EXHIBIT 2.1
ASSET PURCHASE AGREEMENT
This ASSET PURCHASE AGREEMENT ("Agreement") is entered into as of this __
day of June, 2003, by and between P-Com, Inc., a Delaware corporation
("Purchaser") and SPEEDCOM Wireless Corporation, a Delaware corporation
("Seller").
RECITALS
WHEREAS, the Boards of Directors of Purchaser and Seller believe it is in
the best interests of each company that Purchaser acquire certain listed assets
and assume certain listed liabilities of Seller.
NOW, THEREFORE, in consideration of the covenants, promises and
representations set forth herein, and for other good and valuable consideration,
the parties hereby agree as follows:
ARTICLE I
PURCHASE AND SALE OF ASSETS
SECTION 1. 1 DESCRIPTION OF ASSETS TO BE ACQUIRED.
On the terms and subject to the conditions set forth in this Agreement, at
the Closing Time (as defined in Section 7.1), Seller will convey, sell,
transfer, assign, and deliver to Purchaser and Purchaser shall purchase and
acquire from Seller, all right, title, and interest in and to the assets,
properties, and rights of Seller specifically referred to in this Section 1.1
(collectively, the "Assets") free and clear of all liens, pledges, charges,
claims, actions, suits, proceedings, security interests or other encumbrances of
any sort ("Liens"), other than as set forth on Schedule 1.1. The Assets consist
of the following:
(a) All of Seller's interests in the machinery, equipment, instruments,
computer hardware and software, tooling, furniture, fixtures, motor vehicles,
supplies, repair and maintenance parts, demonstration units and other fixed
assets, together with manufacturer or vendor warranties associated therewith,
listed on Schedule 1.1 (a);
(b) All of Seller's inventories of raw materials (together with any
manufacturer or vendor warranties associated therewith), work-in-process,
finished goods and supplies, including scrapwork and rework, listed on Schedule
1.1 (b);
(c) All of Seller's claims and rights under all agreements, contracts,
licenses, leases, franchises, instruments, documents, purchase and sale orders
and other executory commitments, all cash, cash equivalents and bank accounts
owned by Seller at the Closing Date and all of Seller's permits, consents and
certificates of any regulatory, administrative or other governmental agency or
body, listed on Schedule 1.1 (c) hereto;
(d) All of Seller's interests in the leasehold[s] listed on Schedule
1.1(d), and all related rights, easements and uses which benefit or burden any
such property;
(e) All of Seller's right, title and interest to trademarks, trademark
rights, service marks, service xxxx rights, copyrights, trade names, trade name
rights, fictitious business names, nondisclosure agreements, confidentiality
agreements, assignment of inventions agreements, proprietary information and
inventions agreements, works of authorship, inventions, software, source code,
industrial models, industrial designs, utility models and certificates of
invention, designs emblems and logos, trade secrets, know-how, manufacturing
formulae, technical information, patents, patent applications, mask work
registrations, inventions, franchises, franchise rights, customer and supplier
lists listed on Schedule 1.1(e), together with the goodwill associated therewith
and all other proprietary rights, information and processes;
(f) All accounts and notes receivable of Seller, all of which are listed on
Schedule 1.1(f);
(g) Duplicates of all of Seller's original books of account, general
ledgers, sales invoices, purchase orders, accounts payable and payroll records,
tax returns and supporting schedules, drawings, files, papers and all other
records relating to Seller's business;
(h) All rights under express or implied warranties from suppliers of
Seller's business only to the extent such warranties relate to the business;
(i) All of the causes of action, judgments, and claims or demands of
whatever kind or description arising out of the activities of Seller's business,
but only to the extent such causes of action, judgments and claims or documents
relate to the business; and
(j) All goodwill of Seller's business.
SECTION 1.2 DESCRIPTION OF ASSETS TO BE RETAINED. Notwithstanding any
provision to the contrary in this Agreement, the rights, properties and assets
(collectively, the "Excluded Assets") as set forth on Schedule 1.2 will not be
included in the Assets.
SECTION 1.3 NON-ASSIGNMENT OF CERTAIN ASSETS. Notwithstanding anything to
the contrary in this Agreement, to the extent that the assignment or
subcontracting hereunder of any of the Assets shall require the consent of any
other party (or in the event that any of the same shall be nonassignable or
unable to be subcontracted), neither this Agreement nor any action taken
pursuant to its provisions shall constitute an assignment or subcontract or an
agreement to assign or subcontract if such assignment or subcontract or
attempted assignment or subcontract would constitute a breach thereof or result
in the loss of diminution thereof; provided however, in each such case, that
Seller shall use its commercially reasonable efforts to obtain the consent of
such other party to an assignment to Purchaser. If such consent is not obtained
by the
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Closing, Seller shall cooperate with Purchaser in any arrangement designed for
Purchaser to perform Seller's obligation with respect to such Asset after the
Closing and for Purchaser to receive the benefits under any Asset after the
Closing, which arrangements may include enforcement, for the account and benefit
of Purchaser, of any and all rights of Seller against any other person arising
out of the breach or cancellation by such other person or otherwise, all of such
actions of Seller to be at the direction and expense of Purchaser.
ARTICLE II
LIABILITIES OF SELLER
SECTION 2.1 ASSUMED LIABILITIES. Purchaser hereby agrees to assume, satisfy
or perform only those liabilities and obligations of Seller specifically
identified on Schedule 2.1 attached hereto (collectively, the "Assumed
Liabilities").
SECTION 2.2 LIABILITIES NOT ASSUMED. Other than the Assumed Liabilities,
Purchaser shall not assume, nor shall Purchaser or any affiliate, or any
officer, director, employee, stockholder or agent of Purchaser, be deemed to
have assumed or guaranteed, any liabilities, obligations, litigation, disputes,
debts, payables, counterclaims, rights of set-off or return, or commitments or
claims, whether such liabilities are contingent or otherwise, or direct or
indirect, of Seller in existence on or prior to or after the Closing Time or
based on any events, facts or circumstances in existence prior to the Closing
Time (collectively, the "Excluded Liabilities"). Without limiting the generality
of the foregoing, the Excluded Liabilities shall include any liabilities or
claims arising from or related to the termination of employees of Seller on or
before the Closing Date, or liabilities or claims arising from or related to
Employee Plans as defined in Section 5.16.
SECTION 2.3 RISK OF LOSS. In the event any of the Assets are unavailable
for delivery to Purchaser on the Closing Date as a result of risks for which
such Assets were insured by Seller, Purchaser may at its option elect (i) to
require Seller to deliver to Purchaser assignments of Seller's rights under its
insurance policies, if any, applicable to such Assets and to close on that
basis, or (ii) to not close due to the failure of a condition to Closing if the
rights described in (i) above are not fully assignable and the amount of the
loss reasonably can be expected to be in excess of five hundred thousand dollars
($500,000). Seller hereby agrees to use its reasonable best efforts to make such
assignment of rights if Purchaser so elects.
ARTICLE III
PURCHASE PRICE
SECTION 3.1 CONSIDERATION. Upon the terms and subject to the conditions
contained in this Agreement, in consideration for the Assets and in full
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payment therefore, Purchaser will pay, or cause to be paid, to Seller the
Purchase Price set forth in Section 3.2.
SECTION 3.2 PAYMENT OF PURCHASE PRICE. The purchase price ("Purchase
Price") to be paid or payable by Purchaser to Seller shall consist of Sixty
Seven Million, Five Hundred Thousand (67,500,000) shares of Purchaser's common
stock, par value $.001 per share (the "Common Stock"). The shares of Common
Stock issuable in payment of the Purchase Price are herein sometimes referred to
as the "Securities." The Purchase Price shall be subject to adjustment under the
circumstances and in the manner set forth in Schedule 3.2 attached hereto.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PURCHASER
Purchaser hereby represents and warrants to Seller, subject to such
exceptions as are specifically disclosed in the disclosure schedules supplied by
Seller to Purchaser (collectively the "Seller Disclosure Schedules"), as
referenced within the applicable Sections and dated as of the date hereof, which
disclosures shall be deemed to be representations and warranties hereunder, as
follows:
SECTION 4.1 ORGANIZATION. Purchaser is a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware.
SECTION 4.2 AUTHORIZATION. Subject to Purchaser obtaining stockholder
approval to increase the number of authorized shares of Common Stock necessary
to consummate the transaction, Purchaser has full corporate power and authority
to enter into this Agreement, to perform its obligations hereunder and to
consummate the transactions contemplated hereby. Purchaser has taken all
necessary and appropriate corporate action with respect to the execution and
delivery of this Agreement, and subject to Purchaser obtaining stockholder
approval to increase the number of authorized shares of Common Stock necessary
to consummate the transaction, this Agreement constitutes a valid and binding
obligation of Purchaser, enforceable in accordance with its respective terms:
(i) except as limited by applicable bankruptcy, insolvency, moratorium,
reorganization, or other laws affecting creditors' rights and remedies
generally; and
(ii) except as the indemnification provisions contained in this Agreement
may be limited by principles of public policy.
SECTION 4.3 FINANCIAL STATEMENTS. Each of the consolidated financial
statements (including, in each case, any related notes thereto) included in the
Purchaser SEC Reports (as defined in Section 4.4) (the "Purchaser Financial
Statements") was prepared in accordance with U.S. generally accepted accounting
principles ("GAAP") applied on a consistent basis throughout the periods
involved and each fairly
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presented the consolidated financial position of Purchaser as of the respective
dates thereof and the consolidated results of its operations and cash flows for
the periods indicated, except that the unaudited interim financial statements
were or are subject to normal and recurring year-end adjustments which were not
or are not expected to be material in amount. Purchaser's revenue recognition
policies with respect to the Purchaser Financial Statements have been made in
accordance with GAAP. Purchaser maintains a standard system of accounting in
accordance with GAAP. All of Purchaser's general ledgers, books and records are
located at Purchaser's principal place of business. Purchaser's financial
reserves are adequate to cover claims incurred.
SECTION 4.4 SEC FILINGS. Purchaser has filed all forms, reports and
documents required to be filed with the SEC since January 1, 2000 and has made
available to Seller, in the form filed with the SEC, (i) its annual report on
Form 10-K for the fiscal years ended December 31, 2000, 2001 and 2002, (ii) its
quarterly report on Form 10-Q for the period ended Xxxxx 00, 0000, (xxx) all
proxy statements relating to Purchaser's meetings of stockholders (whether
annual or special) held since January 1, 2000, (iv) all other reports or
registration statements filed by Purchaser with the SEC since January 1, 2000,
and (v) all amendments and supplements to all such reports, proxy statements and
registration statements filed by Purchaser with the SEC. All such required
forms, reports and documents (including those enumerated in clauses (i) through
(v) of the preceding sentence) are referred to herein as the "Purchaser SEC
Reports." As of their respective dates, the Purchaser SEC Reports (i) were
prepared in accordance with the requirements of the Securities Act of 1933, as
amended (the "Securities Act"), or the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), as the case may be, and the rules and regulations
of the SEC thereunder applicable to such Purchaser SEC Reports, and (ii) did not
at the time they were filed (or if amended or superseded by a filing prior to
the date of this Agreement, then on the date of such filing) contain any untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary in order to make the statements therein, in the
light of the circumstances under which they were made, not misleading. None of
Purchaser's subsidiaries is required to file any forms, reports or other
documents with the SEC.
SECTION 4.5 CAPITALIZATION. The authorized capital stock of Purchaser
consists, or will consist immediately prior to the Closing, of:
(a) Preferred Stock. Two million (2,000,000) shares of Preferred Xxxxx,
x.0000 par value, of which 500,000 shares are designated Series A Junior
Participating Preferred Stock, and none of which are issued or outstanding. The
rights, privileges and preferences of the Series A Preferred Stock will be as
stated in Purchaser's Amended and Restated Certificate of Incorporation. The
parties agree and acknowledge that Purchaser may issue shares of Series A
Preferred Stock in connection with a Qualified Financing, as such term is
defined in Section 8.1(g) below.
(b) Common Stock. Sixty-nine million (69,000,000) shares of Common Stock,
of which 41,037,644 shares were issued and outstanding as of June 3, 2003. All
such shares have been duly authorized, and all such issued and outstanding
shares have been validly issued (including, without limitation, issued in
compliance with applicable federal and
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state securities laws), are fully paid and nonassessable and are free of any
liens or encumbrances other than any liens or encumbrances created by or imposed
thereon by the holders thereof.
(c) Other Securities. As of June 3, 2003, Purchaser had reserved 5,786,892
shares of Common Stock for issuance pursuant to Purchaser's 1995 Stock
Option/Stock Issuance Plan (the "Stock Option Plan"), under which options were
outstanding for 2,415,374 shares, and 10,216,701 shares of Common Stock for
issuance upon exercise of outstanding warrants. As of June 6, 2003, Purchaser
had outstanding $20,090,000 principal amount of 7% Convertible Subordinated
Notes ("Convertible Notes"), convertible into 12,853,175 shares of Common Stock.
All shares of Common Stock subject to issuance as aforesaid, upon issuance on
the terms and conditions specified in the instruments pursuant to which they are
issuable, shall be duly authorized, validly issued, fully paid and
nonassessable. Since June 1, 2003, there have been no amendments of any
Purchaser stock options, warrants or Convertible Notes and no changes in the
capital structure of Purchaser other than issuances of Common Stock upon the
exercise of options granted under the Stock Option Plan.
SECTION 4.6 VALID ISSUANCE.
(a) The Securities, when issued and delivered in accordance with the terms
of this Agreement, will be duly and validly issued, fully paid and nonassessable
and will be free and clear of any preemptive rights, security interests, claims,
liens or other encumbrances.
(b) The issuance of the Securities are (assuming no change in applicable
law) issued in full compliance with applicable state and federal securities
laws.
