which the
Intellectual Property Rights are being used. The Company has taken all actions
and made all applications and filings pursuant to applicable laws to perfect or
protect their interests in such Intellectual Property Rights.
(v) No claims with respect to the Intellectual Property Rights
have been asserted or are threatened by any person, and none of the
Securityholders know of any claims (i) to the effect that the manufacture,
marketing, license, sale or use of any product as now used or offered or
proposed for use or sale by the Company infringes any copyright, patent, trade
secret, or other intellectual property right of any third party or violates any
license or agreement with any third party, (ii) contesting the right of the
Company to use, sell, license or dispose of any Intellectual Property Rights, or
(iii) challenging the ownership, validity or effectiveness of any of the
Intellectual Property Rights.
(vi) All patents, patent applications and trademarks, service
marks, and other company, product or service identifiers and copyrights held by
the Company are valid and subsisting.
10.
(vii) There has not been and there is not now any
unauthorized use, infringement or misappropriation of any of the Intellectual
Property Rights by any third party, including, without limitation, any service
provider of the Company. The Company has not been sued or charged as a
defendant in any claim, suit, action or proceeding which involves a claim of
infringement of any patents, patent applications, trademarks, service marks,
copyrights or other intellectual property rights and which has not been finally
terminated prior to the date hereof. There are no such charges or claims
outstanding; and the Company does not have any infringement liability with
respect to any patent, patent applications, trademark, service xxxx, copyright
or other intellectual property right of another.
(viii) No Intellectual Property Right is subject to any order,
judgment, decree, stipulation or agreement restricting in any manner the
licensing thereof by the Company. The Company has not entered into any
agreement to indemnify any other person against any charge of infringement of
any Intellectual Property Right. The Company has not entered into any agreement
granting any third party the right to bring infringement actions with respect
to, or otherwise to enforce rights with respect to, any Intellectual Property
Right. The Company has the exclusive right to file, prosecute and maintain all
applications and registrations with respect to the Intellectual Property Rights.
(n) Service Provider Agreements. To the best of the knowledge of the
---------------------------
Securityholders, after due inquiry, no service provider of the Company is in
violation of any term of any employment agreement (whether written or verbal),
patent or trademark disclosure agreement or any other contract or agreement
relating to the relationship of any such service provider with the Company or
any other party (including prior employers) or any term of any judgment, decree,
or order, because of the nature of the business now conducted or now proposed to
be conducted by the Company. Each current and former service provider of the
Company has executed a proprietary information and inventions agreement (or
similar agreement) with the Company in the form then being used by the Company,
which forms, if any, have been previously delivered to Purchaser by the Company.
Each employee or consultant-inventor has executed a written agreement validly
assigning his or her rights to the Company on all inventions, pending patent
applications, all patents issued, and all other intellectual property rights
developed by such service provider while working for or on behalf of the
Company. To the extent the Company has ever utilized consultants or independent
contractors, each consultant or independent contractor has executed a written
agreement, validly assigning to the Company his or her rights in and to all
copyrights and works of authorship relating to products, services or technology
designed, developed, manufactured, licensed, sold, marketed or serviced by the
Company and its business. The Securityholders are not aware that any of the
Company's service providers is in violation thereof and will use all efforts to
prevent any such violation. The Securityholders are not aware that any of the
Company's service providers is obligated under any contract (including licenses,
covenants or commitments of any nature) or other agreement, or subject to any
judgment, decree or order of any court or administrative agency, that would
interfere with the use of his or her best efforts
11.
to promote the interests of the Company or that would conflict with the
Company's business as conducted or as proposed to be conducted or that would
prevent any such service provider from assigning inventions to the Company. The
Securityholders do not believe that it is or will be necessary for the Company
to utilize any inventions of any of its service providers (or people it
currently intends to hire) made prior to their employment by or relationship
with the Company.
(o) Restrictive Documents or Orders. Neither the Company nor any
-------------------------------
Securityholder is a party to or bound under any agreement, contract, order,
judgment or decree, or any similar restriction not of general application which
adversely affects or reasonably could be expected to adversely affect (i) the
continued operation by Purchaser of the business of the Company after the
Closing on substantially the same basis as said business was theretofore
operated or (ii) the consummation of the transactions contemplated by this
Agreement.
(p) Contracts and Commitments.
-------------------------
(i) There is set forth on Schedule 2.1(p) a complete list of all
---------------
outstanding contracts in excess of United States $2,500, whether or not in
writing, to which the Company or any of the Securityholders is a party, to which
any of the assets of the Company are subject or that relate to any aspect of the
Company's business (the "Contracts").
(ii) The Company and each Securityholder, as the case may be, has
performed all of its obligations under the terms of each Contract, and is not in
default thereunder. To the best of each Securityholder's knowledge, no event or
omission has occurred which but for the giving of notice or lapse of time or
both would constitute a default by any party thereto under any such Contract.
Each such Contract is valid and binding on all parties thereto and in full force
and effect. The Company has received no written or unwritten notice of default,
cancellation, or termination in connection with any such Contract. The Company
has paid, or will pay, all debts and performed all obligations accrued or
required as of the Closing under the terms of all Contracts.
(iii) There has not been any notice (written or unwritten)
from any of the Company's suppliers that any such supplier will not continue to
supply the current level and type of goods currently being provided by such
supplier to the Company on the current terms and conditions.
(iv) Schedule 2.1(p) also lists all sole or limited source supply
---------------
agreements. Notwithstanding anything in this Agreement or in any Schedule, the
Company and the Securityholders shall also be responsible for all debts and
obligations arising on or prior to the Closing or that have their basis from
actions, conduct, inactions or omissions of the Company or agents acting on the
Company's behalf having occurred on or prior to the
12.
Closing except as specifically provided for in the Company's Closing Date
Balance Sheet delivered pursuant to Section 4.15 of this Agreement.
(q) Title to the Property. The Company has good and marketable title
---------------------
to all properties, all of which are reflected in the Financial Statements, in
each case free and clear of all liabilities, mortgages, pledges, liens, charges,
conditional sale or other title retention agreements, assessments, easements,
covenants, restrictions, reservations, commitments, obligations or other
encumbrances of any nature whatsoever. Schedule 2.1(q) hereto lists all leases
---------------
of property to which the Company is a party. All leases of property are valid,
binding and in full force and effect, and there exists no default thereunder.
There exists no restriction on the use of leased property in connection with the
business now conducted by the Company or any other matter which prevents or
impairs the use of such leased property for the purpose now used or any similar
purpose. The Company has all easements and rights, including easements for
power lines, telephone and telefax, necessary to conduct the business it now
conducts.
(i) All buildings, offices, and other structures occupied by the
Company and all machinery, equipment, tools, fixtures, motor vehicles and other
properties owned or used by the Company are in normal operating condition and
repair in accordance with generally accepted standards.
(ii) Neither the whole nor any portion of any property owned or
occupied by the Company has been condemned or otherwise taken by any public
authority, nor does the Company have reasonable grounds to believe that any such
condemnation or taking is threatened.
(iii) To the best of the knowledge of the Securityholders,
after due inquiry, all of the properties owned or used by the Company conform to
all zoning, building, health, safety laws, regulations and/or ordinances
relating to such property, whether already in effect or whether enacted by the
appropriate legislative bodies but not yet in effect. No notices of violation
relating to any such laws, regulations and/or ordinances or calling attention to
the need for any work, repairs, constructions, alterations or installations,
have been received by the Company, nor are the Securityholders aware of any
action, inaction, or state of facts which, with or without the passage of time,
may reasonably give rise to any such violation or need for any such work,
repairs, constructions, alterations or installments.
(r) Title to Securities. Good and marketable and unencumbered title
-------------------
to all of the securities held by the Securityholders shall pass to Purchaser
upon consummation of the transactions set forth in this Agreement.
(s) Litigation. None of the Company, the Securityholders nor any of
----------
the Company's officers, directors or employees is engaged in, or has received
any threat of,
13.
any litigation, arbitration, investigation, claim or other proceeding relating
to the Securityholders, the Company or its officers, directors, employees,
benefit plans, properties, Intellectual Property Rights, business, assets,
licenses, permits, or goodwill; or against or affecting the actions taken or
contemplated in connection therewith, nor is there any reasonable basis
therefor. There is no action, suit, proceeding or investigation pending or
threatened against the Company or any of the Securityholders, or the officers or
directors of the Company, that questions the validity of this Agreement or the
right of the Securityholders to enter into this Agreement or the Closing
Documents, or to consummate the transactions contemplated hereby or thereby, or
which might result in any material adverse change in the assets, the business
condition, prospects or properties of the Company, or the financial condition of
the Securityholders. There is no action, suit, proceeding or investigation by
the Company or the Securityholders currently pending or which any of them
currently intends to initiate. None of the Company, the Securityholders nor any
of the Company's officers or directors is bound by any judgment, decree,
injunction, ruling or order of any court, governmental, regulatory or
administrative department, commission, agency or instrumentality, arbitrator or
any other person which would or could have a material adverse effect on the
business of the Company. None of the Company, the Securityholders, nor any
of the Company's officers or directors is bound by any judgment, decree,
injunction, agreement, ruling or order of any court, governmental, regulatory or
administrative department, commission, agency or instrumentality, arbitrator or
any other person which would or could impose any limitations or restrictions on
the ability of the Company to sell its products in any jurisdiction.
(t) Labor Relations. The amounts shown on the Financial Statements
---------------
for staff leaving indemnities ("TFR") or any similar obligations, exclusive of
notice, represent the full amount which the Company will be required by law to
pay to its employees and sales agents for all periods through September 30,
1996, to cover termination pay upon cessation of the employment or agency
relationship, respectively, up to that date. Except as disclosed in Schedule
--------
2.1(t)A hereto, none of the Company's directors, employees or agents has been
-------
granted any special termination pay, pension or beneficial plan. The Company
has filed all declarations, returns and reports required to be filed with
respect to social security and welfare laws and regulations. All social and
welfare charges of the Company through the Closing Date have been paid in full
or adequately reserved for. Except as disclosed in Schedule 2.1(t)B hereto, the
----------------
Company is not the beneficiary of temporary exemption or reduction schemes of
social security charges (such as "contratti di formazione"). The hours worked
-----------------------
by and payments made to the Company's employees have not been in violation in
any respect of applicable Italian or foreign state or local or provincial laws
dealing with such matters.
(u) Personnel. The Company has provided to Purchaser a list
---------
identifying all current directors, officers, employees, independent contractors
and consultants of the Company, setting forth the job title of, and salary
(including bonuses and commissions)
14.
payable to, each such person. The Company has not entered into any consulting
agreements with any service provider who owes services to or are owed
compensation by the Company for services provided in excess of United States
$10,000.
(v) Brokers' and Finders' Fees/Contractual Limitations. The Company
--------------------------------------------------
is not obligated, directly or indirectly, to pay any fees or expenses of any
broker or finder in connection with the origin, negotiation, or execution of
this Agreement or in connection with any transactions contemplated hereby.
