Asset Purchase Agreement

Exhibit 10.1


ASSET PURCHASE AGREEMENT


by and between


UTSTARCOM, INC.


and


3COM CORPORATION


Dated as of March 4, 2003


TABLE OF CONTENTS


ARTICLE I TRANSFER OF ASSETS AND LIABILITIES

Section 1.1

Assets to be Sold; Assumption of Liabilities

Section 1.2

Purchase Price

Section 1.3

Closing

Section 1.4

Deliveries by Seller

Section 1.5

Deliveries by Buyer

Section 1.6

Post-Closing Arrangements

Section 1.7

Post-Closing Purchase Price Adjustment


ARTICLE II RELATED MATTERS

Section 2.1

Books and Records of Seller Group

Section 2.2

Mail and Check Handling

Section 2.3

Employees and Employee Benefits


ARTICLE III REPRESENTATIONS AND WARRANTIES OF SELLER GROUP

Section 3.1

Organization

Section 3.2

Authorization

Section 3.3

Consents and Approvals; No Violations

Section 3.4

Financial Statements

Section 3.5

Absence of Undisclosed Liabilities

Section 3.6

Absence of Certain Changes

Section 3.7

Intellectual Property

Section 3.8

Title, Ownership and Related Matters

Section 3.9

Subsidiaries

Section 3.10

Litigation; Product Liability

Section 3.11

Compliance with Applicable Law

Section 3.12

Certain Contracts and Arrangements

Section 3.13

Taxes

Section 3.14

Employee Benefit Plans; ERISA; Employees

Section 3.15

Environmental Matters

Section 3.16

Insurance

Section 3.17

Labor Matters

Section 3.18

Suppliers

Section 3.19

Customers

Section 3.20

Assets and Permits Necessary to the Business; Equipment

Section 3.21

Transactions with Affiliates

Section 3.22

Certain Fees


ARTICLE IV REPRESENTATIONS AND WARRANTIES OF BUYER

Section 4.1

Organization

Section 4.2

Authorization

Section 4.3

Consents and Approvals; No Violations

Section 4.4

Certain Fees

Section 4.5

Funding


ARTICLE V COVENANTS

Section 5.1

Conduct of the Business


i


Section 5.2

Access to Information

Section 5.3

Consents and Approvals

Section 5.4

Reasonable Efforts

Section 5.5

Public Announcements

Section 5.6

Covenant to Satisfy Conditions

Section 5.7

Supplemental Disclosure

Section 5.8

Transfers Not Effected as of Closing

Section 5.9

Employment of Eligible Employees

Section 5.10

Prohibition on Solicitation and Hiring

Section 5.11

No Negotiation

Section 5.12

Confidentiality

Section 5.13

Agreements Related to Certain Business Real Property

Section 5.14

Insurance Claims

Section 5.15

Tax Matters

Section 5.16

Further Actions

Section 5.17

Compliance with Bulk Sales Laws; Payment of Retained Liabilities

Section 5.18

Standards Organizations

Section 5.19

Compilers, etc.

