1
EXHIBIT 2
ASSET PURCHASE AGREEMENT
BY AND AMONG
PARADYNE NETWORKS INC.
"PDYN",
PARADYNE CORPORATION
AS "BUYER",
P-COM, INC.
"P-COM"
AND
CONTROL RESOURCES CORPORATION
AS "SELLER"
DATED AS OF APRIL 5, 2000
2
TABLE OF CONTENTS
Page
----
ARTICLE I
DEFINITIONS
1.1 Defined Terms...................................................................................1
ARTICLE II
PURCHASE AND SALE OF TRANSFERRED ASSETS
2.1 Transferred Assets..............................................................................6
2.2 Excluded Assets.................................................................................8
2.3 Assumption of Liabilities by the Buyer..........................................................8
2.4 Purchase Price..................................................................................8
ARTICLE III
CLOSING
3.1 Closing........................................................................................10
3.2 Seller's Deliveries at the Closing.............................................................10
3.3 Buyer's Deliveries at the Closing..............................................................10
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE SELLER AND P-COM
4.1 Organization of Seller.........................................................................10
4.2 Authorization..................................................................................10
4.3 Financial Statements...........................................................................11
4.4 Absence of Certain Changes.....................................................................11
4.5 Title to Transferred Assets, Right to Convey...................................................11
4.6 Contracts and Commitments......................................................................12
4.7 No Conflict or Violation.......................................................................13
4.8 Consents and Approvals.........................................................................13
4.9 Litigation.....................................................................................13
4.10 Compliance with Law; Permits and Licenses......................................................14
4.11 Brokers........................................................................................14
4.12 Intellectual Property Rights...................................................................14
4.13 Employee Plans.................................................................................16
4.14 Taxes..........................................................................................17
-ii-
3
4.15 Environmental and Other Regulations............................................................17
4.16 Labor Matters..................................................................................18
4.17 Insurance......................................................................................18
4.18 Sufficiency of Transferred Assets..............................................................18
4.19 Inventory......................................................................................18
4.20 Suppliers......................................................................................19
4.21 Backlog........................................................................................19
4.22 Accounts Receivable............................................................................19
4.23 Definition of "knowledge"......................................................................19
4.24 Employee Stock Options.........................................................................20
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF THE BUYER
5.1 Organization of the Buyer......................................................................20
5.2 Authorization..................................................................................20
5.3 No Conflict or Violation.......................................................................20
5.4 Consents and Approvals.........................................................................20
5.5 Litigation.....................................................................................21
5.6 Brokers........................................................................................21
5.7 Purchase for Resale............................................................................21
5.8 No Breach by the Seller........................................................................21
5.9 Organizational Documents.......................................................................21
5.10 Investigation and Evaluation...................................................................21
5.11 SEC filings....................................................................................21
ARTICLE VI
ACTIONS BY SELLER AND BUYER PRIOR TO THE CLOSING
6.1 Conduct of Business............................................................................22
6.2 Access to Information..........................................................................22
6.3 Regulatory and Other Authorizations............................................................22
6.4 Bulk Transfer Laws.............................................................................23
6.5 Insurance......................................................................................23
6.6 Release from Assumed Liabilities...............................................................23
6.7 Further Action.................................................................................23
6.8 Non-Assignable Leases, Contracts, and Permits..................................................23
6.9 Schedules......................................................................................24
6.10 Notification of Changes........................................................................24
6.11 Compliance with New Jersey Industrial Site Recovery Act........................................24
-iii-
4
ARTICLE VII
CONDITIONS TO CLOSING
7.1 Conditions to Obligations of the Seller........................................................25
7.2 Conditions to Obligations of the Buyer.........................................................26
ARTICLE VIII
ACTIONS BY SELLER AND BUYER
AFTER THE CLOSING
8.1 Confidentiality................................................................................28
8.2 Employment of Seller's Personnel...............................................................28
8.3 Books and Records; Access to Information.......................................................30
8.4 Mail Received After Closing....................................................................31
8.5 Other Employee Benefits........................................................................32
8.6 No Solicitation................................................................................32
8.7 Discharge of Business Obligations..............................................................32
8.8 UCC Matters....................................................................................32
8.9 Tax Matters....................................................................................32
8.10 Sales and Transfer Taxes.......................................................................32
8.11 Change of Name.................................................................................33
ARTICLE IX
INDEMNIFICATION
9.1 Survival of Certain Representations and Warranties.............................................33
9.2 Indemnification by the Buyer...................................................................33
9.3 Indemnification by the Seller and P-COM........................................................35
ARTICLE X
TERMINATION AND ABANDONMENT
10.1 Methods of Termination.........................................................................36
10.2 Procedure Upon Termination.....................................................................37
10.3 Effect of Termination..........................................................................37
ARTICLE XI
MISCELLANEOUS
11.1 Specific Performance...........................................................................37
11.2 Assignment.....................................................................................37
-iv-
5
11.3 Notices........................................................................................37
11.4 Choice of Law..................................................................................38
11.5 Resolution of Conflicts; Arbitration...........................................................38
11.6 Entire Agreement; Amendments and Waivers.......................................................39
11.7 Counterparts...................................................................................39
11.8 Invalidity.....................................................................................39
11.9 Headings.......................................................................................39
11.10 Expenses.......................................................................................39
11.11 Publicity......................................................................................39
-v-
6
SCHEDULES AND EXHIBITS
SELLER'S SCHEDULES
Schedule 2.1(a) - Leases and Leased Real Property
Schedule 2.1(b) - Equipment
Schedule 2.1(c) - Contracts
Schedule 2.1(e) - Intellectual Property Rights
Schedule 2.1(g) - Permits
Schedule 2.1(h) - Receivables
Schedule 2.1(i) - Computer Programs
Schedule 2.2 - Excluded Assets
Schedule 2.3 - Excluded Liabilities
Schedule 4.5 - Title Exceptions
Schedule 4.6(c) - Material Contract or Lease Defaults
Schedule 4.6(d) - Contracts not in the Ordinary Course
Schedule 4.6(e) - Termination or Amendments to Contracts
Schedule 4.7 - Conflict or Violation
Schedule 4.8 - Consents and Approvals
Schedule 4.9 - Litigation
Schedule 4.10(a) - Compliance with Law
Schedule 4.10(b) - Permits and Licenses
Schedule 4.12(a) - Intellectual Property Rights Requiring Third Party Consent to be Assigned
Schedule 4.12(h) - Royalties
Schedule 4.12(i) - Agreements with Officers and Employees regarding Intellectual Property Rights
Schedule 4.14 - Taxes
Schedule 4.15(a) - Environmental and Other Regulations
Schedule 4.15(b) - Equal Employment Opportunity and Employee Health and Safety
Schedule 4.16(b) - Labor Matters
Schedule 4.17 - Insurance
Schedule 4.18 - Sufficiency of Transferred Assets
Schedule 4.19 - Inventory
Schedule 4.20 - Suppliers
Schedule 4.21 - Backlog
Schedule 4.22 - Accounts Receivable
Schedule 7.1(c) - Key Employees
Schedule 7.1(e) - Employee Stock Options
Schedule 8.2(a) - Employees
Schedule 8.2(c) - Employees with Additional Severance
EXHIBITS
Exhibit 1.1 - Financial Statements
Exhibit 2.4 - Note
Exhibit 8.1 - Confidentiality Agreement
Exhibit 8.2(b)(i) - Paradyne/CRC Special Severance Plan
Exhibit 8.2(b)(ii) - Form of Termination Agreement, Waiver and Release
-i-
7
This Asset Purchase Agreement, dated as of April 5, 2000
(together with all schedules and exhibits hereto, the "Agreement"), is by and
between Paradyne Networks, Inc., a corporation organized and existing under the
laws of Delaware ("PDYN"), Paradyne Corporation, a corporation organized and
existing under the laws of Delaware and a wholly owned subsidiary of PDYN (the
"Buyer"), P-Com, Inc., a corporation organized and existing under the laws of
Delaware ("P-COM"), and Control Resources Corporation, a corporation organized
and existing under the laws of Delaware and a wholly owned subsidiary of P-COM
(the "Seller").
RECITALS
WHEREAS, the Seller is presently engaged in the design,
manufacture and sale of communications products primarily for network and
information service providers (the foregoing is referred to hereinafter as the
"Business");
WHEREAS, subject to the terms and conditions of this
Agreement, the Buyer desires to purchase from Seller, and the Seller desires to
sell to the Buyer, all of the assets of the Seller related to the Business; and
WHEREAS, the Seller desires that the Buyer assume, and the
Buyer has agreed to assume, certain of the liabilities of the Seller related to
the Business;
NOW, THEREFORE, in consideration of the mutual covenants and
promises contained herein, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS
1.1 Defined Terms. Capitalized words and phrases used and not
otherwise defined in this Agreement shall have the following meanings:
"Actions" is defined in Section 4.9.
"Affiliate" means a Person that directly, or indirectly
through one or more intermediaries, controls, is controlled by or is under
common control with the Person specified. For purposes of this definition, the
term control of a Person means the possession, direct or indirect, of the power
to (i) vote 50% or more of the voting securities of such Person or (ii) direct
or cause the direction of the management and policies of such Person, whether
by contract or otherwise, and the terms and phrases controlling, controlled by
and under common control with have correlative meanings.
"Agreement" is defined in the preamble.
"Allocation Schedule" is defined in Section 2.4(c)
8
"Assumed Liabilities" means the liabilities of the Seller
assumed by the Buyer pursuant to this Agreement which specifically exclude the
Excluded Liabilities set forth on Schedule 2.3.
"AT&T" means any entity which is affiliated with AT&T Corp.
"Business" is defined in the Recitals.
"Business Day" means any day other than a Saturday, Sunday or
other day on which commercial banks in New York are authorized or required by
law to close.
"Buyer" is defined in the preamble.
"Closing" is defined in Section 3.1.
"Closing Cash Payment" is defined in Section 2.4(a)(i).
"Closing Date" means the date on which the Closing occurs
pursuant to Section 3.1.
"Code" means the Internal Revenue Code of 1986, as amended
from time to time.
"Computer Programs" is defined in Section 2.1(i).
"Contracts" is defined in Section 2.1(c).
"Cause" shall mean (a) a material breach of the Buyer's
written policies constituting dishonesty, breach of a fiduciary obligation,
intentional wrongdoing or malfeasance, violation or negligent disregard for
workplace rules and procedures, insubordination, theft, violent acts or threats
of violence, or consumption of alcohol or possession of controlled substances
on the property of the Buyer (or an Affiliate of the Buyer); (b) conviction of
a criminal violation constituting a felony (other than a felony traffic
offense) or involving fraud or dishonesty; (c) the failure to materially
satisfy the conditions and requirements of an employment with the Buyer (or an
Affiliate of the Buyer), and such failure by its nature is incapable of being
cured, or such failure remains uncured for more than 30 days following receipt
by the employee of written notice from the Buyer specifying the nature of the
failure and demanding the cure thereof. For purposes of this definition,
inattention by an employee to his or her duties shall be deemed a failure
capable of cure.
"Equipment" is defined in Section 2.1(b).
"Environmental Law" shall mean any and all statutes, codes,
laws (including, without limitation, common law), ordinances, agency rules,
regulations, and guidance, and reporting or licensing requirements relating to
pollution or protection of human health or the environment (including ambient
air, surface water, ground water, land surface, or subsurface strata),
including, without limitation (i) the Comprehensive Environmental Response
Compensation and Liability Act, 42 U.S.C. ss. 9601 et seq. ("CERCLA"); (ii) the
Solid Waste Disposal Act, as amended by the Resource Conservation and Recovery
Act, as amended, 42
-2-
9
U.S.C. ss. 6901 et seq. ("RCRA"); (iii) the Emergency Planning and Community
Right to Know Act (42 U.S.C. ss. 11001 et seq.); (iv) the Clean Air Act (42
U.S.C. ss. 7401 et seq.); (v) the Clean Water Act (33 U.S.C. ss. 1251 et seq.);
(vi) the Toxic Substances Control Act (15 U.S.C. ss. 1261 et seq.); (vii) the
Hazardous Materials Transportation Act (49 U.S.C. ss. 5101 et seq.); (viii) the
Safe Drinking Water Act (41 U.S.C. ss. 300f et seq.); (ix) any state, county,
municipal, or local statutes, laws or ordinances similar or analogous to the
federal statutes listed in parts (i) - (viii) of this paragraph; (x) any
amendments to the statutes, laws or ordinances listed in parts (i) - (ix) of
this paragraphs; (any rules, regulations, guidelines, directives, orders or the
like adopted pursuant to or implementing the statutes, laws, ordinances and
amendments listed in parts (i) - (ix) of this paragraph; and (xii) any other
law, statutes, ordinance, amendment, rule, regulation, guideline, directive,
order or the like relating to environmental protection, pollution, or
environmental control.
"Environmental Liability of the Buyer" is defined as all
liabilities, costs and expenses (including reasonable attorney and expert fees)
and damages arising out of or relating to any provision of any applicable
Environmental Law, as it pertains to, or arises out of (i) any act or omission
of the Buyer, its employees, agents or representatives; (ii) the operation of
the Business subsequent to the Closing; (iii) the Leased Real Property, or any
other plant, facility, site, area, or property owned, leased, operated, or used
by the Buyer or in the operation of the Business subsequent to the Closing at
which a release of a Hazardous Material has occurred on, in, at, from,
adjacent, or about such Leased Real Property, plant, facility, site, area, or
property subsequent to the Closing when such release occurred during the
Buyer's ownership, lease, operation or use of such Leased Real Property, plant,
facility, site, area, or property.
"Environmental Liability of the Seller" is defined as all
liabilities, costs and expenses (including reasonable attorney and expert fees)
and damages arising out of or relating to any provision of any applicable
Environmental Law, as it pertains to, or arises out of (i) any act or omission
of the Seller, its employees, agents or representatives; (ii) the operation of
the Business prior to the Closing; (iii) the Leased Real Property, or any other
plant, facility, site, area, or property owned, leased, operated, or used by
the Seller or in the operation of the Business prior to the Closing at which a
release of a Hazardous Material has occurred on, in, at, from, adjacent, or
about such Leased Real Property, plant, facility, site, area, or property prior
to the Closing when such release occurred during the Seller's ownership, lease,
operation or use of such Leased Real Property, plant, facility, site, area, or
property.
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended.