Neither the Company nor any officer, director, employee, shareholder, agent, or
representative of the Company (collectively "Agent/Representatives") are or have
been subject to any agreement, letter of intent, or understanding of any kind
which prohibits, limits, or restricts the Company or Agent/Representatives from
negotiating, entering into and consummating this Agreement and the transactions
contemplated hereby.
(w) Related Party Transactions. No employee, officer or director of
--------------------------
the Company or member of his or her immediate family is indebted to the Company,
nor is the Company indebted (or committed to make loans or extend or guarantee
credit) to any of them. To the best of each Securityholder's knowledge, none of
such persons has any direct or indirect ownership interest in any firm or
corporation with which the Company is affiliated or with which the Company has a
business relationship, or any firm or corporation that competes with the
Company, except that the employees, officers or directors of the Company and
members of their immediate families may own stock in publicly traded companies
that may compete with the Company. No member of the immediate family or any
officer or director of the Company or Securityholder is directly interested in
any material contract with the Company.
(x) Certain Payments. In connection with its business, the Company
----------------
has not and no person directly or indirectly on behalf of the Company has made
or received any payment that was not legal to make or receive.
(y) Products Liability. There are no claims received by the Company
------------------
or any Securityholder against the Company, fixed or contingent, asserting (a)
any damage, loss or injury caused by any Product or (b) any breach of any
express or implied product warranty or any other similar claim with respect to
any Product other than standard warranty obligations (to replace, repair or
refund) made by the Company in the ordinary course of business, except for those
claims that, if adversely determined against the Company, would not have a
material adverse effect on the business, results of operations, financial
condition or prospects of the Company. As used herein, "Product" shall mean any
products manufactured, designed, developed, distributed, sold, re-sold,
customized or serviced by the Company.
15.
(z) Product Warranties. The Company has provided to Purchaser copies
------------------
of its warranty policies and all outstanding warranties or guarantees relating
to any of the Company's products, if any, other than warranties or guarantees
implied by law.
(aa) Returns. There are no agreements or arrangements, written or
-------
oral, that entitle any business partner or customer of the Company to return
products sold, delivered or shipped by the Company to such business partner or
customer.
(ab) Customers. Except as indicated on Schedule 2.1(ab) attached
--------- ----------------
hereto, no single customer of the Company accounted for more than 5% of the net
sales of the Company during the twelve-month period ended December 31, 1996.
The Company has furnished Purchaser with complete and accurate copies or
descriptions of all current agreements (written or unwritten) with such
customers, which are set forth on the list of contracts. The Securityholders
are not aware of any event, happening, or fact which would lead it or him to
believe that any of such customers will not continue their current level of
purchases after the Closing.
(ac) Suppliers. Schedule 2.1(ac) hereto lists all suppliers of goods
--------- ----------------
to the Company during the prior one (1) year and the value of goods supplied to
the Company in such year. The Securityholders are not aware of any event,
happening, or fact which would lead them to believe that any of such suppliers
will not continue to supply the current level and type of goods currently being
provided to the Company on current terms and conditions.
(ad) Books and Records. The books and records of the Company to which
-----------------
Purchaser and its accountants and attorneys have been given access are the true
books and records of the Company and truly and fairly reflect the underlying
facts and transactions in all material respects.
(ae) Complete Disclosure. No representation or warranty made by any
-------------------
Securityholder in this Agreement, nor any document, information, statement,
financial statement, certificate, schedule or exhibit prepared and furnished or
to be prepared and furnished by the Company or any Securityholder or its
respective representatives pursuant hereto or in connection with the
transactions contemplated hereby, contains or will contain any untrue statement
of a material fact, or omits or will omit to state a material fact necessary to
make the statements or facts contained herein or therein not misleading in light
of the circumstances under which they were furnished. There is no event, fact
or condition that has resulted in, or could reasonably be expected to result in
any event, change or effect that is materially adverse to the condition
(financial or otherwise), properties, assets, liabilities, businesses,
operations, results of operations or prospects of the Company taken as a whole
that has not been specifically identified in the relevant Schedules attached
hereto.
16.
(af) Performance of Agreement. All covenants, conditions, and other
------------------------
obligations under this Agreement which are to be performed or complied with by
the Company and the Securityholders prior to the Closing have been fully
performed and complied with at or prior to the Closing, including the delivery
of the instruments and documents in accordance with this Agreement.
(ag) Absence of Governmental or Other Objection. There is no pending
------------------------------------------
or threatened lawsuit or action or hearing challenging the transaction by any
body or agency of the Italian, state, or local or provincial government or by
any third party, and the consummation of the transaction has not been enjoined
by a court of competent jurisdiction as of the Closing. To the best of the
Securityholder's knowledge, after due inquiry, there is no legislation and no
rulings in effect by any regulatory, administrative or governmental authority
that would make operation of the Company's systems inoperable anywhere.
(ah) Insurance. Schedule 2.1(ah) lists all insurance policies and
--------- ----------------
fidelity bonds covering the assets, business, equipment, properties, operations,
employees, officers and directors of the Company, the amounts of coverage under
each such policy and bond of the Company. The Company has not been refused any
requested coverage and no material claim made by the Company has been denied by
the underwriters of such policies or bonds. All premiums payable under all such
policies and bonds have been paid, and the Company is otherwise in full
compliance with the terms of such policies and bonds (or other policies and
bonds providing substantially similar insurance coverage). The Company is in
compliance with each of such policies. Such policies of insurance and bonds are
of the type and in amounts customarily carried by persons conducting businesses
similar to those of the Company. The Securityholders do not know of any
threatened termination of, the invalidation of any coverage of or material
premium increase with respect to, any of such policies.
(ai) Environmental Matters. The Company holds all of the
---------------------
environmental permits required by applicable law to store, transport, dispose
of, discharge, release or emit any waste material ("Environmental Permits").
All Environmental Permits are renewable in the ordinary course of business and
will remain in full force and effect following the Closing. The Company is
conducting, and has conducted, its business in compliance with all Environmental
Permits, according to an interpretation thereof to the best of any of the
Securityholders' judgment and has received no notice that it is in breach of any
such Environmental Permit. To the best of the Securityholders' knowledge, the
Company is in substantial compliance with all applicable Italian, state or local
or provincial laws relating to emissions, discharges, releases or threatened
releases of pollutants, contaminants, or hazardous or toxic materials or waste.
The Company and its predecessors have processed, stored, disposed, transported,
handled, emitted, discharged and released any waste material, whether on or off
the real estate, only in compliance with applicable law and applicable
Environmental Permits, and no such disposal may form the basis for any claim,
demand or action seeking the clean-up of any site, location, body of water,
surface, or subsurface, wherever located. The
17.
Securityholders have no knowledge or information or reason to believe that any
waste material, tanks, containers, cylinders, drums or cans were buried on its
real estate by the Company or any other party during or preceding the Company's
ownership or leasing of any real estate. The Company has delivered to Purchaser
copies of all environmental reports prepared by or for the Company.
(aj) Backlog. Schedule 2.1(aj) hereto sets forth the backlog of
------- ----------------
orders relating to the business of the Company that the Company is to ship and
contract work to be performed as of the Closing. The Company either possesses
sufficient inventory of parts, materials and personnel to produce the same
within the scheduled delivery dates or such parts or materials have lead times
such that the Company can acquire such parts and materials in time to produce
and ship such backlog in accordance with its scheduled shipping date, as of the
Closing.
(ak) Accounts Receivable. The amount of all Accounts Receivable set
-------------------
forth on Schedule 2.1(ak) are as of the date hereof, and will be as of the
----------------
Closing, good and collectible in full in the ordinary course of business within
90 days of Closing; all such Accounts Receivable arise from bona fide
transactions in the ordinary course of business; no contest with respect to the
amount or validity of any amount is pending; and none of such Accounts
Receivable is or will at the Closing be subject to any counterclaim or setoff.
The value at which Accounts Receivable are carried reflect the accounts
receivable valuation policy of the Company. As of the date hereof, and as of the
Closing, except as set forth in Schedule 2.1(ak), there is and will be (i) no
----------------
account debtor or note debtor delinquent in its payment by more than 30 days,
(ii) no account debtor or note debtor that has refused (or threatened
to refuse) to pay its obligation for any reason, (iii) no account
debtor or note debtor that is insolvent or bankrupt, and (iv) no account
receivable or note receivable which is pledged to any third party by the
Company. The Company holds no deposits from customers and has received no
prepaid service contract revenue or other prepaid revenue.
(al) Subsidiaries. Except as set forth in Schedule 2.1(al), the
------------ ----------------
Company does not own or control, directly or indirectly, any corporation,
partnership, business, trust or other entity. Schedule 2.1(al) also sets forth
----------------
a true and complete list of all states and foreign countries where the Company
and its subsidiaries are qualified to do business or are doing business. All of
the shares of capital stock of each such subsidiary are owned by the Company
free and clear of all liens and Purchaser shall acquire good and marketable
title to all such shares upon consummation of the events contemplated in this
Agreement.
(am) Exports to Certain Countries. For the five years preceding the
----------------------------
date hereof, the Company has made no sales to entities located or residing or
domiciled in, directly or indirectly, Cuba or North Korea. Except as listed in
Schedule 2.1(am), for the five years preceding the date hereof, the Company has
----------------
made no sales to entities located or residing
18.
or domiciled in, directly or indirectly, Libya, Iraq or Iran. All contracts
currently outstanding with entities located or residing or domiciled in,
directly or indirectly, Libya, Iraq and Iran are for the supply of products
which are currently produced by the Company and which contain less than 10%
content of U.S. origin.
(an) Foreign Corrupt Practices Act. The Securityholders have no
-----------------------------
knowledge or reason to believe that any of the activities or types of conduct
below have been or may have been engaged in by the Company, either directly or
indirectly:
(i) Any bribes or kickbacks to government officials or their
relatives, or any other payments to such persons, whether or not legal, to
obtain or retain business or to receive favorable treatment with regard to
business; or
(ii) Any bribes or kickbacks to persons other than government
officials, or to relatives of such persons, or any other payments to such
persons or their relatives, whether or not legal, to obtain or retain business
or to receive favorable treatment with regard to business; or
(iii) Any contributions, whether or not legal, made to any
political party, political candidate or holder of governmental office; or
(iv) Any bank accounts, funds or pools of funds created or
maintained without being reflected on the corporate books of account, or as to
which the receipts and disbursements therefrom have not been reflected on such
books; or
(v) Any receipts or disbursements, the actual nature of which has
been "disguised" or intentionally misrecorded on the corporate books of account;
or
(vi) Fees paid to consultants or commercial agents which exceeded
the reasonable value of the services purported to have been rendered; or
(vii) Any payments or reimbursements made to personnel of the
Company for the purposes of enabling them to expend time or to make
contributions or payments of the kind or for the purpose referred to in
subparagraphs (i)-(vi) above. In addition, the Securityholders have no reason to
believe that the Company has violated the United States Corrupt Foreign
Practices Act or any other similar laws, statute, rule or regulation of any
country.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF PURCHASER
19.
