<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------
FORM 10-Q
(Mark One)
[x] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934.
For the quarterly period ended June 30, 1996
or
[ ] Transition Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934.
For the transition period from ______to ______
Commission file number: 0-18391
ASPECT TELECOMMUNICATIONS CORPORATION
(Exact name of registrant as specified in its charter)
California 94-2974062
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1730 Fox Drive, San Jose, California 95131-2312
(Address of principal executive offices and zip code)
Registrant's telephone number: (408) 325-2200
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports) and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
---- ----
The number of shares outstanding of the Registrant's Common Stock, $.01 par
value, was 21,164,658 at July 31, 1996.
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ASPECT TELECOMMUNICATIONS CORPORATION
INDEX
<TABLE>
<CAPTION>
Description Page Number
- - ----------------------------------------------------------------------------- -----------
<S> <C>
Cover Page 1
Index 2
Part I: Financial Information
Item 1: Financial Statements
Condensed Consolidated Balance Sheets as of June 30, 1996 and
December 31, 1995 3
Condensed Consolidated Statements of Income for the Three and
Six Month Periods Ended June 30, 1996 and 1995 4
Condensed Consolidated Statements of Cash Flows for the Six Month
Periods Ended June 30, 1996 and 1995 5
Notes to Condensed Consolidated Financial Statements 6
Item 2: Management's Discussion and Analysis of Financial Condition and
Results of Operations 8
Part II: Other Information
Item 4: Submission of Matters to a Vote of Security Holders 12
Item 6: Exhibits and Reports on Form 8-K 12
Signature 13
</TABLE>
2
<PAGE> 3
ASPECT TELECOMMUNICATIONS CORPORATION
PART I: FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except share data)
ASSETS
<TABLE>
<CAPTION>
June 30, December 31,
1996 1995
--------- ---------
(unaudited) **
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 34,865 $ 22,102
Short-term investments 74,515 71,531
Accounts receivable, net 42,922 39,291
Inventories 11,926 11,051
Other current assets 9,503 8,699
--------- ---------
Total current assets 173,731 152,674
Property and equipment, net 34,002 28,418
Other assets 4,237 3,374
Intangible assets, net 29,541 31,405
--------- ---------
Total assets $ 241,511 $ 215,871
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 7,678 $ 11,142
Accrued compensation and related benefits 8,277 8,427
Other accrued liabilities 22,119 15,242
Customer deposits and deferred revenue 10,719 9,275
--------- ---------
Total current liabilities 48,793 44,086
Convertible subordinated debentures 55,000 55,000
Note payable 4,500 4,500
Shareholders' equity:
Preferred stock, $.01 par value:
2,000,000 shares authorized, none outstanding in 1996 and 1995 -- --
Common stock, $.01 par value:
100,000,000 shares authorized, 21,155,633 outstanding
in 1996; 20,876,461 outstanding in 1995 66,012 62,082
Net unrealized gain (loss) on available-for-sale securities (22) 102
Accumulated translation adjustments (464) (437)
Retained earnings 67,692 50,538
--------- ---------
Total shareholders' equity 133,218 112,285
--------- ---------
Total liabilities and shareholders' equity $ 241,511 $ 215,871
========= =========
</TABLE>
** Derived from audited financial statements.
See accompanying notes.
3
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ASPECT TELECOMMUNICATIONS CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(unaudited - in thousands, except per share data)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
------------------------------- ------------------------------
June 30, 1996 June 30, 1995 June 30, 1996 June 30, 1995
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Net revenues:
Product $ 54,391 $ 33,801 $104,431 $ 65,672
Customer support 17,135 12,428 32,922 23,283
-------- -------- -------- --------
Total net revenues 71,526 46,229 137,353 88,955
Cost of revenues:
Cost of product revenues 17,971 11,342 34,479 22,747
Cost of customer support revenues 12,387 8,768 23,760 16,564
-------- -------- -------- --------
Total cost of revenues 30,358 20,110 58,239 39,311
-------- -------- -------- --------
Gross margin 41,168 26,119 79,114 49,644
Operating expenses:
Research and development 8,038 5,726 15,376 10,761
Selling, general and administrative 19,298 11,728 37,066 22,395
-------- -------- -------- --------
Total operating expenses 27,336 17,454 52,442 33,156
-------- -------- -------- --------
Income from operations 13,832 8,665 26,672 16,488
Interest income, net 315 593 556 943
-------- -------- -------- --------
Income before income taxes 14,147 9,258 27,228 17,431
Provision for income taxes 5,234 3,425 10,074 6,449
-------- -------- -------- --------
Net income $ 8,913 $ 5,833 $ 17,154 $ 10,982
======== ======== ======== ========
Primary earnings per share:
Net income per share $ 0.39 $ 0.27 $ 0.75 $ 0.51
======== ======== ======== ========
Shares used in per share computations 23,065 21,608 22,928 21,548
======== ======== ======== ========
Fully diluted earnings per share:
Net income per share $ 0.36 $ 0.26 $ 0.70 $ 0.48
======== ======== ======== ========
Shares used in per share computations 25,895 24,564 25,826 24,538
======== ======== ======== ========
</TABLE>
See accompanying notes.
4
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ASPECT TELECOMMUNICATIONS CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited - in thousands)
<TABLE>
<CAPTION>
Six Months Ended June 30,
---------------------------
1996 1995
-------- --------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 17,154 $ 10,982
Reconciliation of net income to cash provided by
operating activities:
Depreciation and amortization 6,713 4,340
Changes in:
Accounts receivable (4,006) (7,747)
Inventories (987) 393
Other current assets and other assets (1,641) 286
Accounts payable (3,405) (465)
Accrued compensation and related benefits (146) 294
Other accrued liabilities 6,941 2,511
Customer deposits and deferred revenue 1,623 (1,392)
-------- --------
Cash provided by operating activities 22,246 9,202
Cash flows from financing activities:
Common stock transactions 3,930 2,064
-------- --------
Cash provided by financing activities 3,930 2,064
Cash flows from investing activities:
Short-term investment purchases (51,719) (44,086)
Short-term investment sales and maturities 48,522 36,950
Property and equipment purchases (10,562) (6,209)
-------- --------
Cash used in investing activities (13,759) (13,345)
Effect of exchange rate changes on cash 346 36
-------- --------
Increase (decrease) in cash and cash equivalents 12,763 (2,043)
Cash and cash equivalents:
Beginning of period 22,102 27,971
-------- --------
End of period $ 34,865 $ 25,928
======== ========
</TABLE>
See accompanying notes.
5
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ASPECT TELECOMMUNICATIONS CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Basis of Presentation
The consolidated financial statements include the accounts of Aspect
Telecommunications Corporation and its wholly-owned subsidiaries. All
significant intercompany accounts and transactions have been eliminated.
