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Asset Purchase Agreement |
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2005 |
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$37 |
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ASSET PURCHASE AGREEMENT
BETWEEN
TERABEAM WIRELESS,
PROXIM CORPORATION,
PROXIM WIRELESS NETWORKS, INC.
and
PROXIM INTERNATIONAL HOLDINGS, INC.
July 18, 2005
<PAGE>
ASSET PURCHASE AGREEMENT
This Asset Purchase Agreement (this "Agreement") is entered into as of
July 18, 2005 (the "Signing Date"), between TERABEAM WIRELESS, the business name
of YDI Wireless, Inc., a Delaware corporation ("Purchaser") and PROXIM
CORPORATION, a Delaware corporation ("Parent"), PROXIM WIRELESS NETWORKS, INC.,
a Delaware corporation ("PWC"), and PROXIM INTERNATIONAL HOLDINGS, INC., a
Delaware corporation, ("PIH" and together with Parent and PWC, "Proxim" or
"Sellers").
PRELIMINARY STATEMENTS
A. Sellers have commenced chapter 11 cases in the United States Bankruptcy
Court for the District of Delaware (the "Bankruptcy Court") (such cases,
the "Chapter 11 Cases") and currently are operating as debtors in
possession under chapter 11 of title 11 of the United States Code, 11
U.S.C. ss.ss. 101, et seq. (the "Bankruptcy Code");
B. Subject to the approval of the Bankruptcy Court, Sellers desire to sell to
Purchaser, and Purchaser desires to purchase from Sellers, certain of
Sellers' assets, all upon the terms and subject to the conditions set
forth in this Agreement.
STATEMENT OF AGREEMENT
NOW, THEREFORE, in consideration of the premises and the mutual covenants,
agreements, representations and warranties set forth in this Agreement, and for
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, Purchaser and Sellers, intending to be legally bound,
hereby agree as follows:
SECTION 1. PURCHASE AND SALE OF ASSETS; ASSUMPTION OF LIABILITY
1.1. Purchase and Sale of Assets.
Pursuant to Sections 363 and 365 of the Bankruptcy Code and the Sale Order
(as such term is defined in Section 9.3(a) hereof) and subject to the terms and
conditions and in reliance upon the representations and warranties contained in
this Agreement, at the Closing (as such term is defined in Section 3.1 hereof),
Sellers shall sell, transfer and assign to Purchaser, and Purchaser shall
purchase and assume from Sellers, all of Sellers' right, title and interest in,
to and under the assets, properties and rights listed in this Section 1.1,
wherever located, free and clear of any and all liens (including but not limited
to any and all "liens" as defined in Bankruptcy Code ss. 101(37)) ("Liens"),
claims (including but not limited to any and all "claims" as defined in
Bankruptcy Code ss. 101(5) and the Cure Amounts (as such term is defined in
Section 1.4 hereof) to be paid by Sellers in accordance with Section 1.4
(together, "Claims")), mortgages, deeds of trust, guarantees, security
agreements, security interests, pledges, options, hypothecations, charges,
obligations, rights, restrictions, interests and encumbrances in or with respect
to any of the following assets, properties or rights (including without
<PAGE>
limitation any options or rights to purchase such property and any mechanic's or
tax liens or any restrictions, limitations or claims of infringement on the use
of any computer program embedded in any portion of the following assets which
constitutes goods, as that term is defined in ss. 9102(44) of the Revised
Uniform Commercial Code and any supporting information provided in connection
with the goods (collectively, "Goods") relating to the program if (i) the
program is associated with such goods in such a manner that it customarily is
considered part of such goods, or (ii) as the owner of such goods, Sellers
acquired the right to use the program in connection with such goods, whether
arising prior to or subsequent to the filing of Sellers' Chapter 11 petitions),
whether imposed by agreement, understanding, law, equity or otherwise (together,
the "Other Rights") (Liens, Claims and Other Rights are defined herein
collectively as "Encumbrances"), but excluding (y) the Excluded Assets (as such
---------
term is defined in Section 1.2 hereof), and (z) Encumbrances that do not have a
material adverse impact upon the Purchased Assets (as defined herein) and the
Business (as defined below) (it being agreed by the parties that Encumbrances
arising from the filing by the United States of America Federal Trade Commission
(the "FTC") of its objection motion, dated July 18, 2005, in the Chapter 11
Cases and the possible granting by the Bankruptcy Court of the relief requested
in that motion shall not be deemed to have such a material adverse impact) for
the period commencing on the Commencement Date (as defined in Section 4 below)
through the Closing Date (such assets, properties and rights, collectively, the
"Purchased Assets"):
(a) All fixed assets, machinery, equipment, development equipment, test
equipment, tools, furniture, fixtures, computers, printers, computer disks and
other computer storage devises, computer software, supplies, spare and
replacement parts (collectively, the "Fixed Assets") and Goods, including,