Section 5.20

Buyer Acknowledgment

Section 5.21

Conduct Relating to Receivable and Payables

Section 5.22

Non-U.S. Agreements

Section 5.23

Agreements Related to Certain Warranty and Service Obligations

Section 5.24

Assistance Relating to Retained Agreements


ARTICLE VI CONDITIONS TO OBLIGATIONS OF THE PARTIES

Section 6.1

Conditions to Each Party's Obligations

Section 6.2

Conditions to Obligations of Seller Group

Section 6.3

Conditions to Obligations of Buyer


ARTICLE VII SURVIVAL OF REPRESENTATIONS; INDEMNIFICATIONS

Section 7.1

Survival of Representations

Section 7.2

Seller Group's Agreement to Indemnify

Section 7.3

Buyer's Agreement to Indemnify

Section 7.4

Third Party Indemnification

Section 7.5

Sole Remedy


ARTICLE VIII TERMINATION, AMENDMENT AND WAIVER

Section 8.1

Termination of Agreement

Section 8.2

Procedure for and Effect of Termination

Section 8.3

Amendment, Extension and Waiver

Section 8.4

Termination Fee


ARTICLE IX MISCELLANEOUS

Section 9.1

Fees and Expenses

Section 9.2

Further Assurances; Guarantee

Section 9.3

Notices

Section 9.4

Severability

Section 9.5

Binding Effect; Assignment


ii


Section 9.6

No Third Party Beneficiaries

Section 9.7

Interpretation

Section 9.8

Jurisdiction and Consent to Service; Expenses Related to Legal Proceedings

Section 9.9

Entire Agreement

Section 9.10

Descriptive Headings

Section 9.11

Governing Law

Section 9.12

Counterparts

Section 9.13

Specific Performance


iii


EXHIBITS :


Exhibit A

Reference Balance Sheet (see Schedule 3.4(i))

Exhibit B

Bill of Sale

Exhibit C

Form of Assignment of Patent Rights

Exhibit D

Form of Assignment of Copyrights

Exhibit E

Form of Assignment of Trademarks

Exhibit F

Instrument of Assumption

Exhibit G

Rolling Meadows Lease Agreement

Exhibit H

Multiple Site License Agreement

Exhibit I

Consulting Services Agreement

Exhibit J

Intellectual Property License Agreement

Exhibit K

Form of Lease Assignment Agreement


iv


ASSET PURCHASE AGREEMENT


This ASSET PURCHASE AGREEMENT, dated as of March 4, 2003 (the " Agreement"), is by and between UTStarcom, Inc., a Delaware corporation, and its designated subsidiaries or affiliates (" Buyer"), and 3Com Corporation, a Delaware corporation (" Seller").


WHEREAS, Seller by itself and through the entities set forth on Schedule 3.9 of the Disclosure Schedules (collectively, the " Seller Group") is currently engaged in developing, manufacturing, having manufactured, selling, marketing, supporting and providing professional services with respect to the Products (as defined in Section 3.7(n)(iv)) (the " Business"); and


WHEREAS, Buyer desires to purchase and assume from Seller, and Seller desires to, or desires to cause other members of the Seller Group to, sell, assign, transfer, convey and deliver to Buyer, certain specified assets and properties of the Seller Group related to the Business together with certain specified obligations and liabilities relating thereto, all in the manner and subject to the terms and conditions set forth herein;


NOW, THEREFORE, in consideration of the foregoing and the respective representations, warranties, covenants, agreements and conditions hereinafter set forth, and intending to be legally bound hereby, the parties hereto agree as follows:


ARTICLE I TRANSFER OF ASSETS AND LIABILITIES Section 1.1 Assets to be Sold; Assumption of Liabilities (a) Subject to the terms and conditions of this Agreement, at the Closing (as defined in Section 1.3), Seller Group will sell, convey, assign, transfer and deliver, or will cause to be sold, conveyed, assigned, transferred and delivered, to Buyer, and Buyer agrees to purchase and acquire, or will cause to be purchased and acquired, from Seller Group, free and clear of any Liens (as defined in Section 3.8(a)), except for Permitted Encumbrances (as defined in Section 3.8(a)), all of Seller Group's right, title and interest in and to the following assets (collectively, the " Assets"): (i) the following Product-related items: (A) all marketing, sales and promotional literature relating primarily to the Business owned by or in the possession of any member of the Seller Group; (B) in accordance with and to the extent not prohibited by applicable law, all lists, files, bills and correspondence of or related to customers and suppliers in possession or under control of a Business Employee as of the date hereof or as of the Closing Date and (x) related to the Business and located in the Rolling Meadows facility of Seller or (y) primarily related to the Business and located in the locations set forth on Schedule 1.1(a)(i)(B) of the Disclosure Schedules (the " Business Real Property"); (C) the tangible embodiments of Transferred Intellectual Property or tangible embodiments of Intellectual Property licensed pursuant to an Intellectual Property Contract, in both cases, related to the Business (subject to Seller's right to retain copies pursuant to the Intellectual Property License Agreement);