3.1 Representations and Warranties of Purchaser. Purchaser hereby
-------------------------------------------
represents and warrants that:
(a) Organization. Purchaser is a corporation duly organized and
------------
validly existing under the laws of the state of Delaware, and has all corporate
power and authority to lease, own, and operate its properties and carry on its
business and operations and to directly own, lease, and operate the assets of
Purchaser. Purchaser is duly qualified or licensed to do business as a
corporation, and is in good standing in each jurisdiction where the failure to
qualify would have a material adverse effect on its business and operations.
(b) Authority.
---------
(i) Purchaser has all requisite corporate power and authority to
enter into this Agreement, to execute, deliver and perform its obligations
hereunder and to consummate the transactions contemplated hereby. The execution
and delivery of this Agreement, the performance by Purchaser of its obligations
hereunder and the consummation of the transactions contemplated hereby have been
duly and validly authorized by all necessary corporate action on the part of
Purchaser, including approval by its Board of Directors. This Agreement is a
legal, valid and binding obligation of Purchaser enforceable against Purchaser
in accordance with its terms, except as enforcement may be limited by
bankruptcy, insolvency, or other similar laws affecting the enforcement of
creditors' rights generally and except that the availability of equitable
remedies is subject to the discretion of the court before which any proceeding
therefor may be brought.
(ii) No consent, approval, order or authorization of, or
registration, declaration, qualification, or filing of or with, any Governmental
Entity is required by or with respect to Purchaser in connection with the
execution and delivery of this Agreement or the consummation by Purchaser of the
transactions contemplated hereby, except for the making of such reports under
the Securities Exchange Act of 1934, as amended, as are required in connection
with the transactions contemplated by this Agreement.
ARTICLE IV
COVENANTS OF THE SECURITYHOLDERS
4.1 Maintenance of Business. During the period from the date hereof
-----------------------
to the Closing, the Securityholders shall cause the Company to carry on and use
its best efforts to preserve its business, operations and facilities, the
goodwill of the business, operations and facilities and relationships with
customers, suppliers, officers, employees, agents, licensees and others with
respect to the business, operations and facilities in substantially the same
manner as the Company did prior to the date of this Agreement. If the
Securityholders become aware of a deterioration in a relationship between the
Company and any such customer,
20.
supplier, licensee or officer, employee or agent with respect to the business,
operations and facilities, the Company will promptly bring such information to
the attention of Purchaser and will use its best efforts to restore such
relationship.
4.2 Conduct of Business. From the date hereof until the Closing,
-------------------
except as expressly permitted hereby, the Company shall not without Purchaser's
prior express written consent:
(a) incur any indebtedness for money borrowed or guarantee any
indebtedness or obligation of any other party or enter into any performance
bond;
(b) declare or pay any dividends on or make any other distributions
(whether in cash, stock or property) in respect of any of the Company common
stock or otherwise, or split, combine or reclassify any of its common stock or
issue or authorize the issuance of any other securities in respect of, in lieu
of or in substitution for shares of the Company common stock, or repurchase or
otherwise acquire, directly or indirectly, any shares of the Company common
stock except repurchases of common stock at cost from former service providers
in accordance with the terms of agreements providing for the repurchase of
shares in connection with any termination of service to the Company;
(c) issue or grant any securities or securities convertible into
common stock or grant or issue any options, warrants or rights to subscribe for
its common stock or securities convertible into its common stock;
(d) enter into, amend or terminate any employment or consulting
agreement or any similar agreement or arrangement;
(e) hire, or enter into any commitment to hire, any additional
employees or service providers of the Company;
(f) increase or modify the compensation payable or to become payable
to any of its officers, directors, employees or agents, or adopt or amend any
employee benefit plan or arrangement or issue any bonus or dividend other than
as required by law or as specifically required under the applicable agreement;
(g) acquire or dispose of by sale, lease, license or other means, any
properties or assets used in its business, except in the ordinary course of
business;
(h) waive or commit to waive any rights of substantial value;
(i) create or cause to be imposed any lien, mortgage, security
interest or other charge on or against its properties or assets; provided,
however that the
21.
Company shall promptly consult with Purchaser regarding any possible defenses to
any such actions initiated by third parties;
(j) enter into, amend or terminate any lease of real or personal
property otherwise than in the ordinary course of business;
(k) amend its charter documents;
(l) engage in any activities or transactions outside the ordinary
course of its business;
(m) make any material amendments or changes in any instruments or
agreements delivered by it or its representatives to Purchaser or its counsel;
(n) accelerate the vesting of any employee stock benefit (including
vesting under stock purchase agreements or exercisability of stock options) or
waive any repurchase right or other right of forfeiture or take any other action
designed to accomplish the foregoing;
(o) grant any severance or termination pay to any director, officer,
employee or consultant other than as required by law or prior agreement;
(p) transfer to any person or entity any rights to the Company's
Intellectual Property Rights;
(q) enter into or amend any agreements pursuant to which any other
party is granted marketing or other similar rights of any type or scope with
respect to any Products of the Company;
(r) violate the terms of any Contract;
(s) except with prior consultation with Purchaser, commence a
lawsuit other than for the routine collection of bills;
(t) revalue any of its assets, including, without limitation, writing
down the value of inventory or accounts receivable;
(u) liquidate or discount any Account Receivable or subject any
Account Receivable to a claim or setoff;
22.
(v) pay, discharge or satisfy in an amount in excess of United States
$5,000 in any one case any claim, liability or obligation (absolute, accrued,
asserted or unasserted, contingent or otherwise), other than the payment,
discharge or satisfaction in the ordinary course of business consistent with
past practice of liabilities reflected or reserved against in the Financial
Statements;
(w) fail to pay or otherwise satisfy its material monetary obligations
as they become due or consistent with past practice, except such as are being
contested in good faith;
(x) waive or commit to waive any rights of substantial value;
(y) cancel, amend or, other than in the ordinary course upon
expiration of a policy term, renew any material insurance policy;
(z) alter, or enter into any commitment to materially alter, its
interest in any corporation, association, joint venture, partnership or business
entity in which the Company directly or indirectly holds any interest on the
date hereof; or
(aa) take, or agree (in writing or otherwise) to take, any of the
actions described in this Section 4.2 or any action which would make any of the
representations or warranties or covenants of the Securityholders contained in
this Agreement materially untrue or incorrect.
4.3 Necessary Consents. Prior to the Closing, the Company and the
------------------
Securityholders will obtain such written consents and take such other actions as
may be necessary or appropriate to allow the consummation of the transactions
contemplated hereby and to allow the continuation of the Company's businesses by
Purchaser after the Closing as conducted on the date hereof.
4.4 Access to Information.
---------------------
(a) The Company has given and shall give to Purchaser and its
accountants, legal counsel and other representatives full and complete access,
during normal business hours throughout the period from the date hereof to the
Closing, to all of the properties, books, contracts, commitments and records
relating to the business, assets and liabilities of the Company, and will
furnish Purchaser, its accountants, legal counsel and other representatives
during such period all such information concerning its affairs as Purchaser may
request; provided that any furnishing of such information pursuant hereto or any
investigation by Purchaser or any of their advisors shall not affect Purchaser's
right to rely on the representations, warranties, agreements and covenants made
by the Securityholders in this Agreement.
23.
(b) The Company shall provide Purchaser with an unaudited monthly
balance sheet and profit and loss account within twenty-five (25) days of each
month-end prior to the Closing, if applicable, as well as copies of such other
internal financial statements as may be requested by Purchaser.
4.5 Best Efforts. The Securityholders will use their best efforts to
------------
cause the Company to perform and fulfill all obligations to be performed and
fulfilled under this Agreement, and to cause all the conditions precedent to the
consummation of the transactions to be timely satisfied, to the end that the
transactions contemplated by this Agreement shall be effected substantially in
accordance with its terms. The Securityholders shall cooperate and cause the
Company to cooperate with Purchaser in such actions and in securing requisite
approvals and shall deliver such further documents as Purchaser may request as
necessary to evidence such transactions.
4.6 Exclusivity; Acquisition Proposals. Until the earlier to occur
----------------------------------
of the Closing or such date as Purchaser advises the Securityholders in writing
that Purchaser is terminating this Agreement in accordance with Article X
hereof:
(a) The Securityholders shall not knowingly, and shall not cause or
permit the Company to, directly or indirectly, through any officer, director,
agent or representative of the Company (including, without limitation,
investment bankers, attorneys, accountants and consultants), or otherwise:
(i) solicit, initiate or further the submission of proposals or
offers from, or enter into any agreement with, any firm, corporation,
partnership, association, group or other person or entity, individually or
collectively (including, without limitation, any managers or employees of the
Company or any affiliates), other than Purchaser (a "Third Party"), relating to
any acquisition or purchase or license of all or any portion of the assets of,
or any equity interest in, the Company or any merger, consolidation or business
combination with the Company;
(ii) participate in any discussions or negotiations regarding, or
furnish to any Third Party any confidential information with respect to the
Company or Purchaser in connection with any acquisition or purchase or license
of all or any portion of the assets of, or any equity interest in, the Company
or any merger, consolidation or business combination with the Company; or
(iii) cooperate in any way with, or assist or participate in,
facilitate or encourage, any effort or attempt by any Third Party to undertake
or seek to undertake any acquisition or purchase or license of all or any
portion of the assets of, or any equity interest in, the Company or any merger,
consolidation or business combination with the Company.
24.
(b) In the event that, prior to termination of this Agreement, the
Company receives any offer or indication of interest from any Third Party
relating to any acquisition or purchase or license of all or any portion of the
assets of, or any equity interest in, the Company or any merger, consolidation
or business combination with the Company, the Securityholders shall cause the
Company to promptly notify Purchaser in writing, and shall in any such notice,
set forth in reasonable detail the identity of the Third Party, the terms and
conditions of any proposal and any other information requested of the Company by
the Third Party or in connection therewith.
(c) The Securityholders shall cause the Company to immediately cease
and cause to be terminated any existing activities, discussions or negotiations
with any Third Party with respect to any of the foregoing.
4.7 Breach of Representations, Warranties, Agreements and Covenants.
---------------------------------------------------------------
(a) The Securityholders shall cause the Company not to take, or fail
to take, any action which from the date hereof through the Closing would cause
or constitute a breach of any of the Securityholders' representations,
warranties, agreements and covenants set forth in this Agreement. In the event
of, and promptly after becoming aware of, the actual, pending or threatened
occurrence of any event which would cause or constitute such a breach or
inaccuracy, the Securityholders shall give detailed notice thereof to Purchaser
and shall use their best efforts to prevent or promptly remedy such breach or
inaccuracy.