"ERISA Affiliate." An "ERISA Affiliate" of any entity shall
mean any member of a group of trades or businesses under common control (as
defined in Sections 4001(a)(14) or 4001(b)(1) of ERISA) with that entity, or
that is required to be considered a single employer with that entity pursuant
to Sections 414(b), (c) or (m) of the Code.
"Excluded Assets" is defined in Section 2.2.
"Excluded Liabilities" is defined in Section 2.3.
-3-
10
"Financial Statements" means (i) the unaudited statement of
income for the years ending December 31, 1999, December 31, 1998 and December
31, 1997 and accompanying balance sheet of the Seller as at such dates, and
(ii) the unaudited statement of income for the two-month period ending February
29, 2000 and accompanying balance sheet of the Seller as at such date, as
previously delivered to the Buyer and attached hereto as Exhibit 1.1.
"GAAP" means general accepted accounting principles
consistently applied in the United States of America, as from time to time in
effect.
"Hazardous Material" means, for purposes of this Agreement,
any chemical, waste, substance, material, pollutant, contaminant, equipment or
fixture defined or deemed as "hazardous" or "toxic" or otherwise regulated
under any Environmental Law or other law or regulation relating to pollution
and environmental control, including, without limitation, CERCLA hazardous
substances, RCRA hazardous wastes, pesticides and other agricultural chemicals,
oil and petroleum-products or by-products and any constituents thereof,
asbestos-containing materials, and polychlorinated biphenyls (PCBs).
"Hired Employee" is defined in Section 8.2(a).
"Intellectual Property Rights" shall mean all rights to, all
patents, trademarks, trade names, service marks, copyrights, trade secret
rights and other intellectual property rights of the Seller and any
applications or registrations therefor, and all schematics, technology, source
code, know-how, computer software programs and all other tangible and
intangible information or material used by the Seller in the Business.
"Inventory" is defined in Section 2.1(d).
"IRS" means the Internal Revenue Service.
"ISRA" is defined in Section 6.11.
"Leased Real Property" is defined in Section 2.1(a).
"Leases" is defined in Section 2.1(a).
"Material Adverse Effect" means, with respect to the Business
or the Transferred Assets, a material adverse effect on the assets, financial
condition or properties of the Business and the Transferred Assets, taken as a
whole.
"NetPath" means all products of the Business which are
identified by the trade name NetPath.
"Net Revenue Value" shall mean an amount billed to the
customer or an order from a customer that is/will be included in the income
statement as revenue in accordance with GAAP, net of any revenue credits.
Amounts specifically excluded from Net Revenue Value include but are not
limited to sales tax or other taxes (including without limitation any added
value, use, or similar tax), freight, interest, other product delivery
services, and duty.
-4-
11
"Net Working Capital" shall mean the sum of the Seller's (i)
current assets which shall consist of cash, accounts receivable, inventory and
prepaid expenses, (ii) other assets, (iii) fixed assets, (iv) any assets which
are reclassified from current to long term as a result of the audit of the
Seller's Financial Statements as set forth in Section 2.4(a)(iii); less the sum
of (a) current liabilities which shall consist of accounts payable, employee
compensation, current portion of long term debt (only as it relates to capital
leases) and other accrued liabilities, (b) long term warranty reserves, and (c)
any liabilities which are reclassified from current to long term as a result of
the audit of the Seller's Financial Statements as set forth in Section
2.4(a)(iii). Net Working Capital shall specifically exclude software/test
development, capitalized software, accrued vacation costs (including taxes)
intercompany account, accrued interest P-COM, notes payable, and all amounts
classified as taxes payable (because such amounts will not be assumed by the
Buyer). In addition, any asset or liability classifications which (i) are not
of an inter-company nature between the Seller and its Affiliates, or (ii) are
not in the nature of an asset or liability specifically excluded from Net
Working Capital herein, and (iii) appear on the Seller's Closing Date balance
sheet and do not appear on the Seller's balance sheet for the two-month period
ending February 29, 2000, shall be included in Net Working Capital.
"NJDEP" is defined in Section 6.11.
"Note" is defined in Section 2.4(a)(ii).
"Path View" means a software product of the Business which
uses the trade name Path View.
"Permits" is defined in Section 2.1(g).
"P-COM" is defined in the preamble.
"Person" means an individual, a partnership, a limited
liability company, a joint venture, a corporation, a trust, an unincorporated
organization, a division or operating group of any of the foregoing, a
government or any department or agency thereof or any other entity.
"Personnel" is defined in Section 4.9
"Plan" means all plans, programs, policies, commitments or
other arrangements (whether or not set forth in a written document) that are
currently or, within the past three years have been, maintained by P-COM, or to
which P-COM has contributed, on behalf of the Seller that provide incentive
compensation, stock options or other stock purchase rights, severance or
termination pay, medical, dental, life, disability or accident benefits
(whether or not insured), collective bargaining agreements, benefits described
in Sections 125 or 129 of the Code, or pension, profit sharing or retirement
benefits to, or for the benefit of, any active, former or retired service
provider of the Seller or their spouses or dependents.
"Purchase Price" is defined in Section 2.4(a).
"Records" is defined in Section 2.1(f).
"Regulations" is defined in Section 4.10(a).
-5-
12
"Representative" means any officer, director, principal,
agent, employee, counsel, consultant, independent auditor or other
representative of a Person.
"SEC" means the Securities and Exchange Commission.
"SEC Reports" means all forms, reports and documents together
with all exhibits required to be filed with the SEC by the Buyer.
"Securities Act" means The Securities Act of 1933, as
amended.
"Seller" is defined in the preamble.
"Severance Plan" is defined in Section 8.2(b).
"Tax" or "Taxes" means any federal, state, local, or foreign
income, gross receipts, license, payroll, employment, excise, severance, stamp,
occupation, premium, windfall profits, environmental (including taxes under
Code ss. 59A), customs duties, capital stock, franchise, profits, withholding,
social security (or similar), unemployment, disability, real property, personal
property, sales, use, transfer, registration, value added, alternative or
add-on minimum, estimated, or other tax of any kind whatsoever, including any
interest, penalty, or addition thereto, whether disputed or not.
"Tax Return" means any return, filing, questionnaire,
information return or other document required to be filed, including requests
for extensions of time, filings made with estimated tax payments, claims for
refund and amended returns that may be filed, for any period with any taxing
authority (whether domestic or foreign) in connection with any Tax (whether or
not a payment is required to be made with respect to such filing).
"Transferred Assets" is defined in Section 2.1.
"Transfer Taxes" is defined in Section 8.10.
ARTICLE II
PURCHASE AND SALE OF TRANSFERRED ASSETS
2.1 Transferred Assets. Subject to the terms and conditions
of this Agreement, the Seller shall sell, transfer, assign and convey to the
Buyer, and the Buyer shall purchase and acquire from the Seller, on the Closing
Date the following (the "Transferred Assets"):
(a) The Seller's rights in, to and under, the real
estate leases described in Schedule 2.1(a) (the "Leases"), together with all of
the Seller's right, title and interest, if any, in the building, office,
warehouse or plant space, fixtures and improvements thereon and any security
deposits relating to the Leases (collectively, the "Leased Real Property") and
any and all assignable warranties of third parties covering such buildings,
fixtures and improvements; provided, however, that the Seller shall retain any
and all rights under the Leases in connection with any event occurring prior to
the Closing Date.
-6-
13
(b) The Seller's rights in, to and under all machinery,
spare parts, equipment, furniture and fixtures of the Seller located in, on or
about the Leased Real Property, and used principally in connection therewith
and in connection with the Business as set forth in Schedule 2.1(b) (the
"Equipment"), and any and all assignable warranties of third parties covering
the Equipment;
(c) All assignable rights of the Seller in, to and under
(i) the leases, licenses (including patent, know-how and trademark licenses),
contracts and commitments set forth in Schedule 2.1(c), including, without
limitation, commitments for additions to property, plant or equipment
deliverable after the Closing Date (the "Contracts"), (ii) all unfilled
purchase and sales orders of the Business existing as of the Closing Date and
(iii) all security deposits related to the Contracts;
(d) All of the Seller's inventory of work in process,
samples, finished goods, raw materials and supplies (to the extent of the
Seller's rights therein) located on the Leased Real Property or located
elsewhere and related solely to the Business (the "Inventory");
(e) All the Intellectual Property Rights, as set forth
in Schedule 2.1(e);
(f) All books, records, accounting records, drawings,
customer lists, files and documents (including computer tapes or disks) of the
Seller relating to the Business or the Transferred Assets that are located upon
the Leased Real Property or elsewhere and are in all cases related primarily to
the operations of the Business, or are necessary for the daily operations of
the Business (the "Records"), but not the corporate minute books, corporate
seals, consolidated financial statements or tax records of the Seller;
(g) All permits, licenses, certificates and governmental
or regulatory authorizations which the Seller has obtained for the conduct of
the Business which are assignable to the Buyer, as set forth in Schedule 2.1(g)
(the "Permits"). Schedule 2.1(g) also sets forth all Permits that are not
assignable to the Buyer;
(h) All accounts and notes receivable of the Seller as
of the Closing Date for products sold, arising out of the conduct of the
Business, as set forth in Schedule 2.1(h);
(i) All of the Seller's assignable data processing
programs used in the conduct of the Business, including accounting, invoicing,
auditing and data processing programs, as set forth in Schedule 2.1(i) (the
"Computer Programs"), with the understanding that certain of the Computer
Programs are non-exclusive and may in certain instances continue also to be
used by the Seller. Schedule 2.1(i) also sets forth the Computer Programs that
are not assignable to the Buyer.
(j) All other assets of the Seller, including
miscellaneous office supplies used in the conduct of the Business and located
on the Leased Real Property or elsewhere and in all cases related primarily to
the operations of the Business, or are necessary for the daily operations of
the Business;
(k) The Seller's goodwill, if any, associated with the
Business;
-7-
14
(l) All of the Seller's intangible rights with respect
to claims for warranties or defects of workmanship, manufacturing or design
against third parties relating to any Transferred Assets; and
(m) All rights which the Seller possesses to use the
corporate name "Control Resources Corporation" in connection with the Business.
2.2 Excluded Assets. The Seller shall retain, and the Buyer
shall not purchase, the assets of the Seller set forth in Schedule 2.2 hereto
(collectively, the "Excluded Assets"), all of which shall remain the exclusive
property of the Seller, free and clear of any claim of the Buyer except as
provided for herein.
2.3 Assumption of Liabilities by the Buyer. On the Closing
Date, subject to the terms and conditions of this Agreement, the Buyer shall
unconditionally and irrevocably assume, and agrees to pay, perform and
discharge, the Assumed Liabilities as they existed at the Closing Date and as
they have existed or shall exist after the Closing Date (whether fixed or
contingent, arising by law or by contract or otherwise). The Buyer shall not
assume those liabilities specifically set forth on Schedule 2.3 (the "Excluded
Liabilities"). The Excluded Liabilities shall remain the obligation of the
Seller.
2.4 Purchase Price. (a) Upon the terms and subject to the
conditions contained herein, as consideration for the purchase of the
Transferred Assets (including the Assumed Liabilities), the Buyer shall deliver
to the Seller an aggregate purchase price (the "Purchase Price") equal to the
following:
i. At the Closing, the sum of $3,100,000,
payable by wire transfer, in immediately available funds, to an account which
the Seller shall designate in writing to the Buyer, in lawful money of the
United States of America (the "Closing Cash Payment");
ii. At the Closing, an interest bearing Note
from the Buyer (the "Note") in the form of Exhibit 2.4 in the principal amount
of $4,546,842. The principal amount of such Note shall be (i) decreased by the
amount of cash reflected in the Closing Date balance sheet of the Seller, and
(ii) increased or decreased, as the case may be, on a dollar for dollar basis
by the difference, if any, between the Net Working Capital reflected on the
unaudited balance sheet of the Seller as of February 29, 2000, (as included in
Exhibit 1.1 hereto) and the Net Working Capital reflected on the balance sheet
of the Seller as of the close of business on the Closing Date as prepared by
the Buyer and audited by PriceWaterhouseCoopers LLP at the Buyer's sole cost
and expense. Such Closing Date balance sheet shall be prepared from the books
and records of the Business in accordance with GAAP on a basis consistent with
the audited Financial Statements described in Section 2.4(a)(iii). The audit of
said Closing Date balance sheet shall be completed not later than 60 days after
the Closing Date and the Note shall be reissued as soon as practicable after
the completion of such audit in order to reflect the final principal amount as
adjusted pursuant to this Section 2.4(a)(ii).
iii. The income statement of the Seller for the
year ending December 31, 1999 and the accompanying balance sheet of the Seller
as at such date
-8-
15
shall be audited by PriceWaterhouseCoopers LLP at the Buyer's sole cost and
expense and such audit shall be completed not later than 60 days after the
Closing Date. At the Buyer's option, the financial statements of the Seller for
the periods ending December 31, 1998 and December 31, 1997 may be audited by
PriceWaterhouseCoopers LLP at the Buyer's sole cost and expense and the Seller
and/or P-COM shall reasonably assist the Buyer for a period of 180 days after
the Closing Date in the conduct of such audit. In the event of any proposed
adjustments resulting from the audit of the Financial Statements for the period
ending December 31, 1999 or the Closing Date balance sheet of the Seller, the
Buyer shall provide the Seller with direct access to PriceWaterhouseCoopers LLP
for the purpose of resolving any dispute regarding such adjustments, in the
same manner and timely fashion that the Seller would have had if the Seller had
engaged PriceWaterhouseCoopers LLP to perform such audit. It is recognized that
time is of the essence and all parties shall cooperate in the resolution of
such dispute.
iv. The principal amount of the Note and any
interest payable thereon, shall, at the option of the Buyer, be paid by the
Buyer either: (i) on or before September 15, 2000 by wire transfer of
immediately available funds to an account which the Seller shall designate in
writing to the Buyer in an amount equal to the full amount due, or (ii) on
September 15, 2000 by the (a) issuance to the Seller of registered shares of
common stock of PDYN with the number of such shares based on the average
closing price of PDYN's common stock on the 7 business days immediately
preceding the day such shares of common stock of PDYN are delivered by PDYN to
the Seller, and (b) delivery of a good check to the Seller for the difference
between the total value of such shares and the full amount due under the Note.
