<PAGE>
FORM 8-K
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) August 1, 1997
DIGITAL VIDEO SYSTEMS, INC.
(Exact name of registrant as specified in its charter)
Delaware
(State or other jurisdiction of incorporation)
0-28472 77-0333728
(Commission File Number) (I.R.S. Employer Identification No.)
2710 Walsh Avenue
Santa Clara, California 95051 95051
(Address of principal executive offices) (Zip Code)
(408) 748-2100
Registrant's telephone number, including area code
<PAGE>
Item 2. Acquisition or Disposition of Assets
------------------------------------
(a) On August 1, 1997, Digital Video Systems, Inc., a Delaware
corporation (the "Registrant"), completed the acquisition (the "Acquisition") of
substantially all of the assets (excluding accounts receivable) of the Digital
Video division (the "DV Business") of Arris Interactive L.L.C., a Delaware
limited liability company ("Arris"). Arris is a joint venture between Nortel and
Antec. Prior to the Acquisition, assets of the DV Business acquired by the
Registrant (the "DV Assets") were used by the DV Business in its business of
designing, manufacturing and distributing MPEG-2 decoding, switching/streaming
and multiplexing solutions used to deliver advanced video services like digital
ad insertion, video on demand, and near video on demand to subscribers.
The Acquisition was effected pursuant to an Asset Purchase Agreement dated
as of July 25, 1997, as amended by an amendment dated as of August 1, 1997 (the
"Purchase Agreement"), by and between the Registrant and Arris, with the
Registrant acquiring the DV Assets in exchange for $1,500,000 in cash, 600,000
shares of the Registrant's common stock ("Registrant Common Stock") and
additional contingent cash consideration of up to $5,000,000 (the "Contingent
Consideration"). The Contingent Consideration paid to Arris will equal 15.5% of
the net revenues of the DV Business during the period from August 1, 1997
through March 31, 1998 (subject to such revenues exceeding at least $3,000,000
during such period) and 15.5% of the net revenues of the DV Business during the
period from August 1, 1998 through January 31, 1999 (subject to such revenues
exceeding at least $5,000,000 during such period). The amount of consideration
paid by the Registrant to acquire the DV Assets was negotiated by the Registrant
with Arris and was based on the Registrant's evaluation of the value of the DV
Assets, including the proprietary technology and the patents and patent
applications acquired in the Acquisition.
The $1,500,000 in cash consideration was funded from the Registrant's
available cash and the Contingent Consideration, if any, paid by the Registrant
is also expected to be funded from the Registrant's available cash. The 600,000
shares of Registrant Common Stock were issued to Arris in a private transaction
in reliance upon Section 4(2) of the Securities Act of 1933, as amended. Such
shares are subject to a lockup provision set forth in the Purchase Agreement and
may not be sold or otherwise transferred for a period of twelve months from the
closing date of the Acquisition. After the expiration of such twelve-month
period, 50% of the Registrant Common Stock will be released from the lockup.
The remaining 50% of the Registrant Common Stock will be released from the
lockup 24 months after the closing date of the Acquisition.
Under the terms of the Purchase Agreement, 300,000 of the 600,000 shares of
Registrant Common Stock issued to Arris pursuant to the Acquisition are subject
to an escrow (the "Escrow") pursuant to an escrow agreement dated as of August
1, 1997 by and between Arris and the Registrant. The 300,000 shares of
Registrant Common Stock subject to the Escrow shall be released to Arris from
the Escrow provided that a satisfactory legal opinion (the "Opinion") relating
to two key patent applications (the "Patent Applications") is delivered to the
Registrant within 90 days following the closing date of the Acquisition (or such
longer period as Arris' counsel in its reasonable opinion believes is required
to conduct the patent search described in the Opinion and to deliver the
Opinion) and such Opinion provides the Registrant and its counsel reasonable
assurance that neither of the Patent Applications constitutes an infringement of
any United States patent in a manner that results in
2.
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a direct impact on the Registrant's ability to ship products of the DV Business
or products proposed in the business plan of the DV Business. In the event the
foregoing conditions are not satisfied, the Registrant Common Stock held in
escrow shall be forfeited by Arris and cancelled.
(b) The DV Assets consist of patents and patent applications, fixed
assets (including equipment, computers, inventory, parts, and other tangible
personal property) and a shippable backlog of ad insertion and near video on
demand equipment orders. The Registrant intends to continue to use the DV Assets
for the same purposes that such assets were used for prior to the Acquisition.
Item 7. Financial Statements and Exhibits
---------------------------------
(a) Financial statements of business acquired. It is impracticable to
-----------------------------------------
file audited financial statements for the DV Business at this time. Audited
financial statements will be filed as an Amendment to this Form 8-K as soon as
they are available, but in any event not later than 75 days after the date of
the Acquisition.
(b) Pro forma financial information. It is impracticable to file pro
-------------------------------
forma financial information in connection with the Acquisition at this time. Pro
forma financial information will be filed as an Amendment to this Form 8-K as
soon as it is available, but in any event not later than 75 days after the date
of the Acquisition.
(c) Exhibits
--------
The exhibits listed below are filed as part of this Current Report.
<TABLE>
<CAPTION>
Exhibit No. Description of Exhibit
- ----------- ----------------------
<S> <C>
2.1 Asset Purchase Agreement dated as of July 25, 1997 by and between
the Registrant and Arris.
2.2 Amendment to Asset Purchase Agreement dated as of August 1, 1997.
4.1 Form of Escrow Agreement dated as of August 1, 1997 by and between
the Registrant and Arris.
</TABLE>
3.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
DIGITAL VIDEO SYSTEMS, INC.
Date: August 15, 1997 By: /s/ Thomas R. Parkinson
------------------------------------
Thomas R. Parkinson
President
4.
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EXHIBIT INDEX
The exhibits listed below are filed as part of this Current Report.
<TABLE>
<CAPTION>
Exhibit No. Description of Exhibit Page
- ----------- ---------------------- ----
<C> <S> <C>
2.1 Asset Purchase Agreement dated as of July 25, 1997
by and between the Registrant and Arris.
2.1 Amendment to Asset Purchase Agreement dated as of
August 1, 1997.
4.1 Form of Escrow Agreement dated as of August 1, 1997
by and between the Registrant and Arris.
</TABLE>
5.
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Exhibit 2.1
ASSET PURCHASE AGREEMENT
ASSET PURCHASE AGREEMENT dated as of July 25, 1997, by and between Digital
Video Systems, Inc., a Delaware corporation ("DVS") with offices at 2710 Walsh
Avenue, Santa Clara, California 95051 and Arris Interactive L.L.C., a Delaware
limited liability company ("Arris") with offices at 3871 Lakefield Drive, Suite
300, Suwanee, Georgia 30174.
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, DVS desires to purchase from Arris and Arris desires to sell to
DVS substantially all of the assets (the "DV Assets") of Arris used or useful in
its Ad Insertion and Near Video On Demand business division known as "Digital
Video" (the "DV Business") in exchange for cash and shares of common stock of
DVS (the "Common Stock") as set forth herein (collectively, the "Transaction");
WHEREAS, the parties desire to enter into this Asset Purchase Agreement to
set forth their mutual agreements concerning the above matters;
NOW, THEREFORE, in consideration of the mutual promises of the parties
hereto, and of good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, it is mutually agreed by and between the parties
hereto as follows:
ARTICLE 1
SALE AND TRANSFER OF ASSETS AND SHARES; CLOSING
1.1 Exchange.
--------
(a) Sale of Assets. Subject to the terms and conditions of this
--------------
Agreement, at the Closing, Arris will sell, convey, assign and transfer the DV
Assets (further described herein) to DVS, and DVS will purchase the DV Assets
from Arris. The DV Assets shall be free and clear of any liens, royalty
payments or other liabilities, and shall include the following:
(i) all of the tangible personal property used in the conduct of
the DV Business, including, but not limited to, fixed assets, equipment,
computers, computer disks, magnetic tape, inventory, spare parts, manuals and
other such tangible personal property (a complete listing of such tangible
assets is attached hereto as Exhibit A);
(ii) all of Arris's right to operate the DV Business, including
all licenses, consents, certificates, authorizations and privileges (a complete
listing of such material
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licenses, consents, certificates, authorizations and privileges is attached
hereto as Exhibit B);
(iii) all of the books and records relating to the DV Business
and all of Arris's trademarks, patents, servicemarks, copyrights, any pending
applications for trademarks or patents or servicemarks or copyrights (a complete
schedule of all trademarks, patents, servicemarks and copyrights and pending
applications for each of the foregoing is attached hereto as Exhibit C), trade
secrets, design know-how, and engineering and other plans, drawings and diagrams
relating to the DV Business (the "Proprietary Technology");
(iv) all of the benefits and obligations of Arris's sales
contracts, pending sales, and customer database related to the DV Business
(excluding any accounts receivable), including all existing obligations for
warranty, support and maintenance (the "Support Obligations"), with a complete
listing of the foregoing contracts (the "Contracts") being attached hereto as
Exhibit D; provided, however, that if Support Obligations after Closing relating
to sales of DV products made by Arris exceed $170,000, Arris shall promptly
indemnify DVS for the amount of all Support Obligations in excess of $170,000;
and
(v) certain of Arris's employees who participate in the DV
Business (the "Arris Employees") and whose names are set forth on Exhibit E
attached hereto.
(b) Taxes. DVS and Arris shall each be responsible for 50% of all
-----
federal, state and local taxes and fees related to the transfer of the DV Assets
to DVS, other than taxes based solely on the income (including capital gains on
the sale of the DV Assets) or net worth of Arris, which shall be the sole
responsibility of Arris.
(c) Warranty as to Assets. Except as otherwise expressly set forth
---------------------
herein: (i) Arris shall transfer the DV Assets "AS IS" and "WHERE IS" in their
condition on the Closing Date; (ii) DVS shall not assume any liabilities of or
relating to Arris or the DV Assets; and (iii) NO WARRANTIES, EXPRESS OR IMPLIED,
INCLUDING, BUT NOT LIMITED TO, THOSE OF MERCHANTABILITY OR FITNESS FOR A
PARTICULAR PURPOSE shall be given by Arris to DVS with regard to the DV Assets.
1.2 Consideration and Earn Out.
--------------------------
(a) Payment at Closing.
------------------
(i) In consideration of the transfer by Arris of the DV Assets
to DVS, DVS at Closing shall issue to Arris 600,000 shares of Common Stock and
shall pay to Arris $1,500,000 by wire
2
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transfer or certified check, and DVS shall assume the liabilities under Sections
1.4(c) and 1.5 hereof accrued through the Closing Date.
(ii) The offer and sale of the Common Stock issued to Arris
hereunder has not been registered under the Securities Act of 1933, as amended
(the "Securities Act"). Such Common Stock must be held by Arris until: (A) such
Common Stock is registered pursuant to an effective registration statement under
the Securities Act and all applicable state securities laws or (B) an exemption
from such registration is available.
(iii) Arris agrees not to sell or otherwise transfer the Common
Stock for a period of twelve months from and after the Closing Date. After the
expiration of such twelve-month period, Arris shall be entitled to transfer or
sell 50% of such then existing shares of Common Stock (as may be adjusted for
stock splits or dividends). After the expiration of 24 months from the Closing
Date, Arris shall be entitled to transfer or sell all of said shares of Common
Stock.
(iv) Rule 144 Reporting. DVS agrees to use its reasonable best
------------------
efforts to:
(1) Make and keep public information available as those
terms are understood and defined in Rule 144 under the Securities Act, at all
times from and after the Effective Date;
(2) File with the Securities and Exchange Commission (the
"SEC") in a timely manner all reports and other documents required of DVS under
the Securities Act and the Exchange Act of 1934 (the "Exchange Act"); and
(3) So long as Arris owns any Common Stock issued to
Arris pursuant to the Purchase Agreement, inform Arris upon request as to its
compliance with the reporting requirements of Rule 144 and of the Securities Act
and the Exchange Act.
(4) DVS will use its reasonable best efforts to maintain
its listing on Nasdaq or another national securities exchange.
Notwithstanding the foregoing, DVS shall not be obligated to comply with any of
the provisions of (1) through (4) above, if such compliance would impair DVS's
ability to engage in a merger or consolidation of DVS with or into another
corporation or entity in which DVS does not survive, or in the event of a sale
of all or substantially all of the assets of DVS.
3
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(b) Post-Closing Payment. In addition to the above, DVS shall pay to
--------------------
Arris additional consideration equal to an amount (not to exceed $5,000,000)
calculated as follows:
(i) Arris shall be entitled to 15.5% of the net revenues as
determined in accordance with generally accepted accounting principles ("GAAP")
of the DV Business (or its successor) including all revenues to DVS that are
directly or indirectly based upon the existing technologies and products,
including any improvements or successor generations of such products, being
acquired by DVS from Arris in the transactions contemplated herein (the "DV Base
Revenues") from the period beginning on the Closing Date and ending March 31,
1998 (the "First Period"). The payment of such amount shall be made in cash upon
the conclusion of DVS's fiscal 1998 audit. Arris shall not be entitled to such
payment unless the DV Base Revenues for the First Period exceed $3,000,000.
(ii) Arris shall be entitled to 15.5% of the DV Base Revenues
from the period beginning April 1, 1998 and ending 18 months from the Closing
Date (the "Second Period"). The payment of such amount shall be made in cash no
later than March 31, 1999. Arris shall not be entitled to such payment unless
the DV Base Revenues for the Second Period exceed $5,000,000.
(iii) In connection with the foregoing obligations, DVS agrees
to use its best efforts to fund the DV Business and maximize the sales of the DV
Business (consistent with generating commercially reasonable levels of
profitability for the DV Business) through at least the period ending 18 months
from the Closing Date; provided that in no event shall such funding be less than
$3,000,000 through December 31, 1998; DVS shall conduct the DV Business in the
ordinary course of business during such 18-month period so as to not distort the
DV Base Revenues for such period. DVS shall furnish to Arris all documentation
regarding its determination of the DV Base Revenues and shall furnish to Arris
any additional information reasonably requested by Arris regarding DVS's conduct
of the DV Business. DV Base Revenues shall be calculated in accordance with GAAP
and shall be net of discounts, returns, allowances, shipping and other similar
items. The DV Business shall be conducted either through a subsidiary of DVS or
as a division of DVS. In the event the DV Business is subsequently spun out by
DVS through an initial public offering or otherwise, or the operations of the DV
Business are combined with other operations of DVS, an adjustment will be made
to the DV Base Revenues targets, if appropriate, to reflect the impact of this
action by DVS, with such modification to be agreed to by DVS and Arris.
4
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1.3 Closing. The Transaction (the "Closing") provided for in this
-------
Agreement will take place at the offices of Arris at 3871 Lakefield Drive,
Suwanee, Georgia 30174, at 10:00 a.m. (local time) on August 1, 1997, or at such
other time and place as the parties may agree. Subject to any other provision
of this Agreement to the contrary, failure to consummate the transactions
provided for in this Agreement on the date and time and at the place determined
pursuant to this Section 1.3 will not result in the termination of this
Agreement and will not relieve any party of any obligation under this Agreement.
1.4 Closing Obligations. At Closing, DVS and Arris shall take the
-------------------
following actions, in addition to such other actions as may otherwise be
required under this Agreement:
(a) Conveyance Instruments. Arris shall deliver to DVS such warranty
----------------------
deeds, bills of sale, assignments, and other instruments of conveyance and
transfer as DVS may reasonably request to effect the assignment to DVS of the DV
Assets.
(b) Delivery of Stock. DVS shall deliver to Arris share certificates
-----------------
duly endorsed for transfer to Arris representing 600,000 shares of DVS's issued
and outstanding Common Stock.
(c) Assumption Agreement. DVS shall deliver to Arris an assumption
--------------------
agreement in the form of Exhibit F hereto, pursuant to which DVS assumes all of
the benefits to the Contracts and agrees to pay and perform all of the
obligations of the Contracts, including the Support Obligations up to $170,000.
