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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES ACT OF 1934
DATE OF REPORT (DATE OF EARLIEST EVENT REPORTED) JUNE 7, 1996
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COMPRESSION LABS, INCORPORATED
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(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 0-13218 94-2390960
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(STATE OR OTHER (COMMISSION (I.R.S. EMPLOYER
JURISDICTION OF FILE NUMBER) IDENTIFICATION NO.)
INCORPORATION)
2860 JUNCTION AVE., SAN JOSE, CA 95134
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(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE (408)435-3000
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(FORMER NAME OR FORMER ADDRESS, IF CHANGED SINCE LAST REPORT.)
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Item 2. Disposition of Assets
On June 7, 1996, Compression Labs, Incorporated ("CLI" or the
"Company") and Charger Industries, Inc., a wholly owned subsidiary of General
Instrument Corporation ("GI") entered into an Asset Purchase Agreement (the
"Agreement") for the purchase by GI of assets of CLI's Broadcast Division other
then CLI's SpectrumSaver product for broadcast of business television over
satellite. The CLI Broadcast Division product development, research,
marketing, sales and operations team are expected to transfer to GI. The
transaction is expected to be completed by June 30, 1996. However, there can be
no assurance that the transaction will be consummated.
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Item 7. Exhibits
Exhibit 1. Asset Purchase Agreement between Compression Labs,
Incorporated, a Delaware Corporation and Charger Industries,
Inc., a California Corporation, dated as of June 7, 1996
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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.
COMPRESSION LABS, INCORPORATED
Dated: June 14, 1996
By: /s/ Michael E. Seifert
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Michael E. Seifert
Vice President, Finance and
Chief Accounting Officer
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INDEX TO EXHIBITS
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Page No.
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Exhibit 1. Asset Purchase Agreement 5
Between Compression Labs,
Incorporated, a Delaware
Corporation and Charger
Industries, Inc., a
California Corporation
Dated as of June 7, 1996.
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ASSET PURCHASE AGREEMENT
Between
Compression Labs, Incorporated, a Delaware Corporation
and
Charger Industries, Inc., a California Corporation
Dated as of June 7, 1996
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This ASSET PURCHASE AGREEMENT (together with the exhibits and schedules hereto,
the "Agreement") is entered into as of June 7, 1996 between Compression Labs
Incorporated, a Delaware corporation ("Seller"), and Charger Industries, a
California corporation and a subsidiary of General Instrument Corporation of
Delaware, a Delaware corporation ("Buyer"), with reference to the following
facts:
RECITALS
A. Seller, through its Broadcast Products Division is the owner of certain
assets more particularly described in this Agreement, including both tangible
and intangible property, used by it in the business of developing, designing,
licensing and/or manufacturing radio and television broadcast products and
associated electronics parts, all as further set forth in Section 2.1.
B. Buyer wishes to purchase those assets and is willing to assume certain
associated obligations and some related liabilities, and Seller is willing to
sell those assets, on the terms and conditions set forth herein.
NOW, THEREFORE, in consideration of the premises and the mutual covenants
hereinafter set forth, the parties agree as follows:
1. DEFINITIONS. The following terms shall have the following meanings when used
in the Agreement:
"Accounting Principles" mean the accounting principles and methodologies set
forth on Schedule 4.5.
"Accounts Payable" shall have the meaning set forth in Section 4.7.
"Accrued Pre-Closing Taxes Payable" shall have the meaning set forth in Section
3.8.
"Affiliate" shall mean any parent, subsidiary or division, whether direct or
indirect, of a specified corporation including any division thereof.
"Assets" shall have the meaning set forth in Section 2.1.
"Assigned Contracts" shall have the meaning set forth in Section 2.1.5.
"Assignment and Assumption Agreement" shall mean an Assignment and Assumption
Agreement with respect to the Assumed Liabilities and the Excluded Liabilities,
in form and substance mutually agreeable to the parties.
"Assumed Liabilities" shall have the meaning set forth in Section 3.5.
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"Bill of Sale" shall mean a Bill of Sale with respect to the Assets in form and
substance mutually agreeable to the parties.
"Business" shall mean the business of the Broadcast Products Division as it is
currently conducted, excluding the SpectrumSaver operation.
"CERCLA" means the Comprehensive Environmental Response, Compensation and
Liability Act of 1980, as amended from time to time, and regulations promulgated
thereunder.
"Closing" and "Closing Date" shall have the respective meanings set forth in
Section 3.1.
"Closing Date Valuations" shall mean the Net Value of Inventory and the Net
Value of Fixed Assets, each as of the Closing Date, calculated in accordance
with Section 3.2.2.
"COBRA" shall have the meaning set forth in Section 11.2(f).
"Contract" shall mean any contract, agreement, license, lease, sales order,
purchase order or other legally binding commitment, which has been expressly and
voluntarily entered into with a third party, whether written or oral.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974, as
amended.
"Employee Letter" shall have the meaning set forth in section 8.1.9.
"Employees" shall have the meaning set forth in Section 4.8.
"Encoder Subcontracting Agreements" shall mean an agreement for Seller to
subcontract to Buyer all manufacturing of encoders and related equipment
pursuant to the agreement between Seller and Thomson Consumer Electronics, Inc.,
dated March 30, 1992, (the "Thomson Agreement") and the agreement between Seller
and NEC Australia (the "NEC Australia Agreement"), provided that all terms and
conditions under such agreements shall be substantially the same as under the
Thomson Agreement and the NEC Australia Agreement, respectively, except Buyer
shall have no obligations for indemnification of Seller or Thomson or NEC
Australia under the Encoder Subcontracting Agreements.
"Environmental Laws" shall mean all federal, state and local laws or
regulations, codes, orders, decrees, judgments or injunctions issued,
promulgated, approved or entered thereunder relating to protection of the
environment from Hazardous Substances, including, but not limited to, those
relating to (i) emissions, discharges or releases of Hazardous Substances into
the environment (including, but not limited to, ambient air, surface water,
groundwater, land surface or subsurface strata), (ii) the manufacture,
processing, distribution, use, generation, treatment, storage, disposal,
transport or handling of Hazardous Substances as such, and (iii) underground
storage tanks containing Hazardous Substances, and related piping, and
emissions, discharges or releases therefrom.
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"Environmental Losses" means all Losses (including anticipated compliance costs)
which result from a violation of applicable Environmental Law or the presence or
Release or offsite shipment of Hazardous Substances prior to the Closing.
"Environmental Response" shall mean any actions, liability to investigate,
contain, treat, eliminate or reduce the concentration of Hazardous Substances
that are required to comply with a Government Agency order including, but not
limited to, the investigation of the environmental condition, the preparation of
any feasibility studies, reports or remedial plans and the performance of any
cleanup, remediation, treatment, containment, operation, maintenance, monitoring
or restoration work.
"Excluded Assets" shall have the meaning set forth in Section 2.2.
"Excluded Liabilities" shall have the meaning set forth in Section 3.6.
"Facilities and Services Agreement" shall mean an agreement substantially in the
form set forth on Schedule A.
"Fixed Assets" shall mean the machinery and equipment, including computer
equipment, furniture and fixtures, tools and supplies included in the Assets.
"GAAP" means generally accepted accounting principles in the United States.
"Government Agency" shall mean any federal, state, local or foreign government
or government agency, bureau, board, commission, department or political
subdivision.
"Hazardous Substances" shall mean pollutants, contaminants, chemicals, or
industrial, toxic or hazardous substances or wastes, including, but not limited
to, asbestos and asbestos containing materials, polychlorinated biphenyl,
petroleum, including crude oil or any fraction thereof, or any chemicals or
substances the presence of which a Government Agency requires to be investigated
or remediated.
"Indemnified Party" shall mean, with respect to any Losses, the party seeking
indemnity hereunder.
"Indemnifying Party" shall mean, with respect to any Losses, the party from whom
indemnity is being sought hereunder.
"Independent Accountants" shall have the meaning set forth in Section 3.2.2(c).
"Intellectual Property" shall have the meaning set forth in Section 2.1.2.
"Inventory" shall mean the raw materials, work-in-process and finished goods
included in the Assets.
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"Leased Real Property" shall mean the real property located at 2860 Junction
Blvd., San Jose, California and the real property located at Duluth, Georgia.
"License and Co-Ownership Agreement" shall mean a license agreement in
substantially the form attached hereto as Exhibit B.
"Losses" shall mean any and all costs and expenses (including, but not limited
to, reasonable attorneys' fees, but excluding consequential damages), damages
and losses actually incurred by the Indemnified Party, net of (i) any tax
adjustments, benefits, savings or reductions, and (ii) any insurance proceeds,
in either case to which the Indemnified Party is entitled by virtue of such
costs, expenses, damages and losses.
"Manufacturing Agreement" shall mean an agreement substantially in the form set
forth on Schedule C.
"Material Adverse Effect" shall mean a material adverse effect on the
operations, Assets, business or condition (financial or otherwise) of the
Business.
"NEC Australia Agreement" shall have the meaning set forth in the definition of
"Encoder Subcontracting Agreements."
"Net Value of Fixed Assets" shall mean the historical cost of the Fixed Assets
less accumulated depreciation determined in accordance with GAAP adjusted by the
principles and methodologies set forth in Schedule 4.5(a).