SECTION 4.7 NO CONFLICT OR DEFAULT. Neither the execution and delivery of
this Agreement, nor compliance with the terms and provisions hereof and thereof,
including the consummation of the transactions contemplated hereby and thereby,
will violate any statute, regulation or ordinance of any governmental authority,
or conflict with or result in the breach of any term, condition or provision of
Purchaser's Certificate of Incorporation or Bylaws (or similar constituent
documents), or of any agreement, deed, contract, mortgage, indenture, writ,
order, decree, legal obligation or instrument to which Purchaser is a party or
by which Purchaser's assets are bound, or constitute a default (or an event
which, with the lapse of time or the giving of notice, or both, would constitute
a default) thereunder.
SECTION 4.8 ABSENCE OF CERTAIN CHANGES AND EVENTS. Except as set forth in
Schedule 4.8, or as otherwise disclosed in the Purchaser SEC Reports, since
March 31, 2003, there has not been:
(a) Any material adverse change in the financial condition, results of
operation, assets, liabilities, business or prospects of Purchaser or any
occurrence, circumstance or combination thereof which reasonably could be
expected to result in any such material adverse change;
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(b) Any material transaction relating to or involving Purchaser (other than
the transactions contemplated herein) which was entered into or carried out by
Purchaser other than in the ordinary and usual course of business;
(c) Any adverse relationships or conditions with vendors or customers that
may have a material adverse effect on Purchaser; and
(d) Any other event or condition of any character that has resulted in a
material adverse effect, or may reasonably be expected to have a material
adverse effect, upon Purchaser.
SECTION 4.9 COMPLIANCE WITH LAWS. Except as otherwise set forth in Schedule
4.9, or as otherwise disclosed in the Purchaser SEC Reports, Purchaser has
complied and is in compliance with all applicable foreign, federal, state, and
local laws, statutes, licensing requirements, rules, and regulations, and
judicial or administrative decisions where the failure to comply could have a
material adverse effect on Purchaser. There is no order issued, investigation,
or proceeding pending or notice served on Purchaser or, to Purchaser's
knowledge, threatened, with respect to any violation of any law, ordinance,
order, writ, decree, rule, or regulation issued by any federal, state, local, or
foreign court or governmental agency or instrumentality.
SECTION 4.10 CONSENTS. The execution and delivery of this Agreement by
Purchaser does not, and the performance of this Agreement by Purchaser shall
not, require any consent, approval, authorization or permit of, or filing with
or notification to, any governmental or regulatory authority, domestic or
foreign, or any other third party, including licensors and lenders, except for
(i) the approval by Purchaser's shareholders of an increase in the authorized
Common Stock of Purchaser; (ii) compliance with the applicable requirements, if
any, of the bulk sales laws; and (iii) consent of Silicon Valley Bank.
SECTION 4.11 BROKER'S AND FINDER'S FEES/CONTRACTUAL LIMITATIONS. Except as
set forth in Schedule 4.11, no agent, broker, investment banker, person or firm
acting on behalf of or under the authority of Purchaser is or will be entitled
to any broker's or finder's fee or any other commission directly or indirectly
in connection with any transactions contemplated hereby. Neither Purchaser nor
any of its officers, directors, employees, agents or representatives
(collectively "Representatives") are or have been subject to any agreement,
letter of intent, or understanding of any kind which prohibits, limits, or
restricts Purchaser or its Representatives from negotiating, entering into and
consummating this Agreement and the transactions contemplated hereby and
thereby.
SECTION 4.12 DISCLOSURE OF INFORMATION. Purchaser believes it has received
all the information it considers necessary or appropriate for deciding whether
to enter into this Agreement and thereby contract to purchase the Assets.
Purchaser further represents that it has had an opportunity to ask questions and
receive
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answers from Seller regarding the terms and conditions of the offering of the
Assets and the business, properties, prospects and financial condition of
Seller.
SECTION 4.13 COMPLETE DISCLOSURE. No representation or warranty made by
Purchaser in this Agreement, nor any financial statements prepared and furnished
or to be prepared and furnished by Purchaser or its representatives to Seller
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.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF SELLER
Seller represents and warrants to Purchaser, subject to such exceptions as
are specifically disclosed in the disclosure schedules supplied by Seller to
Purchaser (collectively the "Seller Disclosure Schedules"), as referenced within
the applicable Sections and dated as of the date hereof, which disclosures shall
be deemed to be representations and warranties hereunder, as follows:
SECTION 5.1 ORGANIZATION; GOOD STANDING. Seller is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware, and has the corporate power and authority to own, lease and operate
its properties and to carry on its business as the same is now being conducted.
Seller is qualified as a foreign corporation and is in good standing in such
other jurisdictions in which the failure to be so qualified would have a
material adverse effect on the Assets taken as a whole (or Purchaser's interest
in or use of any material portion thereof following the Closing) (a "Material
Adverse Effect"). Except as set forth in Schedule 5.1, Seller does not own,
directly or indirectly, any equity or other ownership interest in or control any
corporation, partnership, joint venture or other entity. Seller has property,
employees or operations relating to the Assets only in the jurisdictions set
forth on Schedule 5.1(a).
SECTION 5.2 AUTHORIZATION. Subject to Seller obtaining the requisite
shareholder approval, Seller has the full corporate power and authority to enter
into this Agreement, to perform its obligations hereunder and to consummate the
transactions contemplated hereby, including the execution and delivery of the
general conveyances, bills of sale, assignments and other documents and
instruments evidencing the conveyance of the Assets or delivered in accordance
with Section 7.2 hereunder (the "Closing Documents"). Subject to Seller
obtaining the requisite shareholder approval, Seller has taken all necessary and
appropriate corporate action with respect to the execution and delivery of any
Closing Documents, and no other corporate proceedings on the part of Seller are
necessary to authorize this Agreement or to consummate the transactions
contemplated hereby and thereby. Subject to Seller obtaining the requisite
shareholder approval, this Agreement constitutes valid and binding obligation of
Seller,
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enforceable against Seller in accordance with its terms: (i) except as limited
by applicable bankruptcy, insolvency, moratorium, reorganization or other laws
affecting creditors' rights and remedies generally, (ii) except as may be
required by bulk sales provisions of the applicable state laws and (iii) except
as the indemnification provisions contained in this Agreement may be limited by
principles of public policy. The execution and delivery of this Agreement by
Seller does not, and, as of the Closing, the consummation of the transactions
contemplated hereby and thereby will not, conflict with, or result in any
violation of or default under (with or without notice or lapse of time, or
both), or give rise to a right of termination, cancellation or acceleration of
any obligation or loss of any benefit under (any such event, a "Conflict") (i)
any provision of the Certificate of Incorporation or Bylaws of Seller or (ii)
any material mortgage, indenture, lease, contract or other agreement or material
instrument, permit, concession, franchise, license, judgment, order, decree,
statute, law, ordinance, rule or regulation applicable to Seller or by which its
properties or assets are bound, except where such Conflict would not have a
Material Adverse Effect.
SECTION 5.3 FINANCIAL STATEMENTS. Each of the financial statements
(including, in each case, any related notes thereto) included in the Seller SEC
Reports (as defined in Section 5.4) delivered by Seller to Purchaser (the
"Seller Financial Statements") was prepared in accordance with GAAP applied on a
consistent basis throughout the periods involved and each fairly presented the
financial position of Seller as of the respective dates thereof and the results
of its operations and cash flows for the periods indicated, except that the
unaudited interim financial statements were or are subject to normal and
recurring year-end adjustments which were not or are not expected to be material
in amount. Seller's revenue recognition policies with respect to the Seller
Financial Statements have been made in accordance with GAAP. Seller maintains a
standard system of accounting in accordance with GAAP. All of Seller's general
ledgers, books and records are located at Seller's principal place of business.
Seller's financial reserves are adequate to cover claims incurred.
SECTION 5.4 SEC FILINGS. Seller has filed all forms, reports and documents
required to be filed with the SEC since January 1, 2000 and has made available
to Purchaser, in the form filed with the SEC, (i) its annual report on Form 10-K
for the fiscal years ended December 31, 2000, 2001 and 2002, (ii) its quarterly
report on Form 10-Q for the period ended Xxxxx 00, 0000, (xxx) all proxy
statements relating to Seller's meetings of stockholders (whether annual or
special) held since January 1, 2000, (iv) all other reports or registration
statements filed by Seller with the SEC since January 1, 2000, and (v) all
amendments and supplements to all such reports, proxy statements and
registration statements filed by Seller with the SEC. All such required forms,
reports and documents (including those enumerated in clauses (i) through (v) of
the preceding sentence and Seller's March 31, 2003 Form 10-Q) are referred to
herein as the "Seller SEC Reports." As of their respective dates, Seller SEC
Reports (i) were prepared in accordance with the requirements of the Securities
Act or the Exchange Act, as the case may be, and the rules and regulations of
the SEC thereunder applicable to such Seller SEC Reports, and (ii) did not at
the time they were filed (or if amended or superseded by a filing prior to the
date of this Agreement, then on the date of such filing) contain any
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untrue statement of a material fact or omit to state a material fact required to
be stated therein or necessary in order to make the statements therein, in the
light of the circumstances under which they were made, not misleading. None of
Seller's subsidiaries is required to file any forms, reports or other documents
with the SEC.
SECTION 5.5 ABSENCE OF CERTAIN CHANGES AND EVENTS. Except as set forth in
Schedule 5.5, or as otherwise disclosed in Seller SEC Reports, since March 31,
2003, there has not been:
(a) Any material adverse change in the financial condition, results of
operation, assets, liabilities, business, or prospects of Seller or any
occurrence, circumstance, or combination thereof which reasonably could be
expected to result in any such material adverse change;
(b) Any material transaction relating to or involving Seller (other than
the transactions contemplated herein) which was entered into or carried out by
Seller other than in the ordinary and usual course of business;
(c) Any modification, waiver, change, amendment, release, rescission,
accord and satisfaction, or termination of, or with respect to, any term,
condition, or provision of any material contract, agreement, license, or other
instrument to which Seller is a party and relating to or affecting the Assets,
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;
(d) Any adverse relationships or conditions with vendors or customers that
may have a Material Adverse Effect;
(e) Any other event or condition of any character that has resulted in a
Material Adverse Effect, or may reasonably be expected to have a Material
Adverse Effect;
(f) Any labor disputes or disturbances materially affecting Seller in an
adverse manner, including, without limitation, the filing of any petition or
charge of unfair labor practices with the National Labor Relations Board; or
(g) Any purchase or lease of, or any agreements to purchase or lease,
capital assets for Seller in excess of $10,000 individually, or in excess of
$50,000 in the aggregate.
SECTION 5.6 UNDISCLOSED LIABILITIES. There are no debts, liabilities or
obligations, other than the Excluded Liabilities with respect to which the
Assets are subject, liquidated, unliquidated, accrued, absolute, contingent, or
otherwise, that are not specifically identified in the Financial Statements.
Seller has not guaranteed the repayment of any obligations of any third party,
including affiliates and affiliated entities or persons.
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SECTION 5.7 PROPERTIES. Seller has good, valid and marketable title to all
assets, tangible and intangible, purported to be owned by Seller, including the
Assets, reflected on the Financial Statements. All such assets purported to be
owned by Seller are free and clear of all mortgages, liens, charges, security
interests or other encumbrances of any nature whatsoever except as reflected in
the Financial Statements and except for liens for current taxes not delinquent,
liens imposed by operation of law and liens incurred in the ordinary course of
business. All Assets, including machinery and equipment, owned, leased or
otherwise used by Seller are in good operating condition and repair, reasonable
wear and tear excepted, and are suitable and adequate for use in the ordinary
course of business and conform in all material respects to all applicable laws.
All leases relating to Seller's business are binding, valid and enforceable in
accordance with their terms. After the Closing Time, Purchaser will be entitled
to the continued use and possession of the property leased by Seller, for the
terms specified in such leases and for the purposes for which such property is
used. There is no pending or, to Seller's knowledge threatened, condemnation or
similar proceeding affecting any of the real property used in the business
leased by Seller.
SECTION 5.8 TAXES.
(a) No Tax (as defined below) is required to be withheld pursuant to
Section 1445 of the Code as a result of the transfers contemplated by this
Agreement.
(b) There are no liens, except as disclosed in Schedule 1.1, for Taxes upon
the Assets except liens for current Taxes not yet due. Seller's unpaid Taxes do
not exceed the reserve for Taxes established on Seller's books and records. No
governmental entity (a "Taxing Authority") responsible for the imposition of any
Tax (domestic or foreign) has asserted that Seller owes any Taxes other than as
shown on its tax returns and paid with such returns.
(c) None of the assets (including the Assets) of Seller (i) is property
that is required to be treated as owned by any other person pursuant to the
so-called "safe harbor lease" provisions of former Section 168(f)(8) of the
Code, (ii) directly or indirectly secures any debt the interest on which is tax
exempt under Section 103(a) of the Code or (iii) is "tax exempt use property"
within the meaning of Section 168(h) of the Code. The transactions contemplated
herein are not subject to the tax withholding provisions of Code Section 3406,
or of Subchapter A of Chapter 3 of the Code or of any other provision of law in
any jurisdiction. Seller is not and has never been a member of a group permitted
or required to file consolidated Tax returns and is not party to any agreement
relating to the payment or sharing of liability for Taxes. Seller has not filed
consent under Section 341(f) of the Code.
(d) For purposes of this Agreement, "Tax" (and, with correlative meaning,
"Taxes" and "Taxable") means (i) any net income, alternative or add-on minimum
tax, gross income, gross receipts, sales, use, ad valorem, transfer, franchise,
profits, license, withholding, payroll, employment, excise, severance, stamp,
occupation, premium, property, environmental or windfall profit tax, custom,
duty or other tax, governmental
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fee or other like assessment or charge of any kind whatsoever, together with any
interest or any penalty, addition to tax or additional amount imposed by any
Taxing Authority responsible for the imposition of any such tax (domestic or
foreign), (ii) any liability for the payment of any amounts of the type
described in (i) as a result of being a member of an affiliated, consolidated,
combined or unitary group for any Taxable period and (iii) any liability for the
payment of any amounts of the type described in (i) or (ii) as a result of any
express or implied obligation to indemnify any other person.