(b) Should the total of (i) the Net Revenue Value of
invoiced amounts for shipments of NetPath equipment to AT&T during the year
2000, plus (ii) the Net Revenue Value of the Seller's NetPath equipment which
is ordered by AT&T prior to December 15, 2000 with a requested delivery date,
including any requested extensions thereof, which is within the Buyer's
standard lead time for such products, during the year 2000 and not delivered by
the Buyer before December 31, 2000, plus (iii) Net Revenue Value for ▇▇▇▇▇▇▇▇
to AT&T for Path View and/or Path View based services during the year 2000, be
in excess of $12,000,000, no later than January 15, 2001 the Buyer shall make
an additional payment to the Seller of $1,500,000, which payment may, at the
option of the Buyer, be made either by (a) issuance to the Seller of registered
shares of common stock of PDYN having an aggregate value of not less than
$1,500,000 computed on the basis of the average closing price of PDYN's common
stock on the 7 business days immediately preceding the day such shares of
common stock of PDYN are delivered by the Buyer to the Seller, or (b) by wire
transfer of immediately available funds to an account which the Seller shall
designate in writing to the Buyer in an amount equal to the full amount due.
(c) Within 90 days of the determination of the final
Purchase Price, the Buyer shall prepare a schedule allocating the Purchase
Price among the Transferred Assets for the Seller's review (the "Allocation
Schedule"). Within 15 days after the receipt of such Allocation Schedule, the
Seller will propose to the Buyer any changes to such Allocation Schedule (and
in the event no such changes are proposed in writing to the Buyer within such
time period, the Seller will be deemed to have agreed to, and accepted the
Allocation Schedule). The Buyer and the Seller shall endeavor in good faith to
resolve any differences with respect to the Allocation
-9-
16
Schedule. If the Buyer and the Seller are unable to resolve any differences,
then any remaining disputed matters will be finally and conclusively determined
by an independent accounting firm of recognized national standing selected by
the Buyer and the Seller. The allocation in the Allocation Schedule will comply
with the requirements of Section 1060 of the Code. The Buyer and the Seller
each agrees to file IRS Form 8594 and Tax Returns in accordance with the
Allocation Schedule.
ARTICLE III
CLOSING
3.1 Closing. The closing of the transactions contemplated by
this Agreement (the "Closing") shall take place on the first to occur of: (i)
June 1, 2000, or (ii) four days following the date on which all of the
conditions set forth in Article VII hereto have been fulfilled, or (iii) such
other date as agreed by the Buyer and the Seller (such date, the "Closing
Date"). The Closing shall be held at 10:00 a.m., local time, on the Closing
Date at the offices of Cadwalader, ▇▇▇▇▇▇▇▇▇▇ & ▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇
▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇ or such other place as agreed between the Buyer and the
Seller.
3.2 Seller's Deliveries at the Closing. At the Closing, the
Seller shall deliver to the Buyer bills of sale, deeds, endorsements,
assignments and all other instruments of transfer, reasonably satisfactory in
form and substance to the Buyer and its counsel, as shall be effective and
necessary to vest in the Buyer all of the Seller's interest in and title to the
Transferred Assets, together with the certificates and other agreements
contemplated by Article VII.
3.3 Buyer's Deliveries at the Closing. At the Closing, the
Buyer shall deliver to the Seller (i) the Closing Cash Payment and the Note, as
provided in Section 2.4 and (ii) the certificates, agreements, and other
documents contemplated by Article VII.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE SELLER AND P-COM
The Seller hereby represents and warrants to the Buyer as
follows:
4.1 Organization of Seller. The Seller is duly organized,
validly existing and in good standing as a corporation under the laws of the
State of Delaware and has full corporate power and authority to conduct the
Business as it is presently being conducted and to own and lease its properties
and assets. The Seller is duly qualified to do business and is in good standing
as a foreign corporation in each jurisdiction where the nature of its business
or its ownership of property makes such qualification necessary and where the
failure so to qualify would have a Material Adverse Effect.
4.2 Authorization. Each of the Seller and P-COM hereby
represents and warrants to the Buyer that each of the Seller and P-COM has all
necessary corporate power and authority to enter into this Agreement and each
has taken all corporate action necessary to consummate the transactions
contemplated hereby and to perform its obligations hereunder. This Agreement
has
-10-
17
been duly executed and delivered by the Seller and P-COM and, assuming the due
execution and delivery of this Agreement by the Buyer, is a legal, valid and
binding obligation of the Seller and P-COM, enforceable against the Seller and
P-COM in accordance with its terms, except that (i) such enforcement may be
subject to bankruptcy, insolvency, reorganization, moratorium or other similar
laws now or hereafter in effect relating to creditors' rights generally, and
(ii) the remedy of specific performance and injunctive and other forms of
equitable relief may be subject to equitable defenses and to the discretion of
the court before which any proceeding therefor may be brought.
4.3 Financial Statements. The Seller has delivered to the
Buyer the Financial Statements. The Financial Statements are true, correct and
complete, are based on the books and records of the Business, fairly present
the financial condition and, results of operations and cash flow of the
Business, as of the dates and for the periods indicated therein, and have been
prepared in accordance with GAAP.
4.4 Absence of Certain Changes. (a) Since December 31, 1999,
there has not been any change in the Business, Transferred Assets, or Assumed
Liabilities except for (i) changes contemplated hereby or relating to the
transactions contemplated hereby, (ii) changes in the ordinary course of
business, and (iii) changes which have not, individually or in the aggregate,
had a Material Adverse Effect.
(b) Since December 31, 1999, the Seller has not
declared, set aside, or paid any dividends or made any other payments (whether
in cash, stock or property) in respect of any of the Seller's capital stock.
4.5 Title to Transferred Assets, Right to Convey. The Seller
has good and marketable title to, or valid and subsisting leasehold interests
in, all of the Transferred Assets to be conveyed by it, free and clear of all
liens, claims and encumbrances of every kind and nature, and will convey the
same to the Buyer, subject however to the following, all of which is set forth
in Schedule 4.5:
(a) liens for taxes and assessments not yet due and
payable;
(b) liens for taxes, assessments, charges and other
claims the validity of which the Seller is contesting in good faith;
(c) the Contracts being subject to the Seller's
obligations thereunder and to the rights and obligations of the other parties
thereto;
(d) the Seller not having exclusive right and title to
the Seller's trade names and style names included in the Intellectual Property
Rights; and
(e) the existence of imperfections of title, exceptions,
liens, security interests, claims, and other charges and encumbrances which do
not interfere materially with the Seller's present use or ownership of any of
the Transferred Assets or the conduct and operation of the Business taken as a
whole.
-11-
18
4.6 Contracts and Commitments.
(a) The Leases listed on Schedule 2.1(a) include all
leases for the Leased Real Property, and copies thereof have been furnished to
the Buyer. The Seller hereby represents that it is the lessee under the Leases
listed on Schedule 2.1(a). Except as set forth in Schedule 2.1(a), the Seller's
interest in the Leases is free and clear of any mortgages and liens, and is not
subject to any deeds of trust, assignments, subleases or rights of any third
parties known to or created or permitted by the Seller.
(b) The Contracts set forth in Schedule 2.1(c) include
all material leases for personal property, contracts and commitments related to
the conduct of the Business and the operation of the Transferred Assets. Copies
of the Contracts have been made available to the Buyer.
(c) Except as set forth in Schedule 4.6(c), all
Contracts and the Leases are in full force and effect, valid and existing and
binding, and each of them is, to the Seller's knowledge, binding upon and
enforceable against the parties thereto in accordance with their respective
terms other than those Contracts and the Leases the failure of which to be in
full force and effect, valid or existing or binding or enforceable,
individually or in the aggregate, would not have a Material Adverse Effect.
Neither the Seller, nor, to the Seller's knowledge, any other party to such
Contract or the Leases, is in default under the terms thereof, and, to the
Seller's knowledge, there exists no condition which, after notice or lapse of
time or both, would constitute such a default, other than those defaults which,
individually, or in the aggregate, would not have a Material Adverse Effect.
Except as set forth in Schedule 4.6(c), no consents to the assignment to the
Buyer of any such Contracts or the Leases are required and the assignment of
such Contracts or Leases will not cause a breach, default or event of default
under any such Contract or Lease.
(d) Except as set forth in Schedule 4.6(d), neither the
Seller nor its Affiliates are parties to any written or oral:
(i) contracts materially affecting the Business
and not made in the ordinary course of business;
(ii) contracts containing covenants limiting, in
a manner which is material to the Business, its freedom to engage in any line
of business in any geographic area or to compete with any Person;
(iii) contracts for employment or to employ, in
connection with the Business, including without limitation contracts to employ
executive officers and other contracts with officers or directors of the
Seller, which can not be terminated by the Seller upon notice of sixty days or
less without penalty or premium.
(iv) agreement, contract, or commitment for the
future purchases of, or payment for, supplies or products, or for the
performance of services by a third party which supplies, products or services
used in the conduct of the Business involving in any one case $10,000 or more;
or
-12-
19
(v) agreement, contract or commitment to sell
or supply products or to perform maintenance, services or similar duties in
connection with the Business involving in any one case $10,000 or more.
(e) Except as set forth on Schedule 4.6(e), there exists
no actual or, to the knowledge of the Seller, any threatened termination,
cancellation, or limitation of, or any amendment, modification, or change to
any Contract, which would have a Material Adverse Effect on the business or
condition, financial or otherwise, of the Business, including without
limitation: (i) the business relationship of the Seller with any customer,
distributor, or related group of customers or distributors whose purchases
individually or in the aggregate are material to the operations and financial
condition of the Business, (ii) the requirements of any customer or related
group of customers of the Seller whose purchases individually or in the
aggregate are material to the operations and financial condition of the
Business, or (iii) the business relationship of the Seller with any material
supplier to the Business.
4.7 No Conflict or Violation. Except as set forth in Schedule
4.7, neither the execution and delivery of this Agreement nor the consummation
of the transactions contemplated hereby will result in (a) a violation of or a
conflict with any provision of the Certificate of Incorporation or Bylaws of
the Seller or its Affiliates, (b) a breach of, or a default under, or a right
to accelerate with respect to, the Leases, any Contract, commitment or other
obligation to which the Seller or its Affiliates is a party or is subject or by
which any of the Transferred Assets are bound, which would have a Material
Adverse Effect, or interfere in any material way with the ability of the Seller
or its Affiliates to consummate the transactions contemplated by this
Agreement, (c) a violation by the Seller of any statute, rule, regulation,
ordinance, code, order, judgment, writ, injunction, decree or award, which
would have a Material Adverse Effect, or would interfere in any material way
with the ability of the Seller to consummate the transactions contemplated by
this Agreement, or (d) the creation of any lien, charge, or encumbrance upon
any of the Transferred Assets, or result in the acceleration of the maturity of
any payment date of any of the Assumed Liabilities, or increase or adversely
effect the obligations of the Seller under any of the Assumed Liabilities.
4.8 Consents and Approvals. To the Seller's knowledge, except
as set forth in Schedule 4.8, no consent, approval, authorization or other
action by, or filing with or notification to, any governmental or regulatory
authority or other third party is required to be made or obtained by the Seller
or its Affiliates on or prior to the Closing Date in connection with the
execution, delivery and performance of this Agreement and the consummation of
the transactions contemplated hereby, except (i) where failure to obtain such
consent, approval, authorization or action, or to make such filing or
notification, would not interfere in any material way with the ability of the
Seller to consummate the transactions contemplated by this Agreement or would
not have a Material Adverse Effect or (ii) for those requirements which become
applicable to the Seller as a result of the specific regulatory status of the
Buyer or as a result of any other facts that specifically relate to the
business or activities in which the Buyer is or proposes to be engaged.
4.9 Litigation. Except as set forth in Schedule 4.9, there is
no action, order, writ, injunction, judgment or decree outstanding, or suit,
litigation, proceeding, labor dispute (other than routine grievance procedures
or routine, uncontested claims for benefits under any benefit
-13-
20
plans for any officers, employees or agents of the Seller employed in
connection with the Business (collectively, "Personnel") , which have been
previously disclosed to the Buyer), arbitration, investigation or reported
claim, pending or, to the Seller's knowledge, threatened, before any court,
governmental entity or arbitrator (collectively, "Actions"), relating to (i)
the Business or the Transferred Assets, (ii) any benefit plan for Personnel or
any fiduciary or administrator thereof or (iii) the transactions contemplated
by this Agreement. Nor is the Seller in default under or in violation of any
order, writ, injunction, or decree of any court, governmental entity or
arbitrator, affecting the Business or the Transferred Assets.
4.10 Compliance with Law; Permits and Licenses. (a) Except as
set forth in Schedule 4.10(a), to the Seller's knowledge, the Seller has not
received notice of any material, unremedied violation of any applicable law,
rule, regulation, order, writ or decree of any court or any governmental agency
or instrumentality (collectively, "Regulations"), where the consequences of
such default or violation would have a Material Adverse Effect.
(b) Except as set forth in Schedule 4.10(b), the Seller
holds all governmental or regulatory licenses, permits and authorizations
necessary for the ownership and conduct of the Business in each of the
jurisdictions in which the Business is presently being conducted or operated,
and such governmental or regulatory licenses, permits and authorizations are in
full force and effect, except where the failure to hold any thereof or the
failure of any thereof to be in full force and effect would not have a Material
Adverse Effect.
4.11 Brokers. Except for an agreement between P-COM and CIBC
▇▇▇▇▇▇▇▇▇▇▇ Corp., neither the Seller nor any of its Affiliates has employed,
or is subject to any valid claim of, any broker, finder, investment banker,
consultant or other intermediary in connection with the transactions
contemplated by this Agreement who will be entitled to a fee or commission in
connection with such transactions.
4.12 Intellectual Property Rights. (a) The Seller owns, or is
licensed or otherwise entitled to exercise, without restriction (other than
pursuant to applicable law and the terms of each such license) the Intellectual
Property Rights without any conflict or infringement of the rights of others
and upon the consummation of the transactions contemplated by this Agreement,
the Buyer will own or have the uncontested right to use the Intellectual
Property Rights. Except as set forth in Schedule 4.12(a), all Intellectual
Property Rights and registrations, applications and agreements related thereto
of the Seller and any of its Affiliates which are necessary for the operation
of the Business are fully assignable to the Buyer without the consent of any
third party.
