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EXHIBIT 2.2
THIS ASSET PURCHASE AGREEMENT (this "Agreement") is made and entered
into as of July 16, 1997, by and between ACT Networks (BNS), Inc., a
wholly-owned subsidiary of ACT Networks, Inc., a Delaware corporation
("Purchaser"), and Sourcecom, Inc., a California corporation ("Seller").
RECITALS
A. Seller is the debtor and debtor-in-possession in that certain
Chapter 11 bankruptcy proceeding known as In re Sourcecom, Inc. pending in the
United States Bankruptcy Court, Central District of California (the "Bankruptcy
Court"), as Case No. SV___________.
B. Subject to the conditions set forth herein, Seller desires to sell,
and Purchaser desires to purchase, all of the assets of Seller in accordance
with the terms set forth herein.
AGREEMENT
NOW, THEREFORE, in consideration of the foregoing recitals and for
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the parties agree as follows:
1. Transfer of Assets. Subject to the terms and conditions set forth in
this Agreement, on the Closing Date (as defined below), Seller shall sell,
transfer, assign and deliver to Purchaser (the "Transfer") and Purchaser shall
purchase from Seller, for the consideration hereinafter described, all of
Seller's right, title and interest in all of its assets, including, without
limitation, the following assets (the "Assets"):
(a) the inventory of raw materials, work in process and finished goods
including, without limitation, those assets listed on Schedule 1(a) (the
"Inventory");
(b) all tooling of Seller, whether or not in the possession of Seller;
(c) all owned tools, machinery, equipment, office furniture, office
equipment and other tangible personal property, including without limitation
those assets listed on Schedule 1(c);
(d) all accounts receivable of Seller including without limitation
those assets listed on Schedule 1(d);
(e) those certain assets listed on Schedule 1(e);
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(f) all other goodwill and intellectual property of Seller (hereinafter
collectively referred to as "Proprietary Rights"), including without limitation,
all (i) patents, patent applications, patent disclosures and all related
continuation, continuation-in-part, divisional, reissue, re-examination,
utility, model, certificate of invention and design patents, patent
applications, registrations and applications for registrations, (ii) trademarks,
service marks, logos, trade names and corporate names and registrations and
applications for registration thereof, (iii) copyrights and registrations and
applications for registration thereof, (iv) mask works and registrations and
applications for registration thereof, (v) computer software, data and
documentation, (vi) trade secrets and confidential business information, whether
patentable or nonpatentable, and know how, manufacturing and product processes
and techniques, research and development information, copyrightable works,
financial, marketing and business data, pricing and cost information, business
and marketing plans and customer and supplier lists and information, (vii) other
proprietary rights relating to any of the foregoing (including without
limitation, remedies against infringements thereof and rights of protection of
interest therein under the laws of all jurisdictions); and (viii) copies and
tangible embodiments thereof;
(g) all licenses, sublicenses or any similar agreements (to or from
third parties) including, without limitation, those which relate to Seller's
Proprietary Rights; and
(h) subject to the satisfaction of the conditions for assumption and
assignment under Section 365 of the Bankruptcy Code (the "Conditions for
Assumption"), and further subject to Purchaser agreeing to reimburse Seller for
any amounts owing to the lessors of such leases that must be paid as a Condition
to Assumption, such of the contracts, licenses, leases and any other agreements
to which Seller is a party (collectively, the "Contracts") listed on Schedule
1(h) as shall be designated by Purchaser (in its sole discretion) at least three
business days prior to the Sale Hearing;
2. Excluded Assets. Notwithstanding the provisions of Section 1, Seller
shall not sell, transfer, assign or deliver to Purchaser, and Purchaser shall
not purchase from Seller, any assets specified in writing by Purchaser at least
three business days prior to the Sale Hearing (the "Excluded Assets" none of
which for any purpose hereunder shall be deemed to be Assets).
3. Assumption of Liabilities. Except to the extent otherwise provided
in the designations pursuant to Section 1(h) (the "Designation of Assumption")
or required under the Conditions for Assumption or under Section 363 of the
Bankruptcy Code, Purchaser shall not assume or otherwise become liable with
respect to any of the liabilities, claims or other obligations of Seller
(including, without limitation, warranty claims or obligations owed under the
Contracts as of the Closing Date).
4. Purchase Price.
(a) Subject to the terms of this Agreement, in consideration of the
Transfer of the Assets on the Closing Date, Purchaser shall pay to Seller the
amount of eight million
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dollars ($8,000,000), subject to possible adjustment under section 5 below (the
"Purchase Price"), payable at the Closing (as defined below), in cash or by
certified check.
(b) Concurrent with the execution and delivery of this Agreement,
Purchaser has deposited with Seller the amount of one million dollars
($1,000,000) (the "Deposit"). At the Closing, the Deposit shall be credited
against the Purchase Price. The Deposit shall remain the sole and exclusive
property of Purchaser unless and until Purchaser purchases the Assets at the
Closing or Seller is entitled to deduct from the deposit its damages on account
of Purchaser's material failure to perform its obligations under this Agreement,
as is more fully set forth in Section 15a hereof.
(c) Neither party contemplates that any broker's, finder's, investment
banker's, financial advisor's or similar fee will be payable to any entity in
connection with this Agreement, or the transactions contemplated hereby,
however, Seller shall bear sole responsibility for any such fee that is
determined to be owing (other than as a result of obligations or commitments
undertaken by Purchaser) and for the defense of any such assertion.