(b) The Securityholders shall cause the Company to execute,
simultaneously on the date of execution hereof, a letter substantially identical
to the letter attached hereto as Exhibit 4.7.
-----------
4.8 Legal Conditions to the Sale or Surrender of the Securities. The
-----------------------------------------------------------
Securityholders shall cause the Company to take all reasonable actions necessary
to comply promptly with all legal requirements which may be imposed on the
Company or the Securityholders with respect to the consummation of the
transactions set forth herein and will promptly cooperate with and furnish
information to Purchaser in connection with any such requirements imposed upon
Purchaser in connection with the consummation of the transactions set forth
herein. The Securityholders shall cause the Company to take all reasonable
actions to obtain (and to cooperate with Purchaser in obtaining) any consent,
authorization, order or approval of, or any exemption by, any Governmental
Entity required to be obtained or made by the Company or the Securityholders (or
by Purchaser) in connection with the consummation of the transactions set forth
herein or the taking of any action contemplated thereby or by this Agreement,
and to defend such lawsuits or other legal proceedings challenging this
Agreement or the consummation of the transactions contemplated hereby as the
Securityholders deem advisable in good faith, to lift or rescind any injunction
or restraining order or other order adversely affecting the ability of the
parties to consummate the transactions contemplated
25.
hereby as the Securityholders deem it advisable in good faith, and to effect all
necessary registrations and filings and submissions of information as the
Securityholders deem advisable in good faith required by any Governmental
Entity, and to fulfill all conditions to this Agreement.
4.9 Public Announcements. The Securityholders agree, and shall cause
--------------------
the Company, to maintain the confidentiality of the terms and conditions of this
Agreement. The Securityholders will consult in advance with Purchaser
concerning the timing and content of any announcement, press release or public
statement concerning the transactions set forth in this Agreement.
4.10 Non-Competition.
---------------
(a) Commencing on the Closing and continuing for five (5) years
thereafter, each of the Securityholders other than Elettronica S.p.A.
("Elettronica"), agree individually, that it, he, or she shall not engage
(except in his or her capacity as an officer, director, and/or employee of
Purchaser), directly or indirectly, whether on its, his, or her own account or
as a shareholder (other than as a less than 1% shareholder of a publicly-held
company (other than Purchaser)), partner, joint venturer, employee, consultant,
advisor, and/or agent, of any person, firm, corporation, or other entity, in any
or all of the following activities worldwide:
(i) Enter into or engage in the business of manufacturing, selling
or servicing radio systems or sub-systems or components thereof or radio
antennas or activities related to broadcasting and to microwave point to point
and point to multipoint radio links;
(ii) Solicit customers, suppliers or business patronage which
results in competition with Purchaser or any of its affiliates, in the business
of manufacturing, selling or servicing radio systems or sub-systems or
components thereof or radio antennas or activities related to broadcasting and
to microwave point to point and point to multipoint radio links;
(iii) Encourage or solicit any employees of Purchaser or any of
their affiliates to leave the employment of Purchaser or any of its affiliates
for any reason; or
(iv) Promote or assist, financially or otherwise, any person,
firm, association, corporation, or other entity engaged in the business of
manufacturing, selling or servicing radio systems or sub-systems or components
thereof or radio antennas or activities related to broadcasting and to microwave
point to point and point to multipoint radio links.
26.
(b) Commencing on the Closing and continuing for four (4) years
thereafter, Elettronica agrees individually, that it shall not engage, directly
or indirectly, whether on its own account or as a controlling shareholder of any
firm, corporation, or other entity, in any or all of the following activities
worldwide:
(i) Enter into or engage in the business of manufacturing, selling
or servicing radio systems or sub-systems or components thereof or radio
antennas or activities related to broadcasting and to microwave point to point
and point to multipoint radio links except for sole use in the defense market;
(ii) Solicit customers, suppliers or business patronage which
results in competition with Purchaser or any of its affiliates, in the business
of manufacturing, selling or servicing radio systems or sub-systems or
components thereof or radio antennas or activities related to broadcasting and
to microwave point to point and point to multipoint radio links except for sole
use in the defense market;
(iii) Encourage or solicit any employees of Purchaser or any
of their affiliates to leave the employment of Purchaser or any of its
affiliates for any reason; or
(iv) Promote or assist, financially or otherwise, any person,
firm, association, corporation, or other entity engaged in the business of
manufacturing, selling or servicing radio systems or sub-systems or components
thereof or radio antennas or activities related to broadcasting and to microwave
point to point and point to multipoint radio links except for sole use in the
defense market.
(c) Without limitation, the parties agree and intend that the
covenants contained in this Section 4.10 shall be deemed to be a series of
separate covenants and agreements, one for each and every region of each state
and political subdivision worldwide. If, in any judicial proceeding, a court
shall refuse to enforce in such action any of the separate covenants deemed
included herein, then at the option of Purchaser, wholly unenforceable covenants
shall be deemed eliminated from the provisions hereof for the purpose of such
proceeding to the extent necessary to permit the remaining separate covenants to
be enforced in such a proceeding.
(d) The parties agree that due to the unique nature of the services
and capabilities of the Company and the Securityholders, there can be no
adequate remedy at law for any breach of their obligations hereunder, that any
such breach may allow any of the Securityholders and/or third parties to
unfairly compete with Purchaser resulting in irreparable harm to Purchaser, and
therefore, that upon any such breach or any threat thereof, Purchaser shall be
entitled to appropriate equitable relief in addition to whatever remedies they
might have at law. Further, Purchaser shall be entitled, until the expiration
of the applicable statute of limitations, to indemnification by each
Securityholder, severally but not jointly, from any
27.
loss or harm, including, without limitation, attorney's fees, in connection with
any breach, or any enforcement, of such Securityholder's obligations hereunder.
(e) The Securityholders represent and warrant to Purchaser that the
covenants of each of the Securityholders in this Section 4.10 are reasonably
necessary for the protection of Purchaser's interests under this Agreement and
are not unduly restrictive upon the Company or any of the Securityholders.
4.11 Shareholders' Meeting. The Securityholders shall cause all
---------------------
directors and current statutory officers of the Company to resign as of the
Closing. Prior to the Closing, the Securityholders shall cause a shareholders'
meeting of the Company to be held, at which meeting (i) a resolution authorizing
the change of the name of the Company from Technosystem S.p.A. to P-COM Italia
S.p.A. shall be passed, and (ii) such directors and statutory auditors of the
Company as shall be designated by Purchaser shall be elected.
4.12 No Transfer. Each Securityholder agrees not to sell, offer for
-----------
sale, assign, transfer or otherwise encumber any of the Securities to any third
party other than Purchaser; provided that this Agreement is not terminated
pursuant to Article X hereof. Each Securityholder also waives any rights of
first offer or refusal or similar rights that it has with respect to the
transfer of any Company security by any Company securityholder to Purchaser.
4.13 Elettronica Cooperation. Elettronica understands and agrees that
-----------------------
certain Cooperation Agreement dated January 16, 1996 by and between Elettronica
and the Company shall remain valid and enforceable, upon terms no less favorable
to the Company, following the Closing. In this regard, Elettronica agrees that
the term of such agreement shall be extended to expire on the date that is three
years after the Closing. In addition, Elettronica agrees that the Company will
have access to the laboratories, facilities, equipment and technology of
Elettronica for use by the Company in developing certain commercial applications
of such technology after the Closing for a period of three (3) years.
4.14 Bank Guarantees. Elettronica individually covenants and agrees
---------------
to arrange for all guarantees that it has issued on behalf of the Company in
connection with the Company's banking facilities and performance bonds to
survive for a period of 90 days following the Closing. All such guarantees are
set forth in detail on Schedule 4.14 attached hereto.
4.15 Net Asset Determination.
-----------------------
(a) As used in this Section 4.15, the "Net Assets" of the Company
shall mean the difference between the total assets and the total liabilities of
the Company as of the relevant dates, determined in accordance with GAAP.
28.
(b) As soon as reasonably practicable after the signature of this
Agreement, but in no event later than the Closing Date, the Securityholders
shall cause the Company to deliver to Purchaser an unaudited balance sheet (the
"December Balance Sheet") of the Company dated as of December 31, 1996. The
December Balance Sheet shall fairly present the Net Assets of the Company as of
December 31, 1996 in accordance with GAAP and on a basis consistent with
previous periods.
(c) Upon receipt of the December Balance Sheet by Purchaser, if the
Net Assets as of December 31, 1996 are less than the value of such Net Assets as
set forth in the September 30, 1996 unaudited financial statements delivered to
Purchaser (the Net Assets contained in such September 30, 1996 unaudited
financial statements to be referred to herein as the "Minimum Net Assets"), then
the Securityholders shall immediately pay Purchaser in cash the amount by which
the Net Assets as of December 31, 1996 are less than the Minimum Net Assets;
provided, however, that the Securityholders shall only be obligated to make a
payment pursuant to this Section 4.15 to the extent that the Minimum Net Assets
exceed the Net Assets as of December 31, 1996 by more than United States
$300,000 and provided further that the Securityholders shall not be obligated to
make any payments for shortfalls in the Net Assets as of December 31, 1996
arising from adjustments to the December Balance Sheet necessitated by Price
Waterhouse, Rome as indicated in Schedule 2.1(f). In the event that the
Securityholders do not make a required payment in cash within the time set forth
in this Section 4.15, Purchaser shall be entitled to deduct (on a proportional
basis) from the Deferred Payment referred to in Section 1.2(c) hereof that
amount sufficient to cover the payment owed by the Securityholders.
4.16 No Further Exports To Certain Countries. The Company and the
---------------------------------------
Securityholders agree that from and after the date of this Agreement the Company
shall not enter into any new contracts for the supply of products to entities
located or residing or domiciled in, directly or indirectly, Libya, Iraq, Iran,
Cuba or North Korea. The Company agrees that in performing under any existing
contracts for the sale of products to entities located in Libya, Iraq or Iran,
the Company shall supply products containing less than 10% content of U.S.
origin.
ARTICLE V
COVENANTS OF PURCHASER
5.1 Necessary Consents. Prior to the Closing, Purchaser will obtain
------------------
such consents and take such other actions as may be necessary or appropriate to
allow the consummation of the transactions contemplated hereby.
5.2 Access to Information. Purchaser shall give the Securityholders
---------------------
and their accountants, legal counsel and other representatives full access,
during normal business
29.
hours throughout the period prior to the Closing, to all of the properties,
books, contracts, commitments and records relating to the business, assets and
liabilities of Purchaser and will furnish the Securityholders, their
accountants, legal counsel and other representatives during such period all such
information concerning its affairs as the Securityholders may reasonably
request; provided that any furnishing of such information pursuant hereto or any
investigation by the Securityholders shall not affect the Securityholders's
right to rely on the representations, warranties, agreements and covenants made
by Purchaser in this Agreement.
