EXHIBIT 10.1
SECURITIES PURCHASE AGREEMENT
by and among
P-Com, Inc., a Delaware corporation,
P-Com Field Services, Inc., a Delaware corporation,
Telematics, Inc., a Virginia corporation
and
Xxxxxx X. Xxxxxx
Dated as of November 17, 1997
TABLE OF CONTENTS
Page
ARTICLE I PURCHASE, SALE AND SURRENDER OF SECURITIES........................................................... 1
Section 1.1 Purchase, Sale and Surrender of Securities............................................. 1
ARTICLE II PURCHASE PRICE...................................................................................... 1
Section 2.1 Consideration.......................................................................... 1
Section 2.2 Amount................................................................................. 1
ARTICLE III REPRESENTATIONS AND WARRANTIES..................................................................... 2
Section 3.1 Representations and Warranties of the Company and each
Securityholder......................................................................... 2
(a) Organization of Company................................................................ 2
(b) Capital Structure...................................................................... 3
(c) Authorization of Company and Securityholder............................................ 3
(d) Conflict............................................................................... 4
(e) No Consent Required.................................................................... 4
(f) Financial Information.................................................................. 4
(g) Absence of Certain Changes and Events.................................................. 5
(h) Conduct of Business.................................................................... 6
(i) Undisclosed Liabilities................................................................ 6
(j) Inventory.............................................................................. 6
(k) Taxes.................................................................................. 7
(l) Employee Matters....................................................................... 8
(m) Compliance With Law.................................................................... 8
(n) Governmental Consents.................................................................. 8
(o) Intellectual Property Rights........................................................... 9
(p) Service Provider Agreements............................................................ 10
(q) Restrictive Documents or Orders........................................................ 10
(r) Contracts and Commitments.............................................................. 10
(s) Title to the Property.................................................................. 11
(t) Litigation............................................................................. 12
(u) No Conflict or Default................................................................. 12
(v) Consents............................................................................... 13
(w) Labor Relations........................................................................ 13
(x) Brokers' and Finders' Fees/Contractual Limitations..................................... 13
(y) Interested Party Relationships......................................................... 14
(z) Certain Payments....................................................................... 14
(aa) Products Liability..................................................................... 14
(ab) Product Warranties..................................................................... 14
(ac) Returns................................................................................ 14
i.
(ad) Customers.............................................................................. 14
(ae) Suppliers.............................................................................. 15
(af) Books and Records...................................................................... 15
(ag) Complete Disclosure.................................................................... 15
(ah) Performance of Agreement............................................................... 15
(ai) Absence of Governmental or Other Objection............................................. 15
(aj) Insurance.............................................................................. 15
(ak) Environmental Matters.................................................................. 16
(al) Backlog................................................................................ 19
(am) Accounts Receivable.................................................................... 19
(an) Pooling of Interests................................................................... 19
(ao) Purchase Entirely for Own Account...................................................... 19
(ap) Disclosure of Information.............................................................. 19
(aq) Investment Experience.................................................................. 20
(ar) Accredited Investor.................................................................... 20
(as) Restricted Securities.................................................................. 20
(at) Legends................................................................................ 20
Section 3.2 Representations and Warranties of Purchaser............................................ 20
(a) Organization........................................................................... 20
(b) Brokers' and Finders' Fees............................................................. 20
(c) SEC Filings............................................................................ 21
(e) Limitation on Liability................................................................ 21
(f) Termination of Liability and Representations and Warranties............................ 21
(g) Liability Floor........................................................................ 21
Section 4.1 Covenants Against Disclosure........................................................... 22
Section 4.2 Net Asset Determination................................................................ 22
Section 4.3 Non-Competition........................................................................ 23
Section 4.4 Maintenance of Business................................................................ 24
Section 4.5 Access to Information.................................................................. 27
Section 4.6 Registration Rights.................................................................... 27
Section 4.7 Pooling of Interests Transaction....................................................... 27
Section 4.8 Necessary Consents..................................................................... 27
Section 4.9 Best Efforts........................................................................... 27
Section 4.10 Exclusivity; Acquisition Proposals..................................................... 27
Section 4.11 Breach of Representations, Warranties, Agreements and
Covenants.............................................................................. 28
Section 4.12 Legal Conditions to the Sale or Surrender of the Telematics, Inc.
Securities............................................................................. 29
Section 4.13 Public Announcements................................................................... 29
Section 4.14 Shareholder's Meeting.................................................................. 29
Section 4.15 No Transfer............................................................................ 29
Section 4.16 Unitech Matters........................................................................ 29
Section 4.17 Section 368 Reorganization............................................................. 29
ARTICLE V CLOSING.............................................................................................. 30
ii.
Section 5.1 Time of Closing..................................................................... 30
Section 5.2 Deliveries by Company and Securityholder............................................ 30
(a) Certificates and Instruments........................................................ 30
(b) Escrow Agreement.................................................................... 30
(c) Corporate Minute Books.............................................................. 30
(d) Certificate of Good Standing........................................................ 30
(e) Closing Documents................................................................... 30
(f) Books and Records................................................................... 30
(g) Consents............................................................................ 30
(h) Opinion of Counsel.................................................................. 31
(i) Securityholder Certificate.......................................................... 31
(j) FIRPTA.............................................................................. 31
(k) Proprietary Information and Inventions Agreement.................................... 31
(l) Securityholder Agreement and Pooling Opinion........................................ 31
(m) Promissory Note..................................................................... 31
(n) Waiver Letter....................................................................... 31
(o) Stoppleman Opinion.................................................................. 31
(p) Demand Note......................................................................... 31
(q) Other Documents..................................................................... 31
Section 5.3 Deliveries by Purchaser............................................................. 32
Section 5.4 Further Assurances.................................................................. 32
Section 5.5 Termination......................................................................... 32
Section 5.6 Cure Period......................................................................... 32
Section 5.7 Proprietary Information and Inventions Agreement.................................... 33
ARTICLE VI CONDITIONS PRECEDENT TO OBLIGATIONS.............................................................. 33
Section 6.1 Conditions to Obligations of Purchaser.............................................. 33
(a) Certificates for Securities......................................................... 33
(b) Representations and Warranties...................................................... 33
(c) Performance of Agreement............................................................ 33
(d) No Material Adverse Effect.......................................................... 33
(e) Absence of Governmental or Other Objection.......................................... 34
(f) Due Diligence Review................................................................ 34
(g) Certificate of President and Securityholder......................................... 34
(h) Execution of Escrow Agreement....................................................... 34
(i) Third Party Consents................................................................ 34
(j) Opinions of Counsel for the Company and the Securityholder.......................... 34
(k) No Violations; No Actions........................................................... 34
(l) Proceedings and Documents........................................................... 34
(m) Schedules........................................................................... 34
(n) Tax Forms........................................................................... 35
(o) Board Approval...................................................................... 35
(p) Other Matters....................................................................... 35
(q) Securityholder Agreements........................................................... 35
(r) Pooling of Interests Transaction.................................................... 35
iii.
(s) Employment Agreement................................................................... 36
(t) Unitech Matters........................................................................ 36
(u) Promissory Note........................................................................ 36
(v) Waiver Letter.......................................................................... 36
(w) Stoppleman Opinion..................................................................... 36
(x) Demand Note............................................................................ 36
Section 6.2 Conditions to Obligations of the Company and the
Securityholder......................................................................... 36
(a) Performance of Agreement............................................................... 36
(b) Execution of Escrow Agreement.......................................................... 36
(c) Absence of Governmental or Other Objection............................................. 36
(d) Third Party Consents................................................................... 36
(e) Registration Rights Agreement.......................................................... 37
(f) Employment Arrangements................................................................ 37
ARTICLE VII INDEMNIFICATION........................................................................ 38
Section 7.1 Survival of Representations, Warranties, Covenants and
Agreements............................................................................. 38
Section 7.2 Indemnification; Escrow Deposit of Purchase Shares..................................... 39
Section 7.3 Termination of Indemnity and Representations and Warranties............................ 40
Section 7.4 Liability Floor........................................................................ 41
Section 7.5 Limitations............................................................................ 41
ARTICLE VIII MISCELLANEOUS PROVISIONS.......................................................................... 41
Section 8.1 Notice................................................................................. 41
Section 8.2 Entire Agreement....................................................................... 42
Section 8.3 Binding Effect; Assignment............................................................. 42
Section 8.4 Expenses of Transaction; Taxes......................................................... 43
Section 8.5 Waiver; Consent........................................................................ 43
Section 8.6 Third-Party Beneficiaries.............................................................. 43
Section 8.7 Counterparts........................................................................... 43
Section 8.8 Severability........................................................................... 43
Section 8.9 Governing Law.......................................................................... 43
Section 8.10 Arbitration; Attorneys' Fees........................................................... 43
Section 8.11 Securityholder Guarantees.............................................................. 44
Section 8.12 Lease Expiration....................................................................... 44
Section 8.13 Future Prospects....................................................................... 44
Section 8.14 No Reliance............................................................................ 45
iv.
Exhibits
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2.2 Escrow Agreement
4.1(d) Form of Affiliate's Agreement
4.6 Registration Rights Agreement
5.2(g) Opinion of the Jefferson Firm, counsel to Securityholder
6.2(d) Form of Offer Letter for Key Employees and Other Employees and
Consultants
6.2(e) Form of Proprietary Information and Inventions Agreement
6.2(g) Assignment and Assumption of the Contracts
Schedules
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3.1 Disclosure Letter
3.1(b) List of Stockholders
3.1(j) List of Inventory
3.1(m) List of Accounts Receivable
3.1(n) List of Governmental Permits
3.1(o) List of Intellectual Property Rights
3.1(r) List of Contracts
3.1(s) List of Leasehold Interests
3.1(w) List of Employees
3.1(ad) List of Customers
3.1(ae) List of Suppliers
3.1(aj) List of Insurance Policies
3.1(ak) List of Environmental Matters
3.1(al) Backlog of Orders
SECURITIES PURCHASE AGREEMENT
-----------------------------
THIS AGREEMENT is dated as of November 17, 1997 by and among P-Com,
Inc., a Delaware corporation ("P-Com"), P-Com Field Services, Inc. ("PFS" and,
collectively with P-Com, the "Purchaser"), Telematics, Inc., a Virginia
corporation (the "Company"), and Xxxxxx X. Xxxxxx (the "Securityholder").
WHEREAS, PFS desires to acquire all of the rights of equity ownership
of the Securityholder through the purchase by PFS 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 Securityholder
consideration in the form of shares of the Common Stock of P-Com for his
securities of the Company;
NOW, THEREFORE, in consideration of the mutual promises and covenants
set forth herein, the parties hereby agree as follows:
ARTICLE I
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PURCHASE, SALE AND SURRENDER OF SECURITIES
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Section 1.1 Purchase, Sale and Surrender of Securities. Upon the
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terms and subject to the conditions of this Agreement, the Securityholder shall
sell to PFS and PFS shall purchase from the Securityholder all of the shares of
capital stock and all other equity interest of the Company held by the
Securityholder, and the Securityholder shall surrender all options and other
rights to purchase such shares held by the Securityholder (collectively, the
"Securities") at the Closing (as defined in Section 5.1 hereof).
ARTICLE II
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PURCHASE PRICE
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Section 2.1 Consideration. Upon the terms and subject to the
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conditions contained in this Agreement, in consideration for the Securities and
in full payment therefor, Purchaser will pay, or cause to be paid, the purchase
price set forth in Section 2.2.
