The Asset Purchase Agreement Dated July 16, 1997

THIS ASSET PURCHASE AGREEMENT (this "Agreement") is made and entered into as of July 16, 1997, by and between ACT Networks (BNS), Inc., a wholly-owned subsidiary of ACT Networks, Inc., a Delaware corporation ("Purchaser"), and Sourcecom, Inc., a California corporation ("Seller").


RECITALS


A. Seller is the debtor and debtor-in-possession in that certain Chapter 11 bankruptcy proceeding known as In re Sourcecom, Inc. pending in the United States Bankruptcy Court, Central District of California (the "Bankruptcy Court"), as Case No. SV___________.


B. Subject to the conditions set forth herein, Seller desires to sell, and Purchaser desires to purchase, all of the assets of Seller in accordance with the terms set forth herein.


AGREEMENT


NOW, THEREFORE, in consideration of the foregoing recitals and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties agree as follows:


1. Transfer of Assets. Subject to the terms and conditions set forth in this Agreement, on the Closing Date (as defined below), Seller shall sell, transfer, assign and deliver to Purchaser (the "Transfer") and Purchaser shall purchase from Seller, for the consideration hereinafter described, all of Seller's right, title and interest in all of its assets, including, without limitation, the following assets (the "Assets"):


(a) the inventory of raw materials, work in process and finished goods including, without limitation, those assets listed on Schedule 1(a) (the "Inventory");


(b) all tooling of Seller, whether or not in the possession of Seller;


(c) all owned tools, machinery, equipment, office furniture, office equipment and other tangible personal property, including without limitation those assets listed on Schedule 1(c);


(d) all accounts receivable of Seller including without limitation those assets listed on Schedule 1(d);


(e) those certain assets listed on Schedule 1(e);


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(f) all other goodwill and intellectual property of Seller (hereinafter collectively referred to as "Proprietary Rights"), including without limitation, all (i) patents, patent applications, patent disclosures and all related continuation, continuation-in-part, divisional, reissue, re-examination, utility, model, certificate of invention and design patents, patent applications, registrations and applications for registrations, (ii) trademarks, service marks, logos, trade names and corporate names and registrations and applications for registration thereof, (iii) copyrights and registrations and applications for registration thereof, (iv) mask works and registrations and applications for registration thereof, (v) computer software, data and documentation, (vi) trade secrets and confidential business information, whether patentable or nonpatentable, and know how, manufacturing and product processes and techniques, research and development information, copyrightable works, financial, marketing and business data, pricing and cost information, business and marketing plans and customer and supplier lists and information, (vii) other proprietary rights relating to any of the foregoing (including without limitation, remedies against infringements thereof and rights of protection of interest therein under the laws of all jurisdictions); and (viii) copies and tangible embodiments thereof;


(g) all licenses, sublicenses or any similar agreements (to or from third parties) including, without limitation, those which relate to Seller's Proprietary Rights; and


(h) subject to the satisfaction of the conditions for assumption and assignment under Section 365 of the Bankruptcy Code (the "Conditions for Assumption"), and further subject to Purchaser agreeing to reimburse Seller for any amounts owing to the lessors of such leases that must be paid as a Condition to Assumption, such of the contracts, licenses, leases and any other agreements to which Seller is a party (collectively, the "Contracts") listed on Schedule 1(h) as shall be designated by Purchaser (in its sole discretion) at least three business days prior to the Sale Hearing;


2. Excluded Assets. Notwithstanding the provisions of Section 1, Seller shall not sell, transfer, assign or deliver to Purchaser, and Purchaser shall not purchase from Seller, any assets specified in writing by Purchaser at least three business days prior to the Sale Hearing (the "Excluded Assets" none of which for any purpose hereunder shall be deemed to be Assets).


3. Assumption of Liabilities. Except to the extent otherwise provided in the designations pursuant to Section 1(h) (the "Designation of Assumption") or required under the Conditions for Assumption or under Section 363 of the Bankruptcy Code, Purchaser shall not assume or otherwise become liable with respect to any of the liabilities, claims or other obligations of Seller (including, without limitation, warranty claims or obligations owed under the Contracts as of the Closing Date).


4. Purchase Price.


(a) Subject to the terms of this Agreement, in consideration of the Transfer of the Assets on the Closing Date, Purchaser shall pay to Seller the amount of eight million


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dollars ($8,000,000), subject to possible adjustment under section 5 below (the "Purchase Price"), payable at the Closing (as defined below), in cash or by certified check.