without limitation, those Fixed Assets and Goods listed on Schedule 1.1(a)
---------------
hereto;
(b) All customer and supplier lists and all other information as to
sources of supply and relationships with suppliers, vendors and customers
(collectively, the "Customers and Suppliers");
(c) Originals or copies of all books, records, correspondence, files,
manuals, drawings, diagrams, computer programs, data, personnel files for
Transferred Employees (as defined in Section 11.2(a) hereof) and other
documentation directly relating to the business of Proxim (the "Business") or
the Purchased Assets or the Assumed Liabilities, reasonably required by
Purchaser (other than attorney-client privileged materials insofar as they are
not directly related to any of the Intellectual Property to enable the
continuity of legal representation in connection with the Intellectual Property)
and files of non-Transferred Employees and other books and records not directly
related to the Purchased Assets, the Assumed Liabilities assets being sold to
Purchaser or the Business (collectively, the "Records");
(d) Subject to Section 2.2(c) below, all claims and rights under those
executory contracts and unexpired leases to which any of Sellers is a party (as
an original party or through assignment made prior to or on the Closing Date) to
the extent such contracts can be assumed and assigned under applicable law, and
which Sellers and Purchaser have mutually agreed to have Sellers assume and
assign to Purchaser pursuant to Section 365 of the Bankruptcy Code, all of which
are listed on Schedule 1.1(d) hereto, provided, however, such Schedule may be
--------------
2
<PAGE>
amended at any time by Purchaser from the Signing Date through and including the
Closing (collectively, the "Assumed Contracts");
(e) All artwork and other graphic media used in, or related to, the
Business;
(f) All Intellectual Property (as defined in Section 4.8(a)(i)).
(g) All investments in and securities of the subsidiaries listed on
Schedule 1.1(g) hereto (collectively, the "Transferred Subsidiaries") and all
--------------
investments in third parties, including any rights to purchase securities in
such third parties (collectively, "Transferred Third Party Investments"), which
such Transferred Subsidiaries and Transferred Third Party Investments are listed
on Schedule 1.1(g) hereto, provided, however, such Schedule may be amended at
any time by Purchaser from the Signing Date through and including the Closing
but that the amendment of Schedule 1.1(g) after the Signing Date shall not alter
the definition of Transferred Subsidiaries for the purposes of any other
provision of this Agreement;
(h) All inventory, including (i) finished goods inventory, (ii) raw
materials, (iii) accessories, (iv) supplies, and (v) work in process
(collectively, "Inventory"), including without limitation the Inventory listed
on Schedule 1.1(h);
--------------
(i) All pre-paid deposits for (i) trade show attendance, (ii) equipment
leases that are Assumed Contracts, (iii) real estate leases that are Assumed
Contracts, (iv) memberships, (v) software maintenance and licensing contracts to
which Sellers are a party, and (vi) all other Assumed Contracts (collectively,
the "Pre-Paid Deposits"), including without limitation the Pre-Paid Deposits on
Schedule 1.1(i);
--------------
(j) All rights of Sellers under express or implied manufacturer warranties
related to any of the Goods or Fixed Assets being sold to Purchaser and
described in Section 1.1(a) hereof;
(k) All accounts receivable of Sellers, including any claims or actions
with respect thereto (the "Accounts Receivable");
(l) To the extent allowable by law, all rights or causes of action arising
out of occurrences before or after the Closing Date and related to any portion
of the Business or the Purchased Assets, including third party warranties and
guarantees and all related claims, credits, insurance claims, rights of recovery
and set-off and other similar contractual rights, as to third parties held by or
in favor of Sellers and arising out of, resulting from or relating to the
Business or the Purchased Assets (collectively, "Other Claims");
(m) All accounts, deposit accounts, security deposits, cash, and
restricted cash for security for letters of credit and other obligations owed to
Winthrop Financial Services in the sum of approximately $1,500,000, investment
securities and other cash equivalents held by Sellers and general intangibles of
Sellers, including but not limited to letter of credit rights and payment
intangibles, including promissory notes and all other payment or performance
obligations and instruments in favor of Sellers (collectively, "Accounts and
General Intangibles"), including the Accounts and General Intangibles listed on
Schedule 1.1(m);
---------------
3
<PAGE>
(n) All approvals, permits, grants, licenses and authorizations from
domestic and foreign local, state and federal governmental agencies relating to
the Business, to the extent such authorizations are assignable; and
(o) All assets, properties or rights that are not otherwise Excluded
Assets.