Section 2.2 Amount. The purchase price ("Purchase Price") for the
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Securities shall consist of shares of Common Stock of P-Com to be issued
directly from Purchaser to the Securityholder (the "Purchase Shares").
The aggregate number of Purchase Shares payable to the Securityholder
at the Time of Closing (the "Closing Shares") shall be determined by dividing
the amount of Five Million Dollars ($5,000,000) by the average closing sales
price of P-Com Common Stock as quoted on the National Association of Securities
Dealers Automated Quotation System National Market ("Nasdaq National Market")
for the thirty trading days ending three trading days prior to the Time of
Closing (the "Closing Date Average Price").
The Purchase Shares shall be paid as follows:
(i) One Hundred Percent (100%) of the total number of Purchase Shares
shall be issued at the Time of Closing. Ninety Percent (90%) of such Purchase
Shares shall be delivered to the Securityholder at the Time of Closing. Ten
Percent (10%) of the Purchase Shares shall be held in an escrow account (the
"Securityholder Escrow Shares") pursuant to an escrow agreement substantially in
the form attached hereto as Exhibit 2.2 (the "Escrow Agreement").
(ii) Except as set forth in this Agreement, the Securityholder Escrow
Shares shall be retained by the Escrow Agent and held until the publication date
of the auditor's report for P-Com in P-Com's Annual Report on Form 10-K that
includes the audited results for the Company for the fiscal year ended December
31, 1997 in an escrow account pursuant to the Escrow Agreement as collateral, in
part, for the indemnification obligations set forth in this Agreement and the
Escrow Agreement.
ARTICLE III
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REPRESENTATIONS AND WARRANTIES
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Section 3.1 Representations and Warranties of the Company and each
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Securityholder. Except as set forth in a letter (Schedule 3.1) specifically
--------------
referring to this Section 3.1 of this Agreement (the "Disclosure Letter")
delivered by the Company and the Securityholder to Purchaser and Xxxxxxx,
Phleger & Xxxxxxxx LLP, counsel to Purchaser, the Company and Securityholder
hereby, jointly and severally, represent and warrant to Purchaser that:
(a) Organization of Company. The Company is a corporation duly
-----------------------
organized and validly existing under the laws of the State of Virginia and has
all requisite 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 Virginia 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 Virginia.
2.
(b) Capital Structure.
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(i) The authorized capital stock of the Company consists of a
thousand (1,000) shares of Common Stock, par value fifty dollars ($50.00) per
share. As of the date of this Agreement, there were issued and outstanding
fifty-one (51) shares of Company Common Stock. As of the date of this Agreement,
there were no shares of Common Stock reserved for issuance upon the exercise of
options to purchase shares of Company Common Stock (the "Company Options").
There are no outstanding shares of Company capital stock or any other equity
securities or rights to purchase equity securities of Company (collectively,
"Company Capital Stock"), other than as described in the preceding sentence.
(ii) All outstanding shares of Company Common Stock are duly
authorized, validly issued, fully paid and nonassessable and not subject to
preemptive rights created by statute, the Company's Articles of Incorporation or
Bylaws or any agreement to which the Company is a party or by which the Company
may be bound. To the best of the Company's and the Securityholder's knowledge,
after due inquiry, all outstanding common stock or other securities have been
issued in compliance with applicable Virginia 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 do or may obligate the Company to issue, deliver or sell, or cause to be
issued, delivered or sold, additional shares of 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 3.1(b)(i) above.
(iii) Schedule 3.1(b) contains a complete and accurate list of,
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and the number of shares owned of record by, the holders of outstanding Company
Common Stock and their state or country of residence.
(iv) Except for any restrictions imposed by applicable Xxxxxxxx
xxxx, 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 or giving of written consent with
respect to any outstanding security of the Company.
(c) Authorization of Company and Securityholder. The Company and each
-------------------------------------------
Securityholder has full power and authority to enter into this Agreement and the
Escrow Agreement, to perform its obligations hereunder and thereunder, and to
consummate the transactions contemplated hereby and thereby, including, without
limitation, the execution and delivery of this Agreement and the Escrow
Agreement, and other documents and instruments delivered in accordance with
Section 6.2 hereunder (the "Closing Documents") and the Escrow Agreement. Each
of the Company and the Securityholder has taken all necessary and appropriate
action with respect to the execution and delivery of this Agreement, the Closing
3.
Documents, and the Escrow Agreement. This Agreement and the Escrow Agreement
constitute valid and binding obligations of the Company and the Securityholder,
enforceable in accordance with their 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 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, and to the knowledge of the Company and the
Securityholder does not and will not 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 of the United States 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 Securityholder or the consummation by the Securityholder of the
transactions contemplated hereby. No consent, approval or authorization of the
Company's Board of Directors (or any committee thereof), Securityholder or of
any third party is required in connection with the Securityholder's 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 sheet as of December 31, 1996 and
September 30, 1997, and its statement of operations, cash flow and shareholders'
equity for its fiscal year ended December 31, 1996 and the nine months September
30, 1997 (which, collectively with the Closing Date Balance Sheet referred to in
Section 4.2 hereof, shall be referred to herein for all purposes as, the
"Financial Statements"). The Financial Statements have been prepared in
accordance with United States generally accepted accounting principles ("GAAP")
consistently applied and fairly present the consolidated financial position of
the Company as and at the dates thereof and the Company's consolidated results
of operations and cash flows for the periods then ended. The projections of the
Company as included in Schedule 3.1(f) were prepared in good faith and are based
on reasonable assumptions. Write-downs of inventory and write-offs of notes
receivable as reflected in Schedules 3.1(j) and 3.1(am) will not be deemed to
breach this Section 3.1(f) or related sections.
4.
(g) Absence of Certain Changes and Events. Except as contemplated
-------------------------------------
herein, or as disclosed in the Disclosure Letter and Schedules, since September
30, 1997, there has not been:
(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 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 assets 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;
5.
(ix) Any written notice (or to the knowledge of the Company or
any of its officers, unwritten notice) 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) To the best knowledge of Company and Securityholder, 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;
(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; or
(xiii) Any purchase or lease of or any agreements to purchase or
lease capital assets relating to the business of the Company in excess of
$10,000 individually, or in excess of $25,000 in the aggregate.
(h) Conduct of Business. At all times since September 30, 1997, the
-------------------
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.
(i) Undisclosed Liabilities. There are no debts, liabilities, or
-----------------------
obligations with respect to the Company, whether liquidated, unliquidated,
accrued, absolute, contingent, known or unknown or otherwise, that are not
identified in the Disclosure Letter, the Schedules, or that are not reflected in
the Financial Information.
(j) Inventory. Schedule 3.1(j) lists all inventory owned by the
---------
Company relating to the business of 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 first-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 3.1(j). Except as disclosed in Schedule 3.1(j), the
Company holds no Inventories manufactured to
6.
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) Definitions. For purposes of this Agreement:
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a. the term "Taxes" means (A) all United States or foreign,
local and other net income, gross income, value added, gross receipts, sales,
use, ad valorem, transfer, franchise, profits, license, lease, service, service
use, withholding, payroll, employ ment, excise, severance, stamp, occupation,
premium, property, windfall profits, customs, duties or other taxes, fees,
assessments or charges of any kind whatever, together with any interest and any
penalties, additions to tax or additional amounts with respect thereto, (B) any
liability for payment of amounts described in clause (A) whether as a result of
transferee liability, of being a member of an affiliated, consolidated, combined
or unitary group for any period, or otherwise through operation of law, and (C)
any liability for the payment of amounts described in clauses (A) or (B) as a
result of any tax sharing, tax indemnity or tax allocation agreement or any
other express or implied agreement to indemnify any other person; and the term
"Tax" means any one of the foregoing Taxes; and
b. the term "Returns" means all returns, declarations,
reports, statements and other documents required to be filed in respect of
Taxes, and the term "Return" means any one of the foregoing Returns.
(ii) The Company has properly completed and filed on a timely
basis and in correct form all Returns required to be filed on or prior to the
Time of Closing. As of the time of filing, the foregoing Returns correctly
reflected the facts regarding the income, the business and assets of the
Company, operations, activities, status or other matters of the Company or any
other information required to be shown thereon. In particular, the foregoing
Returns are not subject to penalties under any federal or local tax law
provision corresponding to Section 6662 of the United States Internal Revenue
Code of 1986 (the Code"), relating to accuracy-related penalties or any other
penalties. An extension of time within which to file any Return that has not
been filed has not been requested or granted. The Company will properly complete
and file on a timely basis and in correct form all Returns required to be filed
on or prior to the Closing. There are no liens for Taxes on the assets of the
Company, and all Taxes due or payable, and all interest and penalties thereon,
whether disputed or not, which could result in the imposition of any Lien on the
assets of the Company or against Purchaser, have been paid in full.
(iii) With respect to all amounts in respect of Taxes imposed
upon the Company, or for which the Company is or could be liable, whether to
taxing authorities (as, for example, under law) or to other persons or entities
(as, for example, under tax allocation agreements), with respect to all taxable
periods ending on or before the Time of Closing and portions of periods
commencing before the Time of Closing and ending after the Time of Closing, all
applicable tax laws and agreements have been fully complied with, and
7.
all such amounts required to be paid by the Company to taxing authorities or
others on or before the Closing have been paid, and all such amounts required to
be paid by the Company to taxing authorities or others after the Closing which
have not been paid are reflected on the Financial Statements.
(iv) The Company is not, and has not been, a United States real
property holding corporation (as defined in Section 897(c)(2) of the Code)
during the applicable period specified in Section 897(c)(1)(A)(ii) of the Code.
(l) Employee Matters.
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(i) The hours worked by and payments made to the Company
employees have not been in violation in any respect of any applicable federal or
local laws dealing with such matters.
(ii) All payments due from the Company on account of employee
health and welfare insurance have been paid.
(iii) All severance and vacation and similar payments by the
Company which are or were due under the terms of any agreement or otherwise have
been paid in full, or have been accrued on the books of the Company.
(m) Compliance With Law. Schedule 3.1(m) sets forth all of the
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Company's franchises, licenses, permits, use permits, consents, authorizations,
and approvals of any United States or foreign, or local 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 United States or foreign, and, to the best of
the Company's and Securityholder's knowledge, local laws, statutes, licensing
requirements, rules, and regulations, and judicial or administrative or zoning
decisions. To the best of the Company's and Securityholder's knowledge, after
due inquiry, the Company has been granted all licenses, permits (temporary and
otherwise), authorizations, and approvals from federal or foreign, and local
government regulatory or zoning bodies necessary to carry on its business and
maintain its assets, 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 by the change in ownership of the Company capital stock
provided under this Agreement. There is no order issued, investigation, or
proceeding pending or of which the Securityholder or the Company has received a
written or oral threat, or notice served with respect to violation of any law,
ordinance, order, writ, decree, rule, or regulation issued by any federal or
foreign, or local court or governmental agency or instrumentality applicable to
the Company. The Company has valid use permits for its business.
(n) Governmental Consents. To the best of the Company's and
---------------------
Securityholder's knowledge, no consent, approval, order, or authorization of, or
registration, qualification, designation, declaration, or filing with any United
States or foreign, or local
8.
governmental authority on the part of the Company or Securityholder is required
in connection with the consummation of the transactions contemplated hereunder.