(D) all inventory (consisting of raw materials, work in process and finished goods) of Products; (E) all transferable licenses, permits and authorizations relating to governmental authorization for the manufacture and distribution of Products (excluding any general business licenses to conduct business in a particular jurisdiction and the like) (the " Permits"), and copies of all reports and certifications related to the Permits or to other similar licenses, permits and authorizations that are not transferable; (F) all specifications, schematics, designs, drawings, blue prints, models, sketches, technical manuals, operating manuals, flow charts and related files for the Products owned by or in possession of any member of the Seller Group (subject to Seller's right to retain copies pursuant to the Intellectual Property License Agreement); (G) the following intangible assets: (I) the Transferred Intellectual Property; (II) all claims for past infringement of Transferred Intellectual Property; (III) all goodwill of the Business; and (IV) all other intangible assets, if any, listed on Schedule 1.1(a)(i)(G)(IV) of the Disclosure Schedules; (ii) the following balance sheet items: (A) prepaid expenses and security deposits reflected in the balance sheet of the Business dated as of November 29, 2002 attached hereto as Exhibit A (the " Reference Balance Sheet"), with such changes thereto that occur in the ordinary course of business prior to the Closing Date; (B) the furniture, fixtures, equipment, furnishings and office supplies and other tangible personal property of the Business reflected in the Reference Balance Sheet, including, but not limited to, the items listed on Schedule 3.20(c) of the Disclosure Schedules and the one-time setup equipment contemplated by the Transition Services Agreement between Buyer and Seller dated the date hereof (subject to completion of payment of such amounts due by Buyer thereunder), with such changes thereto that occur in the ordinary course of business prior to the Closing Date; and (C) all other assets reflected on the Reference Balance Sheet (other than accounts receivable, which shall be retained by the Seller) with such changes thereto that occur in the ordinary course of business prior to the Closing Date; (iii) the following contractual items: (A) subject to Section 5.8, the contracts for the sale, distribution or manufacture of the Products or relating to technology embodied in the Products, including amendments and supplements, modifications or side letters related thereto, set forth on Schedule 1.1(a)(iii)(A) of the Disclosure Schedules and (1) any such contracts entered into in compliance with the terms hereof during the period commencing on the date hereof and through the Closing Date (as defined in Section 1.3) and (2) any other contracts that the parties mutually agree to include in the Assets prior to the Closing Date, as evidenced by an amendment to 2