SECTION 5.9 COMPLIANCE WITH LAWS. Seller has complied and is in compliance
with all applicable foreign, federal, state, and local laws, statutes, licensing
requirements, rules, and regulations, and judicial or administrative decisions
where the failure to comply could have a Material Adverse Effect. There is no
order issued, investigation, or proceeding pending or notice served on Seller
or, to Seller's knowledge, threatened, with respect to any violation of any law,
ordinance, order, writ, decree, rule, or regulation issued by any federal,
state, local, or foreign court or governmental agency or instrumentality
applicable to the Assets.
SECTION 5.10 CONSENTS. The execution and delivery of this Agreement by
Seller does not, and the performance of this Agreement by Seller shall not,
require any consent, approval, authorization or permit of, or filing with or
notification to, any governmental or regulatory authority, domestic or foreign,
or any other third party (except as may be required to notify the preferred
investors), including licensors and lenders, except for (i) the approval by
Seller's shareholders of this Agreement and the transactions contemplated
hereby, (ii) compliance with the applicable requirements, if any, of the bulk
sales laws, and (iii) consent from SDS and/or its affiliated lenders.
SECTION 5.11 PRODUCT LIABILITY. There are no defects in the design or
technology embodied in any product of Seller which Seller currently markets or
has marketed in the past that impairs or are likely to impair the intended use
of the product or injure any consumer of the product or third party, except that
warranty claims may arise in the normal course of business, for products shipped
prior to the Closing Time, in an aggregate amount of no more than the warranty
reserves established on the most recent balance sheet of Seller. Seller has
delivered to Purchaser copies of its warranty policies and all outstanding
warranties or guarantees relating to any of Seller's products other than
warranties or guarantees implied by law. There is no claim asserting (a) any
damage, loss or injury caused by any product of Seller, or (b) any breach of any
express or implied product warranty or any other similar claim with respect to
any product of Seller other than standard warranty obligations (to replace,
repair or refund) made by Seller in the ordinary course of business.
SECTION 5.12 PROPRIETARY RIGHTS.
(a) Seller (i) owns all right, title and interest in, (ii) is licensed, or
(iii) is otherwise entitled to exercise, without restriction, all rights to all
patents, trademarks, trade names, service marks, copyrights, mask works, trade
secrets and other intellectual property rights, and any applications or
registrations therefore, and all inventions, mask work
12
layouts, net lists, source code, object code, schematics, technical drawings,
technology, know-how, processes, formulas, algorithms, computer software
programs, documentation, and all other tangible and intangible information or
material in any form which form part of the Assets, without any conflict with or
infringement of the rights of others and free and clear of any Liens
(collectively, the "Intellectual Property Rights"). Seller has the right to use,
sell, license, assign, transfer, convey or dispose of the Intellectual Property
Rights or the products, processes and materials covered thereby.
(b) Schedule 5.12(b) sets forth: (i) all copyrights, patents, patent
applications, trademarks, service marks, trade names, and other company, product
or service identifiers owned by or licensed to Seller with respect to the
Intellectual Property Rights; (ii) the jurisdictions) in which an application
for patent or application for registration, if any, of each Intellectual
Property Right has been made, including the respective application numbers and
dates; (iii) the jurisdiction(s), if any, in which each such Intellectual
Property Right has been patented or registered, including the respective patent
or registration numbers and dates; and (iv) all licenses, sublicenses and other
agreements to which Seller is a party and pursuant to which any other party is
authorized to use, exercise, or receive any benefit from the Intellectual
Property Rights (other than to end-user licenses entered into in the ordinary
course of business). Seller has delivered to Purchaser copies of all licenses,
sublicenses, and other agreements identified pursuant to clause (iv) above.
Seller and, to the knowledge of Seller, each other party thereto, is in
compliance with all material terms and conditions of all such licenses,
sublicenses, and other agreements. Seller has no knowledge of any claim,
threatened claim or facts indicating that Seller or any other party thereto has
breached any material terms or conditions of such licenses, sublicenses, or
other agreements.
(c) Seller has taken all necessary and appropriate steps, including,
without limitation, the filing of copyright, and trademark applications to
perfect and protect its interest in the Intellectual Property Rights in the
United States. Seller has the exclusive right to file, prosecute, and maintain
such applications and the patents and registrations that issue therefrom.
(d) To Seller's knowledge, after due inquiry, all patents and registered
trademarks, service marks, and other company, product or service identifiers and
copyrights held by Seller are valid and enforceable.
(e) Seller has secured or is in the process of securing valid written
assignments from all consultants and employees who contributed to the creation
or development of the Intellectual Property Rights of the rights to such
contributions that Seller does not already own by operation of law except where
failure to secure such assignments would not have a Material Adverse Effect.
(f) To Seller's knowledge, there has not been and there is not now any
unauthorized use, infringement or misappropriation of any of the Intellectual
Property Rights by any third party, including, without limitation, any service
provider of Seller.
13
(g) Seller has not brought any actions or lawsuits alleging (i)
infringement of any of the Intellectual Property Rights or (ii) breach of any
license, sublicense or other agreement authorizing another party to use the
Intellectual Property Rights. To Seller's knowledge, there do not exist any
facts that could form the basis of any such action or lawsuit. Seller 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 of the Intellectual Property Rights.
(h) No person has asserted or, to the knowledge of Seller, threatened to
assert any claims with respect to the Intellectual Property Rights (i)
contesting the right of Seller to use, exercise, sell, license, transfer or
dispose of any of the Intellectual Property Rights or any products, processes or
materials covered thereby or (ii) challenging the ownership, validity or
enforceability of any of the Intellectual Property Rights. No Intellectual
Property Right is subject to any outstanding order, judgment, decree,
stipulation or agreement related to or restricting in any manner the licensing,
assignment, transfer or conveyance thereof by Seller.
(i) Schedule 5.12(i) sets forth: (i) all copyrights, patents, patent
applications, trademarks, service marks, trade names, trade secrets and other
company, product or service identifiers licensed to Seller ("In-Licensed
Intellectual Property Rights") and (ii) all licenses, sublicenses and other
agreements to which Seller is a party and pursuant to which Seller is authorized
to use, exercise, or receive any benefit from any In-Licensed Intellectual
Property Right (other than commercially available, i.e., "off-the-shelf"
software). Seller has delivered to Purchaser copies of all licenses, sublicenses
and other agreements identified pursuant to clause (ii) above. Seller and, to
Seller's knowledge, each other party thereto is in compliance with all material
terms and conditions of all such licenses, sublicenses, and other agreements.
Seller has no knowledge of any claim, threatened claim or the existence of any
facts indicating that Seller or any other party thereto has breached any
material terms or conditions of such licenses, sublicenses, or other agreements.
(j) No In-Licensed Intellectual Property Right is subject to any
outstanding order, judgment, decree, stipulation or agreement related to, or
restricting in any manner, the use or licensing thereof by Seller.
(k) Seller has the right to sell, assign, transfer, and convey all of its
right, title and interest in and to the Intellectual Property Rights and
In-Licensed Intellectual Property Rights to Purchaser. Seller is not, nor will
be as a result of the execution and delivery of this Agreement or the
consummation of the transactions contemplated hereby or thereby, in violation
of, breach of nor will Seller forfeit, terminate or in any way impair any
material Intellectual Property Right or In-Licensed Intellectual Property Right
whether or not pursuant to any license, sublicense or agreement with respect to
the Intellectual Property Rights or In-Licensed Intellectual Property Rights set
forth or required to be set forth in Seller Schedules, or in any way impair the
right of Purchaser to use, sell, license or dispose of or to bring any action
for the infringement of, any Intellectual Property
14
Right or In-Licensed Intellectual Property Right or any products or technology
designed, developed, manufactured, sold or serviced by Seller (collectively,
"Products").
(l) To Seller's knowledge, the manufacture, marketing, license, sale or use
of any Products anywhere in the world does not (i) violate any material license
or agreement with any third party, or (ii) infringe on any intellectual property
right of any third party. Seller does not know of any claims to the effect that
the manufacture, marketing, license, sale or use of any Product 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. Seller
has not received service of process or been charged in writing as a defendant in
any claim, suit, action or proceeding that alleges that any Asset infringes any
patents, trademarks, service marks, trade secret rights, copyrights or other
intellectual property rights of any third party, which has not been finally
adjudicated prior to the date hereof. Seller does not have any outstanding
restrictions or infringement liability with respect to any patent, trade secret,
trademark, service xxxx, copyright or other intellectual property right of
another which relates to the Assets.
(m) Seller has taken all necessary and appropriate steps to protect and
preserve the confidentiality of, and proprietary rights in, all inventions,
algorithms, formulas, schematics, technical drawings, ideas, know-how, processes
not otherwise protected by patents or patent applications, source code, program
listings, and trade secrets ("Confidential Information"), including, without
limitation, marking all such Confidential Information with appropriate
"Proprietary" or "Confidential" legends, establishing policies for the handling,
disclosure, and use of Confidential Information, and the acquisition of valid
written nondisclosure agreements from any party (including Seller employees)
receiving Confidential Information (the form of which has been provided to
Purchaser and its counsel), except where failure to take such steps would not
have a Material Adverse Effect. All Confidential Information is presently, and
as of the Closing will be, located at Seller's address as set forth in this
Agreement. No person other than Seller has used, divulged or appropriated
Confidential Information except for the benefit of Seller. No person has used,
divulged or appropriated Confidential Information to the detriment of Seller
other than pursuant to the terms of written agreements between Seller and such
other persons.
SECTION 5.13 CONTRACTS AND COMMITMENTS.
(a) Schedule 5.13 sets forth a list of all outstanding licenses, contracts
or other agreements, whether or not in writing, to which obligations are owing
by Seller and which are related to the Assets or pursuant to which Seller
derives any benefits relating to the Assets (collectively "Contracts").
(b) Seller has performed all of its obligations under the terms of each
Contract, and is not in default thereunder, except has noted in Schedule 2.1, in
either case, except where such non-performance or default would have a Material
Adverse Effect. No event or omission has occurred which but for the giving of
notice or lapse of time or both would constitute a default by Seller or, to
Seller's knowledge, any other party thereto under any
15
such Contract where such default by any such party could have a Material Adverse
Effect. Each Contract is valid and binding on Seller and, to the knowledge of
Seller, on each other party thereto and is in full force and effect.
SECTION 5.14 NO CONFLICT OR DEFAULT. Neither the execution and delivery of
this Agreement, nor compliance with the terms and provisions hereof and thereof,
including the consummation of the transactions contemplated hereby and thereby,
will violate any statute, regulation, or ordinance of any governmental
authority, or conflict with or result in the breach of any term, condition, or
provision of Seller's Articles of Incorporation or Bylaws (or similar
constituent documents), as presently in effect, or of any agreement, deed,
contract, mortgage, indenture, writ, order, decree, legal obligation, or
instrument to which Seller is a party or by which it or they or any of the
Assets are or may be bound, or constitute a default (or an event which, with the
lapse of time or the giving of notice, or both, would constitute a default)
thereunder.
SECTION 5.15 LABOR RELATIONS.
(a) Seller has not failed to comply in any respect with Title VII of the
Civil Rights Act of 1964, as amended, the Fair Labor Standards Act, as amended,
the Occupational Safety and Health Act of 1970, as amended, all applicable
federal, state, 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 pending or threatened between Seller
and any of its employees or any labor union or other collective bargaining unit
representing any of the employees.
(c) Seller has never entered into a collective bargaining agreement or
other labor union contract relating to the business and applicable to the
employees.
(d) Except as disclosed on Schedule 5.15(d), there are no written
employment or separation agreements, or oral employment or separation agreements
other than those establishing an "at-will" employment relationship between
Seller and any of the employees.
SECTION 5.16 EMPLOYEE BENEFIT PLANS.
(a) Schedule 5.16 lists all employee benefit plans (as defined in Section
3(3) of the Employee Retirement Income Security Act of 1974, as amended
("ERISA")) and all bonus, stock option, stock purchase, incentive, deferred
compensation, supplemental retirement, severance and other similar fringe or
employee benefit plans, programs or arrangements, and any current or former
employment or executive compensation or severance agreements, written or
otherwise, for the benefit of, or relating to, any employee of Seller, any trade
or business (whether or not incorporated) which is a member or which is under
common control with Seller (an "ERISA Affiliate") within
16
the meaning of Section 414 of the Code (together, the "Employee Plans"), and a
copy of each such Employee Plan has been provided to Purchaser.
(b) None of the Employee Plans promises or provides retiree medical or
other retiree welfare benefits to any person; (ii) there has been no "prohibited
transaction," as such term is defined in Section 406 of ERISA and Section 4975
of the Code, with respect to any Employee Plan, which could result in any
material liability of Seller; (iii) all Employee Plans are in compliance in all
respects with the requirements prescribed by any and all statutes (including
ERISA and the Code), orders, or governmental rules and regulations currently in
effect with respect thereto (including all applicable requirements for
notification to participants or the Department of Labor, Internal Revenue
Service or Secretary of the Treasury), and Seller has performed all material
obligations required to be performed by it under, is not in any material respect
in default under or violation of, and has no knowledge of any default or
violation by any other party to, any of the Employee Plans; (iv) each Employee
Plan intended to qualify under Section 401(a) of the Code and each trust
intended to qualify under Section 501(a) of the Code does so qualify and a
favorable determination letter with respect to each such Employee Plan and trust
has been received from the Internal Revenue Service (the "IRS"), and nothing has
occurred which may reasonably be expected to cause the loss of such
qualification or exemption; (v) all contributions required to be made to any
Employee Plan pursuant to Section 412 of the Code, the terms of the Employee
Plan or any collective bargaining agreement, have been made on or before their
due dates and a reasonable amount has been accrued for contributions to each
Employee Plan for the current plan years; (vi) with respect to each Employee
Plan, no "reportable event" within the meaning of Section 4043 of ERISA
(excluding any such event for which the thirty (30) day notice requirement has
been waived under the regulations to Section 4043 of ERISA) nor any event
described in Section 4062, 4063 or 4041 of ERISA has occurred; and (vii) no
Employee Plan is covered by, and Seller has not incurred or expects to incur any
liability under, Title IV of ERISA or Section 412 of the Code.