(o) 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, 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.
Except for the generally available software programs set forth on Schedule
3.1(o), the Company does not have any such Intellectual Property Rights.
(ii) 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
material rights pursuant to any license, sublicense or agreement described in
Schedule 3.1(o), if applicable.
(iii) 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.
(iv) No claims with respect to the Intellectual Property Rights
have been asserted and the Securityholder and the Company have not received
written or oral notice that such a claim might be asserted, and neither the
Company nor the Securityholder knows 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.
(v) 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, 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
application, trademark, service xxxx, copyright or other intellectual property
right of another.
9.
(vi) No Intellectual Property Right is subject to any outstanding
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.
(p) Service Provider Agreements. To the best of the knowledge of the
---------------------------
Company and the Securityholder, 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. The Company and the
Securityholder 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 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 Company and the Securityholder do not believe that it is or will
be necessary for the Company to utilize any inventions of any of the Company's
service providers (or people it currently intends to hire) made prior to their
employment by or relationship with the Company.
(q) Restrictive Documents or Orders. Neither the Company nor
-------------------------------
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 the
continued operation by Purchaser of the business of the Company after the Time
of Closing on substantially the same basis as said business was theretofore
operated or which prevents the consummation of the transactions contemplated by
this Agreement.
(r) Contracts and Commitments.
-------------------------
(i) There is set forth on Schedule 3.1(r) a list of all
outstanding contracts (the "Contracts"), whether or not in writing, to which the
Company or any of the Securityholder is a party, to which any of the Company's
assets are subject or that relate to any aspect of the business of the Company.
(ii) The Company and Securityholder, as the case may be, has
performed all of its obligations under the terms of each Contract, and is not in
default there under. To the best of the Company's and 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
10.
default by any party thereto under any such Contract. To the best knowledge of
Company and Securityholder, 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 Time of Closing
under the terms of all Contracts, or will accrue such debts and obligations on
the books of the Company.
(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 3.1(r) also lists all sole or limited source
supply agreements. Notwithstanding anything in this Agreement or in any
Schedule, the Company and the Securityholder 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 Closing except
as specifically provided for in the Company's Closing Date Balance Sheet
delivered pursuant to Section 4.2 of this Agreement.
(s) Title to the Property.
---------------------
(A) The Company has good and marketable title to all 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 3.1(s) 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. There are no easements and rights, including easements for power lines,
telephone and telefax, necessary to conduct the business it now conducts.
(B) 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.
(C) 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.
11.
(D) 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. 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 is the Securityholder 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.
(t) Litigation. None of the Company, the Securityholder nor any of
----------
the Company's officers or directors is engaged in, or, to the knowledge of the
Securityholder and the officers and directors of the Company, has received any
threat of, any litigation, arbitra tion, investigation, claim or other
proceeding relating to the Company, the Securityholder, 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, to the best of
each's knowledge, is there any reasonable basis therefor. There is no action,
suit, proceeding, or investigation pending or, to the knowledge of the Company
and the Securityholder, threatened, against the Company, or the Securityholder,
or the officers or directors of the Company, that questions the validity of this
Agreement, the Escrow Agreement, or the right of the Company or the
Securityholder to enter into this Agreement, the Escrow Agreement, the Closing
Documents, or to consummate the transactions contemplated hereby or thereby, or
which might result in any material adverse change in the assets, business,
condition, prospects or properties of the Company, or the financial condition of
the Securityholder. There is no action, suit, proceeding, or investigation by
the Company or the Securityholder currently pending or which any of them
currently intends to initiate. None of the Company, the Securityholder, 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 Securityholder, 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.
(u) No Conflict or Default. Neither the execution and delivery of
----------------------
this Agreement or the Escrow Agreement, nor compliance with the terms and
provisions hereof and thereof, including without limitation, the consummation of
the transactions contemplated hereby and thereby, will violate any statute,
regulation, or ordinance of any governmental or administrative authority, or
conflict with or result in the breach of any term, condition, or provision of
the Company's Articles of Incorporation or Bylaws, as presently in effect, or of
any agreement, deed, contract, mortgage, indenture, writ, order, decree, legal
obligation, or instrument to which the Company or the Securityholder is a party
or by which it or they or any of the assets of the Company are or may be bound,
or constitute a default (or an event
12.
which, with the lapse of time or the giving of notice, or both, would constitute
a default) thereunder.
(v) Consents. No consent, approval, order or authorization of, or
--------
registration, qualification, designation, declaration or filing with any
governmental, regulatory or administrative authority on the part of the Company
is required in connection with the consummation of the transactions contemplated
hereunder. No consent, approval or authorization of the Company's Board of
Directors (or any committee thereof), shareholders or of any third party (other
than Purchaser and parties related to Purchaser, such as lenders, stockholders,
shareholders and similar persons) is required in connection with the Company's
consummation of the transactions contemplated hereunder that has not been
obtained or waived by the Time of Closing.
(w) Labor Relations.
---------------
a. To the best of the Company's and Securityholder's knowledge,
the Company has not failed to comply in any respect with all applicable
United States or foreign and local laws, rules, and regulations relating to
employment, and all applicable laws, rules and regulations governing
payment of minimum wages and overtime rates, and the withholding and
payment of taxes from compensation of employees.
b. There are no labor controversies between the Company and any
of its employees (the "Employees") that is pending or of which the
Securityholder or the officers of the Company have received a written or
oral threat or any labor union or other collective bargaining unit
representing any of the Employees.
c. The Company has never entered into a collective bargaining
agreement or other labor union contract applicable to the Employees.
d. There are no written employment or separation agreements, or
(to the best knowledge of Securityholder or the Company) oral employment or
separation agreements other than those establishing an "at-will" employment
relationship between the Company and any of the Employees.
e. Attached hereto as Schedule 3.1(w) is a list of all
employees of the Company; their positions, their respective salaries or
other forms of potential compensation (including severance packages) and
benefits for which they are eligible.
(x) Brokers' and Finders' Fees/Contractual Limitations. Neither the
--------------------------------------------------
Securityholder nor the Company is obligated to pay any fees or expenses of any
broker or finder in connection with the origin, negotiation, or execution of
this Agreement or in connec tion 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 under-
13.
standing 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.
(y) Interested Party Relationships. Neither the Securityholder nor
------------------------------
the Company (nor any family member of the Securityholder or any corporation,
partnership, or other entity which, directly or indirectly, alone or together
with others, controls, is controlled by, or is in common control with the
Securityholder, the Company, or any such family member) have any material
financial interest, direct or indirect, in any material supplier or customer,
any party to any contract which is material to the Company, or any competitor
with the Company.
(z) 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.
(aa) Products Liability. There are no claims received by Company or
------------------
Securityholder against 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
Company in the ordinary course of business, except for those claims that, if
adversely determined against Company, would not have a material adverse change
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.
(ab) 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.
(ac) Returns. There are no agreements or arrangements, written or
-------
oral, that expressly 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.
(ad) Customers. Except as indicated on Schedule 3.1(ad) attached
---------
hereto, no single customer of the Company accounted for more than 5% of the net
sales of Company during the twelve-month period ended September 30, 1997. 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. Neither Company nor
the Securityholder is aware of any event, happening, or fact in existence as of
their execution of this Agreement which would lead it or him to believe that any
of such customers will not continue their current level of purchases after the
Time of Closing. As used in this subparagraph, "current" means in effect as of
the date hereof, and "after the Time of Closing" means the 12-month period
thereafter.
14.
(ae) Suppliers. Schedule 3.1(ae) hereto lists all suppliers of goods
---------
totalling over five thousand dollars ($5,000.00) to Company during the prior
year and the value of goods supplied to Company in each such year. Company and
the Securityholder 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 Company on similar
terms and conditions.
(af) 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 Company and truly and fairly reflect the underlying facts
and transactions in all material respects.
(ag) Complete Disclosure. No representation or warranty made by
-------------------
Company or Securityholder in this Agreement, nor any document, written
information, statement, financial statement, certificate, schedule or exhibit
prepared and furnished or to be prepared and furnished by Company or
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. All schedules and exhibits prepared by Company and the
Securityholder shall be updated as of the Time of Closing. To the best
knowledge of Company and Securityholder after reasonable inquiry, 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 Company based on historical
operations taken as a whole that has not been set forth in this Agreement or in
the Disclosure Letter.
(ah) Performance of Agreement. All covenants, conditions, and other
------------------------
obligations under this Agreement which are to be performed or complied with by
Company and the Securityholder prior to the Time of Closing have been fully
performed and complied with at or prior to the Time of Closing, including the
delivery of the instruments and documents in accordance with Section 6.2.
(ai) Absence of Governmental or Other Objection. There is no pending
------------------------------------------
or, to the knowledge of the Securityholder or the officers of the Company,
threatened, lawsuit or action or hearing challenging the transaction by any body
or agency of the United States, foreign or local 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 Time of Closing. There is no legislation
and there are no rulings in effect by any regulatory, administrative or
governmental authority that would make operation of the Company's systems
inoperable anywhere.
(aj) Insurance. Schedule 3.1(aj) lists all insurance policies and
---------
fidelity bonds covering the assets, business, equipment, properties, operations,
employees, officers and directors of Company, the amounts of coverage under each
such policy and bond of
15.
Company. Company has not been refused any requested coverage and no material
claim made by 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 Company is otherwise in full compliance with the terms of such policies and
bonds (or other policies and bonds providing substantially similar insurance
coverage). Company is in compliance with each of such policies. Company does
not know of any threatened termination of, the invalidation of any coverage of
or material premium increase with respect to, any of such policies.
(ak) Environmental Matters.
---------------------
(i) For purposes of this Section 3.1(ak), the following terms
shall have the following meanings:
"Court Order" shall mean any judgment, order, award or decree of any
United Kingdom, United States or other foreign local or other court or tribunal,
or any governmental entity, and any award in any arbitration proceeding.
"Disposal Site" shall mean landfill, disposal agent, waste hauler
or recycler of Hazardous Materials.
"Environmental Encumbrance" shall mean any lien, claim, charge,
security interest, mortgage, pledge, easement, conditional sale or other title
retention agree ment, defect in title, covenant or other restrictions of any
kind in favor of any governmental entity for (i) any liability under any
Environmental Law, or (ii) damages arising from, or costs incurred by such
governmental entity in response to, a Release or threatened Release of a
Hazardous Material into the environment.
"Environmental Laws" shall mean all Requirements of Laws which relate
to any Hazardous Material or the use, handling, transportation, production,
spill, leaking, pumping, injection, deposit, disposal, discharge, dispersal,
Release, threatened Release, migration, emission, sale or storage of, or the
exposure of any person to, a Hazardous Material.
"Governmental Permits" shall mean all licenses, franchises, permits,
privileges, immunities, approvals and other authorizations from a governmental
entity.
"Hazardous Material" shall mean any material or substance that is
prohibited or regulated by any Requirement of Law or that is designated by any
governmental entity to be radioactive, toxic, hazardous or otherwise a danger to
health, reproduction or the environment.
"Hazardous Materials Activities" shall mean the use, handling,
transportation, distribution, sale, Release or threatened Release of, or
Remedial Action concerning any Hazardous Material, performed in connection with
the Real Property.
16.
"Real Property" shall mean real property now or at any time in the
past owned or leased by Company or any predecessors or affiliates.