5.3 Best Efforts. Purchaser will use its best efforts to perform and
------------
fulfill all obligations on its part to be performed and fulfilled under this
Agreement, and to cause all the conditions precedent to the consummation of the
transactions to be timely satisfied, to the end that the transactions
contemplated by this Agreement shall be effected substantially in accordance
with its terms. Purchaser shall cooperate with the Securityholders in such
actions and in securing requisite approvals and shall deliver such further
documents as the Securityholders may reasonably request as necessary to evidence
such transactions.
5.4 Public Announcements. Purchaser agrees to maintain the
--------------------
confidentiality of the terms and conditions of this Agreement, except to the
extent required by law and pursuant to the public reporting obligations of
Purchaser. Purchaser will consult in advance with the Securityholders
concerning the timing and content of any announcement, press release or public
statement concerning the transactions set forth in this Agreement and will not
make any such announcement, release or statement without the Securityholders'
consent; provided, however, that Purchaser may make any public statement
concerning the transactions set forth in this Agreement without the
Securityholders's consent, if, in the opinion of counsel for Purchaser such
statement or announcement is required or advisable to comply with applicable
law, statute, rule or regulation, but in such event the Securityholders shall
bear no liability for such disclosure.
5.5 Breach of Representations, Warranties, Agreements and Covenants.
---------------------------------------------------------------
Purchaser shall not take, or fail to take, any action which from the date hereof
through the Closing would cause or constitute a breach of any of its
representations, warranties, agreements and covenants set forth in this
Agreement. In the event of, and promptly after becoming aware of, the actual,
pending or threatened occurrence of any event which would cause or constitute
such a breach or inaccuracy, Purchaser shall give detailed notice thereof
to the Securityholders and shall use its best efforts to prevent or promptly
remedy such breach or inaccuracy.
5.6 Legal Conditions to the Sale or Surrender of Securities.
-------------------------------------------------------
Purchaser shall take all reasonable actions necessary to comply promptly with
all legal requirements which may be imposed on it with respect to the
consummation of the transactions set forth herein and will promptly cooperate
with and furnish information to the Securityholders in connection with any such
requirement imposed upon the Securityholders in connection with the consummation
30.
of the transactions set forth herein. Purchaser shall take all reasonable
actions to obtain (and to cooperate with the Securityholders in obtaining) any
consent, authorization, order or approval of, or exemption by, any Governmental
Entity required to be obtained or made by Purchaser in connection with the
consummation of the transactions set forth herein or the taking of any action
contemplated by this Agreement, and to defend such lawsuits or other legal
proceedings challenging this Agreement or the consummation of the transactions
contemplated hereby as Purchaser deems advisable in good faith, to lift or
rescind any injunction or restraining order or other order adversely affecting
the ability of the parties to consummate the transactions contemplated hereby as
Purchaser deems advisable in good faith, and to effect all necessary
registrations and filings and submissions of information as Purchaser deems
advisable in good faith required by any Governmental Entity, and to fulfill all
conditions to this Agreement.
5.7 Bank Guarantees; Intercompany Debts. P-COM covenants and agrees
-----------------------------------
that within 90 days following the Closing, it will review the Company's existing
banking facilities and performance bonds and either (i) pay off all amounts
owing under any facility or secured by any performance bond for which
Elettronica has issued a guarantee, or (ii) assume such guarantee in a manner
that enables such banks or other financial institutions to fully discharge
Elettronica's guarantees, as set forth on Schedule 4.14 attached hereto.
Purchaser shall provide to Elettronica at the Closing a bank counter-guarantee
for the full amount set forth in Schedule 4.14 attached hereto. All such
guarantees of Elettronica relating to banking facilities and performance bonds
are identified in Schedule 4.14. In addition, Purchaser shall cause the Company
to satisfy all actual intercompany debts (including interest accruing thereon)
owing from the Company to Elettronica, as set forth on Schedule 4.14, within 90
days of the Closing.
ARTICLE VI
CONDITIONS PRECEDENT TO OBLIGATIONS OF PURCHASER
The obligations of Purchaser to consummate the transactions
contemplated by this Agreement are subject to the satisfaction, at or before the
Closing, of all the following conditions, unless waived in writing by Purchaser:
6.1 Certificates for Securities. Purchaser shall have received all
---------------------------
written certificates and other documents evidencing the Securities. In
addition, Purchaser shall have received all documents, agreements and
certificates necessary to effect the transfer to Purchaser of any shares of the
capital stock of Elbas S.r.l. held by Messrs. Biscarini and Bertuccioli.
6.2 Representations and Warranties True. All representations and
-----------------------------------
warranties of the Securityholders in this Agreement and the schedules and
exhibits hereto, and in any
31.
written statement or certificate that shall be delivered to Purchaser under this
Agreement, shall be true and correct on and as of the Closing Date as if made on
the date thereof.
6.3 Covenants Performed. The Company and the Securityholders shall
-------------------
have performed, satisfied, and complied with all covenants, agreements, and
conditions required by this Agreement to be performed or complied with by the
Company and the Securityholders, as applicable, on or before the Closing Date.
6.4 Certificates. Purchaser shall have received certificates from
------------
the Company and from each of the Securityholders, dated the Closing Date,
certifying, in such detail as Purchaser and its counsel may reasonably request,
that the conditions specified in this Article VI have been satisfied.
6.5 Opinions of Counsel for the Company and the Securityholders.
-----------------------------------------------------------
Purchaser shall have received an opinion from counsel for the Company and all of
the Securityholders, dated the Closing Date, in a form acceptable to Purchaser
(the "Securityholders' Opinion").
6.6 No Violations; No Actions. Consummation of the transactions
-------------------------
contemplated by this Agreement shall not violate any order, decree or judgment
of any court or Governmental Entity having competent jurisdiction and no action
or proceeding shall have been instituted or threatened by any person, entity or
Governmental Entity which, in any such case, in the sole but reasonable judgment
of Purchaser, has a reasonable probability of resulting in (i) the obtaining of
material damages from Purchaser; (ii) an order, judgment or decree restraining,
prohibiting or rendering unlawful the consummation of the transactions
contemplated by this Agreement; or (iii) other relief in connection therewith.
6.7 No Material Adverse Effect. During the period from September 30,
--------------------------
1996 to the Closing, there shall not have been any material and adverse effect
on the business condition or prospects of the Company.
6.8 Proceedings and Documents. All corporate and other proceedings
-------------------------
in connection with the transactions contemplated hereby and all documents and
instruments incident to such transactions shall be in form and substance
reasonably satisfactory to Purchaser and its counsel, and Purchaser shall have
received all such counterpart originals or certified or other copies of such
documents as it may reasonably request.
6.9 Schedules. If necessary or appropriate, the Company shall have
---------
updated or amended all schedules required by this Agreement, and all such
updated or amended schedules shall have been acceptable to Purchaser in its sole
but reasonable discretion.
32.
6.10 Required Consents. All consents, approvals and waivers from
-----------------
third parties and governmental authorities necessary for the consummation of the
transactions as contemplated hereby or to the continued validity and
effectiveness of the Company's Intellectual Property Rights shall have been
obtained or timely filed, as applicable.
6.11 Proprietary Information Agreements. All employees and
----------------------------------
consultants of the Company shall have entered into a proprietary information and
confidentiality agreement in a form acceptable to Purchaser.
6.12 Tax Forms. Each of the Securityholders shall have provided to
---------
Purchaser an executed Form W-8 or Form W-9 properly reporting the transactions
set forth in this Agreement.
6.13 Due Diligence Review. Purchaser shall have completed to its sole
--------------------
satisfaction its due diligence review of the Company and its operations,
business, and financial condition, and Purchaser shall have received favorable
reviews from their advisors of the results of their final due diligence review
of the business of the Company.
6.14 Board Approval. This Agreement shall have been duly approved by
--------------
the Board of Directors of Purchaser.
6.15 Other Matters.
-------------
(a) between September 30, 1996 and the Closing Date, the Company shall
not have suffered any damage, destruction or loss by reason of fire, flood,
accident, or other casualty, of such character as would interfere in a
materially adverse way with the continuous operation of the Company's business,
regardless of whether or not such loss was covered by insurance;
(b) no strike, except as a result of a national, regional, industry-
wide strike or of shop-level wage or working conditions negotiations ("contralto
---------
integrative aziendale"), shall be on-going on the Closing Date;
---------------------
(c) from September 30, 1996 to the Closing Date:
(i) no distribution of profits of the Company shall have been made
or, if any such distribution has been made, it shall have been repaid prior to
the Closing;
(ii) no compensation shall have been paid, directly or indirectly,
to any officer, director, employee or agent by the Company other than as
applicable on September 30, 1996 and no such person or firm shall have received,
directly or indirectly,
33.
funds or assets belonging to the Company or, if any such compensation has been
paid or assets have been received, the amount thereof shall have been repaid
prior to Closing;
(iii) there shall have been no material increase in the
compensation currently payable or to become payable (over that applicable as of
September 30, 1996) to the Company's directors, managers, key employees or
agents, except as required by law;
(iv) the Company shall not have entered into any transaction
otherwise than in the ordinary course of business nor otherwise than in
accordance with generally accepted commercial practice.
ARTICLE VII
CONDITIONS PRECEDENT TO OBLIGATIONS
OF THE SECURITYHOLDERS
The obligations of the Securityholders to consummate the transactions
contemplated by this Agreement are subject to the satisfaction, at or before the
Closing, of all the following conditions, unless waived in writing by the
Securityholders:
7.1 Representations and Warranties True. All representations and
-----------------------------------
warranties by Purchaser in this Agreement and the schedules and exhibits hereto,
and in any written statement or certificate that shall be delivered to the
Company or to the Securityholders by Purchaser under this Agreement shall be
true on and as of the Closing as though such representations and warranties were
made on and as of that date.
7.2 Covenants Performed. Purchaser shall have performed, satisfied,
-------------------
and complied with all covenants, agreements, and conditions required by this
Agreement to be performed or complied with by Purchaser on or before the
Closing.
7.3 No Violations; No Actions. Consummation of the transactions
-------------------------
contemplated by this Agreement shall not violate any order, decree or judgment
of any court or governmental body having competent jurisdiction and no action or
proceeding shall have been instituted or threatened by any person, entity or
governmental agency which, in any such case, in the sole but reasonable judgment
of the Securityholders, has a reasonable probability of resulting in (i) the
obtaining of material damages from the Company or from the Securityholders, (ii)
an order, judgment or decree restraining, prohibiting or rendering unlawful the
consummation of the transactions contemplated by this Agreement, or (iii) other
relief in connection therewith.
34.
7.4 Proceedings and Documents. All corporate and other proceedings
-------------------------
in connection with the transactions contemplated hereby and all documents and
instruments incident to such transactions shall be in form and substance
reasonably satisfactory to the Securityholders and their counsel, and the
Securityholders shall have received all such counterpart originals or certified
or other copies of such documents as they may reasonably request.
7.5 Required Consents. All consents, approvals and waivers from
-----------------
third parties and governmental authorities necessary to the transactions as
contemplated hereby shall have been obtained.