(b) Concurrent with the execution and delivery of this Agreement, Purchaser has deposited with Seller the amount of one million dollars ($1,000,000) (the "Deposit"). At the Closing, the Deposit shall be credited against the Purchase Price. The Deposit shall remain the sole and exclusive property of Purchaser unless and until Purchaser purchases the Assets at the Closing or Seller is entitled to deduct from the deposit its damages on account of Purchaser's material failure to perform its obligations under this Agreement, as is more fully set forth in Section 15a hereof.


(c) Neither party contemplates that any broker's, finder's, investment banker's, financial advisor's or similar fee will be payable to any entity in connection with this Agreement, or the transactions contemplated hereby, however, Seller shall bear sole responsibility for any such fee that is determined to be owing (other than as a result of obligations or commitments undertaken by Purchaser) and for the defense of any such assertion.


5. Purchase of Materials, Collection of Account Receivables, Etc. In order to maintain the value of the accounts receivable and cash to be purchased by Purchaser, Seller should refrain from utilizing any cash in the debtor's accounts or any cash collected prior to the Closing Date for any of Seller's operating or non-operating expenses, except for payment for materials received after the commencement of Seller's Chapter 11 case and the Closing Date. The Purchaser and Seller acknowledge that the Budget is intended to reflect the minimum cost of operations. To the extent that Purchaser loans funds to Seller under that certain Loan and Security Agreement of even date herewith between Purchaser and Seller for the purchase of materials (or other similar expenses which, in the joint judgment of Purchaser and Seller (or determined by the Bankruptcy Court in the absence of such agreement), are not contemplated by the Budget and are necessary for the generation of further accounts receivable, and in the event that Purchaser purchases the Assets for the base consideration herein of $8,000,000, then the amount of such loans will be added to the base consideration of $8,000,000 in order to determine the Purchase Price, it being clearly understood by the parties hereto that in the event the Purchase Price equals or exceeds $8,600,000 as a result of competitive bidding, then the Purchase Price will not be so adjusted and each bidder will be bidding on the same basis to purchase all of the Seller's assets, including the accounts receivable or work in process generated as a result of Seller borrowing funds to purchase raw materials.


6. Sales, Use and Transfer Taxes. Seller shall be liable for the payment of all sales, use and other transfer taxes applicable to the transfer of the Assets contemplated hereby.


7. Representations and Warranties of Seller.


Seller represents and warrants to Purchaser as follows:


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(a) Power and Authority. Seller has all requisite corporate power and authority to enter into this Agreement and to assume and perform fully its obligations hereunder. The execution and delivery of this Agreement and the performance by Seller of its obligations hereunder have been duly and validly authorized by all necessary corporate action. This Agreement is a valid and binding obligation of Seller, enforceable in accordance with its terms.


(b) Consents and Approvals. Except for the consent of the Bankruptcy Court, there is no requirement applicable to Seller to make any filing with, or to obtain any permit, authorization, consent or approval of, any governmental or regulatory authority as a condition to the lawful consummation by Seller of the transactions contemplated by this Agreement. There is no lawsuit, proceeding or investigation pending or, to the best knowledge of Seller, threatened against Seller that seeks to prevent the consummation of the transactions contemplated hereby.


(c) Disclosure. To the best of Seller's knowledge, the representations and warranties by Seller in this Agreement do not and will not contain any untrue statement of a material fact and do not and will not omit to state any material fact necessary to make the statements herein or therein not misleading.


(d) Contracts. Schedule 1(h) is a complete and accurate list of all of the material Contracts to which Seller is a party.


(e) Intellectual Property.


(i) Schedule 1(f) contains a complete and accurate list and brief
description of all Proprietary Rights owned by Seller. Schedule 1(g)(i)
contains a complete and accurate list and brief description of all
licenses, sublicenses and similar licenses pursuant to which third parties
have granted Seller rights to their Proprietary Rights. Schedule 1(g)(ii)
contains a complete and accurate list and brief description of all
licenses, sublicenses and similar licenses pursuant to which Seller has
granted third parties rights to Seller's Proprietary Rights. Other than the
Proprietary Rights listed in Schedule 1(f) and any Proprietary Rights
relating to items listed in Schedule 1(g)(i), no Proprietary Rights are
used in Seller's business or its products (including, without limitation,
Innerware/G3, Inroute, Incarda, the BANC 6000, and the BANC 9000, and all
variants and custom modules related to the foregoing) (collectively, the
"Products"). Other than the Proprietary Rights relating to items listed in
Schedule 1(g)(i), no third-party Proprietary Rights are used in Seller's
business or Products, and Seller is not aware of any claim by any employee,
consultant, officer or shareholder of Seller to any Proprietary Rights used
in Seller's business or the Products.