(d) Certificates. Each party shall deliver the certificates as to
------------
the accuracy of the representations and warranties contained herein, the
compliance with the covenants and agreements contained herein, and the
satisfaction of the conditions to Closing contained herein.
(e) Employment Agreements. Each of Dave Keller and Michael Maslaney
---------------------
shall have entered into contracts providing for their employment by DVS, in the
form attached hereto as Exhibits G-1 and G-2, respectively. DVS shall make
offers of employment to the other personnel of DV under terms similar to those
offered to similarly situated current employees of DVS.
1.5 Post-Closing Obligations To Be Assumed By DVS. DVS agrees that it
---------------------------------------------
will assume and will pay, perform and discharge all obligations of the DV
Business that are specifically assumed by DVS as provided herein or that arise
from the conduct of the DV Business after the Closing Date when the same become
due or are required to be performed or discharged.
5
<PAGE>
1.6 Post-Closing Obligations To Be Paid By Arris. Arris agrees that it
--------------------------------------------
will be solely liable for and shall pay, perform and discharge all obligations
of the DV Business (including any contingent liabilities relating to the conduct
of the DV Business prior to the Closing Date) that are not specifically assumed
by DVS as provided herein that relate to the conduct of the DV Business prior to
the Closing Date when the same become due or are required to be performed or
discharged.
ARTICLE 2
REPRESENTATIONS AND WARRANTIES OF ARRIS
Arris hereby represents and warrants to DVS as follows:
2.1 Organization. Arris is a limited liability company validly existing
------------
and in good standing under the laws of the State of Delaware with the power and
authority to conduct its business and to own and lease its properties and assets
(including the DV Assets) and, as to the conduct of the DV Business and the use
and ownership of the DV Assets specifically, is duly qualified or licensed to do
business and is in good standing as a foreign limited liability company in the
State of Georgia and in any other states in which it does business.
2.2 Power and Authority. Arris has the power and authority to execute,
-------------------
deliver, and perform this Agreement and the other agreements and instruments to
be executed and delivered by it in connection with the transactions contemplated
hereby and thereby, has taken all necessary company action (including obtaining
the approval of the members of Arris) to authorize the execution and delivery of
this Agreement and such other agreements and instruments and the consummation of
the transactions contemplated hereby and thereby. This Agreement is, and the
other agreements and instruments to be executed and delivered by Arris in
connection with the transactions contemplated hereby when executed and delivered
shall be, the legal, valid, and binding obligations of Arris, enforceable in
accordance with their terms.
2.3 No Conflict. Neither the execution and delivery of this Agreement and
-----------
the other agreements and instruments to be executed and delivered in connection
with the transactions contemplated hereby or thereby, nor the consummation, of
the transactions contemplated hereby or thereby, will violate or conflict with:
(a) except insofar as required consents are to be procured prior to Closing, any
federal, state, or local law, regulation, ordinance, zoning requirement,
governmental restriction, order, judgment or decree applicable to Arris, the DV
Business, or the DV Assets; (b) any provision of any charter, bylaw or other
governing or organizational instruments of Arris; or (c) except insofar as
consents are to be procured prior to Closing, any mortgage,
6
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indenture, license, instruments trust, contract, agreement, or other commitment
or arrangement to which Arris is a party or by which Arris or any of the DV
Assets is bound.
2.4 Required Government Consents. Except for the filing and/or recording
----------------------------
of deeds and other instruments of conveyance, transfer, or assignment required
by federal copyright, patent, or trademark laws or the laws of the states in
which the DV Assets are located, to occur upon Closing and except as otherwise
set forth herein, no approval, authorization, certification, consent, variance,
permission, license, or permit to or from, or notice, filing, or recording to or
with, federal, state, or local governmental authorities is necessary for the
execution and delivery of this Agreement and other agreements and instruments to
be executed and delivered in connection with the transactions contemplated
hereby or thereby by Arris or the consummation by Arris of the transactions
contemplated hereby or thereby, or the ownership and use of the DV Assets and
the conduct of the DV Business (including by DVS).
2.5 Required Contract Consents. Except as set forth in Exhibit H (such
--------------------------
scheduled items being referred to herein as the "Required Contract Consents"),
no approval, authorization, consent, permission, or waiver to or from, or
notice, filing, or recording to or with, any person is necessary for: (a) the
execution and delivery of this Agreement and the other agreements and
instruments to be executed and delivered in connection with the transactions
contemplated hereby or thereby by Arris or the consummation by Arris of the
transactions contemplated hereby; (b) the transfer and assignment to DVS at
Closing of the Contracts; or (c) the ownership and use of the DV Assets and the
conduct of the DV Business (including by DVS).
2.6 Title to Assets; Sufficiency, etc. Arris has good and marketable
----------------------------------
title to, or a valid leasehold interest in, the properties and assets used by or
in connection with the DV Business, located on the premises of the DV Business,
or shown on the most recent balance sheet or acquired after the date thereof,
free and clear of all liens, security interests or other restrictions on
transfer, except for properties and assets disposed of in the ordinary course of
business since the date of the most recent balance sheet. The DV Business owns
or leases all buildings, machinery, equipment, and other tangible assets
necessary for the conduct of its business as presently conducted and as
presently proposed to be conducted.
7
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2.7 Title to Intellectual Property.
------------------------------
(a) DVS shall receive title to the Proprietary Technology at
Closing, free and clear of all liens, encumbrances or licenses (except as set
forth on Exhibit C);
(b) Except as set forth on Exhibit C hereto, Arris owns or will own
on the Closing Date all Proprietary Technology necessary for the operation of
the DV Business as presently conducted and as presently proposed to be conducted
in the Digital Video Business Plan dated 6/97 (the "Business Plan"). Each item
of Proprietary Technology owned by Arris for or in connection with the DV
Business immediately prior to the Closing Date will be owned by DVS immediately
subsequent to the Closing Date. Arris has taken all necessary and desirable
action to maintain and protect each item of Proprietary Technology that it owns
in connection with the DV Business.
(c) The DV Business does not interfere with, infringe upon,
misappropriate, or otherwise come into conflict with any proprietary technology
rights of third parties, and has never received any charge, complaint, claim,
demand, or notice alleging any such interference, infringement,
misappropriation, or violation (including any claim that Arris must license or
refrain from using any proprietary technology rights of any third party) in
connection with the conduct of the DV Business. To the knowledge of Arris, no
third party has interfered with, infringed upon, misappropriated, or otherwise
come into conflict with any Proprietary Technology rights of Arris.
(d) Arris has delivered to DVS correct and complete copies of all
items of Proprietary Technology listed in Exhibit C. With respect to each item
of Proprietary Technology required to be identified in Exhibit C:
(i) Arris possesses all right, title, and interest in and to
the item, free and clear of any security interest, license, or other
restriction;
(ii) the item is not subject to any outstanding injunction,
judgment, order, decree, ruling, or charge;
(iii) no action, suit, proceeding, hearing, investigation,
charge, complaint, claim, or demand is pending or, to the knowledge of Arris,
its the directors and officers (and employees with responsibility for
Proprietary Technology matters), is threatened, which challenges the legality,
validity, enforceability, use, or ownership of the item; and
(iv) Arris has never agreed to indemnify any person (other than
its customers) for or against any interference,
8
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infringement, misappropriation, or other conflict with respect to the item.
2.8 Financial Statements. Arris shall provide the following financial
--------------------
statements (the "Financial Statements"): (a) no later than three business days
prior to the Closing Date, unaudited income statements, balance sheets, and
statements of cash flow for the DV Business for (i) the fiscal year ended
December 31, 1996 and (ii) the three-month period ended March 31, 1997; and (b)
no later than 60 days after the Closing Date, audited income statements, balance
sheets, and statements of cash flow, including the notes thereto, for the DV
Business for the two years ended December 31, 1996 and unaudited income
statements, balance sheets, and statements of cash flow, including the notes
thereto, for the DV Business for the 3 months ended March 31, 1997 and 1996, and
the 6 months ended June 30, 1997 and 1996. The Financial Statements, including
the notes thereto, will properly reflect all assets and assumed liabilities as
then in existence. The Financial Statements, including the notes thereto, will
fairly present the results of operation and the financial position of the DV
Business as of the dates thereof and the periods then ended in conformity with
GAAP consistently applied with the principles and procedures employed in prior
periods by Arris, and the audited and unaudited Financial Statements, including
the notes thereto, provided pursuant to clause (b) of this Section 2.8 will
comply with all reporting requirements of the Securities and Exchange Commission
(the "SEC"); provided, that if Arris shall fail to deliver the Financial
--------
Statements described in clause (b) of this Section 2.8 within 60 days of the
Closing, Arris shall pay to DVS liquidated damages in the amount of $100,000;
and further provided, that if Arris shall fail to deliver the Financial
------- --------
Statements described in clause (b) of this Section 2.8 to DVS within 90 days of
the Closing, Arris shall pay to DVS an additional $100,000 in liquidated
damages.
2.9 Audit of Financial Statements. Arris has no reason to believe that:
-----------------------------
(a) the financial condition of the DV Business and the DV Assets is not capable
of being audited as described in Section 2.8 hereof, or (b) the Financial
Statements described in clause (b) of Section 2.8 hereof cannot be prepared in
accordance with GAAP within 60 days of the Closing.
2.10 Conduct of Business.
-------------------
(a) Ordinary Course of Business: No Removal or Disposal of Assets.
-------------------------------------------------------------
Since December 31, 1996, Arris has operated the DV Business in an ordinary
course consistent with past practices, and has not removed or disposed of any
assets that were assets of the DV Business as of December 31, 1996 except in the
ordinary course.
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(b) No Material Adverse Change. Since December 31, 1996, there has
--------------------------
been no material adverse change in the DV Business or the DV Assets or in the
financial condition, operations, or prospects of the DV Business.
(c) Absence of Particular Events. Since December 31, 1996, Arris has
----------------------------
not: (i) suffered any damage or destruction adversely affecting the DV Business
or involving the DV Assets in the amount of $50,000 in any one instance; (ii)
incurred any liability or obligation relating to the DV Business other than in
the ordinary course consistent with past practice; (iii) made any change in any
method, practice, or principle of accounting involving the DV Business or the DV
Assets; or (iv) paid, loaned, or advanced any material monetary amount or other
asset to, or sold, transferred, or leased any asset to, any employee involved in
the DV Business except for normal compensation involving salary and benefits.
(d) Absence of Joint Ventures, etc. Arris is not a party to any joint
-------------------------
venture or other similar agreement or arrangement that involves any sharing of
profits of the DV Business or the DV Assets or is similar to or competitive with
the DV Business .
2.11 Major Vendors and Customers. Exhibit I lists each licensor,
---------------------------
developer, remarketer, distributor, and supplier of property or services to, and
each licensee, end-user, or customer of, the DV Business, to whom Arris paid or
billed in the aggregate $100,000 or more during the fiscal year ended December
31, 1996, together with, in each case, the amount paid or billed during such
period. To the best knowledge of Arris, there is no reason why the relationship
with any such person or entity might not be continued by DVS, after its
acquisition of the DV Business, indefinitely at least at substantially the same
level of business and on substantially the same terms as Arris experienced
during the twelve-month period preceding the Closing.
2.12 Litigation. No claim, action, suit, proceeding, inquiry, hearing,
----------
arbitration, administrative proceeding, or investigation (collectively,
"Litigation") is pending, or, to Arris's best knowledge threatened against
Arris, its present or former directors, officers, or employees, or any party to
any contract, affecting, involving, or relating to the DV Business or any of the
DV Assets. Arris knows of no facts that could reasonably be expected to serve
as the basis for litigation against itself (or DVS upon acquisition of the DV
Business), its present or former directors, officers, or employees affecting,
involving, or relating to the DV Business or the DV Assets.
2.13 Personnel and Compensation. Arris shall have delivered to DVS prior
--------------------------
to Closing a due and complete list of the names and
10
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current compensation levels of: (a) all salaried, annual or other employees
materially involved in the DV Business; and (b) all consultants involved in the
DV Business.
2.14 No Liability for Terminated Employees. DVS shall not incur any
-------------------------------------
liability in connection with the termination by Arris of any employees in
connection with the sale of the DV Assets, including, without limitation, any
fees, costs or expenses described in Section 9.1(a) hereof and those relating to
or in connection with any threatened or actual claims or litigation relating to
such termination or to DVS's determination, in its sole discretion, to not
employ any such terminated employees.
2.15 Inventory. The inventory of the DV Business consists of raw materials
---------
and supplies, manufactured and purchased parts, goods in process, and finished
goods, all of which, to the best knowledge of Arris, is merchantable.
2.16 Contracts. (a) Exhibit J lists all of the material contracts to
---------
which Arris is a party (the "Material Contracts"); and
(b) Arris has delivered to DVS a correct and complete copy of each
Contract (as amended to date). With respect to each Material Contract: (i) the
Material Contract is legal, valid, binding, enforceable, and in full force and
effect; (ii) except as otherwise expressly stated herein, the Material Contract
will continue to be legal, valid, binding, enforceable, and in full force and
effect on identical terms following the consummation of the transactions
contemplated hereby (subject to the assignments and assumptions provided for in
this Agreement); (iii) no party is in breach or default, and no event has
occurred which with notice or lapse of time would constitute a breach or
default, or permit termination, modification, or acceleration, under the
Material Contract; and (iv) no party has repudiated any provision of the
Material Contract.
2.17 Product Warranty; Liability. To the best knowledge of Arris, each
---------------------------
product manufactured, sold, leased, or delivered by Arris in connection with the
DV Business has been in conformity with all applicable contractual commitments
and all express and implied warranties, and the DV Business does not have any
liability (and there is no basis for any present or future action, suit,
proceeding, hearing, investigation, charge, complaint, claim, or demand against
any of them giving rise to any liability) for replacement or repair thereof or
other damages in connection therewith. To the best knowledge of Arris, no
product manufactured, sold, leased, or delivered by Arris in connection with the
DV Business is subject to any guaranty, warranty, or other indemnity beyond the
applicable standard terms and conditions of sale or lease.
11
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2.18 Employees. With respect to the DV Business, Arris: (a) is not a
---------
party to or bound by any collective bargaining agreement, nor has it experienced
any strikes, grievances, claims of unfair labor practices, or other collective
bargaining disputes; and (b) is not a party to any employment agreement with any
officer, director or employee (other than as set forth on Exhibit E hereto).
2.19 Environmental, Health and Safety Matters. (a) Arris has obtained and
----------------------------------------
complied with, and is in compliance with, all material permits, licenses and
other authorizations that are required pursuant to environmental, health, and
safety laws, rules and regulations for the occupation of its facilities and the
operation of the DV Business, all of which are listed on Exhibit B hereto.
(b) Arris has not received any written or oral notice, report or
other information regarding any actual or alleged material violation of any
environmental, health, and safety regulations, or any liabilities or potential
liabilities (whether accrued, absolute, contingent, unliquidated or otherwise),
including any investigatory, remedial or corrective obligations, relating to any
of them or its facilities arising under environmental, health, and safety laws,
rules and regulations.
2.20 Investment. Arris: (a) understands that the Common Stock issued to
----------
Arris pursuant to this Agreement has not been, and will not be, registered under
the Securities Act, or under any state securities laws, and is being offered and
sold in reliance upon federal and state exemptions for transactions not
involving any public offering and; (b) it is acquiring such Common Stock solely
for its own account for investment purposes, and not with a view to the
distribution thereof; and (c) agrees and acknowledges that it will not, directly
or indirectly, offer, transfer, sell, assign, pledge, hypothecate or otherwise
dispose of any shares of the Common Stock except: (i) pursuant to an effective
registration statement under the Securities Act and all applicable state
securities or "blue sky" laws or (ii) pursuant to an exemption therefrom.
2.21 Broker's or Finder's Fees. Arris has not authorized any person to act
-------------------------
as broker or finder or in any other similar capacity in connection with the
transactions contemplated by this Agreement in any manner that may or will
impose liability on DVS.