While the quarterly financial information contained in this filing is unaudited,
the financial statements presented reflect all adjustments (consisting only of
normal recurring adjustments) which the Company considers necessary for a fair
presentation of the results of operations for the interim periods presented and
of the financial condition of the Company at the dates of the interim balance
sheets. The results for interim periods are not necessarily indicative of the
results for the entire year. The information included in this report should be
read in conjunction with the Company's audited financial statements and notes
thereto included in the Company's 1995 Annual Report to Shareholders.
Per Share Information
Per share information for the periods presented is computed using the weighted
average number of common and common-equivalent shares outstanding. For primary
earnings per share calculations, common-equivalent shares consist of the
incremental shares issuable upon the assumed exercise of dilutive stock options
using the treasury stock method.
For fully diluted earnings per share calculations, common-equivalent shares also
include the dilutive effect of incremental shares issuable upon the conversion
of the 5% convertible subordinated debentures, and net income is adjusted for
the interest expense, net of income taxes, related to the debentures.
Share and per share data for all periods presented reflect a two-for-one stock
split beginning September 25, 1995.
Inventories
Inventories, valued at the lower of cost (first-in, first-out) or market,
consist of:
<TABLE>
<CAPTION>
(in thousands)
June 30, December 31,
1996 1995
------------ ------------
<S> <C> <C>
Raw materials $7,480 $7,556
Work-in-progress 773 660
Finished goods 3,673 2,835
------- -------
Total $11,926 $11,051
======= =======
</TABLE>
6
<PAGE> 7
Subsequent Event
On July 26, 1996, the Company acquired a 98,000 square-foot building and
approximately ten acres of land, of which approximately four acres are
undeveloped, for $10.5 million in cash. The building and the land are directly
across the street from the Company's San Jose, California headquarters.
7
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ASPECT TELECOMMUNICATIONS CORPORATION
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The following discussion should be read in conjunction with the unaudited
condensed consolidated financial statements and notes thereto included in Part I
- - -- Item 1 of this Quarterly Report and the audited consolidated financial
statements and notes thereto and Management's Discussion and Analysis in the
Company's 1995 Annual Report to Shareholders.
On October 31, 1995, the Company acquired TCS Management Group, Inc. (TCS), a
company engaged in the business of designing, marketing, and supporting software
that automates the tasks associated with managing the workforce in a call
center, specifically, call forecasting, staff scheduling, and staff performance
tracking. The acquisition was accounted for as a purchase. The operating results
of TCS have been included in the consolidated statements of income since the
date of acquisition.
The Company desires to take advantage of the "safe harbor" provisions of the
Private Securities Litigation Reform Act of 1995. Specifically, the Company
wishes to alert readers that, except for the historical information contained
herein, the following discussion constitutes forward-looking statements that are
dependent on certain risks and uncertainties. These and other factors which may
cause actual results to differ materially from those expressed in any
forward-looking statements made by or on behalf of the Company are described
below, in the Company's 1995 Form 10-K and in the Company's 1995 Annual
Report to Shareholders in the section titled "Management's Discussion and
Analysis - Risk Factors."
The Company's common stock price may be subject to significant volatility. Past
financial performance should not be considered a reliable indicator of
performance for any future period, and investors should not use historical
trends to anticipate future results or trends. For any given quarter, a
shortfall in the Company's announced revenue or earnings from the levels
expected by securities analysts could have an immediate and adverse effect on
the trading price of the Company's common stock. Additionally, the Company may
not learn of such shortfalls until late in a fiscal quarter, which could result
in an even more immediate and adverse effect on the trading price of the
Company's common stock. Further, the Company participates in a very dynamic high
technology industry, which could result in significant fluctuations in the
Company's common stock price at any time.
The Company believes that changes in any of the following areas could have a
material adverse affect on the Company's future financial position or results of
operations: changes in the overall demand for telecommunications products;
changes in the technology underlying the call transaction processing market;
increased competition; litigation against the Company based on securities,
intellectual property or other claims; risks associated with international
operations; compliance with regulatory requirements; availability of necessary
components and manufacturing licenses; and the Company's ability to implement
and improve its operational and financial systems and attract and retain
employees necessary to support its growth. See the section titled "Management's
Discussion and Analysis - Risk Factors" in the Company's 1995 Annual Report to
Shareholders.
RESULTS OF OPERATIONS
Net Revenues
Total net revenues for the second quarter of 1996 were $72 million, representing
an increase of 55% when compared with total net revenues of $46 million for the
same period in 1995. Total net revenues for the first six months of 1996 were
$137 million, representing an increase of 54% when compared with total net
revenues of $89 million for the same period in 1995.
8
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ASPECT TELECOMMUNICATIONS CORPORATION
Sales of the Company's products generally involve a cycle of six months or
longer from the point of initial customer contact until receipt of the first
system order, and there will typically be a period ranging from one to six
months from the time an order is initially received to the time the system is
installed. The Company generally recognizes revenue from the sale of systems
upon installation at the customer site; revenues from add-ons, upgrades,
software licenses, and sales to distributors are generally recognized upon
shipment to the customer or distributor.
Within the context of the above-described sales cycle, both product and customer
support revenues for the Company remain dependent upon overall demand for
telecommunications products, which has in the past, and may in the future,
fluctuate significantly based on numerous factors, including capital spending
practices of customers, market competition, and economic conditions in general.
Given the relatively large sales prices of the Company's systems in relation to
quarterly revenue levels, a limited number of systems can account for a
substantial portion of product revenues in any particular quarter. Moreover, a
significant percentage of system revenue continues to be derived from new
customers. Revenues and the related gross product margins can be expected to
fluctuate due to the mix of products sold, channel of distribution, the volume
of systems sold to individual customers, and the operating results of TCS.
Because of these and other factors, the Company could experience significant
fluctuations in product and customer support revenues and operating results in
future periods. While the Company believes that its products will continue to
compare favorably with competitive products, competition may have an erosive
effect on prices, resulting in lower product margins and operating results.
Product revenues for the second quarter of 1996 were $54 million, representing
an increase of 61% when compared with product revenues of $34 million for the
same period in 1995. Product revenues for the first six months of 1996 were $104
million, representing an increase of 59% when compared with product revenues of
$66 million for the same period in 1995. The increases in product revenues for
both periods were primarily attributable to increased demand for the Company's
products, as both the volume of new system sales and the volume of add-ons and
upgrades increased from the same periods in 1995, and the inclusion of TCS's
product revenues in 1996. Average selling prices on new systems remained
relatively stable across the periods.
Customer support revenues for the second quarter of 1996 were $17 million,
representing an increase of 38% when compared with customer support revenues of
$12 million for the same period in 1995. Customer support revenues for the first
six months of 1996 were $33 million, representing an increase of 41% when
compared with customer support revenues of $23 million for the same period in
1995. The increases in customer support revenues for both periods resulted
primarily from the growth of the installed base and the inclusion of TCS's
customer support revenue in 1996. Customer support revenues include charges to
install products at customer sites, charges for providing contractually
agreed-upon ongoing system service and maintenance, which typically commences
twelve months from the date a system is first installed, and other support
services provided to the Company's customers. Installation revenue will
generally follow product revenue fluctuations, although no installation revenue
is ordinarily received for product sales to the Company's distributors. Contract
support revenues are largely dependent on renewable customer support contracts
and will be primarily affected by the general growth in Aspect's installed base.