"Net Value of Inventory" shall mean the historical cost of the Inventory, less
valuation reserves, determined in accordance with GAAP, adjusted by the
principles and methodologies set forth on Schedule 4.5(a).
"Pension Plans" shall have the meaning set forth in Section 4.8.
"Plan Liabilities" shall have the meaning set forth in Section 3.6.
"Prepaid Post-Closing Taxes" shall have the meaning set forth in Section 3.8.
"Purchase Price" shall have the meaning set forth in Section 3.2.1.
"Purchase Price Adjustment" shall have the meaning set forth in Section 3.2.1.
"Real Estate Document" shall mean the sub-sublease relating to the Duluth,
Georgia facility, substantially in the form set forth in Schedule D.
"Rehired Employee" shall have the meaning set forth in Section 11.2(a).
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"Release" means any discharge, emission or release, including a Release as
defined in CERCLA at 2 U.S.C. Section 9601(22). The term "Released" has a
corresponding meaning.
"Transaction Documents" shall mean this Agreement, the Assignment and Assumption
Agreement, the Bill of Sale, the License Agreement, the Encoder Subcontracting
Agreements the Facilities and Services Agreement, the Real Estate Document and
the Manufacturing Agreement.
"Transactions" shall mean the transactions contemplated by the Transaction
Documents.
"Vacation Accrual" shall have the meaning set forth in Section 11.2(d).
"Valuations" shall mean the Net Value of Inventory and the Net Value of Fixed
Assets.
"Virtex Agreements" shall have the meaning set forth in Section 8.1.11.
"Welfare Plans" shall have the meaning set forth in Section 4.8.
2. TRANSFER OF ASSETS.
2.1 TRANSFER OF ASSETS. Subject to the terms and conditions of this Agreement,
on the Closing Date, Seller will sell, convey, transfer, assign and deliver to
Buyer, and Buyer will purchase from Seller, all of Seller's right, title and
interest in and to all of the assets and properties, as the same shall exist on
the Closing Date (except the Excluded Assets), whether real, personal or mixed,
tangible or intangible, whether or not reflected on the books of Seller, and
wherever located, which (except as set forth below) are used primarily in
connection with the conduct of the Business (collectively, the "Assets"),
including without limitation, the following:
2.1.1 PERSONAL PROPERTY. All tangible personal property, including, but
not limited to, fixtures, vehicles, machinery and equipment, furniture,
tools, supplies and inventory (finished goods, work-in-process and raw
materials), used in the Business (other than that relating to
videoconferencing) including those set forth in Schedule 2.1.1;
2.1.2 INTELLECTUAL PROPERTY. The trademarks and trade names used
primarily in the Business, including without limitation those listed in
Schedule 2.1.2, the patents, patent applications, trademark and trade
name registrations, service marks and service mark registrations, mask
works and mask work registrations, the applications therefor and
licenses with respect thereto that are listed in Schedule 2.1.2,
copyrights and copyright registrations, know how, including without
limitation, trade secrets, designs, inventions, technical information,
engineering notebooks, technical and product documentation and
specifications, software (including source code), customer lists,
supplier lists, other proprietary and trade rights, the goodwill and
the business appurtenant to any of the foregoing and any rights, claims
or choses in action relating to or deriving from any of the foregoing
primarily attributable to the Business, and together with any
unregistered intellectual property used by the Business (collectively,
the "Intellectual Property");
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2.1.3 SALES MATERIALS. All catalogues, brochures, sales literature,
promotional material and other selling material relating solely to the
products of the Business;
2.1.4 BOOKS AND RECORDS. All books and records and all files,
documents, papers and agreements pertaining to the Assets, the Assumed
Liabilities or otherwise to the business of the Business that would be
necessary or helpful in continuing the operation of the Business as a
going concern; provided that Seller may retain copies thereof to the
extent related to other businesses of Seller;
2.1.5 ASSIGNED CONTRACTS. All Contracts listed in Schedule 4.9 (the
"Assigned Contracts");
2.1.6 INSURANCE FROM DESTROYED OR DAMAGED ASSETS. All insurance
proceeds from any insurance provider for any Asset that is destroyed or
damaged after the date hereof and prior to the Closing, or any
replacement property or asset actually acquired for such destroyed or
damaged Asset;
2.1.7 PERMITS AND LICENSE. All transferable business licenses, permits
and equivalent documents related primarily to the Business or necessary
to the Business; and
The Assets shall include, in addition, all of the assets of the type
described above that are acquired by Seller for use primarily in
connection with the Business between the date hereof and the Closing
Date.
2.2 ASSETS NOT TRANSFERRED. Notwithstanding anything to the contrary contained
herein, the following assets and properties of Seller are specifically excluded
from the Assets and shall be retained by Seller (the "Excluded Assets"):
2.2.1 CASH AND CASH EQUIVALENTS. Subject to Section 2.1.6, cash on hand
and cash equivalents of Seller (whether or not relating to the
Business), including, but not limited to, bank accounts and temporary
cash investments;
2.2.2 ACCOUNTS RECEIVABLE. Accounts receivable of Seller, whether or
not relating to the Business.
2.2.3 REFUND CLAIMS. Rights to or Claims for refunds of taxes and other
governmental charges for periods ending on or prior to the Closing Date
and benefit of net operating loss carry-forwards or other credits of
Seller;
2.2.4 INSURANCE. Except as set forth in Section 2.1.6, all insurance
policies and rights thereunder including but not limited to rights to
any cancellation value as of the Closing Date;
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2.2.5 UNRELATED CONFIDENTIAL INFORMATION. Proprietary or confidential
business or technical information, records and policies that relate
generally to Seller or any of its Affiliates and are not used in the
Business, including but not limited to the corporate directory,
management procedures and guidelines, proprietary financial reporting
formats, accounting procedures, instructions, organization manuals and
strategic plans;
2.2.6 UNRELATED AND CORPORATE ASSETS. All other assets of Seller not
included in the Assets to be sold hereunder, including but not limited
to assets not used primarily in connection with the conduct of the
Business and assets used exclusively in connection with Seller's
corporate functions (including but not limited to the corporate
charter, taxpayer and other identification numbers, seals, minute
books, videoconferencing equipment, routers and servers and stock
transfer books), and all assets used exclusively in the SpectrumSaver
operations.
2.2.7 NON-ASSIGNED CONTRACTS. All Contracts relating to the Business
other than the Assigned Contracts.
2.2.8 ASSETS DISPOSED OF. Any assets of the Business that are disposed
of, sold or consumed after the date hereof in the ordinary course of
business consistent with past practice.
3. CLOSING, PURCHASE PRICE, ASSUMPTION OF LIABILITIES.
3.1 CLOSING. The closing (the "Closing") shall take place at the offices of
Cooley Godward Castro Huddleson & Tatum, Palo Alto, California on June 20, 1996
at 10:00 a.m., or at such other place or at such other date and time as Seller
and Buyer may mutually agree (the "Closing Date").
3.2 PURCHASE PRICE AND ADJUSTMENT.
3.2.1 PURCHASE PRICE. The purchase price (the "Purchase Price") for the
Assets hereunder shall be $12,458,000, subject to adjustment under
Section 3.2.2.
3.2.2 POST-CLOSING ADJUSTMENT TO PURCHASE PRICE. The Purchase Price
shall be subject to adjustment after the Closing in accordance with the
following procedure:
(a) On the Closing Date (or such other date as the parties may
jointly specify), Seller shall conduct a physical inventory at
all locations including sub-contractor locations. Buyer and its
representatives shall be entitled to observe such inventory.
Promptly after the Closing Date, but in no event later than 15
days following the Closing, Seller, with the assistance and
cooperation of personnel of the Business employed by Buyer after
the Closing Date (who, for these purposes, will be under the
direction and supervision of Seller) -- but who shall be entitled
to keep Buyer regularly informed regarding their activities under
this paragraph (a),
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will prepare in accordance with GAAP and the principles and
methodologies used to prepare the Valuations, and present to
Buyer the Closing Date Valuations.
(b) After the Closing Date, for the purpose of preparing the
Closing Date Valuations, Seller and its accountants shall have
full access, at all reasonable times and in a manner not
disruptive of the ongoing operation of Buyer, to the books,
records and properties of Buyer reasonably related to the
Business and all personnel of Buyer reasonably requested by
Seller. Buyer and its accountants shall have the right to review
the work papers of Seller utilized in preparing the Closing Date
Valuations. The Closing Date Valuations shall be binding on Buyer
unless Buyer presents to Seller within 20 days after its receipt
of the Closing Date Valuations from Seller written notice of
disagreement specifying in reasonable detail the nature and
extent of the disagreement.
(c) If Buyer and Seller are unable to resolve any disagreement
with respect to the Closing Date Valuations within 30 days after
Seller receives a timely notice of disagreement, the items of
disagreement alone shall be referred for final determination to a
San Francisco Bay Area office of Ernst & Young LLP, or if a San
Francisco Bay Area office of Ernst & Young LLP is unable or
unwilling to make such final determination to such other
independent accounting firm as the parties shall mutually
designate (Ernst & Young LLP or such other accounting firm is
referred to herein as the "Independent Accountants"). The Closing
Date Valuations shall be deemed to be binding on Buyer and Seller
(the "Final Valuations") upon (i) Buyer's failure to deliver a
notice of disagreement to Seller, (ii) resolution of any
disagreement by mutual agreement of the parties after a timely
notice of disagreement has been delivered to Seller, of (iii)
notification by the Independent Accountants of their final
determination of the items of disagreement submitted to them.