5. Purchase of Materials, Collection of Account Receivables, Etc. In
order to maintain the value of the accounts receivable and cash to be purchased
by Purchaser, Seller should refrain from utilizing any cash in the debtor's
accounts or any cash collected prior to the Closing Date for any of Seller's
operating or non-operating expenses, except for payment for materials received
after the commencement of Seller's Chapter 11 case and the Closing Date. The
Purchaser and Seller acknowledge that the Budget is intended to reflect the
minimum cost of operations. To the extent that Purchaser loans funds to Seller
under that certain Loan and Security Agreement of even date herewith between
Purchaser and Seller for the purchase of materials (or other similar expenses
which, in the joint judgment of Purchaser and Seller (or determined by the
Bankruptcy Court in the absence of such agreement), are not contemplated by the
Budget and are necessary for the generation of further accounts receivable, and
in the event that Purchaser purchases the Assets for the base consideration
herein of $8,000,000, then the amount of such loans will be added to the base
consideration of $8,000,000 in order to determine the Purchase Price, it being
clearly understood by the parties hereto that in the event the Purchase Price
equals or exceeds $8,600,000 as a result of competitive bidding, then the
Purchase Price will not be so adjusted and each bidder will be bidding on the
same basis to purchase all of the Seller's assets, including the accounts
receivable or work in process generated as a result of Seller borrowing funds to
purchase raw materials.
6. Sales, Use and Transfer Taxes. Seller shall be liable for the
payment of all sales, use and other transfer taxes applicable to the transfer of
the Assets contemplated hereby.
7. Representations and Warranties of Seller.
Seller represents and warrants to Purchaser as follows:
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(a) Power and Authority. Seller has all requisite corporate power and
authority to enter into this Agreement and to assume and perform fully its
obligations hereunder. The execution and delivery of this Agreement and the
performance by Seller of its obligations hereunder have been duly and validly
authorized by all necessary corporate action. This Agreement is a valid and
binding obligation of Seller, enforceable in accordance with its terms.
(b) Consents and Approvals. Except for the consent of the Bankruptcy
Court, there is no requirement applicable to Seller to make any filing with, or
to obtain any permit, authorization, consent or approval of, any governmental or
regulatory authority as a condition to the lawful consummation by Seller of the
transactions contemplated by this Agreement. There is no lawsuit, proceeding or
investigation pending or, to the best knowledge of Seller, threatened against
Seller that seeks to prevent the consummation of the transactions contemplated
hereby.
(c) Disclosure. To the best of Seller's knowledge, the representations
and warranties by Seller in this Agreement do not and will not contain any
untrue statement of a material fact and do not and will not omit to state any
material fact necessary to make the statements herein or therein not misleading.
(d) Contracts. Schedule 1(h) is a complete and accurate list of all of
the material Contracts to which Seller is a party.
(e) Intellectual Property.
(i) Schedule 1(f) contains a complete and accurate list and brief
description of all Proprietary Rights owned by Seller. Schedule 1(g)(i)
contains a complete and accurate list and brief description of all
licenses, sublicenses and similar licenses pursuant to which third parties
have granted Seller rights to their Proprietary Rights. Schedule 1(g)(ii)
contains a complete and accurate list and brief description of all
licenses, sublicenses and similar licenses pursuant to which Seller has
granted third parties rights to Seller's Proprietary Rights. Other than the
Proprietary Rights listed in Schedule 1(f) and any Proprietary Rights
relating to items listed in Schedule 1(g)(i), no Proprietary Rights are
used in Seller's business or its products (including, without limitation,
Innerware/G3, Inroute, Incarda, the BANC 6000, and the BANC 9000, and all
variants and custom modules related to the foregoing) (collectively, the
"Products"). Other than the Proprietary Rights relating to items listed in
Schedule 1(g)(i), no third-party Proprietary Rights are used in Seller's
business or Products, and Seller is not aware of any claim by any employee,
consultant, officer or shareholder of Seller to any Proprietary Rights used
in Seller's business or the Products.
(ii) To the best of Seller's knowledge; a) Seller has the exclusive
right to use all Proprietary Rights listed in Schedule 1(f) and any
Proprietary Rights relating to items listed in Schedule 1(g)(i); b) Seller
has granted no other licenses or other rights to its Proprietary Rights,
other than those listed in Schedule 1(g)(ii); c)
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on the Closing Date, Purchaser will own, subject to the provisions of any
license, sublicense or similar agreements set forth in Schedule 1(g)(i) and
Schedule 1(g)(ii), all Proprietary Rights listed in such Schedules; and d)
there are no outstanding or threatened disputes or disagreements with
respect to any license, sublicense or similar agreements listed in Schedule
1(g)(i) or Schedule 1(g)(ii).
(iii) To the best of Seller's knowledge, none of the activities or
business presently conducted by Seller infringes or violates, or
constitutes a misappropriation of, any Proprietary Rights of any other
person or entity. Except as set forth in Schedule 1(g)(iii), Seller has not
received any complaint, claim or notice alleging any such infringement,
violation or misappropriation, and Seller is not aware of any facts or
reasons which would give rise to any claim therefor.