"Release" shall mean release, spill, emission, leaking, pumping,
injection, deposit, disposal, discharge, dispersal, leaching or migration of a
Hazardous Material in, on, under or through the Real Property or the air, soil,
surface water, ground water or improvements thereof.
"Remedial Action" shall mean any reporting, investigation,
characterization, feasibility study, health assessment, risk assessment,
remediation, treatment, recycling, removal, transport, monitoring, maintenance
or any other activity incident to the Release, threatened Release,
investigation, remediation or removal of a Hazardous Material existing on the
Real Property or in, on, under or through the air, soil, ground water, surface
water or improvements thereof.
"Requirements of Laws" shall mean any United States, foreign and
local laws, statutes, regulations, rules, guidelines, codes, ordinances,
judgments, injunctions, decrees, orders, permits, approvals, treaties or
protocols enacted, adopted, issued or promulgated by any governmental entity
(including, without limitation, those pertaining to electrical, building,
zoning, environmental and occupational safety and health requirements) or common
law in effect on the date hereof.
(ii) Except as set forth in Schedule 3.1(ak),
a. Company complies in all material respects with all
applicable Environmental Laws;
b. Company has obtained all environmental, health and
safety Governmental Permits necessary for its operation or required by any
Environmental Laws, all such Governmental Permits are in good standing, and
Company is in compliance in all material respects with all terms and conditions
of such permits;
c. none of Company nor any of the Real Property or present
or past Company operations is subject to any pending or ongoing investigation
by, notice or order from or agreement with any person (including, without
limitation, any prior owner or operator of the Real Property) with respect to
(A) any claim of Environmental Law, (B) any Remedial Action, or (C) any claim of
losses and expenses arising from the Release or threatened Release of a
Hazardous Material;
d. Company is not subject to any pending or existing
judicial or administrative proceeding, Court Order or settlement alleging or
addressing a violation of or liability under any Environmental Law;
e. Company has not filed, and Company does not intend to
file any notice or report under any Environmental Law reporting a violation of
any Environmental Law;
17.
f. there is not now, and to the best knowledge of Company,
there has never been, in any Company Real Property (A) any underground storage
tank or surface impoundment; (B) any landfill or waste pile which either is or
was used in the frequent manner to dispose or store any Hazardous Material or
contains or contained a substantial volume of Hazardous Material; or (C) any
polychlorinated biphenyls;
g. Company has not received any notice of claim to the
effect that it is or may be liable to any person as a result of the Release or
threatened Release of a Hazardous Material into the environment from or on any
Real Property;
h. Company is not aware of any Environmental Encumbrance
on any Real Property;
i. any asbestos-containing material which is on or part of
any Real Property is in good repair according to the current standards and
practices governing such material, and its presence or condition does not
violate any currently applicable Environmental Law;
j. none of the products Company manufactures, distributes
or sells or has manufactured, distributed or sold in the past, contains
substantial amounts of asbestos-containing material;
k. other than Hazardous Materials reasonably necessary for
the conduct of Company's operations which are properly stored in accordance with
applicable Environmental Laws, no Hazardous Material is present on Real
Property, and no reasonable likelihood exists that any Hazardous Material
present on other property will come to be present on the Real Property;
l. Hazardous Materials Activities (A) have been conducted
in compliance with applicable Environmental Laws, and (B) have not resulted in
the exposure of any person to a Hazardous Material in a manner which has or will
cause an adverse health effect to such person;
m. no court order, action, proceeding, liability or claim
exists or, to the best knowledge of Company is threatened, against any Disposal
Site or against Company with respect to any transfer or release of Hazardous
Materials by Company to a Disposal Site, and there is no valid basis for such
claim;
n. Company is not aware of any fact or circumstance which
is reasonably expected to involve Company in any environmental litigation or
impose upon Company any environmental liability which would have a material and
adverse effect on the business condition of Company; and
o. Company has no records pertaining to environmental
audits or environmental assessments of any Real Property.
18.
(al) Backlog. Schedule 3.1(al) hereto sets forth the backlog of
-------
orders relating to the business of the Company to ship, service and contract
work to be performed as of the Time of Closing. The Company either possesses
sufficient inventory of parts, materials and personnel to produce or service the
same within their 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, service and ship such backlog in accordance with its scheduled shipping
date, as of the Closing.
(am) Accounts Receivable. The amount of all accounts receivable of
-------------------
the Company will be good and collectible in full in the ordinary course of
business within 90 days of closing; all 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 Company. As of September 30, 1997 and as of the
Closing, except as set forth in Schedule 3.1(am), 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 Company. Company holds no deposits from
customers and has received no prepaid service contract revenue or other prepaid
revenue. Purchaser will exercise reasonable best efforts to collect all
accounts receivable and notes receivable on a timely basis.
(an) Pooling of Interests. None of the Company nor any of its
--------------------
subsidiaries and no other "affiliate" of the Company has taken or failed to
take, any action which would prevent the Company or P-Com from accounting for
this transaction for financial accounting and reporting purposes as a pooling of
interests in accordance with generally accepted accounting principles and the
pronouncements of the SEC.
(ao) Purchase Entirely for Own Account. This Agreement is made with
---------------------------------
the Company and Securityholder in reliance upon Securityholder's representation
that the Purchase Shares to be received by Securityholder will be acquired for
investment for securityholder's own account, not as a nominee or agent, and not
with a view to the resale or distribution of any part thereof, and that
Securityholder has no present intention of selling, granting any participation
in, or otherwise distributing the same, except in each case for any subsequent
resale or distribution effected pursuant to an effective registration statement
under the Securities Act of 1933, as amended, or an available exemption from the
registration requirements thereof.
(ap) Disclosure of Information. Securityholder believes it has
-------------------------
received all the information it considers necessary or appropriate for deciding
whether to purchase the Purchase Shares.
19.
(aq) Investment Experience. Securityholder can bear the economic risk
---------------------
of its investment, and has such knowledge and experience in financial or
business matters that it is capable of evaluating the merits and risks of the
investment in the Purchase Shares.
(ar) Accredited Investor. Securityholder is an "accredited investor"
-------------------
within the meaning of Securities and Exchange Commission ("SEC") Rule 501 of
Regulation D, as presently in effect.
(as) Restricted Securities. Securityholder understands that the
---------------------
Purchase Shares he is receiving are characterized as "restricted securities"
under the federal securities laws inasmuch as they are being acquired in a
transaction not involving a public offering and that under such laws and
applicable regulations such securities may be resold without registration under
the Act only in certain limited circumstances. In this connection,
Securityholder is familiar with SEC Rule 144, as presently in effect, and
understands the resale limitations imposed thereby and by the Act.
(at) Legends. It is understood that the certificates evidencing the
-------
Purchase Shares may bear one or all of the following legends:
(i) "These securities have not been registered under the
Securities Act of 1933, as amended. They may not be sold, offered for sale,
pledged or hypothecated in the absence of a registration statement in effect
with respect to the securities under such Act or an opinion of counsel
satisfactory to the Company that such registration is not required or unless
sold pursuant to Rule 144 of such Act. "
(ii) Any legend required by the laws of any applicable
jurisdiction or any other state.
Section 3.2 Representations and Warranties of Purchaser. Each of P-
-------------------------------------------
Com and PFS, as applicable, hereby represents and warrants that:
(a) Organization. Each 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. Each 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.
P-Com Field Services, Inc. is a wholly-owned subsidiary of P-Com, Inc.
(b) Brokers' and Finders' Fees. Neither Purchaser is obligated to
--------------------------
pay any fees or expenses of any broker or finder in connection with the origin,
negotiation, or execution of this Agreement, the Escrow Agreement, or in
connection with any transactions contemplated hereby that the Company, or the
Securityholder would be required or obligated to make or pay.
20.
(c) SEC Filings. P-Com has filed all forms, reports and documents
-----------
required to be filed with the United States Securities and Exchange Commission
("SEC") since March 2, 1995 (collectively, the "P-Com SEC Reports"). The P-Com
SEC Reports were prepared in accordance with the requirements of the United
States Securities Act of 1933, as amended or the United States Securities
Exchange Act of 1934, as amended, as the case may be.
(d) Section 368 Reorganization. Purchaser does not know of any
--------------------------
circumstances relating to P-Com, Inc., P-Com Field Services, Inc. or their
respective affiliates that would prevent the transactions contemplated hereby
from qualifying as a reorganization within the meaning of Section 368 of the
Internal Revenue Code, provided that Purchaser makes no affirmative
representations or warranties as to any circumstances related to Company or the
Securityholder or any actions taken or agreed to be taken by any of them that
would prevent the transactions contemplated hereby from qualifying as a
reorganization within the meaning of Section 368 of the Internal Revenue Code.
(e) Limitation on Liability. Notwithstanding any provision of
-----------------------
this Section 3.2, the maximum aggregate liability of Purchaser to the
Securityholder shall be limited to the value of the Escrow Shares then held in
escrow, based upon the per share price used in calculating the final purchase
price hereunder.
(f) Termination of Liability and Representations and Warranties.
-----------------------------------------------------------
Absent fraud, the liability of Purchaser pursuant to this Agreement (and the
representations, warranties, covenants and other agreements of Purchaser set
forth in this Agreement, except otherwise set forth herein) for a breach or
inaccuracy of, or a failure to perform or comply with, any or all of Purchaser's
respective representations, warranties, covenants and agreements and all other
rights, claims, actions and causes of action at law or in equity in respect of
such representations, warranties, covenants and agreements shall terminate upon
the publication date of the auditor's report for P-COM that includes the audited
results for the Company for the fiscal year ended December 31, 1997. This
subparagraph is subject to the limitation of liability of Purchaser in paragraph
3.2 (e) above.
(g) Liability Floor. Notwithstanding anything to the contrary in
---------------
this Agreement and any documents related hereto, and subject to other
limitations for the benefit of Purchaser herein, neither the Purchaser nor any
affiliate shall be liable to Securityholder or the Company with respect to any
claim for indemnifiable damages unless the aggregate amount of all indemnifiable
damages incurred by Securityholder or the Company exceed Fifty Thousand Dollars
($50,000.00), in which case the Purchaser and such affiliate shall be liable for
the total amount of such indemnifiable damages. Any other provision of this
Agreement notwithstanding, Sections 3.2(e) and (f) ("Limitation on Liability"
and "Termination of Liability and Representations and Warranties") above will
not apply to Purchaser's obligation to pay the purchase price under Article II
above and any other provision of this Agreement, the Registration Rights
Agreement or the transaction documents relating to Purchaser's issuance and
registration of the Purchase Shares, subject to the terms of the applicable
documents.
21.
ARTICLE IV
----------
COVENANTS
---------
Section 4.1 Covenants Against Disclosure. The parties agree 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 P-Com. No party shall disseminate (except to the parties to this
Agreement) any press release or announcement concerning the transactions
contemplated by this Agreement or the Escrow Agreement or the parties hereto or
thereto without the prior written consent of the Company and P-Com, except as
required under the public reporting obligations of P-Com as may be required to
obtain consents necessary pursuant to Sections 6.1(i) and 6.2(d) hereof to
consummate the transactions contemplated herein; provided that P-Com shall issue
a press release describing the transaction contemplated herein at any time
within ten (10) days after the date hereof and the Time of Closing.
Section 4.2 Net Asset Determination.
----------- -----------------------
(a) As used in this Section 4.2, 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.