Since most costs associated with providing customer support are fixed, quarterly
fluctuations in customer support revenues can have a significant impact on the
related customer support gross margin.
Subsequent to the end of the second quarter of 1996, the Company received a
multi-system order from the United States Postal Service (USPS) for automatic
call distributors and certain call center support services valued at $20
million. Recently, one of the Company's competitors filed an award protest with
the General Counsel of the USPS in connection with such order alleging that the
USPS improperly awarded the contract. There can be no assurance that such
protest will be resolved in the Company's favor. Subject to
9
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ASPECT TELECOMMUNICATIONS CORPORATION
favorable resolution of the protest, installation of the first systems is
anticipated to begin in 1996 and the contract will span five years.
Gross Margin on Product Revenues
Product gross margin increased to 67% for the second quarter of 1996 from 66%
for the same period in 1995. The increase in product gross margin was primarily
attributable to the inclusion of TCS's product revenues in the second quarter of
1996, which typically carry higher margins than the Company's other product
revenues. For the first six months of 1996, product gross margin increased to
67% from 65% for the same period in 1995. The increase in product gross margin
reflects the inclusion of TCS's product revenues in 1996, which typically carry
higher margins than the Company's other product revenues, and lower revenues
from sales to the Internal Revenue Service, which typically have lower than
average margins. As noted above, gross product margins can be expected to
fluctuate due to the mix of products sold, channel of distribution, the volume
of systems sold to individual customers, the operating results of TCS, and other
factors.
Gross Margin on Customer Support Revenues
Customer support gross margin decreased to 28% for both the second quarter and
first six months of 1996 from 29% for the same periods in 1995. The decreases in
customer support margin for both periods primarily reflect customer support
revenues not growing proportionately with the costs associated with providing
the related services. As noted above, since most costs associated with providing
customer support are fixed, quarterly fluctuations in customer support revenues
can have a significant impact on the related customer support gross margin. On a
forward-looking basis, the Company anticipates that its customer support gross
margins may decline further in the next several quarters as the Company
significantly expands its efforts in the area of consulting and systems
integration.
Research and Development Expenses
Research and development ("R&D") expenses were $8 million for the second quarter
of 1996, representing an increase of 40% when compared with R&D expenses of $6
million for the same period in 1995. R&D expenses were $15 million for the first
six months of the year, representing an increase of 43% when compared with R&D
expenses of $11 million for the same period in 1995. The increases in R&D
expenses for both periods were primarily attributable to increases in R&D
personnel, equipment expenditures, and related infrastructure costs, as well as
the inclusion of TCS's R&D expenses in 1996. As a percentage of net revenues,
R&D spending was 11% for both the second quarter and first six months of 1996
compared to 12% for the same periods in 1995. The Company continues to believe
that significant investment in research and development is required to remain
competitive and anticipates, on a forward-looking basis, that such expenses will
increase in terms of absolute dollars for 1996 as a whole, when compared to
1995, although such expenses as a percentage of net revenues may fluctuate on a
quarterly basis.
Selling, General and Administrative Expenses
Selling, general and administrative ("SG&A") expenses were $19 million for the
second quarter of 1996, representing an increase of 65% when compared with SG&A
expenses of $12 million for the same period in 1995. SG&A expenses were $37
million for the first six months of 1996, representing an increase of 66% when
compared with SG&A expenses of $22 million for the same period in 1995. The
increases in SG&A expenses for both periods were primarily related to increases
in personnel and related expenses, the expansion of the Company's operations,
the inclusion of TCS's SG&A expenses in 1996, and the amortization of the
intangible assets related to the TCS acquisition. As a percentage of net
revenues, SG&A was 27% for both the second quarter and first six months of 1996
compared to 25% for the same
10
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ASPECT TELECOMMUNICATIONS CORPORATION
periods in 1995. The Company is currently in the process of implementing a new
internal integrated business application software program and, during the second
quarter of 1996, began using such software as its principal business application
software for its domestic operations. There can be no assurance that
complications will not arise from the software system transition, resulting in
substantial, unanticipated expenses. The Company anticipates, on a
forward-looking basis, that SG&A expenses will increase in terms of absolute
dollars for 1996 as a whole, when compared to 1995, although such expenses as a
percentage of net revenues may fluctuate on a quarterly basis.
Net Interest Income
Net interest income (interest income, net of interest expense) was $0.3 million
for the second quarter of 1996, representing a decrease of 47% when compared
with net interest income of $0.6 million for the same period in 1995. Net
interest income was $0.6 million for the first six months of 1996, representing
a decrease of 41% when compared with net interest income of $0.9 million for the
same period in 1995. The decreases in net interest income for both periods were
primarily due to interest expense on the note payable incurred in connection
with the TCS acquisition, lower interest earning balances and lower yields on
interest earning balances.
Income Taxes
The Company's effective income tax rate was 37% for the second quarter and first
six months of 1996, and the comparable periods in 1995.
LIQUIDITY AND CAPITAL RESOURCES
As of June 30, 1996, the Company's principal source of liquidity consisted of
cash, cash equivalents, and short-term investments totaling $109 million, which
represented 45% of total assets. The primary sources of cash during the first
six months of 1996 consisted of cash provided by operating activities of $22
million and proceeds from the issuance of common stock under various stock plans
of $4 million. The primary uses of cash during the first six months of 1996
consisted of $3 million for net purchases of short-term investments and $11
million for purchases of property and equipment.
As of June 30, 1996, the Company's outstanding borrowings consisted of $55
million of convertible subordinated debentures and a $4.5 million note payable
incurred in connection with the acquisition of TCS (see Notes 7 and 2,
respectively, to the Company's 1995 Consolidated Financial Statements).
On July 26, 1996, the Company acquired a 98,000 square-foot building and
approximately ten acres of land, of which approximately four acres are
undeveloped, for $10.5 million in cash (see Notes to Condensed Consolidated
Financial Statements).
The Company believes, on a forward-looking basis, that its cash, cash
equivalents, and short-term investments and anticipated cash flow from
operations will be sufficient to meet the Company's presently anticipated cash
requirements during at least the next twelve months.
11
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ASPECT TELECOMMUNICATIONS CORPORATION
Part II: Other Information
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
On May 9, 1996, the Annual Meeting of Shareholders of Aspect Telecommunications
Corporation was held in San Jose, California.