Notwithstanding anything contained in this Agreement, in no event
shall the Final Valuation of Net Value of Fixed Assets be greater
than $5 million or Net Value of Inventory be greater than $11
million.
(d) The Purchase Price shall be reduced or increased, as the case
may be, by (i) the amount, if any, by which the Net Value of
Fixed Assets, as set forth in the final Valuations, is less than
or greater than $3,145,000 and (ii) the amount, if any, by which
the Net Value of Inventory, as set forth in the final Valuations,
is less than or greater than $5,067,000 (the "Purchase Price
Adjustment").
(e) If issues are submitted to the Independent Accountants for
resolution, (i) each party will furnish the Independent
Accountants with such workpapers, documents and other information
related to the disputed issue as the Independent Accountants may
reasonably request and each party will be afforded the
opportunity to present to the Independent Accountants any
material it believes relevant to the resolution of the disputed
issue and to discuss the same with the Independent Accountants,
(ii) the determination of the Independent Accountants as to the
resolution of the disputed issues, which shall be set forth in a
written
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notice delivered to Buyer and Seller, shall be binding and
conclusive on both parties, and (iii) the fees and disbursements
to the Independent Accountants shall be borne equally, one-half
by Buyer and one-half by Seller.
3.3 PAYMENT TO SELLER ON CLOSING DATE. (a) On the Closing Date, Buyer shall
pay (i) $10,958,000 of the Purchase Price, less the amount of Vacation
Accrual and less the amounts payable under Section 3.3 (as adjusted by
agreement of the parties prior to the Closing), to Seller, and (ii) the
amounts listed on Schedule 3.3 (as adjusted by agreement of the parties prior
to the Closing) to the payees set forth in Schedule 3.3. The parties agree that
Schedule 3.3 may be adjusted prior to Closing to include any amounts payable by
Seller to third parties and not previously disclosed pursuant hereto, payment
of which, pursuant to this Section 3.3, will release all claims which such
parties may have against any of the Assets, it being understood that to the
extent that such claims are released at or prior to Closing that any related
breach of Section 4 shall not cause the condition set forth in Section 8.1.1
regarding representations and warranties not to have been satisfied. All
amounts paid to Seller pursuant hereto shall be paid by wire transfer in
immediately available funds to the following account:
Bank: Bank of America
1850 Gateway Boulevard
Concord, CA 94520
ABA No. 121000358
Beneficiary: Compression Labs, Incorporated
Concentration Account
Account No. 1233518997
(b) Within three (3) business days after the Purchase Price Adjustment is
determined, Buyer shall pay the balance of the Purchase Price plus or minus, as
applicable, the amount of the Purchase Price Adjustment (the "Net Purchase
Price"), together with interest from the Closing Date at the applicable prime
rate or reference rate as announced from time to time by Bank of America to
Seller by wire transfer in immediately available funds to the account identified
above; provided that, if the Net Purchase Price is less than $10,958,000, then
within such time period, Seller shall pay to Buyer the amount by which the Net
Purchase Price is less than $10,958,000, together with interest from the Closing
Date at the applicable prime rate or reference rate as announced from time to
time by Bank of America by wire transfer in immediately available funds to an
account identified to Seller by Buyer.
(c) On the Closing Date, Buyer shall pay to Jabil Circuits Inc. on behalf of
Seller $1,142,000 with respect to Seller's accounts payable to Jabil Circuits
Inc. related to the Business.
3.4 INSTRUMENTS OF CONVEYANCE AND TRANSFER. On the Closing Date, Seller shall
execute and deliver to Buyer the Transaction Documents that have not previously
been executed, and such other conveyance and transfer documents as may be
reasonably requested by Buyer in order to carry out the Transactions.
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3.5 ASSUMPTION OF LIABILITIES. On the Closing Date, Buyer shall execute and
deliver to Seller the Assignment and Assumption Agreement, pursuant to which,
subject to Section 3.6, Buyer shall assume and agree to pay, perform and
discharge when due, all of the liabilities and obligations that arise or are to
be performed on or after the Closing Date under the Assigned Contracts, accrued
vacation and sabbatical liability for re-hired employees pursuant to Section
11.2(d), product warranty costs for products of the Business sold prior to the
Closing Date and the liabilities set forth on Schedule 3.5 (the "Assumed
Liabilities"). Nothing herein will be interpreted to mean that Buyer assumes any
liability for occurrences prior to the Closing Date other than product warranty
costs, regardless of when a claim is made.
3.6 NON-ASSUMPTION OF CERTAIN LIABILITIES. Buyer is not assuming, and shall not
be deemed to have assumed, any liabilities of Seller other than those
specifically assumed under Section 3.5, including but not limited to: (i)
liabilities for taxes (other than as set forth in Section 3.8); (ii) any
pension, profit-sharing or welfare benefit plans maintained by Seller or its
Affiliates or any liabilities allocated thereto (including but not limited to
any liabilities resulting from unfunded contributions under any employee benefit
plan subject to ERISA) (the "Plan Liabilities"), and (iii) any liabilities owed
to any third party (including employees), including but not limited to accounts
payable. Liabilities of Seller other than those specifically assumed under
Section 3.5 are referred to collectively as the "Excluded Liabilities."
3.7 TAX ALLOCATION. Buyer and Seller shall allocate the Purchase Price to broad
categories constituting components of the Assets in accordance with basis of
allocation used in preparing the Form 8594 attached hereto as Schedule 3.7 and
shall file a Form 8594 with respect to the Transactions similar to that set
forth in Schedule 3.7, except to the extent that modifications are necessary to
reflect changes in the Assets between the date hereof and Closing Date. Each
party will report the purchase and sale of the Assets in accordance with the
agreed upon allocation among such broad categories for all federal, state, local
and other tax purposes, but such allocation shall not constrain reporting for
other purposes.
3.8 SALES AND USE TAX. Buyer and Seller shall cooperate in preparing and filing
sales and use tax returns relating to the Transactions, shall agree as to which
party is responsible to make such payments, and such party will make such
payments when due. Buyer and Seller shall each be responsible for one half of
any and all sales and use tax, and transfer taxes due with regard to the
Transactions, and the non-paying party shall, immediately after notification of
payment by the paying party, reimburse the paying party for its allocable share.
Property taxes on personal property included in the Assets will be prorated as
of the Closing Date on the Basis of the taxes paid or to be paid without giving
effect to the Transaction. If, based on such proration, the amount of such
property taxes payable as of the Closing Date which have accrued with respect to
the period prior to the Closing Date (the "Accrued Pre-Closing Taxes Payable")
exceeds the amount of such property taxes which may have been prepaid as of the
Closing Date with respect to the period after the Closing Date ("Prepaid
Post-Closing Taxes"), Seller shall pay such excess to Buyer on the Closing Date.
If, based on such proration, the Accrued Pre-Closing Taxes Payable are less than
the Prepaid Post-Closing Taxes, Buyer shall pay such difference to Seller on the
Closing Date by reduction of the amount to be paid by Seller in respect of the
Purchase Price. Buyer shall pay to the applicable taxing authority any property
taxes due on personal
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property which are required to be paid after the Closing Date with respect to
the applicable current tax year.
4. REPRESENTATIONS AND WARRANTIES OF SELLER.
As an inducement for Buyer to enter into this agreement, Seller represents and
warrants to Buyer that each of the following statements is true and correct as
of the date hereof:
4.1 ORGANIZATION, CORPORATE POWER AND AUTHORITY. Seller is a corporation duly
organized, validly existing and in good standing under the laws of the state in
which it is incorporated and is duly qualified to do business as a foreign
corporation in jurisdictions in which Seller is obligated to be so qualified to
conduct the business of the Business. Seller has all requisite corporate power
and authority to own, operate and lease the Assets, to conduct the business of
the Business, to execute and deliver the Transaction Documents and to perform
its obligations thereunder.
4.2 AUTHORIZATION OF AGREEMENTS. The execution, delivery and performance by
Seller of the Transaction Documents, and the consummation by it of the
Transactions, have been duly authorized by all necessary corporate action by
Seller. This Agreement has been, and each other Transaction Document will be at
the Closing, duly executed and delivered by Seller and constitutes, or will,
when delivered, constitute, the legal, valid and binding obligation of Seller,
enforceable against Seller in accordance with their respective terms.
4.3 EFFECT OF AGREEMENT. The execution, delivery and performance by Seller of
the Transaction Documents, and the consummation by it of the Transactions, will
not violate the Certificate of Incorporation or By-laws of Seller or any
judgment, award or decree or any indenture, agreement or other instrument to
which Seller is a party, or by which Seller or the Assets are bound, or conflict
with, result in a breach of or constitute (with due notice or lapse of time or
both) a default under any such indenture, agreement or other instrument, or
result in the creation or imposition of any lien, charge, security interest or
encumbrance of any nature whatsoever upon any of the Assets, except to the
extent that (a) the effect thereof does not have a Material Adverse Effect, (b)
consents may be required for assignment of certain of the Assigned Contracts, or
(c) consents of the lessors of personal properties used in the operation of the
Business may be required.