2.22 Disclosure. No representation, warranty, or statement made by Arris
----------
in this Agreement or in any document or certificate furnished or to be furnished
to DVS pursuant to this Agreement contains or will contain any untrue statement
or omits or will omit to state any fact necessary to make the statements
contained herein or therein not misleading. Arris has disclosed to DVS all
facts known or reasonably available to Arris that are material to the
12
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financial condition, operation, or prospects of the DV Business and the DV
Assets.
2.23 Truth at Closing. All of: (a) the representations, warranties, and
----------------
agreements of Arris contained in this Article 2 and (b) the representations,
warranties and agreements of Arris contained in the Exhibits attached hereto
shall be true and correct and in full force and effect on and as of the Closing
Date.
2.24 Disclaimer. Except as expressly set forth in this Agreement or in any
----------
certificate or agreement furnished or to be furnished to DVS pursuant to this
Agreement, ARRIS MAKES NO REPRESENTATION OR WARRANTY, EXPRESS OR IMPLIED WITH
RESPECT TO THE DV ASSETS OR THE DV BUSINESS, INCLUDING ANY IMPLIED WARRANTY OF
MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF DVS
DVS hereby represents and warrants to Arris as follows:
3.1 Organization. DVS is a corporation validly existing and in good
------------
standing under the laws of the State of Delaware with the corporate power and
authority to conduct its business and to own and lease its properties and
assets. DVS is duly qualified or licensed to do business and is in good
standing as a foreign corporation in each state in which the failure to be so
qualified or licensed would have a material adverse effect on its financial
condition or operations.
3.2 Power and Authority. DVS has the power and authority to execute,
-------------------
deliver, and perform this Agreement and the other agreements and instruments to
be executed and delivered by it in connection with the transactions contemplated
hereby and thereby, and DVS has taken all necessary corporate action to
authorize the execution and delivery of this Agreement and such other agreements
and instruments and the consummation of the transactions contemplated hereby and
thereby. This Agreement is, and, when such other agreements and instruments are
executed and delivered, the other agreements and instruments to be executed and
delivered by DVS in connection with the transactions contemplated hereby and
thereby shall be, the legal, valid, and binding obligation of DVS, enforceable
in accordance with their terms.
3.3 Broker's or Finder's Fees. DVS has not authorized any person to act
-------------------------
as broker, finder, or in any other similar capacity in connection with the
transactions contemplated by this Agreement.
3.4 No Conflict. Neither the execution and delivery by DVS of this
-----------
Agreement and of the other agreements and instruments to be
13
<PAGE>
executed and delivered by DVS in connection with the transactions contemplated
hereby or thereby, nor the consummation by DVS of the transactions contemplated
hereby or thereby will violate or conflict with: (a) any federal, state, or
local law, regulation, ordinance, governmental restriction, order, judgment or
decree applicable to DVS; or (b) any provision of any charter, bylaw, or other
governing or organizational instrument of DVS.
3.5 Financial Statements. Exhibit K attached hereto sets forth
--------------------
consolidated income statements, balance sheets, and statements of cash flow for
DVS as of March 31, 1997 (the "Financial Statements"), prepared in accordance
with GAAP, consistently applied with the principles and procedures employed in
prior periods by DVS. The Financial Statements properly reflect all assets and
assumed liabilities as then in existence. The Financial Statements fairly
present the results of operation and the financial position of DVS as of the
dates thereof and the periods then ended in conformity with GAAP consistently
applied with the principles and procedures employed in prior periods by DVS.
3.6 Required Contract Consents. No approval, authorization, consent,
--------------------------
permission, or waiver to or from, or notice, or recording to or with, any person
is necessary for the execution and delivery of this Agreement and the other
agreements and instruments to be executed and delivered in connection with the
transactions contemplated hereby or thereby by DVS or the consummation by DVS of
the transactions contemplated hereby.
3.7 Conduct of Business.
-------------------
(a) Ordinary Course of Business: No Removal or Disposal of Assets.
-------------------------------------------------------------
Since April 1, 1997, DVS has operated its business in the ordinary course
consistent with past practices, and has not removed or disposed of any assets
that were assets of its business as of April 1, 1997 except in the ordinary
course.
(b) No Material Adverse Change. Since April 1, 1997, there has been
--------------------------
no material adverse change in its business or its assets or in the financial
condition, operations, or prospects of its business.
(c) Absence of Particular Events. Since April 1, 1997, DVS has not:
----------------------------
(i) suffered any damage or destruction adversely affecting its business or
involving its assets in the amount of $100,000 in any one instance; (ii)
incurred any liability or obligation relating to its business other than in the
ordinary course consistent with past practice; (iii) made any change in any
method, practice, or principle of accounting involving its business or assets;
or (iv) paid, loaned, or advanced any material monetary amount or other asset
to, or sold, transferred, or leased any asset
14
<PAGE>
to, any employee involved in the business except for normal compensation
involving salary and benefits.
3.8 Disclosure. No representation, warranty, or statement made by DVS in
----------
this Agreement or in any document or certificate furnished or to be furnished to
DVS pursuant to this Agreement contains or will contain any untrue statement or
omits or will omit to state any fact necessary to make the statements contained
herein or therein not misleading. DVS has disclosed to Arris directly or
through its filings with the SEC pursuant to the Securities and Exchange Act of
1934, all facts known or reasonably available to DVS that are material to the
financial condition, operation, or prospects of its business and assets.
3.9 Share Ownership. DVS warrants that the shares transferred to Arris
---------------
hereunder are duly authorized, fully paid and non assessable and owned free and
clear of any preemptive rights, liens, claims, charges or encumbrances. DVS
warrants that it has only one class of common stock, there are no outstanding
commitments to purchase, reacquire or redeem any of its Capital Stock nor are
there any declared but unpaid dividends on such Capital Stock.
3.10 Truth at Closing. All of: (a) the representations, warranties, and
----------------
agreements of DVS contained in this Article 3 and (b) the representations,
warranties and agreements of DVS contained in the Exhibits attached hereto shall
be true and correct and in full force and effect on and as of the Closing Date.
ARTICLE 4
CONDUCT OF THE BUSINESSES PRIOR TO CLOSING
4.1 Course of Business. Prior to the Closing Date, Arris shall conduct
------------------
the DV Business and DVS shall conduct its business diligently and substantially
in the same manner heretofore conducted, and neither Arris nor DVS shall
institute any new methods of accounting or operation or engage in any
transaction or activity, enter into any agreement, or make any commitment,
except in the ordinary course of such business and consistent with past
practice, and except as would not reasonably be expected to have a material
adverse effect on the DV Business.
4.2 Prohibited Actions. Until after Closing, in no event, without the
------------------
prior written consent of the other party, shall Arris:
(a) Liens. Permit any of its assets to be subjected to any mortgage,
-----
pledge, lien, or encumbrance.
(b) Disposition of Assets. Waive any claims or rights of substantial
---------------------
value respecting their assets, or sell, transfer, or
15
<PAGE>
otherwise dispose of any of their assets, except in the ordinary course of
business and consistent with past practice.
(c) Licenses. Other than in the ordinary course of its licensing
--------
activities and consistent with past practice, dispose of, license, or permit to
lapse any rights in any intellectual property.
(d) Increases in Compensation. Increase the compensation of
-------------------------
officers, employees, or consultants with respect to the DV Business.
4.3 StarNet License. Arris shall use its reasonable best efforts to obtain
---------------
a license from StarNet, Inc. to enable DVS, after Closing, to use certain
technology used in connection with PC-based Ad Insertion Systems (as is
reflected in the Digital Video Business Plan dated 6/97).
ARTICLE 5
COVENANTS OF ARRIS AND DVS PRIOR TO CLOSING
5.1 Access. From the date of this Agreement to the Closing Date, each
------
party shall: (a) provide the other with such information as such party may from
time to time reasonably request with respect to their businesses and the
transactions contemplated by this Agreement; (b) provide the other party and its
officers, counsel, and other authorized representatives access during regular
business hours and upon reasonable notice to its books, records, and offices, as
such party may from time to time reasonably request; and (c) permit the other
party to make such inspections thereof as it may reasonably request. Any
investigation shall be conducted in such a manner as not to interfere
unreasonably with the operation of the business of the other party.
5.2 Updating of Information. From the date of this Agreement to the
-----------------------
Closing Date, each party shall deliver revised or supplementary Exhibits to
this Agreement, containing accurate information as of the Closing Date, in order
to enable the other party to confirm the accuracy of its representations and
warranties and otherwise to give full effect to the provisions of this
Agreement. Delivery of revised Exhibits by either party hereto shall not reduce
or impair any of the rights the other party may have under Article 6 hereof.
16
<PAGE>
ARTICLE 6
CONDITIONS TO ARRIS'S OBLIGATIONS
Each of the obligations of Arris to be performed hereunder shall
subject to the satisfaction (or waiver by Arris) at or prior to the Closing Date
of each of the following conditions:
6.1 Representations and Warranties True at Closing Date. DVS's
---------------------------------------------------
representations and warranties contained in this Agreement shall be true on and
as of the Closing Date with the same force and effect as though made on and as
of such date; DVS shall have complied with the covenants and agreements set
forth herein to be performed by it on or before the Closing Date; and DVS shall
have delivered to Arris a certificate dated the Closing Date and signed by a
duly authorized officer of DVS to all such warrants.
6.2 Litigation. No Litigation shall be threatened or pending against
----------
DVS or Arris before any court or governmental agency that, in the reasonable
opinion of counsel for Arris, could result in the restraint or prohibition of
any such party, or the obtaining of damages or other relief from such party, in
connection with this Agreement or the consummation of the transactions
contemplated hereby.
6.3 Documents Satisfactory in Form and Substance. All agreements,
--------------------------------------------
certificates, and other documents delivered by DVS to Arris hereunder shall be
in form and substance satisfactory to counsel for Arris, in the exercise of such
counsel's reasonable judgment.
6.4 Consents. All required consents shall have been obtained.
--------
6.5 Investigations. Neither any investigation of DVS by Arris, nor
--------------
the Exhibits hereto, nor any other document delivered to Arris as contemplated
by this Agreement, shall have revealed any facts or circumstances that, in the
good faith judgment of Arris, reflect in a material adverse way on the business,
operations, or prospects of the DVS and its business.
6.6 No Material Adverse Change. From the date of this Agreement
--------------------------
until the Closing Date, DVS shall not have suffered any material adverse change
(whether or not such change is referred to or described in any supplement to the
Exhibits), or the financial condition, operations, or prospects of DVS's
business.
6.7 Opinion of Counsel. At the Closing, Arris shall have received an
------------------
opinion of Troy & Gould, counsel to DVS, in the form attached hereto as
Exhibit L.
17
<PAGE>
ARTICLE 7
CONDITIONS TO DVS'S OBLIGATIONS
Each of the obligations of DVS to be performed hereunder shall be
subject to the satisfaction (or the waiver by DVS) at or prior to the Closing
Date of each of the following conditions:
7.1 Representations and Warranties True at Closing Date. Arris's
---------------------------------------------------
representations and warranties contained in this Agreement shall be true on and
as of the Closing Date with the same force and effect as though made on and as
of such date; Arris shall have complied with the covenants and agreements set
forth herein to be performed by it on or before the Closing Date; and Arris
shall have delivered to DVS a certificate dated the Closing Date and signed by a
duly authorized officer of Arris to all such effects.
7.2 Performance. Arris, shall have performed and complied with all
-----------
agreements, obligations, and conditions required by this Agreement to be
performed or complied with by it on or prior to the Closing.
7.3 Investigations. Neither any investigation of Arris by DVS, nor
--------------
the Exhibits hereto, nor any other document delivered to DVS as contemplated by
this Agreement, shall have revealed any facts or circumstances that, in the good
faith judgment of DVS, reflect in a material adverse way at the DV Assets or the
business, operations, or prospects of the DV Business.
7.4 Consents. All required consents (including all Required
--------
Contract Consents) have been obtained.
7.5 No Litigation. No Litigation shall be threatened or pending
-------------
against DVS or Arris before any court or governmental agency that, in the
reasonable opinion of counsel for DVS, could result in the restraint or
prohibition of any such party, or the obtaining of damages or other relief from
such party, in connection with this Agreement or the consummation of the
transactions contemplated hereby.
7.6 No Material Adverse Change. From the date of this Agreement
--------------------------
until the Closing Date, Arris shall not have suffered any material adverse
change (whether or not such change is referred to or described in any supplement
to the Exhibits), or the financial condition, operations, or prospects of the DV
Business.
7.7 Employment Agreements. At or prior to the Closing, Dave Keller
---------------------
and Michael Maslaney shall have entered into contracts providing for their
employment by DVS, in the forms attached hereto as Exhibits G-1 and G-2,
respectively, the effectiveness of which shall be expressly contingent upon the
occurrence of Closing.
18
<PAGE>
7.8 Opinion of Counsel. At the Closing, DVS shall have received (a)
------------------
an opinion of Rob Friedman, Esq., general counsel to Arris, in the form attached
hereto as Exhibit M-1 and (b) and opinion of counsel to Arris with respect to
intellectual property matters in the form attached hereto as Exhibit M-2.
7.9 Letter Re Audited Financial Statements. DVS shall have received
--------------------------------------
a signed letter of Ernst & Young LLP, in the form attached hereto as Exhibit N
stating that: (a) the financial condition of the DV Business and the DV Assets
is capable of being audited as described in Section 2.8 hereof and (b) the
Financial Statements described in clause (b) of Section 2.8 are capable of being
prepared in accordance with GAAP within 60 days of the Closing.
7.10 Condition of Tangible Assets. To the reasonable satisfaction of
----------------------------
DVS, each tangible asset shall be free from defects (patent and latent), shall
have been maintained in accordance with normal industry practice, shall be in
good operating condition and repair (subject to normal wear and tear), and shall
be suitable for the purposes for which it presently is used and presently is
proposed to be used in the Business Plan.
7.11 Technology Audit. DVS shall have completed a review of the
----------------
Proprietary Technology and shall be reasonably satisfied that the Proprietary
Technology is sufficient for the purpose for which it is presently used and for
which it is presently proposed to be used.
ARTICLE 8
COVENANTS OF ARRIS AND DVS FOLLOWING CLOSING
8.1 Tax Matters.
-----------
(a) Arris's Right and Responsibility for Preclosing Tax Matters.
-----------------------------------------------------------
Arris shall have the right and responsibility to direct the handling of all
matters affecting or relating to the conduct of the DV Business prior to the
Closing Date, including the prosecution of all administrative and judicial
remedies, the settlement of all issues, and the execution of agreements,
consents, or waivers, extending the statute of limitations, provided that no
such action, agreement, or stipulation shall have any effect on the tax position
or liability of DVS, including as successor to the DV Business.
(b) DVS's Cooperation. DVS shall use its reasonable efforts to
-----------------
provide Arris such assistance as it may reasonably request in connection with
matters relating to taxes, including information with respect to Arris's
preparation of any returns of taxes, any audit or other examination by any
taxing authority, any judicial or administrative proceeding relating to Arris's
liability
19
<PAGE>
for taxes, or any claims arising hereunder respecting the DV Business. DVS
shall retain and provide Arris with records or information which may be relevant
to any such return, audit, examination, proceeding, or determination, and DVS
shall retain all such books and records for examination so long as necessary in
keeping with applicable statutes of limitations.
8.2 Allocation of Purchase Price. The purchase price shall be
----------------------------
allocated to the DV Assets in accordance with the requirements of Section 1060
of the Internal Revenue Code of 1986, as amended, based on mutual agreement
between Arris and DVS as set forth in Exhibit O (Internal Revenue Service Form
8594), and all tax returns and reports filed or prepared by Arris and DVS with
respect to the transactions contemplated by this Agreement shall be consistent
with that allocation.