(iv) Seller has supplied to, or made available for inspection by,
Purchaser correct and complete copies of all licenses, sublicenses or other
agreements (as amended to date) referred to in Schedule 1(g)(i) and
Schedule 1(g)(ii). Except as set forth in Schedule 1(g)(i) and Schedule
1(g)(ii), with respect to such Proprietary Rights, and to the best of
Seller's knowledge, (i) each such license, sublicense or other agreement is
legal, valid and binding with respect to Seller and to every other party
thereto, and (ii) neither Seller nor any other party is in material breach
or default under any such license, sublicense or other agreement, and no
event has occurred which, with notice and/or lapse of time, would
constitute such a material breach or default or permit termination,
modification or acceleration thereunder.
(v) With respect to any trade secret described in Schedule 1(f),
Seller has provided sufficient documentation, or made the same available
for inspection, to accurately identify, explain and allow the full and
proper use of such trade secret without special knowledge or memory of
others. To the best of Seller's knowledge, all such trade secrets are
presently valid and protectible, are not part of the public knowledge or
literatures, and have not been used, divulged or appropriated for the
benefit of any person other than Seller.
(vi) Seller has taken all reasonable security measures to protect
the secrecy, confidentiality and value of its Proprietary Rights. Each
individual or entity responsible for developing any such Proprietary Right
has assigned its rights thereto to Seller, and all of such rights of Seller
are being assigned to Purchaser hereunder.
(vii) To the best of Seller's knowledge, the transactions
contemplated by this Agreement will not have an adverse effect on Seller's
or Purchaser's interest in any of Seller's Proprietary Rights. All
necessary consents or waivers relating to the Proprietary Rights listed
therein which are required to consummate the transactions contemplated in
this Agreement have been obtained.
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(f) Brokers or Finders. To the best of Seller's knowledge, Seller does
not and will not have any obligation to pay any broker's, finder's, investment
banker's, financial advisor's or similar fee in connection with this Agreement,
or the transactions contemplated hereby or thereby. Seller shall bear sole
responsibility for any such fee that is determined to be owing (other than as a
result of obligations or commitments undertaken by Purchaser) and for the
defense of any such assertion.
(g) Product Performance. To the best of Seller's knowledge, (i) the
BANC 6000 performs in accordance with the technical specifications for such
product which are attached to Schedule 1(f) and there are no material obstacles
(assuming application of the necessary engineering resources) that would prevent
the modification of such product to a fast packet switch and (ii) while the BANC
9000 is in the development stage and Purchaser acknowledges that it will take a
substantial amount of development to complete such product, there are no
material obstacles (assuming application of the necessary engineering resources)
that would prevent the completion of such product so that it performs in
accordance with the technical specifications for such product which are proposed
or attached to Schedule 1(f).
8. Representations and Warranties of Purchaser.
Purchaser represents and warrants to Seller as follows:
(a) Organization. Purchaser is a corporation duly organized and
existing in good standing under the laws of the State of Delaware. Purchaser has
the corporate authority to own its properties and to carry on its business as
now conducted and to execute and deliver this Agreement and to consummate the
transactions contemplated hereby.
(b) Power and Authority. Purchaser has all requisite corporate power
and authority to enter into this Agreement and to assume and perform fully its
obligations hereunder. The execution and delivery of this Agreement and the
performance by Purchaser of its obligations hereunder have been duly and validly
authorized by all necessary corporate action, and this Agreement is a valid and
binding obligation of Purchaser enforceable in accordance with its terms.
(c) Consents and Approvals. There is no requirement applicable to
Purchaser to make any filing with, or to obtain any permit, authorization,
consent or approval of, any governmental or regulatory authority as a condition
to the lawful consummation by Purchaser of the transactions contemplated by this
Agreement, except such permits, authorizations, consents or approvals which have
been obtained. There is no lawsuit, proceeding or investigation pending or, to
the best of Purchaser's knowledge, threatened against Purchaser that seeks to
prevent the consummation of the transactions contemplated hereby.
(d) Brokers or Finders. Purchaser does not and will not have any
obligation to pay any broker's, finder's, investment banker's, financial
advisor's or similar fee in connection with this Agreement, or the transactions
contemplated hereby or thereby, by reason of any action taken by or on behalf of
Purchaser.
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(e) Disclosure. The representations and warranties by Purchaser in this
Agreement do not and will not contain any untrue statement of a material fact
and do not and will not omit to state any material fact necessary to make the
statements herein or therein not misleading.
9. Covenants of the Seller:
(a) Notice to Purchaser. Promptly provide telephonic and written notice
to Purchaser of any one or more of the present 29 members of the Seller's
engineering staff leaving the employ of Seller or giving notice of intent to
leave the employ of Seller;
(b) Access. Seller shall provide Purchaser and its agents with
unlimited access to Seller's facilities, Assets and books and records at 0000
Xxxxxxxx Xxxxxx Xxxxx, Xxxxxxxx Xxxxxxx, Xxxxxxxxxx, and wherever else the
Assets or books and records may be found, commencing upon execution and delivery
of this Agreement and continuing through the Closing or the termination of this
Agreement.