An election of directors was held with the following individuals being elected
to the Board of Directors of the Company:
James R. Carreker (19,387,541 votes for, 59,694 votes withheld)
Debra J. Engel (19,428,121 votes for, 19,114 votes withheld)
Norman A. Fogelsong (19,428,038 votes for, 19,197 votes withheld)
James L. Patterson (19,428,115 votes for, 19,120 votes withheld)
John W. Peth (19,427,429 votes for, 19,806 votes withheld)
Other matters voted upon and approved at the meeting, and the number of
affirmative and negative votes cast with respect to each such matter were as
follows:
To amend the 1990 Employee Stock Purchase Plan to increase the number
of shares of Common Stock reserved for issuance thereunder by 250,000
shares (17,312,246 votes in favor, 183,784 votes opposed, 116,568
abstaining, 1,834,637 votes withheld).
To amend the 1989 Stock Option Plan to increase the number of shares of
Common Stock reserved for issuance thereunder by 1,000,000 shares
(10,134,197 votes in favor, 7,349,828 votes opposed, 128,573
abstaining, 1,834,637 votes withheld).
To ratify the appointment of Deloitte & Touche LLP as the independent
auditors of the Company for the year ending December 31, 1996
(19,318,579 votes in favor, 24,882 votes opposed, 103,774 abstaining,
no votes withheld).
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
A. EXHIBITS
Exhibit 10.55 Agreement of Purchase and Sale between the Registrant
and Arrow Electronics, Inc., dated April 22, 1996
Exhibit 11.1 Statement re: Computation of Earnings Per Share
Exhibit 27 Financial Data Schedule
B. REPORTS ON FORM 8-K
No reports on Form 8-K were filed during the quarter ended June 30, 1996.
12
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ASPECT TELECOMMUNICATIONS CORPORATION
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has caused this report to be signed on its behalf by the undersigned
thereunto duly authorized.
Aspect Telecommunications Corporation
(Registrant)
Date: August 13, 1996
By
/s/ Eric J. Keller
-------------------------------------------
Eric J. Keller
Vice President, Finance and
Chief Financial Officer
(Duly Authorized and Principal Financial
and Accounting Officer)
13
<PAGE> 1
AGREEMENT OF PURCHASE AND SALE
DEFINED TERMS
EFFECTIVE DATE: April 22, 1996
BUYER: ASPECT TELECOMMUNICATIONS CORPORATION, a California
corporation
BUYER'S ADDRESS: 1730 Fox Drive
San Jose, California 95131-2312
Attn: Mr. Eric Keller
Telephone: (408) 325-2200
Facsimile: (408) 325-2261
SELLER: ANTHEM ELECTRONICS, INC., a Delaware corporation
SELLER'S ADDRESS: 1160 Ridder Park Drive
San Jose, CA 95131
Attn: Mr. Robert S. Throop
Telephone: (408) 453-1200
Facsimile: (408) 441-4500
With a Copy to:
Mr. Bill Carroll
Director of Real Estate
Arrow Electronics, Inc.
25 Hub Drive
Melville, NY 11747
REAL PROPERTY: Those two (2) certain improved and unimproved real
property parcels consisting of respectively, (i)
98,353 square feet of improved property and (ii)
approximately four (4) acres of unimproved property and
both parcels commonly referred to as 1160 Ridder Park
Drive, San Jose, California, and more particularly
described in Exhibit A hereto.
PURCHASE PRICE: $10,500,000.00
DEPOSIT: $250,000.00
DUE DILIGENCE PERIOD: Sixty (60) days from the Effective Date; provided, the
Due Diligence Period may be extended by Buyer for an
additional thirty (30) day period by giving Seller
written notice of such extension prior
<PAGE> 2
to the expiration of the initial sixty (60) day period.
TITLE COMPANY and
ESCROW HOLDER: First American Title Insurance Company
SCHEDULED CLOSING DATE: No later than thirty (30) days following the
delivery of the Earnest Money Deposit to the
Escrow Holder
CLOSING COST ALLOCATIONS:
- BUYER: ALTA SURVEY 100%
ENVIRONMENTAL AUDIT 100%
- SELLER: TITLE INSURANCE (ALTA) 100%
TRANSFER TAXES 100%
ESCROW FEES 100%
The foregoing Defined Terms are incorporated by reference into the attached
Agreement.
BUYER (/s/ EK) AND SELLER (/s/ RK) AGREE.
<PAGE> 3
<TABLE>
<CAPTION>
TABLE OF CONTENTS
Page
<S> <C>
1. Purchase and Sale of Property................................................. 1
A. Real Property..................................................... 1
B. Personal Property................................................. 1
C. Intangible Property............................................... 1
2. Purchase Price................................................................ 2
A. Earnest Money Deposit............................................. 2
B. Cash at Closing................................................... 2
3. Seller's Due Diligence Deliveries. .......................................... 2
A. Personal Property................................................. 2
B. Service Contracts................................................. 2
C. Records, Plans and Surveys........................................ 3
D. Licenses, Permits and Warranties.................................. 3
E. Insurance Policies................................................ 3
F. Real Estate Tax Bills............................................. 3
G. Litigation........................................................ 3
H. Other Material Documents.......................................... 3
4. Conditions Precedent.......................................................... 4
A. Buyer's Conditions................................................ 4
B. Seller's Conditions............................................... 5
C. Failure or Waiver of Conditions Precedent......................... 6
5. Close of Escrow............................................................... 6
A. Seller's Deliveries into Escrow................................... 6
B. Buyer's Deliveries into Escrow.................................... 7
C. Seller's Deliveries Outside of Escrow............................. 7
D. Escrow Holder's Duties............................................ 8
6. Covenants, Representations and Warranties..................................... 8
A. Seller's Covenants................................................ 8
B. Seller's Representations and Warranties........................... 9
C. Buyer's Representations and Warranties............................ 11
7. Closing Adjustments and Prorations............................................ 12
A. Closing Costs..................................................... 12
B. Real Estate Taxes................................................. 12
C. Utilities......................................................... 12
D. Calculations for Closing.......................................... 12
E. California Withholding Requirement................................ 13
8. Casualty and Condemnation..................................................... 13
A. Material Casualty or Condemnation................................. 13
B. Immaterial Casualty or Condemnation............................... 14
</TABLE>
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<TABLE>
<CAPTION>
TABLE OF CONTENTS
Page
<S> <C>
9. Indemnification............................................................... 14
10. Default by Buyer.............................................................. 14
A. Before Delivery of Earnest Money Deposit.......................... 14
B. After Delivery of Earnest Money Deposit........................... 14
11. Default by Seller............................................................. 15
12. Miscellaneous................................................................. 15
A. Leasing Commissions............................................... 15
B. Brokerage Commissions............................................. 15
C. No Liability...................................................... 16
D. Time of the Essence............................................... 16
E. Notices........................................................... 16
F. Attorneys' Fees................................................... 16
G. Successors and Assigns............................................ 16
H. Captions.......................................................... 17
I. Exhibits.......................................................... 17
J. Binding Effect.................................................... 17
K. Construction...................................................... 17
L. Counterparts...................................................... 17
M. Further Assurances................................................ 17
N. No Merger......................................................... 17
O. Governing Law..................................................... 17
P. Confidentiality................................................... 17
Q. Entire Agreement.................................................. 18
EXHIBIT A - GRANT DEED
EXHIBIT B - BILL OF SALE