(b) Schedule 2.1(e) also lists (i) all patents and all
registered copyrights, trade dress, trade names, trademarks, service marks and
other company, product or service identifiers and work rights included in the
Intellectual Property Rights, and specifies the jurisdictions in which each
such Intellectual Property Right has been registered, including the respective
registration numbers; (ii) all licenses, sublicenses and other agreements as to
which the Seller is a party and pursuant to which the Seller or any other
Person is authorized to use any Intellectual Property Right except for licenses
for software which is generally available; and (iii) if applicable, all parties
to whom the Seller has delivered copies of the Seller source code, whether
pursuant to an escrow arrangement or otherwise, or parties who have the right
to receive such
-14-
21
source code. Copies of all such licenses, sublicenses, and other agreements
identified pursuant to clause (ii) above have been delivered by the Seller to
the Buyer.
(c) The Seller is not, or as a result of the execution
and delivery of this Agreement or the performance of the Seller's obligations
hereunder will not be, in violation of, or lose or in any way impair any
material rights pursuant to any license, sublicense or agreement described in
Schedule 2.1(e).
(d) The Seller is the absolute owner or licensee of,
with all necessary right, title and interest in and to (free and clear of any
liens, encumbrances or security interests), the Intellectual Property Rights
and has rights to the use, sale, license or disposal thereof or the material
covered thereby in connection with the services or products in respect of which
the Intellectual Property Rights are being used, sold, licensed or disposed of.
Except as described in Schedule 2.1(e), the Seller has taken all commercially
reasonable actions and made all applicable applications and filings pursuant to
applicable laws to perfect or protect its interests in such Intellectual
Property Rights.
(e) To the Seller's knowledge, no claims with respect to
the Intellectual Property Rights have been asserted or are threatened, written
or otherwise, by any Person, and there are no claims (i) to the effect that the
manufacture, marketing, license, sale, offer for sale, import or use of any
product or service as now used or offered or proposed for use or sale by the
Seller infringes any copyright, patent, trademark, trade secret or other
intellectual property right of any third party or violates any license or
agreement with any third party; (ii) contesting the right of the Seller to use,
sell, license or dispose of any Intellectual Property Rights; or (iii)
challenging the ownership, validity or effectiveness of any of the Intellectual
Property Rights.
(f) There has not been and there is not now any
unauthorized use, infringement or misappropriation of any of the Intellectual
Property Rights by any third party, including, without limitation, any service
provider of the Seller; the Seller has not been sued or charged as a defendant
in any claim, suit, action or proceeding which involves a claim of infringement
of any patents, trademarks, service marks, copyrights of other intellectual
property rights and which has not been finally terminated prior to the date
hereof; there are no such charges or claims outstanding; and the Seller does
not have any infringement liability or threat thereof, written or otherwise,
with respect to any trademark, service ▇▇▇▇, copyright, registered patent or
other intellectual property right of another.
(g) No Intellectual Property Right is subject to any
outstanding order, judgment, settlement agreement, decree, or, except as
provided for in the terms of the relevant license, stipulation or agreement
restricting in any manner the licensing thereof by the Seller. The 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 Intellectual Property Right owned by the Seller. The Seller has
the exclusive right to file, prosecute and maintain all applications and
registrations with respect to the Intellectual Property Rights owned by the
Seller.
(h) Except as set forth in Schedule 4.12(h), no
royalties or fees are payable by the Seller to anyone for use of the
Intellectual Property Rights.
-15-
22
(i) All Intellectual Property Rights owned by the Seller
or its Affiliates have been (i) developed by employees of the Seller or its
Affiliates, (ii) developed by independent contractors or (iii) was acquired
from a third party. Except as described on Schedule 4.12(i), every current and
for the last five years every former officer, director, consultant, independent
contractor or employee of the Seller has entered into an agreement that
requires such officer, director, consultant, independent contractor or employee
to assign to the Seller any interest in any Intellectual Property Rights
created by such Person in the course of his or her engagement with the Seller
that relates to the Business and to keep confidential any trade secrets,
proprietary data or other proprietary business information of the Seller and to
the Seller's knowledge, no such officer, director, consultant, independent
contractor or employee is in breach of his, her or its obligations pursuant to
any such agreement, nor is a party to any other agreement that requires such
individual to assign any interest in any Intellectual Property Rights created
by such Person in the course of his or her engagement with the Seller that
relates to the Business to any Person other than the Seller, or to keep
confidential any trade secrets, proprietary data, customer information or other
business information of any Person other than the Seller.
4.13 Employee Plans. Any Plan required to be qualified under
Section 401(a) of the Code has either obtained a favorable determination letter
as to its qualified status from the IRS or still has a remaining period of time
under applicable Treasury Regulations or IRS pronouncements in which to apply
for such determination letter and to make any amendments necessary to obtain a
favorable determination. To the extent any Plan with an existing determination
letter from the IRS must be amended to comply with the applicable requirements
of the Tax Reform Act of 1986 and subsequent legislation, the time period for
effecting such amendments will not expire prior to the consummation of the
transactions contemplated by this Agreement. The Seller has furnished to the
Buyer copies of the Plans and related Plan documents (including trust
documents, insurance policies or contracts, employee booklets, summary plan
descriptions and other authorizing documents, and to the extent still in its
possession any material employee communications relating thereto) and, where
applicable, will provide, as soon as practicable hereafter, copies of the most
recent IRS determination letters and Forms 5500 with respect to any such Plan.
Each Plan has been maintained and administered in all respects in compliance
with its terms (whether written or otherwise), with any oral written
representations made to any participant or beneficiary by or on behalf of P-COM
or any affiliate of P-COM, and with the requirements prescribed by all
statutes, orders, rules and regulations, including but not limited to ERISA and
the Code, which are applicable to such Plan, except to the extent noncompliance
would not have a Material Adverse Effect on the Seller's obligations and
liabilities arising from such Plan or related provisions of ERISA and the Code.
No suit, administrative proceeding, action or other litigation has been brought
or is threatened against or with respect to any such Plan, including any audit
or inquiry by the IRS or United States Department of Labor. All contributions,
reserves or premium payments required to be made or accrued as of the date
hereof to the Plans have been made or accrued.
No Plan is a "defined benefit plan" within the meaning of
Section 414(j) of the Code.
Neither P-COM nor any ERISA Affiliate of P-COM maintains or
contributes to or, within the past six years has maintained or contributed to,
or been required to maintain or
-16-
23
contribute to, any "defined benefit plan" (as defined in Section 414(j) of the
Code), including any multiemployer plan within the meaning of Section 3(37) of
ERISA.
Except as specifically set forth in this Agreement, neither
the Buyer nor any ERISA Affiliate of the Buyer shall have any liability or
obligation with respect to (i) employment-related liabilities, whether
contingent or otherwise, arising out of any individual's employment or working
relationship with the Seller or any ERISA Affiliate of the Seller; or (ii) any
Plan.
4.14 Taxes. Except as set forth on Schedule 4.14, (a) and
except for such Tax Returns the failure of which to be timely filed would not
have a Material Adverse Effect, as of the date hereof and as of the Closing
Date, all Tax Returns relating to the Transferred Assets required to be filed
by or on behalf of the Seller or its Affiliates have been duly filed, or
extensions have been obtained, and all taxes, assessments, and levies shown
thereon to be due and payable, have been paid.
(b) There are no pending federal or state tax disputes
in which the Seller or its Affiliates, with respect to the Business, are
alleged to be liable or in which the Seller or its Affiliates are claiming a
refund.
(c) All taxes required to be withheld prior to the
Closing Date from employees of the Seller or its Affiliates engaged in the
Business for income taxes and social security taxes have been properly withheld
and, if required prior to the Closing Date, have been deposited with the
appropriate governmental agency.
(d) Except for any Transfer Taxes covered by Section
8.10 of this Agreement, the Seller has fully paid all sales, use and
withholding Taxes, the non-payment of which may give rise to successor
liability under state law.
4.15 Environmental and Other Regulations. (a) Except as set
forth in Schedule 4.15(a), to the Seller's knowledge, the Seller is in
compliance with all applicable laws and regulations relating to pollution and
environmental control with respect to the Business or the Transferred Assets in
all jurisdictions in which the Seller is presently operating the Business,
other than those laws or regulations which are being contested by the Seller in
good faith and by appropriate proceedings and except where failure to be in
compliance would not have a Material Adverse Effect.
(b) Except as set forth in Schedule 4.15(b), to the
Seller's knowledge, the Seller is in compliance with all applicable laws and
regulations relating to equal employment opportunity and employee health and
safety with respect to the Business or the Transferred Assets in all
jurisdictions in which the Seller is presently operating the Business, other
than those laws or regulations which are being contested by the Seller in good
faith and by appropriate proceedings and except where failure to be in
compliance would not have a Material Adverse Effect.
(c) With respect to the Business, there are no actions,
suits, claims, arbitration proceedings, or complaints pending or, to the
Seller's knowledge, threatened by any
-17-
24
governmental authority, municipality, community, citizen, or other entity,
against the Seller relating to environmental protection, compliance with
environmental laws, or the condition of the Leased Real Property, nor is the
Seller aware of any unasserted action, suit, claim, proceeding, or complaint
the assertion of which is probable.
(d) With respect to the Business, no lien has arisen or
any of the Transferred Assets under or as a result of any federal, state or
local law, rule or registration relating to environmental protection.
4.16 Labor Matters. (a) Neither the Seller nor its Affiliates
is a party to any collective bargaining agreement or other labor union contract
applicable to persons employed by them in connection with the operation of the
Business.
(b) The Seller and its Affiliates, with respect to the
Business, is in material compliance with all applicable federal, state, local
and foreign laws and regulations concerning the employer-employee relationship
and with all agreements relating to the employment of the Seller's employees,
including applicable wage and hour laws, fair employment laws, safety laws,
worker compensation statutes, unemployment laws, and social security laws.
Except as set forth on Schedule 4.16(b), with respect to the Business, to the
Seller's knowledge, there are no pending or threatened claims, investigations,
charges, citations, hearings, consent decrees, or litigation concerning: wages,
compensation, bonuses, commissions, or payroll deductions; equal employment or
human rights violations regarding race, color, religion, sex, national origin,
age, handicap, veteran's status, disability, or any other recognized class,
status, or attribute under any federal, state, local or foreign equal
employment law prohibiting discrimination; representation petitions or unfair
labor practices; grievances or arbitrations pursuant to current or expired
collective bargaining agreements; workers' compensation; wrongful termination,
negligent hiring, immigration or any other claim based on the employment
relationship or termination of the employment relationship. With respect to the
Business, to the Seller's knowledge the Seller is not liable for any unpaid
wages, bonuses, or commissions (other than those not yet due) or any tax,
penalty, assessment, or forfeiture for failure to comply with any of the
foregoing.
4.17 Insurance. Schedule 4.17 sets forth a list of the
insurance policies providing insurance coverage for the Business and the
Transferred Assets. Each of such policies is issued in favor of the Seller and
is valid, existing and binding and in full force and effect. There are no
outstanding requirements or written recommendations by any current insurer or
underwriter with respect to the Business or the Transferred Assets which
require or recommend changes in the conduct of the Business, or require any
repairs or other work to be done with respect to any of the Transferred Assets
or operations of the Business.
4.18 Sufficiency of Transferred Assets. Except as set forth
in Schedule 4.18, the Transferred Assets constitute substantially all the
assets of the Seller used in the Business as conducted by the Seller prior to
the date hereof, and constitute all the rights and assets necessary to conduct
the Business in the ordinary course as presently conducted by Seller.
4.19 Inventory. Schedule 4.19 lists all inventory owned by
the Seller as of December 31, 1999, including goods supplied to the Seller by
suppliers, goods on consignment and all other goods customarily sold by the
Seller (whether located on the premises of the Seller,
-18-
25
in transit to or from such premises, in other storage facilities, or
otherwise), and identifies whether such inventory is owned by the Seller free
and clear of any liens, claims, charges and encumbrances or held on consignment
(collectively, the "Inventory"). The Inventory is valued at cost (determined on
a first-in first-out basis) or market, whichever is lower, with allowances for
excess and obsolete materials and materials below standard quality determined
in accordance with GAAP consistently applied. The quality and quantity of the
Inventory is such that the Inventory is, in all material respects readily
usable and saleable in the ordinary course of the business of the Seller,
except such amounts as are reserved in accordance with GAAP consistently
applied. All Inventory materially in excess of reasonable estimated
requirements for the Seller based on current operations for the calendar year
2000 is set forth in Schedule 4.19.
4.20 Suppliers. Schedule 4.20 hereto lists all suppliers of
goods to the Seller during the prior two years and the value of goods supplied
to the Seller in each such year where such value exceeds $10,000 per annum.
Schedule 4.20 also contains a list of each supplier the Seller reasonably
expects to purchase goods from, with an aggregate value exceeding $10,000,
during the twelve months following the Closing Date. There has not been any
event, happening or fact which would lead the Seller to believe any of such
suppliers will not continue to supply the current level and type of goods
currently being provided to the Seller on similar terms and conditions.
4.21 Backlog. Schedule 4.21 hereto sets forth as of a date
not earlier than 10 days prior to the date hereof, the backlog of orders that
the Seller is to ship and contract work to be performed by the Seller. The
Seller either possesses sufficient inventory of parts, materials and personnel
to produce the same within their scheduled delivery dates or such parts of
materials have lead times such that, absent the occurrence of a force majeure
event, the Seller can acquire such parts and materials in time to produce and
ship such backlog in accordance with its scheduled shipping date.
4.22 Accounts Receivable. The amount of all accounts
receivable of the Seller will be good and collectible in full in the ordinary
course of business at the Closing; all accounts receivable arise from bona fide
transactions in the ordinary course of business; no contest with respect to the
amount or validity of any amount is pending; and none of such accounts
receivable is or will on the Closing be subject to any defenses, counterclaim,
rights of return, refusals to pay or setoff except to the extent of the
allowance therefor recorded in accordance with GAAP. The value at which
accounts receivable are carried reflect the accounts receivable valuation
policy of the Seller. As of December 31, l999 and as of the Closing, except as
set forth in Schedule 4.22, there is and will be (i) no account debtor or note
debtor delinquent in its payment by more than 45 days, (ii) no account debtor
or note debtor that has refused (or threatened to refuse) to pay its obligation
for any reason, (iii) no account debtor or note debtor that is insolvent or
bankrupt and (iv) no account receivable or note receivable which is pledged to
any third party by the Seller, except as set forth on Schedule 4.22. The Seller
holds no deposits from customers and has received no prepaid service contract
revenue or other prepaid revenue.