(c) Actions of Seller. Seller shall take all such actions as may be
reasonably necessary to consummate the transactions contemplated hereby,
including without limitation, such actions as may be necessary to obtain prompt
Bankruptcy Court approval of the transactions contemplated hereby. While Seller
will cooperate with parties identifying themselves as potential bidders and
Seller will assist such parties in conducting due diligence, by virtue of
executing this Agreement, Seller has committed to use its best efforts to
consummate the sale of its Assets to Purchaser and Seller shall not, therefore,
undertake any activity seeking to solicit competing bidders to the bid of
Purchaser (other than providing notice of the Sale Hearing and the Sale
Procedures to those parties previously identified by the investment banker
retained by Seller as prospective and interested purchasers and conducting any
advertising as may be deemed necessary and prudent by the Bankruptcy Court).
(d) Operation of the Business; Maintenance of Assets. From the date
hereof to the Closing, except as expressly contemplated by this Agreement or
otherwise consented to by Purchaser in writing, Seller shall: (i) carry on the
business of Seller with respect to the Assets substantially in the manner set
forth in the Budget (the "Budget") defined in, and delivered by Seller to
Purchaser in connection with, the contemporaneous Loan and Security Agreement,
and use its reasonable best efforts, consistent with the level of post-petition
financing, to keep available the services of its present engineering staff and
preserve its relationships with customers, suppliers and others having business
dealings with it; and (ii) use its best efforts, consistent with the level of
post-petition financing, to maintain and repair the Assets so that their
condition and repair shall be substantially the same or better than their
condition and repair as of July 16, 1997.
(e) Seller to Preserve the Assets. During the period from the date of
this Agreement and continuing until the earlier of the termination of this
Agreement or the Closing Date, except as expressly contemplated by this
Agreement, Seller shall not allow,
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perform, cause or permit any of the following, without the prior written consent
of Purchaser.
(i) Material Contracts. Enter into any contract or commitment,
amend or otherwise modify or waive any of the terms of any of its
contracts, other than in the ordinary course of business consistent with
past practice and in no event shall such contract, commitment, amendment,
modification or waiver be in excess of $5,000;
(ii) Intellectual Property. Transfer to any person or entity any
rights relating to its Proprietary Rights or take any other action, or fail
to take any action, which action or failure to act adversely affects
Seller's Proprietary Rights.
(iii) Exclusive Rights. Enter into or amend any agreement pursuant
to which any other party is granted marketing or other rights of any type
or scope with respect to any of its products or technology;
(iv) Dispositions. Sell, lease, license or otherwise dispose of or
encumber any of its properties or assets except in the ordinary course of
business consistent with past practice;
(v) Indebtedness. Incur any indebtedness for borrowed money (other
than in connection with, the contemporaneous Loan and Security Agreement
between Purchaser and Seller) or guarantee any such indebtedness or issue
or sell any debt securities or guarantee any debt securities of others;
(vi) Leases. Enter into any operating lease;
(vii) Payment of Obligations. Pay, discharge or satisfy any claim,
liability or obligation (absolute, accrued, asserted or unasserted,
contingent or otherwise) arising other than in the ordinary course of
business, provided however, that Seller may partially or fully satisfy
existing lease obligations by returning the leased property to the lessor,
subject to the consent of Purchaser;
(viii) Capital Expenditures. Make any capital expenditures, capital
additions or capital improvements;
(ix) Insurance. Materially reduce the amount of any material
insurance coverage provided for in the Budget.
(x) Lawsuits. Commence a lawsuit other than (i) for the routine
collection of bills, (ii) in such cases where it in good faith determines
that failure to commence suit would result in the material impairment of a
valuable aspect of its business, provided that it consults with Purchaser
prior to the filing of such a suit, or (iii) for a breach of this
Agreement;
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(xi) Other. Take or agree in writing or otherwise to take, any of
the action which would make any of Seller's representations or warranties
contained in this Agreement untrue or incorrect or prevent Seller from
performing or cause Seller not to perform its covenants hereunder.
10. Covenant of the Purchaser. Purchaser shall take all such actions as
may be reasonably necessary to consummate the transactions contemplated hereby,
including without limitation such actions as may be necessary to obtain
Bankruptcy Court approval of the transactions contemplated hereby.
11. Closing. The consummation of the transactions contemplated hereby
(the "Closing") shall take place at the offices of Pachulski, Stang, Xxxxx &
Xxxxx, 00000 Xxxxx Xxxxxx Xxxxxxxxx, Xxxxx 0000, Xxx Xxxxxxx, Xxxxxxxxxx at
10:00 a.m. on the first business day when the conditions to Closing shall have
been satisfied or waived in accordance with the terms of this Agreement and, in
any event, not later than three business days after entry of a order of the
Bankruptcy Court approving the transactions contemplated hereby (the "Closing
Date"). At the Closing, the parties shall exchange the consideration,
certificates and other documents required hereby.
12. Conditions to Closing. The obligation of Purchaser to close the
transactions contemplated hereby shall be subject to the fulfillment and
satisfaction, prior to or at the Closing, of the following conditions, or the
written waiver thereof by Purchaser:
(a) The representations and warranties of Seller contained in this
Agreement, to the best of Seller's knowledge, shall be true and correct on and
as of the Closing Date with the same force and effect as though made on and as
of the Closing Date. Seller shall have performed and complied with all covenants
and agreements required by this Agreement to be performed or complied with by
Seller on or prior to the Closing Date.