7.6 Certificate. The Securityholders shall have received a
-----------
certificate from Purchaser, dated the Closing Date, certifying in such detail as
the Securityholders and their counsel may reasonably request that the conditions
specified in this Article VII that have to be satisfied by Purchaser have been
satisfied.
7.7 Board Approval. This Agreement shall have been duly approved by
--------------
the Board of Directors of Elettronica, S.p.A.
ARTICLE VIII
CLOSING
8.1 Time and Place. The purchase, sale and surrender of the
--------------
Securities hereunder (the "Closing") shall occur at as soon as practicable on
-------
the first business day after satisfaction of the conditions set forth in this
Agreement at Rome, Italy or at such time, place and date to which the parties
may agree in writing (the "Closing Date" or the "Closing").
8.2 Deliveries of the Securityholders. At the Closing, the
---------------------------------
Securityholders will execute and deliver or cause to be executed and delivered
to Purchaser:
(a) Certificates and Instruments. Certificates representing the
----------------------------
Securities endorsed over to Purchaser or accompanied by duly executed stock
powers or similar instruments of transfer or, in the case of Securities to be
surrendered, instruments effecting such surrender, and certificates representing
the equity interests of Elbas S.r.l. endorsed over to Purchaser or accompanied
by duly executed stock powers or similar instruments;
(b) Corporate Minute Books. The corporate minute books of the Company
----------------------
and its subsidiaries duly updated as of the Closing;
35.
(c) Certificate of Good Standing. Certificate of Good Standing (or
----------------------------
the equivalent under Italian or other law), dated as of a recent date, with
respect to the Company and its subsidiaries issued by the Registry delle Imprese
of Rome or other appropriate government agency.
(d) Closing Documents. All other Closing Documents and
-----------------
performance of the transactions contemplated hereby;
(e) Books and Records. All of the minute books, stock ledgers and
-----------------
similar corporate records of the Company and such subsidiaries;
(f) Consents. Evidence that all consents, approvals, or
--------
authorizations of or notifications to any third parties (including governmental
agencies), if any, required to issue and exchange the Securities for the
consideration set forth herein, and to consummate the transactions contemplated
hereby, have been obtained or made, as applicable, by the Company and/or the
Securityholders;
(g) Opinion of Counsel. The Securityholders' Opinion;
------------------
(h) Securityholder Certificate. A certificate from the
--------------------------
Securityholders, dated the Closing Date, containing the information required
pursuant to Section 6.4;
(i) FIRPTA. A Foreign Investment and Real Property Tax Act of 1980
------
Notification Letter executed by the Securityholders;
(j) Proprietary Information and Inventions Agreement. Executed
------------------------------------------------
Proprietary Information and Inventions Agreement from each employee and
consultant in a form acceptable to Purchaser; and
(k) Other Documents. Such other documents and instruments as
---------------
Purchaser or its counsel shall deem necessary to consummate the transactions
contemplated hereby.
All documents delivered to Purchaser under this Agreement shall be in
form and substance satisfactory to Purchaser.
8.3 Deliveries of Purchaser. At the Closing, Purchaser will execute
-----------------------
and deliver or cause to be executed and delivered to the Securityholders,
simultaneously with delivery of the items referred to in Section 8.2 above:
36.
(a) Payment of the Consideration. The consideration set forth in
----------------------------
Article I;
(b) Resolutions. A copy of the resolutions of the Board of Directors
-----------
of Purchaser, certified by its corporate secretary as having been duly and
validly adopted and being in full force and effect, authorizing execution and
delivery of this Agreement and the Closing Documents and performance of the
transactions contemplated hereby by Purchaser;
(c) Consents. Evidence that all consents, approvals or authorizations
--------
of or notifications to any third parties (including governmental agencies), if
any, required to purchase the Securities and to consummate the transactions
contemplated hereby have been obtained or made, as applicable, by Purchaser;
(d) Purchaser Certificate. A certificate from Purchaser dated the
---------------------
Closing Date, containing the information required pursuant to Section 7.6;
(e) Other Documents. Such other documents and instruments as the
---------------
Securityholders or their counsel reasonably shall deem necessary to consummate
the transactions contemplated hereby.
All documents delivered to the Securityholders shall be in form and
substance satisfactory to the Securityholders.
ARTICLE IX
INDEMNIFICATION
9.1 Survival of Representations, Warranties, Covenants and
------------------------------------------------------
Agreements.
----------
(a) Notwithstanding any investigation conducted at any time with
regard thereto by or on behalf of any party, all representations, warranties,
covenants, and agreements of each Securityholder shall survive the execution,
delivery, and performance of this Agreement as set forth in this Agreement,
including Section 9.1(c). All representations and warranties of each
Securityholder set forth in this Agreement shall be deemed to have been made
again by each Securityholder at and as of the Closing. No performance or
execution of this Agreement in whole or in part by any party hereto, no course
of dealing between or among the parties hereto or any delay or failure on the
part of any party in exercising any rights hereunder or at law or in equity, and
no investigation by any party hereto shall operate as a waiver of any rights of
such party.
(b) As used in this Article IX, except as otherwise indicated in this
Article IX, any reference to a representation, warranty, agreement, or covenant
contained in
37.
any section of this Agreement shall include the schedule (in a form reasonably
acceptable to Purchaser as of the date hereof and as of the Closing) relating to
such section.
(c) The indemnity obligations of the Securityholders pursuant to
Section 9.2 shall terminate as follows:
(i) as to any representations and warranties under Sections
2.1(k), 2.1(ai) and 2.1(an), upon the expiration of the applicable statute of
limitations plus eighteen months thereafter; and
(ii) as to all other representations and warranties, upon
April 30, 2000.
(iii) notwithstanding the expiration date of the representations
and warranties set forth herein, if Purchaser or its affiliates shall notify the
Securityholders with respect to the submission of a claim during the time period
of survivability of such representation or warranty, each Securityholder's
liability or obligation for Damages shall continue in full force and effect
until settled by mutual agreement or arbitration pursuant to Section 11.10 with
respect to those claims timely made. Such notice shall specify in reasonable
detail the basis of such claim.
(d) Nothing in this Agreement shall be construed as limiting in any
way the remedies that may be available to Purchaser or its affiliates in the
event of fraud relating to the representations and warranties made by the
Securityholders in this Agreement.
9.2 Securityholder Indemnification.
------------------------------
(a) Each of the Securityholders hereby agrees, severally but not
jointly, in accordance with their respective equity interests in the Company as
in existence prior to the Closing, to indemnify and hold harmless Purchaser and
each of its officers, directors and other affiliates against any and all losses,
liabilities, damages, demands, claims, suits, actions, judgments, and causes of
action, assessments, costs, and expenses, including, without limitation,
interest, penalties, attorneys' fees, any and all expenses incurred in
investigating, preparing, and defending against any litigation, commenced or
threatened, and any claim whatsoever, and any and all amounts paid in settlement
of any claim or litigation (collectively, "Damages"), asserted against,
resulting from, imposed upon, or incurred or suffered by Purchaser and each of
its respective officers, directors and other affiliates, directly or indirectly,
as a result of or arising from any misrepresentation or omission in or breach or
nonfulfillment of any of the representations, warranties, covenants or
agreements made by any of the Securityholders in this Agreement or any facts or
circumstances constituting such a misrepresentation, omission, breach or
nonfulfillment (all of which, including those set forth in the clauses below,
shall be referred to as the "Securityholder Identifiable Claims").
38.
(b) Without limiting the generality of any provision of this Article
IX, any amounts paid or payable by Purchaser pursuant to this Agreement, if any,
shall be subject to a right of setoff by Purchaser or its affiliates for any
Damages and Itelco and related Damages incurred by Purchaser or its officers,
directors or other affiliates in connection with this Agreement.
(c) As a component of Purchaser's rights and remedies, which shall be
cumulative under all agreements and indemnification covenants referred to
herein, Purchaser and its affiliates shall have the right to seek recourse under
Section 1.2(c) hereof for Damages and Itelco and Related Damages pursuant to the
terms of Section 1.2(c) hereof. The rights to indemnification provided by this
Article IX are not exclusive and shall not be construed to exclude or preclude
the exercise of, and shall be in addition to, any other rights of the parties
hereto, express or implied, under this Agreement or applicable law for
misrepresentation, breach of contract or warranty or the breach or
nonperformance of any agreement, covenant or obligation.
(d) All payments pursuant to this Section 9.2 will include all amounts
necessary to hold the Purchaser harmless on an after tax basis.
(e) The Securityholders shall have no obligation to make any payment
on the basis of this Article IX (except pursuant to Section 9.5 which shall not
have a liability cushion) unless and until the aggregate amount to which
Purchaser is entitled to be indemnified under this Agreement from all
indemnifying parties exceeds United States $75,000, at which point Purchaser
shall be entitled to the full amount due pursuant to this Article IX including
such minimum liability cushion.
9.3 Procedure for Indemnification with Respect to Third-Party Claims.
----------------------------------------------------------------
(a) If the Purchaser or any affiliate of Purchaser determines to seek
indemnification (such party shall be referred to herein as an "Indemnified
Party") under Section 9.2 with respect to Securityholder Identifiable Claims
above (such Claims shall be referred to herein as "Identifiable Claims")
resulting from the assertion of liability by third parties, such Indemnified
Party shall give notice to the parties from which indemnification is sought
(such parties shall be referred to herein as "Indemnifying Parties") within 160
days of such Indemnified Party becoming aware of any such Identifiable Claim or
of facts upon which any such Identifiable Claim may be based, but in any event
within a reasonable time to allow the Indemnifying Party to adopt proper
defensive actions. The notice shall set forth such material information with
respect thereto as is then reasonably available to such Indemnified Party. In
case any such liability is asserted against any Indemnified Party, and such
Indemnified Party notifies the Indemnifying Parties thereof, the Indemnifying
Parties will be entitled, if such Indemnifying Parties so elect by written
notice delivered to such Indemnified Party within 20 days after receiving such
Indemnified Party's notice, to assume the defense
39.
thereof with counsel selected by the Indemnifying Party, which counsel shall be
reasonably satisfactory to such Indemnified Party. Notwithstanding the
foregoing, (i) such Indemnified Party shall also have the right to employ its
own counsel in any such case, but the fees and expenses of such counsel shall be
at the expense of such Indemnified Party unless such Indemnified Party shall
reasonably determine that there is a conflict of interest between or among such
Indemnified Party and any Indemnifying Party with respect to such Identifiable
Claim, in which case the fees and expenses of such counsel will be borne by such
Indemnifying Parties, (ii) none of the Indemnified Parties shall have any
obligation to give any notice of any assertion of liability by a third party
unless such assertion is in writing, and (iii) the rights of the Indemnified
Parties to be indemnified hereunder in respect of Identifiable Claims resulting
from the assertion of liability by third parties shall not be adversely affected
by their failure to give notice pursuant to the foregoing unless, and, if so,
only to the extent that, such Indemnifying Parties are materially prejudiced
thereby, or unless the payment for which indemnity is sought was made by
Purchaser to the third party prior to providing notice to the Indemnifying
Parties. With respect to any assertion of liability by a third party that
results in an Identifiable Claim, the parties hereto shall make available to
each other all relevant information in their possession material to any such
assertion.