EXHIBIT C - ASSIGNMENT OF INTANGIBLE PROPERTY
EXHIBIT D - NON-FOREIGN CERTIFICATE
EXHIBIT E - CLOSING CERTIFICATE
EXHIBIT F - LEASE
EXHIBIT G - DEFINITION OF HAZARDOUS MATERIALS
</TABLE>
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AGREEMENT
THIS AGREEMENT, dated as of the Effective Date, is made between
Seller and Buyer (and to the extent provided herein, Arrow (defined below)), who
for valuable consideration received, agree as follows:
1. PURCHASE AND SALE OF PROPERTY. Seller agrees to sell and Buyer
agrees to purchase on the terms hereafter stated all of Seller's right, title
and interest in the following described property (collectively, "Property"):
A. Real Property. All the Real Property, together with the
parking areas, improvements, fixtures (except Seller's trade
fixtures), appurtenant easements, access rights, air, water and
riparian rights, development rights, solar rights and all other
tenements, privileges and appurtenances thereto (the improvements
and fixtures shall be transferred in their current condition,
reasonable wear and tear excepted);
B. Personal Property. All tangible personal property located
in, on, arising out of and used in connection with the ownership or
operation of the Real Property, including any uninterruptable power
supply that the Property may have, all installed and uninstalled
equipment, machinery, furnishings, landscaping, maintenance
equipment and all building materials (including any granite tiles
but not the tile containing the "eagle" logo of Seller, which logo
shall be removed after the expiration of the Lease (defined below))
("Personal Property") (the term "Personal Property" shall not
include office furniture, desk partitions, warehouse shelving or
fork lifts of Seller); and
C. Intangible Property. Any and all intangible personal
property arising out of or in connection with the ownership or
operation of the Property, but not including the trademarks or
tradenames of Seller or the right to use the Anthem name, the
goodwill of Seller in connection therewith, all licenses, permits,
certificates of occupancy and franchises issued by Federal, state or
local municipal authorities relating to the use, maintenance,
occupancy or operation of the Property, all plans, specifications
and drawings relating to the construction of the improvements, all
warranties, guaranties or sureties with respect thereto, any pending
or future award made in condemnation or to be made in lieu thereof,
any unpaid award for damage to the Property and any proceeds of
insurance or claim or cause of action for damage, loss or injury of
or to the Property (collectively, the "Intangible Property").
2. PURCHASE PRICE. Subject to the closing adjustments and prorations
hereafter described, Buyer shall pay to Seller the Purchase Price for the
Property, in the following manner:
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<PAGE> 6
A. Earnest Money Deposit. At any time prior to the expiration
of the Due Diligence Period, as such period may be extended as
provided herein, and upon Buyer's approval or waiver of all of the
conditions precedent set forth in Paragraph 4A of this Agreement,
cash in an amount equal to the Deposit shall be deposited by Buyer
with the Escrow Holder. Escrow Holder shall place such funds in an
interest-bearing account. (The Deposit and all interest earned
thereon shall hereinafter collectively be referred to as the
"Earnest Money Deposit.") The Earnest Money Deposit shall be fully
refundable to Buyer in the event of a default by Seller. Upon the
Close of Escrow (as hereinafter defined), the Earnest Money Deposit
shall be applied against the Purchase Price. Buyer shall bear the
risk of loss of any money deposited in escrow until Close of Escrow.
B. Cash at Closing. On or before the Close of Escrow, Buyer
shall deposit with Escrow Holder by federal wire transfer or
cashier's check cash in an amount equal to the difference between
the Purchase Price and the Earnest Money Deposit, plus or minus the
closing adjustments and prorations.
3. SELLER'S DUE DILIGENCE DELIVERIES. Seller shall endeavor to
deliver to Buyer within five (5) days from the date of this Agreement and in any
event as soon as practical the following documents ("Due Diligence Materials"),
ownership of which shall be deemed transferred from Seller to Buyer upon the
Close of Escrow:
A. Personal Property. A list of the Personal Property as of the
opening of the escrow. In the event Seller acquires Personal
Property the cost of which exceeds One Thousand ($1,000.00) per item
after the opening of escrow, Seller shall notify Buyer in writing of
such acquisition within five (5) days thereafter (but in any event
before the Closing Date).
B. Service Contracts. A list and legible copies of all existing
service, equipment, maintenance and construction contracts
(collectively, "Service Contracts") and all proposed Service
Contracts being negotiated.
C. Records, Plans and Surveys. A list and legible copies of all
records relating to sample results from any well on the Property,
toxic or hazardous waste investigations, any notices from government
or public agencies with respect to the Property, any building plans
and specifications (including "shop" drawings) and surveys
respecting the Property and any environmental assessments or reports
in Seller's possession.
D. Licenses, Permits and Warranties. A list and legible copies
of all licenses and permits for the use and operation of the
Property
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<PAGE> 7
and all warranties and guaranties with respect to the Property, any
component thereof, any interest therein or any Service Contract.
E. Insurance Policies. A list briefly summarizing all hazard,
rent loss, liability, worker's compensation and other insurance
policies currently in effect with respect to the Property, and
copies of all claims and settlements of Ten Thousand Dollars
($10,000.00) or more which are pending or which are related to
conditions at the Property which still exist and have not been
corrected.
F. Real Estate Tax Bills. Legible copies of the bills issued
for the three (3) most recent tax years for all real estate taxes
and personal property taxes and copies of all notices or documents
for any assessments or bonds relating to the Property received
within the last twelve (12) months.
G. Litigation. A list of all presently pending disputes,
claims, actions, suits, legal proceedings, arbitrations or any other
legal or administrative proceedings relating to the Property, which
list shall describe in reasonable detail the current status of all
such matters. A dispute or claim which is not yet the subject of
formal legal proceedings shall be deemed to be "presently pending"
hereunder five (5) days after Seller's receipt of any written notice
thereof without receipt of a written notice of resolution from the
other party to the dispute or making the claim acknowledging that
such dispute has been settled or such claim satisfied. Seller shall
notify Buyer within five (5) days after any additional dispute,
claim or matter arises or is made or instituted.
H. Other Material Documents. Any other documents relating to
the Property that a buyer of the Property might deem material to the
purchase of the Property.
4. CONDITIONS PRECEDENT
A. Buyer's Conditions. Buyer's obligation to purchase the
Property shall be subject to and contingent upon the satisfaction or
written waiver of the following conditions precedent (as determined
solely by Buyer in its reasonable discretion):
(i) Buyer's inspection and approval during the Due
Diligence Period of all Due Diligence Materials, all records
and files of Seller relating to the Property and all physical,
environmental, geotechnical, legal and any other matters
relating to the Property (including zoning, land use and
similar public agency or governmental conditions or approvals
with respect to the ownership, operation and use of the
Property) as Buyer may, in Buyer's sole discretion, elect to
investigate; and, during the Due Diligence Period, Buyer shall
be permitted to make complete
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<PAGE> 8
physical, environmental, legal and such other reasonable and
necessary tests and inspections of the Property and to make and
remove copies of any and all records and files regarding the
Property; provided, such tests and inspections are to be
conducted in such a way as to minimize interference with
Seller's business conducted at the Property and may only be
conducted with Seller's prior authorization, not to be
unreasonably withheld or delayed. Subject to the foregoing,
Buyer or representatives of Buyer shall have reasonable access
to the Property during normal business hours.