(b) No injunction or restraining order shall be in effect which forbids
or enjoins the consummation of the transactions contemplated by this Agreement,
no proceedings for such purpose shall be pending, and no federal, state, local
or foreign statute, rule or regulation shall have been enacted which prohibits,
restricts or delays the consummation hereof. No governmental litigation or
governmental investigation or governmental proceeding seeking to enjoin or
challenging, or seeking damages or relief in connection with, the transactions
contemplated by this Agreement shall be pending, which in Purchaser's reasonable
judgment (with advice of counsel), makes it inadvisable to proceed with the
transaction contemplated by this Agreement.
(c) The Bankruptcy Court shall have caused to be entered an order, in
the form attached hereto as Exhibit "A" (the "Bankruptcy Court Order"), which
order is not subject to any order staying the effectiveness or enforcement of
the Bankruptcy Court Order. All other governmental and third party approvals,
consents, licenses, permits or waivers necessary for consummation of the
transactions contemplated by this Agreement shall have been obtained.
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(d) The Bankruptcy Court shall have caused to be entered an order
approving the Sale Procedures (as defined below) on at least as favorable terms
as set forth below.
(e) If designated by Purchaser, the third parties under any designated
contracts shall have consented to, or the Bankruptcy Court shall have otherwise
authorized, the assignment and assumption of such contracts to Purchaser, which
consents or authorizations shall be in form and substance satisfactory to
Purchaser in its sole and absolute discretion (the "Contract
Consents/Authorization").
(f) The Assets shall be in substantially the same (or better) condition
and repair as existed on July 16, 1997, consistent with the level of
post-petition financing, as determined in the exercise of the reasonable
business judgment of Purchaser;
(g) Seller shall have delivered, or caused to be delivered, to
Purchaser the following documents and certificates (which shall be in form and
substance satisfactory to Purchaser):
(i) a certificate dated as of the Closing Date and signed by an
executive officer of Seller expressly certifying that the conditions set
forth in Sections 12(a) and 12(b) have been met and stating that all other
conditions to Seller's obligations hereunder have been satisfied or waived;
(ii) an original xxxx of sale and other good and sufficient
instruments of transfer and conveyance in form sufficient and effective to
vest in Purchaser good and marketable title to the Assets;
(iii) a certificate of title for each motor vehicle included in the
Assets, duly endorsed for transfer to Purchaser;
(iv) UCC termination statements, collateral releases and other
documents in form sufficient and effective to terminate all liens of record
against the Assets (to the extent that any of such documents have not been
made available to Seller after Seller exercising its reasonable best
efforts to obtain the same, Seller may deliver such documents to Purchaser
within a reasonable time after the Closing);
(v) such other documents of transfer, conveyance and assignment in
form sufficient and effective to Transfer all of the Assets to Purchaser as
may be reasonably requested by Purchaser; and
(h) The Closing shall have occurred no later than September 3, 1997.
13. Sale Procedures. The parties acknowledge that the approval by the
Bankruptcy Court of the transactions contemplated hereby shall be subject to
overbidding in accordance with applicable statutes, regulations and Bankruptcy
Court rules. Each and every obligation of Purchaser hereunder is expressly
subject to and conditioned upon the
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Bankruptcy Court approving sale procedures governing the sale of the Assets (the
"Sale Procedures") no less favorable to Purchaser than set forth herein.
Purchaser reserves the right (but shall be under no obligation) to consent to
Sale Procedures less favorable to Purchaser than set forth herein, provided
however, that Purchaser must provide notice to Seller within two business days
of the Bankruptcy Court's determination of such less favorable Sale Procedures
of Purchaser's intent to proceed with the transactions contemplated in this
Agreement. The parties agree to request the Bankruptcy Court to approve the
following Sale Procedures:
(a) in order to afford the Purchaser overbid protection, any initial
overbid shall be at least $8,600,000;
(b) bidding in excess of any such initial overbid shall be permitted
only in minimum increments of $100,000 until no more bids are received;
(c) in order to be eligible to participate in open court bidding at the
Bankruptcy Court hearing held for the purpose of approving Purchaser's offer and
the terms of this Agreement, and for the purpose of entertaining higher bids
from other bidders on the same terms as set forth in this Agreement other than
the Purchase Price (the "Sale Hearing"), prospective bidders shall be required
to submit a written bid to Seller in an amount of at least $8,600,000, and
accompany such bid with a deposit delivered to Seller in the amount of one
million dollars $1,000,000 in cash or by certified check, at least two business
days prior to the Sale Hearing;
(d) prospective bidders shall be provided the opportunity to view and
evaluate the Assets prior to the Sale Hearing and the winning bidder shall
consummate the purchase of the Assets and payment of the consideration therefor
on or before the dates on which the Closing and the payments of Purchase Price
are scheduled to take place hereunder;
(e) all bids from prospective bidders shall (i) relate to a purchase of
substantially all of the assets of Seller (other than those assets of Seller
excluded by Purchaser from Schedule 1(a) and the Excluded Assets), and (ii)
include, to the extent applicable, a binding commitment for debt financing