(b) As soon as reasonably practicable after the signing of this
Agreement, but in no event later than the Closing Date, the Securityholder shall
cause the Company to deliver to Purchaser an unaudited balance sheet (the
"Closing Date Balance Sheet") of the Company dated as of the Time of Closing.
The Closing Date Balance Sheet shall fairly present the Net Assets of the
Company as the Time of Closing in accordance with GAAP and on a basis consistent
with previous periods.
(c) Upon receipt of the Closing Date Balance Sheet by the Company
(the "Post-Time of Closing"), if the Net Assets as of the Time of Closing (as
determined pursuant to Section 4.2(d)) are less than One Million Eight Hundred
Thousand Dollars ($1,800,000) (the "Minimum Net Assets"), then the Company and
the Securityholder shall immediately pay Purchaser in cash the amount by which
the Net Assets as of the Time of Closing are less than the Minimum Net Assets.
In the event that the Company and the Securityholder do not make the payment in
cash within the time set forth in this Section 4.2, Purchaser shall be entitled
to deduct from the shares of Common Stock held pursuant to the Escrow Agreement
that number of shares with a fair market value equal to the closing sales price
of the Common Stock of Purchaser as reported on the Nasdaq/NMS on the execution
date of this Agreement sufficient to cover the payment owed by the Company and
the Securityholder.
(d) As of the Closing, Securityholder shall provide Purchaser
with a draft of the Closing Date Balance Sheet. Within 30 days after closing,
Securityholder will prepare and deliver to the Purchaser the Closing Date
Balance Sheet, and will promptly provide the Purchaser with the basis for all
determinations therein as requested by the
22.
Purchaser. If within 30 days after receipt of the Closing Date Balance Sheet
the Purchaser shall not have given written notice to Securityholder setting
forth any objection of the Purchaser to the Closing Date Balance Sheet, then
such Closing Date Balance Sheet will be final and binding on the parties hereto.
In the event the Purchaser gives written notice of any objection within the 30-
day period, Purchaser and Securityholder will use reasonable efforts to resolve
the dispute within the 30-day period following the receipt by Securityholder of
the written notice from the Purchaser. If the parties are unable to reach an
agreement within such 30-day period, the matter will be submitted to Price
Waterhouse, LLP, for determination, which will be final and binding upon
Purchaser and the Securityholder. Purchaser and the Securityholder will
contribute equally to all costs (including fees and expenses charged by Price
Waterhouse, LLP) in connection with the resolution of any such dispute.
Section 4.3 Non-Competition.
----------- ---------------
(a) Commencing on the Time of Closing and continuing for five (5)
years thereafter, Securityholder agrees that he shall not engage (except in his
capacity as an officer, director, and/or employee of Purchaser), directly or
indirectly, whether on his 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 the Company or
Purchaser (or its affiliates), either presently or during the term of this
Section 4.3;
(ii) Solicit customers, suppliers, or business patronage
which results in competition with the Company, Purchaser or any of its
affiliates;
(iii) Encourage or solicit any employees of the Company,
Purchaser or any of its affiliates to leave the employment of the Company,
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 the
Company, Purchaser or its affiliates; or
(v) Notwithstanding the five (5) year time limitation set
forth above, ever establish or continue any business in the future using the
name Telematics or any name capable of confusion therewith.
(b) Without limitation, the parties agree and intend that the
covenants contained in this Section 4.3 shall be deemed to be a series of
separate covenants and agreements, one for each and every county 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
23.
purpose of such proceeding to the extent necessary to permit the remaining
separate covenants to be enforced in such a proceeding.
(c) The parties agree that due to the unique nature of the services
and capabilities of Securityholder, there can be no adequate remedy at law for
any breach of their obligations hereunder, that any such breach may allow
Securityholder 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 it might have at law. Further, Purchaser shall
be entitled to indemnification by Securityholder from any loss or harm,
including, without limitation, attorney's fees, in connection with any breach,
or any enforcement, of Securityholder's obligations hereunder.
(d) Securityholder represents and warrants to Purchaser that the
covenants of Securityholder in this Section 4.3 are reasonably necessary for the
protection of Purchaser's interests under this Agreement and are not unduly
restrictive upon Securityholder.
Section 4.4 Maintenance of Business. During the period from the date
----------- -----------------------
of this Agreement and continuing until the earlier of the termination of this
Agreement or the Time of Closing, the Company shall carry on its business in the
usual, regular and ordinary course in substantially the same manner as conducted
prior to the date of this Agreement and, to the extent consistent with such
business, use its best efforts to preserve intact its present business
organizations, keep available the services of its present service providers and
preserve its relationships with customers, suppliers, distributors, licensors,
licensees, and others having business dealings with it, to the end that its
goodwill and ongoing businesses shall be not materially diminished at the Time
of Closing. The Company shall promptly notify Purchaser of any event or
occurrence not in the ordinary course of business of the Company, and any event
which could have a material and adverse effect on the business condition of the
Company. Except as expressly contemplated by this Agreement, the Company,
without the prior written consent of Purchaser shall not:
(a) Accelerate, amend or change the period of exercisability of
options, warrants, stock or purchase rights or authorize cash payments in
exchange therefor or perform any actions that would prohibit the pooling of
interests accounting treatment;
(b) Enter into any commitment or transaction not in the ordinary
course of business to be performed over a period longer than six (6) months in
duration, or, except as in accordance with its existing capital budget
previously disclosed to Purchaser, to purchase fixed assets with an aggregate
purchase price exceeding $5,000;
(c) Grant any severance or termination pay to any service
provider;
(d) Transfer to any person or entity any rights to the Company's
Intellectual Property Rights, except licenses of Intellectual Property Rights in
connection with the sale of the Company's products in the ordinary course of
business consistent with past practice;
24.
(e) 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 Company;
(f) Violate, or, except in the ordinary course of business consistent
with past practice, amend or otherwise modify the terms of any contract;
(g) Except with prior consultation with Purchaser, commence a
lawsuit other than for the routine collection of bills;
(h) Declare or pay any dividends on or make any other distributions
(whether in cash, stock or property) in respect of any 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 Company Common Stock, or repurchase or otherwise
acquire, directly or indirectly, any shares of 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;
(i) Issue, deliver or sell or authorize or propose the issuance,
delivery or sale of or authorization of, the purchase of any shares of Company
capital stock or securities convertible into, or subscriptions, rights, warrants
or options to acquire, or other agreements or commitments of any character
obligating it to issue any such shares or other convertible securities, other
than the issuance of shares of Company Common Stock upon the exercise of
previously outstanding options and warrants to purchase Company's capital stock;
(j) Cause or permit any amendments to Company's Articles of
Incorporation or Bylaws;
(k) Acquire or agree to acquire by merging or consolidating with, or
by purchasing a substantial portion of the assets of, or by any other manner,
any business or any corporation, partnership, association or other business
organization or division thereof, or otherwise acquire or agree to acquire any
assets which are material, individually or in the aggregate, to the business
condition of the Company;
(l) Sell, lease, license or otherwise dispose of any of its properties
or assets except in the ordinary course of business;
(m) Incur any indebtedness for borrowed money or guarantee any such
indebtedness or issue or sell any debt securities or guarantee any debt
securities of others, except in the ordinary course of business consistent with
past practice, e.g., credit cards, phone cards, and trade accounts.
(n) Adopt or amend any employee benefit plans, or enter into any
employment contract for more than $10,000 per year, pay any bonus or
remuneration to any service provider, or increase the salaries or wage rates of
its employees other than pursuant to
25.
scheduled employee reviews under the Company's normal employee review cycle or
in connection with the hiring of employees other than officers in the ordinary
course of business, in all cases consistent with past practice, or otherwise
increase or modify the compensation or benefits payable or to become payable by
the Company to any of its service providers;
(o) Revalue any of its assets, including, without limitation, writing
down the value of inventory or accounts receivable;
(p) Liquidate or discount any account receivable or subject any
account receivable to a claim or setoff;
(q) Pay, discharge or satisfy in an amount in excess of $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;
(r) Make any material Tax election other than in the ordinary course
of business and consistent with past practice, change any material tax election,
adopt any material Tax accounting method other than in the ordinary course of
business and consistent with past practice, change any material Tax accounting
method, file any material Tax return (other than any estimated tax returns,
payroll tax returns or sales tax returns) or any amendment to a material Tax
return other than in the ordinary course of business, enter into any closing
agreement, settle any Tax claim or assessment or consent to any Tax claim or
assessment;
(s) Engage in any activities or transactions that are outside the
ordinary course of its business consistent with past practice;
(t) 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;
(u) Waive or commit to waive any rights of substantial value;
(v) Cancel, amend or, other than in the ordinary course upon
expiration of a policy term, renew any material insurance policy;
(w) 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
(x) Take, or agree (in writing or otherwise) to take, any of the
actions described in this Section 4.4 or any action which would make any of the
representations or warranties or covenants of the Company contained in this
Agreement materially untrue or incorrect.
26.
Section 4.5 Access to Information. The Company will give Purchaser
----------- ---------------------
and their respective accountants, legal counsel and other representatives full
access, during normal business hours, to all of the properties, books,
contracts, commitments, and records relating to the Company's business and the
Company will furnish to Purchaser, their respective accountants, legal counsel,
and other representatives during such period all such information concerning its
business or assets as Purchaser may reasonably request; provided, that any
furnishing of such information pursuant hereto or any investigation by Purchaser
shall not affect Purchaser's right to rely on the representations, warranties,
agreements and covenants made by the Company and the Securityholder in this
Agreement. The Company and the Securityholder shall cooperate (without expense
to the Company or Securityholder) with the Purchaser in auditing the financial
statements of the Company, including, but not limited to, executing any and all
written representations reasonably required by Purchaser's accountants.
Section 4.6 Registration Rights. P-Com hereby agrees to grant to the
----------- -------------------
holder of P-Com Common Stock issued pursuant to this Agreement registration
rights as set forth in the Registration Rights Agreement attached hereto as
Exhibit 4.6 (the "Registration Rights Agreement").
Section 4.7 Pooling of Interests Transaction. P-Com and the Company
----------- --------------------------------
shall use their reasonable best efforts to cause Price Waterhouse LLP, on behalf
of both the Company and P-Com, to deliver to P-Com upon the execution of this
Agreement, an opinion, as to the firm's concurrence with the respective
companies' management regarding the appropriateness of pooling of interests
accounting for the merger under the Accounting Principles Board opinion No. 16
were the transaction to close as of the date hereof and as of the Closing.
Section 4.8 Necessary Consents. Prior to the Closing, the Company
----------- ------------------
and the Securityholder 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.
Section 4.9 Best Efforts. The Company will perform and fulfill all
----------- ------------
obligations to be performed and fulfilled under this Agreement, and 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 Securityholder and
the Company will 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. The parties do not intend
for this paragraph to require out-of-pocket expenditures by Securityholder or
the Company, except as to obligations specifically identified herein.
Section 4.10 Exclusivity; Acquisition Proposals.
------------ ----------------------------------
(a) The Securityholder and the Company shall not knowingly, directly
or indirectly, through any officer, director, agent or representative of the
Company
27.
(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 (for purposes of this Section
4.10, 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.
(b) In the event that, prior to termination of this Agreement or
November 30, 1997, whichever is earlier, 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 Securityholder 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 Securityholder 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.
Section 4.11 Breach of Representations, Warranties, Agreements and
------------ -----------------------------------------------------
Covenants.