(ii) To the best of Seller's knowledge; a) Seller has the exclusive
right to use all Proprietary Rights listed in Schedule 1(f) and any
Proprietary Rights relating to items listed in Schedule 1(g)(i); b) Seller
has granted no other licenses or other rights to its Proprietary Rights,
other than those listed in Schedule 1(g)(ii); c)


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on the Closing Date, Purchaser will own, subject to the provisions of any
license, sublicense or similar agreements set forth in Schedule 1(g)(i) and
Schedule 1(g)(ii), all Proprietary Rights listed in such Schedules; and d)
there are no outstanding or threatened disputes or disagreements with
respect to any license, sublicense or similar agreements listed in Schedule
1(g)(i) or Schedule 1(g)(ii).


(iii) To the best of Seller's knowledge, none of the activities or
business presently conducted by Seller infringes or violates, or
constitutes a misappropriation of, any Proprietary Rights of any other
person or entity. Except as set forth in Schedule 1(g)(iii), Seller has not
received any complaint, claim or notice alleging any such infringement,
violation or misappropriation, and Seller is not aware of any facts or
reasons which would give rise to any claim therefor.


(iv) Seller has supplied to, or made available for inspection by,
Purchaser correct and complete copies of all licenses, sublicenses or other
agreements (as amended to date) referred to in Schedule 1(g)(i) and
Schedule 1(g)(ii). Except as set forth in Schedule 1(g)(i) and Schedule
1(g)(ii), with respect to such Proprietary Rights, and to the best of
Seller's knowledge, (i) each such license, sublicense or other agreement is
legal, valid and binding with respect to Seller and to every other party
thereto, and (ii) neither Seller nor any other party is in material breach
or default under any such license, sublicense or other agreement, and no
event has occurred which, with notice and/or lapse of time, would
constitute such a material breach or default or permit termination,
modification or acceleration thereunder.


(v) With respect to any trade secret described in Schedule 1(f),
Seller has provided sufficient documentation, or made the same available
for inspection, to accurately identify, explain and allow the full and
proper use of such trade secret without special knowledge or memory of
others. To the best of Seller's knowledge, all such trade secrets are
presently valid and protectible, are not part of the public knowledge or
literatures, and have not been used, divulged or appropriated for the
benefit of any person other than Seller.


(vi) Seller has taken all reasonable security measures to protect
the secrecy, confidentiality and value of its Proprietary Rights. Each
individual or entity responsible for developing any such Proprietary Right
has assigned its rights thereto to Seller, and all of such rights of Seller
are being assigned to Purchaser hereunder.


(vii) To the best of Seller's knowledge, the transactions
contemplated by this Agreement will not have an adverse effect on Seller's
or Purchaser's interest in any of Seller's Proprietary Rights. All
necessary consents or waivers relating to the Proprietary Rights listed
therein which are required to consummate the transactions contemplated in
this Agreement have been obtained.


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(f) Brokers or Finders. To the best of Seller's knowledge, Seller does not and will not have any obligation to pay any broker's, finder's, investment banker's, financial advisor's or similar fee in connection with this Agreement, or the transactions contemplated hereby or thereby. Seller shall bear sole responsibility for any such fee that is determined to be owing (other than as a result of obligations or commitments undertaken by Purchaser) and for the defense of any such assertion.


(g) Product Performance. To the best of Seller's knowledge, (i) the BANC 6000 performs in accordance with the technical specifications for such product which are attached to Schedule 1(f) and there are no material obstacles (assuming application of the necessary engineering resources) that would prevent the modification of such product to a fast packet switch and (ii) while the BANC 9000 is in the development stage and Purchaser acknowledges that it will take a substantial amount of development to complete such product, there are no material obstacles (assuming application of the necessary engineering resources) that would prevent the completion of such product so that it performs in accordance with the technical specifications for such product which are proposed or attached to Schedule 1(f).


8. Representations and Warranties of Purchaser.


Purchaser represents and warrants to Seller as follows:


(a) Organization. Purchaser is a corporation duly organized and existing in good standing under the laws of the State of Delaware. Purchaser has the corporate authority to own its properties and to carry on its business as now conducted and to execute and deliver this Agreement and to consummate the transactions contemplated hereby.


(b) Power and Authority. Purchaser has all requisite corporate power and authority to enter into this Agreement and to assume and perform fully its obligations hereunder. The execution and delivery of this Agreement and the performance by Purchaser of its obligations hereunder have been duly and validly authorized by all necessary corporate action, and this Agreement is a valid and binding obligation of Purchaser enforceable in accordance with its terms.


(c) Consents and Approvals. There is no requirement applicable to Purchas ...