4.23 Definition of "knowledge". The phrases "to the knowledge
of the Seller", "the Seller has not received notice", "to the Seller's
knowledge", "the Seller has not been notified" and any other similar phrases as
used in this Article IV refer to the directors and executive officers of the
Seller, P-COM and its Affiliates and, as to specific areas which are the
-19-
26
subject of the representations and warranties, those employees of the Seller or
P-COM having management responsibilities related to such specific areas of the
Business.
4.24 Employee Stock Options. The number of outstanding
unvested options that the Hired Employees hold pursuant to the P-COM 1995 Stock
Option/Stock Issuance Plan (as amended and restated effective as of April 1997)
as reflected in Schedule 7.1(e) is correct in all material respects.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF THE BUYER
The Buyer hereby represents and warrants to the Seller as
follows:
5.1 Organization of the Buyer. The Buyer is duly organized,
validly existing and in good standing under the laws of Delaware and has full
corporate power and authority to conduct its business as it is presently being
conducted and to own and lease its properties and assets.
5.2 Authorization. The Buyer has all necessary corporate
power and authority to enter into this Agreement and has taken all corporate
action necessary to consummate the transactions contemplated hereby and to
perform its obligations hereunder. This Agreement has been duly executed and
delivered by the Buyer and, assuming the due execution and delivery of this
Agreement by the Seller, is a legal, valid and binding obligation of the Buyer,
enforceable against the Buyer in accordance with its terms, except that (i)
such enforcement may be subject to bankruptcy, insolvency, reorganization,
moratorium or other similar laws now or hereafter in effect relating to
creditors' rights generally, and (ii) the remedy of specific performance and
injunctive and other forms of equitable relief may be subject to equitable
defenses and to the discretion of the court before which any proceeding
therefor may be brought.
5.3 No Conflict or Violation. Neither the execution and
delivery of this Agreement nor the consummation of the transactions
contemplated hereby will result in (a) a violation of or a conflict with any
provision of the Certificate of Incorporation or Bylaws of the Buyer, (b) a
breach of, or a default under, or a right to accelerate with respect to, any
term or provision of any contract, commitment or other obligation to which the
Buyer or any of its Affiliates is a party or is subject, or (c) a violation by
the Buyer of any statute, rule, regulation, ordinance, code, order, judgment,
writ, injunction, decree or award which would have a Material Adverse Effect on
the Buyer.
5.4 Consents and Approvals. No consent, approval,
authorization or other action by, or filing with or notification to, any
governmental or regulatory authority or other third party is required to be
made or obtained by the Buyer or any of its Affiliates on or prior to the
Closing Date in connection with the execution, delivery and performance of this
Agreement and the consummation of the transactions contemplated hereby, except
where failure to obtain such consent, approval, authorization or action, or to
make such filing or notification, would not interfere in any material way with
the ability of the Buyer to consummate the transactions contemplated by this
Agreement or would not have a Material Adverse Effect on the Buyer.
-20-
27
5.5 Litigation. There is no material action, order, writ,
injunction, judgment or decree outstanding, or suit, litigation, proceeding,
labor dispute (other than routine grievance procedures or routine, uncontested
claims for benefits under any benefit plans for any officers, employees or
agents of the Buyer), arbitration, investigation or reported claim, pending or,
to the knowledge of the Buyer, threatened, before any court, governmental
entity or arbitrator, which seeks to delay or prevent the consummation of the
transactions contemplated by this Agreement or would, if successful, materially
and adversely affect the ability of the Buyer to consummate the transactions
contemplated by this Agreement.
5.6 Brokers. The Buyer has not employed, and is not subject
to any valid claim of, any broker, finder, investment banker, consultant or
other intermediary in connection with the transactions contemplated by this
Agreement who will be entitled to a fee or commission in connection with such
transactions.
5.7 Purchase for Resale. The Buyer is purchasing the
Inventory transferred herein for resale.
5.8 No Breach by the Seller. As of the date hereof, the Buyer
does not know of any condition or event which constitutes or may constitute a
material breach by the Seller of the warranties and representations set forth
in Article IV; provided, however, no right of recovery against the Buyer shall
accrue to the Seller under this Section 5.8; it being understood, however, that
the Seller may use such knowledge as a defense to any claim by the Buyer
alleging any breach of the Seller's representations and warranties under
Article IV.
5.9 Organizational Documents. Copies of the Certificate of
Incorporation and Bylaws of the Buyer have been delivered to the Seller and
such copies are accurate and complete, without any amendment, modification or
supplement, as of the date of this Agreement and the Closing Date.
5.10 Investigation and Evaluation. Execution of this
Agreement shall constitute the Buyer's representation that the Buyer has
requested and been provided with the opportunity to review and examine
originals or copies of such documents of or relating to the Business and the
Transferred Assets and the transactions contemplated by this Agreement as the
Buyer has deemed necessary or desirable to evaluate the merits of purchasing
the Transferred Assets and assuming the Assumed Liabilities and the Buyer has
made its determination to do so solely based upon its own analysis. The Buyer
understands and agrees that the Seller makes and has made no representations in
connection with the purchase and transfer by the Buyer of the Transferred
Assets and Assumed Liabilities other than those expressly contained herein,
which have been relied upon by the Buyer in entering into this Agreement.
5.11 SEC filings. PDYN has timely filed all SEC Reports
required to be filed by PDYN and has made such SEC Reports available to the
Seller. The SEC Reports (i) as of their respective dates were duly prepared in
accordance with the rules and regulations of the SEC applicable to such 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 later filing) contain any untrue statement of a material fact or omit to
state a material fact required to be
-21-
28
stated therein or necessary in order to make the statements therein, in the
light of the circumstances under which they were made, not misleading.
ARTICLE VI
ACTIONS BY SELLER AND BUYER PRIOR TO THE CLOSING
6.1 Conduct of Business. (a) The Seller covenants and agrees
that, from the date hereof through the Closing Date, the Seller shall conduct
the Business only in the ordinary course and in a manner consistent with the
current practice of the Business.
(b) Except as contemplated by this Agreement, from the
date hereof through the Closing Date, the Seller shall not, without the consent
of the Buyer, purchase or acquire any assets or properties, whether real or
personal, tangible or intangible, that if acquired would be a Transferred Asset
hereunder, and shall not sell, pledge, dispose of or encumber any of the
Transferred Assets, the sale, pledge, disposition or encumbrance of which would
have a Material Adverse Effect, except in the ordinary course and in a manner
consistent with current practice of the Business.
(c) The Seller covenants and agrees that, from the date
hereof through the Closing Date, the Seller shall maintain the Transferred
Assets in their present order and condition, reasonable wear and use excepted,
and deliver the Transferred Assets to the Buyer on the Closing Date in such
condition.
(d) The Seller covenants and agrees that, from the date
hereof through the Closing Date, the Seller shall take all steps reasonably
necessary to maintain the Intellectual Property Rights and other intangible
assets of the Seller.
(e) From the date hereof through the Closing Date, the
Seller will not adopt any new plan, program, policy or arrangement that, if it
existed as of the Closing Date, would constitute a Plan, or substantially
modify or amend any existing Plan.
6.2 Access to Information. From the date hereof through the
Closing Date, upon reasonable notice, the Seller shall, and shall cause each of
its officers, employees, auditors and agents to (i) afford the Representatives
of the Buyer reasonable access, during normal business hours, to the offices,
properties, books and records of the Business and (ii) furnish to the
Representatives of the Buyer such additional financial and operating data and
other information regarding the Business and the Transferred Assets, as the
Buyer may from time to time reasonably request for the purpose of consummating
the transactions contemplated by this Agreement; provided, however, that such
investigation shall not unreasonably interfere with the business or operations
of the Seller; and provided further that the Seller shall not be required to
take any action which would constitute a waiver of the attorney-client
privilege.
6.3 Regulatory and Other Authorizations. (a) Each of the
Seller and the Buyer shall use its best efforts to obtain all authorizations,
consents, orders and approvals of all federal, state and foreign regulatory
bodies and officials that may be or become necessary for the performance of its
obligations pursuant to this Agreement and shall cooperate fully with the
-22-
29
other party in promptly seeking to obtain all such authorizations, consents,
orders and approvals. Neither the Seller nor the Buyer shall take any action
that will have the effect of delaying, impairing or impeding the receipt of any
required approval.
(b) If, in order to properly prepare documents required
to be filed with governmental authorities or its financial statements, it is
necessary that either the Seller or the Buyer be furnished with additional
information relating to the Business, the Transferred Assets or Assumed
Liabilities and such information is in the possession of the other party, such
party agrees to use its best efforts to furnish such information in a timely
manner to such other party, at the cost and expense of the party being
furnished such information.
6.4 Bulk Transfer Laws. The Buyer hereby waives compliance by
the Seller with the provisions of any so-called bulk transfer laws of any
jurisdiction in connection with the sale of the Transferred Assets to, and the
assumption of the Assumed Liabilities by, the Buyer.
6.5 Insurance. Through the Closing Date, the Seller or its
Affiliates will continue to maintain insurance policies providing insurance
coverage for the Business and Transferred Assets of the kinds, in the amounts
and against the risks substantially as are presently provided pursuant to the
policies set forth on Schedule 4.17 for the Business and the Transferred
Assets. After the Closing Date, the Buyer shall provide all insurance coverage
for the Business and Transferred Assets.
6.6 Release from Assumed Liabilities. The Buyer shall, at the
request of the Seller, use its best efforts to obtain promptly the release of
the Seller from any Assumed Liabilities if it can do so without incurring
expense (unless reimbursed by the Seller) or materially increasing its
obligations under any of the Assumed Liabilities.
6.7 Further Action. Each of the Seller and the Buyer shall
execute such documents and other papers and take such further actions as may be
reasonably required or desirable to carry out the transactions contemplated by
this Agreement. Upon the terms and subject to the conditions of this Agreement,
each of the parties shall use its best 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.
6.8 Non-Assignable Leases, Contracts, and Permits. (a)
Nothing in this Agreement shall constitute an agreement to assign any Lease,
Contract, or Permit (i) which, by its terms or by law, is not assignable
without the consent of the other party or parties to such Lease, Contract, or
Permit unless such consent shall have been given, or (ii) if any attempted
assignment thereof, without the consent of the other party or parties, would
constitute a breach thereof, or would contravene any law or regulation. If any
such consent shall not be obtained, then the Seller and the Buyer shall, at the
request of the Buyer and at the Buyer's cost, do all things reasonably
necessary and cooperate with each other in any legal and reasonable arrangement
designed to provide for the Buyer the benefit of any such Lease, Contract, or
Permit, including maintaining the Seller's Permits (and any bond or other
financial security posted in connection with the issuance thereof) until
issuance of similar permits to the Buyer. With respect to any non-assignable
customer contracts and orders (including bids) made in the
-23-
30
name of the Seller which the Buyer has assumed in accordance with Section 2.3,
the Buyer, acting in the capacity of subcontractor, shall complete and deliver
to customers the work and products represented by such contracts or orders. In
conjunction with the Buyer, and at the Buyer's direction and expense, the
Seller shall invoice and collect the accounts receivable for such orders for
the Buyer's account, segregate the funds and promptly pay to the Buyer any
amounts so collected.
(b) Notwithstanding the aforementioned, the Seller shall
use reasonable commercial efforts to obtain, at its sole cost and expense,
prior to the Closing all consents and estoppels which, in the reasonable
judgment of the Buyer, are necessary or appropriate for the transfer or
assignment of each of the material Transferred Assets and the Business to the
Buyer and the consummation of the transactions contemplated hereby. All such
consents and estoppels shall be in writing and in form and substance reasonably
satisfactory to the Buyer, and executed counterparts thereof will be delivered
to the Buyer promptly after receipt thereof but in no event later than the
Closing Date.
6.9 Schedules. The Seller shall have the obligation to
supplement or amend the Schedules being delivered concurrently with the
execution of this Agreement and annexed hereto with respect to any matter
hereafter arising or discovered which, if existing or known at the date of this
Agreement, would have been required to be set forth or described in the
Schedules; provided, however, that for the purpose of the rights and
obligations of the parties, any such supplemental or amended disclosure shall
not be deemed to have been disclosed as of the date of this Agreement unless so
agreed to in writing by the Buyer or to preclude the Buyer from seeking a
remedy in damages for losses incurred as a result of such supplemented or
amended disclosure, subject to the offsets and limitations set forth in Section
9.3(b). The Seller's obligation to amend or supplement the Schedules shall
terminate on the Closing Date.
6.10 Notification of Changes. Between the date hereof and the
Closing Date, the Seller shall promptly notify the Buyer in writing of any
change that would have a Material Adverse Effect on the financial condition of
the Business, any material damage to or loss of any of the Transferred Assets,
or the institution of or, if known by the Seller, the threat of institution of
legal, administrative, or other proceedings against the Seller, related to the
Business, or the occurrence or existence of any unasserted proceedings known to
the Seller that are probable of assertion.
6.11 Compliance with New Jersey Industrial Site Recovery Act.
With respect to the Leased Real Property, the Seller covenants and agrees that
it will comply with all applicable provisions of the New Jersey Industrial Site
Recovery Act, N.J.S.A. 13: 1K-6 et. seq. ("ISRA"), including, but not limited
to: (i) filing all necessary documents with the New Jersey Department of
Environmental Protection ("NJDEP") and receiving all necessary approval prior
to the Closing to allow the transactions contemplated hereby to proceed prior
to full compliance with ISRA; (ii) obtaining all necessary authorizations,
consents, orders and approvals from NJDEP; and (iii) completing all necessary
post-Closing and remedial activities, if any, required by NJDEP for its
approval. The Buyer shall grant the Seller and its representatives access
during business hours to conduct any required post-Closing remedial activities
and the Seller agrees to indemnify, defend and hold the Buyer harmless for any
such activities and take any necessary action to repair, rebuild, reconstruct
or otherwise correct, to the reasonable satisfaction of the
-24-
31
Buyer, any further damages or destruction caused by the Seller or its
representatives while performing such activities.