---------
(a) The Securityholder and the Company 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 the Securityholder's or the Company's
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 Securityholder and the Company shall
28.
give detailed notice thereof to Purchaser and shall use their reasonable best
efforts to prevent or promptly remedy such breach or inaccuracy.
Section 4.12 Legal Conditions to the Sale or Surrender of the
------------ ------------------------------------------------
Telematics, Inc. Securities. The Securityholder and the Company shall take all
---------------------------
reasonable actions necessary to comply promptly with all legal requirements
which may be imposed on the Company or the Securityholder 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 Securityholder and the Company shall 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
Securityholder (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 Securityholder and the Company 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
hereby as the Securityholder and the Company deem it advisable in good faith,
and to effect all necessary registrations and filings and submissions of
information as the Securityholder and the Company deem advisable in good faith
required by any Governmental Entity, and to fulfill all conditions to this
Agreement.
Section 4.13 Public Announcements. The Securityholder and the
------------ --------------------
Company agree to maintain the confidentiality of the terms and conditions of
this Agreement. The Securityholder and the Company 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.
Section 4.14 Shareholder's Meeting. The Securityholder shall cause
------------ ---------------------
all directors and current officers of the Company to resign as of the Closing.
Section 4.15 No Transfer. Securityholder agrees not to sell, offer
------------ -----------
for sale, assign, transfer or otherwise encumber any of the Securities to any
third party other than Purchaser. 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.
Section 4.16 Unitech Matters. Prior to the Closing, Securityholder
------------ ---------------
shall resign all offices he holds in Unitech and shall transfer all shares of
capital stock he holds in Unitech to the separate account of a third party.
Section 4.17 Section 368 Reorganization. The parties will act after
------------ --------------------------
Closing in a manner which is not inconsistent with this transaction's qualifying
as a reorganization under Section 368 of the Internal Revenue Code. The parties
agree to use their respective best
29.
efforts to contest, or to assist any other party hereto who is contesting, the
assertion of any governmental authority that this transaction failed to qualify
as a reorganization under Section 368 of the Internal Revenue Code.
Securityholder and the Company have each received its own advice, including tax
advice, with respect to all matters set forth in this Agreement.
ARTICLE V
CLOSING
-------
Section 5.1 Time of Closing. The transactions contemplated by this
----------- ---------------
Agreement shall be completed (the "Closing") on the first business day on which
the last of the conditions contained in Article V hereof is fulfilled or waived
(the "Time of Closing"), with the expectation that the Closing shall occur on or
about November 28, 1997 unless otherwise agreed to in writing by the Company and
Purchaser. The Closing shall take place at P-Com Field Services, Inc., 0000
Xxxxx Xxxxxxxxx, Xxxxxx, Xxxxxxxx or at such other place or date as may be
agreed to in writing by Purchaser and the Company. The "Closing" shall mean the
deliveries to be made by the parties hereto at the Time of Closing in accordance
with this Agreement.
Section 5.2 Deliveries by Company and Securityholder. At the
----------- ----------------------------------------
Closing, the Securityholder and the Company, as applicable, shall deliver to PFS
and P-Com, as applicable, all duly and properly executed, the following:
(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;
(b) Escrow Agreement. The Escrow Agreement in the form attached
----------------
hereto as Exhibit 2.2 duly executed by the Company and Securityholder;
(c) Corporate Minute Books. The corporate minute books of the
----------------------
Company and its subsidiaries duly updated as of the Closing;
(d) Certificate of Good Standing. Certificate of Good Standing,
----------------------------
dated as of a recent date, with respect to the Company and its subsidiaries
issued by the appropriate government agency;
(e) Closing Documents. All other Closing Documents and
-----------------
performance of the transactions contemplated hereby;
(f) Books and Records. All of the stock ledgers and similar
-----------------
corporate records of the Company and such subsidiaries;
(g) Consents. Evidence that all consents, approvals, or
--------
authorizations of or notifications to any third parties (including governmental
agencies), if
30.
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 Securityholder;
(h) Opinion of Counsel. An Opinion from counsel for the Company
------------------
and the Securityholder, dated the Closing Date, in the form attached as Exhibit
5.2(g) (the "Securityholder's Opinion");
(i) Securityholder Certificate. A certificate from the President
--------------------------
of the Company and the Securityholder, dated the Closing Date, containing the
information required pursuant to Section 6.1(g);
(j) FIRPTA. A Foreign Investment and Real Property Tax Act of
------
1980 Notification Letter executed by the Securityholder;
(k) Proprietary Information and Inventions Agreement. Executed
------------------------------------------------
Proprietary Information and Inventions Agreement from each employee and
consultant in a the form attached hereto as Exhibit 6.1(j);
(l) Securityholder Agreement and Pooling Opinion. The
--------------------------------------------
Securityholder Agreement and Pooling Opinion; and
(m) Promissory Note. The promissory note from Securityholder in
---------------
the form attached hereto as Exhibit 5.2(m) (the "Promissory Note").
(n) Waiver Letter. The letter waiving certain of the
-------------
Securityholder's rights in the form attached hereto as Exhibit 5.2(n) (the
"Waiver Letter").
(o) Stoppleman Opinion. An opinion from the Stoppleman Firm (the
------------------
"Stoppleman Opinion") to the effect that the shares of the Company held by
Securityholder will be transferred from Securityholder to Purchaser in
compliance with applicable federal and state securities laws; provided, however,
that such opinion shall be in a form typical in transactions of this type.
(p) Demand Note. A demand note from Unitec Digital Systems in the
-----------
amount of $8,954.80 plus interest dated as of the Time of Closing.
(q) Other Documents. Such other documents and instruments as
---------------
Purchaser or its counsel shall deem necessary to consummate the transactions
contemplated hereby; provided, however, that such documents as are not
specifically identified herein will not result in expenses to Securityholder or
the Company, or materially increase their respective obligations or liabilities
under this Agreement.
All documents delivered to Purchaser under this Agreement shall be in
form and substance satisfactory to Purchaser.
31.
Section 5.3 Deliveries by Purchaser. At the Closing, P-Com or PFS,
----------- -----------------------
as applicable, shall deliver, or cause to be delivered, to the Company and/or
the Securityholder, as applicable, all duly and properly executed, the
following:
(a) Payment. The payment set forth in Section 2.2.
-------
(b) Resolutions. A copy of the resolutions of the Board of
-----------
Directors of each 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 each 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) Purchase Certificate. A Certificate from the Chief Financial
--------------------
Officer of P-Com and the President of PFS, dated the Closing Date, containing
the information required pursuant to Section 6.2(j).
(e) Other Documents. Such other documents and instruments as the
---------------
Securityholder or his counsel reasonably shall deem necessary to consummate the
transactions contemplated hereby provided, however, that such documents as are
not specifically identified herein will not result in expenses to Purchaser, or
materially increase its obligations or liabilities under this Agreement.
All documents delivered to the Securityholder shall be in form and
substance satisfactory to the Securityholder.
Section 5.4 Further Assurances. At or after the Time of Closing,
----------- ------------------
each party shall prepare, execute, and deliver, at the preparer's expense, such
further instruments of conveyance, sale, assignment, or transfer, and shall take
or cause to be taken such other or further action, as any party shall reasonably
request of any other party at any time or from time to time in order to perfect,
confirm, or evidence in Purchaser title to all or any part of the assets of the
Company or to consummate, in any other manner, the terms and provisions of this
Agreement; provided, however, that such documents as are not specifically
identified herein will not result in expenses to Securityholder or the Company,
or materially increase their respective obligations or liabilities under this
Agreement.
Section 5.5 Termination. Either party may terminate this Agreement
----------- -----------
if Closing is not fully accomplished by or on November 30, 1997. Time is of the
--------------
essence with respect to this paragraph.
-------
Section 5.6 Cure Period. If Purchaser should determine prior to
----------- -----------
Closing that there has been a breach of, inaccuracy in, or nonfulfillment of any
representation, warranty,
32.
covenant, or agreement of Securityholder or the Company herein or in any other
transaction document, then Purchaser will use best efforts to promptly hand
deliver written notice to the Securityholder and the Company stating the facts
of such matter with reasonable specificity, so Securityholder and the Company
will have an opportunity to effect a cure. No matter will be deemed a default
under this Agreement or any other transaction document if cured by the
Securityholder or the Company prior to Closing; provided, however, that this
paragraph will not in any case be deemed to give any party the right to extend
the date of Closing and provided further that nothing contained in this Section
5.6 shall limit Purchaser's ability to rely on the representations, warranties,
covenants and agreements of Securityholder and the Company contained in the
Agreement.
Section 5.7 Proprietary Information and Inventions Agreement. The
----------- ------------------------------------------------
Company and Securityholder shall use reasonable best efforts to (i) have the
engineers and other staff to be employed at the PFS offices sign a copy of the
Company's Form B Proprietary Information and Inventions Agreement (in the form
attached) and (ii) have all other employees and consultants of the Company sign
a copy of the Company's Form A Proprietary Information and Inventions Agreement
(in the form attached), in each case within 15 days of the Closing.
ARTICLE VI
----------
CONDITIONS PRECEDENT TO OBLIGATIONS
-----------------------------------
Section 6.1 Conditions to Obligations of Purchaser. Each and every
----------- --------------------------------------
obligation of P-Com and/or PFS, as applicable, to be performed at the Closing
shall be subject to the satisfaction as of or before the Time of Closing of the
following conditions (unless waived in writing by P-Com and/or PFS, as
applicable):
(a) Certificates for Securities. PFS shall have received all written
---------------------------
certificates and other documents evidencing the Securities.
(b) Representations and Warranties. The representations and
------------------------------
warranties of the Company and the Securityholder set forth in Section 3.1 of
this Agreement shall have been true and correct when made and shall be true and
correct at and as of the Time of Closing as if such representations and
warranties were made as of such date and time.
(c) Performance of Agreement. All covenants, conditions, and other
------------------------
obligations under this Agreement which are to be performed or complied with by
the Securityholder and the Company, as the case may be, including Board of
Directors and shareholder approval, shall have been fully performed and complied
with at or prior to the Time of Closing, including the delivery of the
instruments and documents in accordance with Section 5.2 hereof.
(d) No Material Adverse Effect. During the period from September 30,
--------------------------
1997 to the Closing, there shall not have been any material and adverse effect
on the business condition or prospects of the Company.
33.
(e) Absence of Governmental or Other Objection. There shall be no
------------------------------------------
pending or threatened lawsuit challenging the transaction by any body or agency
of the United States or foreign, or local government or by any third party, and
the consummation of the transaction shall not have been enjoined by a court of
competent jurisdiction as of the Time of Closing and any applicable waiting
period under any applicable law shall have expired.
(f) 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 Company.
(g) Certificate of President and Securityholder. The Company shall
-------------------------------------------
have delivered to Purchaser a certificate executed by its President and the
Securityholder, dated the date of the Closing, to the effect that the conditions
set forth in subsections (a), (b), (c) and (d) of this Section 6.1, have been
satisfied.
(h) Execution of Escrow Agreement. Purchaser shall have received
-----------------------------
fully executed copies of the Escrow Agreement.
(i) Third Party Consents. The Company and Securityholder shall have
--------------------
obtained all third party consents and approvals and assignments to all Contracts
and all other instruments required to consummate the transactions contemplated
by this Agreement or as reasonably requested by counsel to Purchaser.
