A Pennsylvania judge has awarded nearly $126 million to Com-Net Critical Communications Inc. in a shareholder action against Tyco Electronics Corp. over its purchase of the wireless communications company. Judge Alan Hertzberg issued the verdict on July 13. Tyco is required under the order to turn over $80 million it has been withholding from Com-Net Critical shareholders and pay $45.75 million in interest. The withholding was part of the stock purchase agreement for Com-Net Critical, which was signed in March of 2001. A provision of the contract said that if a then-ongoing communications project in Florida was not completed on time and within the specified budget, Tyco would be entitled to keep some or all of that portion of the payment.
In the findings accompanying the verdict, Judge Hertzberg found that Tyco was responsible for slowing down the project and that Com-Net Critical should not be held liable. The judge stated in his findings:
While Florida actually provided the ‘written acknowledgment’ on September 16, 2010, defendants’ breach of the provision of the stock purchase agreement that required diligent, timely and efficient completion of the Florida communications system, using all commercially reasonable efforts, delayed its completion, and therefore receipt of the written acknowledgment from Florida.
The Florida project originally included 134 radio frequency towers and 22 microwave towers. Judge Hertzberg said that alterations made to the project plans, which included additional towers, were not agreed to by Com-Net Critical and should not be counted toward the overall cost. He found that Tyco’s calculations showing the project came in over budget improperly counted these additions and also included other mistakes. Judge Hertzberg stated further in his findings:
While more than $124 million was spent to complete the Florida communications system, under the definition in the stock purchase agreement of ‘costs incurred,’ the amount of the overspend did not exceed $124 million.
Judge Hertzberg said the withheld payment started accruing interest on Jan. 1, 2006. The case is in the Court of Common Pleas of the State of Pennsylvania, County of Allegheny.
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