4.4 APPROVALS. Except as set forth in Schedule 4.4, no approval, authorization,
consent or order or action of or filing with any court, administrative agency or
other governmental authority is required to be obtained by Seller for the
execution and delivery by Seller of the Transaction Documents for the
consummation by it of the Transactions.
4.5 VALUATIONS. The Valuations have been prepared in accordance with GAAP as
adjusted by the principles and methodologies set forth on Schedule 4.5.
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4.6 ABSENCE OF CERTAIN CHANGES OR EVENTS. Since March 31, 1996, through the date
hereof, except as set forth in Schedule 4.6 or as contemplated hereunder:
4.6.1 MATERIAL OBLIGATIONS. Seller has not with respect to the Business
incurred any obligation or liability (fixed or contingent), except
normal trade or business obligations and liabilities incurred in the
ordinary course of business and obligations and liabilities in
connection with the Transactions;
4.6.2 DISCHARGE OR SATISFACTION OF LIENS. Seller has not with respect
to the Business discharged or satisfied any lien security interest or
encumbrance or paid any significant obligation or liability (fixed or
contingent), other than pursuant to the terms of such obligation or in
the ordinary course of business;
4.6.3 ADDITIONAL LIENS. Seller has not with respect to the Business
mortgaged, pledged or subjected any Assets to any lien, security
interest or other encumbrance (other than of the type permitted by
Section 4.7);
4.6.4 ACQUISITION, DISPOSITION OR LOSS OF ASSETS. Seller has not with
respect to the Business transferred, leased or otherwise disposed of
any Assets, or acquired any assets or properties, except those
acquired, disposed of, sold or consumed in the ordinary course of
business, or sustained a casualty loss with respect to any material
portion of any Assets;
4.6.5 COMPROMISE OF DEBTS OR CLAIMS. Seller has not with respect to the
Business canceled or compromised any debt or claim for more than
$10,000, except in the ordinary course of business;
4.6.6 WAIVER OF MATERIAL RIGHTS. Seller has not with respect to the
Business waived or released any rights of significant value to the
Business;
4.6.7 RIGHTS IN LICENSES, TRADEMARKS, PATENTS. Seller has not with
respect to the Business transferred or granted any rights to any
Intellectual Property except to the extent embodied in products of the
Business sold in the ordinary course of business;
4.6.8 EMPLOYEE COMPENSATION. Seller has not with respect to the
Business, except as required by law, made or granted any wage or salary
increase applicable to any employee working primarily for the Business
(other than standard step or merit increases not to exceed 5%), entered
into any written employment contract with any officer or employee of
Seller working primarily for the Business or made any loan to, or
entered into any transaction of any other nature (except in the
ordinary course of business, e.g., expense account reimbursement) with
any officer or employee of Seller working primarily for the Business;
4.6.9 CONTRACTS. Seller has not with respect to the Business entered
into any Contract, except for Contracts listed in Schedule 4.6.9 and
the Transaction Documents and sales or purchases in the ordinary course
of business, or
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4.6.10 MATERIAL ADVERSE CHANGE. There has been no material adverse
change in the operations, Assets, business or condition (financial or
otherwise) of the Business.
4.7 TITLE TO PROPERTIES, ABSENCE OF LIENS AND ENCUMBRANCES. (a) Seller has good,
valid and marketable title to all of the Assets (except for leased Assets), in
each case free and clear of all mortgages, liens, charges, security interests or
other encumbrances of any nature whatsoever, other than (i) liens for taxes not
yet due, (ii) nonperfected liens of landlords, carriers, warehousemen,
mechanics, material men and others imposed by law and incurred in the ordinary
course of business consistent with past practice, and (iii) the matters set
forth on Schedule 4.7(a) hereto. Schedule 4.7(b) sets forth all accounts payable
of Seller primarily related to the Business as of June 3, 1996, which are
individually in an amount in excess of $1,000 (the "Accounts Payable").
4.8 EMPLOYEE BENEFIT PLANS. Schedule 4.8 lists all of the material employee
benefit plans and programs including, but not limited to, retirement, savings
and other pension plans ("Pension Plans"), health, severance, insurance,
disability and other employee welfare plans ("Welfare Plans") and incentive,
vacation and other similar plans that are maintained by Seller with respect to
employees of Seller working primarily for the Business (the "Employees") or to
which Seller has contributed or is now contributing on behalf of the Employees.
Seller is not a party to any multi-employer plan as defined in Section 3 (27) of
ERISA with respect to the Employees.
4.9 ASSIGNED CONTRACTS. Except as set forth on Schedule 4.9, the Assigned
Contracts constitute all Contracts that are necessary to the operation of the
Business as presently conducted. Seller has made available to Buyer true and
complete copies or summaries thereof, if Contracts are oral. Each Contract is
enforceable in accordance with its terms for the periods stated therein, and
there is no existing default or event that, with notice or lapse of time or
both, would constitute such a default under the terms thereof. There are no
claims or allegations of which Seller has knowledge made by customers or vendors
of the Business alleging any material breach, material violation or default by
Seller or the Business under any Contracts.
4.10 LITIGATION. Except as set forth in Schedule 4.10 and Schedule 4.11, there
are no actions, suits or proceedings relating to the Business (other than
actions, suits or proceedings against Seller generally which do not relate to
the ongoing business operations of the Business as they may be conducted by
Buyer after the Closing) pending or, to Seller's knowledge, threatened against
Seller at law or in equity, or before or by any federal, state or other
governmental agency or instrumentality, except as set forth in Schedule 4.10 and
Schedule 4.11. Except as set forth in Schedule 4.10, there are no orders,
judgments or decrees of any court or governmental agency that apply to the
Business or any of the Assets (other than orders, judgments or decrees which
relate to Seller generally and have no impact on the Business).
4.11 LABOR MATTERS. Except as set forth in Schedule 4.10 and Schedule 4.11,
there are no unfair labor practice or labor arbitration proceedings with respect
to the Business (other than actions, suits or proceedings against Seller
generally which do not relate to the ongoing business operations of the Business
as they may be conducted by Buyer after the Closing) pending or, to
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the Seller's knowledge threatened against Seller or the Business, and, there are
no organizational efforts presently being made or, to Seller's knowledge,
threatened involving any of Seller's employees working primarily for the
Business. Since March 31, 1996, Seller has not received notice of any claim with
respect to the Business that it has not complied with any laws relating to the
employment of labor, including any provisions thereof relating to wages, hours,
collective bargaining, the payment of social security and similar taxes, equal
employment opportunity, employment discrimination and employment safety, or that
it may be liable for any arrears of wages or any taxes or penalties for failure
to comply with any of the foregoing.
4.12 PATENT AND TRADEMARK CLAIMS. Except as set forth in Schedule 4.12, no
person has made or, to Seller's knowledge, threatened to make, any claims that
the operation of the Business is in violation or infringement of any patent,
patent license, trade name, trademark, service mark, copyright, mask work,
know-how or other proprietary or trade right of any third party. Seller owns or
has the right to use all patents, patent licenses, trade names, trademarks,
service marks, copyrights, mask works and know-how which are necessary to
conduct the Business as presently being conducted, all of which patents, patent
licenses, trade names, trademarks, service marks and mask works are listed on
Schedule 2.1.2. Seller has not violated or infringed the intellectual property
rights of any third party and the Intellectual Property does not infringe rights
of any third party.
4.13 USE OF LEASED REAL PROPERTY. Seller has not received notice of any material
violation of any applicable zoning or building regulation ordinance relating to
the Leased Real Property and, there is not such a violation.
4.14 INSURANCE AND CERTIFICATES OF INSURANCE. Set forth in Schedule 4.14 is a
complete list of Seller's insurance and certificates of insurance (including the
terms of any self insurance plan) which relate in any way to the Assets or to
any liability in any way associated to the Assets.
4.15 COMPLIANCE WITH LAW. Except as set forth in Schedule 4.15, Seller is not in
default with respect to any order of any court or governmental authority to
which Seller is subject and which applies to the Business or the Assets. To its
knowledge, Seller has operated the Business, and the operation of the Business
is in compliance with all laws, regulations, orders, judgments, or decrees of
any federal, state local or foreign court or governmental authority applicable
to the Business or the Assets including, but not limited to, those related to
antitrust and trade matters, civil rights, zoning and building codes, public
health and safety, worker health and safety and labor and nondiscrimination, the
failure to comply with which could have a Material Adverse Effect, and Seller
has not received any notice alleging non-compliance with any of the
aforementioned laws, regulations, orders, judgments or decrees.
4.16 ENVIRONMENTAL MATTERS.
(a) Seller has obtained all permits, licenses and other authorizations
which are presently required under Environmental Laws with respect to
the current operation of the business of the Business or the Assets.
Seller is in compliance with all terms and conditions of the presently
required governmental permits, licenses and authorizations under the
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Environmental Laws with respect to the Business or the Assets, except
as would not have a Material Adverse Effect.