8.3 Transfer Taxes. All sales, transfer, and similar taxes and fees
--------------
(including all recording fees, if any) incurred in connection with this
Agreement and the transactions contemplated hereby shall be borne equally by DVS
and Arris, and DVS and Arris shall file all necessary documentation with respect
to such taxes.
8.4 Further Assurances. Subject to the terms and conditions of this
------------------
Agreement, each party agrees to use all of its reasonable efforts to take, or
cause to be taken, all actions and to do or cause to be done, all things
necessary and proper or advisable to consummate and make effective the
transactions contemplated by this Agreement (including the execution and
delivery of such further instruments and documents) as the other party may
reasonably request.
ARTICLE 9
CERTAIN TRANSACTION MATTERS
9.1 Termination and Hiring of Employees. Arris shall: (a) be solely
-----------------------------------
responsible for all fees, costs, and expenses (including, without limitation,
those related to termination of any 401(k) plan, retirement plan, or other plan,
medical insurance costs, and severance pay, if any) of terminating all employees
of Arris terminated in connection with the sale of the DV Assets; and (b) use
reasonable efforts to enable DVS to hire, on such terms as DVS may reasonably
establish, such of the employees of the DV Business associated with the
operation or management of the DV Business as DVS, in its sole discretion, may
specify on or before Closing.
9.2 COBRA. DVS shall be responsible for the collection of premiums
-----
and all related costs of benefits offered under the continuation of benefits
provisions of the Consolidated Omnibus Budget Reconciliation Act for all
employees of the DV Business and
20
<PAGE>
their dependents not kept in the continuous employ of DVS following Closing.
9.3 Transition Services Provided by Arris.
-------------------------------------
(a) Commitment. Arris shall continue to provide the Transition
----------
Services, as defined in Section 9.3(b) to DVS following Closing until the
earlier of six months after the Closing Date or the last day of the month in
which DVS ceases to be collocated with Arris, to the extent such Transition
Services may be requested by DVS.
(b) Definition of Transition Services. For purposes of this
---------------------------------
Agreement, "Transition Services" shall mean administrative support services of a
nature previously rendered by the head quarters of Arris to the DV Business such
as the processing of payroll and insurance claims, accounting and billing, legal
compliance work, clerical support, maintenance of facilities, and similar
services.
(c) Manner and Time of Performance. Arris shall perform the
------------------------------
Transition Services with the degree of care, skill, and diligence with which it
previously performed, or may continue to perform, similar services for itself or
others. Arris will make every reasonable effort to maintain sufficient
resources such that it may provide the Transition Services. Arris reserves the
right to determine staffing and scheduling of Transition Services, and to engage
contractors as needed, provided that Arris shall make every reasonable effort to
conform to the priorities and timeframes given by DVS. Arris shall not be
required to devote substantial time of its executives to the Transition Services
such as would interfere with their other responsibilities to Arris. To the
extent possible, DVS shall advise Arris in advance of its projected
requirements, according to skill level of personnel and estimated worktime, and
provide priorities and timeframes with respect to the urgency of completion.
(d) Facilities Rental. For 90 days from the Closing Date,
-----------------
Arris shall rent space at its facilities currently occupied by the DV Business
to DVS to conduct the DV Business (the "Rental") at a rate of $6,000 per month.
Thereafter, Arris shall rent such space to DVS at its cost, if requested by DVS.
(e) Funding and Reimbursement. As payment for the Transition
-------------------------
Services, DVS shall reimburse Arris according to the fee schedule set forth in
Exhibit P. Arris and DVS agree that the rates noted on such fee schedule may
change from time to time to take into account variations in accordance with
actual costs. Arris shall invoice DVS on a monthly basis for fees accruing for
Transition Services and Rental, and DVS shall remit payment in full of the
invoiced amount within 30 days of receipt of Arris's
21
<PAGE>
invoice. Late payments will accrue interest at a rate of 1.5% per month.
(f) Records. Arris shall maintain complete and accurate
-------
accounting records, in a form consistent with prior practice and standard
accounting procedures, to substantiate its fees accruing for Transition Services
and Rental.
ARTICLE 10
INDEMNITY
10.1 Indemnification by Arris. Arris shall indemnify, defend, and
------------------------
hold harmless DVS and its respective successors and assigns and the directors,
officers, employees, and agents of each (collectively, the "DVS Group"), at, and
at any time after, the Closing, from and against any and all demands, claim,
actions, or causes of action, assessments, losses, damages, liabilities, costs,
and expenses, including reasonable fees and expenses of counsel, other expenses
of investigation, handling, and litigation, and settlement amounts, together
with interest and penalties (collectively, a "Loss" or "Losses"), asserted
against, resulting to, imposed upon, or incurred by the DVS Group, directly or
indirectly, by reason of, resulting from, or arising in connection with any of
the following:
(a) Breach or Obligation. Any breach of any representation,
--------------------
warranty, or agreement of Arris contained in or made pursuant to this Agreement,
including the agreements and other instruments contemplated hereby.
(b) Excluded Liabilities. Any liabilities or obligations of
--------------------
any kind or nature whatsoever, whether accrued, absolute, contingent or
otherwise, known or unknown, arising out of or in connection with the conduct of
the DV Business or the ownership or use of the DV Assets prior to the Closing
Date, except for the liabilities specifically assumed by DVS hereunder.
(c) Termination of Employees. Any fees, costs or expenses
------------------------
incurred by DVS in connection with the termination by Arris of any employees in
connection with the sale of the DV Assets, including, without limitation, those
described in Section 9.1(a) hereof and those relating to or in connection with
any threatened or actual claims or litigation relating to such termination or to
DVS's determination, in its sole discretion, to not employ any such terminated
employees.
(d) Incidental Matters. To the extent not covered by the
------------------
foregoing, any and all demands, claims, actions or causes of action,
assessments, losses, damages, liabilities, costs, and expenses, including
reasonable fees and expenses of counsel, other
22
<PAGE>
expenses of investigation, handling, and litigation and settlement amounts,
together with interest and penalties, incident to the foregoing.
10.2 Indemnification by DVS. DVS shall indemnify, defend, and hold
----------------------
harmless Arris and its successors and assigns and the directors, officers,
employees, and agents of each (collectively, the "Arris Group"), at, and at any
time after, the Closing, from and against any and all demands, claims, actions
or causes of action, assessments, losses, damages, liabilities, costs, and
expenses, including reasonable fees and expenses of counsel, other expenses of
investigation, handling, and litigation, and settlement amounts and including
any net income tax amount associated with all such indemnification recoveries
(collectively, a "Loss" or "Losses"), asserted against, resulting to, imposed
upon, or incurred by the Arris Group, to the extent arising from any of the
following:
(a) Breach of Obligation. Any breach of any representation,
--------------------
warranty, or agreement of DVS contained in or made pursuant to this Agreement,
including the agreements and other instruments contemplated hereby.
(b) Assumed Liabilities. Any of its liabilities assumed
-------------------
hereunder and any liabilities arising with regard to the DV Assets and DV
Business after the Closing.
(c) Incidental Matters. To the extent not covered by the
------------------
foregoing, any and all demands, claims, actions or causes of action,
assessments, losses, damages, liabilities, costs, and expenses, including
reasonable fees and expenses of counsel, other expenses of investigation,
handling, and litigation, and settlement amounts, together with interest and
penalties, incident to the foregoing.
10.3 Notice of Claim. The party entitled to indemnification
---------------
hereunder (the "Claimant") shall promptly deliver to the party liable for such
indemnification hereunder (the "Obligor") notice in writing (the "Required
Notice") of any claim for recovery under Section 10.1 or Section 10.2,
specifying in reasonable detail the nature of the Loss, and, if known, the
amount, or an estimate of the amount of the liability arising therefrom (the
"Claim"). The Claimant shall provide to the Obligor as promptly as practicable
thereafter information and documentation reasonably requested by the Obligor to
support and verify the claim asserted, provided that, in so doing, it may
restrict or condition any disclosure in the interest of preserving privileges of
importance in any foreseeable litigation.
23
<PAGE>
10.4 Defense. If the facts pertaining to the Loss arise out of the
-------
claim of any third party (other than a member of the DVS Group or Arris Group,
whichever is entitled to indemnification for such matter) available by virtue of
the circumstances of the Loss, the Obligor may assume the defense or the
prosecution thereof, including the employment of counsel or accountants, at its
cost and expense. The Claimant shall have the right to employ counsel separate
from counsel employed by the Obligor in any such action and to participate
therein, but the fees and expenses of such counsel employed by the Claimant
shall be at its expense. The Claimant shall have the right to determine and
adopt (or, in the case of a proposal by Obligor, to approve) a settlement of
such matter in its reasonable discretion, except that Claimant need not consent
to any settlement that: (a) imposes any nonmonetary obligation or (b) Obligor
does not agree to pay in full. The Obligor shall not be liable for any
settlement of any such claim effected without its prior written consent, which
shall not be unreasonably withheld. Whether or not the Obligor chooses to so
defend or prosecute such claim, all the parties hereto shall cooperate in the
defense or prosecution thereof and shall furnish such records, information, and
testimony, and attend such conferences, discovery proceedings, hearings, trials,
and appeals, as may be reasonably requested in connection therewith.
10.5 Recovery of Attorney Fees For Frivolous Actions. The Obligor
-----------------------------------------------
shall be entitled to recover its reasonable out-of-pocket costs (including court
costs and actual attorney fees) incurred in defending any Claim brought by the
Claimant on frivolous grounds or pursued for the purpose of delay or harassment.
The Claimant shall be entitled to recover its reasonable out-of-pocket costs
(including court costs and actual attorney fees) incurred in pursuing any Claim
defended by the Obligor on frivolous grounds or opposed for the purpose of delay
or harassment. A frivolous claim shall include any Claim that is not bona fide
and that is not brought in good faith after consultation with counsel.
ARTICLE 11
CONFIDENTIALITY
11.1 Confidentiality Obligation of DVS Prior to Closing. Until
--------------------------------------------------
Closing (and, if this Agreement is terminated for any reason, for three years
thereafter), DVS shall, and shall use its best efforts to cause its personnel
and agents to, hold in strict confidence, not disclose to any person without the
prior written consent of Arris, and not use in any manner except in connection
with the transactions contemplated hereby, any confidential business or
technical information obtained from Arris in connection with the transactions
contemplated hereby concerning Arris, the DV Business or DV Assets. This
obligation shall cease to apply to DVS upon the occurrence of Closing, provided
however that information
24
<PAGE>
concerning Arris's other business shall be kept confidential. In the event of
this Agreement terminates for any reason, DVS shall return to Arris or destroy
all materials in its possession containing any such confidential information,
including all copies, extracts, adaptations, and transcriptions thereof.
11.2 Confidentiality Obligation of Arris Following Closing. For a
-----------------------------------------------------
period of three years from the date hereof, Arris shall, and shall use its best
efforts to cause its personnel and agents to, hold in strict confidence, not
disclose to any person without the prior written consent of DVS, and not use in
any manner whatsoever (except as otherwise provided herein), any confidential
business or technical information retraining in its possession concerning DVS's
business or assets. Such confidential information specifically includes all
source code, system and user documentation, and other technical documentation,
including any proposed design and specifications for future products and
products in development, marketing plans, and all other technical and business
information concerning DVS's business and assets. In the event that this
Agreement terminates for any reason, Arris shall surrender to DVS or destroy all
materials remaining in its possession containing any such confidential
information, including all copies, extracts, adaptations, and transcriptions
thereof.
11.3 Permitted Disclosures. Notwithstanding Sections 11.1 and 11.2,
---------------------
either party may disclose confidential information (1) where necessary to any
regulatory authorities or governmental agencies pursuant to legal process, (2)
if required by court order or decree or (3) if required in the opinion of
counsel to a party for that party to comply with SEC disclosure requirements.
11.4 Scope of Confidential Information. For purposes of this
---------------------------------
Agreement, information shall not be deemed confidential (1) if such information
is available in full from public sources; (2) if such information is received
from a third party not under an obligation to keep such information
confidential; or (1) if die recipient can conclusively demonstrate that such
information was independently developed by the recipient.
ARTICLE 12
TERMINATION PRIOR TO CLOSING
12.1 Termination of Agreement. This Agreement may be terminated at
------------------------
any time prior to the Closing:
(a) Mutual Consent. By the mutual consent of DVS and Arris;
--------------
25
<PAGE>
(b) Deadline. By DVS or Arris, in writing, without liability,
--------
if the Closing shall not have occurred on or before October 1, 1997; or
(c) Material Breach. By DVS or Arris in writing, without
---------------
liability, if the other party shall (1) fail to perform in any material respect
its agreements contained herein required to be performed by it on or prior to
the Closing Date or (2) materially breach any of its representations,
warranties, agreements, or covenants contained herein, provided that such
failure or breach is not cured within ten (10) days after such party has been
notified of the other party's intent to terminate this Agreement pursuant
hereto.
12.2 Termination of Obligations. Termination of this Agreement
--------------------------
pursuant to this Article 12 shall terminate all obligations of the parties
hereunder, except for the obligations set forth in Article 11 and except for any
damages incurred by the non-defaulting party in the event of a termination
under Section 12.1(c) hereof.
ARTICLE 13
MISCELLANEOUS
13.1 Entire Agreement. This Agreement (including the Exhibits), and
----------------
the other certificates, agreements, and other instruments to be executed and
delivered by the parties in connection with the transactions contemplated
hereby; constitute the sole understanding of the parties with respect to the
subject matter hereof. No amendment, modification, or alteration of the terms
or provisions of this Agreement shall be binding unless the same shall be in
writing and duly executed by the parties hereto.
13.2 Parties Bound by Agreement; Successors and Assigns. The terms,
--------------------------------------------------
conditions, and obligations of this Agreement shall inure to the benefit of and
be binding upon the parties hereto and the respective successors and assigns
thereof.
13.3 Counterparts. This Agreement may be executed in one or more
------------
counterparts, each of which shall for all purposes be deemed to be an original
and all of which shall constitute the same instrument.
13.4 Headings. The headings of the Sections and paragraphs of this
--------
Agreement are inserted for convenience only and shall not be deemed to
constitute part of this Agreement or to affect the construction hereof.
13.5 Modification and Waiver. Any of the terms or conditions of this
-----------------------
Agreement may be waived in writing at any time by the party
26
<PAGE>
that is entitled to the benefits thereof. No waiver of any of the provisions of
this Agreement shall he deemed to or shall constitute a waiver of any other
provision hereof (whether or not similar).
13.6 Expenses. Arris and DVS shall each pay all costs and expenses
--------
incurred by it or on its behalf in connection with this Agreement and the
transactions contemplated hereby, including fees and expenses of its own
financial consultants, accountants, and counsel.
13.7 Notices. Any notice, request, instrument, or other document to
-------
be given hereunder by any party hereto to any other party hereto shall be in
writing and delivered personally or sent by registered or certified mail,
postage prepaid, if to Arris to:
ARRIS INTERACTIVE L.L.C.
3871 Lakefield Drive
Suwanee, Georgia 30174
Attention: Rob Friedman, General Counsel
Tel. (770) 622-8669
if to DVS to:
DIGITAL VIDEO SYSTEMS, INC.
2710 Walsh Avenue
Santa Clara, California 95051
Attention: Thomas R. Parkinson, President
with a copy to:
Troy & Gould
1801 Century Park East
Suite 1600
Los Angeles, California 90067
Attention: Sanford J. Hillsberg, Esq.
or at such other address for a party as shall be specified by like notice. Any
notice that is delivered personally in the manner provided herein shall be
deemed to have been duly given to the party to whom it is directed upon actual
receipt by such party (or its agent for notices hereunder). Any notice that is
addressed and mailed in the manner herein provided shall be conclusively
presumed to have been duly given to the party to which it is addressed at the
close of business, local time of the recipient, on the fourth business day after
the day it is so placed in the mail.
13.8 Bulk Sales Law. The parties waive compliance with any bulk
--------------
sales laws or similar laws relating to notices to creditors.