(ii) Buyer shall have the opportunity to review and
approve during the Due Diligence Period a current preliminary
title report for the Property ("Title Report") together with a
copy of each of the documents noted as exceptions in the Title
Report and a current ALTA survey of the Property; provided,
within the Due Diligence Period, Buyer shall notify Seller of
any defects Buyer may, in its discretion, deem material (the
"Defects"). Seller shall have ten (10) days after Buyer informs
Seller of the Defects to notify Buyer in writing that Seller
will or will not correct any of the Defects. Seller may decide
to correct or not correct such Defects in its discretion. If
Seller decides not to correct any or all of the Defects, then,
within ten (10) days of receipt of such written notice from
Seller (and, if necessary, the Close of Escrow shall be
extended by the number of days necessary to give Buyer this
full ten-day period), Buyer shall have the option of
terminating this Agreement. In the event of such termination,
neither party shall have any further rights or obligations
under this Agreement. Notwithstanding the foregoing, Buyer
hereby objects to any title exceptions for delinquent tax
liens, liens evidencing any loan secured by the Property or any
mechanics' liens affecting the Property; and Seller agrees to
cause all such liens to be eliminated from title to the
Property, or sufficient bond shall be posted by Seller to cause
the Title Company to insure title to the Property without any
such lien as an exception to title, prior to the Close of
Escrow. The title exceptions approved by Buyer, and any other
exceptions which Buyer expressly approves in writing, shall be
referred to hereinafter as the "Permitted Exceptions".
(iii) The willingness of Title Company to issue, upon the
sole condition of the payment of its regularly scheduled
premium, an ALTA Owner's Form B1970 policy of title insurance,
with such endorsements as Buyer may reasonably require and with
such reinsurance or coinsurance as Buyer may require
(collectively, the "Title Policy"), insuring Buyer in the
amount of the Purchase Price that fee simple title to the Real
Property is vested in Buyer as of the Close of Escrow, subject
only to the standard printed conditions and exceptions and the
Permitted Exceptions.
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<PAGE> 9
(iv) Seller's performance of each and every covenant
required to be performed by Seller hereunder, and the truth and
correctness of each of Seller's representations and warranties
as set forth in Paragraph 6.B.
(v) Buyer shall have approved any material (in Buyer's
reasonable judgment) change to Seller's representations and
warranties reflected in the Closing Certificate (as defined in
Paragraph 5.A(vi)). Buyer shall have two (2) business days
following receipt of said certificate to approve or disapprove
any such changes (and if necessary, the Close of Escrow shall
be extended by the number of days necessary to give Buyer this
full two (2) business day period).
(vi) There shall have been no material adverse changes in
the physical condition of the Property or the financial
condition of the Seller.
B. Seller's Conditions. Seller's obligation to sell the
Property shall be subject to and contingent upon Buyer's performance
of each and every covenant required to be performed by Buyer
hereunder and the truth and correctness of each of Buyer's
representations and warranties, as set forth in Paragraph 6.C.
C. Failure or Waiver of Conditions Precedent. In the event any
of the conditions set forth above in Paragraphs 4.A and 4.B are not
fulfilled, waived or deemed waived (for any reason other than a
default by either Buyer or Seller hereunder), this Agreement shall
terminate, all rights and obligations hereunder of each party shall
be at an end and the Earnest Money Deposit shall be returned to
Buyer. Buyer or Seller may elect, at any time or times on or before
the date specified for the satisfaction of the condition, to waive
in writing the benefit of any of their respective conditions set
forth in Paragraph 4.A or Paragraph 4.B above, as applicable.
Buyer's failure to notify Seller in writing of the satisfaction of
the condition set forth in Paragraph 4.A on or before the date
specified for satisfaction shall be deemed to constitute a failure
of such condition. In any event, Buyer's and Seller's consent to the
Close of Escrow shall waive any remaining unfulfilled conditions
(but such waiver shall not be deemed to waive any breach of any
representation, warranty or covenant made by either party to this
Agreement.)
5. CLOSE OF ESCROW. Concurrently herewith, Seller and Buyer shall
open an escrow (the "Escrow") with Escrow Holder for the purchase and sale
contemplated by this Agreement. Buyer and Seller agree that such escrow shall be
closed and the purchase and sale shall be consummated (the "Close of Escrow") on
or before the Scheduled Closing Date in the following manner:
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<PAGE> 10
A. Seller's Deliveries into Escrow. Prior to the Close of
Escrow, Seller shall deliver or cause to be delivered to the Escrow
the following (all documents shall be duly executed by Seller and
shall be acknowledged where required):
(i) A grant deed to the Real Property in the form of, and
upon the terms and conditions contained in, Exhibit A attached
hereto (the "Deed");
(ii) A bill of sale ("Bill of Sale") with respect to the
Personal Property in the form of, and upon the terms and
conditions contained in, Exhibit B attached hereto;
(iii) A duplicate original of an assignment of Seller's
interest in the Intangible Property ("Assignment of Intangible
Property") selected by and acceptable to Buyer in the form of,
and upon the terms and conditions contained in, Exhibit C
attached hereto;
(iv) A certificate ("Non-Foreign Certificate") from Seller
certifying that Seller is not a "foreign person" within the
meaning of Section 1445(f)(3) of the Internal Revenue Code in
the form of, and upon the terms and conditions contained in,
Exhibit D attached hereto and a California Form 590;
(v) A duplicate original of the Standard
Industrial/Commercial Single-Tenant Lease-Net ("Lease") in the
form of, and upon the terms and conditions contained in,
Exhibit F attached hereto, including the term of the Lease
which will end on the date fifteen (15) months from the last
day of the month in which the Close of Escrow takes place;
(vi) A certificate in the form attached hereto as Exhibit
E ("Closing Certificate") which shall recite each
representation and warranty of Seller and Arrow Electronics,
Inc. ("Arrow") set forth in Paragraph 6.B, and which certifies
that each such representation and warranty is true as of the
Close of Escrow, or sets forth any reason any such
representation or warranty is not true; and
(vii) Seller's written escrow instructions to close Escrow
in accordance with the terms of this Agreement.
B. Buyer's Deliveries into Escrow. Prior to the Close of
Escrow, Buyer shall deliver to the Escrow the following:
(i) The Purchase Price plus or minus closing adjustments
and prorations;
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<PAGE> 11
(ii) Duplicate originals, duly executed by Buyer, of the
Assignment of Intangible Property and Lease; and
(iii) Buyer's written instructions to close Escrow in
accordance with the terms of this Agreement.