(b) Seller has not received (i) any notice of any pending or threatened
civil, criminal or administrative action, suit, demand, claim or
hearing under any Environmental Law relating in any way to the Business
or the Assets, or (ii) any notice of violation, investigation,
proceeding, notice or demand letter in respect of the Business or the
Assets, in each case, relating to Environmental Laws or any extant
regulation, code, plan, order, decree, judgment, injunction, notice or
demand letter issued, entered, promulgated or approved thereunder,
which remains unresolved or uncured.
(c) To Seller's knowledge, there has been no occurrence of any storage,
holding, existence, release, emission, discharge, generation,
processing, abatement, removal, disposition, handling or transportation
of any Hazardous Substance from, under, into or on any real property
occupied or leased in respect of the Business or the Assets which has
resulted in the violation by Seller in respect of the Business or the
Assets of any applicable Environmental Laws.
4.17 ASSETS. The Assets constitute all of the assets and properties used
primarily by the Business as of May 23, 1996, except as to (a) Assets, sold,
disposed of or consumed in the ordinary course of business since such date and
(b) the Excluded Assets.
4.18 COMMISSIONS. Neither Seller nor any of its directors, officers, employees
or agents have employed, or incurred any liability to, any broker, finder or
agent for any brokerage fees, finder's fees, commissions or other amounts with
respect to the Transactions.
4.19 WARRANTIES. Schedule 4.19 contains (i) true and complete copies of all
standard forms of written warranties currently in effect covering the products
and services of the Business, and all other warranties that deviate from such
standard forms, and (ii) a schedule which fairly presents the warranty expenses
for the products and services of the Business for the year ended December 31,
1995 and the three months ended March 31, 1996.
5. REPRESENTATIONS AND WARRANTIES OF BUYER.
As an inducement for Seller to enter into this Agreement, Buyer represents and
warrants to Seller that each of the following statements is true and correct as
of the date hereof:
5.1 ORGANIZATION, CORPORATE POWER AND AUTHORITY. Buyer is a corporation duly
organized, validly existing and in good standing under laws of the State of
California and is duly qualified to do business as a foreign corporation in the
jurisdictions in which Buyer conducts its business, except where the failure so
to qualify will not preclude Buyer's ability to perform its obligations under
the Transaction Documents and, after the Closing, to use the Assets and operate
the Business. Buyer has all requisite corporate power and authority to acquire,
own, and/or lease the
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Assets, to conduct the business of the Business, to execute and deliver the
Transaction Documents to which it is a party and to perform its obligations
thereunder.
5.2 AUTHORIZATION OF AGREEMENT. The execution, delivery and performance by Buyer
of the Transaction Documents to which it is a party, and the consummation by it
of the Transactions, have been duly authorized by all necessary corporate action
by Buyer. This Agreement has been, and each other Transaction Document to which
Buyer is a party will be at the Closing, duly executed and delivered by Buyer
and constitutes or will, when delivered, constitute, the legal, valid and
binding obligations of Buyer, enforceable against Buyer in accordance with its
respective terms.
5.3 EFFECT OF AGREEMENT. The execution, delivery and performance by Buyer of the
Transaction Documents to which it is a party, and the consummation by it of the
Transactions, will not violate the Certificate of Incorporation or By-laws of
Buyer or any judgment, award or decree or any indenture, agreement or other
instrument to which Buyer is a party, or by which Buyer or its properties or
assets are bound, or conflict with, result in a breach of or constitute (with
due notice or lapse of time or both) a default under, any such indenture,
agreement or other instrument, or result in the creation or imposition of any
lien, charge, security interest or encumbrance of any nature whatsoever upon any
of the properties or assets of Buyer, except to the extent the effect thereof
will not preclude Buyer's ability to fulfill its obligations under the
Transaction Documents to which it is a party, and, after the Closing, to use the
Assets and operate the business of the Business.
5.4 GOVERNMENTAL APPROVALS. Except as set forth in Schedule 5.4, no approval,
authorization, consent or order or action of or filing with any court,
administrative agency or other governmental authority is required to be obtained
by Buyer for the execution and delivery by Buyer of the Transaction Documents to
which it is a party or the consummation by it of the Transactions.
5.5 COMMISSIONS. Neither Buyer nor any of its directors, officers, employees or
agents have employed, or incurred any liability to, any broker, finder or agent
for any brokerage fees, finder's fees, commissions or other amounts with respect
to the Transactions.
5.6 FINANCING. Buyer has available cash under presently existing and enforceable
credit lines that is sufficient to consummate the Transactions. No other
financing is required to enable Buyer to consummate the Transactions.
6. COVENANTS OF SELLER.
6.1 CONDUCT OF BUSINESS. During the period from the date hereof to the Closing
Date, unless Buyer first consents in writing, Seller shall:
6.1.1 ORDINARY COURSE. Conduct the business of the Business only in the
ordinary and usual course, and use all commercially reasonable efforts
to preserve the Assets,
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including its relationships with licensors, suppliers, dealers,
customers, employees and others having business relationships with
Business. Seller's management will meet with Buyer on a regular basis
at Buyer's request to discuss the general status of the ongoing
operations of the Business and any problems relating to the conduct of
it business. Seller will notify Buyer of any of the following occurring
after the date hereof of which Seller has knowledge: (a) any material
change in the conduct of the Business or operations of the Business,
(b) the threat or initiation of any litigation against Seller which
relates to the Business or Assets and (c) the initiation of any
investigation of the Business by any governmental agency or body.
Seller will keep Buyer fully informed of developments with respect to
such events of which Seller has knowledge and afford Buyer's
representatives reasonable access to all materials in Seller's
possession relating thereto;
6.1.2 PRESERVATION OF GOODWILL. Use all reasonable commercial efforts
to preserve the goodwill of those of its suppliers, customers and
distributors having business relations with the Business;
6.1.3 MAINTAIN INSURANCE. Maintain all insurance coverage existing as
of the date hereof, or substantially equivalent coverage, which relates
in any way to the Assets or to any liability in any way associated to
the Assets, and in the event of any significant change to such
insurance coverage Seller shall immediately notify Buyer in writing
thereof;
6.1.4 SALE OF ASSETS. Not transfer or encumber any of the Assets except
for sales of inventory in the ordinary course of business consistent
with past practice and any transfer or encumbrance of other assets
having a then fair market value not in excess of $5,000 in the
aggregate in the ordinary course of business consistent with past
practice;
6.1.5 MAINTENANCE OF ASSETS. Maintain the Assets, in the aggregate, in
a condition comparable to their current condition, reasonable wear,
tear and depreciation excepted, and except for Assets disposed of, sold
or consumed in the ordinary course of business;
6.1.6 ASSIGNED CONTRACTS. Not amend any Assigned Contract other than in
the ordinary course or default on any Assigned Contract, or enter into
any Contract;
6.1.7 EMPLOYMENT CONTRACTS. Subject to Section 4.6.8, not enter into
any employment contract with any Employees or increase the compensation
of any Employees of the Business; or
6.1.8 CAPITAL SPENDING. Not make or commit to make capital expenditures
with respect to the Business in an aggregate amount of more than
$25,000.
6.1.9 PURCHASE ORDER. Not sign a purchase order with respect to the
Business in an aggregate amount of more than $25,000.
6.1.10 ENCUMBRANCE. Not encumber the Assets in any way.
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6.1.11 COMPLIANCE. Comply in all material respects with all laws set
forth in Section 4.15.
6.2 ACCESS. Seller will (a) during ordinary business hours and upon reasonable
notice from Buyer, permit Buyer and its authorized representatives to have
access to all Assets, officers, Contracts, books and records of the Business,
(b) furnish, as soon as reasonably practicable, to Buyer or its authorized
representatives such financial, operating and other information in Seller's
possession with respect to the Business as Buyer may from time to time
reasonably request, and (c) otherwise reasonably cooperate in the examination or
audit of the Business by Buyer.
6.3 PERMITS AND CONSENTS. As promptly as practicable, whether prior to or after
the Closing, Seller shall make all filings with governmental bodies and other
regulatory authorities and obtain all permits, approvals, authorizations and
consents of all third parties, required for Seller to consummate the
Transactions. Buyer shall furnish promptly to Seller all information that is in
Buyer's possession and not otherwise available to Seller that Seller may
reasonably request in connection with any such filing to be made by Seller.
Seller shall use all commercially reasonable efforts to obtain such consents to
the assignment of the Assigned Contracts and the sublease of the Leased Real
Property in San Jose, California as may be required.
6.4 NONSOLICITATION. Seller agrees that for a period of three (3) years after
the Closing, Seller will not directly solicit (on the Seller's own behalf or on
behalf of any other person or entity) any employee of Buyer to leave his or her
employment with Buyer.
6.5 COMMERCIALLY REASONABLE EFFORTS REGARDING LEASED FACILITY. Seller agrees to
use its commercially reasonable efforts to obtain the consent of Seller's
landlord to sublease of the Leased Facility in San Jose, California as described
in Section 8.1.10.
7. COVENANTS OF BUYER.
7.1 PERMITS AND CONSENTS. As promptly as practicable, Buyer will make all
filings with governmental bodies and other regulatory authorities required in
connection with the Transactions. Seller shall promptly furnish to Buyer all
information that is in Seller's possession and not otherwise available to Buyer
which Buyer may reasonably request in connection with any such filing to be made
by Buyer. Buyer shall use all commercially reasonable efforts to make all such
filings and obtain such related permits and consents required in connection with
the Transactions.