1.2. Excluded Assets.
Notwithstanding anything contained in this Agreement to the contrary, the
following assets, properties and rights will not be included in the Purchased
Assets (the "Excluded Assets"):
(a) Sellers' equity interests or investments in subsidiaries and third
parties not specifically listed on Schedule 1.1.(g);
----------------
(b) All avoidance actions, including those under Sections 542-544, 547-551
and 553 of the Bankruptcy Code, against entities other than Purchaser and such
other persons or entities designated by Purchaser, and any amounts or other
property received or receivable in any such actions;
(c) All executory contracts and unexpired leases of Sellers that are not
Assumed Contracts;
(d) All intercompany receivables and intercompany claims between Sellers
and any of Sellers' subsidiaries and amongst any of Sellers' subsidiaries;
(e) All insurance policies and proceeds therefrom not related to the
Purchased Assets or any insurance policies relating to interruption of the
Business occurring on and after the Commencement Date as set forth in Schedule
--------
1.2(e);
-----
(f) All attorney-client privileged materials except insofar as they are
directly related to any of the Intellectual Property to enable the continuity of
legal representation in connection with the Intellectual Property; files of
non-Transferred Employees; and other books and records, correspondence, files
and computer programs and data not directly related to the Purchased Assets or
the Business;
(g) All "employee benefit plans" (as such term is defined by Section 3(3)
of the Employee Retirement Security Act of 1974, as amended ("ERISA")),
"employee pension benefit plans" (as such term is defined by Section 3(2) of
ERISA) and all other pension, profit sharing or cash or deferred compensation
plans and trusts and assets thereof and any other employee benefit plan or
arrangement thereof, if any, maintained by Sellers or any of their Subsidiaries
or any third party on behalf of Sellers or their Subsidiaries;
(h) The consideration paid by Purchaser in connection with this Agreement;
and
(i) All assets, properties or rights listed on Schedule 1.2(i).
--------------
4
<PAGE>
1.3. Assumed Liabilities.
As of the Closing, Sellers shall assume and assign to Purchaser all
Assumed Contracts. In accordance with Section 2.2(c) hereof, Purchaser shall pay
any undertakings (payment and/or performance) necessary to cure defaults under
such Assumed Contracts, as set forth on Schedule 1.3 (collectively, the "Cure
------------
Amounts"). Thereafter in due course Purchaser shall pay and fully satisfy all
liabilities and obligations of Sellers associated with the Assumed Contracts
arising after the Closing Date (the "Assumed Liabilities"). Except as set forth
herein, Purchaser has not agreed to pay, shall not be required to assume, and
shall have no liability or obligation with respect to, any liability or
obligation, direct or indirect, absolute or contingent, of Sellers, including
any liabilities or obligations associated with the Assumed Contracts arising on
or before the Closing Date.
SECTION 2. PURCHASE PRICE; TAXES; PURCHASE PRICE ALLOCATION
2.1. Purchase Price.
In addition to assuming the Assumed Liabilities and, subject to Section
2.2(c) hereof and paying all amounts necessary to satisfy the Cure Amounts,
Purchaser shall pay the Adjusted Purchase Price (as defined in Section 2.2(a)).