Schedule 1.1(a)(iii)(A) to be acknowledged by the parties and delivered at the Closing (collectively, the " Contracts"). Notwithstanding the foregoing, to the extent Seller has not provided Buyer with executed copies of any of the Contracts for review prior to the date hereof (each an " Unproduced Contract"), Seller shall, within 45 days of the date hereof, provide any such Unproduced Contracts to Buyer for its review. Buyer may, in its sole discretion, refuse to accept transfer of any such Unproduced Contracts (and such Unproduced Contracts shall immediately cease to be Contracts for all purposes of this Agreement) if and to the extent (i) any such Unproduced Contracts contain materially different or adverse terms as compared to the Contracts provided to Buyer for review, or (ii) Seller fails to produce any such Unproduced Contracts within 45 days of the date hereof. Buyer and Seller agree to cooperate to reconcile their lists of Unproduced Contracts within two days of the date hereof, with the objective of minimizing the number of Unproduced Contracts; and (B) to the extent transferable, all rights of the Seller Group under all warranties, representations and guarantees made by suppliers, manufacturers or contractors in connection with the Business; (iv) in accordance with and to the extent not prohibited by applicable law, all personnel and payroll records of the Affected Employees located in the Rolling Meadows facility or in the Business Real Property and copies of all such records located in the Seller's facility; and (v) copies of all other books, records or correspondence related to the Business (excluding tax returns not related exclusively to the Business). (b) Such sale, conveyance, assignment, transfer and delivery of the Assets will be effected by delivery by Seller and/or other members of the Seller Group to Buyer of (i) duly executed bills of sale (each, a " Bill of Sale") in the form attached hereto as Exhibit B, (ii) instruments of assignment assigning each member of the Seller Group's interest in and to the Transferred Intellectual Property (as defined in Section 3.7(p)), including all Registered Intellectual Property (as defined in Section 3.7(p)) relating thereto, pursuant to the form of Assignment of Patent Rights attached hereto as Exhibit C, Form of Assignment of Copyrights attached hereto as Exhibit D and form of Assignment of Trademarks obtained hereto as Exhibit E (each, an " Intellectual Property Assignment"), (iii) a copy of the patents and patent applications and the registrations and pending applications included in the Transferred Intellectual Property and (iv) such other good and sufficient instruments of sale, conveyance, transfer and assignment as shall be necessary to vest in Buyer good and valid title to the other Assets free and clear of all Liens, except for Permitted Encumbrances (collectively, the " Other Instruments"). (c) At the Closing, Buyer will deliver to Seller Group an instrument of assumption substantially in the form of Exhibit F hereto (the " Instrument of Assumption"), whereby Buyer will undertake, assume and agree to perform, pay and discharge when due, and hold Seller Group harmless from and indemnify Seller Group against, the following debts, liabilities and obligations of Seller Group related to the Business: (i) liabilities and obligations associated with the Contracts, (ii) all warranty obligations relating to the Products or services performed in connection with the Products, except for these warranty obligations set forth on Schedule 1.1(c) hereto (the " Excluded Warranty Obligations") and (iii) other liabilities reflected on the Reference Balance Sheet, with such changes thereto that occur in the ordinary course of business prior to the Closing Date other than accounts payable, which shall be retained by Seller (collectively, the " Assumed Liabilities"). Buyer expressly is not assuming any obligations or liabilities, whether accrued, absolute, contingent, matured, unmatured or other, of Seller Group or any other person or entity, except for the Assumed Liabilities (the "Excluded Liabilities"). Without limiting the foregoing, it is expressly agreed that Buyer shall not assume or have any responsibility with respect to any of the following liabilities or obligations, and the following liabilities and obligations shall not constitute Assumed Liabilities: (1) any 3


liability or obligation for Taxes (as defined in Section 3.13) for which Seller is responsible pursuant to Section 5.15(c) hereof; (2) any liability or obligation of Seller Group as a result of any legal or equitable action or judicial or administrative proceeding initiated at any time in respect of anything done, suffered to be done, or omitted to be done by the Seller Group or any of its directors, officers, employees, or agents, except for Assumed Liabilities, or (3) related to the employment by any member of the Seller Group of any employee of any member of the Seller Group, including, without limitation, Employment Liabilities (unless specifically included in the Reference Balance Sheet and except as specifically set forth herein or to the extent related to their activities as employees of Buyer following the Closing), and severance payments to employees of any member of the Seller Group that are not Affected Employees (as defined below). For these purposes, " Employment Liabilities" means any and all claims, debts, liabilities, commitments and obligations, whether fixed, contingent or absolute, matured or unmatured, liquidated or unliquidated, accrued or unaccrued, known or unknown, whenever or however arising, including all costs and expenses relating to the satisfaction thereof, arising under applicable federal, state, county, local, provincial or foreign statute, law, ordinance, regulation, rule, code, treaty or rule of common law (collectively, " Law"), permits, action or proceeding before any governmental authority, order or consent decree or any award of any arbitrator of any kind relating to any Seller Employee Plan, Employment Agreement or otherwise to an Employee while employed by Seller Group. (d) Notwithstanding the foregoing, the assets identified on Schedule 1.1(d) are expressly excluded from the Assets and shall be retained by the Seller Group. Section 1.2 Purchase Price Subject to the terms and conditions of this Agreement, in reliance on the Seller Group's representations, warranties and agreements contained herein and in any Non-U.S. Agreements (as defined in Section 5.22), and in consideration of the sale, conveyance, assignment, transfer and delivery of the Assets, Buyer will deliver or cause to be delivered, in full payment for the sale, conveyance, assignment, transfer and delivery of the Assets, payment at the Closing by wire transfer to such bank account or bank accounts as shall be specified by Seller, in immediately available funds, of an aggregate of U.S. $100,000,000 (the " Closing Cash Purchase Price"), which shall be subject to subsequent adjustment pursuant to Section 1.7(d).