7.2 ACCESS TO BOOKS AND RECORDS. Buyer shall maintain for a period of five (5)
years all original books, records, files, documents, papers and agreements
pertaining to the Assets, the Assumed Liabilities or otherwise to the business
of the Business before the Closing. After the Closing, Buyer shall provide
Seller after reasonable notice from Seller, with reasonable access to such
original documents. If, at any later time, Buyer shall want to destroy such
records, Buyer shall first offer to deliver the same to Seller at the expense of
Seller.
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7.3 NONSOLICITATION. Buyer agrees that for a period of three (3) years after the
Closing, Buyer will not directly solicit (on the Buyer's own behalf or on behalf
of any other person or entity) any employee of Seller (other than Rehired
Employees) to leave his or her employment with Seller.
7.4 COMMERCIALLY REASONABLE EFFORTS REGARDING LEASED FACILITY. Buyer agrees to
use its commercially reasonable efforts to cooperate with Seller to obtain the
consent of Seller's landlord to sublease of the Leased Facility in San Jose,
California as described in Section 8.1.10.
8. CONDITIONS PRECEDENT.
8.1 CONDITIONS PRECEDENT TO OBLIGATIONS OF BUYER. The obligations of Buyer under
this Agreement are subject, at the option of Buyer, to the satisfaction or
waiver of each of the following conditions on or prior to the Closing Date:
8.1.1 ACCURACY OF REPRESENTATIONS AND WARRANTIES; NO MATERIAL ADVERSE
CHANGE. The representations and warranties of Seller contained in this
Agreement or in any certificate delivered to Buyer pursuant hereto
shall each be true and correct in all material respects on and as of
the Closing Date as though made at and as of that date (except where
such representation and warranty is made as of a date specifically set
forth therein); there shall have been no material adverse change from
the date of this Agreement in the operations, earnings, Assets,
properties, business or condition (financial or otherwise) of the
Business, and Seller shall have delivered to Buyer a certificate to
that effect;
8.1.2 COMPLIANCE WITH COVENANTS. Seller shall have performed and
complied in all material respects with all terms, agreements, covenants
and conditions of this Agreement to be performed or complied with by it
at the Closing Date, and Seller shall have delivered to Buyer a
certificate to that effect;
8.1.3 OPINION OF COUNSEL FOR SELLER. Buyer shall have received the
favorable opinion of Cooley Godward Castro Huddleson & Tatum, counsel
to Seller, dated the Closing Date, in the form attached as Exhibit E.
8.1.4 LEGAL ACTIONS OR PROCEEDINGS. No legal action or proceeding shall
have been instituted or threatened by any third party seeking to
restrain, prohibit, invalidate or otherwise materially and adversely
affect the consummation of the Transactions;
8.1.5 CONSENTS OBTAINED. Each Party hereto shall have obtained all
material significant consents and approvals required to be obtained by
them from any governmental authority and the consents set forth on
Schedule 8.1.5 hereto; provided, that if consent is not obtained with
respect to any Assigned Contract or Schedule 8.1.5, Seller shall
subcontract to Buyer its rights and obligations under such Assigned
Contract on substantially the same terms and conditions as such
Assigned Contract;
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8.1.6 OTHER TRANSACTION DOCUMENTS. Seller shall have executed and
delivered to Buyer original counterparts of each Transaction Document
to which it is a party; and
8.1.7 STOCK OPTIONS. Seller shall have granted or amended stock options
as set forth on Schedule 8.1.7.
8.1.8 RELATIONSHIPS. (a) Buyer shall not have delivered written notice
to Seller prior to June 14, 1996, stating that Buyer is not satisfied
that the business relationships with NAGRA and IRDETO will not be
adversely affected by the consummation of the Transaction; and (b)
Buyer shall be reasonably satisfied that Jabil Circuits, Inc. will have
no claims against any of the Assets as of the Closing.
8.1.9 KEY EMPLOYEES. Buyer shall be reasonably satisfied regarding the
terms set forth in a letter agreement relating to certain employment
matters (the "Employee Letter") dated June 7, 1996.
8.1.10 SATISFACTORY ARRANGEMENT REGARDING THE LEASED FACILITY IN SAN
JOSE, CA. Seller shall have, with the consent of its landlord, entered
into a sublease for Buyer relating to the Leased Facility in San Jose,
California on the same terms and conditions as those of the underlying
lease, or Buyer and Seller shall have reached a mutually agreeable
arrangement for Seller to obtain the use and benefit of the Leased
Facility in San Jose, California in a commercially appropriate manner.
8.1.11 VIRTEX AGREEMENTS. The Release and the License Agreement, each
between Seller and Corporate Computer Systems, Inc. (the "Virtex
Agreements") in the form previously approved by Buyer, shall have been
executed by the parties thereto.
8.2 CONDITIONS PRECEDENT TO OBLIGATIONS OF SELLER. The obligations of Seller
under this Agreement are subject, at the option of Seller, to the satisfaction
or waiver of each of the following conditions at or prior to the Closing Date:
8.2.1 ACCURACY OF REPRESENTATIONS AND WARRANTIES. The representations
and warranties of Buyer contained in this Agreement or in any
certificate or document delivered to Seller pursuant hereto shall be
true and correct in all material respects on and as of the Closing Date
as though made at and as of that date (except where such representation
and warranty is made as of a date specifically set forth therein), and
Buyer shall have delivered to Seller a certificate to such effect;
8.2.2 COMPLIANCE WITH COVENANTS. Buyer shall in all respects have
performed and complied in all material respects with all terms,
agreements, covenants and conditions of this Agreement to be performed
or complied with by it at the Closing Date, and Buyer shall have
delivered to Seller a certificate to that effect;
8.2.3 OPINION OF COUNSEL FOR BUYER. Seller shall have received the
favorable opinion of in-house counsel to Buyer, dated the Closing Date,
in the form attached as Exhibit F.
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8.2.4 RESALE CERTIFICATE. Seller shall have received a Resale
Certificate exempting Seller from paying sales tax on the Inventory;
8.2.5 LEGAL ACTIONS OR PROCEEDINGS. No legal action or proceeding shall
have been instituted or threatened by any third party seeking to
restrain, prohibit, invalidate or otherwise materially and adversely
affect the consummation of the Transactions;
8.2.6 PURCHASE PRICE. Buyer shall have delivered the portion of the
Purchase Price required by Section 3.3;
8.2.7 OTHER TRANSACTION DOCUMENTS. Buyer shall have executed and
delivered to Seller original counterparts of each Transaction Document
to which it is a party.
9. SURVIVAL OF REPRESENTATIONS; INDEMNIFICATION.
9.1 SURVIVAL OF REPRESENTATIONS. The representations and warranties set forth in
Sections 4.2 and 5.2 shall survive indefinitely. All other representations or
warranties contained herein except as set forth in Sections 9.2.3 shall survive
for a period of two (2) years from the Closing Date and shall then expire.
9.2 AGREEMENTS TO INDEMNIFY.
9.2.1 SELLER INDEMNITY. Subject to the terms and conditions of this
Section 9, Seller hereby agrees to indemnify, defend and hold Buyer
harmless from and against all Losses incurred by Buyer and Buyer's
parents, subsidiaries, employees, directors, officers, shareholders and
agents resulting form (a) a breach of any representation, warranty or
covenant of Seller made in this Agreement or (b) the failure of Seller
to pay, perform and discharge when due the Excluded Liabilities or (c)
for any claim arising from an event related to the Assets or the
operations of the Business and occurring prior to the Closing Date.
Notwithstanding the foregoing, indemnification shall be available to
Buyer to the extent that it relates to any matter agreed upon in
determining the Final Valuations and which has resulted in a Purchase
Price Adjustment pursuant to Section 3.2.
9.2.2 BUYER INDEMNITY. Subject to the terms and conditions of this
Section 9, Buyer hereby agrees to indemnify, defend and hold Seller
harmless from and against all Losses incurred by Seller and Seller's
employees, directors, officers, shareholders and agents resulting from
(a) a breach of any representation, warranty or covenant of Buyer made
in this Agreement, or (b) the failure of Buyer to pay, perform and
discharge when due the Assumed Liabilities, or (c) any claim arising
from an event relating to the Assets or the operations of the Business
and occurring after the Closing Date.
9.2.3 ENVIRONMENTAL INDEMNIFICATION. Seller hereby agrees to indemnify,
defend and hold Buyer harmless from and against Environmental Losses
incurred by Buyer and
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Buyer's parents, subsidiaries, employees, directors, officers,
shareholders and agents resulting from (a) Government Agency orders or
demands or (b) claims asserted by third parties, either of which result
from a violation of applicable Environmental Law by Seller with respect
to the Business or the Assets, or the existence, release or off-site
shipment of Hazardous Substances by Seller with respect to the Business
or the Assets, prior to the Closing and relating to operations of, or
Assets or other property owned or used by, the Business or Seller in
connection with the Business. The indemnification provided in this
Section 9.2.3 shall survive for a period of three (3) years from the
Closing Date and shall then expire. Upon the expiration of such
indemnification, the indemnification provisions of this Section 9.2.3
shall be deemed of no further force or effect and no action may be
brought thereafter against Seller in respect of any Environmental Loss
except with respect to any pending or noticed indemnification claims.