ARTICLE VII
CONDITIONS TO CLOSING
7.1 Conditions to Obligations of the Seller. The obligations
of the Seller to consummate the transactions contemplated by this Agreement
shall be subject to the fulfillment, at or prior to the Closing, of each of the
following conditions, all or any of which may be waived, in whole or in part,
by the Seller:
(a) Representations and Warranties; Covenants. The
representations and warranties of the Buyer contained in this Agreement shall
be true and correct in all material respects as of the Closing, with the same
force and effect as if made on and as of the Closing Date, and all the
covenants and other obligations contained in this Agreement to be complied with
by the Buyer on or before the Closing Date shall have been complied with in all
material respects, and the Seller shall have received a certificate of the
Buyer to such effect signed by a duly authorized officer thereof;
(b) No Prohibition. There shall not exist any temporary
restraining order, preliminary or permanent injunction, final judgment, law or
regulation prohibiting the consummation of this Agreement or the transactions
contemplated hereby, or, to the knowledge of any party, any pending or
threatened action by any governmental authority or private party prohibiting or
seeking to prohibit the consummation of this Agreement or the transactions
contemplated hereby;
(c) Employment Agreements. Effective as of the Closing,
the Buyer shall have entered into an employment agreement with each of ▇▇▇▇▇
▇▇▇▇▇ and ▇▇▇▇▇▇ ▇▇▇▇ on terms reasonably acceptable to Messrs. ▇▇▇▇▇ and ▇▇▇▇,
respectively. In addition, the Buyer shall have made an employment offer to
each of the individuals whose name is set forth on Schedule 7.1(c) and such
offers shall have been accepted by substantially all such individuals; and
(d) Additional Documents. The Seller shall have received
such additional documents, certificates, payments, assignments, transfers and
other deliveries as it or its counsel may reasonably request and as are
customary to effect a closing of the matters herein contemplated.
(e) Employee Stock Options. On or before the Closing
Date, the Buyer shall have either (i) issued to each Hired Employee an option
at a price of $17.00 per share to purchase a number of shares of common stock
of PDYN equal to the number of outstanding unvested options that the Hired
Employee had held on the Closing Date granted under the P-COM 1995 Stock
Option/Stock Issuance Plan (as amended and restated effective as of April
1997), or (ii) assume such outstanding unvested options along with such
appropriate adjustments having been made thereto to ensure that the Hired
Employees' rights and benefits pursuant to such option are maintained. No
action or adjustment shall be taken or made to any such assumed option which is
an "incentive stock option" as defined in Section 422 of the Code, which would
result in a
-25-
32
"modification" (as such term is defined in Section 424 of the Code) resulting
in such option ceasing to qualify as an incentive stock option. P-COM agrees
not to issue more options under the P-COM 1995 Stock Option/Stock Issuance Plan
(as amended and restated effective as of April 1997). Schedule 7.1(e) sets
forth the number of unvested options for each Hired Employee as of March 31,
2000.
7.2 Conditions to Obligations of the Buyer. The obligations
of the Buyer to consummate the transactions contemplated by this Agreement
shall be subject to the fulfillment, at or prior to the Closing, of each of the
following conditions, all or any of which may be waived, in whole or in part,
by the Buyer:
(a) Representations and Warranties; Covenants. The
representations and warranties of the Seller contained in this Agreement shall
be true and correct in all material respects as of the Closing, with the same
force and effect as if made on and as of the Closing, and all the covenants and
other obligations contained in this Agreement to be complied with by the Seller
on or before the Closing Date shall have been complied with in all material
respects, and the Buyer shall have received a certificate of the Seller to such
effect signed by a duly authorized officer thereof;
(b) No Prohibition. There shall not exist any temporary
restraining order, preliminary or permanent injunction, final judgment, law or
regulation prohibiting the consummation of this Agreement or the transactions
contemplated hereby or to obtain substantial damages from the Buyer, in respect
of the consummation of the transactions contemplated hereby, or, to the
knowledge of any party, any pending or threatened action by any governmental
authority or private party prohibiting or seeking to prohibit the consummation
of this Agreement or the transactions contemplated hereby or, which seeks to
enjoin the operation of all or a material portion of the Business or the
Transferred Assets, which, in the reasonable judgment of the Buyer, would make
it inadvisable to consummate the transactions contemplated by this Agreement;
(c) Consents. The Seller shall have obtained and
delivered to the Buyer the consents and approvals set forth on Schedule 4.8;
(d) Employment Agreements. Effective as of the Closing,
▇▇▇▇▇ ▇▇▇▇▇ and ▇▇▇▇▇▇ ▇▇▇▇ shall have each entered into an employment
agreement with the Buyer on terms reasonably acceptable to the Buyer;
(e) Additional Agreement. Effective as of the Closing,
▇▇▇▇▇ ▇'▇▇▇▇ shall have entered into an agreement with the Buyer, on terms
reasonably acceptable to the Buyer, whereby ▇▇. ▇'▇▇▇▇ agrees not to compete
with the Buyer or solicit employment for any Hired Employees or other employees
of the Buyer.
(f) Leases. The Seller shall have obtained the written
consent of each lessor of the Leased Real Property to the assignment of the
Leases to the Buyer and the Seller shall have delivered copies of such consents
to the Buyer;
(g) Certified Resolutions and Incumbency. The Buyer
shall have received a certificate of the Secretary or Assistant Secretary of
the Seller containing a true and correct copy
-26-
33
of the resolutions duly adopted by the Seller's board of directors, approving
and authorizing the execution and delivery of this Agreement and related
documents and the transactions contemplated hereby and thereby. The Secretary
or Assistant Secretary of the Seller shall also certify that such resolutions
have not been rescinded, revoked, modified, or otherwise affected and remain in
full force and effect. In addition, the Buyer shall have received a certificate
of incumbency of each of the Seller and P-COM executed by an executive officer
and Secretary or Assistant Secretary of the Seller and P-COM, respectively,
listing the officers of the Seller and P-COM authorized to execute this
Agreement and the instruments of transfer on behalf of the Seller, certifying
the authority of each such officer to execute the agreements, documents, and
instruments on behalf of each of the Seller and P-COM in connection with the
consummation of the transactions contemplated herein;
(h) Instruments of Transfer. The Seller shall have
delivered to the Buyer such warranty deeds, quitclaim deeds, bills of sale,
motor vehicle titles, endorsements, assignments, licenses, and other good and
sufficient instruments of conveyance and transfer and any other instruments
reasonably deemed appropriate by counsel to the Buyer all in form and substance
reasonably satisfactory to counsel to the Buyer to vest in the Buyer all of the
Seller's rights, title, and interest with respect to the Transferred Assets,
free and clear of all liens, charges, encumbrances, pledges, or claims of any
nature;
(i) Condition of Transferred Assets. On the Closing
Date, all of the Transferred Assets shall be in substantially the same
condition as at the close of business on the date hereof, except for ordinary
use and wear thereof and changes occurring in the ordinary course of business
or expressly permitted by this Agreement between the date hereof and the
Closing Date, and the Buyer shall have received a certificate dated as of the
Closing Date, executed by an authorized officer of the Seller to such effect;
provided, however, if on or prior to the Closing Date any of the Transferred
Assets shall have suffered loss or damage on account of fire, flood, accident,
act of war, civil commotion, or any other cause or event beyond the reasonable
power and control of the Seller (whether or not similar to the foregoing) to an
extent which, in the reasonable opinion of the Buyer, materially affects the
value of the Transferred Assets, taken as a whole, the Buyer shall have the
right either (a) to terminate this Agreement and all of the Buyer's obligations
hereunder without incurring any liability to the Seller as a result of such
termination or (b) to consummate the transactions provided for herein and be
paid the full amount of all insurance proceeds, if any, paid or payable to the
Seller, in respect of such loss plus an amount up to a maximum of $500,000
equal to any deductible or co-insurance reserve applicable to such loss. If
under the circumstances described in the foregoing sentence, the Buyer shall
elect to consummate the transactions provided for herein, the Seller shall, on
demand, pay to the Buyer the full amount of any insurance proceeds received by
the Seller in respect of any such loss, together with up to a maximum of
$500,000 of any deductible or co-insurance reserve applicable to such loss; and
(j) Additional Documents. The Buyer shall have received
such additional documents, certificates, payments, assignments, transfers and
other deliveries as it or its counsel may reasonably request and as are
customary to effect a closing of the matters herein contemplated.
-27-
34
(k) Certificate of Non-foreign status and State Tax
Clearance Certificates. The Seller shall have delivered to the Buyer a duly
executed certificate stating that the Seller is not a "foreign person" for
purposes of Section 1445 and Section 897 of the Code.
(l) Proprietary Information and Inventions Agreement of
P-COM. P-COM and the Seller shall have assigned and transferred to the Buyer
any and all Intellectual Property Rights they may own and be entitled to
pursuant to the terms of such Proprietary Information and Inventions Agreements
P-COM and the Seller have entered into with any employee of the Seller.
ARTICLE VIII
ACTIONS BY SELLER AND BUYER
AFTER THE CLOSING
8.1 Confidentiality. The Confidentiality Agreement dated
February 16, 2000 between the Seller and the Buyer and attached as Exhibit 8.1
(the "Confidentiality Agreement") is incorporated by reference herein and shall
continue in full force and effect through the Closing Date. The definition of
"Confidential Information" contained in the Confidentiality Agreement is hereby
amended to include this Agreement, all Schedules and Exhibits to this
Agreement, and all information obtained from the Seller pursuant to Section 8.3
8.2 Employment of Seller's Personnel. (a) The Buyer shall
offer to employ beginning immediately after the Closing Date, at rates of
compensation not less than the Seller's rates of compensation as in effect on
the Closing Date, but otherwise in accordance with the normal hiring practices
and policies of the Buyer and PDYN, all of the Seller's employees listed on
Schedule 8.2(a) and shall employ all of the Seller's employees who accept such
offer of employment. The Seller shall use its best efforts between the date
hereof and the Closing Date to make all of its employees available for
employment by the Buyer. Such employees who are hired by the Buyer shall be
referred to herein as "Hired Employees."
(b) Each Hired Employee of the Seller who, from and
after the Closing Date, is employed by the Buyer and who is subsequently
involuntarily terminated by the Buyer (other than for Cause) before the first
anniversary of the Closing Date, shall be subject to the terms and conditions
of the Paradyne/CRC Special Severance Plan, a description of which is attached
hereto as Exhibit 8.2(b)(i) (the "Severance Plan"). The terms of the Severance
Plan shall be applicable to the Hired Employees for a period of one year from
the date of beginning employment with the Buyer and during such time shall be
determinative of any severance arrangements for all Hired Employees. Following
the one year period from the date of employment by the Buyer, all such Hired
Employees shall then be subject to the Buyer's relevant severance plans and the
Severance Plan shall be of no further force and effect. For purposes of
computing any severance payments owed to a Hired Employee under this Section
8.2(b), it shall be deemed that such employee commenced his or her employment
with the Buyer on the date such employee commenced his or her employment with
the Seller, as determined from the employment records transferred to the Buyer
pursuant to this Agreement. In accordance with the Severance Plan, certain
severance payments described in the Severance Plan shall be conditioned upon
the affected Hired Employees' execution of a Termination Agreement, Waiver and
Release of Claims in the form attached hereto as Exhibit 8.2(b)(ii). The Buyer
agrees that (i) the
-28-
35
principal office described in the Severance Plan is located in Fair Lawn, New
Jersey, (ii) for purposes of the Severance Plan, the Buyer does not now or
currently intend to have any facilities within 50 miles of Fair Lawn, New
Jersey, (iii) the Buyer will not materially amend, modify or terminate, the
Severance Plan, and (iv) the Buyer will not materially amend or modify the
Termination Agreement, Waiver and Release of Claims.
(c) In addition to any severance payments owed to any
Hired Employee pursuant to Section 8.2(b) above, if any Hired Employee who is
named on Schedule 8.2(c) is involuntarily terminated by the Buyer (other than
for Cause) before the first anniversary of the Closing Date, such employee
shall receive from the Buyer at the time of such termination an additional
severance payment equal to the amount set forth opposite such Hired Employee's
name on Schedule 8.2(c). The costs incurred, directly or indirectly, in
connection with the termination or severance after the Closing Date of any
Hired Employee shall be borne exclusively by the Buyer. However, the Seller
shall be responsible for any and all costs incurred, directly or indirectly, in
connection with the termination or severance of any employee of the Seller set
forth on Schedule 8.2 (a) who is not a Hired Employee.
(d) The Seller shall be responsible for complying with
the requirements of Section 4980B of the Code and Part VI of Title I of ERISA
for the employees of the Seller or any Affiliate of the Seller (including the
Hired Employees) and their "qualified beneficiaries" whose "qualifying event"
(as such terms are defined in Section 4980B of the Code) occurs on or prior to
the Closing Date.
(e) The Buyer shall be solely responsible for
employment-related liabilities arising out of the Hired Employees' employment
or working relationship with the Buyer.
(f) As to any Plan that is a tax-qualified defined
contribution retirement plan, the Seller shall, effective no later than the
Closing Date, fully vest all Hired Employees in their benefits thereunder.
Within 90 days after the Closing Date, the Seller shall make eligible rollover
distributions (within the meaning of Section 402(c) of the Code) from any such
plan available to the Hired Employees, except that if the Seller elects to
first file the plan with the IRS for a favorable determination letter, the
Seller must (i) do so within 90 days after the Closing Date, (ii) comply with
any reasonable requirements the IRS imposes as a condition of issuing such
letter; and (iii) make eligible rollover distributions available within 90 days
after the issuance of such letter.
(g) If any Hired Employee has an unreimbursed balance in
his or her medical or dependent care reimbursement accounts as of the Closing
Date, the Seller shall continue to reimburse such Hired Employees from their
respective accounts for eligible claims the Hired Employee incurs prior to the
Closing Date (subject to paragraph (d) above). Any such claims shall be
submitted to the Seller or its designee in the manner specified by the Seller
by February 28, 2001. Nothing in this Section 8.2(g) shall be deemed to require
that the Seller pay dependent care claims after the Closing Date that exceed
the balance of the dependent claim claimant's reimbursement account as of the
Closing Date.