SECTION 5.17 BROKER'S AND FINDER'S FEES / CONTRACTUAL LIMITATIONS. No
agent, broker, investment banker, person or firm acting on behalf of or under
the authority of Seller is or will be entitled to any broker's or finder's fee
or any other commission directly or indirectly in connection with any
transactions contemplated hereby, except as noted in Schedule 5.17. Neither
Seller nor any of its officers, directors, employees, agents or representatives
(collectively "Representatives") are or have been subject to any agreement,
letter of intent, or understanding of any kind which prohibits, limits or
restricts Seller or its Representatives from negotiating, entering into and
consummating this Agreement and the transactions contemplated hereby and
thereby.
SECTION 5.18 INTERESTED PARTY RELATIONSHIPS. Except as set forth in
Seller's SEC Documents, neither Seller, nor to Seller's knowledge any
shareholder of Seller, nor any officer and director or family member thereof, 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, any officer or director or family member thereof has any material
financial interest, direct or indirect, in
17
any material supplier or customer, any party to any contract which is material
to the business, or any competitor with the business.
SECTION 5.19 ENVIRONMENTAL MATTERS. Seller (i) has obtained all applicable
permits, licenses and other authorizations which are required under foreign,
federal, state or local laws relating to pollution or protection of the
environment, including laws relating to emissions, discharges, releases or
threatened releases of pollutants, contaminants, or hazardous or toxic materials
or wastes into ambient air, surface water, ground water, or land or otherwise
relating to the manufacture, processing, distribution, use, treatment, storage,
disposal, transport, or handling of pollutants, contaminants or hazardous or
toxic materials or wastes by Seller (or their respective agents); (ii) are in
compliance with all terms and conditions of such required permits, licenses and
authorization, and also are in compliance with all other limitations,
restrictions, conditions, standards, prohibitions, requirements, obligations,
schedules and timetables contained in such laws or contained in any regulation,
code, plan, order, decree, judgment, notice or demand letter issued, entered,
promulgated or approved thereunder; (iii) are not aware of nor have received
notice of any event, condition, circumstance, activity, practice, incident,
action or plan which is reasonably likely to interfere with or prevent continued
compliance or which would give rise to any common law or statutory liability, or
otherwise form the basis of any claim, action, suit or proceeding, based on or
resulting from Seller's (or its agent's) manufacture, processing, distribution,
use, treatment, storage, disposal, transport, or handling, or the emission,
discharge, or release into the environment, of any pollutant, contaminant, or
hazardous or toxic material waste; (iv) have taken all actions necessary under
applicable requirements of Federal, state or local environmental laws, rules or
regulations to register any products or materials required to be registered by
Seller (or any of its agents) thereunder; and (v) are not aware of any
contaminated soil or groundwater at any of the properties or portions thereof
owned or operated, leased or previously owned or leased by Seller. Seller does
not require any permits relating to pollution or protection of the environment,
including laws relating to emissions, discharges, releases or threatened
releases of pollutants, contaminants, or hazardous or toxic materials or wastes
into ambient air, surface water, ground water, or land or otherwise relating to
the manufacture, processing, distribution, use, treatment, storage, disposal,
transport, or handling of pollutants, contaminants or hazardous or toxic
materials or wastes by Seller (or its agents). Seller has disclosed to Purchaser
all documents relating to tests previously conducted or to be conducted in the
future for potential contamination at any of Seller's facilities, whether owned
or leased, including soil and water tests.
SECTION 5.20 BOOKS AND RECORDS. The books and records of Seller to which
Purchaser has been given access are the true books and records of Seller and
accurately and fairly reflect the underlying facts and transactions in all
respects.
SECTION 5.21 COMPLETE DISCLOSURE. No representations or warranties made by
Seller in this Agreement, nor any financial statements prepared and furnished or
to be prepared and furnished by Seller or its representatives to Purchaser
pursuant hereto or in connection with the transactions contemplated hereby,
contains or will contain any
18
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.
SECTION 5.22 BACKLOG. Schedule 5.22 sets forth the backlog of orders that
Seller is to ship and contract work to be performed as of May 31, 2003. Seller
either possess sufficient inventory of parts, materials and personnel to produce
the same within their scheduled delivery dates or such parts or materials have
lead times such that Seller can acquire such parts and materials in time to
produce and ship such backlog in accordance with its schedule shipping date.
SECTION 5.23 CUSTOMERS AND SUPPLIERS. None of Seller's ten (10) largest
customers and ten (10) largest suppliers during the twelve months ended March
31, 2003 (determined on the basis of both revenues and bookings during such
period) has terminated, or to the knowledge of Seller intends to materially
reduce or terminate, the amount of its business with Seller.
SECTION 5.24 INVENTORY. Schedule 5.24 sets forth a list of all of the
inventories of Seller as of the date hereof (the "Inventories"). 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 normal course of business of
Seller, except such amounts as are reserved in accordance with GAAP consistently
applied. All items included in such Inventories are owned by Seller. All
Inventories materially in excess of reasonable estimated requirements for the
business based on current operations for the three (3) months from the date
hereof are set forth in Schedule 5.24. Except as disclosed in Schedule 5.24,
Seller holds no Inventories manufactured to customer specifications effectively
rendering the Inventories saleable only to that customer.
SECTION 5.25 PAYABLES; RECEIVABLES. All the accounts receivable and notes
receivable owing to Seller as of the date hereof are set forth in Schedule 5.25
and constitute valid and enforceable claims arising from bona fide transactions
in the ordinary course of business, and there are no contingent or asserted
claims, rights of return or other rights of set-off against any thereof, except
to the extent appropriately reserved for in the Seller Financial Statements. As
of the date hereof, except as set forth in Schedule 5.25, there is (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 obligations 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 Seller. Seller does not hold deposits
from customers or has not received prepaid service contract revenue or other
prepaid revenue.
SECTION 5.26 INVESTMENT ENTIRELY FOR OWN ACCOUNT. This Agreement is made
with Seller in reliance upon Seller's representation to Purchaser, which by
Seller's execution of this Agreement, Seller hereby confirms, that the
Securities
19
to be received by Seller in payment of the Purchase Price will be acquired by
Seller for its own account, not as a nominee or agent, and not with a view to
the resale or distribution of any part thereof, and that Seller has no present
intention of selling, granting any participation in or otherwise distributing
the same. By executing this Agreement, Seller further represents that Seller
does not have any contract, undertaking, agreement or arrangement with any
person to sell, transfer or grant participations to such person or to any third
person, with respect to any of the Securities.
SECTION 5.27 DISCLOSURE OF INFORMATION. Seller believes it has received all
the information it considers necessary or appropriate for deciding whether to
enter into this Agreement and thereby contract to purchase the Securities.
Seller further represents that it has had an opportunity to ask questions and
receive answers from Purchaser regarding the terms and conditions of the
offering of the Securities and the business, properties, prospects and financial
condition of Purchaser.
SECTION 5.28 INVESTMENT EXPERIENCE. Seller acknowledges that it is able to
fend for itself, 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 Securities. Seller also
represents it has not been organized for the purpose of acquiring the
Securities.
SECTION 5.29 RESTRICTED SECURITIES. Seller understands that the Securities
it is purchasing are characterized as "restricted securities" under the federal
securities laws inasmuch as they are being acquired from Purchaser 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 the absence of an effective
registration statement covering the Securities or an available exemption from
registration under the Act, the Securities must be held indefinitely. In this
connection, Seller represents that it is familiar with Commission Rule 144, as
presently in effect ("Rule 144"), and understands the resale limitations imposed
thereby and by the Act.
SECTION 5.30 FURTHER LIMITATIONS ON DISPOSITION. Without in any way
limiting the representations set forth above, Seller further agrees not to make
any disposition of all or any portion of the Securities unless and until the
transferee has agreed in writing for the benefit of Seller to be bound by this
Section 5.30 and:
(a) There is then in effect a registration statement under the Act covering
such proposed disposition and such disposition is made in accordance with such
registration statement; or
(b) (i) Seller shall have notified Purchaser of any proposed disposition
and shall have furnished Purchaser with a detailed statement of the
circumstances surrounding the proposed disposition, and (ii) Seller shall have
furnished Purchaser with an opinion of outside counsel, at Seller's expense,
reasonably satisfactory to Purchaser, to the effect that such disposition will
not require registration of such shares under the Act. It is
20
agreed that Purchaser will require opinions of counsel for transactions made
pursuant to Rule 144(k).
SECTION 5.31 LEGENDS. Seller understands that, until such time as the
Securities have been registered under the Act or may otherwise be sold by Seller
under Rule 144(k), the certificates for the Securities shall bear a restrictive
legend in substantially the following form:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES LAWS OF ANY
STATE OF THE UNITED STATES OR IN ANY OTHER JURISDICTION. THE SECURITIES
REPRESENTED HEREBY MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR
HYPOTHECATED OR OTHERWISE TRANSFERRED 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."
Purchaser agrees that it shall, immediately prior to a registration
statement covering the Securities being declared effective, deliver to its
transfer agent an opinion letter of counsel opining that at any time such
registration statement is effective, the transfer agent shall issue, in
connection with the issuance of the Securities, certificates representing such
Securities without the restrictive legend above, provided such Securities are to
be sold pursuant to the prospectus contained in such registration statement.
Upon receipt of such opinion, Purchaser shall cause the transfer agent to
confirm, for the benefit of the holders, that no further opinion of counsel is
required at the time of transfer in order to issue such shares without such
restrictive legend.
The legend set forth above shall be removed and Purchaser shall issue a
certificate without such legend to the holder of any Security upon which is it
stamped (unless otherwise required by state securities laws) (i) the sale of
such Security is registered under the Act (including registration pursuant to
Rule 416 thereunder); (ii) such holder provides Purchaser with an opinion of
counsel, in form, substance and scope customary for opinions of counsel in
comparable transactions, to the effect that a public sale or transfer of such
Security may be made without registration under the Act; or (iii) such holder
provides Purchaser with reasonable assurances that such Security can be sold
under Rule 144. In the event the above legend is removed from any Security and
thereafter the effectiveness of a registration statement covering such Security
is suspended or Purchaser determines that a supplement or amendment thereto is
required by applicable securities laws, then upon reasonable advance written
notice to Seller, Purchaser may require that the above legend be placed on any
Security that cannot then be sold pursuant to an effective registration
statement or under Rule 144 and Seller shall cooperate in the replacement of
such legend. Such legend shall thereafter be removed
21
when such Security may again be sold pursuant to an effective registration
statement or under Rule 144.
ARTICLE VI
COVENANTS
SECTION 6.1 PROXY STATEMENT. As promptly as practicable after the execution
of the Agreement, Purchaser and Seller shall cooperate with each other by
providing information required to prepare and file with the SEC their respective
proxy statements (each a "Proxy Statement"). Should Purchaser and Seller elect
to file a joint Proxy Statement, Purchaser and Seller shall cooperate in the
preparation and filing of such joint Proxy Statement. Purchaser and Seller shall
notify the other party promptly upon the receipt of any comments from the SEC or
its staff or any other government official in connection with any filing made
pursuant hereto and of any request by the SEC or its staff or any other
government official for any amendment or supplement to the Proxy Statement or
any other filing with the SEC or for additional information and shall provide to
the other party copies of all correspondence between such party or any of its
representatives, on the one hand, and the SEC or its staff or any other
government official, on the other hand, with respect to the Proxy Statement or
any other such filing.
SECTION 6.2 CONSENTS. Seller shall use its best efforts to obtain all
consents of and authorizations by third parties and to make all filings with and
give all notices to third parties that may be necessary or required in order to
consummate the sale of the Assets, and shall take such additional actions as
Purchaser may reasonably request so that the transactions contemplated by this
Agreement may be expeditiously consummated. Purchaser shall use its best efforts
to obtain all consents required to issue the Securities to Seller.
SECTION 6.3 EMPLOYMENT OFFERS. Purchaser shall offer to employ such
employees (and only such employees) of Seller as are listed on Schedule 6.3;
provided, however, that Purchaser shall not agree to maintain such employment
for any particular period of time and, if such offers are accepted, such
employees will be employed on an "at will" basis. Purchaser shall not solicit
any employees of Seller other than those set forth on Schedule 6.3.
SECTION 6.4 COBRA. Seller shall comply with the health care continuation
coverage requirements of the Consolidated Omnibus Budget Reconciliation Act of
1985 ("COBRA") applicable to employees of Seller who are terminated by Seller on
or before the Closing Time.
SECTION 6.5 MAIL AND RECEIVABLES PAYMENTS. From and after the Closing Time,
Seller shall endorse any check or any other evidence of indebtedness or payment
received by Seller on account of any Accounts after the Closing Time to the
order of Purchaser or take other appropriate actions and shall promptly forward
such payment to Purchaser no later than five (5) business days after actual
receipt by Seller. Purchaser and Seller shall each provide to the other all the
cooperation that the other may reasonably request in connection with the
collection of the Accounts.
22
SECTION 6.6 NOTIFICATION OF CERTAIN MATTERS. Each party shall give prompt
notice to the other of (i) the occurrence, or non-occurrence, of any event the
occurrence, or non-occurrence, of which would be likely to cause any
representation or warranty contained in this Agreement to be untrue or
inaccurate and (ii) any failure of Purchaser or Seller, as the case may be, to
comply with or satisfy any covenant, condition or agreement to be complied with
or satisfied by them hereunder; provided, however, that the delivery of any
notice pursuant to this Section 6.6 shall not limit or otherwise affect the
remedies available hereunder to the party receiving such notice.
SECTION 6.7 FURTHER ACTION. Upon the terms and subject to the conditions
hereto, Purchaser and Seller hereto shall use all reasonable efforts to take, or
cause to be taken, all actions and to do, or cause to be done, all other things
necessary, proper or advisable to consummate and make effective as promptly as
practicable the transactions contemplated by this Agreement to obtain in a
timely manner all necessary waivers, consents and approvals and to effect all
necessary registrations and filings, and to otherwise satisfy or cause to be
satisfied all conditions precedent to its obligations under this Agreement.