C. Seller's Deliveries Outside of Escrow. Upon the Close of
Escrow, Seller shall deliver or shall have previously delivered to
Buyer the following items:
(i) Copies of the Service Contracts which affect the
Property, together with an affidavit of Seller that such copies
constitute true, correct and complete copies of such contracts;
(ii) Originals of all governmental licenses, permits and
approvals relating to the occupancy or use of the Real Property
in the possession of Seller; and
(iii) The originals of all other Due Diligence Materials.
D. Escrow Holder's Duties. On the Close of Escrow, Escrow
Holder shall effect the same by:
(i) Recording all documents as may be necessary to clear
title in accordance with the requirements of this Agreement;
(ii) Recording the Deed and instructing the county
recorder not to affix the amount of any documentary or transfer
taxes to the Deed but to attach a separate statement to the
Deed after recording;
(iii) Paying all closing costs and making all prorations
in accordance with the terms of this Agreement and a statement
of adjustments and prorations prepared by Buyer and Seller and
delivered to Escrow Holder prior to the Close of Escrow;
(iv) Delivering to Buyer the Title Policy, Escrow Holder's
certified closing statement and an original of each of the Bill
of Sale, Assignment of Intangible Property, Lease, Non-Foreign
Certificate and Closing Certificate; and
(v) Delivering to Seller the Purchase Price, plus or minus
closing adjustments and prorations, Escrow Holder's certified
closing statement and an original of each of the Assignment of
Intangible Property and Lease.
6. COVENANTS, REPRESENTATIONS AND WARRANTIES
A. Seller's Covenants. Seller hereby covenants and agrees that
during the period from the date of this Agreement through the Close
of Escrow (the "Contract Period"):
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<PAGE> 12
(i) Seller shall not make any alterations to the Property
(except such non-structural alterations allowed by the terms of
the Lease or as required by law or governmental order, or in
the event of an emergency) and Seller shall notify Buyer
promptly upon becoming aware of any damage, destruction, repair
or replacement of any part of the Property;
(ii) Seller shall not cause or allow to be recorded any
encumbrance, lien, deed of trust, easement or the like against
the title to the Property, without the express prior written
consent of Buyer;
(iii) Seller will maintain Seller's insurance and operate
and maintain the Property in a manner consistent with Seller's
past practices;
(iv) Seller shall not modify or terminate any of the
licenses, permits or other governmental approvals or any
warranties pertaining to the Property;
(v) Seller shall not, without notice and Buyer's prior
written consent, enter into any lease or other occupancy
agreement pertaining to the Property or accept rent from any
person or entity;
(vi) Seller shall not alter or remove any Personal
Property unless the same is replaced with Personal Property of
the same or similar quality and quantity; and
(vii) Seller shall withdraw the Property from the market
and refrain from offering the Property for sale to any other
party and terminate all negotiations for any such sale with any
party other than Buyer.
B. Seller's Representations and Warranties. Seller and Arrow,
the parent of Seller, hereby represent and warrant to Buyer as
follows:
(i) Seller and Arrow have full power and authority to
enter into this Agreement and any other documents contemplated
by this Agreement and to assume and perform all of Seller's and
Arrow's respective obligations hereunder; the persons executing
this Agreement and any other documents contemplated by this
Agreement on behalf of Seller and Arrow have been authorized
and empowered to bind Seller and Arrow thereto; and this
Agreement is, and each instrument and document to be executed
by Seller and Arrow hereunder shall be, a valid, legally
binding obligation of Seller and Arrow, respectively,
enforceable against Seller and Arrow in accordance with its
terms;
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(ii) Neither the execution and delivery of this Agreement
and the instruments and documents referenced herein nor the
consummation of the transaction contemplated herein conflict
with or result in the material breach of any terms, conditions
or provisions of any contract or other agreement or instrument
to which Seller or Arrow is a party or which affects the
Property; and no consent of any lender, partner, shareholder,
beneficiary, creditor, investor, judicial or administrative
body, governmental authority or other party is required which
has not already been obtained; and all loans, extensions of
credit or other accommodations secured by the Property or any
interest therein shall be paid upon the Close of Escrow from
Seller's proceeds and the Property shall be released from any
liens securing the same;
(iii) There are no leases, subleases or other occupancy
agreements relating to the Property except the Lease. There are
no unpaid leasing commissions, fees or lease assumptions
presently due, or which will become due and payable, under any
lease relating to the Property;
(iv) To the best of Seller's and Arrow's knowledge, after
due inquiry:
(a) There are no eminent domain proceedings for the
condemnation of the Real Property pending or contemplated;
(b) There is no pending or threatened litigation,
proceedings or governmental action which would affect the
Real Property;
(c) Seller has not received notice that (i) the
improvements located on the Real Property are in violation
of any applicable building codes, (ii) there exists any
condition pertaining to the Property which, with the
passage of time or the giving of notice, would constitute
such a violation or (iii) Seller's use of the Real
Property is in violation of any applicable zoning, land
use or other law, order, ordinance or regulation affecting
the Real Property;
(d) There are no defaults or breaches under the terms
and provisions of the Service Contracts; and there are no
employment contracts, union contracts, labor agreements,
pension plans, profit sharing plans or employee benefit
plans relating to the Property which will be binding upon
or be obligations of Buyer after the Close of Escrow;
(e) There has been no presence, generation, disposal,
use, transportation or storage on, under or about the
Property of any Hazardous Materials (as defined in
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<PAGE> 14
Exhibit G attached to this Agreement and incorporated
herein), except Seller has verbally disclosed to Buyer
that Seller uses inks and solvents incidental to the
programming and reprogramming of semi-conductors at the
Property, which inks and solvents may be Hazardous
Materials. Such inks and solvents have been used, stored,
disposed of and transported in accordance with the laws
relating to Hazardous Materials set forth on Exhibit G.
There is no and has not been any proceeding or inquiry by
a governmental or quasi-governmental authority with
respect thereto or any violations of any applicable
federal, state or local law with respect to Hazardous
Materials;
(f) The Due Diligence Materials are true, correct and
complete;
(g) The Property does not have any material physical,
mechanical or electrical defects, including, without
limitation, defects or deficiencies in the heating, air
conditioning, plumbing and other mechanical or electrical
apparatus located on or used within the Property or in the
roof, exterior walls or structural components of the
improvements located thereon; and
(h) Seller is the legal title holder of the Property and
has good, marketable and insurable title thereto free and
clear of all liens and encumbrances except the Permitted
Exceptions and as disclosed in the Title Report and the
ALTA survey of the Property; and none of the easements,
covenants or restrictions contained in any instruments of
record affecting the Property have been violated.