required to fund such bid, adequate evidence that the bidder possesses or has
access to funds required to fund the bid, and a binding commitment to close the
purchase of the Assets no later than three business days after the entry of an
order of the Bankruptcy Court approving the sale;
(f) in the event that Seller sells the Assets for a purchase price in
excess of $8,000,000 (whether at the Sale Hearing or otherwise), Purchaser shall
be paid a breakup fee of $300,000 from the first $600,000 of sales proceeds in
excess of $8,000,000;
(g) Seller acknowledges that:
(i) Seller was badly in need of working capital as of early spring
of 1997;
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(ii) Seller unsuccessfully sought to obtain needed working capital
from a public offering;
(iii) Seller, after determining that it could not remain in
business without additional working capital, and after exhausting
other potential sources of obtaining working capital, thereafter
retained the services of a prominent investment banking firm well
known and experienced in the high technology arena for the purpose
of locating a purchaser for Seller or Seller's assets;
(iv) such investment banking firm located as many as five
prospective purchasers that expressed enough interest in acquiring
Seller or Seller's assets that they conducted due diligence on
Seller with a view to submitting a purchase bid;
(v) at the conclusion of such sale efforts Seller received no
acceptable purchase bids;
(vi) immediately prior to commencing its Chapter 11 case, virtually
all of Seller's employees asserted claims for no less than one
month's back wages, Seller had terminated virtually all of its
employees other than its engineering staff, Seller had no cash to
pay back wages or current wages even to its engineering staff,
Seller was substantially delinquent on its accounts payable,
Seller's major insurance policies had been canceled for nonpayment
of premiums, Seller had little prospect of any significant
collections from outstanding accounts receivable, Seller was in
default to both of its two secured creditors, either of whom could
have immediately commenced foreclosure of their security interests
in Seller's assets, Seller owed approximately $90,000 in back rent
to the landlord of Seller's leased headquarters and production
facility and the landlord had already commenced an unlawful
detainer action to recover the premises, Seller's financial plight
was generally known by Seller's vendors and customers with the
usual results, and other than the purchase bid made by Purchaser,
Seller had exhausted all options other than a Chapter 7 bankruptcy
or a secured creditor foreclosure;
(vii) without the funds provided to Seller by the contemporaneous
post-petition loan facility provided by Purchaser, Seller has
little or no prospects for meeting its Chapter 11 administrative
costs or defending a relief from stay motion by its secured
creditors;
(viii) Seller has no prospect for a Chapter 11 reorganization
absent a major infusion of capital from outside sources, the
prospects for which Seller exhausted prior to filing its Chapter 11
case;
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(ix) Seller is unaware of any other prospective purchaser that
would be willing to negotiate with Seller on terms similar to those
contained in this Agreement;
(x) Purchaser has expressed its unwillingness to pursue such
purchase bid without substantial assurance that Purchaser's bid
will be the bid approved by the Bankruptcy Court and without
substantial protection against Purchaser's effort and resources
being expended for the benefit of a competing bidder;
(xi) but for Purchaser's bid to acquire the Assets, Seller would
likely file a Chapter 7 case, and the Assets would be sold for
substantially less than $8,000,000 and possibly less than the
approximately $4,900,000 amount required to satisfy the secured
creditor claims; and
(xii) Purchaser has made a substantial contribution to the Chapter
11 estate of Seller in the event that the Assets are sold by Seller
for an amount in excess of $8,000,000, for which Purchaser is
entitled to compensation in the form of a topping fee as set forth
herein.
(h) In view of the extreme and unusual circumstances set forth
immediately above, Purchaser has required and Seller has agreed to the payment
to Purchaser of a topping fee in the event that Seller sells the assets at the
Sale Hearing for an amount in excess of Purchaser's bid. Purchaser shall be paid
a topping fee from the overbid proceeds in the following amounts;
(i) in the event that the Sales Hearing is completed (e.g., the
Sale Hearing has occurred and the Bankruptcy Court has approved at the Sales
Hearing a sale of the Assets) within fifteen calendar days of the Seller's
Chapter 11 filing date, the topping fee shall be: a) 0% of the first $2,000,000
of overbid proceeds in excess of $8,600,000; b) 25% of next $500,000 of overbid
proceeds ($10,600,001 to $11,100,000); c) 20% of next $500,000 of overbid
proceeds ($11,100,001 to $11,600,000); d) 15% of next $500,000 of overbid
proceeds ($11,600,001 to $12,100,000); e) 10% of next $500,000 of overbid
proceeds ($12,100,001 to $12,600,000); f) 5% of next $500,000 of overbid
proceeds ($12,600,001 to $13,100,000); g) zero on all further proceeds.
(ii) in the event that the Sales Hearing is completed more than
fifteen calendar days but less than thirty calendar days of the Seller's Chapter
11 filing date, the topping fee shall be: a) 0% of the first $750,000 of overbid
proceeds in excess of $8,600,000; b) 30% of the next $750,000 of overbid
proceeds ($9,350,001 to $10,100,000); c) 25% of next $750,000 of overbid
proceeds ($10,100,001 to $10,850,000); d) 20% of next $750,000 of overbid
proceeds ($10,850,001 to $11,600,000); e) 15% of next $750,000 of overbid
proceeds ($11,600,001 to $12,350,000); f) 10% of next $750,000 of overbid
proceeds ($12,350,001 to $13,100,000); g) 5% of next $750,000 of overbid
proceeds ($13,100,001 to $13,850,000); h) zero on all further overbid proceeds.