SECTION 6.8 COVENANTS AGAINST DISCLOSURE. Seller and Purchaser agree to
maintain the confidentiality of the terms and conditions of this Agreement;
provided, however, that Seller may provide copies of this Agreement and related
documents to any party who acquires, or proposes to acquire, all or
substantially all of the capital stock or remaining assets of Seller; provided,
further, however, any party hereto may disclose information to the extent
required by securities laws or as compelled by court order. Neither Seller nor
Purchaser shall disseminate (except to each other) any press release or
announcement concerning the transactions contemplated by this Agreement without
the prior written consent of the other party; provided, however, that either of
the parties hereto may disseminate information to its employees and legal and
accounting representatives.
SECTION 6.9 NO SHOP.
(a) (i) Seller will not, and will cause its respective directors, officers,
employees, representatives, investment bankers, agents and affiliates not to,
directly or indirectly, (i) solicit or encourage submission of any inquiries,
proposals or offers by any person, entity or group (other than Purchaser and its
affiliates, agents and representatives), or (ii) participate in any discussions
or negotiations with, or disclose any information concerning Seller or any of
its subsidiaries to, or afford any access to the properties, books or records of
Seller or any of its subsidiaries to, or otherwise assist, facilitate or
encourage, or enter into any agreement or understanding with, any person, entity
or group (other than Purchaser and its affiliates, agents and representatives),
in connection with any Acquisition Proposal with respect to Seller. For the
purposes of Section 6.9(a) of this Agreement, an "Acquisition Proposal" shall
mean any proposal relating to the possible acquisition of Seller, whether by way
of merger, purchase of at least 50% of the capital stock of Seller, purchase of
all or substantially all of the assets of Seller, or otherwise. In addition,
subject to the other provisions of this Section 6.9, from and after the date of
this
23
Agreement until the earlier of the Closing Time or the termination of this
Agreement, Seller and its subsidiaries will not, and will cause their respective
directors, officers, employees, representatives, investment bankers, agents and
affiliates not to, directly or indirectly, make or authorize any statement,
recommendation or solicitation in support of any Acquisition Proposal with
respect to Seller made by any person, entity or group (other than Purchaser and
its affiliates). Seller will immediately cease any and all existing activities,
discussions or negotiations with any parties conducted heretofore with respect
to any of the foregoing.
(ii) Notwithstanding the provisions of paragraph (i) above, prior to
the approval of this Agreement by the stockholders of Seller, Seller may, to the
extent the Board of Directors of Seller determines, in good faith, after
consultation with outside legal counsel, that the Board's fiduciary duties under
applicable law require it to do so, participate in discussions or negotiations
with, and, subject to the requirements of paragraph (iii) below, furnish
information to any person, entity or group after such person, entity or group
shall have delivered to Seller in writing, a Superior Proposal. For the purposes
of Sections 6.9(a) of this Agreement, a "Superior Proposal" means an
unsolicited, bona fide Acquisition Proposal which the Board of Directors of
Seller in its good faith reasonable judgment determines, after consultation with
its independent financial advisors, could reasonably be expected to result in a
transaction more favorable to the stockholders of Seller from a financial point
of view than the transactions contemplated by this Agreement and for which
financing, to the extent required, is then committed or which, in the good faith
reasonable judgment of the Board of Directors (after consultation with
independent financial advisors), is reasonably capable of being financed by such
person, entity or group and which is likely to be consummated.
(iii) Seller may furnish information to a person, entity or group that
has made a Superior Proposal only if Seller (a) first notifies Purchaser of the
information proposed to be disclosed, (b) first complies with the provisions of
paragraph (v) below and (c) provides such information pursuant to a
confidentiality agreement in form approved by Purchaser.
(iv) If Seller receives a Superior Proposal, nothing contained in this
Agreement shall prevent the Board of Directors of Seller from approving such
Superior Proposal or recommending such Superior Proposal to Seller's
stockholders, if the Board determines in good faith, after consultation with
outside legal counsel, that such action is required by its fiduciary duties
under applicable law; in such case, the Board may amend or withdraw its
recommendation of the asset purchase contemplated herein.
(v) Seller will (i) notify Purchaser immediately if any inquiry or
proposal is made or any information or access is requested in connection with an
Acquisition Proposal or potential Acquisition Proposal and (ii) immediately
communicate to Purchaser the terms and conditions of any such Acquisition
Proposal or potential Acquisition Proposal or inquiry and the identity of the
offeror or potential offeror. In addition to the foregoing, Seller shall provide
Purchaser with at least forty-eight (48) hours' prior written notice (or such
lesser prior written notice as provided to the members of Seller's Board of
Directors but in no event less than eight (8) hours) of any meeting of
24
Seller's Board of Directors at which Seller's Board of Directors is reasonably
expected to consider a Superior Proposal and provide Purchaser with at least two
(2) business days' prior written notice (or such lesser prior notice as provided
to the members of Seller's Board of Directors but in no event less than eight
(8) hours) of a meeting at which Seller's Board of Directors is reasonably
expected to recommend a Superior Proposal to its stockholders.
(vi) Nothing contained in this Section 6.9 shall prevent Seller or its
Board of Directors from complying with the provisions of Rules 14e-2 and 14d-9
promulgated under the Exchange Act.
(b) (i) From and after the date of this Agreement until the earlier of the
Closing Time or the termination of this Agreement, Purchaser and its
subsidiaries will not, and will cause their respective directors, officers,
employees, representatives, investment bankers, agents and affiliates not to,
directly or indirectly, (i) solicit or encourage submission of any inquiries,
proposals or offers by any person, entity or group (other than Seller and its
affiliates, agents and representatives), or (ii) participate in any discussions
or negotiations with, or disclose any information concerning Seller or any of
its subsidiaries to, or afford any access to the properties, books or records of
Purchaser or any of its subsidiaries to, or otherwise assist, facilitate or
encourage, or enter into any agreement or understanding with, any person, entity
or group (other than Seller and its affiliates, agents and representatives), in
connection with any Acquisition Proposal with respect to Purchaser. For the
purposes of Section 6.9(b) of this Agreement, an "Acquisition Proposal" shall
mean any proposal relating to the possible acquisition of Purchaser, whether by
way of merger, purchase of at least 50% of the capital stock of Purchaser,
purchase of all or substantially all of the assets of Purchaser, or otherwise.
In addition, subject to the other provisions of this Section 6.9, from and after
the date of this Agreement until the earlier of the Closing Time or the
termination of this Agreement, Purchaser and its subsidiaries will not, and will
cause their respective directors, officers, employees, representatives,
investment bankers, agents and affiliates not to, directly or indirectly, make
or authorize any statement, recommendation or solicitation in support of any
Acquisition Proposal with respect to Purchaser made by any person, entity or
group (other than Seller and its affiliates). Purchaser will immediately cease
any and all existing activities, discussions or negotiations with any parties
conducted heretofore with respect to any of the foregoing.
(ii) Notwithstanding the provisions of paragraph (i) above, prior to
the approval of this Agreement by the stockholders of Purchaser, Purchaser may,
to the extent the Board of Directors of Purchaser determines, in good faith,
after consultation with outside legal counsel, that the Board's fiduciary duties
under applicable law require it to do so, participate in discussions or
negotiations with, and, subject to the requirements of paragraph (iii) below,
furnish information to any person, entity or group after such person, entity or
group shall have delivered to Purchaser in writing, a Superior Proposal. For the
purposes of Sections 6.9(b) of this Agreement, a "Superior Proposal" means an
unsolicited, bona fide Acquisition Proposal which the Board of Directors of
Purchaser in its good faith reasonable judgment determines, after consultation
with its independent financial advisors, could reasonably be expected to result
in a transaction
25
that, without the asset purchase, is more favorable to the stockholders of
Purchaser from a financial point of view than such transaction with the asset
purchase and for which financing, to the extent required, is then committed or
which, in the good faith reasonable judgment of the Board of Directors (after
consultation with independent financial advisors), is reasonably capable of
being financed by such person, entity or group and which is likely to be
consummated.
(iii) Purchaser may furnish information to a person, entity or group
that has made a Superior Proposal only if Purchaser (a) first notifies Seller of
the information proposed to be disclosed, (b) first complies with the provisions
of paragraph (v) below and (c) provides such information pursuant to a
confidentiality agreement in a form approved by Seller.
(iv) If Purchaser receives a Superior Proposal, nothing contained in
this Agreement shall prevent the Board of Directors of Purchaser from approving
such Superior Proposal or recommending such Superior Proposal to Purchaser's
stockholders, if the Board determines in good faith, after consultation with
outside legal counsel, that such action is required by its fiduciary duties
under applicable law; in such case, the Board may amend or withdraw its
recommendation of the asset purchase.
(v) Purchaser will (i) notify Seller immediately if any inquiry or
proposal is made or any information or access is requested in connection with an
Acquisition Proposal or potential Acquisition Proposal and (ii) immediately
communicate to Seller the terms and conditions of any such Acquisition Proposal
or potential Acquisition Proposal or inquiry and the identity of the offeror or
potential offeror. In addition to the foregoing, Purchaser shall provide Seller
with at least forty-eight (48) hours' prior written notice (or such lesser prior
written notice as provided to the members of Purchaser's Board of Directors but
in no event less than eight (8) hours) of any meeting of Purchaser's Board of
Directors at which Purchaser's Board of Directors is reasonably expected to
consider a Superior Proposal and provide Seller with at least two (2) business
days' prior written notice (or such lesser prior notice as provided to the
members of Purchaser's Board of Directors but in no event less than eight (8)
hours) of a meeting at which Purchaser's Board of Directors is reasonably
expected to recommend a Superior Proposal to its stockholders.
(vi) Nothing contained in this Section 6.9 shall prevent Purchaser or
its Board of Directors from complying with the provisions of Rules 14e-2 and
14d-9 promulgated under the Exchange Act.
SECTION 6.10 REGISTRATION RIGHTS. At the Closing, Purchaser and Seller
shall enter into a Registration Rights Agreement, in substantially the form
attached hereto as Exhibit 6.10.
SECTION 6.11 BULK SALES LAWS. Purchaser and Seller each hereby waive
compliance by Seller with the provisions of the "bulk sales," "bulk transfer" or
similar laws of any state.
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SECTION 6.12 ALLOCATION OF TRANSFER TAXES. Purchaser and Seller will agree
to the allocation of the transfer taxes incurred in connection with the
transactions contemplated herein within 30 days following the execution of this
Agreement.
ARTICLE VII
CLOSING
SECTION 7.1 CLOSING TIME. The closing of the transactions contemplated by
this Agreement shall occur as soon as reasonably practicable after the approval
by each of Purchaser's and Seller's shareholders of the transactions
contemplated by this Agreement ("Shareholder Approval") (the date and time of
the Closing being the "Closing Time"). The Closing shall take place no later
than December 31, 2003. The Closing shall take place at the offices of
Purchaser, 0000 X. Xxxxxxxxxx Xxxx., Xxxxxxxx, Xxxxxxxxxx 00000, or at such
other place as may be agreed to in writing by Purchaser and Seller. The
"Closing" shall mean the deliveries to be made by Seller and Purchaser at the
Closing Time in accordance with this Agreement.
SECTION 7.2 DELIVERIES BY SELLER. At the Closing, Seller shall deliver to
Purchaser all duly and properly executed, the following:
(a) (1) A good and sufficient xxxx of sale in the form attached as Exhibit
7.2(a) (the "Xxxx of Sale") for the Assets to be transferred from Seller to
Purchaser selling, delivering, transferring, and assigning to Purchaser title to
all of Seller's right, title, and interest to the Assets, free and clear of all
mortgages, pledges, liens, encumbrances, security interests, equities, charges,
and restrictions of any nature whatsoever.
(b) Valid assignments of rights for all Contracts and other third party or
governmental consents necessary in order for Purchaser to operate Seller's
business.
(c) Valid patent, patent application, trademark, trademark application,
trade secret, domain name and other intellectual property assignments in the
forms attached as Exhibit 7.2(c).
(d) Valid proprietary information and invention agreements executed by the
employees of Seller listed in Schedule 6.3.
(e) The Registration Rights Agreement.
(f) An accepted offer of employment with Purchaser from all the employees
of Seller listed on Schedule 6.3.
(g) Copies of all books and records related to Seller.
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(h) The certificates and other documents required to be delivered as a
condition to closing pursuant to Section 8.1.
SECTION 7.3 DELIVERIES BY PURCHASER. At the Closing, Purchaser shall
deliver to Seller:
(a) The Purchase Price in the form of a stock certificate in the name of
Seller.
(b) The Registration Rights Agreement.
(c) The certificates and other documents required to be delivered as a
condition to closing pursuant to Section 8.2.
SECTION 7.4 FURTHER ASSURANCES. At or after the Closing Time, Seller and
Purchaser shall prepare, execute, and deliver, at its 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's title to all or any part of the Assets or to
consummate, in any other manner, the terms and provisions of this Agreement.
ARTICLE VIII
CONDITIONS PRECEDENT TO OBLIGATIONS
SECTION 8.1 CONDITIONS TO OBLIGATIONS OF PURCHASER. Each and every
obligation of Purchaser to be performed at the Closing shall be subject to the
satisfaction as of or before the Closing Time of the following conditions
(unless waived in writing by Purchaser):
(a) Representations and Warranties. The representations and warranties of
Seller set forth in this Agreement shall have been true and correct when made
and shall be true and correct at and as of the Closing Time as if such
representations and warranties were made as of such date and time.
(b) Performance of Agreement. All covenants, conditions, and other
obligations under this Agreement which are to be performed or complied with by
Seller, including necessary approvals of Seller's Board of Directors and
shareholders, shall have been fully performed and complied with at or prior to
the Closing Time.