On the Closing Date, except as otherwise ordered by the Bankruptcy Court or
agreed to by Sellers and the counterparty to an Assumed Contract, Purchaser
shall pay the Cure Amounts directly to the counterparties to such Assumed
Contracts, in each case in accordance with Sections 1.3 and 2.2(c).
2.2. Payment of Purchase Price.
(a) Closing Date Payment. Purchaser shall pay the Adjusted Purchase Price
--------------------
and any other required amounts, if any, by wire transfer of immediately
available funds to the accounts designated by Sellers in an aggregate amount
determined in accordance with the following formula: (i) the Initial Purchase
Price plus, (ii) the Qualified Accounts Receivable minus, (iii) the Threshold
Qualified Accounts Receivable minus, (iv) the DIP Loan Obligations (as such term
is defined in the DIP Loan Agreement (as defined below)) minus, (v) the Basket
Cure Amount plus, (vii) the amount, if any, that the aggregate Cure Amounts is
less than the Basket Cure Amount (the "Adjusted Purchase Price").
(b) For purposes of this Agreement,
(i) "Initial Purchase Price" means the sum of Twenty-Eight Million Dollars
($28,000,000);
(ii) "Qualified Accounts Receivable" means the sum of Five Million Seven
Hundred Thousand Dollars ($5,700,000);
(iii) "Threshold Qualified Accounts Receivable" means the sum of Eight
Million Five Hundred Thousand Dollars ($8,500,000);
(c) Cure Amounts.
------------
5
<PAGE>
At Closing and pursuant to Section 365 of the Bankruptcy Code, Sellers
shall assume and assign to Purchaser the Assumed Contracts. The Cure Amounts, as
determined by Purchaser and the counterparties to such contracts or the
Bankruptcy Court, if any, necessary to cure all defaults, if any, and to all pay
all actual or pecuniary losses that have resulted from such defaults under the
Assumed Contracts, shall be paid by Purchaser, on the Closing Date and upon such
payment Purchaser shall have no liability for the Cure Amounts. Notwithstanding
the foregoing, in the event the actual Cure Amounts for all Assumed Contracts
required to be paid on the Closing Date in accordance with this Agreement
exceeds Two Million Dollars ($2,000,000) plus the sum of pre-petition amounts
due to certain vendors and suppliers designated by Purchaser and Sellers as
"critical vendors" up to an amount of One Million Six Hundred and Fifty Thousand
Dollars ($1,650,000) to the extent such amounts are not otherwise approved by
the Bankruptcy Court and not paid by Sellers post petition (the "Basket Cure
Amount"), then Purchaser may, by written notice to Sellers, elect to (i) pay the
amount by which the Cure Amount exceeds the Basket Cure Amount (the "Excess
Basket Cure Amount") and/or (ii) cause Sellers to reject any Assumed Contract.
No later than three (3) business days prior to the Closing, Purchaser
shall notify Sellers in writing which of the Cure Amounts in excess of the
Excess Basket Cure Amount Purchaser has elected to pay, if any. No later than
one (1) business day prior to the Closing, Sellers shall notify Purchaser in
writing which of the Cure Amounts in excess of the Excess Basket Cure Amount
Sellers have elected to pay, if any.
Upon execution of this Agreement Purchaser shall have the exclusive right
to negotiate the assumption and assignment of each Assumed Contract, including
the Cure Amount, with the counterparty to such to-be Assumed Contract.
Notwithstanding the foregoing, Sellers and any Qualified Bidder (as such term is
defined in the Bidding Procedures attached hereto as Exhibit A) other than
---------
Purchaser, shall have the right to negotiate the assumption and assignment of
any contracts, including the cure amounts, in connection with any competing
offer.