9.3 CONDITIONS OF INDEMNIFICATION. The respective obligations and liabilities of
the Indemnifying Party to the Indemnified Party under Section 9.2 shall be
subject to the following terms and conditions:
9.3.1 An Indemnifying Party will have no liability with respect to any
amount for indemnification claims under Section 9.2.1(a) or Section
9.2.2(a), as applicable, unless and until the aggregate amount of such
obligations exceeds $100,000, and then only for the amount by which
such obligations exceed $100,000. The obligations of an Indemnifying
Party for indemnification claims under Section 9.2.1(a) or Section
9.2.2(a), as applicable, may not exceed, in the aggregate, $5,375,000.
9.3.2 NOTICE. Within 30 days after receipt of notice of commencement of
any action or the written assertion of any claim by a third party (but
in any event at least ten days preceding the date on which an answer or
other pleading must be served in order to prevent a judgment by default
in favor of the party asserting the claim), the Indemnified Party shall
give the Indemnifying Party written notice (the "Claim Notice") thereof
together with a copy of such claim, process or other legal pleading,
and the Indemnifying Party shall have the right to undertake the
defense thereof by representatives of its own choosing that are
reasonably satisfactory to the Indemnified Party provided, that in no
event, shall the Indemnifying Party compromise or settle any claim in a
manner adverse to the interest of the Indemnified Party without the
Indemnified Party's express written consent, which shall not be
unreasonably withheld;
9.3.3 FAILURE TO ASSUME DEFENSE. If the Indemnifying Party, by the
fifth day after receipt of notice of any such claim (or, if earlier, by
the fifth day preceding the day on which an answer or other pleading is
scheduled to be served), does not elect in written notice delivered to
the Indemnified Party to defend against such claim, the Indemnified
Party will (upon no further notice to the Indemnifying Party) have the
right to undertake the defense, compromise or settlement of such claim
on behalf of and for the account and risk of the Indemnifying Party;
provided, however, that the Indemnified Party shall not settle or
compromise such claim without the Indemnifying Party's consent, which
consent shall not be unreasonably withheld;
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9.3.4 FAILURE OF NOTICE. If there is no material adverse effect from
the failure to provide timely notice, such failure will have no impact
on the right to indemnity;
9.3.5 COOPERATION. In connection with any such indemnification, the
Indemnified Party will cooperate with all reasonable requests of the
Indemnifying Party; and
9.3.6 DISPUTE RESOLUTION.
(a) Within forty-five (45) days after the delivery of a Claim
Notice to the Indemnifying Party, pursuant to Section 9.3.1, the
Indemnifying Party shall deliver to the Indemnified Party a
notice (the "Response Notice") describing any portions of the
Claim Notice conceded by the Indemnifying Party and identifying
all aspects of the Claim Notice in dispute (such disputed
portion, whether the dispute involves the existence or the amount
of liability, is referred to herein as the "Disputed Amount"). If
no Response Notice is received by the Indemnified Party from the
Indemnifying Party within forty-five (45) days after the delivery
of a Claim Notice to the Indemnifying Party, then the
Indemnifying Party shall be deemed to have agreed that the entire
amount set forth in the Claim Notice is conceded.
(b) In the event that any Response Notice indicates that there is
a Disputed Amount, the Indemnifying Party and the Indemnified
Party shall, for a period of sixty (60) days, attempt in good
faith to resolve the rights of the respective parties with
respect to such claims.
(c) If no such agreement can be reached within such sixty (60)
day period, either party may demand non-binding mediation of the
matter unless the amount of the Losses at issue is the subject of
pending litigation (or alternative dispute resolution) with a
third party, in which event mediation shall not be commenced
until such litigation is concluded or both parties request
mediation.
10. TERMINATION. This Agreement may be terminated at any time on or prior to the
Closing Date under the following circumstances:
10.1 INJUNCTION. By either party if any court of competent jurisdiction in the
United States shall have issued an order (other than a temporary restraining
order), decree or ruling or taken any other action restraining, enjoining or
otherwise prohibiting the Transactions and such order, decree, ruling or other
action shall have become final and non-appealable.
10.2 MUTUAL AGREEMENT. By mutual written agreement of the parties.
10.3 TERMINATION DATE. By either party if the Closing shall not have occurred on
or before June 30, 1996.
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10.4 MATERIAL BREACH. By either Buyer or Seller, if there has been a material
breach on the part of the other party in its representations, warranties or
covenants set forth herein; provided, however, that if such breach is
susceptible to cure the breaching party shall have ten (10) business days after
receipt of notice from the other party of its intention to terminate this
Agreement in which to cure such breach.
10.5 EFFECTS OF TERMINATION. If this Agreement is terminated pursuant to Section
10, all obligations of the parties hereunder (except for this Section and
Sections 11.1, 12.2, 12.8, 12.9 and 12.10) shall terminate without liability of
any party to any other party. Nothing contained in this Section 10.5 shall
relieve any party of liability for any breach of this Agreement occurring prior
to the date of termination of this Agreement.
11. OTHER COVENANTS.
11.1 ANNOUNCEMENTS. Each party agrees not to make, nor cause to be made, any
news releases or other public announcements pertaining to the Transactions
without first consulting the other party and attempting to formulate a mutually
satisfactory arrangement for such disclosure, and, in any case, will not make an
announcement thereafter without the written consent of the other unless and to
the extent required by applicable law.
11.2 EMPLOYEES.
(a) REHIRED EMPLOYEES. Seller has delivered to Buyer a list of all of
the employees of Seller who are employed by the Business as of the most
recent date for which such information is available. Seller has
afforded or will afford Buyer's representatives access to its existing
employees between the date hereof and the Closing in order to afford
Buyer the opportunity to offer employment with Buyer after the Closing
to any of such persons, whether salaried or hourly employees, and
Yangbin Wang and Paul Haskill, and the employees listed in Section
11.2(d). Such employees who are offered employment and elect to become
employees of Buyer are hereinafter referred to as "Rehired Employees"
and shall be deemed to have become employees of Buyer as of the time
the Closing becomes effective. Seller will offer cash bonuses to
certain employees of the Business, which will be payable if such
employees continue to be employed by Buyer for one year following the
Closing.
(b) EMPLOYEE BENEFIT PLANS. Buyer will permit each salaried employee
and each hourly employee of the Business who becomes a Rehired Employee
to participate, on the same basis that Buyer's employees participate,
in the employee benefit plans and programs regularly made available to
employees of Buyer who hold similar positions in the same or comparable
division. Buyer agrees to provide at least one group health plan and
one group dental plan to the Rehired Employees. Buyer will treat
service by any Rehired Employee with Seller prior to the Closing as
service with Buyer for purposes of vesting and participating in the
General Instrument Corporation Savings Plan (the "Savings Plan") and
the General Instrument Corporation Pension Plan for Salaried and Non
Union
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Employees (the "Pension Plan") (but not for the purpose of the accrual
of benefits under the Pension Plan). The Rehired Employees' accrual of
benefits under the Pension Plan shall be based solely on their service
with Buyer after the Closing. No assets or liabilities with respect to
Rehired Employees shall be transferred, as a result of this Agreement,
from any of Seller's employee benefit plans applicable to the employees
of the Business to any plan maintained or established by the Buyer.
Seller shall retain all obligations to fund or otherwise provide
benefits accrued by Rehired Employees under its benefit plans prior to
the Closing. Benefits under the plans retained by Seller shall
constitute the only benefits to which the Rehired Employees are
entitled with respect to their service with Seller prior to the
Closing.
(c) WORKER'S COMPENSATION. Buyer will assume the responsibility for all
worker's compensation claims made by Rehired Employees arising from
events occurring after the Closing. Seller will retain the
responsibility for all worker's compensation claims made by its
employees or former employees (whether or not Rehired Employees) that
arise from events that occur before the Closing.
(d) VACATION PAY. Buyer shall assume all liability for accrued vacation
and unpaid vacation and accumulated time toward sabbatical pay of
Rehired Employees upon the Closing (the "Vacation Accrual").
(e) COBRA. Seller's plans shall be responsible for all obligations
under Internal Revenue Code Section 4980B and ERISA Section 601
("COBRA") with respect to qualifying events of Rehired Employees and
their dependents through the date of the Closing.
(f) WITHHOLDING. With respect to withholding, FICA and similar tax
information applicable to the Rehired Employees, Buyer and Seller
hereby accept the alternative procedure described in Section 5 of the
Revenue Procedure 84-77 as promulgated by the Internal Revenue Service.
(g) OTHER LIABILITIES RELATING TO EMPLOYEES. Except to the extent
specifically addressed in this Section, Buyer will not assume any
obligations or liabilities with respect to (i) any pension plan,
welfare plan or other employee benefit plan or program relating to any
present, former or retired employees of Seller (including, without
limitation, any life, health, dental or disability insurance benefit
for retired employees of the Business, and any life, health, dental or
disability claims incurred prior to Closing even if not reported until
after Closing), or (ii) any severance or separation obligation which
may result from the consummation of the Transactions contemplated by
this Agreement.
(h) ADMINISTRATION. If, as a result of the Transactions contemplated by
this Agreement, reports are required to be filed with respect to any of
Seller's benefit plans, Seller will file such reports.