(j) Opinions of Counsel for the Company and the Securityholder.
----------------------------------------------------------
Purchaser shall have received the Securityholder's Opinion.
(k) 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.
(l) 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.
(m) 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.
34.
(n) Tax Forms. The Securityholder shall have provided to Purchaser an
---------
executed Form W-8 or Form W-9 properly reporting the transactions set forth in
this Agreement.
(o) Board Approval. This Agreement shall have been duly approved by
--------------
the Board of Directors of each Purchaser.
(p) Other Matters.
-------------
(i) Between September 30, 1997 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;
(ii) No strike shall be on-going on the Closing Date;
(iii) From September 30, 1997 to the Closing Date:
a. 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;
b. 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, 1997 and no such person or firm shall have
received, directly or indirectly, 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;
c. there shall have been no material increase in
the compensation currently payable or to become payable (over that applicable as
of September 30, 1997) to the Company's directors, managers, key employees or
agents, except as required by law;
d. 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.
(q) Securityholder Agreements. P-Com shall have received from
-------------------------
Securityholder a Securityholder Agreement substantially in the form attached
hereto as Exhibit 6.1(q).
(r) Pooling of Interests Transaction. P-Com shall have received
--------------------------------
opinions from Price Waterhouse, LLP and the Company's accountants as to the
respective firms' concurrence with the respective companies' management
regarding the appropriateness of
35.
pooling of interests accounting for the merger under the Accounting Principles
Board opinion No. 16.
(s) Employment Agreement. P-Com shall have the received employment
--------------------
agreements in the form attached as Exhibit 6.1(s), executed by Securityholder
and Xxxx Xxxxx.
(t) Unitech Matters. Securityholder shall have resigned from all
---------------
offices he holds with Unitech and shall have transferred all shares of capital
stock he holds in Unitech to the separate account of a third party.
(u) Promissory Note. Purchaser shall have received the Promissory
---------------
Note executed by Securityholder.
(v) Waiver Letter. Purchaser shall have received the Waiver Letter
-------------
executed by Securityholder.
(w) Stoppleman Opinion. Purchaser shall have received an executed
------------------
version of the Stoppleman Opinion.
(x) Demand Note. Purchaser shall have received an executed version
-----------
of the demand note referenced in Section 5.2(p).
Section 6.2 Conditions to Obligations of the Company and the
----------- ------------------------------------------------
Securityholder. Each and every obligation of the Company to be performed at the
--------------
Time of Closing shall be subject to the satisfaction as of or before such time
of the following conditions (unless waived in writing by the Company):
(a) Performance of Agreement. All covenants, conditions, and other
------------------------
obligations under this Agreement which are to be performed or complied with by
Purchaser shall have been fully performed and complied with at or prior to the
Time of Closing.
(b) Execution of Escrow Agreement. Purchaser shall have received
-----------------------------
fully executed copies of the Escrow Agreement.
(c) Absence of Governmental or Other Objection. There shall be no
------------------------------------------
pending or threatened lawsuit challenging the transaction by any body or agency
of the United Kingdom, U.S federal, state, or local government or by any third
party, and the consummation of the transaction shall not have been enjoined by a
court of competent jurisdiction as of the Time of Closing.
(d) Third Party Consents. The Company and Securityholder shall have
--------------------
obtained all third party consents and approvals and assignments to all Contracts
and all other instruments required to consummate the transactions contemplated
by this Agreement and the Escrow Agreement or as reasonably requested by counsel
to Purchaser.
36.
(e) Registration Rights Agreement. Securityholder shall have received
-----------------------------
a copy of the Registration Rights Agreement executed by P-COM.
(f) Employment Arrangements. P-COM shall have delivered executed
-----------------------
employment agreements in the form attached hereto as Exhibit 6.1(t) to
Securityholder and Xxxx Xxxxx prior to or on the Closing Date.
(g) Purchaser's Opinion. The Company and Securityholder shall have
-------------------
received an opinion of Purchaser's counsel dated as of Closing, in form and
substance reasonably acceptable to the Company and the Securityholder, with
reasonable limitations acceptable to Purchaser's counsel, to the effect that:
(i) P-Com, Inc. and P-Com Field Services, Inc. are
corporations duly organized and existing and in good standing under the laws of
the State of Delaware and are authorized to carry on the business now conducted
by them and own or lease the properties now operated or leased by them;
(ii) Purchasers have obtained all necessary authorizations
and consents of their respective Boards of Directors to effect the transactions
contemplated herein.
(iii) Such counsel does not have actual knowledge that there
is any litigation, proceeding or investigation pending or threatened which might
result in any material adverse change in the properties, business or in the
condition of P-Com, Inc. or which questions the validity of this Agreement;
(iv) This Agreement is a valid and binding obligation of
Purchasers, jointly and severally, and enforceable against Purchasers in
accordance with its terms, except as enforcement may be limited by bankruptcy,
insolvency, reorganization, moratorium or other laws affecting the enforcement
of creditors' rights generally; and
(v) Upon consummation of this transaction and the issuance
and delivery of certificates representing P-Com, Inc. shares to the
Securityholder, the P-Com, Inc. shares will be validly issued, fully paid and
non-assessable shares of P-Com, Inc. common stock.
(h) Consents. All consents and authorizations required of Purchaser,
--------
including without limitation an appropriate Board resolution authorizing the
transaction, shall have been received by the Company and Securityholder.
(i) Representations and Warranties. The representations and
------------------------------
warranties of Purchaser set forth in Section 3.2 of this Agreement shall have
been true and correct when made and shall be true and correct at and as of the
Time of Closing as if such representations and warranties were made as of such
date and time.
(j) Purchaser Certificate. Purchaser shall have delivered to the
---------------------
Company and Securityholder a certificate executed by the Chief Financial Officer
of P-Com and the
37.
President of PFS, dated the date of the Closing, to the effect that the
conditions set forth in subsections (a) and (i) of this Section 6.2, have been
satisfied.
ARTICLE VII
-----------
INDEMNIFICATION
---------------
Section 7.1 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 the Company (which includes its subsidiaries) and
Securityholder shall survive the execution, delivery, and performance of this
Agreement, except as set forth herein. All representations and warranties of
the Company (which includes its subsidiaries) and Securityholder set forth in
this Agreement shall be deemed to have been made again by the Company and
Securityholder at and as of the Closing. No investigation made by or on behalf
of Purchaser or any of its respective affiliates with respect to the Company
(including its Subsidiaries) and the Securityholder shall be deemed to affect
the Purchaser's reliance on the representations, warranties, covenants and
agreements of the Company and the Securityholder and shall not be a waiver of
the Purchaser's or any of its respective affiliates' rights to indemnification
as herein provided.
(b) As used in this Article VII, except as otherwise indicated in
this Article VII, any reference to a representation, warranty, agreement, or
covenant contained in any section of this Agreement shall include the schedule
relating to such section.
(c) The Purchaser may take action for any breach or
nonfulfillment of any warranties, covenants, undertakings, agreements and
representations on behalf of any other party or parties before or after Closing
notwithstanding that such breach or nonfulfillment was known to or discoverable
by the Purchaser before completion and notwithstanding that the Purchaser should
delay or otherwise fail to exercise its rights hereunder or generally in such
response.
(d) Nothing in this Agreement shall be construed as limiting in
any way the remedies that may be available to a party in the event of fraud
relating to any of the representations, warranties, agreements or covenants made
by any other party in this Agreement.
(e) Notwithstanding the expiration date of the representations,
warranties, covenants and agreements of the Company and the Securityholder set
forth herein, if the Purchaser or any of its respective affiliates shall notify
the Securityholder, the Escrow Agent or the Escrow Committee pursuant to the
Escrow Agreement with respect to the submission of a claim during the time
period of survivability of the representations,
38.
warranties, covenants and agreements of the Company and the Securityholder,
Securityholder's liability or obligation for Damages shall continue in full
force and effect until settled to the other party's satisfaction with respect to
those claims timely made. With respect to any claim for indemnifiable damages
hereunder, Purchaser shall give written notice to the Securityholder which
notice shall set forth (i) an estimate of the amount of indemnifiable damages
which Purchaser claims to have sustained; and (ii) the basis of such claim with
reasonable specificity.
Section 7.2 Indemnification; Escrow Deposit of Purchase Shares.
----------- --------------------------------------------------
(a) Except to the extent otherwise set forth herein, the Company
and the Securityholder (regardless of the party making the representation,
warranty, covenant or agreement) shall, to the extent of the Escrow Shares,
indemnify, reimburse, defend and hold harmless each Purchaser and each of its
respective affiliates (other than the Securityholder) 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 each Purchaser and any
of its respective affiliates (other than the Securityholder), as a result of or
arising from or in connection with (1) any inaccuracy in or breach or
nonfulfillment of any of the representations, warranties, covenants, or
agreements made by any of the Securityholder or the Company in this Agreement or
the Escrow Agreement or any facts or circumstances constituting such an
inaccuracy, breach, or nonfulfillment (all of which, including those set forth
in clause (2) below, shall be referred to as "Identifiable Claims"), or (2) any
of the following (but giving effect to any of the disclosures or qualifications
set forth in this Agreement, any accompanying schedule, exhibit, certificate or
the Disclosure Letter):
(i) Any handling, discharge, disposal, release, or
storage of any hazardous or toxic substances, wastes or materials by the
Company, Securityholder, any predecessor of the Company or Securityholder or any
other third party with respect to any of the properties owned, occupied or
leased by the Company or Securityholder occurring prior to the Closing, whether
or not disclosed in this Agreement, any accompanying schedule, exhibit,
certificate or the Disclosure Letter;
(ii) Any litigation or claim arising from actions or
inactions of the Company prior to the Time of Closing;
(iii) Any Damages incurred by the Company, or arising
out of or related to the activities of the Company or services or assets
provided by or products delivered to or by the Company, prior to the Closing;
and
39.
(iv) Taxes imposed on Purchaser or its affiliates for
periods ending on or prior to the Closing and for portions through the Closing
of periods beginning prior to the Closing and ending after the Closing
(including, without limitation, any deferred Tax liability, any Tax liability
arising from the transactions contemplated in this Agreement and the Escrow
Agreement, or any other transaction entered into or consummated prior to the
Closing), including, without limitation, any liability arising out of or related
to any returns filed prior to the Time of Closing, whether or not disclosed in
this Agreement, any accompanying schedule, exhibit, certificate, or the
Disclosure Letter.
(v) Any Damages incurred by the Company or Purchaser
for (x) injuries suffered or caused by the Company's workers in jurisdictions
outside of Virginia that are not covered by the Company's workers' compensation
insurance or (y) any adverse claims made by Securityholder's spouse, in each
case whether or not disclosed in this Agreement, any accompanying schedule,
exhibit, certificate or the Disclosure Letter.
(b) Absent fraud or a breach of the Securityholder's obligations
under Section 4.3 hereof (for which the liability of Securityholder hereunder
shall not be limited), and except for the Securityholder's obligations with
respect to the representations, warranties, covenants and agreements contained
in Section 4.2 of this Agreement, for which the Securityholder shall be liable
to Purchaser in an amount not to exceed $1,250,000 (in cash or shares of P-Com
Common Stock) Purchaser shall use the Escrow Shares as its sole and exclusive
recourse for the Company's and the Securityholder's obligations pursuant to this
Agreement, the Securityholder Certificate and the Escrow Agreement.