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(iii) in the event that the Sales Hearing is completed more than
thirty calendar days but less than forty-five calendar days of the Seller's
Chapter 11 filing date, the topping fee shall be: a) 40% of the first $1,000,000
of overbid proceeds in excess of $8,600,000; b) 35% of the next $1,000,000 of
overbid proceeds ($9,600,001 to $10,600,000); c) 30% of next $1,000,000 of
overbid proceeds ($10,600,001 to $11,600,000); d) 25% of next $1,000,000 of
overbid proceeds ($11,600,001 to $12,600,000); e) 20% of next $1,000,000 of
overbid proceeds ($12,600,001 to $13,600,000); f) 15% of next $1,000,000 of
overbid proceeds ($13,600,001 to $14,600,000); g) 10% of next $1,000,000 of
overbid proceeds ($14,600,001 to $15,600,000); h) 5% of next $1,000,000 of
overbid proceeds ($15,600,001 to $16,600,000); i) zero on all further overbid
proceeds.
(i) The prevailing bid shall be determined at the Sales Hearing and
shall be the highest dollar amount bid (without consideration of net proceeds to
be paid to Seller as a result of the topping fee contained herein) that conforms
to the substantive terms of the sale of the Assets contained herein received
from a bidder that has qualified in the manner set forth herein.
14. Termination.
(a) Anything herein to the contrary notwithstanding, this Agreement may
be terminated at any time prior to the Closing Date:
(i) by mutual written consent of Purchaser and Seller;
(ii) at the option of Purchaser, and upon notice to Seller, if the
Bankruptcy Court fails to approve the Sale Procedures on or before July 24,
1997, or an order approving the Sale Procedures is not entered on or before
July 31, 1997;
(iii) if for any reason other than the failure of Purchaser or
Seller to perform its obligations hereunder or to satisfy any conditions to
Closing on its part to be satisfied, the Closing shall not have occurred on
or before September 2, 1997, or such later date as Purchaser shall have
designated in a written notice to Seller; or
(iv) at the option of Purchaser, and upon notice to Seller, if any
seven or more of the present 26 members of the Seller's engineering staff
(excluding Xxxxxxx Xxxxxxxx, Xxx Xxxxx, and Xxxxx Xxxxxxxxxxxx) leave the
employ of Seller or give notice that they will leave the employ of Seller
or give notice that they will not accept employment with Purchaser;
(v) at the option of Purchaser, and upon notice to Seller, if any
one or more of Xxxxxxx Xxxxxxxx, Xxx Xxxxx, and Xxxxx Xxxxxxxxxxxx leaves
the employ of Seller or gives notice that he will leave the employ of
Seller or gives notice that he will not accept employment with Purchaser;
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(vi) in the event that the Bankruptcy Court approves a buyer of the
Assets other than Purchaser at the Sale Hearing.
(b) Upon the termination of this Agreement pursuant to this Section 14,
all obligations of the parties hereto shall terminate without further liability
of any party to the other and the Deposit shall be promptly returned to
Purchaser.
15. Default, Remedies.
(a) If Purchaser materially defaults in the performance of Purchaser's
obligations hereunder, or under the Loan and Security Agreement of even date
herewith between Seller and Purchaser, Seller may declare Purchaser in default,
refrain from taking any further action required on Seller's part hereunder, and,
as Seller's sole and exclusive remedy, may retain $500,000 of the Deposit as
Seller's liquidated damages.
(b) If Seller materially defaults in the performance of Seller's
obligations hereunder, Purchaser may declare Seller in default, refrain from
taking any further action required on Purchaser's part hereunder, may seek
specific performance (as contemplated by Section 16(i) below), and may seek to
recover any damages to which Purchaser is legally entitled.
16. Miscellaneous.
(a) Entire Agreement. This Agreement and the other documents delivered
in connection herewith constitutes the entire agreement of the parties with
respect to the subject matter hereof.
(b) Survival. The representations and warranties of the parties set
forth herein or required to be provided pursuant hereto shall terminate at the
Closing.
(c) Further Assurances. From time to time after the Closing, Seller
will execute and deliver to Purchaser such instruments of sale, transfer,
conveyance, assignment and delivery, and such consents, assurances, powers of
attorney and other instruments as may be reasonably requested by Purchaser or
its counsel in order to vest in Purchaser all right, title and interest of
Seller in and to the Assets, and otherwise in order to carry out the purpose and
intent of this Agreement. Seller shall use its reasonable best efforts to obtain
assignments for the benefit of Purchaser of interests in the Trademarks from
third parties having any such interests; provided that Seller shall not be
required to make any material expenditure of funds to obtain any such
assignments.
(d) Notices. Any and all notices or other communications or deliveries
required or permitted to be given or made pursuant to any of the provisions of
this Agreement shall be deemed to have been duly given or made for all purposes
if (i) sent by certified or registered mail, return receipt requested and
postage prepaid, (ii) hand delivered, (iii) sent by a nationally recognized
overnight courier or (iv) sent by telephone facsimile transmission as follows:
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If to Purchaser:
ACT Networks (BNS), Inc.
ACT Networks, Inc.
000 Xxxxxx Xxxx
Xxxxxxxxx, XX 00000-0000
Telecopy No.: (000) 000-0000
Phone No.: (000) 000-0000
With copies to:
Xxxxxxx, Phleger & Xxxxxxxx LLP
0000 XxxXxxxxx Xxxxx
Xxxxx 0000
Xxxxxxx Xxxxx, XX 00000
Attention: Xxxxxxxx X. Xxxxxxx, Xx.