27
<PAGE>
13.9 Governing Law. This Agreement shall be construed in accordance
-------------
with and governed by the laws of the State of Delaware without giving effect to
the principles of conflicts of law thereof.
13.10 Public Announcements. Arris and DVS shall consult with each
--------------------
other before issuing any press releases or otherwise making any public
statements with respect to this Agreement and the transactions contemplated
hereby. Neither Arris nor DVS shall issue any such press release or make any
public statement without the agreement of the other party, except as such
party's counsel advises in writing and as may be required by law.
13.11 Third-Party Beneficiaries. With the exception of: (a) the
-------------------------
parties to this Agreement and (b) the DVS Group and the Arris Group with respect
to the matters inuring to their benefit under Article 12, there shall exist no
right of any person to claim a beneficial interest in this Agreement or any
rights occurring by virtue of this Agreement.
13.12 "Including." Words of inclusion shall not be construed as
---------
terms of limitation herein, so that references to "included" matters shall be
regarded as nonexclusive, noncharacterizing illustrations.
13.13 References. Whenever reference is made in this Agreement to
----------
any Article, Section, or Exhibit, such reference shall be deemed to apply to the
specified Article or Section of this Agreement or the specified Exhibit to this
Agreement.
28
<PAGE>
13.14 Survival of Agreements. All Covenants, agreements,
----------------------
representations, and warranties made herein shall survive the execution and
delivery of this Agreement and the Closing.
IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement to be
executed on its behalf on the date indicated.
DIGITAL VIDEO SYSTEMS, INC.
By: /s/ THOMAS R. PARKINSON
------------------------
Title: President and COO
Date: July 25, 1997
[Corporate seal]
ARRIS INTERACTIVE L.L.C.
By: /s/ ROBERT STANZIONE
------------------------
Title: CEO and President
Date: July 24, 1997
[Company seal]
29
<PAGE>
EXHIBIT A
<TABLE>
<CAPTION>
Basis Net
--------- ---------
<S> <C> <C>
Schedule 1 1,530,827 1,168,189
Schedule 2 73,220 73,220
Schedule 3 N/A 0
TOTAL 1,604,047 1,241,409
</TABLE>
<PAGE>
EXHIBIT B
LICENSES AND AUTHORIZATIONS
None
<PAGE>
EXHIBIT C
PROPRIETARY TECHNOLOGY
Issued Patents
1. A-0001 "Method and Apparatus for Producing on Demand Services in a
Subscriber System," Serial No. 08/142,670
Pending Applications
2. A-0014 "Distributed Video Library System"
3. A-0026 "Sound Level Control for Ad Insertion," Serial No. 08/626,733
4. A-0115 "Multiple Source Transmission System," Serial No. 08/646,657
5. A-0116 "Video/Audio Switch Verification," Serial No. 08/626,553
6. A-0117 "Method and Circuit for Detecting Polarity Reversal of an Audio
Channel Signal," Serial No. 08/627,834
7. A-0118 "Adaptive Constant Data Rate"
8. A-0121 "Data Multiplexing in Server to Decoder Systems"
9. A-0141 "Vertical Blanking Insertion Device," Serial No. 08/626,557
10. A-0143 "MPEG Transport System and Pre-processing," Serial No. 08/686,629
11. A-0158 "AD Insertion System"
12. A-0174 "System for Communicating Data Files from a Server to a Plurality of
Channel Interface Units"
13. "Digital Program Insertion Equipment and Related Intellectual Property"
<PAGE>
EXHIBIT D
SALES CONTRACTS
1. General Procurement Agreement Between Ameritech New Media Enterprises, Inc.
and Products Venture L.L.C. 2/1/96.
2. Master Purchase Agreement by and between BellSouth Interactive Media
Services Inc., and Arris Interactive L.L.C. 9/1/96.
3. Agreement by and between Starnet, Inc. and Arris Interactive L.L.C.
3/11/97.
<PAGE>
EXHIBIT E
LIST OF EMPLOYEES
FULL TIME
- ---------
Allen, Phillip
Almand, Charles
Columb, Patti
Cramer, Nancy
Doyle, Timothy
Elliott, Herman
Flanders, Mitch
Grice, Dale
Hayes, Shawn
Keller, David*
Maurer, Jeff
Malaney, Michael**
McKechnie, James
O'Neal, Kevin
Prongay, Robert
Stagg, David
Stewart, David
Watson, Sandra
Witherspoon, Rosaria
Wright, Laurie
Wu, Shang
CONTRACTORS
- -----------
Davis, Joseph
* Mr. Keller has an employment agreement with Arris.
** Mr. Maslaney has an employment agreement with Antec.
<PAGE>
EXHIBIT F
ASSIGNMENT AND ASSUMPTION AGREEMENT
FOR VALUE RECEIVED, pursuant to that certain Asset Purchase Agreement,
dated as of _______________, 1997, (the "Agreement"), by and between Arris
Interactive, L.L.C., a Delaware limited liability company ("Assignor") and
Digital Video Systems, Inc., a Delaware corporation ("Assignee"), Assignor does
hereby assign to Assignee all of Assignor's rights to: (i) operate the DV
Business, including all licenses, consents, certificates, authorizations and
privileges; (ii) all of the books and records relating to the DV Business; and
(iii) all of the benefits and obligations of Arris's sales contracts, pending
sales, and customer database related to the DV Business (excluding any accounts
receivable), including the trade obligations for support and maintenance as
provided in the Agreement, except as limited by the terms of the Agreement (the
"DV Contracts") (all of such assigned assets are herein referred to as the
"Assigned Assets"). Assignor agrees to not make any claims to the Assigned
Assets after the Closing (as defined in the Agreement).
Assignee agrees to assume and faithfully perform and discharge all the
terms, conditions, and obligations of Assignor with respect to the DV Contracts
first arising after the Closing (as defined in the Agreement) and agrees to
defend, indemnify and hold Assignor harmless from any liability or claim first
arising on or after the Closing from acts or omissions of Assignee, except as
otherwise provided by the Agreement.
This Assignment is given pursuant to the Agreement and in the event of any
conflict between the terms hereof and those of the Agreement, the Agreement
shall be deemed controlling.
IN WITNESS WHEREOF, Assignor and Assignee have each caused this
Assignment to be duly executed effective the ___ day of _________, 1997.
ASSIGNOR:
ARRIS INTERACTIVE, L.L.C.
By:__________________________________
Title:_______________________________
ASSIGNEE:
DIGITAL VIDEO SYSTEMS, INC.
By:__________________________________
Title:_______________________________
<PAGE>
EXHIBIT G-1 AND EXHIBIT G-2
FORM OF EMPLOYMENT AGREEMENT
This Employment Agreement (this "Agreement") is entered into as of
________, 1997, by and between Digital Video Systems, Inc., a Delaware
corporation (the "Company"), and _____________________ ("_________").
1. Employment.
----------
1.1 Employment as _______________________. The Company agrees to
-------------------------------------
employ _________, and _________ agrees to be employed by the Company, as the
Company's _______________________ for the period beginning on ______________,
1997 or such earlier date as the Company and __________ may agree to (the
"Commencement Date") and ending on the anniversary of the Commencement Date,
unless such employment is terminated earlier pursuant to Section 3 (the
"Employment Period").
1.2 Duties as Employee. ____________ agrees to serve the Company as
------------------
__________________ during the Employment Period. ___________ duties shall be
those customary for a ____________________________ of a company similar to the
Company and such other duties as are specified by the Company's Board. In case
of a reorganization, merger, consolidation, liquidation, dissolution, sale of
all or substantially all of the Company's assets or similar event, the Board
reserves the right, in its sole discretion, to change or modify ___________
duties hereunder as it deems appropriate in good faith. During the Employment
Period, _________ shall devote full time to, and use his best efforts to
advance, the business and welfare of the Company. ___________ shall not
directly or indirectly render any service of a business, commercial, or
professional nature to any other person, organization or other entity, whether
for compensation or otherwise, directly or indirectly, without the prior written
consent of a majority of the members of the Board.
1.3 Salary and Benefits.
-------------------
(a) Salary. The Company shall pay _________ a salary at the
------
annual rate of $_______ per year payable at least as frequently as monthly and
subject to such payroll deductions as may be necessary or customary in respect
of the Company's salaried employees in general.
(b) Incentive, Savings and Retirement Plans. ____________
---------------------------------------
shall be entitled to participate at the discretion of the Board in all annual
bonus, incentive, stock option, savings and retirement plans, practices,
policies and programs applicable generally to other senior executives of the
Company.
1.
<PAGE>
(c) Welfare Benefit Plans. _________ shall be eligible for
---------------------
participation in and shall receive all benefits under welfare benefit plans,
practices, policies and programs provided by the Company to the extent
applicable generally to other senior executives of the Company.
(d) Vacations. _________ shall be entitled to [three] weeks paid
---------
vacation per year of service during the Employment Period. To the extent
vacation is not taken in any year, it shall be accrued and may be taken in
subsequent years.
(e) Expenses. __________ shall be entitled to receive prompt
--------
reimbursement for all reasonable employment expenses incurred by him in
accordance with the policies, practices and procedures as in effect generally
with respect to other senior executives of the Company.
(f) Fringe Benefits. _________ shall be entitled to fringe
---------------
benefits in accordance with the plans, practices, programs and policies as in
effect generally with respect to other senior executives of the Company.
2. Additional Compensation.
-----------------------
2.1 1996 Plan Options.
-----------------
(a) In further consideration for _________'s performance of his
obligations under this Agreement, and pursuant to an option agreement to contain
such terms as are customarily provided for by the Company's 1996 Stock Option
Plan (the "Plan"), the Company, subject to the approval of the Plan by its
shareholders and the approval of the grant by the Company's Board, shall grant
to ___________ options (the "Options") to purchase _______ shares of the
Company's common stock (the "____ Shares") during the five-year period from the
date of grant, at an exercise price per share equal to the closing price of the
Company's common stock on the Nasdaq National Market on the later of the date of
this Agreement or the date on which the Board approves this grant.
(b) The ____ Shares vested and subject to exercise shall be
2.083% of such ____ Shares at the end of each month after the grant date during
which _________ continues to be employed as the Company's
_____________________________________, so that all of the ____ Shares may be
purchased on or after the fourth anniversary of the grant date if _________ has
continued to be employed as the Company's ___________________ through that date.
In the event that _________'s employment with the Company terminates for any
reason, all _____ Options shall either be vested or cancelled as set forth in
Section 3.4 hereof.
3. Termination. The term of __________'s employment under this Agreement
-----------
may terminate as hereinafter provided, in which case (i) _________ shall be
entitled to the amounts set forth in Section
2.
<PAGE>
3.4 hereof and (ii) _________ shall remain subject to the provisions of Sections
4, 5 and 6 hereof to the extent applicable. The Employment Period shall not
extend for any period beyond the second anniversary of the Commencement Date
unless agreed to in writing by _________ and the Company.
3.1 Death or Disability. If ___________ dies or becomes disabled
-------------------
during the Employment Period, _________'s employment under this Agreement shall
automatically terminate upon death or after three consecutive months of
disability, as the case may be. "Dis ability" shall mean any physical or mental
illness that renders _________ unable to perform his agreed-upon services under
this Agreement for any three consecutive months. Such disability shall be
determined by a licensed physician not affiliated with the parties to this
Agreement. In the event of __________'s death, the amounts due him pursuant to
this Agreement through the date of his death shall be paid to whomever he has
previously designated or, in the event no such designation is made, to his
estate, or to the beneficiaries of his estate.
3.2 Good Cause. _________'s employment under this Agreement may be
----------
terminated by the Company for "good cause," as determined in good faith by the
Board. The term "good cause" is defined as any one or more of the following
occurrences:
(a) _________'s continuing repeated willful failure or refusal to
perform his duties as required by this Agreement or other material breach of
this Agreement, provided, that termination of _________'s employment pursuant to
this subsection (a) shall not constitute valid termination for cause unless
___________ shall have first received written notice from the Board stating with
specificity the nature of such failure or refusal and affording _________ at
least 15 days to correct the act or omission complained of;
(b) Gross negligence, material violation by _________ of any duty
of loyalty to the Company or any other material misconduct on the part of
_________, provided that termination of _________'s employment pursuant to this
subsection (b) shall not constitute valid termination for cause unless _________
shall have first received written notice from the Board stating with specificity
the nature of such failure or refusal and affording _________ at least 15 days
to fully correct the act or omission complained of and to indemnify the Company
for any damage caused to it by such act or omission;
(c) _________'s conviction by, or entry of a plea of guilty or
nolo contendere in, a court of competent and final jurisdiction for any crime
involving moral turpitude or punishable by imprisonment in excess of six months
in the jurisdiction involved; or
(d) _________'s commission of an act of fraud,
3.
<PAGE>
whether prior to or subsequent to the date hereof, upon the Company.
3.3 Other Termination.
-----------------
(a) By ___________. __________ may terminate this Agreement at
any time upon [60] days prior written notice.
(b) By the Company. The Company may terminate this Agreement at
any time during the first year of the Employment Period upon twelve months prior
written notice. Thereafter, the Company may terminate this Agreement at any time
upon 180 days prior written notice.
(c) The foregoing notice requirements shall not apply to any
termination pursuant to Section 3.2 of this Agreement.
3.4 Payments Upon Termination.
-------------------------
(a) Completion of Employment Period. If at the end of the
-------------------------------
Employment Period the parties have not agreed in writing to extend the term of
_________'s employment with the Company, _________ shall receive his salary
through the date of such termination. Options vested at such termination date
shall be exercisable in accordance with the terms of the Company's 1996 Stock
Option Plan (the "Option Plan"). Options not vested at such termination date
shall be immediately cancelled. In no event shall ___________ be entitled to
receive additional salary, bonus, options or compensation of any other kind
hereunder.
(b) Death or Disability. In the event of _________'s
-------------------
termination as set forth in Section 3.1 hereof, he shall receive his salary
through the date of such termination. Options vested at such termination date
shall be exercisable in accordance with the terms of the Option Plan. Options
not vested at such termination date shall be immediately cancelled. In no event
shall _________ be entitled to receive additional salary, bonus, options or
compensation of any other kind hereunder.
(c) Good Cause. In the event of _________'s termination as set
----------
forth in Section 3.2 hereof, he shall receive his salary through the date of
such termination. Options vested at such termination date shall be exercisable
in accordance with the terms of the 1996 Stock Option Plan. Options not vested
at such termination date shall be immediately cancelled. In no event shall
_________ be entitled to receive additional salary, bonus, options or
compensation of any other kind hereunder.
(d) Other Termination. In the event of ___________'s
-----------------
termination as set forth in Section 3.3 hereof, he shall receive his salary
through the date of such termination. Options vested at such termination date
shall be exercisable in accordance with the respective terms of the Option
Plans. Options
4.
<PAGE>
not vested at such termination date shall be immediately cancelled. In no event
shall _____________ be entitled to receive any other additional salary, bonus,
options or compensation of any other kind hereunder.
4. Ownership of Intangibles. _________ hereby grants and assigns to the
------------------------
Company all of his right, title and interest in and to any ideas, designs,
techniques, processes, trademarks, inventions and improvements (collectively,
"Inventions") arising during the term of this Agreement, which Inventions relate
to the business of the Company or any of its affiliates, or to actual or
demonstrably anticipated research or development of the Company or any of its
affiliates, or results from work performed by _________ for the Company or any
of its affiliates, together with all patents that are pending or have been
issued in the United States and in all foreign countries during the term of this
Agreement with respect to such Inventions (the "Proprietary Rights"). All such
Proprietary Rights shall be the sole and exclusive property of the Company and
shall remain such notwithstanding the subsequent termi nation of employment
under this Agreement. To the extent that any Proprietary Rights or other ideas,
designs, techniques, processes, trademarks, inventions or improvements used by
the Company during the term of this Agreement rely upon or use patented or
unpatented Inventions that ___________ has made or conceived prior to the date
of this Agreement that has not otherwise been transferred to the Company
pursuant to the Asset Purchase Agreement dated as of July 1, 1997 by and between
the Company and Arris Interactive L.L.C., _________________ hereby grants an
exclusive, perpetual, royalty-free, worldwide license to use such Invention.