(h) The Seller shall be responsible for the payment of
all earned but unpaid salaries, bonus, vacation pay, sick pay, holiday pay, and
other like obligations (including related
-29-
36
taxes) and payments to the employees of the Business for all periods ending on
or prior to the Closing Date, other than such of the foregoing that are
included in Assumed Liabilities, and the Buyer shall be responsible for all
Assumed Liabilities related to such employees. The Seller shall be responsible
for the payment of any amounts due to the employees pursuant to any Plans as a
result of the employment of its employees, and, in determining bonuses and
other similar payments due to the employees for any period ended on or prior to
the Closing Date, the Seller shall, if payment thereof will occur after the
Closing Date, waive any requirement that such employees be employees of the
Seller on the date such bonuses or other similar payments are paid. The Seller
shall be responsible for all incurred but unreported or unpaid medical claims
occurring prior to the Closing Date and for the cost associated with any
hospital confinement which commences prior to the Closing Date. The Buyer shall
become responsible for all costs and liabilities attributable to the employees
accruing on and after the Closing Date; provided, however, that the Buyer shall
not be responsible for (a) liabilities arising under the Plans other than to
the extent reflected in the Assumed Liabilities or (b) liabilities associated
with any leaves taken prior to the Closing Date in connection with the Family
and Medical Leave Act of 1993. Effective on the Closing Date, the Seller and
P-COM shall, and hereby does, release all the employees listed on Schedule
8.2(a) from any employment and/or confidentiality agreement previously entered
into between the Seller and such employees relating to the Business to the
extent (but only to the extent) necessary for the Buyer to operate the Business
in the same manner as operated by the Seller prior to the Closing Date.
8.3 Books and Records; Access to Information. (a) The Seller
agrees that on and after the Closing Date it will permit the Buyer and its
Representatives, during normal business hours, to have access to and to examine
and take copies of all books and records of the Seller which are not delivered
to the Buyer pursuant to this Agreement and which relate to the Business or the
Transferred Assets, whether with respect to events occurring prior to the
Closing Date or to transactions or events occurring subsequent to the Closing
Date which arise out of transactions or events occurring prior to the Closing
Date. All books and records of the Seller relating to the Business or the
Transferred Assets and not delivered to the Buyer pursuant hereto will be
preserved by the Seller for a period of not less than seven years following the
Closing Date.
(b) The Buyer agrees that it shall preserve and keep all
books and records with respect to the Transferred Assets and Assumed
Liabilities for a period of at least seven years from the Closing Date. After
such seven-year period, the Buyer may discard all such books and records unless
the Seller or its Affiliates, 6 months prior to the termination of such
seven-year period, has given notice to the Buyer of its intent to remove and
retain all or any part of such books and records. During such seven-year
period, duly authorized Representatives of the Seller shall, upon reasonable
notice, have access thereto during normal business hours to examine, inspect
and copy such books and records.
(c) The Buyer agrees to receive, maintain and make
available to the Seller for inspection and photocopying during normal business
hours all records, data and analyses of the Business, including without
limitation all records, data and analyses relating to the Business prior to the
Closing Date, with respect to quality control, environmental rules and
regulations and employee health and safety, including, without limitation, all
applicable documents and records issued by or pertaining to regulations
promulgated by the Occupational Safety and Health Administration, the
Environmental Protection Agency, or state agencies.
-30-
37
(d) The Seller and the Buyer will provide each other
with such cooperation and information as either of them reasonably may request
of the other in filing any Tax Return, amended Tax Return or claim for refund,
determining a liability for Taxes or a right to refund of Taxes, preparation
for litigation or investigation of claims in conducting any audit or other
proceeding in respect of Taxes. Such cooperation and information shall include
providing copies of all relevant Tax Returns, documents and records, or
portions thereof, relating exclusively to the Business (but not including
income or franchise Tax Returns or portions thereof). Each of the Seller and
the Buyer shall make its employees available on a mutually convenient basis to
provide explanation of any documents or information provided hereunder.
Notwithstanding Section 8.3(b), each of the Seller and the Buyer will retain
all Tax Returns, schedules and work papers and all material records or other
documents relating to Tax matters of the Business for the taxable year of the
Seller ending on or after the Closing Date and for all previous years, until
the expiration of the statute of limitations of the taxable years to which such
Tax Returns and other documents relate (and, to the extent notified by the
other party in writing, any extensions thereof). Any information obtained under
this Section 8.3(d) shall be kept confidential, except as may be otherwise
necessary in connection with the filing of Tax Returns or claims for refund or
in conducting an audit or other proceeding.
(e) After the Closing Date, the Seller and its
Affiliates and the Buyer shall cooperate with each other in all reasonable
respects in connection with the defense or assertion of any claim related to
any Transferred Asset, non-Transferred Asset or Assumed Liability or
non-Assumed Liability, as the case may be, including, without limitation,
making available records relating to such claim and furnishing, without
expense, management employees of the party as may be reasonably necessary for
the preparation of the defense or assertion of any such claim or for testimony
as a witness in any proceeding relating to such claim; provided, however, that
the foregoing right to cooperation shall not be exercisable by one party in
such a manner as to interfere unreasonably with the normal operations and
business of the other party. The Seller and its Affiliates shall reimburse the
Buyer for all expenses incurred by the Buyer pursuant to this Section 8.3(e),
including salary expenses of employees who are required to be away from their
normal place of employment.
8.4 Mail Received After Closing. (a) In the event that the
Buyer receives after the Closing any mail or other communications addressed to
the Seller, the Buyer may open such mail or other communications and deal with
the contents thereof in its discretion to the extent that such mail or other
communications and the contents thereof relate to the Business or any of the
Transferred Assets or to any of the Assumed Liabilities, including the right to
endorse without recourse the name of the Seller on any check received by the
Buyer with respect to the Business or the Transferred Assets, and to deal with
the proceeds in accordance with the terms of this Agreement. The Buyer agrees
to deliver promptly or cause to be delivered to the Seller all other mail and
the contents thereof which does not relate to the Transferred Assets or the
Assumed Liabilities.
(b) In the event that the Seller or its Affiliates
receives after the Closing Date mail or other communications addressed to the
Seller or its Affiliates which relates to the Business, any of the Transferred
Assets or any of the Assumed Liabilities, the Seller or its Affiliates shall
promptly deliver or cause to be delivered all such mail and the contents
thereof to the Buyer. The Seller and its Affiliates agree to cooperate with the
Buyer and to make arrangements
-31-
38
(including "lock box" and other banking arrangements) reasonably necessary in
order to properly deal with checks addressed to the Seller or its Affiliates
but which belong to the Buyer pursuant to this Agreement, and to properly
direct the proceeds thereof to the Buyer.
8.5 Other Employee Benefits. Effective as of the Closing
Date, and for a period of not less than 12 months following the Closing Date,
the Buyer shall (or shall cause an appropriate Subsidiary or Affiliate to)
provide the Hired Employees with benefits (including, without limitation,
welfare benefits) that are substantially similar to the benefits the Buyer
provides to its other similarly-situated employees, except that the short- and
long-term disability plans available to the Hired Employees during the first
12 months following the Closing Date will be comparable to the short-term and
long-term disability plans the Seller made available to the Hired Employees
prior to the Closing Date. In addition, any such plan or arrangement of the
Buyer shall cover all claims relating to conditions which existed prior to the
Closing Date.
8.6 No Solicitation. For a period of two years following the
Closing, the Seller and its Affiliates shall not, directly or indirectly,
solicit, induce to leave employment or offer employment to any Hired Employee
of the Buyer, or any Affiliate of the Buyer.
8.7 Discharge of Business Obligations. From and after the
Closing Date, the Seller shall pay and discharge, in accordance with past
practice but not less than on a timely basis, all obligations and liabilities
incurred prior to the Closing Date in respect of the Business, its operations
or the assets and properties used therein (except for those expressly assumed
by the Buyer hereunder), including without limitation any liabilities or
obligations to employees and clients of the Business.
8.8 UCC Matters. From and after the Closing Date, the Seller
will promptly refer all inquiries with respect to ownership of the Transferred
Assets or the Business to the Buyer. In addition, the Seller will execute such
documents and financing statements as the Buyer may reasonably request from
time to time to evidence transfer of the Transferred Assets to the Buyer,
including any necessary assignments of financing statements.
8.9 Tax Matters. (a) As soon as practicable after the Closing
Date, but in no event later than the final due date for the filing of a final
Form 941 as required under the Code and applicable regulations thereunder, the
Seller shall provide a Form W-2 for each of its employees for the period
beginning on January 1, 2000 through the Closing Date, as required under the
Code and the regulations promulgated thereunder. Following the Closing Date,
the Buyer shall continue as the Successor Employer, as such term is defined in
the applicable regulations of the Code.
(b) The Seller and the Buyer shall cooperate with each
other in all reasonable respects in connection with the satisfaction of this
provision, including but not limited to, making the appropriate books and
records available as described under Section 8.3.
8.10 Sales and Transfer Taxes. The Buyer and the Seller shall
equally share the liability for and each shall pay one-half of any sales,
transfer and similar Taxes incurred as a result of the sale of the Transferred
Assets (the "Transfer Taxes"). The Seller will file all necessary Tax Returns
and other documents required to be filed with respect to all such Taxes.
-32-
39
8.11 Change of Name. Immediately after the Closing, the
Seller shall change its name to "Control Liquidating Corp.".
ARTICLE IX
INDEMNIFICATION
9.1 Survival of Certain Representations and Warranties. The
representations and warranties set forth in Sections 4.18, 4.20 and 4.21 shall
survive the Closing for a period of six months after the Closing Date. The
representations and warranties set forth in Sections 4.1, 4.2, 4.3, 4.4,
4.5(c)-(e), 4.6, 4.7, 4.9, 4.10, 4.13, 4.15(b), 4.16 and 4.17 and in Sections
5.1, 5.2, 5.3, 5.5, 5.8 and 5.10 shall survive the Closing for a period of 12
months after the Closing Date. The representations and warranties set forth in
Sections 4.5(a) and (b), 4.12 and 4.15(d) shall survive the Closing for a
period of 24 months after the Closing Date. The representations and warranties
set forth in Section 4.15(a) and (c) shall survive the Closing for a period
equal to the applicable statute of limitations. The representations set forth
in Section 4.14 and the covenants set forth in Section 8.9 shall survive the
Closing for the applicable statute of limitations period. All other
representations and warranties of the Seller and the Buyer contained in this
Agreement shall terminate at the Closing and shall be of no force and effect
thereafter.
9.2 Indemnification by the Buyer. (a) The Buyer agrees,
subject to the other terms and conditions of this Agreement, to indemnify the
Seller (and the Seller's directors, officers, employees, Affiliates, successors
and assigns) against, and hold it harmless from all liabilities, costs and
expenses (including reasonable attorney and expert fees) of and damages to the
Seller arising out of (i) the breach of any representation, warranty, covenant
or agreement of the Buyer herein, (ii) the Assumed Liabilities, (iii) the
operation of the Business, as relates to the Transferred Assets, and the
Transferred Assets after the Closing Date, and (iv) the Environmental Liability
of the Buyer. No claim may be asserted nor may any action be commenced against
the Buyer for breach of any representation, warranty, covenant or agreement
contained herein, unless written notice of such claim or action is received by
the Buyer describing in detail the facts and circumstances with respect to the
subject matter of such claim or action on or prior to the date on which the
representation, warranty, covenant or agreement on which such claim or action
is based ceases to survive as set forth in Section 9.1, irrespective of whether
the subject matter of such claim or action shall have occurred before or after
such date. Nothing contained in this Section 9.2(a) shall in any manner alter
or modify the time of survival of the representations and warranties of the
Seller and the Buyer as set forth in Section 9.1 and/or the Excluded
Liabilities retained by the Seller pursuant to this Agreement.
(b) Except for claims with respect to Assumed
Liabilities, as to which the limitations of this sentence (including provisos)
shall not apply, no claim may be made against the Buyer for indemnification
pursuant to this Section 9.2 unless the aggregate of all liabilities and
damages of the Seller (exclusive of legal fees incurred in connection with
pursuing such claim) with respect to this Section 9.2 shall exceed $100,000;
provided that no indemnification shall be available with respect to any
liability or damage if the aggregate of all liabilities and damages for which
the Seller has received indemnification shall have exceeded 100% of the
aggregate purchase price set forth in Section 2.4. For the purposes of this
subsection (b), in computing such aggregate amount of claims, the amount of
each claim shall be deemed to be an
-33-
40
amount (i) net of any Tax benefit to the Seller or any Affiliate thereof, and
(ii) net of any insurance proceeds and any indemnity, contributions or other
similar payment payable by any third party with respect thereto.
(c) Payments by the Buyer pursuant to subsection (a) of
this Section 9.2 shall be limited to the amount of any liability or damage that
remains after deducting therefrom (i) any Tax benefit to the Seller or any
Affiliate thereof, arising from such liability or damage and (ii) any insurance
proceeds and any indemnity, contribution or other similar payment payable to
the Seller or any Affiliate from any third party with respect thereto. Tax
benefits will be considered to be realized by the Seller or any Affiliate
thereof for purposes of this Section 9.2 in the year in which a payment occurs,
and the amount of the Tax benefits shall be determined by assuming (i) the
Seller is in the maximum United States federal income tax bracket after any
deduction reportable with respect to a payment hereunder and (ii) the Seller's
effective state and local income tax rate is its effective rate for the most
recent prior taxable year for which such information is available.
(d) The Seller agrees to give the Buyer prompt written
notice of any claim, assertion, event or proceeding by or in respect of a third
party of which it has knowledge concerning any liability or damage as to which
it may request indemnification hereunder. The Buyer shall have the right to
direct, through counsel of its own choosing, the defense or settlement of any
such claim or proceeding; the Seller may participate in such defense, but in
such case the expenses of the Seller shall be paid by the Seller. The Seller
shall provide the Buyer with access to its records and personnel relating to
any such claim, assertion, event or proceeding during normal business hours and
shall otherwise cooperate with the Buyer and aid at the Buyer's request in the
defense or settlement thereof, and the Buyer shall reimburse the Seller for all
its reasonable out-of-pocket expenses in connection therewith. If the Buyer
elects to direct the defense of any such claim or proceeding, the Seller shall
not pay, or permit to be paid, any part of any claim or demand arising from
such asserted liability, unless the Buyer consents in writing to such payment
or unless the Buyer, subject to the last sentence of this subsection (d),
withdraws from the defense of such asserted liability, or unless a final
judgment from which no appeal may be taken by or on behalf of the Buyer is
entered against the Seller for such liability. If the Buyer shall fail to
defend, or if, after commencing or undertaking any such defense, fails to
prosecute or withdraws from such defense, the Seller shall have the right to
undertake the defense or settlement thereof, at the Buyer's expense. If the
Seller assumes the defense of any such claim or proceeding pursuant to this
subsection (d) and proposes to settle such claim or proceeding prior to a final
judgment thereon or to forego appeal with respect thereto, then the Seller
shall give the Buyer prompt written notice thereof, and the Buyer shall have
the right to participate in the settlement or assume or reassume the defense of
such claim or proceeding.