Telecopy No.: (000) 000-0000
Phone No.: (000) 000-0000
Xxxxxxx, Phleger & Xxxxxxxx LLP
000 Xxxxx Xxxx Xxxxxx
Xxx Xxxxxxx, Xxxxxxxxxx 00000-0000
Attention: Xxxxx X. Xxxx, Esq.
Xxxxxxx X. Xxxxxxx, Esq.
Telecopy No.: (000) 000-0000
Phone No.: (000) 000-0000
If to Seller:
Sourcecom, Inc.
0000 Xxxxxxxx Xxxxxx Xxxxx
Xxxxxxxx Xxxxxxx, XX 00000
Attention: Xxxxxxx Xxxxxxxx
Xxx Xxxxx
Telecopy No.: (000) 000-0000
Phone No.: (000) 000-0000
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With a copy to:
Pachulski, Stang, Xxxxx & Young
00000 Xxxxx Xxxxxx Xxxxxxxxx
Xxxxx 0000
Xxx Xxxxxxx, XX 00000-0000
Attention: Xxxxxx X. Xxxxxxxx, Esq.
Xxxxxxx X. Xxxxx, Esq.
Telecopy No.: (000) 000-0000
Phone No.: (000) 000-0000
or at such other address as any party may specify by notice given to the other
party in accordance with this paragraph. The date of giving of any such notice
shall be the date three days following the posting of the mail, the date of hand
delivery, the day after delivery to the overnight courier service or the date
sent by telephone facsimile.
(e) Waivers. The terms of this Agreement may be waived only by a
written instrument signed by the party waiving compliance.
(f) Counterparts. This Agreement may be executed by the parties hereto
in separate counterparts, each of which when so executed and delivered shall be
an original, but all such counterparts shall together constitute one and the
same instrument. Delivery of an executed counterpart of the signature pages of
this Agreement by telephone facsimile transmission shall be equally effective as
delivery of a manually executed counterpart. Any party delivering an executed
counterpart of the signature pages of this Agreement by telephone facsimile
transmission shall thereafter also promptly deliver a manually executed
counterpart, but the failure to deliver such manually executed counterpart shall
not affect the validity, enforceability, and binding effect of this Agreement.
(g) Governing Law; Severability. EXCEPT TO THE EXTENT THAT FEDERAL LAW
SUPERCEDES, THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH
THE LAWS OF THE STATE OF CALIFORNIA, WITHOUT GIVING EFFECT TO ANY CHOICE OF LAW
OR CONFLICT OF LAW PROVISION OR RULE (WHETHER OF THE STATE OF CALIFORNIA OR ANY
OTHER JURISDICTION) THAT WOULD CAUSE THE APPLICATION OF THE LAWS OF ANY
JURISDICTION OTHER THAN THE STATE OF CALIFORNIA. Should any clause, section or
part of this Agreement be held or declared to be void or illegal for any reason,
all other clauses, sections or parts of this Agreement shall nevertheless
continue in full force and effect.
(h) Assignment. This Agreement shall be binding upon, and inure to the
benefit of, the parties and their respective successors and permitted assigns.
This Agreement or any rights or obligations hereunder shall not be assignable by
either party, except that Purchaser may (i) assign any or all of its rights and
interests hereunder (A) to one or more of its affiliates or (B) in connection
with the transfer of all or substantially all of the assets of Purchaser after
the Closing Date, and (ii) designate one of more of its affiliates to perform
its obligations hereunder (in any or all of which cases Purchaser shall
nonetheless remain liable and responsible for the performance of all of its
obligations hereunder).
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(i) Specific Performance. Each of the parties hereto acknowledges and
agrees that the other would be damaged irreparably in the event any of the
provisions of this Agreement are not performed in accordance with their specific
terms or otherwise are breached and to enforce specifically this Agreement and
the terms and provisions thereof in any action instituted in any court of the
United States or any state thereof having jurisdiction over Purchaser and Seller
and the matter, in addition to any other remedy to which they may be entitled,
at law or in equity.
(j) Attorneys' Fees. In the event that any action, suit, or other
proceedings is instituted to remedy, prevent, or obtain relief from a breach of
this Agreement, or arising out of a breach of this Agreement, the prevailing
party shall be entitled to recover from the non-prevailing party reasonable
attorneys' fees incurred by such prevailing party in each and every such action,
suit or other proceeding, including any and all appeals or petitions therefrom.
(k) Sections and Headings. The Section and other headings contained in
this Agreement are for reference purposes only and shall not affect in any way
the meaning or interpretation of this Agreement or of any term or provision
hereof. Except to the extent otherwise provided herein, references herein to
Sections, subsections, clauses or Schedules are to the Sections, subsections,
clauses or Schedules of this Agreement.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
signed on the date and year first above written.
PURCHASER: ACT Networks (BNS), Inc., a wholly-owned
subsidiary of ACT Networks, Inc.
By: /s/ Xxxxx XxXxxxx
-----------------------------------
Name: Xxxxx XxXxxxx
Title: Vice President,
Corporate Development
SELLER: Sourcecom, a California corporation
By: /s/ Xxxxxxx Xxxxxxxx
-----------------------------------
Name: Xxxxxxx Xxxxxxxx
Title: President
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