(b) In the event that such Indemnifying Parties, within 20 days after
receipt of the aforesaid notice of an Identifiable Claim, fail to assume the
defense of such Indemnified Party against such Identifiable Claim, such
Indemnified Party shall have the right to undertake the defense, compromise, or
settlement of such action on behalf of and for the account, expense, and risk of
such Indemnifying Parties.
(c) Notwithstanding anything in this Section 9.3 to the contrary, (i)
if there is a reasonable probability that an Identifiable Claim may materially
adversely affect such Indemnified Party, such Indemnified Party shall have the
right to participate in such defense, compromise, or settlement and such
Indemnifying Parties shall not without such Indemnified Party's written consent
(which consent shall not be unreasonably withheld), settle or compromise any
Identifiable Claim or consent to entry of any judgment in respect thereof unless
such settlement, compromise, or consent includes as an unconditional term
thereof the giving by the claimant or the plaintiff to such Indemnified Party a
release from all liability in respect of such Identifiable Claim.
9.4 Procedure For Indemnification with Respect to Non-Third Party
-------------------------------------------------------------
Claims. In the event that any Indemnified Party asserts the existence of a
------
claim giving rise to Damages (but excluding claims resulting from the assertion
of liability by third parties), it shall give written notice to the Indemnifying
Parties. Such written notice shall state that it is being given pursuant to
this Section 9.4, specify the nature and amount of the claim asserted and
indicate the date on which such assertion shall be deemed accepted and the
amount of the claim deemed a valid claim (such date to be established in
accordance with the next sentence). If such Indemnifying Parties, within 160
days after the mailing of notice by such Indemnified Party,
40.
shall not give written notice to such Indemnified Party announcing its intent to
contest such assertion of such Indemnified Party, such assertion shall be deemed
accepted and the amount of claim shall be deemed a valid claim. In the event,
however, that such Indemnifying Parties contest the assertion of a claim by
giving such written notice to such Indemnified Party within said period, then
the parties shall act in good faith to reach agreement regarding such claim. If
the parties hereto, acting in good faith, cannot reach agreement with respect to
such claim within ten (10) days after notice thereof, such claim will be
submitted to and settled by arbitration pursuant to Section 11.10 hereof.
9.5 Itelco and Related Damages. In addition to the foregoing general
--------------------------
indemnification (and without giving effect to any of the disclosures or
qualifications set forth in this Agreement, any accompanying schedule, exhibit
or certificate), the Securityholders and each of their successors or assigns or
heirs or representatives, jointly and severally, agree to indemnify and hold
harmless the Purchaser and each of its officers, directors and other affiliates
(including the Company) for all of the "Itelco and Related Damages" until any
and all claims, demands, settlements, criminal investigations, liabilities,
actions and causes of action relating thereto have been fully released and/or
settled. As used herein, "Itelco and Related Damages" shall include all Damages
and all legal and administrative, governmental and regulatory fees, expenses,
fines and charges (whether incurred, accrued, asserted or alleged prior to or
after the date of this Agreement) against or suffered or incurred by Purchaser
or any of its officers, directors or other affiliates (including the Company)
with respect to any and all claims, demands, settlements, criminal
investigations, liabilities, actions and causes of action which directly or
indirectly arise out of (or have arisen out of) or relate to claims or facts or
circumstances or allegations existing on or prior to the Closing (whenever
asserted or made known to the parties hereto) involving any of the following
matters (the "Covered Claims"):
(a) any and all matters relating to Itelco S.p.A. and the production
of transmitters and any other products using any technology; and
(b) any and all matters relating to confidential information, or
alleged confidential information, of Itelco, S.p.A., including but not limited
to information related to broadcasting and to IOT and other technology, trade
secrets, technology, ideas, know-how, processes, formulas, compositions,
techniques, inventions (whether patentable or not), business and product
development plans, the names and expertise of employees and consultants,
customer lists and other technical, business, product, marketing and financial
information and plans.
(c) Notwithstanding the foregoing, any and all proceeds paid by the
plaintiff in the Itelco, S.p.A., litigation (including the reimbursement of
costs, expenses and fees incurred by the Securityholders) to the Company in
connection with Covered Claims shall be transferred by the Company to the
Securityholders.
41.
9.6 Defense of Covered Claims for the Itelco and Related Damages.
------------------------------------------------------------
(a) Notification; Cooperation. If any person or entity shall notify
-------------------------
the Company, Purchaser or any Securityholder with respect to any matter which
may give rise to a Covered Claim, the party receiving such notice shall promptly
notify each of the other parties hereto in writing; provided, however, that no
-----------------
delay on the part of the notifying party in notifying the other parties hereto
shall relieve the other parties from any obligation hereunder. The
Securityholders agree to provide full and total support to the Company in
connection with all of the defenses and legal representation of any and all
Covered Claims, whether currently existing or arising in the future. In
addition, neither the Company nor the Purchaser or any of its officers and
directors will have any responsibility relating to the defense of criminal
actions against any individuals in connection with a Covered Claim. Further, the
Securityholders and the Company may consent to the entry of any judgment or
enter into any settlement, criminal sanction, binding agreement or otherwise
with respect to any such Covered Claim only with the prior written consent of
Purchaser that will not be unreasonably withheld. In addition, the
Securityholders shall apprise in writing Purchaser of all developments related
to the Covered Claims (current and future) and shall provide Purchaser with all
available information in connection with any Covered Claims. Notwithstanding the
foregoing, the Securityholders will keep the Purchaser and its officers and
directors and counsel informed about all material developments of the Covered
Claims, including the current civil and criminal actions. Before any material
decision is made by the courts or other body, the Company or the Securityholders
or other plaintiffs or their counsel that could involve the generation of Itelco
and Related Damages to be asserted against the Purchaser or one of its related
parties, the Securityholders shall solicit the consent to strategy, litigation,
tactics, motions, settlements, if any, and the like from Purchaser and its
counsel.
(b) Legal Counsel. Legal Counsel already appointed by the Company for
-------------
the current civil and criminal actions shall continue to defend the Company and
may be revoked by the decision of the Securityholders. For future litigations
or criminal investigations relating Itelco, S.p.A. Securityholders shall engage
counsel which is mutually acceptable to Purchaser and the Securityholders with
respect to any Covered Claim. The Securityholders shall fully cooperate with
Purchaser and its affiliates in connection with all current and future actions
that take place regarding the Covered Claims and promptly notify Purchaser of
any events of significance of which they are alerted. On the Closing, the
Securityholders shall notify the Company's current counsel on the Covered Claims
that the Securityholders will be fully cooperating with the Purchaser in the
conduct of the litigation (civil and criminal), will be paying all legal fees
and expenses in connection therewith (whenever incurred) and shall inform such
counsel that it must cooperate and inform Purchaser and Purchaser's special
counsel on all matters relating to the Covered Claims. Purchaser's special
counsel shall be notified in writing and copied in all written materials
produced or received by the Company's current and future counsel handling the
Covered Claims.
42.
9.7 Purchaser Indemnification. (a) Purchaser hereby agrees to
-------------------------
indemnify and hold harmless the Securityholders against any and all Damages
asserted against, resulting from, imposed upon, or incurred or suffered by the
Securityholders as a result of or arising from any misrepresentation or omission
in or breach or nonfulfillment of any of the representations, warranties,
covenants or agreements made by Purchaser in this Agreement or any facts or
circumstances constituting such a misrepresentation, omission, breach or
nonfulfillment. Such indemnification shall be subject to the same procedures
and limitations set forth in Sections 9.2(e), 9.3 and 9.4. In addition, the
indemnity obligations of Purchaser pursuant to this Section 9.7 shall terminate
upon April 30, 2000.
9.8 Duty to Mitigate. Purchaser shall act and shall cause the
----------------
Company to act in good faith and in a commercially reasonable manner to avoid
and mitigate any Damages that the Purchaser or the Company could suffer;
provided, however, that this Section 9.8 shall not apply to any Itelco and
Related Damages.
ARTICLE X
TERMINATION
10.1 Termination.
-----------
(a) This Agreement may be terminated at any time prior to the
Closing:
(i) by mutual agreement of Purchaser and the Securityholders;
(ii) by Purchaser, if there has been a breach by any of the
Securityholders of any representation, warranty, covenant or agreement set forth
in this Agreement resulting in a material and adverse change in the business
condition of the Company and which the Securityholders fail to cure, or fail to
cause the Company to cure, within five (5) business days after notice thereof is
given by Purchaser (except that no cure period shall be provided for a breach by
the Securityholders which by its nature cannot be cured);
(iii) by the Securityholders, if there has been a breach by
Purchaser of any representation, warranty, covenant or agreement set forth in
this Agreement on the part of Purchaser resulting in a material and adverse
change in the business condition of Purchaser and which Purchaser fails to cure
within five (5) business days after notice thereof is given by the
Securityholders (except that no cure period shall be provided for a breach by
Purchaser which by its nature cannot be cured);
43.
(iv) by Purchaser or the Securityholders, if the Closing shall not
have been consummated on or before February 28, 1997;
(v) by Purchaser or the Securityholders, if any permanent
injunction or other order of a court or other competent authority preventing the
Closing shall have become final and nonappealable or, in either party's
reasonable good faith judgment, shall render unlikely within a reasonable period
of time the consummation of the transactions set forth herein on the terms
contemplated herein; or
(vi) by Purchaser or the Securityholders, if any Governmental
Entity shall have issued a temporary restraining order, preliminary injunction
or permanent injunction or other order preventing the consummation of the
transactions set forth herein or any litigation shall be pending, the ultimate
resolution of which is likely to (i) result in the issuance of such an order or
injunction, or the imposition against the Securityholders or Purchaser of
substantial damages if the transactions set forth herein are consummated, (ii)
prohibit Purchaser's or the Company's ownership or operation of all or a
material portion of the business rights of the Company or Purchaser and its
subsidiaries taken as a whole, or compel the Company or Purchaser to dispose of
or hold separate all or a material portion of the business or assets of the
Company or Purchaser and its subsidiaries taken as a whole, as a result of the
consummation of the transactions set forth herein, (iii) materially limit or
restrict Purchaser's proposed conduct or operation of the business of the
Company, or (iv) render the Securityholders or Purchaser unable to consummate
the transactions set forth herein. In the event any such order or injunction
shall have been issued, each party agrees to use its best efforts to have any
such order or injunction lifted.
(b) Where action is taken to terminate this Agreement pursuant to this
Section 10.1, it shall be sufficient authorization for such action to be
authorized by the Board of Directors of the party taking such action.