5. Confidential Information. ______________ agrees that during the
------------------------
Employment Period, he will be dealing with proprietary, nonpublic and
confidential information, including inventions and processes developed by the
Company or any of its affiliates, relating to the present and prospective
business, assets and good will of the Company or any of its affiliates (all of
the foregoing referred to as "confidential information"). Without limiting the
generality of the foregoing, it is understood that _______________ will have
access to information regarding intellectual property of the Company or any of
its affiliates, inventions and ideas under development by them, and information
regarding the actual and prospective business and customers of the Company or
any of its affiliates. _______________ agrees that he will not disclose to
anyone, directly or indirectly, any of such confidential matters, or use them
other than in the course of performing his obligations under this Agreement.
All documents prepared by __________________ in connection with the services
provided herein, and all confi dential information (however embodied or
recorded) that might be given to him are the exclusive property of the Company
and shall be returned to the Company at its request. After termination of
_______________'s employment with the Company, he shall not, without the prior
written consent of the Company, or as may otherwise be required by law or legal
process, communicate or
5.
<PAGE>
divulge any such information, knowledge or data to anyone other than the Company
and those designated by it in writing. __________________ acknowledges that
such actions could cause irreparable harm to the Company and that the Company
may obtain an injunction or other equitable relief to enforce this provision.
Furthermore, upon termination of this Agreement, ______________________ shall
promptly deliver to the Company all books, memoranda, records and written data
in original form of every kind relating to the business and affairs of the
Company that may then be in his personal possession.
6. Noncompetition.
--------------
6.1 No Competing Activities. _________________ agrees that, while he
-----------------------
is employed by the Company, he shall not engage or participate in any state of
the United States, directly or indirectly, either as an owner, partner,
director, trustee, officer, employee, consultant, advisor or in any other
individual or representative capacity, in any activity which is the same as,
similar to or competitive in any manner with the business of the Company or its
members or affiliates (herein, a "Competing Activity") or have any investment in
a business which is engaged in a Competing Activity (other than an ownership
interest of less than 5% of any company whose securities are listed on the New
York Stock Exchange, the American Stock Exchange or the Nasdaq National Market).
_________________ further agrees that in the event of a termination for good
cause as set forth in Section 3.2 hereof upon the expiration of the term of this
Agreement, or ______________'s election to terminate employment pursuant to
Section 3.3 hereof, he shall not, for a two-year period following such
termination of employment, engage in a Competing Activity or have any investment
in a business which is engaged in a Competing Activity (other than an ownership
interest of less than 5% of any company whose securities are listed on the New
York Stock Exchange, the American Stock Exchange or the Nasdaq National Market).
6.2 Reasonable Limitations. _____________ acknowledges that, given
----------------------
the nature of the Company's business, the covenants contained in this Section 6
contain reasonable limitations as to time, geographical area and scope of
activity to be restrained, and do not impose a greater restraint than is
necessary to protect the legitimate business interests of the Company. If,
however, this Section 6 is determined by any court of competent jurisdiction, or
in any arbitration, as the case may be, to be unenforceable by reason of its
extending for too long a period of time or over too large a geographic area or
by reason of its being too extensive in any other respect or for any other
reason it will be interpreted to extend only over the longest period of time for
which it may be enforceable and/or over the largest geographical area as to
which it may be enforceable and/or to the maximum extent in all other aspects as
to which it may be enforceable, all as determined by such court, or in such
arbitration, as the case may be.
6.
<PAGE>
6.3 Acknowledgement. _______________ understands that the
---------------
restrictions in Section 6.1 hereof may limit his ability to earn a livelihood in
a business similar to the business of the Company, but he nevertheless believes
that he has received and will receive sufficient consideration hereunder and
otherwise as an employee of the Company to justify such restrictions which, in
any event, given his education, abilities and skills, _________________ does not
believe would prevent him from earning a living.
7. WAIVER OF JURY. WITH RESPECT TO ANY DISPUTE ARISING UNDER OR IN
--------------
CONNECTION WITH THIS AGREEMENT OR ANY RELATED AGREEMENT, EACH PARTY HEREBY
IRREVOCABLY WAIVES ALL RIGHTS IT MAY HAVE TO DEMAND A JURY TRIAL. THIS WAIVER
IS KNOWINGLY, INTENTIONALLY, AND VOLUNTARILY MADE AND EACH PARTY ACKNOWLEDGES
THAT NONE OF THE OTHER PARTIES NOR ANY PERSON ACTING ON BEHALF OF THE OTHER
PARTIES HAS MADE ANY REPRESENTATION OF FACT TO INDUCE THIS WAIVER OF TRIAL BY
JURY OR IN ANY WAY TO MODIFY OR NULLIFY ITS EFFECT. THE PARTIES EACH FURTHER
ACKNOWLEDGE THAT THEY HAVE BEEN REPRESENTED (OR HAVE HAD THE OPPORTUNITY TO BE
REPRESENTED) IN THE SIGNING OF THIS AGREEMENT AND IN THE MAKING OF THIS WAIVER
BY INDEPENDENT LEGAL COUNSEL, SELECTED OF THEIR OWN FREE WILL, AND THAT THEY
HAVE HAD THE OPPORTUNITY TO DISCUSS THIS WAIVER WITH COUNSEL. THE PARTIES EACH
FURTHER ACKNOWLEDGE THAT THEY HAVE READ AND UNDERSTAND THE MEANING AND
RAMIFICATIONS OF THIS WAIVER PROVISION.
8. Miscellaneous.
-------------
8.1 Modification and Waiver of Breach. No waiver or modification of
---------------------------------
this Agreement shall be binding unless it is in writing signed by the parties
hereto. No waiver of a breach hereof shall be deemed to constitute a waiver of
a future breach, whether of a similar or dissimilar nature.
8.2 Assignment. This Agreement shall inure to the benefit of and
----------
shall be binding upon the Company, its successors and assigns. The obligations
and duties of ________________ hereunder are personal and not assignable,
whether voluntarily or involuntarily or by operation of law or otherwise.
8.3 Notices. All notices and other communications required or
-------
permitted under this Agreement shall be in writing, served personally on, or
mailed by certified or registered United States mail to, the party to be charged
with receipt thereof. Notices and other communications served by mail shall be
deemed given hereunder 72 hours after deposit of such notice or communication in
the United States Post Office as certified or registered mail with postage
prepaid and duly addressed to whom such notice or communication is to be given,
in the case of (a) the Company, 2710 Walsh Avenue, Santa Clara, California
95051, Attention: Secretary, or (b) ________________, to the address set forth
below his name on the signature page hereof. Any such party may change said
party's address for purposes of this Section 9.3 by
7.
<PAGE>
giving to the party intended to be bound thereby, in the manner provided herein,
a written notice of such change.
8.4 Counterparts. This instrument may be executed in one or more
------------
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same Agreement.
8.5 Governing Law. This Agreement shall be construed in accordance
-------------
with, and governed by, the internal laws of the State of California.
8.6 Legal Fees. If any legal action or other proceeding is brought
----------
for the enforcement of this Agreement, or because of any alleged dispute,
breach, default or misrepresentation in connection with this Agreement, the
successful or prevailing party shall be entitled to recover reasonable
attorneys' fees and other costs it incurred in that action or proceeding, in
addition to any other relief to which it may be entitled.
8.7 Savings Clause. If any provision of this Agreement or the
--------------
application thereof is held invalid, the invalidity shall not affect other
provisions or applications of the Agreement which can be given effect without
the invalid provisions or applications and to this end the provisions of this
Agreement are declared to be severable.
8.8 Complete Agreement. This instrument constitutes and contains the
------------------
entire agreement and understanding concerning _________________'s employment and
the other subject matters addressed herein between the parties, and supersedes
and replaces all prior negotiations and all agreements proposed or otherwise,
whether written or oral, concerning the subject matters hereof. This is an
integrated document.
8.
<PAGE>
IN WITNESS WHEREOF, the undersigned have executed this Agreement on the day
and year first above written.
[NAME]: THE COMPANY:
DIGITAL VIDEO SYSTEMS, INC.
___________________________ By:____________________________
By:__________________________
[name]
Address:
___________________________
___________________________
___________________________
9.
<PAGE>
EXHIBIT H
REQUIRED CONTRACT CONSENTS
Siemens
BellSouth
Videografica
Hitron
Connect SA
Texscan SA
Video Broadcast
Integrated Systems*
Raima Corporation*
Pure Software Inc.*
Silicon Graphics Inc.*
*Licenses - See Exhibit C
<PAGE>
EXHIBIT I
DIGITAL VIDEO CUSTOMERS
WITH OVER $100K
IN PURCHASES IN 1996
<TABLE>
<CAPTION>
1996 Sales ($K)
---------------
<S> <C>
Ameritech $1,120
Time Warner 58
Cablevision 365
VideoGraphica 277
Bresnan 548
Nortel 23
Bell South 189
Jones 335
Hitron 40
Divicom 39
MultiCanal 281
-------
Total $3,275K
</TABLE>
<PAGE>
EXHIBIT J
MATERIAL CONTRACTS
1. General Procurement Agreement Between Ameritech New Media Enterprises, Inc.
and Products Venture L.L.C. dated 2/1/96.
2. Master Purchase Agreement by and between BellSouth Interactive Media
Services Inc., and Arris Interactive L.L.C. dated 9/1/96.
3. Agreement by and between Starnet, Inc. and Arris Interactive L.L.C. dated
3/11/97.
4. Manufacturing Services Agreement by and between Siemens Energy &
Automation, Inc. and Arris Interactive, L.L.C. dated 5/28/96.
5. International Distributor Agreement by and between Connect S.A. and Arris
Interactive dated 11/27/96.
6. International Distributor Agreement by and between Hitron Tech. and Arris
Interactive dated 11/1/96.
7. International Distributor Agreement by and between Videografica and Arris
Interactive dated 10/10/96.
8. International Distributor Agreement by and between Texscan SA and Arris
Interactive dated 3/17/97.
9. International Distributor Agreement by and between Video Broadcast and
Arris Interactive dated 3/3/97.
10. Expired Product Systems Integrator Agreement by and between Silicon
Graphics Inc. and Antec/Digital Video (currently being renewed).
<PAGE>
EXHIBIT K
DIGITAL VIDEO SYSTEMS, INC.
CONSOLIDATED BALANCE SHEETS
(in thousands, except share and per share amounts)
<TABLE>
<CAPTION>
March 31, December 31,
1997 1995
---------- ------------
ASSETS
Current assets:
<S> <C> <C>
Cash and cash equivalents............. $ 32,221 $ 1,219
Accounts receivable, less allowance
for doubtful accounts of $707 and $0,
respectively......................... 2,875 169
Inventories........................... 1,016 674
Prepaid expenses and other current
assets............................... 485 300
-------- -------
Total current assets............. 36,597 2,362
Property and equipment, net................ 1,420 558
Other Assets............................... 56 50
-------- -------
$ 38,073 $ 2,970
======== =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable...................... $ 3,044 $ 414
Accrued liabilities................... 854 507
-------- -------
Total current liabilities........ 3,898 921
Stockholders' equity:
Preferred stock, $0.0001 par value:
5,000,000 shares authorized; none
and 5,232,948 shares issued and
outstanding at March 31, 1997
and December 31, 1995,
respectively........................ ____ 1
Common stock, $0.0001 par value:
60,000,000 shares authorized;
20,259,579 and 6,627,688 shares
issued and outstanding at March
31, 1997 and December 31, 1995,
respectively........................ 2 1
Additional paid-in capital............ 54,628 8,265
Accumulated deficit................... (20,297) (6,025)
Cumulative foreign currency
translation adjustments.............. (72) (31)
Deferred compensation................. (86) (162)
-------- -------
Total stockholders' equity....... 34,175 2,049
-------- -------
$ 38,073 $ 2,970
======== =======
</TABLE>
<PAGE>
EXHIBIT L
FORM OF OPINION OF DVS COUNSEL
August 1, 1997
DIG 3.4
Arris Interactive L.L.C.
3871 Lakefield Drive
Suwanee, Georgia 30174
Gentlemen:
We have acted as counsel to Digital Video Systems, Inc., a Delaware
corporation ("DVS"), in connection with the Asset Purchase Agreement (the
"Purchase Agreement") dated as of July 25, 1997 by and between DVS and Arris
Interactive L.L.C. ("Arris"). This opinion is being delivered pursuant to
Section 6.7 of the Purchase Agreement. Capitalized terms used but not defined
herein shall have the respective meanings given to them in the Purchase
Agreement.
In rendering the opinions expressed herein, we have reviewed such matters
of law as we have deemed necessary and have examined copies of the following:
(a) The Purchase Agreement, including all exhibits thereto; and
(b) Resolutions adopted by the Board of Directors of DVS on August 1, 1997.
In our examination, we have assumed the genuineness of all signatures, the
authenticity of all documents submitted to us as originals, the conformity to
originals of all documents submitted to us as certified, photostatic or
conformed copies, and the authenticity of the originals of all such latter
documents. We have also assumed the due execution and delivery by parties other
than DVS of all documents referred to herein and that such documents are valid
and binding upon such other parties in accordance with their terms. We have
relied upon certificates of public officials and certificates of officers of DVS
for the accuracy of factual matters contained therein which we have not
independently established. Whenever a statement herein is qualified by "known
to us," "to the best of our knowledge"
<PAGE>
or a similar phrase, it is intended to indicate that, during the course of our
representation of DVS, no information has come to our attention that would give
attorneys presently with this firm who have performed substantive legal services
for DVS current actual knowledge of the inaccuracy of such statement. However,
except as otherwise specified, we have not undertaken any independent
investigation to determine the accuracy of such statement, and any limited
inquiry undertaken by us during the preparation of this opinion letter should
not be regarded as such an investigation; no inference as to our knowledge of
any matters bearing on the accuracy of any such statement should be drawn from
the fact of our representation of DVS.
Based upon the foregoing and in reliance thereon, and subject to the
limitations and qualifications set forth below, we are of the opinion that:
1. DVS is a corporation validly existing and in good standing under the
laws of the State of Delaware with the corporate power and authority to conduct
its business and to own and lease its properties and assets. DVS is duly
qualified or licensed to do business and is in good standing as a foreign
corporation in each state in which the failure to be so qualified or licensed
would have a material adverse effect on its financial condition or operations.
2. DVS has the power and authority to execute, deliver, and perform the
Purchase Agreement, and DVS has taken all necessary corporate action to
authorize the execution and delivery of the Purchase Agreement and the
consummation of the transactions contemplated thereby. The Purchase Agreement
is the legal, valid, and binding obligation of DVS, enforceable in accordance
with its terms (except as such enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or other laws of general
application relating to or affecting enforcement of creditors' rights and the
application of equitable principles in any action, legal or equitable, and
except as rights to indemnity or contribution may be limited by applicable law).
3. The shares, when transferred to Arris under the Purchase Agreement,
will be duly authorized, fully paid and nonassessable and, to the best of our
knowledge, free and clear of any preemptive rights, liens, claims, charges or
encumbrances, except as set forth in subsections 1.2(a)(ii) and (iii) of the
Purchase Agreement.
4. To the best of our knowledge, no litigation is threatened or pending
against DVS before any court or governmental agency that could result in the
restraint or prohibition of DVS, or the obtaining of damages or other relief
from DVS, in connection with the Purchase Agreement or the consummation of the
transactions contemplated thereby.
We are admitted to practice only in the State of California, and this
opinion is limited in all respects to the federal laws of the United States of
America, the laws of the State of California and the
<PAGE>
General Corporation Law of the State of Delaware, and no opinion is expressed
with respect to the laws of any other jurisdiction or any effect which such laws
may have on the opinions expressed herein.