(c) The parties agree that the indemnification provided for in
this Article VII of this Agreement shall be subject to and effected in
accordance with the provisions set forth in the Escrow Agreement, subject,
however, to the terms of this Agreement.
Section 7.3 Termination of Indemnity and Representations and
----------- ------------------------------------------------
Warranties. Absent fraud or a breach of the Securityholder's obligations under
----------
Section 4.3 hereof (for which the liability of Securityholder hereunder shall
not be limited), the indemnity obligations of the Securityholder pursuant to
this Article VII (and the representations, warranties, covenants and other
agreements of the Company and the Securityholder set forth in this Agreement,
except otherwise set forth herein) and the liability of the Company or the
Securityholder under this Agreement and the Securityholder Certificate for a
breach or inaccuracy of, or a failure to perform or comply with, any or all of
the Company's and the Securityholder's respective representations, warranties,
covenants and agreements and all other rights, claims, actions and causes of
action at law in respect of such representations, warranties, covenants and
agreements shall terminate upon the publication date of the auditor's report for
P-Com in P-Com's Annual Report on Form 10-K that includes the audited results
for the Company for the fiscal year ended December 31, 1997; provided, however
that the indemnity obligations of the Securityholder with respect to
representations and warranties contained in Section 4.2 and such representations
and warranties shall terminate upon the date one (1) year from and after the
Time of Closing. For purposes of the indemnifications set forth herein, the fair
market value
40.
of one share of P-Com, Inc. Common Stock shall equal the per share price used in
calculating the Purchase Price.
Section 7.4 Liability Floor. Notwithstanding anything to the
----------- ---------------
contrary in this Agreement and any documents related hereto, and subject to
other limitations for the benefit of Securityholder and the Company herein, the
Securityholder shall not be liable to Purchaser with respect to any claim for
indemnifiable damages unless the aggregate amount of all indemnifiable damages
under the terms of Art. VII incurred by Purchaser exceed Fifty Thousand Dollars
($50,000.00), in which case the Securityholder shall be liable for the total
amount of such indemnifiable damages.
Section 7.5 Limitations. Provided that (i) where the total of all
----------- -----------
claims made by Purchaser and its affiliates pursuant to this Agreement is less
than $500,000 and the Securityholder has previously irrevocably and
unconditionally satisfied in full such claims or (ii) where the total of all
such claims is more than $500,000 and the Securityholder has previously
irrevocably and unconditionally satisfied to the fullest extent possible such
claims by the Securityholder Escrow Shares, Purchaser shall (subject to the
remainder of this Section 7.5) reimburse to the Securityholder all amounts (not
exceeding the aggregate sum paid by the Securityholder) paid by the
Securityholder in respect of any claim which is subsequently recovered by
Purchaser (as the case may be) from any insurance company or other third party
directly referable to the subject matter of such claim. Such reimbursement
shall be paid by Purchaser (as the case may be) after the receipt of such amount
from the relevant insurance company or third party. Purchaser shall deduct from
any amounts received (x) its costs and expenses incurred in recovering such sum
from the third party or insurance company (including any taxation payable by
reason of the receipt thereof) and (y) (where the foregoing (ii) above applies)
the amount of any unsatisfied claims.
ARTICLE VIII
------------
MISCELLANEOUS PROVISIONS
------------------------
Section 8.1 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
8.1:
If to the Company or
Securityholder: Xxxxxx X. Xxxxxx
Xxxx Xxxxxx Xxx 0000
Xxxxxxx, XX 00000
Telecopy No.: (000) 000-0000
41.
with a copy to: The Jefferson Law Firm, PLC
0000 Xxxxxxx Xxxx, Xxxxx 000
Xxxxxx, Xxxxxxxx 00000
Attention: W. Xxxxxx Xxxxxxx, III
Telecopy No.: (000) 000-0000; and
The Jefferson Law Firm, PLC
0000 Xxx Xxxxxx
Xxxxx 000
XxXxxx, XX 00000
Attention: W. Xxxxxx Xxxxxxx, III
Telecopy No.: (000) 000-0000
If to Purchaser: P-Com, Inc.
0000 X. Xxxxxxxxxx Xxxxxxxxx
Xxxxxxxx, Xxxxxxxxxx 00000
Attn: Xxxxxxx Sophie
Telecopy No.: (000) 000-0000
with a copy to: Xxxxxxx, Xxxxxxx & Xxxxxxxx LLP
Two Embarcadero Place
0000 Xxxx Xxxx
Xxxx Xxxx, XX 00000
Attn: Xxxxxx X. Xxxxxxx, Esq.
Telecopy No.: (000) 000-0000
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.
Section 8.2 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 supersede all prior and contemporaneous agreements and
understandings, oral or written, relative to said subject matter.
Section 8.3 Binding Effect; Assignment. This Agreement and the
----------- --------------------------
various rights and obligations arising hereunder shall inure to the benefit of
and be binding upon the
42.
Company, its successors and permitted assigns, and Purchaser and their
successors and permitted 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.
Section 8.4 Expenses of Transaction; Taxes. Purchaser shall bear its
----------- ------------------------------
own costs and expenses in connection with this Agreement and the transactions
contemplated hereby for its own account and the Securityholder shall bear his
and the Company's own costs and expenses in connection with this Agreement and
the transactions contemplated hereby.
Section 8.5 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.
Section 8.6 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.
Section 8.7 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.
Section 8.8 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.
Section 8.9 Governing Law. This Agreement shall in all respects be
----------- -------------
construed in accordance with and governed by the laws of the State of Virginia
without regard to the conflicts or choice of law provisions thereof.
Section 8.10 Arbitration; Attorneys' Fees.
------------ ----------------------------
43.
(a) Any controversy between the parties hereto involving the
construction or application of any terms, covenants or conditions of this
Agreement or the Escrow Agreement, or any claims arising out of or relating to
this Agreement or the Escrow Agreement or the breach thereof will be settled by
arbitration in Fairfax, Virginia, in accordance with the then current Commercial
Arbitration Rules of the American Arbitration Association (the "AAA"), and
judgment upon the award rendered by the arbitrators may be entered in any court
having jurisdiction thereof. Such arbitration shall be conducted by three (3)
arbitrators chosen by mutual agreement of the parties hereto, or failing such
agreement, an arbitrator appointed by the AAA. There shall be limited discovery
prior to the arbitration hearing as follows: (a) exchange of witness lists and
copies of documentary evidence and documents related to or arising out of the
issues to be arbitrated, (b) depositions of all party witnesses, and (c) such
other depositions as may be allowed by the arbitrators upon a showing of good
cause. Depositions shall be conducted in accordance with the Virginia Code of
Civil Procedure, the arbitrator(s) shall be required to provide in writing to
the parties the basis for the award or order of such arbitrator(s), and a court
reporter shall record all hearings, with such record constituting the official
transcript of such proceedings.
(b) In the event of arbitration filed or instituted between the
parties with respect to this Agreement or the Escrow Agreement, 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 that 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 arbitrator(s) to have prevailed on the major disputed
issues. Attorneys' fees of the prevailing party for purposes hereof will be
limited to the attorneys' fees of the non-prevailing party with respect to such
arbitration.
Section 8.11 Securityholder Guarantees. After Closing, Purchaser
------------ -------------------------
will within 90 days, pay all obligations and liabilities of the Company with
respect to which Securityholder has a personal guaranty or is jointly and
severally liable, and will immediately notify all such creditors of the
termination of his guaranty or joint and several obligations as of Closing.
Purchaser will indemnify and hold Securityholder harmless with respect to all
such obligations and liabilities. This paragraph will not apply to the Ford Van
purchased from Xxxxx Xxxxxxxx Ford.
Section 8.12 Lease Expiration. Purchaser does not object to
------------ ----------------
termination of the Company's office lease at the end of December, 1997.
Section 8.13 Future Prospects. As used in this Agreement, the words
------------ ----------------
"which reasonably could be expected to result", "which reasonably could be
expected to have such an effect", "which may reasonably be expected to so
affect", "reasonably could be expected to materially adversely affect", "might
result", "could result", "would or could have a material adverse effect", "would
or could impose", "prospects", "lead it or him to believe", "lead them to
believe", or words of similar effect, or words which impose any obligation or
liability upon Securityholder or the Company under this Agreement or any other
transaction document with respect to the future profitability, plans, or
prospects of the Telematics, Inc. business, will be deemed to impose such
obligation or liability only if the matter referred to, based on the
44.
actual knowledge of the Securityholder at the time, is substantially more likely
to occur than not to occur based on such actual knowledge.
Section 8.14 No Reliance. The Company and the Securityholder
------------ -----------
understand and agree that they are relying solely on their own investigations of
P-Com and PFS to enter into this Agreement and are not relying on any oral or
written representation or warranty (including, without limitation, any forecasts
or projections) other than those representations and warranties of P-Com and PFS
specifically set forth in writing herein. Moreover, the Company and the
Securityholder understand and agree that the market price of P-Com's Common
Stock has fluctuated significantly in the past and will fluctuate significantly
in the future and such fluctuations are often unrelated to the operating
performance of P-Com. The Company and the Securityholder have read and
understand (or have had the opportunity to read) the risk factors set forth in
P-Com's report on Form 10Q for the quarter ended September 30, 1997 and the
registration statement on Form S-3 declared effective on July 31, 1997 provided
or made available to the Company and the Securityholder. The Company and the
Securityholder agree that any analyst reports about P-Com provided to them, if
applicable, have not been written, adopted or endorsed by P-Com or its
management and represent independent views of independent parties.
45.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed as of the day and year first above written.
P-COM, INC.,
a Delaware corporation
By: /s/ Xxxxxxx Sophie
--------------------------------------------
Xxxxxxx Sophie
Vice President, Finance and Administration
and Chief Financial Officer
P-COM FIELD SERVICES, INC.,
a Delaware corporation
By:
--------------------------------------------
TELEMATICS, INC.
a Virginia corporation
By:
--------------------------------------------
Xxxxxx X. Xxxxxx
SECURITYHOLDER:
-----------------------------------------------
Xxxxxx X. Xxxxxx
46.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed as of the day and year first above written.
P-COM, INC.,
a Delaware corporation
By:
--------------------------------------------
Xxxxxxx Sophie
Vice President, Finance and Administration
and Chief Financial Officer
P-COM FIELD SERVICES, INC.,
a Delaware corporation
By: /s/ Xxxxxx X. Xxxxxx
--------------------------------------------
Xxxxxx X. Xxxxxx
President
TELEMATICS, INC.
a Virginia corporation
By:
--------------------------------------------
Xxxxxx X. Xxxxxx
SECURITYHOLDER:
-----------------------------------------------
Xxxxxx X. Xxxxxx
47.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed as of the day and year first above written.
P-COM, INC.,
a Delaware corporation
By:
--------------------------------------------
Xxxxxxx Sophie
Vice President, Finance and Administration
and Chief Financial Officer
P-COM FIELD SERVICES, INC.,
a Delaware corporation
By:
--------------------------------------------
TELEMATICS, INC.
a Virginia corporation
By: /s/ Xxxxxx X. Xxxxxx
--------------------------------------------
Xxxxxx X. Xxxxxx
SECURITYHOLDER:
/s/ Xxxxxx X. Xxxxxx
-----------------------------------------------
Xxxxxx X. Xxxxxx
48.