2.3. Purchase Price Allocation.
Not later than sixty (60) days after the Closing Date, Purchaser shall
prepare and deliver to Sellers copies of Form 8594 and any required exhibits
thereto (collectively, the "Asset Allocation Statement") allocating the Adjusted
Purchase Price (including Assumed Liabilities) among the Purchased Assets in
accordance with Section 1060 of the Internal Revenue Code and the Treasury
regulations thereunder. Sellers shall have a period of ten (10) days after
delivery of the Asset Allocation Statement (the "Allocation Response Period") to
present in writing to Purchaser notice of any objections Sellers may have to the
allocations set forth therein (an "Allocation Objection Notice"). Unless Sellers
object within such ten (10) day period, the Asset Allocation Statement shall be
binding on the parties. If Sellers shall raise any objections within the
Allocation Response Period, Purchaser and Sellers shall negotiate in good faith
and use their commercially reasonable efforts to resolve such dispute. If the
parties fail to agree within fifteen (15) days after the delivery of the
Allocation Objection Notice, then the parties shall submit the Asset Allocation
Statement and the Allocation Objection Notice to an independent accountant for
resolution. Such accountant shall resolve the dispute by selecting the proposed
allocation submitted by either Purchaser or Sellers which in the sole judgment
of such accountant most accurately allocates the Adjusted Purchase Price and the
6
<PAGE>
Assumed Liabilities among the Purchased Assets in accordance with their relative
fair market values, but not by choosing any other formulation. Such accountant
shall render such decision and report to Purchaser and Sellers in writing,
specifying the reason for its decision in reasonable detail, not later than
thirty (30) days after the item has been referred to it. The costs, fees and
expenses of the accountant shall be borne equally by Purchaser and Sellers. The
Adjusted Purchase Price shall be allocated in accordance with the Asset
Allocation Statement, as finally determined, and all income tax returns and
reports filed by Purchaser and Sellers shall be prepared consistently with such
allocation.
2.4. Cooperation on Tax Matters.
(a) Purchase and Sellers shall furnish or cause to be furnished to each
other, as promptly as practicable, such information and assistance relating to
the Purchased Assets and Assumed Liabilities as is reasonably necessary for the
preparation and filing of any tax returns, claims for refunds, or other required
or optional filings related to tax matters, for the preparation of any tax
audit, for the preparation for any tax protest, and for the prosecution or
defense of any suit or other proceeding relating to tax matters.
(b) Purchaser shall retain possession of all accounting, business,
financial, and tax records and information relating to the Purchased Assets and
the Assumed Liabilities that are in existence on the Closing Date and
transferred to Purchaser hereunder for a period of at least seven (7) years from
the Closing Date. Thereafter, Purchaser shall be permitted to destroy such
records without notice to Sellers.
2.5. Transfer Taxes.
Sellers and Purchaser shall each pay half of any and all liabilities for
any sales, use, stamp, documentary, filing, recording, transfer, real estate
transfer, stock transfer, gross receipts, registration, duty, securities
transactions, or similar fees or taxes or governmental charges (together with
any interest or penalty, addition to tax or additional amount imposed) as levied
by any taxing authority in connection with the transactions contemplated by this
Agreement (collectively, "Transfer Taxes"). Sellers, as required by applicable
law, shall timely file or cause to be filed all necessary documents (including
all tax returns) with respect to the Transfer Taxes. Nothing contained in this
Section 2.5 shall be deemed to limit any transfer tax exemption in accordance
with Section 1146(c) of the Bankruptcy Code provided for in the Sale Order.
Sellers shall further seek the inclusion in the Sale Order a provision that
Sellers' sale, transfer, assignment and conveyance of the Purchased Assets to
Purchaser hereunder shall be entitled to the protections afforded under Section
1146(c) of the Bankruptcy Code. The parties will reasonably cooperate to
minimize any such taxes, including with respect to delivery location. To the
extent that an overpayment exists with respect to Transfer Taxes, such
overpayment will be shared in equal amounts by Sellers and Purchaser.
2.6. Prorations.
All personal property taxes, or ad valorem obligations and similar
recurring taxes and fees on the Purchased Assets for taxable periods beginning
before, and ending after, the Closing Date, shall be prorated between Purchaser
7
<PAGE>
and Sellers as of 12:01 a.m. western standard time on the Closing Date. With
respect to the taxes described in this Section 2.6, Sellers shall timely file
all tax returns due before the Closing Date with respect to such taxes and
Purchaser shall prepare and timely file all tax returns due after the Closing
Date with respect to such taxes. If one party remits to the appropriate taxing
authority payment for taxes, which are subject to proration under this Section
2.6 and such payment includes the other party's share of such taxes, such other
party shall promptly reimburse the remitting party for its share of such taxes.