(e) Except as set forth in this Agreement, the Buyer is
not making any representation, warranty, covenant or agreement with respect to
the matters contained herein. Anything herein to the contrary notwithstanding,
no breach of any representation, warranty, covenant or agreement contained
herein shall give rise to any right on the part of the Seller, after the
consummation of the purchase and sale of the Transferred Assets and assumption
of Assumed Liabilities contemplated hereby, to rescind this Agreement or any of
the transactions contemplated hereby.
-34-
41
9.3 Indemnification by the Seller and P-COM. (a) The Seller
and P-COM, jointly and severally, agree, subject to the other terms and
conditions of this Agreement, to indemnify the Buyer (and the Buyer's
directors, officers, employees, Affiliates, successors and assigns) against,
and hold it harmless from all liabilities, costs and expenses (including
reasonable attorney and expert fees) of and damages to the Buyer, arising out
of (i) the breach of any representation, warranty, covenant or agreement of the
Seller or P-COM herein, (ii) the operation of the Business and the Transferred
Assets prior to the Closing Date, (iii) the failure to deliver good, valid and
marketable title to any of the Transferred Assets, (iv) the Excluded
Liabilities, and (v) the Environmental Liability of the Seller. No claim may be
asserted nor may any action be commenced against the Seller and/or P-COM for
any patent infringement arising in connection with (i) any engineering work
relating to the design of products which was not completed prior to the Closing
Date (with such completion evidenced by delivery to customers of such products
or the existence of the Seller's standard manufacturing control documentation
for such products), (ii) any patents which were granted after the Closing Date
and for which there were no claims as set forth in Section 4.12(e), except
those patents issued or issuable to the Seller or its Affiliates which are used
in the Transferred Assets at the time of the Closing, or (iii) third party
patents (or patent applications) of which the Seller had prior knowledge. In
addition, no claim may be asserted nor may any action be commenced against the
Seller and/or P-COM for breach of any representation, warranty, covenant or
agreement contained herein, or any Excluded Liabilities which are asserted
against the Buyer, unless written notice of such claim or action is received by
the Seller or P-COM describing in detail the facts and circumstances with
respect to the subject matter of such claim or action on or prior to the date
on which the representation, warranty, covenant or agreement on which such
claim or action is based ceases to survive as set forth in Section 9.1,
irrespective of whether the subject matter of such claim or action shall have
occurred before or after such date. Nothing contained in this Section 9.3(a)
shall in any manner alter or modify the time of survival of the representations
and warranties of the Seller and the Buyer as set forth in Section 9.1 and/or
the liabilities assumed by the Buyer pursuant to this Agreement and as set
forth in Section 2.3 hereto.
(b) Except for claims with respect to the
representations and warranties set forth in Section 4.14 and the covenants set
forth in Section 8.9, as to which the limitations of this sentence (including
provisos) shall not apply, no claim may be made against the Seller or P-COM for
indemnification pursuant to this Section 9.3 unless the aggregate of all
liabilities and damages (exclusive of legal fees incurred in connection with
pursuing such claim) of the Buyer with respect to this Section 9.3 shall exceed
$100,000; provided that no indemnification shall be available with respect to
any liability or damage if the aggregate of all liabilities and damages for
which the Buyer has received indemnification shall have exceeded 100% of the
aggregate purchase price set forth in Section 2.4. For the purposes of this
subsection (b), in computing such aggregate amount of claims, the amount of
each claim shall be deemed to be an amount (i) net of any Tax benefit to the
Buyer or any Affiliate thereof, and (ii) net of any insurance proceeds and any
indemnity, contributions or other similar payment payable by any third party
with respect thereto.
(c) Payments by the Seller or P-COM pursuant to
subsection (a) of this Section 9.3 shall be limited to the amount of any
liability or damage that remains after deducting therefrom (i) any Tax benefit
to the Buyer or any Affiliate thereof arising from such liability or damage,
and (ii) any insurance proceeds and any indemnity, contribution or other
similar
-35-
42
payment payable to the Buyer or any Affiliate from any third party with respect
thereto. Tax benefits will be considered to be realized by the Buyer for
purposes of this Section 9.3 in the year in which a payment occurs, and the
amount of the Tax benefits shall be determined by assuming (i) the Buyer is in
the maximum United States federal income tax bracket after any deduction
reportable with respect to a payment hereunder and (ii) the Buyer's effective
state and local income tax rate is its effective rate for the most recent prior
taxable year for which such information is available.
(d) The Buyer agrees to give the Seller or P-COM prompt
written notice of any claim, assertion, event or proceeding by or in respect of
a third party of which it has knowledge concerning any liability or damage as
to which it may request indemnification hereunder. The Seller and P-COM shall
have the right to direct, through counsel of its own choosing, the defense or
settlement of any such claim or proceeding; the Buyer may participate in such
defense, but in such case the expenses of the Buyer shall be paid by the Buyer.
The Buyer shall provide the Seller and P-COM with access to its records and
personnel relating to any such claim, assertion, event or proceeding during
normal business hours and shall otherwise cooperate with and aid at the
Seller's or P-COM's request the Seller and/or P-COM in the defense or
settlement thereof, and the Seller and/or P-COM shall reimburse the Buyer for
all its reasonable out-of-pocket expenses in connection therewith. If the
Seller or P-COM elects to direct the defense of any such claim or proceeding,
the Buyer shall not pay, or permit to be paid, any part of any claim or demand
arising from such asserted liability unless the Seller or P-COM consents in
writing to such payment or unless the Seller or P-COM, subject to the last
sentence of this subsection (d), withdraws from the defense of such asserted
liability or unless a final judgment from which no appeal may be taken by or on
behalf of the Seller is entered against the Buyer for such liability. If the
Seller and/or P-COM shall fail to defend, or if, after commencing or
undertaking any such defense, fails to prosecute or withdraws from such
defense, the Buyer shall have the right to undertake the defense or settlement
thereof, at the Seller's and/or P-COM's expense. If the Buyer assumes the
defense of any such claim or proceeding pursuant to this subsection (d) and
proposes to settle such claim or proceeding prior to a final judgment thereon
or to forego appeal with respect thereto, then the Buyer shall give the Seller
and P-COM prompt written notice thereof, and the Seller and P-COM shall have
the right to participate in the settlement or assume or reassume the defense of
such claim or proceeding.
(e) Except as set forth in this Agreement, neither the
Seller nor P-COM is making a representation, warranty, covenant or agreement
with respect to the matters contained herein. Anything herein to the contrary
notwithstanding, no breach of any representation, warranty, covenant or
agreement contained herein shall give rise to any right on the part of the
Buyer, after the consummation of the purchase and sale of the Transferred
Assets and assumption of Assumed Liabilities contemplated hereby, to rescind
this Agreement or any of the transactions contemplated hereby.
ARTICLE X
TERMINATION AND ABANDONMENT
10.1 Methods of Termination. The transactions contemplated
herein may be terminated and/or abandoned at any time but not later than the
Closing:
-36-
43
(a) by mutual written consent of the Buyer and the
Seller; and
(b) by the Buyer or the Seller if the Closing has not
occurred within 90 days of the date hereof for any reason.
10.2 Procedure Upon Termination. In the event of termination
and abandonment by the Buyer or by the Seller, or both, pursuant to Section
10.1, written notice thereof shall be given to the other party and the
transactions contemplated by this Agreement shall be terminated and/or
abandoned, without further action by the parties. If the transactions
contemplated by this Agreement are terminated and/or abandoned as provided
herein:
(a) each party hereto will redeliver all documents, work
papers and other material (and all copies thereof) of the other party relating
to the transactions contemplated hereby, whether so obtained before or after
the execution hereof, to the party furnishing the same; and
(b) all confidential information received by either
party hereto with respect to the business of the other Party hereto shall be
treated in accordance with Section 8.1.
10.3 Effect of Termination. In the event of the termination
of this Agreement pursuant to Section 10.1, this Agreement shall thereafter
become void and have no effect, and no party hereto shall have any liability or
obligation to any other party hereto in respect of this Agreement, except that
the provisions of Section 8.1 (Confidentiality), Article XI (Miscellaneous) and
this Section 10.3 shall survive any such termination.
ARTICLE XI
MISCELLANEOUS
11.1 Specific Performance. It is expressly understood and
agreed that the material breach of any covenant contained in this Agreement
will result in irreparable injury to the other party and that therefore such
other party shall be entitled to specific performance thereof.
11.2 Assignment. Neither this Agreement nor any of the rights
or obligations hereunder may be assigned by the Seller without the prior
written consent of the Buyer, or by the Buyer without the prior written consent
of the Seller. Subject to the foregoing, this Agreement shall be binding upon
and inure to the benefit of the parties hereto and their respective successors
and assigns, and no other Person shall have any right, benefit or obligation
hereunder.
11.3 Notices. Unless otherwise provided herein, any notice,
request, instruction or other document to be given hereunder by any party to
the other parties shall be in writing and delivered in person or by courier or
by facsimile transmission as follows (or at such address or facsimile number of
which notice shall have been duly given in accordance with this Section 11.3):
-37-
44
If to the Seller or P-COM: P-Com, Inc.
▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇.
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
If to the Buyer or PDYN: Paradyne Corporation
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
or to such other place and with such other copies as either party may designate
as to itself by written notice to the others. Any failure by any party to
deliver copies of any notice shall not, in itself, affect the validity of such
notice if otherwise properly made to the other party.
11.4 Choice of Law. This Agreement shall be construed,
interpreted and the rights of the parties determined in accordance with the
laws of the State of Delaware, without regard to the conflict of law principles
thereof.
11.5 Resolution of Conflicts; Arbitration. (a) In the event
of any dispute among the parties in connection with this Agreement, including
without limitation, disputes over a claim pursuant to Section 9.2 or Section
9.3, and disputes over any amount payable pursuant to Section 2.4 hereof, the
Seller and the Buyer shall attempt in good faith to agree upon the rights of
the respective parties with respect to each of such claims. If the Seller and
the Buyer should so agree, a memorandum setting forth such agreement shall be
prepared and signed by both parties.
(b) If no such agreement can be reached after good faith
negotiation (or in any event after 60 days from the date of a notice setting
forth such dispute), either the Buyer or the Seller may demand arbitration of
the matter unless the amount of the damage or loss is at issue in pending
litigation with a third party, in which event arbitration shall not be
commenced until such amount is ascertained or both parties agree to
arbitration; and in either such event the matter shall be settled by
arbitration conducted by three arbitrators. The Buyer and the Seller shall each
select one arbitrator, and the two arbitrators so selected shall select a third
arbitrator. The arbitrators shall set a limited time period and establish
procedures designed to reduce the cost and time for discovery while allowing
the parties an opportunity, adequate in the sole judgment of the arbitrators,
to discover relevant information from the opposing parties about the subject
matter of the dispute. The arbitrators shall rule upon motions to compel or
limit discovery and shall have the authority to impose sanctions, including
attorneys' fees and costs, to the same extent as a court of law or equity,
should the arbitrators determine that discovery was sought without substantial
justification or that discovery was refused or objected to without substantial
justification. The decision of a majority of the three arbitrators as to the
validity and amount of any claim shall be binding and conclusive upon the
parties to this Agreement. Such decision shall be written and shall be
supported by written findings of fact and conclusions which shall set
-38-
45
forth the award, judgment, decree or order awarded by the arbitrators. The
arbitrators shall not be empowered to award punitive damages.
(c) Judgment upon any award rendered by the arbitrators
may be entered in any court having jurisdiction. Any such arbitration shall be
held in Washington, D.C. under the rules then in effect of the American
Arbitration Association. The arbitrators shall determine how all expenses
relating to the arbitration shall be paid, including without limitation, the
respective expenses of each party, the fees of each arbitrator and the
administrative fee of the American Arbitration Association.
(d) The provisions set forth in Section 11.5(b) and (c)
shall not apply to disputes involving Environmental Liability or ISRA
compliance, as defined in this Agreement.
11.6 Entire Agreement; Amendments and Waivers. This Agreement
constitutes the entire agreement among the parties pertaining to the subject
matter hereof and supersedes all prior agreements, understandings, negotiations
and discussions, whether oral or written, of the parties. No supplement,
modification or waiver of this Agreement shall be binding unless executed in
writing by all parties. No waiver of any of the provisions of this Agreement
shall be deemed or shall constitute a waiver of any other provision hereof
(whether or not similar), nor shall such waiver constitute a continuing waiver
unless otherwise expressly provided.
11.7 Counterparts. This Agreement may be executed in two or
more counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
11.8 Invalidity. In the event that any one or more of the
provisions contained in this Agreement or in any other instrument referred to
herein, shall, for any reason, be held to be invalid, illegal or unenforceable
in any respect, such invalidity, illegality or unenforceability shall not
affect any other provision of this Agreement or any other such instrument.
11.9 Headings. The headings of the Articles and Sections
herein are inserted for convenience of reference only and are not intended to
be part of or to affect the meaning or interpretation of this Agreement.
11.10 Expenses. Except as otherwise provided in this
Agreement, the Seller and the Buyer will each be liable for its own costs and
expenses incurred in connection with the negotiation, preparation, execution or
performance of this Agreement.
11.11 Publicity. The parties agree to notify each other prior
to issuing any press release or making any public statement regarding the
transactions contemplated hereby, and will attempt to obtain the reasonable
approval of the other party prior to making such release or statement,
including, without limitation, any press release issued by either or both of
the parties in connection with the Closing.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK].
-39-
46
IN WITNESS WHEREOF, the parties have executed this Agreement
as of the day and year first above written.
PARADYNE CORPORATION
By:
-----------------------------------------
Name:
Title:
PARADYNE NETWORKS, INC.
By:
-----------------------------------------
Name:
Title:
P-COM, INC.
By:
-----------------------------------------
Name:
Title:
CONTROL RESOURCES CORPORATION
By:
-----------------------------------------
Name: ▇▇▇▇▇ ▇'▇▇▇▇
Title