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(i) CONSULTING AGREEMENT. Seller will make available to Buyer
approximately 25 percent (25%) of the working time of one of its
employees, Wen Chen, to act as consultant to Buyer for a period of one
year. Buyer shall pay to Seller $200 per hour for consulting services
provided by Wen Chen, unless Buyer commits at the time of entering into
a consulting agreement with Seller to use Wen Chen as a consultant for
the entire 25% of such working time, in which case Buyer shall pay to
Seller $175 per hour for such consulting services. All benefits arising
from the work done under such consulting agreement shall be for the
benefit of Buyer.
(j) OTHER EMPLOYEE AGREEMENT. Seller will give to Buyer the necessary
permission and make all necessary filings or applications under the law
of the Peoples Republic of China to offer employment to Jason Xie,
Kitty Sun, Joyce Zho, Bob Liu and Tramond Wu in Seller's China office.
11.3 COOPERATION. Each party hereto agrees, both before and after the Closing,
to execute any and all further documents and writings and perform such other
reasonable actions which may be or become necessary or expedient to effectuate
and carry out the Transactions (which shall not include any obligation to make
payments).
11.4 TAX COOPERATION. After the Closing, the parties shall, and shall cause
their respective Affiliates to, cooperate with each other in the preparation of
all tax returns and shall provide, or cause to be provided, to such other party
any records and other information reasonably requested by such party in
connection therewith as well as access to, and the cooperation of, the auditors
of such other party and its Affiliates. After the Closing, the parties shall,
and shall cause their respective Affiliates to, cooperate with the other party
in connection with any tax investigation, tax audit or other tax proceeding
relating to the Business. Any information obtained pursuant to this Section
relating to taxes shall be kept confidential by the other party.
12. MISCELLANEOUS.
12.1 BULK TRANSFER LAWS. Subject to Section 9.2, the parties hereto hereby waive
compliance with any applicable bulk transfer laws, including, but not limited
to, the bulk transfer provisions of the Uniform Commercial Code of any state, or
any similar statute, with respect to the Transactions contemplated hereby.
12.2 EXPENSES. Except as contemplated by Sections 3.8 and 10.5, whether or not
the Transactions are consummated, neither of the parties hereto shall have any
obligation to pay any of the fees and expenses of the other party incident to
the negotiation, preparation, execution of the Transaction Documents, or the
closing of the Transactions, including, but not limited to, the fees and
expenses of counsel, accountants, investment bankers and other experts.
12.3 WAIVERS. Either party may, by written notice to the other party, (a) extend
the time for the performance of any of the obligations or other actions of the
other party under this Agreement; (b) waive any inaccuracies in the
representations or warranties of the other party contained in this Agreement;
(c) waive compliance with any of the conditions or covenants of the other
contained
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in this Agreement; or (d) waive performance of any of the obligations of the
other under this Agreement. With regard to any power, remedy or right provided
herein or otherwise available to any party hereunder, (i) no waiver or extension
of time will be effective unless expressly contained in a writing signed by the
waiving party, and (ii) no alteration, modification or impairment will be
implied by reason of any previous waiver, extension of time, or delay or
omission in exercise of rights or other indulgence.
12.4 AMENDMENTS, SUPPLEMENTS. This Agreement may be amended or supplemented at
any time by the mutual written consent of the parties.
12.5 ENTIRE AGREEMENT. This Agreement, its exhibits and schedules, the documents
incorporated by reference, and the documents executed on the Closing Date in
connection herewith, constitute the entire agreement, including without
limitation the Letter of Intent dated March 22, 1996, in its entirety, between
the parties hereto with respect to the subject matter hereof and supersede all
prior agreements and understandings, oral and written, between the parties
hereto with respect to the subject matter hereof. No representation, warranty,
promise, inducement or statement of intention has been made by either party that
is not embodied in this Agreement or such other documents, and neither party
shall be bound by, or be liable for, any alleged representation, warranty,
promise, inducement or statement of intention not embodied herein or therein.
12.6 BINDING EFFECT, BENEFITS. This Agreement shall inure to the benefit of and
be binding upon the parties hereto and their respective permitted successors and
assigns. Notwithstanding anything contained in this Agreement to the contrary,
nothing in this Agreement, expressed or implied, is intended to confer on any
person other than the parties hereto or their respective permitted successors
and assigns, any rights, remedies, obligations or liabilities under or by reason
of this Agreement.
12.7 ASSIGNABILITY. Neither this Agreement nor any of the parties' rights
hereunder shall be assignable by either party except to an affiliate or
subsidiary without the prior written consent of the other party.
12.8 NOTICES. All notices under this Agreement will be in writing and will be
delivered by personal service or telegram, telecopy or certified mail (if such
service is not available, then by first class mail), postage prepaid, or
overnight courier to such address as may be designated from time to time by the
relevant party, and which will initially be as set forth below. All notices will
be deemed given when received. No objection may be made to the manner of
delivery of any notice actually received in writing by an authorized agent of a
party. Notices will be addressed as follows or to such other address as the
party to whom the same is directed will have specified in conformity with the
foregoing:
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(a) If to Buyer:
Charger Industries, Inc.
c/o General Instrument Corporation of Delaware
8770 W. Bryn Mawr Avenue
Suite 1300
Chicago, IL 60631
(312) 695-1100
Attention: Richard C. Smith
with a copy to:
General Instrument Corporation of Delaware
8770 W. Bryn Mawr Avenue
Suite 1300
Chicago, IL 60631
(312) 695-1100
Attn: General Counsel
(b) If to Seller:
Compression Labs, Incorporated
2860 Junction Avenue
San Jose, CA 95134
(408) 435-3000
Attention: T. Gary Trimm
with a copy to:
Cooley Godward Castro Huddleson & Tatum
Five Palo Alto Square
3000 El Camino Real
Palo Alto, CA 94306
(415) 843-5000
Attention: Craig E. Dauchy
12.9 GOVERNING LAW; JURISDICTION. This Agreement has been negotiated and entered
into in the State of California, and all questions with respect to the Agreement
and the rights and liabilities of the parties will be governed by the laws of
that state, regardless of the choice of laws provisions of California or any
other jurisdiction. Any and all disputes between the parties which may arise
pursuant to this Agreement may be heard and determined before an appropriate
federal or state court located in the State of California. The parties hereto
acknowledge that such court has the jurisdiction to interpret and enforce the
provisions of this Agreement and the parties waive any and all objections that
they may have as to jurisdiction or venue in any of the above courts.
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12.10 ATTORNEYS' FEES. If any litigation is commenced (including any proceedings
in a bankruptcy court) between the parties hereto or their representatives
concerning any provision of this Agreement or the rights and duties of any
person or entity hereunder, solely as between the parties hereto or their
successors, the party or parties prevailing in such proceeding will be entitled
to the reasonable attorneys' fees and expenses of counsel and court costs
incurred by reason of such litigation.
12.11 EQUITABLE REMEDIES. Seller and Buyer acknowledge the remedy at law for any
breach, or threatened breach, of their respective covenants to consummate the
Transactions will be inadequate and, accordingly, each covenants and agrees
that, with respect to any such breach or threatened breach, the other will, in
addition to any other rights or remedies that it may have and regardless of
whether such other rights or remedies have been previously exercised, be
entitled to such equitable and injunctive relief as may be available from an
appropriate court referred to in Section 12.9. Notwithstanding the foregoing
sentence, any monetary damages which are all or a portion of any equitable
relief granted hereunder shall be subject to the limitations set forth in
Section 9.
12.12 RULES OF CONSTRUCTION.
12.12. 1 HEADINGS. The section headings in this Agreement are inserted
only as a matter of convenience, and in no way define, limit, or extend
or interpret the scope of this Agreement or of any particular section.
12.12.2 TENSE, GENDER AND CASE. Throughout this Agreement, as the
context may require , references to any word used in one tense or case
shall include all other appropriate tenses, genders or cases.
12.12.3 SEVERABILITY. The validity, legality or enforceability of the
remainder of this Agreement will not be affected even if one or more of
the provisions of this Agreement will be held to be invalid, illegal or
unenforceable in any respect.
12.12.4 AGREEMENT NEGOTIATED. The parties hereto are sophisticated and
have been represented by lawyers hereto who are sophisticated and have
been represented by lawyers throughout the Transactions who have
carefully negotiated the provisions hereof. As a consequence, the
parties do not believe the presumption of California Civil Code Section
1654 and similar laws or rules relating to the interpretation of
contracts against the drafter of any particular clause should be
applied in this case therefore waive its effects.
12.13 COUNTERPARTS. This Agreement may be executed in two or more counterparts,
each of which shall be deemed an original, but all of which together shall
constitute one and the same instrument.
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IN WITNESS WHEREOF, this Asset Purchase Agreement has been duly executed and
delivered by the duly authorized officers of the parties hereto as of the date
first above written.
BUYER
Charger Industries, Inc.
a California corporation
By: /s/ RICHARD C. SMITH
-----------------------------------
Name: Richard C. Smith
Its: Vice President, Taxes and Treasurer
SELLER
Compression Labs, Incorporated,
a Delaware corporation
By: /S/ T. GARY TRIMM
------------------------------------
Name: T. Gary Trimm
Its: President and Chief Executive Officer
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