SECTION 3. CLOSING; CLOSING DELIVERIES.
3.1. Closing.
The transactions contemplated by this Agreement (the "Closing") shall
occur within five (5) business days after the satisfaction or waiver of the
conditions set forth in Sections 7 and 8 hereof, at the offices of Purchaser,
located at 990 Almanor Avenue, Sunnyvale, California 94085, or at such other
place and on such other date and time as Purchaser and Sellers shall mutually
agree, orally or in writing (such date being referred to herein as the "Closing
Date"), provided, however, the Closing Date shall occur no later than July 29,
2005; provided, however, by written consent of Sellers and Purchaser such
Closing Date may be extended .
3.2. Sellers' Obligations.
At the Closing, unless specified otherwise, Sellers shall deliver, cause
to be delivered or make available to Purchaser:
(a) all of the Records included in the Purchased Assets;
(b) all of the Purchased Assets, which insofar as they are tangible will
remain at the premises where they are located, provided that Sellers will not
have any on-going obligations with respect to such assets or the storage thereof
at such premises;
(c) all documents of title relating to the Purchased Assets;
(d) any applicable filings, recordations, notices and consents;
(e) all originals or copies of all Assumed Contracts and appropriate
instruments of assignment thereof;
(f) copies of resolutions of Sellers' Boards of Directors certified by a
Secretary, Assistant Secretary, or other appropriate officer of Sellers,
authorizing the execution, delivery and performance of this Agreement and the
transactions contemplated hereby;
(g) a certificate (the "Sellers Closing Certificate") setting forth
Sellers' representations and warranties that, except as expressly set forth in
the Sellers Closing Certificate, (i) each of the representations and warranties
made by Sellers in this Agreement that are qualified as to a Material Adverse
Effect shall be true and correct, and the representations and warranties made by
Sellers in this Agreement that are not so qualified shall be true and correct,
except where their failure to be true and correct does not have and would not be
8
<PAGE>
reasonably likely to have, either individually or in the aggregate, a Material
Adverse Effect, in each case on and as of the Closing Date with the same effect
as though such representations and warranties had been made on and as of the
Closing Date, except to the extent such representations and warranties expressly
relate to an earlier date, in which case as of such earlier date; (ii) each of
the covenants and obligations that Sellers is required to have complied with or
performed pursuant to this Agreement at or prior to the Closing has been duly
complied with and performed in all material respects; and (iii) each of the
conditions set forth in Section 7 has been satisfied in all material respects.
For purposes of this Agreement, "Material Adverse Effect" means any material
adverse effect on, or change, event, occurrence or state of facts materially
adverse to (i) the Business for the period commencing from the Commencement Date
of execution of this Agreement until Closing, or (ii) the Purchased Assets, or
(iii) Sellers' ability to, in a timely manner, perform their obligations under
this Agreement or consummate the transactions contemplated hereby, or (iv) the
Business or the Purchased Assets, as a result of any action (excluding the
issuance of any subpoenas), claim, counterclaim, demand whatsoever, whether
known or unknown, liquidated, unliquidated, fixed, contingent, material,
immaterial, disputed, undisputed, legal or equitable, held by the FTC (it being
agreed that the filing by the FTC of its objection motion, dated July 18, 2005,
in the Chapter 11 Cases and the possible granting by the Bankruptcy Court of the
relief requested in that motion does not constitute a Material Adverse Effect);
provided, that none of the following, alone or in combination, shall constitute
a Material Adverse Effect: effects, changes, events, occurrences and states of
fact to the extent caused by (w) the announcement or pendency of this Agreement
and the transactions contemplated hereby (including cancellations of or delays
in customer orders, reductions in sales, disruption in supplier, distributor,
partner or similar relationships, loss of employees to the extent so caused, or
the commencement of the Chapter 11 Cases); (x) compliance by Sellers or the
Transferred Subsidiaries with the prohibitions of, or the taking of any action
required by, this Agreement; (y) changes in the U.S. economy or the economy of
any foreign country from which Sellers derive a material portion of its
revenues, or in the wireless networking / wireless communications industry
generally (but only to the extent that such changes do not have a
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