The opinions expressed herein are rendered as of the date hereof, and we
expressly disclaim any undertaking or obligation to advise you of any changes
which may occur after the date hereof which would affect this opinion. The
opinions expressed herein are for the benefit of and may be relied upon only by
you solely in connection with the closing of the transactions contemplated by
the Purchase Agreement. Neither these opinions nor any extract herefrom or
reference hereto shall be published or furnished, quoted to, or relied upon by
any person for any other purpose without our express written permission.
Very truly yours,
TROY & GOULD PROFESSIONAL CORPORATION
<PAGE>
EXHIBIT M-1
FORM OF OPINION OF ARRIS COUNSEL
____________, 1997
Digital Video Systems, Inc.
2710 Walsh Avenue
Santa Clara, CA 95051
Gentlemen:
We have acted as counsel to Arris Interactive L.L.C., a Delaware limited
liability company ("Arris"), in connection with the Asset Purchase Agreement
(the "Purchase Agreement") dated as of _______________, 1997, by and between
Arris and Digital Video Systems, Inc. ("DVS"), a Delaware corporation. This
opinion is being furnished to you pursuant to Section 7.8(a) of the Purchase
Agreement. Capitalized terms used but not defined herein shall have the
meanings given to them in the Purchase Agreement.
In rendering the opinions expressed herein, we have reviewed such matters
of law as we have deemed necessary and have examined originals or copies of the
following:
(a) The Purchase Agreement, including all exhibits thereto.
(b) The Articles of Organization as now in effect of Arris (the "Articles
of Organization").
(c) The Operating Agreement as now in effect of Arris.
(d) Resolutions adopted by the members of Arris.
In our examination, I have assumed the genuineness of all signatures, the
authenticity of all documents submitted to us as originals, the conformity to
originals of all documents submitted to us as certified, photostatic or
conformed copies, and the authenticity of the originals of all such latter
documents. I have also assumed the due execution and delivery by parties other
than Arris of all documents
<PAGE>
referred to herein and that such documents are valid and binding upon such other
parties in accordance with their terms. I have relied upon certificates of
public officials and certificates of officers of Arris for the accuracy of
factual matters contained therein which were not independently established.
Based upon the foregoing and in reliance thereon, and subject to the
limitations and qualifications set forth below, we are of the opinion that:
1. Arris is a limited liability company validly existing and in good
standing under the laws of the State of Delaware with the power and authority to
conduct its business and to own and lease its properties and assets (including
the DV Assets) and, as to the conduct of the DV Business and the use and
ownership of the DV Assets specifically, is duly qualified or licensed to do
business and is in good standing as a foreign limited liability company in the
State of Georgia and in any other states in which it does business.
2. Arris has the power and authority to execute, deliver, and perform the
Purchase Agreement and the other agreements and instruments to be executed and
delivered by it in connection with the transactions contemplated thereby, has
taken all necessary company action (including obtaining the approval of the
members of Arris) to authorize the execution and delivery of the Purchase
Agreement and such other agreements and instruments and the consummation of the
transactions contemplated hereby and thereby. The Purchase Agreement and the
other agreements and instruments delivered in connection therewith and in
connection with the transactions contemplated thereby have each been duly
executed and delivered and are the legal, valid, and binding obligations of
Arris, enforceable in accordance with their respective terms (except as such
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or other laws of general application relating to or
affecting enforcement of creditors' rights and the application of equitable
principles in any action, legal or equitable, and except as rights to indemnity
or contribution may be limited by applicable law).
3. Neither the execution and delivery of the Purchase Agreement and the
other agreements and instruments executed and delivered in connection with the
transactions contemplated thereby, nor the consummation of the transactions
contemplated thereby, will violate or conflict with: (a) any federal, state, or
local law, regulation, ordinance, zoning requirement, governmental restriction,
order, judgement, or decree applicable to Arris, the DV Business, or the DV
Assets; (b) any provision of any charter, articles of organization, bylaw or
other governing or organizational instruments of Arris; or (c) any mortgage,
indenture, license, instruments, trust, contract, agreement, or other commitment
or arrangement to which Arris is a party or by which Arris or any of the DV
Assets is bound and of which we have knowledge.
<PAGE>
4. No approval, authorization, certification, consent, variance,
permission, license, or permit to or from, or notice, filing, or recording to or
with, federal, state, or local governmental authorities is necessary for the
execution and delivery of the Purchase Agreement and the other agreements and
instruments to be executed and delivered in connection with the transactions
contemplated thereby by Arris, or the consummation by Arris of the transactions
contemplated thereby, or the ownership and use of the DV Assets and the conduct
of the DV Business (including by DVS).
5. Except as set forth in Exhibit H to the Purchase Agreement, no
approval, authorization, consent, permission, or waiver to or from, or notice,
filing, or recording to or with, any person is necessary for: (1) the execution
and delivery by Arris of the Purchase Agreement and the other agreements and
instruments to be executed and delivered in connection with the transactions
contemplated thereby, or the consummation by Arris of the transactions
contemplated thereby; (2) the transfer and assignment to DVS at Closing of the
Contracts; or (3) the ownership and use of the DV Assets and the conduct of the
DV Business (including by DVS).
6. To our best knowledge, no claim, action, suit, proceeding, inquiry,
hearing, arbitration, administrative proceeding, or investigation is pending,
threatened against Arris, its present or former directors, officers, or
employees, or any party to any contract, affecting, involving, or relating to
the DV Business or any of the DV Assets.
Very truly yours,
<PAGE>
EXHIBIT M-2
FORM OF INTELLECTUAL PROPERTY OPINION OF ARRIS COUNSEL
____________, 1997
Digital Video Systems, Inc.
2710 Walsh Avenue
Santa Clara, CA 95051
Gentlemen:
We have acted as counsel to Arris Interactive L.L.C., a Delaware limited
liability company ("Arris"), in connection with the Asset Purchase Agreement
(the "Purchase Agreement") dated as of _______________, 1997, by and between
Arris and Digital Video Systems, Inc. ("DVS"), a Delaware corporation. This
opinion is being furnished to you pursuant to Section 7.8(b) of the Purchase
Agreement. Capitalized terms used but not defined herein shall have the
meanings given to them in the Purchase Agreement.
In rendering the opinions expressed herein with respect to [specifically
identify patents and patent applications] that comprise a portion of the
Proprietary Technology (the "Patents" and "Patent Applications"), we have
reviewed such matters of law as we have deemed necessary and have examined
originals or copies of the following:
(a) The Purchase Agreement, including all exhibits thereto;
(b) [other documents]
We have conducted a search of United States patents in connection with
rendering the opinions expressed herein.
In our examination, we have assumed the genuineness of all signatures, the
authenticity of all documents submitted to us as originals, the conformity to
originals of all documents submitted to us as certified, photostatic or
conformed copies, and the authenticity of the originals of all such latter
documents. We have also assumed the due execution and delivery by parties other
than Arris of all
<PAGE>
documents referred to herein and that such documents are valid and binding upon
such other parties in accordance with their terms.
Based upon the foregoing and in reliance thereon, and subject to the
limitations and qualifications set forth below, we are of the opinion that:
1. Each of the Patents has been validly issued and each of the inventions
proposed to be patented pursuant to the Patent Applications can be patented, and
Arris possesses all right, title and interest in and to each of the Patents and
Patent Applications, free and clear of any security interest, license or other
restriction.
2. Upon consummation of the Transaction, DVS will own each of the Patents
and Patent Applications free and clear of any security interest, license or
other restriction.
3. There has not been any public use or sale by Arris prior to the filing
of any of the Patent Applications related to the technical documentation which
are proposed to be filed by Arris which would affect their validity, and we have
no reason to believe that patents will not issue with respect thereto or that
the claims contained in the applications proposed to be filed by Arris conflict
with the rights of others.
4. We are not aware of any adverse or conflicting rights or licenses to
use any U.S. patents necessary to the DV Business as currently conducted or as
proposed to be conducted pursuant to the Business Plan; and there have been no
claims asserted against Arris in this regard.
5. There have been no claims asserted against Arris relating to the
potential infringement of or conflict with any patents, trademarks, copyrights
or trade secrets of others.
Very truly yours,
<PAGE>
EXHIBIT N
Gentlemen:
We are not engaged to, and have not separately audited Digital Video as part of
our audit of the consolidated financial statements of ANTEC Corporation as of
December 31, 1995 and for the year then ended. ANTEC Corporation management has
represented to us that the financial records of the DV Business are capable of
being audited and that the financial statements at December 31, 1995 and for the
year then ended, as described in Section 2.8 of Asset Purchase Agreement
("Agreement") between Arris and Digital Video Systems are capable of being
prepared in accordance with GAAP within 60 days of the Closing. Based on our
discussions with management and their representations to use, we have no reason
to believe that (a) the financial records of the DV Business are not capable of
being audited as described in Section 2.8 of the Agreement and (b) the Financial
Statements as of December 31, 1995 and for the year then ended as described in
clause (b) of Section 2.8 are not capable of being prepared in accordance with
GAAP within 60 days of Closing.
This letter is intended solely for the information and use of Digital Video
Systems, Arris Interactive, and ANTEC Corporation in connection with Digital
Video Systems' proposed acquisition of Digital Video and should not be used for
any other purpose.
<PAGE>
EXHIBIT O
ALLOCATION OF PURCHASE PRICE
The Purchase Price Allocation will be mutually agreed to by Arris and DVS after
Closing.
<PAGE>
EXHIBIT P
TRANSITION SERVICES
FACILITIES TOTAL COST PER MONTH: 0-90 DAYS $9,750/after 90 days $16,750
- ----------
Rent and utilities - includes the use of the square footage currently
occupied by the DV group at 3871 Lakefield Drive and common areas
(including conference rooms) as well as the associated utilities exclusive
of telecommunications. COST: $6,000 FOR 90 DAYS. THEREAFTER COST: $10,000
Furniture and office equipment rental - includes cubicles and related
office furniture. Arris' currently monthly furniture and office equipment
rental expense is approximately $15,000 per month. The office equipment
applies to copiers and other miscellaneous items charged to the general
facilities account but used by all occupants of the building. The DV group
comprises approximately 10% of all building occupants. NO CHARGE -
INCLUDED WITH FACILITIES FOR 90 DAYS. THEREAFTER COST: $1,500
Telecom - includes local and long distance as well as internet access,
voice mail and e-mail but excludes mobile phones and telecom while
traveling. The charge is based on a DV headcount of 25 (includes
contractors). COST: $3,000
Repairs and maintenance - includes cleaning and trash removal but excludes
repairs and/or maintenance of lab equipment or computers owned by DV. NO
CHARGE - INCLUDED WITH FACILITIES FOR 90 DAYS. THEREAFTER COST: $500
Security/reception - covers 24-hour 7-days a week security. Arris, current
monthly expense is approximately $10,000. NO CHARGE - INCLUDED WITH
FACILITIES FOR 90 DAYS. THEREAFTER COST: $1,000
Shipping/receiving (non-inventory items) - covers the staffing required to
support these activities. It does not include inventory management and
---
customer shipments or the associated carrier charges although it does
include postage and fedex of a general administrative nature. COST: $750
GENERAL & ADMIN TOTAL COST PER MONTH: 0-90 DAYS $12,000/AFTER 90 DAYS
$15,250
MRP system - software and hardware charge for the GrowthPower computer
system. Arris' annual expense is estimated at $48,000 exclusive of the
personnel required to perform file maintenance and management but inclusive
of the info tech personnel required to support the platform. COST: $2,000
Purchasing and accounts payable (clerical only) - includes personnel and
systems required to perform these functions at a clerical level with
minimum supervision. It does not include a buyer for negotiating materials
-----------
(i.e. inventory and electronic components) pricing and delivery dates.
COST: $3,000
<PAGE>
Inventory management - includes personnel required to support MRP system,
perpetual records and monthly reconciliation at the basic level. Includes
billing but not collections. COST: $3,000
Professional accounting services - includes financial reporting for sales,
cost of sales, accounts payable, accounts receivable, fixed assets and
inventory. It does not include audit fees or financial systems charges.
COST: $4,000
Financial Systems - includes GrowthPower software, license, support,
hardware, operating platform, file maintenance, etc. Arris' annual charges
are in excess of $250,000. Excluding MRP, the annual expenses exceed
$200,000. NO CHARGE - 90 DAYS. THEREAFTER COST: $3,250
Legal, insurance, payroll, human resources, workers' comp, secretarial etc.
- no provision for these services.
<PAGE>
Exhibit 2.2
AMENDMENT TO ASSET PURCHASE AGREEMENT
Amendment dated as of August 1, 1997 to Asset Purchase Agreement dated as
of July 25, 1997 (the "Purchase Agreement") by and between Digital Video
Systems, Inc. ("DVS") and Arris Interactive L.L.C. ("Arris"). Capitalized terms
used in this Amendment and not otherwise defined shall have the respective
meanings given to such terms in the Purchase Agreement.
WHEREAS, DVS and Arris desire to amend the Purchase Agreement.
NOW THEREFORE, in consideration of the mutual promises of the parties
hereto, and of good and valuable consideration, the receipt of which is hereby
acknowledged, it is mutually agreed by and between the parties that the Purchase
Agreement shall be amended as follows:
1. Section 1.2(a) (i). Section 1.2(a)(i) shall be amended by deleting the
------------------
existing Section 1.2(a)(i) in its entirety and substituting in lieu thereof the
following:
In consideration of the transfer by Arris of the DV Assets to DVS, DVS at
Closing shall issue to Arris 600,000 shares of Common Stock and shall pay to
Arris $1,500,000 by wire transfer or certified check, and DVS shall assume the
liabilities under Sections 1.4(c) and 1.5 hereof accrued through the Closing
Date; provided that notwithstanding any provision of the Purchase Agreement to
--------
the contrary, 300,000 shares of DVS's Common Stock to be issued to Arris in
connection with the Transaction shall be held in an escrow (pursuant to an
escrow agreement to be signed as soon as practicable following the Closing)
until such time as DVS receives a legal opinion reasonably satisfactory to DVS
and its counsel with respect to the following Patent Applications: (a) A-0158
("AD Insertion System") and (b) A-0174 ("System for Communicating Data Files
from a Server to a Plurality of Channel Interface Units"), each as identified on
Exhibit C to the Purchase Agreement; provided further that with respect to both
-------- -------
of the above-listed Patent Applications, Arris shall conduct or cause to be
conducted a search of existing United States patents and publications, which
search shall include (A) conducting at least a validity search of both of the
below-listed Patent Applications, (B) reviewing the contents of the files in
Arris' possession relating to both of the below-listed Patent Applications and
(C) conducting a review to determine whether the inventions described in each of
the below-listed Patent Applications are patentable or whether making, using,
selling or offering to sell any of such inventions constitutes an infringement
of any United States patent; provided further that Arris shall provide DVS with
-------- -------
a
<PAGE>
legal opinion with respect to the validity and patentability of both of the
above-listed Patent Applications, which opinion sets forth the scope of the
above-described search; provided further that Arris shall use its reasonable
-------- -------
best efforts to obtain such opinion in substantially the form attached hereto as
Exhibit A; provided further that such opinion shall be deemed reasonably
-------- -------
satisfactory so long as it provides DVS and its counsel reasonable assurance
that neither of the above-listed Patent Applications constitutes an infringement
of a United States patent in a manner that results in a direct impact on DVS's
and ability to ship current products of the DV Business or products proposed in
the Business Plan; provided further that in the event such opinion is not
-------- -------
received within 90 days following the Closing Date, the consideration to be paid
by DVS for the DV Assets shall be reduced by eliminating 300,000 shares of DVS's
Common Stock as part of the consideration for the DV Assets and such shares
shall be cancelled; provided further that if the above-described search
-------- -------
indicates that either of the above-listed Patent Applications constitutes an
infringement of any United States patent in a manner that results in a direct
impact on DVS's ability to ship current products of the DV Business or products
proposed in the Business Plan, the consideration to be paid by DVS for the DV
Assets shall be reduced by eliminating 300,000 shares of DVS's Common Stock as
part of the consideration for the DV Assets and such shares shall be cancelled.