Section 1.3 Closing The closing of the transactions contemplated by this Agreement (the " Closing") shall take place not later than 10:00 A.M., local time, at the offices of Wilson Sonsini Goodrich & Rosati PC, 650 Page Mill Road, Palo Alto, California 94304-1050 on the second business day following the satisfaction or waiver of all of the conditions set forth in Article VI hereof or at such other time or place as to which the parties shall agree. As provided in Section 5.4, the parties shall use reasonable best efforts to cause the Closing to occur on or prior to May 3, 2003. The effective time of the Closing is sometimes referred to herein as the " Closing Date ."


Section 1.4 Deliveries by Seller At the Closing, Seller Group will deliver or cause to be delivered to Buyer (unless previously delivered or waived in writing by Buyer) the following:


(a) duly executed Bills of Sale (b) duly executed counterparts of the Intellectual Property Assignments; 4 (c) the Other Instruments (d) the officer's certificates referred to in Section 6.3(d); (e) the consents referred to in Section 6.3(c); (f) certificates of each member of the Seller Group complying with the requirements of Section 1445 of the Internal Revenue Code of 1986, as amended (the " Code"), and the Treasury Regulations promulgated thereunder, to the effect that no withholding of federal income tax is required (the " 1445 Certificates"); (g) duly executed counterpart of the Rolling Meadows, Illinois Lease Agreement, substantially in the form of Exhibit G (the " Rolling Meadows Lease Agreement"); (h) duly executed counterpart of the Multiple Site License Agreement, substantially in the form of Exhibit H, with respect to the Business Real Property identified therein (the " Multiple Site License Agreement"); (i) duly executed counterpart of the Consulting Services Agreement, substantially in the form of Exhibit I (the " Consulting Services Agreement"); (j) duly executed counterpart of the Intellectual Property License Agreement, substantially in the form of Exhibit J (the " Intellectual Property License Agreement"); (k) duly executed counterparts of two separate Lease Assignment Agreements, substantially in the form of Exhibit K, with respect to a lease for each of the following two Business Real Properties (i) 100 Davidson Avenue, Somerset, New Jersey and (ii) 420 ST Kilda Road, Suite 3, Level 2, Melbourne, Australia (" Lease Assignment Agreements"); (l) all other documents, instruments, declarations, affidavits and writings as may (in the judgment of Buyer) be necessary or appropriate to assign, convey, transfer and deliver to Buyer good and valid title to the Assets free and clear of all Liens except for Permitted Encumbrances or as may be required to be delivered by Seller Group at or prior to the Closing Date pursuant to this Agreement (the agreements referred to in this Section 1.4, as well as similar agreements required elsewhere in the Agreement, being referred to herein as the " Ancillary Agreements"); and (m) (i) all copies of all tangible materials in the possession of Seller Group embodying the Transferred Intellectual Property (subject to Seller's right to retain copies pursuant to the Intellectual Property License Agreement), and (ii) a copy of all tangible materials in the possession of Seller Group embodying the Licensed Intellectual Property, in each case including without limitation specifications, documentation, invention disclosures, laboratory notebooks, source code listings, technical manuals, flow charts, and files related thereto. Section 1.5 Deliveries by Buyer

At the Closing, Buyer will deliver or cause to be delivered to Seller, or, in the case of clause (a) below, to the affiliates of Seller who are parties to any Non-U.S. Agreements, if applicable (unless previously delivered), the following:


(a) the Closing Cash Purchase Price referred to in Section 1.2; provided , that if Seller Group shall fail to deliver the 1445 Certificates, Buyer may (but shall not be required to) withhold from the cash payable at 5


the Closing and pay over to the appropriate taxing authority an amount equal to ten percent (10%) of the total "amount realized" (as defined in Internal Revenue Service Treasury Regulation 1.1445 - 1(g)(5)) by any member of the Seller Group for the transfer of any "U.S. real property interests" (as defined in Section 1445 of the Code). A portion of the Closing Cash Purchase Price shall be paid in accordance with the terms of the Non-U.S. Agreements, with the remainder paid to Seller; (b) duly executed counterparts of the Intellectual Property Assignments; (c) duly executed Instruments of Assumption; (d) the officer's certificate referred to in Section 6.2(c); (e) duly executed counterpart of the Multiple Site License Agreement; (f) duly executed counterpart of the Rolling Meadows Lease Agreement; (g) duly executed counterpart of the Consulting Services Agreement; (h) duly executed counterpart of the Intellectual Property License Agreement; (i) duly executed counterparts of the Lease Assignment Agreements; (j) a list of any proceedings or actions known to any member of the Seller Group before any governmental authority (including, without limitation, the U.S. P.T.O. or equivalent authority anywhere in the world) related to Registered Intellectual Property included in the Transferred Intellectual Property, and all actions that must be taken before the date sixty (60) days after the Closing Date, including without limitation the payment of any registration, maintenance or renewal fees or the filing of any documents, applications or certificates, for the purposes of maintaining, perfecting or preserving the Registered Intellectual Property included within the Transferred Intellectual Property; and (k) all other documents, instruments and writings required to be delivered by Buyer at or prior to the Closing Date pursuant to this Agreement or the Ancillary Agreements. Section 1.6 Post-Closing Arrangements Except as set forth in any other agreement between the parties hereto, at the Closing all data processing, accounting, insurance, banking, personnel, legal, communications and other products and services provided to the Business by Seller Group or its affiliates, including any agreements or understandings (written or oral) with respect thereto, will terminate without any further action or liability on the part of the parties thereto.


Section 1.7 Post-Closing Purchase Price Adjustment (a) On the tenth (10th) business day following the completion and acceptance by each party hereto of a statement (the " Final Statement") of the Working Capital of the Business (as defined below) as of the close of business on the Closing Date (unless the Closing Date does not fall on the end of a monthly fiscal period of the Seller Group, in which case the Final Statement shall be as of the last day of Seller Group's preceding monthly fiscal period), either (i) Buyer shall pay to Seller the amount (together with interest as described below) by which the Working Capital of the Business as set forth in the Final Statement is greater than $7,771,000, which is equal to the Working Capital of the Business as of the date of the Reference Balance 6


Sheet (the " Opening Statement") plus $1,000,000, or (ii) Seller shall pay to Buyer the amount (together with interest as described below) by which the Working Capital of the Business as set forth in the Final Statement is less than $5,771,000, which is equal to the Opening Statement less $1,000,000.00. In the event of a payment pursuant to the immediately preceding sentence, such amount shall bear simple interest at an annual rate equal to the minimum Applicable Federal Rate in effect as of the Closing Date, accruing from the Closing Date to the date of payment. (b) The Final Statement shall be prepared by Seller in the following manner: (i) within seventy-five (75) days after the Closing Date, Seller shall deliver to Buyer the Final Statement, fairly presenting the Working Capital of the Business as of the close of business on the Closing Date. The Final Statement shall be accompanied by a report setting forth (i) the Working Capital of the Business, as reflected in the Final Statement, and (ii) the amount of any adjustment to the Closing Cash Purchase Price to be paid and by whom pursuant to Section 1.7(a) and the basis therefor; (ii) following the Closing, each party shall give the other party hereto and any independent auditors and authorized representatives of such other party full access at all reasonable times to the properties, books, records and personnel of the Business in their possession, custody or control relating to periods prior to the Closing Date for purposes of preparing, reviewing and resolving any disputes concerning the Final Statement. Within thirty (30) days following the delivery to Buyer of the Final Statement, Buyer shall notify Seller of any dispute of any item contained in the Final Statement, which notice shall set forth in reasonable detail the basis for such dispute. If Buyer fails to notify Seller of any such dispute within such thirty (30)-day period, the Final Statement shall ...