(c) Shareholder Approval. This Agreement shall have been approved and
adopted by the requisite vote of Seller's shareholders under applicable law and
pursuant to Seller's Certificate of Incorporation.
(d) Absence of Governmental or Other Objection. There shall be no pending
or threatened lawsuit challenging the transaction by any body or agency of the
federal, state,
28
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 Closing Time.
(e) Approval of Documentation. The form and substance of all certificates,
instruments, opinions, and other documents delivered or to be delivered to
Purchaser under this Agreement shall be satisfactory to Purchaser in all
respects.
(f) Qualified Financing. The Purchaser shall have consummated an equity
financing transaction generating at least $5,000,000 in net proceeds to the
Purchaser ("Qualified Financing").
(g) Licenses. Purchaser shall have received all licenses from all
appropriate governmental agencies or third parties to operate Seller's Business
in the same manner as Seller operated the business prior to the Closing Time.
(h) Note Conversion. All principal and accrued but unpaid interest on the
Purchaser's 7% Convertible Subordinated Notes due 2005 (the "Notes") shall have
converted into Shares of Common Stock of the Purchaser at a conversion price of
at least $.20 per share of Common Stock ("Note Conversion Price").
(i) Bridge Note Conversion. Purchaser shall have converted each of its
promissory notes totaling $1,500,000 issued on March 26, 2003, and any
additional promissory notes issued from March 26, 2003 until the Closing, into
Shares of Common Stock of the Purchaser (collectively, the "Bridge Notes"), in
accordance with the terms of such Bridge Notes.
(j) Officer's Certificate. Seller shall have delivered to Purchaser an
officer's certificate, dated the date of the Closing, to the effect that all of
the conditions to Closing set forth in this Section 8.1 have been satisfied.
(k) Required Consents. Seller shall have delivered to Purchaser all
required approvals and consents to the Agreement so as to be in compliance with
Section 5.10.
SECTION 8.2 CONDITIONS TO OBLIGATIONS OF SELLER. Each and every obligation
of Seller to be performed at the Closing Time shall be subject to the
satisfaction as of or before such time of the following conditions (unless
waived in writing by Seller):
(a) Representations and Warranties. Purchaser's representations and
warranties set forth in this Agreement shall have been true and correct when
made and shall be true and correct at and as of the Closing Time as if such
representations and warranties were made as of such time and date.
(b) Performance of Agreement. All covenants, conditions, and other
obligations under this Agreement which are to be performed or complied with by
Purchaser,
29
including necessary approvals of Purchaser's Board of Directors and
shareholders, shall have been fully performed and complied with at or prior to
the Closing Time,
(c) Shareholder Approval. This Agreement and the increase in authorized
shares of Purchaser shall have been approved and adopted by the requisite vote
of Purchaser's shareholders under applicable law and pursuant to Purchaser's
Certificate of Incorporation.
(d) Absence of Governmental or Other Objection. There shall be no pending
or threatened lawsuit challenging the transaction by any body or agency of the
federal, state, or local government, and the consummation of the transaction
shall not have been enjoined by a court of competent jurisdiction as of the
Closing Time.
(e) Performance of Agreement. All covenants, conditions, and other
obligations under this Agreement which are to be performed or complied with by
Purchaser, including necessary approvals of Purchaser's Board of Directors and
shareholders, shall have been fully performed and complied with at or prior to
the Closing Time, including the delivery of the instruments and documents in
accordance with Section 7.3 hereof.
(f) Approval of Documentation. The form and substance of all certificates,
instruments, opinions, and other documents delivered or to be delivered to
Seller under this Agreement shall be satisfactory to Seller in all respects.
(g) Officer's Certificate. Purchaser shall have delivered to Seller an
officer's certificate, dated the date of the Closing, to the effect that all of
the conditions to Closing set forth in this Section 8.2 have been satisfied.
(h) Qualified Financing. The Purchaser shall have consummated a Qualified
Financing.
(i) Note Conversion. The Notes shall have converted into Common Stock of
the Purchaser at the Note Conversion Price.
(j) Bridge Note Conversion. The Bridge Notes shall have converted into
Common Stock of the Purchaser in accordance with their terms.
ARTICLE IX
INDEMNIFICATION
9.1 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. The representations and
warranties of each party hereto set forth in this Agreement (as modified by
Seller Schedules) shall survive until the date that is one year after the
Closing Date; provided, however, that the representations and warranties
contained in Sections 5.6, 5.8, 5.11 and 5.12(a) shall survive until the date
that is three (3) years after the Closing Date. All covenants and agreements
made by the parties to this Agreement
30
that contemplates performance following the Closing Date shall survive the
Closing Date. All other covenants and agreements, including without limitation
Section 6.8 of this Agreement, shall not survive the Closing Date and shall
terminate as of the Closing.
9.2 OBLIGATION OF SELLER TO INDEMNIFY, REIMBURSE, ETC. Subject to the
limitations set forth in Sections 9.1, 9.5 and 9.6, Seller and its successors
and assigns, jointly and severally, shall indemnify, reimburse, defend and hold
harmless Purchaser and its respective successors and assigns and each of their
respective directors, officers, employees, and its respective successors and
assigns from and against any claims, losses, liabilities, damages, causes of
action, costs and expenses (including reasonable attorney's, accountant's,
consultant's and expert's fees and expenses) (collectively "Losses") resulting
from, imposed upon, incurred or suffered by any of them, directly or indirectly,
based upon, arising out of or otherwise in respect of (i) any inaccuracy in or
any breach of any representation or warranty of Seller (after taking into
account the exceptions to such representations and warranties which are set
forth on the Seller Schedules), and (ii) the nonfulfillment or breach on the
part of Seller of any unwaived covenant or agreement set forth in this Agreement
which survives the Closing Date in accordance with Section 9.1.
9.3 OBLIGATION OF PURCHASER TO INDEMNIFY, REIMBURSE, ETC. Subject to the
limitations set forth in Sections 9.1, 9.5 and 9.6, Purchaser and its respective
successors and assigns, jointly and severally, shall indemnify, defend and hold
harmless Seller and its respective successors and assigns and each of its
respective directors, officers, employees, and its respective successors and
assigns from and against any Losses resulting from, imposed upon, incurred or
suffered by any of them, directly or indirectly, based upon, arising out of or
otherwise in respect of (i) any inaccuracy in or breach of any representation or
warranty of Purchaser (after taking into account the exceptions to such
representations and warranties which are set forth on the Purchaser Schedules)
and (ii) the nonfulfillment on the part of Purchaser of any unwaived covenant or
agreement set forth in this Agreement which survives the Closing Date in
accordance with Section 9.1.
9.4 NOTICE AND OPPORTUNITY TO DEFEND AGAINST THIRD PARTY CLAIMS.
(a) Promptly after receipt from any third party by any party hereto of a
written notice of any demand, claim or circumstance that, immediately or with
the lapse of time, would give rise to a claim or the commencement (or threatened
commencement) of any action, proceeding or investigation (an "Asserted
Liability") that may result in Losses for which indemnification may be sought
hereunder, the party seeking indemnification pursuant to Section 9.2 or 9.3 (the
"Indemnitee") shall give written notice thereof (the "Claims Notice") to the
party obligated to provide indemnification pursuant to Section 9.2 or 9.3 (the
"Indemnifying Party"), provided, however, that a failure to give such notice
shall not prejudice the Indemnitee's right to indemnification hereunder except
to the extent that the Indemnifying Party is actually and materially prejudiced
thereby. The Claims Notice shall describe the Asserted Liability in reasonable
detail, and shall indicate
31
the amount (estimated, if necessary) of the Losses that have been or may be
suffered by the Indemnitee when such information is available.
(b) The Indemnifying Party may elect to compromise or defend, at its own
expense and by its own counsel, any Asserted Liability. If the Indemnifying
Party elects to compromise or defend such Asserted Liability, it shall, within
20 business days following its receipt of the Claims Notice (or sooner, if the
nature of the Asserted Liability so requires) notify the Indemnitee of its
intent to do so, and the Indemnitee shall cooperate, at the expense of the
Indemnifying Party, in the compromise of, or defense against, such Asserted
Liability. If the Indemnifying Party elects not to compromise or defend the
Asserted Liability, fails to notify the Indemnitee of its election as herein
provided or contests its obligation to provide indemnification under this
Agreement, the Indemnitee may pay, compromise or defend such Asserted Liability
with all reasonable costs and expenses borne by the Indemnifying Party.
Notwithstanding the foregoing, neither the Indemnifying Party nor the Indemnitee
may settle or compromise any claim without the consent of the other party,
provided, however, that such consent to settlement or compromise shall not be
unreasonably withheld. In any event, the Indemnitee and the Indemnifying Party
may participate, at their own expense, in the defense of such Asserted
Liability; provided, however, that if the Indemnitee reasonably determines that
there is a conflict of interest between the Indemnified Party and the
Indemnitee, the fees of such counsel shall be borne by the Indemnifying Party.
If the Indemnifying Party chooses to defend any claim, the Indemnitee shall make
available to the Indemnifying Party any books, records or other documents within
its control that are necessary or appropriate for such defense.
9.5 PROCEDURE FOR INDEMNIFICATION WITH RESPECT TO NON-THIRD PARTY CLAIMS.
In the event that Purchaser, on the one hand, and Seller, on the other hand,
assert the existence of a claim giving rise to Losses (but excluding claims
resulting from the assertion of liability by third parties), Indemnitee shall
give written notice to the Indemnifying Party. Such written notice shall state
that it is being given pursuant to this Section 9.5, specify the nature and
amount of the claim asserted and indicate the date on which such assertion shall
be deemed accepted and the amount of the claim deemed a valid claim (such date
to be established in accordance with the next sentence). If Indemnifying Party,
within sixty (60) days after the mailing of notice by Indemnitee, shall not give
written notice to Indemnitee announcing its intent to contest such assertion of
Indemnitee, such assertion shall be deemed accepted and the amount of claim
shall be deemed a valid claim. In the event, however, that Indemnifying Party
contests the assertion of a claim by giving such written notice to Indemnitee
within said period, then the parties shall act in good faith to reach agreement
regarding such claim. In the event that litigation shall arise with respect to
any such claim, the prevailing party shall be entitled to reimbursement of costs
and expenses incurred in connection with such litigation, including attorney's
fees, if the parties hereto, acting in good faith, cannot reach agreement with
respect to such claim within ten (10) days after such notice.
9.6 NET INDEMNITY. The amount of any Losses from and against which either
party is liable to indemnify, reimburse, defend and hold harmless the other
party or
32
any other person pursuant to Section 9.2 or Section 9.3 shall be reduced by any
insurance or other recoveries or any tax benefit that such indemnified person
realizes or may realize as a result of or in connection with such Loss and
increased by any taxes such indemnified person realizes or may realize in
respect of indemnification for such Loss.
9.7 LIMITS ON INDEMNIFICATION. Absent fraud or willful misconduct of any
party (for which there shall be no limitation of liability of any party), no
party shall have any right to seek indemnification under this Agreement (i)
until Losses which would otherwise be indemnifiable hereunder and have been
incurred by such party and other indemnitees associated with or related to such
party exceed $100,000, after insurance or other recoveries, and on an after-tax
basis, in the aggregate (provided that after such $100,000 amount has been
satisfied, the Indemnitee shall be entitled to recover all Losses, including
such $100,000 amount); or (ii) for an aggregate amount in excess of $1,000,000.
The parties to this Agreement shall have liabilities and obligations for Losses
under this Article IX only with respect to claims submitted or notice of claims
provided during the relevant time period of survivability of the specific
representation, warranty, covenant or agreement as set forth herein.
Notwithstanding the expiration dates of the representations, warranties,
covenants and agreements set forth herein, if any party to this Agreement shall
provide notice to the other parties with respect to the submission of a claim
during the time period of survivability of such representation, warranty,
covenant or agreement, such Indemnifying Party's (as defined herein) liability
or obligation for Losses identified in such notice shall continue in full force
and effect until a final determination of such liability or obligation with
respect to those claims timely made.
ARTICLE X
TERMINATION
10.1 TERMINATION OF AGREEMENT. The parties may terminate this Agreement
with the prior authorization of their respective Board of Directors as provided
below:
(a) This Agreement may be terminated by the mutual written consent of the
parties at any time prior to the Closing Time before or after the approval of
this Agreement and the transactions contemplated hereby by the Purchaser
shareholders or the Seller shareholders.
(b) This Agreement may be terminated by either Purchaser or Seller, before
or after the approval of this Agreement and the transactions contemplated hereby
by the Purchaser shareholders or the Seller shareholders, (i) if the Closing
Time shall not have occurred by December 31, 2003 (the "Outside Date") (unless
the failure to consummate the transactions contemplated hereby by such date is
due to the action or failure to act of the party seeking to terminate) or (ii)
if any condition to the obligation of the terminating party to consummate the
transactions contemplated hereby shall have become incapable of being satisfied
prior to the Outside Date as of a result of a governmental order that is final
and non-appealable.
33
(c) This Agreement may be terminated by Seller at any time prior to the
Closing Time, before or after the approval of this Agreement and the
transactions contemplated hereby by the Purchaser shareholders or the Seller
shareholders, in the event that Purchaser shall have breached any of its
representations, warranties or covenants under this Agreement which breach (i)
would give rise to the failure of a condition set forth in Section 8.2 above,
and (ii) cannot be or has not been cured within 30 days after the giving of
written notice by Seller to Purchaser of such breach (provided that Seller is
not then in material breach of any representation, warranty or covenant
contained in this Agreement).
(d) This Agreement may be terminated by Purchaser at any time prior to the
Closing Time, before or after the approval of this Agreement and the
transactions contemplated hereby by the Purchaser shareholders or the Seller
shareholders, in the event that the Seller shall have breached any of its
representations, warranties or covenants under this Agreement which breach (i)
would give rise to the failure of a condition set forth in Section 8.1 above,
and (ii) cannot be or has not been cured within 30 days after the giving of
written notice by Purchaser to Seller of such breach (provided that Purchaser is
not then in material breach of any representation, warranty or covenant
contained in this Agreement).