DIGITAL VIDEO SYSTEMS, INC. ARRIS INTERACTIVE L.L.C.
By: /s/ THOMAS R. PARKINSON By: /s/ ROBERT STANZIONE
------------------------- -------------------------
Title: President and COO Title: CEO and President
<PAGE>
Exhibit 4.1
ESCROW AGREEMENT
AGREEMENT, dated as of August 1, 1997, by and between Digital Video
Systems, Inc., a Delaware corporation (the "Company") and Arris Interactive
L.L.C. ("Arris"). Capitalized terms used herein and not otherwise defined shall
have the meanings given to such terms in the Asset Purchase Agreement, dated as
of July 25, 1997 by and between the Company and Arris, as amended by an
amendment dated as of August 1, 1997 (the "Purchase Agreement"). Capitalized
terms used herein and not otherwise defined shall have the respective meanings
given to such terms in the Purchase Agreement.
WITNESSETH
WHEREAS, on August 1, 1997 the Company acquired substantially all of the
assets of the Digital Video division of Arris (the "DV Business"), for a
combination of cash, 600,000 shares of the Company's common stock (the "Common
Stock"), and additional cash consideration to be based on the future revenues of
the DV Business (the "Transaction");
WHEREAS, the assets of the DV Business acquired by the Company include the
following United States patent applications: (a) A-0158 ("AD Insertion System")
and (b) A-0174 ("System for Communicating Data Files from a Server to a
Plurality of Channel Interface Units"), each as identified on Exhibit C to the
Purchase Agreement (the "Patent Applications");
WHEREAS, the acquisition of the DV Business by the Company was based in
substantial part on the commercial value of the inventions described in the
Patent Applications;
WHEREAS, the value of the Patent Applications to the Company will depend,
in substantial part, upon the Company's ability to ship current products of the
DV Business or products proposed in the Business Plan without infringing other
United States patents; and
WHEREAS, in connection with the Transaction, Arris has agreed to conduct or
cause to be conducted a search with respect to the Patent Applications (the
"Search") and to provide the Company with a legal opinion with respect to the
Patent Applications (the "Opinion"), all as set forth in the Purchase Agreement;
NOW, THEREFORE, in consideration of the mutual covenants and promises
contained herein and for other good and valuable consideration, the receipt and
adequacy of which is hereby acknowledged, the Company and Arris agree as
follows:
1. Appointment of Escrow Agent; Delivery of Escrow Securities. The
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Company and Arris hereby agree that the Company will serve as the escrow agent
for purposes of this Agreement (the Company in this capacity and any successor
escrow agent being hereinafter referred to as the "Escrow Agent"). Arris agrees
that the Escrow Agent shall hold in accordance with the provisions hereof, a
certificate representing 300,000 of the shares of the Company's common stock
issued to Arris pursuant to the Transaction (the "Escrow Securities"), together
with a stock power executed in blank.
2. Effectiveness of Agreement. This Agreement shall be effective as of
--------------------------
the date hereof (the "Escrow Date") and shall continue in effect until the
distribution by the Escrow
<PAGE>
Agent of all of the Escrow Securities or the cancellation of the Escrow
Securities in accordance with the terms hereof (the "Termination Date"). The
period of time from the Escrow Date until the Termination Date is referred to
herein as the "Escrow Period."
3. Escrow Property. During the Escrow Period, the Escrow Agent shall
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receive all of the money, securities, rights or property distributed in respect
of the Escrow Securities then held in escrow, including any such property
distributed pursuant to any stock split, merger, recapitalization, dissolution,
or total or partial liquidation of the Company, such property to be held and
distributed as herein provided and hereinafter referred to collectively as the
"Escrow Property." Dividends distributed with respect to the Escrow Property
shall be promptly paid to Arris.
4. Escrow Conditions. The Escrow Securities and any related Escrow
-----------------
Property shall be released from the Escrow upon a conclusive determination by
Arris and the Company that the conditions set forth below (the "Release
Conditions") have been fully satisfied; otherwise such Escrow Securities and any
related Escrow Property shall be forfeited by Arris and cancelled:
The Opinion is delivered to DVS within 90 days following the
Closing Date (or such longer period as Arris' counsel in its reasonable
opinion believes is required to conduct the Search and to deliver the
Opinion) and such Opinion provides DVS and its counsel reasonable assurance
that neither of the Patent Applications constitutes an infringement of any
United States patent in a manner that results in a direct impact on DVS's
ability to ship current products of the DV Business or products proposed in
the Business Plan.
5. Notice to Transfer Agent; Notice to Escrow Agent.
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(a) Upon execution of this Agreement, the Company shall direct the
transfer agent for the Company (the "Transfer Agent") to place stop transfer
orders with respect to the Escrow Securities and to maintain such orders in
effect until the Transfer Agent shall have received written notice from the
Company as provided in paragraph 5(b) as to such Escrow Securities. Subsequent
removal of the Stop orders pursuant to this Agreement shall not impact any other
stop orders with respect to the Escrow Securities.
(b) Upon the occurrence of satisfaction or nonsatisfaction of the
Release Conditions as specified in paragraph 4, the Company shall promptly give
appropriate notice to the Escrow Agent and to the Transfer Agent, and present
such documentation as is reasonably required by the Escrow Agent to evidence the
satisfaction or nonsatisfaction of such conditions.
In the event it is conclusively determined by Arris and the Company that
the Release Conditions have been fully satisfied, all Escrow Securities,
together with stock powers executed in blank, and the related Escrow Property
shall be released from the Escrow and immediately delivered to Arris by the
Escrow Agent. In the event it is conclusively determined by Arris and the
Company that the Release Conditions have not been fully satisfied, all Escrow
Securities, together with stock powers executed in blank, and the related Escrow
Property shall be delivered to the Company to be placed in the Company's
2.
<PAGE>
treasury for cancellation thereof. After such delivery, Arris shall have no
further rights as a stockholder of the Company with respect to any of the
cancelled Escrow Securities or the related Escrow Property.
6. Duties of Escrow Agent. It is understood and agreed by the parties to
----------------------
this Agreement as follows:
(a) The Escrow Agent is not and shall not be deemed to be a trustee
for any party for any purpose and is merely acting as a depository and in a
ministerial capacity hereunder with the limited duties herein prescribed.
(b) The Escrow Agent does not have and shall not be deemed to have
any responsibility in respect of any instruction, certificate or notice
delivered to it or of the Escrow Securities or any related Escrow Property other
than faithfully to carry out the obligations undertaken in this Agreement and to
follow the directions in such instruction or notice provided in accordance with
the terms hereof.
(c) The Escrow Agent is not and shall not be deemed to be liable for
any action taken or omitted by it in good faith and may rely upon, and act in
accordance with the advice of its counsel without liability on its part for any
action taken or omitted in accordance with such advice. In any event, its
liability hereunder shall be limited to liability for gross negligence, willful
misconduct or bad faith on its part.
(d) The Escrow Agent may conclusively rely upon and act in
accordance with any certificate, instruction, notice, letter, telegram,
cablegram on other written instrument believed by it to be genuine and to have
been signed by the proper party or parties.
(e) The Company agrees (i) to pay the Escrow Agent's reasonable fees
and to reimburse it for its reasonable expenses, including attorney's fees,
incurred in connection with duties hereunder and (ii) to save harmless,
indemnify and defend the Escrow Agent from and against any loss, damage,
liability, judgment, cost and expense whatsoever, including counsel fees,
suffered or incurred by it by reason of, or on account of, any misrepresentation
made to it or its status or activities as Escrow Agent under this Agreement
except for any loss, damage, liability, judgment, cost or expense resulting from
gross negligence, willful misconduct or bad faith on the part of the Escrow
Agent. The obligation of the Escrow Agent to deliver the Escrow Securities to
either Arris or the Company shall be subject to the prior satisfaction upon
demand from the Escrow Agent, of the Company's obligations to so save harmless,
indemnify and defend the Escrow Agent or otherwise pay its fees and expenses
hereunder.
(f) The Escrow Agent shall not be required to defend any legal
proceeding which may be instituted against it in respect of the subject matter
of this Agreement unless requested to do so by Arris or the Company and
indemnified to the Escrow Agent's satisfaction against the cost and expense of
such defense by the party requesting such defense. If any such legal proceeding
is instituted against it, the Escrow Agent agrees promptly to give notice of
such proceeding to Arris and the Company. The Escrow Agent shall not be required
to institute legal proceedings of any kind. Notwithstanding the fact that the
Company is acting as Escrow Agent under this Agreement, nothing herein shall
limit the liability of the Company under the Purchase Agreement or the liability
of the Company in its capacity as the Company under this Agreement.
(g) The Escrow Agent shall not, by act, delay, omission or
otherwise, be deemed to have waived any right or remedy it may have either under
this Agreement or generally, unless such waiver be in writing, and no waiver
shall be valid unless it is in writing, signed by the Escrow Agent,
3.
<PAGE>
and only to the extent expressly therein set forth. A waiver by the Escrow
Agent under the term of this Agreement shall not be construed as a bar to, or
waiver of, the same or any other such right or remedy which it would otherwise
have on any other occasion.
(h) The Escrow Agent may resign as such hereunder by giving 30 days
written notice thereof to Arris and the Company. Within 20 days after receipt
of such notice, the Company shall furnish to the Escrow Agent written
instructions for the release of the Escrow Securities and any related Escrow
Property (if such shares, options and property, if any, have not yet been
released pursuant to paragraph 4 hereof) to a substitute Escrow Agent which
(whether designated by written instructions from the Company or in the absence
thereof by instructions from a court of competent jurisdiction to the Escrow
Agent; provided that Arris shall have the right to approve any substitute Escrow
Agent) shall be a bank or trust company organized and doing business under the
laws of the United States or any state thereof. Such substitute Escrow Agent
shall thereafter hold any Escrow Securities and any related Escrow Property
received by it pursuant to the terms of this Agreement and otherwise act
hereunder as if it were the Escrow Agent originally named herein. The Escrow
Agent's duties and responsibilities hereunder shall terminate upon the release
of all shares then held in escrow according to such written instruction or upon
such delivery as herein provided. The Agreement shall not otherwise be
assignable by the Escrow Agent without the prior written consent of the Company.
7. No Pledge of Escrow Securities; Further Assurances.
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(a) Arris agrees that during the term of this Agreement, it will not
sell, transfer, hypothecate, negotiate, pledge, assign, encumber or otherwise
dispose of any or all of the Escrow Securities, unless and until (A) the Company
shall have given the notice of satisfaction of the Release Conditions as
provided in paragraph 5 as to such Escrow Securities; or (B) such disposition is
to be made in connection with an agreement by which the Company is to be
acquired or merged into another entity. Any such sale or other transfer also
shall be subject to the lockup provisions of the Purchase Agreement.
(b) Arris will take any action necessary or appropriate, including
the execution of any further documents or agreements, in order to effectuate the
transfer of the Escrow Securities to the Company if required pursuant to the
provisions of this Agreement.
8. Legends. Each of the certificates representing the Escrow Securities
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shall bear legends to the following effect, as well as any other legends
required by applicable law:
(i) "RESTRICTED SECURITIES."
(ii) "THE SALE, TRANSFER, HYPOTHECATION, NEGOTIATION, PLEDGE, ASSIGNMENT,
ENCUMBRANCE OR OTHER DISPOSITION OF THE SHARES EVIDENCED BY THIS
CERTIFICATE ARE RESTRICTED BY AND ARE SUBJECT TO ALL OF THE TERMS,
CONDITIONS AND PROVISIONS OF A CERTAIN ESCROW AGREEMENT ENTERED INTO
AMONG DIGITAL VIDEO SYSTEMS, INC., AND ARRIS INTERACTIVE L.L.C., DATED
AS OF AUGUST 1, 1997, A COPY OF WHICH MAY BE OBTAINED FROM THE
SECRETARY OF DIGITAL VIDEO SYSTEMS, INC. NO TRANSFER, SALE OR OTHER
DISPOSITION OF THESE SHARES MAY BE MADE UNLESS SPECIFIC CONDITIONS OF
SUCH AGREEMENT HAVE BEEN SATISFIED."
4.
<PAGE>
(iii) "THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1993, AS AMENDED OR ANY STATE SECURITIES
LAWS. SUCH SHARES MAY NOT BE SOLD, TRANSFERRED OR OTHERWISE DISPOSED
OF UNLESS REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND
ALL APPLICABLE STATE SECURITIES LAWS, OR UNLESS AN EXEMPTION FROM SUCH
REGISTRATION IS AVAILABLE IN THE OPINION OF COUNSEL FOR THE ISSUER."
(iv) "THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO A LOCKUP
PROVISION (THE LOCKUP PROVISION IS PART OF AN ASSET PURCHASE
AGREEMENT, A COPY OF WHICH IS ON FILE WITH THE SECRETARY OF THE
COMPANY) AND MAY NOT BE SOLD OR OTHERWISE TRANSFERRED FOR A PERIOD OF
TWELVE MONTHS FROM AND AFTER THE DATE ON WHICH SUCH SHARES WERE
ISSUED. AFTER THE EXPIRATION OF SUCH TWELVE-MONTH PERIOD, UP TO 50%
OF SUCH SHARES SHALL BE ENTITLED TO BE TRANSFERRED OR SOLD IN
ACCORDANCE WITH ANY OTHER APPLICABLE RESTRICTIONS. AFTER THE
EXPIRATION OF 24 MONTHS FROM THE DATE ON WHICH SUCH SHARES WERE
ISSUED, ALL OF SUCH SHARES SHALL BE ENTITLED TO BE TRANSFERRED OR SOLD
IN ACCORDANCE WITH ANY OTHER APPLICABLE RESTRICTIONS."
9. Notices. Each notice, instruction or other certificate required or
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permitted by the terms hereof shall be in writing and shall be communicated by
personal delivery, fax or registered or certified mail, return receipt
requested, to the parties hereto at the addresses set forth below, or at such
other address as any of them may designate by notice to each of the others:
(i) If to Arris, to:
Arris Interactive L.L.C.
3871 Lakefield Drive
Suwanee, Georgia 30174
Attn: Rob Friedman, General Counsel
(ii) If the Company or the Escrow Agent, to:
Digital Video Systems, Inc.
2710 Walsh Avenue
Santa Clara, California 95051
Attn: Thomas R. Parkinson
with a copy to:
Troy & Gould Professional Corporation
1801 Century Park East, Suite 1600
Los Angeles, California 90067
Attn: Sanford J. Hillsberg, Esq.
5.
<PAGE>
All notices, instructions or certificates given hereunder to the Escrow Agent
shall be effective upon receipt by the Escrow Agent. All notices given hereunder
by the Escrow Agent shall be effective and deemed received upon personal
delivery or transmission by fax or, if mailed, five (5) calendar days after
mailing by the Escrow Agent.
10. Amendments. This Agreement may not be modified, altered or amended in
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any material respect or cancelled or terminated except with the prior written
consent of all the parties hereto.
11. Titles. The headings of paragraphs herein are inserted for
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convenience of reference only and are not intended to be a part of or to affect
the meaning or interpretation of this Agreement.
12. Governing Law. This Agreement shall be governed by and construed in
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accordance with the internal laws of California and shall be binding upon and
inure to the benefit of all parties hereto and their respective successors in
interest and assigns.
13. Counterparts. This Agreement may be executed in several counterparts,
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which taken together shall constitute a single instrument.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their duly authorized officers on the day and year first above
written.
DIGITAL VIDEO SYSTEMS, INC.,
for itself and as Escrow Agent
By:________________________________________
Name:
Title:
ARRIS INTERACTIVE L.L.C.
By:________________________________________
Name:
Title:
6.