(c) In the event of termination of this Agreement as provided in this
Section 10.1, this Agreement shall forthwith become null and void.
(d) In the event of termination of this Agreement pursuant to any of
the events or conditions set forth in Section 10.1, no party shall be liable for
any costs, charges, expenses or fees of any other party. In addition, in no
event will any party to this Agreement be liable for special, consequential or
indirect damages relating to or arising out of this Agreement, except for such
damages arising out of actual fraud or intentional misrepresentation.
ARTICLE XI
MISCELLANEOUS PROVISIONS
44.
11.1 Notice. All notices and other communications required or
------
permitted under this Agreement shall be delivered to the parties at the address
set forth below their respective signature blocks, or at such other address that
they designate by notice to all other parties in accordance with this Section
11.1:
If to
Securityholders: Each of the Securityholders listed in Schedule A hereto at
their respective addresses set forth hereinbelow, provided
that one or more Securityholders may designate, by notice
given pursuant to this Section 11.1, one or more of them as
the authorized recipient on behalf of any such Securityholders
of any notice to be given hereunder.
with copies to: Avv. Xxxxxxxxxx x'Xxxxxxxx
Xxx X. Xxxxxxx 00
00000 Xxxx, Xxxxx
Telecopy No.: 00-0000000
Avv. Xxxxxxxxx Xxxxxxxx
Studio Xxxxxxxxx
Xxx X. Xxxxxxx 00
00000 Xxxx, Xxxxx
Telecopy No.: 00-0000000
If to Purchaser: P-COM, Inc.
0000 X. Xxxxxxxxxx Xxxxxxxxx
Xxxxxxxx, Xxxxxxxxxx 00000
Attn: Xxxxxxx Sophie
Telecopy No.: (000) 000-0000
with copies to: Xxxxxxx, Phleger & Xxxxxxxx LLP
Two Embarcadero Place
0000 Xxxx Xxxx
Xxxx Xxxx, XX 00000
Attn: Xxxxxx X. Xxxxxxx, Esq. and H. Xxxxxxx Xxxxxx, Esq.
Telecopy No.: (000) 000-0000
De Libero Xxxxxxx Xxxxxxxx Xxxxxxx Xx Xxxxx
3, Xxxxxx Xxxx
00000 Xxxxx, Xxxxx
Attn: Xxxxxxx X. Xxxxxxxx
Telecopy No.: 39-2-76.00.81.65
45.
All notices and communications shall be deemed to have been received: (i) in the
case of personal delivery, on the date of such delivery; (ii) in the case of
telex or facsimile transmission, on the date on which the sender receives
confirmation by telex or facsimile transmission that such notice was received by
the addressee, provided that a copy of such transmission is additionally sent by
mail as set forth in (iv) below; (iii) in the case of overnight air courier, on
the second business day following the day sent, with receipt confirmed by the
courier; and (iv) in the case of mailing by first class certified or registered
mail, postage prepaid, return receipt requested, on the fifth business day
following such mailing.
11.2 Entire Agreement. This Agreement, the exhibits and schedules
----------------
hereto, and the documents referred to herein embody the entire agreement and
understanding of the parties hereto with respect to the subject matter hereof
and thereof, and supersede all prior and contemporaneous agreements and
understandings, oral or written, relative to said subject matter.
11.3 Binding Effect; Assignment. This Agreement and the various
--------------------------
rights and obligations arising hereunder shall inure to the benefit of and be
binding upon the Securityholders, their successors and assigns, and Purchaser
and its respective successors and assigns. Neither this Agreement nor any of
the rights, interests, or obligations hereunder shall be transferred or assigned
(by operation of law or otherwise) by any of the parties hereto without the
prior written consent of the other party.
11.4 Expenses of Transaction. Purchaser shall bear its own costs and
-----------------------
expenses in connection with this Agreement and the transactions contemplated
hereby for its own account and the Securityholders shall bear their and the
Company's own costs and expenses in connection with this Agreement and the
transactions contemplated hereby. Securityholders shall pay all applicable
sales, use, transfer, documentary and other taxes arising out of the purchase
and sale of the Securities.
11.5 Waiver; Consent. This Agreement may not be changed, amended,
---------------
terminated, augmented, rescinded or discharged (other than by performance), in
whole or in part, except by a writing executed by the parties hereto; and no
waiver of any of the provisions or conditions of this Agreement or any of the
rights of a party hereto shall be effective or binding unless such waiver shall
be in writing and signed by the party claimed to have given or consented
thereto. Except to the extent that a party hereto may have otherwise agreed in
writing, no waiver by that party of any condition of this Agreement or breach by
the other party of any of its obligations or representations hereunder or
thereunder shall be deemed to be a waiver of any other condition or subsequent
or prior breach of the same or any other obligation or representation by the
other party, nor shall any forbearance by the first party to seek a remedy for
any noncompliance or breach by the other party be deemed to be a waiver by the
first party of its rights and remedies with respect to such noncompliance or
breach.
46.
11.6 Third-Party Beneficiaries. Except as otherwise expressly
-------------------------
provided for in this Agreement, nothing herein, expressed or implied, is
intended or shall be construed to confer upon or give to any person, firm,
corporation or legal entity, other than the parties hereto, any rights, remedies
or other benefits under or by reason of this Agreement.
11.7 Counterparts. This Agreement may be executed simultaneously in
------------
multiple counterparts, each of which shall be deemed an original, but all of
which taken together shall constitute one and the same instrument.
11.8 Severability. If one or more provisions of this Agreement are
------------
held to be unenforceable under applicable law, such provision shall be excluded
from this Agreement and the balance of the Agreement shall be interpreted as if
such provision were so excluded and shall be enforceable in accordance with its
terms.
11.9 Governing Law. This Agreement shall in all respects be
-------------
construed in accordance with and governed by the laws of Italy without regard to
the conflicts or choice of law provisions thereof.
11.10 Arbitration; Attorneys' Fees.
----------------------------
(a) All disputes arising in connection with this Agreement or any
modification or extension of this Agreement shall be finally settled by
procedural arbitration ("arbitrato rituale") in accordance with the Rules of
International Arbitration of the Chamber of Commerce of Milan (the "Chamber") in
effect at that time by a panel of three arbitrators. Each party shall appoint
one arbitrator and the two arbitrators so appointed shall jointly select a third
arbitrator. Failing agreement between the two arbitrators selected by the
parties on the third arbitrator, or failing the appointment of its own
arbitrator by one of the parties within thirty (30) days of receipt by said
party of a notice of arbitration from the other party, the third arbitrator or
the arbitrator not appointed by one party shall be appointed by the Chamber at
the request of the arbitrator appointed by the other party.
(b) In selecting the third arbitrator, the Chamber shall ensure that
such arbitrator has a full knowledge of the English language and, in particular,
of United States legal terminology and concepts, and has adequate familiarity
with United States GAAP, which familiarity may have been obtained by the study
of, participation in transactions involving, or litigation or adjudication of
cases involving, such principles, provided, however, that the choice of the
arbitrator by the Chamber shall be purely discretional and not subject to
challenge. The arbitrators shall be free to consult technical experts of their
own choosing in resolving any dispute.
(c) The arbitration shall be held in Rome. The arbitration
proceedings shall be conducted in the English language but witnesses may be
heard and
47.
documents submitted in Italian or English or any other language
acceptable to the arbitrators. The arbitrators may, for their own convenience
or that of the parties, take evidence at places other than Rome, without
changing the situs of the proceedings.
(d) The arbitrators shall hear and dispose of any dispute in such
manner as they, in their discretion, shall determine, but in so doing they shall
be required to receive the submissions of the parties with respect to such
dispute between the parties.
(e) The arbitrators shall base their award with respect to the matter
before them on the contents of this Agreement and on the provisions of Italian
law. Where the intention of the parties is not clear, the arbitrators may have
recourse to further written or oral evidence.
(f) The award of the arbitrators may be, alternatively or
cumulatively, for monetary damages or any other appropriate order or remedy.
(g) The arbitrators may issue interim awards.
(h) The decision of the arbitrators shall be rendered in writing with
all reasonable expedition, shall set the reasons therefor and shall be final and
binding upon the parties to this Agreement,
(i) Judgment upon the arbitration award rendered may be entered in any
court having jurisdiction, or application may be made to any such court for
judicial acceptance of the award and an order of enforcement or execution, as
the case may be.
(j) The prevailing party will be entitled to receive from the other
party all costs, damages and expenses, including reasonable attorney's fees,
incurred by the prevailing party in connection with the action or proceeding
whether or not the controversy is reduced to judgment or award. The prevailing
party will be that party who may be fairly said by the arbitrators to have
prevailed on the major disputed issues. In the event that registration of this
Agreement in Italy or elsewhere becomes necessary in connection with any legal
or arbitration proceedings, any and all expense including without limitation any
registration taxes and fines arising out of such registration shall be borne by
that party against whom an arbitration award or judgment by a court in said
legal proceedings is directed. The provisions of this Section 11.10 shall
survive the execution of this Agreement until any dispute is finally settled.
11.11 Remedies.
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(a) Each of the Securityholders agree that the Securities are unique
and not otherwise readily available to Purchaser. Accordingly, each
Securityholder
48.
acknowledges that, in addition to all other remedies to which Purchaser is
entitled, Purchaser shall have the right to enforce the terms of this Agreement
by a decree of specific performance.
(b) Any and all rights and remedies herein expressly conferred upon a
party pursuant to this Agreement or in any agreement referred to herein will be
deemed cumulative with and not exclusive of any other right or remedy conferred
hereby or thereby; and the exercise of any one right or remedy will not preclude
the exercise of any other right or remedy under any such agreement.
11.12 Mutual Drafting. This Agreement is the joint product of
---------------
Purchaser and the Securityholders, and each provision hereof has been subject to
the mutual consultation, negotiation and agreement of Purchaser and the
Securityholders, and their respective counsel, and shall not be construed for or
against any party hereto. The governing language for purposes of this Agreement
shall be English.
49.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed as of the day and year first above written.
PURCHASER:
P-COM, INC.
/S/ Xxxxxxx X. Sophie
By: ____________________________________
Address: 0000 X. Xxxxxxxxxx Xxxxxxxxx
Xxxxxxxx, XX 00000
SECURITYHOLDERS:
ELETTRONICA S.p.A.
/S/ Xxxx Xxxxxxx
By: ___________________________________
Address: _________________________________________
_________________________________________
/S/ A. Biscarini
_________________________________________
A. Biscarini
Address: _________________________________________
_________________________________________
/S/ X. Xxxxxxxxxxx
_________________________________________
X. Xxxxxxxxxxx
Address: _________________________________________
_________________________________________
50.
/S/ G. Melandri
_________________________________________
G. Melandri
Address: _________________________________________
_________________________________________
/S/ X. Xxxxxx
_________________________________________
X. Xxxxxx
Address: _________________________________________
_________________________________________
51.