(e) This Agreement may be terminated by Purchaser (i) if Seller's Board of
Directors (A) enters into or publicly announces its intention to enter into an
agreement or agreement in principle with respect to an Acquisition Proposal, and
(B) withdraws its recommendation to the Seller shareholders of this Agreement or
the transactions contemplated hereby, and (C) after the receipt of an
Acquisition Proposal, fails to confirm publicly, within ten days after the
request of Purchaser, its recommendation to the Seller shareholders that the
Seller shareholders adopt and approve this Agreement and the transactions
contemplated hereby; or (ii) if Seller or any of its Representatives takes any
of the actions that would be proscribed by Section 6.9(a) above.
(f) This Agreement may be terminated by Seller (i) if Purchaser's Board of
Directors (A) enters into or publicly announces its intention to enter into an
agreement or agreement in principle with respect to a Acquisition Proposal, and
(B) withdraws its recommendation to the Purchaser shareholders that the
Purchaser shareholders approve the issuance of the Securities as provided by the
Agreement or, if necessary, that the Purchaser shareholders approve an amendment
to the Certificate of Incorporation of Purchaser to increase the authorized
number of Purchaser Shares, and (C) after receipt of a Purchaser Acquisition
Proposal, fails to publicly confirm, within ten days after the request of
Seller, its recommendation to the Purchaser shareholders described in the
foregoing clause (B); or (ii) if Purchaser or any of its Representatives takes
any of the actions that would be proscribed by Section 6.9(b).
(g) Either party may terminate this Agreement by giving written notice to
the other party at any time after the special meeting of the Seller shareholders
called for the purpose of approving this Agreement and the transactions
contemplated hereby in the event that such matters fail to receive the requisite
approval by the Seller shareholders.
34
(h) Either party may terminate this Agreement by giving written notice to
the other party at any time after the special meeting of the Purchaser's
shareholders called for the purpose of approving this Agreement and the
transactions contemplated hereby in the event that such matters fail to receive
the requisite approval by the Purchaser shareholders.
10.2 EFFECT OF TERMINATION.
(a) Except as provided in clauses (b) or (c) of this Section 10.2, if
either party terminates this Agreement pursuant to Section 10.1 above, all
rights and obligations of the parties hereunder shall terminate without any
liability of either party to the other party (except for any liability of any
Party then in breach); provided, however, that this Section 10.2 and Article XI
below, shall survive any such termination.
(b) If this Agreement is terminated (i) by Purchaser pursuant to Section
10.1(d) or Section 10.1(e), or (ii) any person makes an Acquisition Proposal
that remains in effect on the date 60 days prior to the Outside Date and the
requisite approval of the Seller's shareholders is not obtained prior to
termination of this Agreement pursuant to Section 10.1(b), then, within sixty
(60) days after such termination, Seller shall pay Purchaser the sum of $500,000
in immediately available funds.
(c) If this Agreement is terminated (i) by Seller pursuant to Section
10.1(c) or Section 10.1(f) or (ii) any person makes a Prohibited Purchaser
Acquisition Proposal that remains in effect on the date 60 days prior to the
Outside Date and the requisite approval of the Purchaser shareholders is not
obtained prior to termination of this Agreement pursuant to Section 10.1(b),
then, within sixty (60) days after such termination, Purchaser shall pay the
Company the sum of $500,000 in immediately available funds.
ARTICLE XI
MISCELLANEOUS PROVISIONS
SECTION 11.1 NOTICE. All notices and other communications required or
permitted under this Agreement shall be delivered to the parties at the address
set forth below, or at such other address that they designate by notice to all
other parties in accordance with this Section 11.1. 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:
35
If to Purchaser: P-Com, Inc.
0000 X. Xxxxxxxxxx Xxxx.
Xxxxxxxx, XX 00000
Attention: General Counsel
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
with a copy to: Sheppard, Mullin, Xxxxxxx & Hampton LLP
000 Xxxxxxx Xxxxxx
Xxxxx Xxxxxxx, XX 00000
Attention: Xxxxxxxx X. Xxxxxxx, Esq.
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
If to Seller: SPEEDCOM Wireless Corporation
0000 Xxxxxxxxxxxx Xxxxxxx Xxxx
Xxxxxxxx, XX 00000
Attention: Chief Executive Officer
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
with a copy to: Xxxxxxx Berlin Shereff Xxxxxxxx, LLP
0000 X Xxxxxx, X.X., Xxxxx 000
Xxxxxxxxxx, XX 00000
Attention: Xxxx X. XxXxxxxxxx, Esq.
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
SECTION 11.2 ENTIRE AGREEMENT. This Agreement, the exhibits and schedules
hereto, and the documents referred to herein embody the entire agreement and
understanding of the parties hereto with respect to the subject matter hereof,
and supersede all prior and contemporaneous agreements and understandings, oral
or written, relative to said subject matter.
SECTION 11.3 REMEDIES OF PURCHASER. Seller agrees that the Assets are
unique and not otherwise readily available to Purchaser. Accordingly, Seller
acknowledges that, in addition to all other remedies to which Purchaser are
entitled, Purchaser shall have the right to enforce the terms of this Agreement
by a decree of specific performance, provided Purchaser is not in material
default hereunder.
SECTION 11.4 BINDING EFFECT, ASSIGNMENT. This Agreement and the various
rights and obligations arising hereunder shall inure to the benefit of and be
binding upon Seller, its successors and permitted assigns, and Purchaser and its
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
36
otherwise) by either of the parties hereto without the prior written consent of
the other party.
SECTION 11.5 EXPENSES OF TRANSACTION, TAXES. Each party shall bear its own
costs and expenses in connection with this Agreement.
SECTION 11.6 WAIVER, CONSENT. This Agreement may not be amended 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 11.7 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 11.8 SEVERABILITY. If one or more provisions of this Agreement are
held to be unenforceable under applicable law, such provision shall be excluded
from this Agreement and the balance of the Agreement shall be interpreted as if
such provision were so excluded and shall be enforceable in accordance with its
terms.
SECTION 11.9 GOVERNING LAW. This Agreement shall in all respects be
construed in accordance with and governed by the laws of the State of Delaware
as applied to agreements among Delaware residents entered into and to be
performed entirely within the State of Delaware.
SECTION 11.10 ATTORNEYS' FEES. If any action at law or in equity is
necessary to enforce or interpret the terms of this Agreement or to protect the
rights obtained hereunder the prevailing party shall be entitled to its
reasonable attorneys' fees, costs, and disbursements in addition to any other
relief to which it may be entitled.
SECTION 11.11 COOPERATION AND RECORDS RETENTION. Seller and Purchaser shall
(i) each provide the other with such assistance as may reasonably be requested
by them in connection with the preparation of any tax return, statement, report
form or other document (hereinafter collectively a "Tax Return"), or in
connection with any audit or other examination by any taxing authority or any
judicial or administrative proceedings relating to liability for Taxes, (ii)
each retain and provide the other, with any
37
records or other information which may be relevant to any such Tax Return, audit
or examination, proceeding or determination, and (ii) each provide the other
with any final determination of any such audit or examination, proceeding or
determination that affects any amount required to be shown on any Tax Return of
the other for any period. Without limiting the generality of the foregoing,
Seller and Purchaser shall retain, until the applicable statute of limitations
(including any extensions) have expired, copies of all Tax Returns, supporting
work schedules and other records or information which may be relevant to such
Tax Returns for all tax periods or portions thereof ending before or including
the Closing Time and shall not destroy or otherwise dispose of any such records
without first providing the other party with a reasonable opportunity to review
and copy the same. Purchaser shall keep the original copies of the records at
its facilities in California and elsewhere, if applicable, and, at Seller's
expense, shall provide copies of the Records to Seller upon request.
SECTION 11.12 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.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
38
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.
By:
-------------------------------------
Name: Xxxxxx X. Xxxxxxx
Title: Chief Executive Officer
SPEEDCOM WIRELESS CORPORATION
By:
-------------------------------------
Name:
Title: Chief Executive Officer
39
SCHEDULES TO ASSET PURCHASE AGREEMENT
The following schedules refer to the Asset Purchase Agreement (the
Agreement") dated as of June , 2003, by and between SPEEDCOM Wireless
--
Corporation, a Delaware corporation ("Seller"), and P-Com, Inc., a Delaware
corporation ("Purchaser").
Nothing in the following schedules is intended to broaden the scope of any
representation or warranty contained in the Agreement or to create any covenant
on the part of either Party.
To the extent more than one representation and warranty contained in the
Agreement requires the same disclosure, the appearance of such disclosure on any
single schedule herein shall serve as disclosure for all other representations
and warranties to which such disclosure applies. The failure by either Party to
cross-reference any disclosure on any particular schedule shall not constitute a
breach by that Party of the applicable representation or warranty as long as the
matter is disclosed elsewhere in these schedules.
Inclusion of any item in the schedules (1) does not represent a
determination by either Party that such item is material nor shall it be deemed
to establish a standard of materiality (it being the intent that such Party
shall not be penalized for having disclosed more than it may be required by the
terms of the Agreement), (2) does not represent a determination by such Party
that such item did not arise in the ordinary course of business and (3) shall
not constitute, or be deemed to be, an admission concerning such item by the
Party. The items in the schedules are descriptions of instruments or brief
summaries of certain aspects of each Party, such Party's business and the
business of such Party (to such Party's knowledge). Such descriptions and
summaries are qualified in their entirety by reference to the more detailed
information in documents attached hereto or previously delivered or made
available to either Party and its representatives.
Capitalized terms used but not defined herein shall have the same meanings
ascribed to them in the Agreement. The headings in the following schedules are
for reference only and shall not affect the disclosures contained therein.
40
SCHEDULE 1.1
Seller's assets are subject to the following liens:
1. All tangible and intangible assets of Seller secure $4,143,000 of notes
payable (this amount could increase as new bridge loans are given).
2. Seller has various capital leases (approximately $27,000 in total) for
software, phones and equipment that are collateralized by assets of Seller.
3. Seller owes the Florida Department of Revenue $28,173 (as of the date this
schedule was prepared), for which the Florida Department of Revenue has filed a
claim.
41
SCHEDULE 1.1(a)
Furniture and Fixtures $ 157,653
Automobiles 7,600
Store and Warehouse Equipment 223,733
Leasehold Improvements 144,436
Computers and Office Equipment 1,013,387
----------
Gross 1,546,809
Accumulated Depreciation 1,064,108
----------
Net $ 482,701
Note that these numbers are subject to adjustment based on small purchases
made between the date that this schedule was prepared and the Closing Date and
depreciation.
42
SCHEDULE 1.1(b)
Raw Materials $ 662,311
Finished Goods 576,155
----------
Gross 1,238,466
Reserve 83,353
----------
Net $1,155,113
Note that these numbers are subject to adjustment based on purchases and sales
made between the date that this schedule was prepared and the Closing Date, as
well as adjustments to the obsolescence reserve.
43
SCHEDULE 1.1(c)
Cash $ 201,416 (115,472 foreign accounts)
Prepaid Expenses 21,434
Rental Deposits 219,026
Utility Deposits 6,397
Leases Receivable 110,338
--------
Total $558,611
Note that these numbers are subject to adjustment based on amortization,
payments made and payments received between the date this schedule was prepared
and the Closing Date. Notwithstanding the foregoing, the total of the itemized
accounts herein on the Closing Date, exclusive of leases receivable, shall not
be less than the total amount set forth in this Schedule 1.1(c).
44
SCHEDULE 1.1(d)
All leasehold improvements are listed on Schedule 1.1(a).
45
SCHEDULE 1.1(e)
SRI Intellectual Property $1,599,500
Amortization 618,714
----------
Net $ 980,786
Note that these numbers are subject to adjustment based on amortization between
the date this schedule was prepared and the Closing Date.
46
SCHEDULE 1.1(f)
Accounts Receivable $628,889
Reserve 121,020
--------
Net $507,869
Note that these numbers are subject to adjustment based on sales and payments
received between the date this schedule was prepared and the Closing Date and
adjustments in the bad debt and credit memo reserves. Notwithstanding the above,
the total accounts receivable on the Closing Date shall not be less than the
amount set forth in this Schedule 1.1(f), less the Excluded Assets as set forth
on Schedule 1.2.
47
SCHEDULE 1.2
Seller shall retain up to $200,000 in accounts receivable, which amount shall be
determined as a result of AP Reductions obtained by Seller, as more particularly
set forth in Schedule 2.1.
48
SCHEDULE 2.1
Purchaser will assume all of the liabilities of Seller described below, subject
to the applicable notes, which qualify the liabilities assumed by Seller:
Accounts Payable $1,135,024*
Accrued Expenses 921,094**
Deferred Revenue 24,411
Notes and Leases Payable 4,387,121***
VP Employment Contracts 175,000****
----------
Total $6,642,650
* Purchaser shall assume all of the accounts payable generated in the ordinary
course of business subject to a maximum amount of $1,200,000, which amount shall
be reduced by any agreements entered into between existing creditors and Seller
to reduce the amount of the accounts payable ("AP Reductions"). For every dollar
saved as a result of AP Reductions, Seller shall get credit for $.50 of each
such dollar, which credit shall be retained by Seller as an Excluded Asset. The
accounts payable assumed by Purchaser shall specifically exclude the obligation
to Jenkens & Xxxxxxxxx, attorneys to investors of Seller, which obligation shall
be an Excluded Liability.
** Purchaser shall only assume Seller's (i) accrued payroll and vacation pay
liability of no more than $150,000; (ii) severance obligations to Xxxx Xxxxx of
no more than $17,500.00; (iii) customer deposits; (iv) amounts due and payable
by Seller to Purchaser; and (v) other accrued expenses totaling no more than
$25,000. Seller shall not assume any other accrued expenses, which expenses
shall constitute Excluded Liabilities. By way of example, and not by limitation,
Excluded Liabilities shall include (x) all severance and related obligations to
Xxx Xxxxxx and Xxxxx Xxxxxxxxxxx; (y) accrued interest payable to Seller's
equity or debt investors, other than Purchaser; and (z) any notes or accrued
interest obligations to past or current directors of Seller.
*** Purchaser shall only assume (i) up to $3,000,000 in promissory notes, which
notes shall be renegotiated so that principal and accrued interest are due and
payable according to the following terms: (A) a maturity of not less than 36
months; and (B) annual interest rate not to exceed 7%; (ii) capital lease
obligations of no more than $27,000; and (iii) amounts due and payable by Seller
to Purchaser. All other Notes and Leases Payable shall constitute Excluded
Liabilities.
**** Seller has three employment contracts which shall be assumed or
renegotiated by Purchaser: one with the VP of Marketing, one with the VP of
Research and Development and one with the VP of Finance and Accounting. These
employment contracts guarantee six months' salary in the case of two contracts
and twelve months' salary in the case of
49
one contract upon a change of control to the employees, if they leave the new
combined company. This change of control has already occurred.
Seller is past due on many of its payment to vendors who originally gave Seller
net 30 terms. Seller has provided P-Com with a list of its aged payables.
Seller is required to start accruing dividends on the outstanding preferred
stock in August 2003.
Seller is currently involved in a settlement negotiation with Racks. A liability
for this settlement has not been recorded yet because the agreement has not been
signed yet. Estimated liability to Seller is $12,000.
Seller is currently involved in litigation with XeTel Corporation. This
litigation is in the early stages. Seller gave a PO to XeTel with terms net 30,
and subsequently cancelled shipment. The equipment was never delivered, but
XeTel is claiming that they incurred costs buying the inventory for Seller.
XeTel is claiming to have $101,527 of inventory. Seller examined the list and
can use $70,035 of the inventory that XeTel has. Settlement possible.
50
SCHEDULE 3.2
Assumptions:
1. Purchaser anticipates that approximately 163,000,000 shares of its
Common Stock ("Share Value") will be issued and outstanding
immediately prior to the Closing, which amount assumes (i) 41,037,644
shares of Common Stock issued and outstanding as of the date hereof,
(ii) the issuance of shares upon conversion of the Purchaser's 7%
Convertible Subordinated Notes due 2005 in satisfaction of the
condition precedent described in Section 8.1(h) of the Agreement;
(iii) the issuance of shares upon conversion of certain promissory
notes of the Purchaser totaling $1,500,000 issued on March 26, 2003;
(iii) the issuance of certain shares to persons or entities under
existing obligations or proposed in connection with transactions
contemplated by this Agreement; provided, however, the Share Value
shall not include any dilution incurred as a result of the
consummation of a Qualified Financing, or shares issuable in
connection with any transaction approved by the Parties in writing.
2. In the event Purchaser's Share Value exceeds 180,000,000 just prior to
the Closing, the shares of Common Stock constituting the Purchase
Price shall be increased so that the percentage ownership of Seller in
Purchaser immediately after Closing equals 29.3%.
51
SCHEDULE 4.8
Not applicable.
52
SCHEDULE 4.9
Not applicable.
53
SCHEDULE 4.11
Xxxxx McAfee Capital Partners shall receive compensation in the amount of 2% of
the Purchase Price in connection with the transactions contemplated hereby.
54
SCHEDULE 5.1
Speedcell Corporation Common Stock (written off as worthless).
55
SCHEDULE 5.1(a)
Seller is qualified to conduct business as a foreign corporation in the
following jurisdictions:
Florida
Maryland
California
Spain
Brazil
Singapore
Shanghai
Canada
56
SCHEDULE 5.5
Seller received a bridge loan in the initial principal amount of $200,000 on May
15, 2003.
57
SCHEDULE 5.12(b)
Trade Marks
SPEEDVIEW November 15, 2002 Xxxxxxxxxxxx #000000 Xxxxxx Xxxxxx
SPEEDVOICE June 1, 1998 Xxxxxxxxxxxx #0000000 Xxxxxx Xxxxxx
SPEEDCOM March 21, 0000 Xxxxxxxxxxxx #0000000 Xxxxxx Xxxxxx
Trade Names
SPEEDLAN
SPEEDWAVE
Licenses
Intellectual Property License Agreement between SRI International and Seller
dated January 10, 2001.
58
SCHEDULE 5.12(i)
Trade Marks
SPEEDVIEW November 15, 2002 Xxxxxxxxxxxx #000000 Xxxxxx Xxxxxx
SPEEDVOICE June 1, 1998 Xxxxxxxxxxxx #0000000 Xxxxxx Xxxxxx
SPEEDCOM March 21, 0000 Xxxxxxxxxxxx #0000000 Xxxxxx Xxxxxx
Trade Names
SPEEDLAN
SPEEDWAVE
Licenses
Intellectual Property License Agreement between SRI International and Seller
dated January 10, 2001.
59
SCHEDULE 5.13
Warrant No. W-1 to Purchase 146,667 Shares of Common Stock issued to S.A.C.
Capital Associates, LLC.
Warrant No. W-2 to Purchase 73,333 Shares of Common Stock issued to SDS Merchant
Fund, L.P.
Warrant No. W-3 to Purchase 220,000 Shares of Common Stock issued to Oscar
Private Equity Investments, L.P.
Warrant No. W-4 to Purchase 73,333 Shares of Common Stock issued to Xxxxx
Xxxxxxxxxxx.
Purchase Agreement, dated August 23, 2001, by and among Seller and Purchasers,
as defined.
Registration Rights Agreement dated August 23, 2001, by and among Seller and
Purchasers, as defined.
Form of Series A Warrant of Seller dated August 23, 2001.
Form of Series B Warrant of Seller dated August 23, 2001.
Settlement Agreement between Seller and X.X. Xxxxxx Group, Inc. dated June 25,
2001.
Secured Promissory Note dated April 26, 2002 between Seller and DMG Legacy Fund,
LLC.
Secured Promissory Note dated May 7, 2002 between Seller and DMG Legacy Fund,
LLC.
Secured Promissory Note dated April 26, 2002 between Seller and DMG Legacy
Institutional Fund LLC.
Secured Promissory Note dated May 7, 2002 between Seller and DMG Legacy
Institutional Fund LLC.
Secured Promissory Note dated April 26, 2002 between Seller and DMG Legacy
International LTD.
Secured Promissory Note dated May 7, 2002 between Seller and DMG Legacy
International LTD.
Letter Loan Agreement dated April 26, 2002.
Security Agreement dated April 26, 2002.
Letter Agreement dated April 26, 2002.
Agreement to Vote Shares dated April 26, 2002.
Secured Promissory Note dated June 10, 2002 between Seller and SDS Merchant
Fund, L.P.
Secured Promissory Note dated June 11, 2002 between Seller and SDS Merchant
Fund, L.P.
Secured Promissory Note dated June 12, 2002 between Seller and SDS Merchant
Fund, L.P.
Secured Promissory Note dated June 25, 2002 between Seller and DMG International
LTD.
Secured Promissory Note dated June 25, 2002 between Seller and DMG Legacy Fund
LLC.
Secured Promissory Note dated June 25, 2002 between Seller and DMG Legacy
Institutional Fund LLC.
Letter Loan Agreement dated June 10, 2002.
Security Agreement dated June 10, 2002.
Secured Promissory Note dated August 8, 2002 between Seller and DMG Legacy Fund
LLC.
Secured Promissory Note dated August 8, 2002 between Seller and DMG
International LTD.
Secured Promissory Note dated August 8, 2002 between Seller and DMG Legacy
Institutional Fund LLC.
Letter Loan Agreement dated August 8, 2002.
Security Agreement dated August 8, 2002.
Secured Promissory Note dated September 18, 2002 between Seller and DMG Legacy
Fund LLC.
Secured Promissory Note dated September 18, 2002 between Seller and DMG
International LTD.
Secured Promissory Note dated September 18, 2002 between Seller and DMG Legacy
Institutional Fund LLC.
Letter Loan Agreement dated September 18, 2002.
Security Agreement dated September 18, 2002.
Secured Promissory Note dated November 11, 2002 between Seller and DMG Legacy
Fund LLC.
Secured Promissory Note dated November 11, 2002 between Seller and DMG
International LTD.
Secured Promissory Note dated November 11, 2002 between Seller and DMG Legacy
Institutional Fund LLC.
Letter Loan Agreement dated November 11, 2002.
Security Agreement dated November 11, 2002.
Secured Promissory Note dated December 24, 2002 between Seller and DMG Legacy
Fund LLC.
Secured Promissory Note dated December 24, 2002 between Seller and DMG
International LTD.
Secured Promissory Note dated December 24, 2002 between Seller and DMG Legacy
Institutional Fund LLC.
Letter Loan Agreement dated December 24, 2002.
Security Agreement dated December 24, 2002.
60
Secured Promissory Note dated January 31, 2003 between Seller and DMG Legacy
Fund LLC.
Secured Promissory Note dated January 31, 2003 between Seller and DMG
International LTD.
Secured Promissory Note dated January 31, 2003 between Seller and DMG Legacy
Institutional Fund LLC.
Letter Loan Agreement dated January 31, 2003.
Security Agreement dated January 31, 2003.
Note Purchase Agreement dated March 26, 2003.
Convertible Promissory Note dated March 26, 2003.
Letter Loan Agreement dated April 14, 2003.
Security Agreement dated April 14, 2003.
Secured Promissory Note dated April 14, 2003 between Seller and SDS Merchant
Fund L.P.
Letter Loan Agreement dated April 29, 2003.
Security Agreement dated April 29, 2003.
Secured Promissory Note dated April 29, 2003 between Seller and North Sound
Legacy Institutional Fund LLC.
Secured Promissory Note dated April 29, 2003 between Seller and North Sound
Legacy International LTD.
Severance Agreement between Seller and Xxxxxxx Xxxxx.
Xxxxxxxxx Agreement between Seller and Xxxxx Xxxxxxxxxxx. SPEEDCOM has received
default notice.
Severance Agreement between Seller and Xxx Xxxxxx.
SPEEDCOM has received default notice.
Employment Agreement between Seller and Xxxxxxx Xxxxxxxx
Employment Agreement between Seller and Xxxx Xxxxx
Employment Agreement between Seller and Xxxxxx Xxxxxx
Employment Memo between Seller and Xxxx Xxxxx
Promissory Note between Seller and XX Xxxxxx
Promissory Note between Seller and Xxxx Xxxxx
Promissory Note between Seller and Xxxx xxx Xxxx
Capital Lease between Seller and Telogy
Capital Lease between Seller and American PackagingCapital
Capital Lease between Seller and Graybar
Rental Lease Agreement between Seller and Lakewood Ranch, as amended
Rental Lease Agreement between Seller and Xxxxxxx Xxxxx
Rental Lease Agreements for the Brazil, Shanghai and Singapore offices
(one year lease terms)
Operating Lease Agreement between Seller and GE Capital
Operating Lease Agreement between Seller and Dell Computers
Operating Lease Agreement between Seller and De Lage
Operating Lease Agreement between Seller and J&J Leasing
Penalty on late registration of S-3 to the preferred investors $163,970
61
SCHEDULE 5.15(d)
Employment Agreement between Seller and Xxxxxxx Xxxxxxxx
Employment Agreement between Seller and Xxxx Xxxxx
Employment Agreement between Seller and Xxxxxx Xxxxxx
Employment Memo between Seller and Xxxx Xxxxx
62
SCHEDULE 5.16
Seller's 401(k) Plan
Seller's 1998 Employee Stock Option Plan
Seller's 2000 Employee Stock Option Plan
Severance Agreement between Seller and Xxxxxxx Xxxxx.
Xxxxxxxxx Agreement between Seller and Xxxxx Xxxxxxxxxxx
Severance Agreement between Seller and Xxx Xxxxxx
Employment Agreement between Seller and Xxxxxxx Xxxxxxxx
Employment Agreement between Seller and Xxxx Xxxxx
Employment Agreement between Seller and Xxxxxx Xxxxxx
Employment Memo between Seller and Xxxx Xxxxx
63
SCHEDULE 5.17
In connection with the transactions contemplated herein, X.X. Xxxxxxxxxx will
receive a fee of $150,000. In connection with X.X. Xxxxxxxxxx'x services in
connection with the conversion of the SDS loans to equity, X.X. Xxxxxxxxxx will
receive an additional fee of $150,000. Such fees shall be payable in stock of
the Seller.
64
SCHEDULE 5.22
Backlog as of 5/28/03 is $22,257 that will not ship in May because of inventory
lead-time issues.
65
SCHEDULE 5.24
Raw Materials $ 662,311
Finished Goods 576,155
----------
Gross $1,238,466
Standard Reserve $ 83,353
Reserve for Nonuse in 3 Months 30,104
----------
Net $1,185,217
Note that these numbers are subject to adjustment based on purchases and sales
made between the date that this schedule was prepared and the Closing Date, as
well as adjustments to the obsolescence reserves.
66
SCHEDULE 5.25
Seller has furnished to Purchaser an aging of its Accounts Receivable and
Accounts Payable as of various dates and can request an updated aging at any
time (last aging date given 5/28/03). There are numerous instances where Seller
has not been paid within terms or has not paid within terms as can be observed
from these agings.
Receivables relate to products that can be returned by customers, but Seller has
an established reserve for such returns that is evaluated every quarter. As of
March 31, 2003, Seller believes this reserve was adequate. Bad debt is always
possible as well, but Seller has an established reserve for payment refusals
that is evaluated every quarter. As of March 31, 2003, Seller believes this
reserve was adequate.
Seller does accept deposits and prepayments both for maintenance contracts that
extend over a period of time and for shipments yet to be made.
67
SCHEDULE 6.3
To be determined prior to Closing.
68
EXHIBIT 6.10
FORM OF REGISTRATION RIGHTS AGREEMENT
69
EXHIBIT 7.2(a)
FORM OF XXXX OF SALE
70
EXHIBIT 7.2(b)
FORM OF ASSIGNMENT OF CONTRACTS
71
EXHIBIT 7.2(c)
FORM OF ASSIGNMENT OF INTELLECTUAL PROPERTY
72