C. Buyer's Representations and Warranties. Buyer hereby
represents and warrants to Seller that Buyer has full power and
authority to enter into this Agreement and any other documents
contemplated by this Agreement and to assume and perform all of
Buyer's obligations hereunder; the persons executing this Agreement
and any other documents contemplated by this Agreement on behalf of
Buyer have been authorized and empowered to bind Buyer thereto; and
this Agreement is, and each instrument and document to be executed
by Buyer hereunder shall be, a valid, legally binding obligation of
Buyer enforceable against Buyer in accordance with its terms.
Pursuant to Paragraph 4.A(i) of this Agreement, Buyer shall perform
its own inspections of the Property.
7. CLOSING ADJUSTMENTS AND PRORATIONS. The adjustments and
prorations set forth below shall be made at the Close of Escrow. For the
purposes of this Paragraph 7, the term "Proration Date" shall be defined as
11:59 p.m. on the day preceding the Close of Escrow.
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<PAGE> 15
A. Closing Costs. Seller and Buyer shall pay the Closing Costs
identified above. All other closing costs incurred in connection
with this transaction shall be apportioned in accordance with local
custom.
B. Real Estate Taxes. All real and personal property taxes,
installments of bonds and special taxes and assessments attributable
to the Property shall be prorated as of the Proration Date based on
a 365-day year and the assessed value of the Property in effect at
the Close of Escrow. Seller shall pay all such real estate taxes,
assessments, installments and special taxes attributable to periods
through and including the Proration Date. If at any time after the
Proration Date additional or supplemental real estate taxes, are
assessed against the Property by reason of any event occurring prior
to the Proration Date, or there is any rebate of such taxes, Buyer
and Seller shall promptly re-prorate such taxes, and any amounts due
from one party to the other shall be paid in cash at that time.
C. Utilities. Seller shall pay, through and including the
Proration Date, and after the Close of Escrow as lessee under the
Lease, all utility charges attributable to the Property.
D. Calculations for Closing. Seller and Buyer shall provide
Escrow Holder with a preliminary calculation of prorations no later
than three (3) days prior to the Proration Date and a final
calculation no later than one (1) day prior to the Proration Date.
The final calculation shall be executed by each party and may be
relied upon by Escrow Holder in completing the closing adjustments
and prorations. In the event incomplete information is available, or
estimates have been utilized to calculate prorations as of the
Proration Date, any prorations relating thereto shall be further
adjusted and completed outside of Escrow within sixty (60) days
after the Proration Date or as and when complete information becomes
available to Buyer and Seller. Any adjustments to initial estimated
prorations which are required upon review of such complete
information shall be made by Buyer and Seller, with due diligence
and cooperation, by prompt cash payment to the party entitled to a
credit as a result of such adjustments. Any errors or adjustments in
calculations of the foregoing adjustments shall be corrected or
adjusted as soon as practicable after the Close of Escrow; provided,
however, the provisions hereof shall survive the Close of Escrow for
not more than eighteen (18) months after the Close of Escrow.
E. California Withholding Requirement. As a further condition
precedent to the Close of Escrow, Seller and, if appropriate, Arrow
shall deliver to Title Company: (i) in the event Seller's permanent
place of business is located in California or Seller is a resident
of California, a completed and executed California Form 590
"Certificate of California Residence (Individuals) or Permanent
Place of Business (Corporation)" certifying, among other things,
that Seller's permanent place of business is located in California
or Seller is a resident of California or (ii) in the event Seller's
permanent
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<PAGE> 16
place of business is not located in California or Seller is not a
resident of California, a completed and executed California Form
597, certifying, among other things, that Seller's permanent place
of business is not located in California or Seller is not a resident
of California. In the event subparagraph (ii) is applicable to
Seller, Seller acknowledges and agrees that Title Company shall (a)
be entitled to withhold from Seller an amount equal to three and
one-third percent (3-1/3%) of the Purchase Price, and (b) pay such
withheld amounts to the Franchise Tax Board of California within
twenty (20) days following the Close of Escrow.
8. CASUALTY AND CONDEMNATION
A. Material Casualty or Condemnation. If prior to Close of
Escrow (i) the Property shall sustain damage caused by fire or other
casualty which (a) would cost in excess of an amount equal to the
Deposit to repair or replace, or (b) would take more than sixty (60)
days from the date of damage or destruction to repair or replace, or
(ii) if a taking or condemnation of any portion of the Property has
occurred or is threatened which would materially adversely affect
the Property or would materially and negatively affect the aesthetic
quality of, or any access to, the Property, Buyer may, at its
option, terminate this Agreement within five (5) days after receipt
of written notice of such event (and, if necessary, the Close of
Escrow shall be extended by the number of days necessary to give
Buyer this full five-day (5-day) period). If Buyer does not provide
said termination notice within such period, the Close of Escrow
shall take place as provided herein with a credit against the
Purchase Price in an amount equal to the difference between any
insurance proceeds or condemnation awards actually received by Buyer
on account of such occurrence and the cost of repair or replacement,
in the event of a casualty, or the diminution in value of the
Property by reason of a taking.
B. Immaterial Casualty or Condemnation. If prior to Close of
Escrow the Property shall sustain damage caused by fire or other
casualty which is not described in Paragraph 8.A, or a taking or
condemnation has occurred, or is threatened, which is not described
in Paragraph 8.A, the Close of Escrow shall take place as provided
in this Agreement with a credit against the Purchase Price equal to
the difference between any insurance proceeds or condemnation awards
actually received by Buyer on account of such occurrence and the
cost of repair and replacement (if not already performed and paid by
Seller), in the event of a casualty, or the diminution in value of
the Property by reason of a taking. At Close of Escrow, Seller shall
assign to Buyer all rights or interest in and to any insurance
proceeds or condemnation awards which may be due to Seller on
account of any such occurrence; provided Seller may recoup from such
proceeds any reasonable and
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documented sums expended by Seller in repairing damage or replacing
damaged property.
9. INDEMNIFICATION. Each party hereto, including Arrow, shall
indemnify and hold harmless the other party (with counsel acceptable to such
party) from and against any loss, cost, expense, claim, demand, liabilities or
damages, including reasonable attorneys' fees, attributable to any breach or
default by such party of any of its representations, warranties or covenants
contained in this Agreement. Buyer agrees to indemnify Seller and hold Seller
harmless from all costs, expenses, losses and claims arising directly from
Buyer's activities at the Real Property during the Due Diligence Period.
10. DEFAULT BY BUYER.
A. BEFORE DELIVERY OF EARNEST MONEY DEPOSIT. Except as set
forth in the last sentence of Paragraph 9, in the event of a default
by Buyer under this Agreement prior to delivery of the Earnest Money
Deposit to Escrow Holder, neither party shall have any further
rights or obligations hereunder except to a return of those
documents or other items previously delivered to the other party.
B. AFTER DELIVERY OF EARNEST MONEY DEPOSIT. ONLY AFTER THE
EARNEST MONEY DEPOSIT IS DELIVERED BY BUYER TO ESCROW HOLDER, IN THE
EVENT OF THE FAILURE TO CLOSE ESCROW DUE TO DEFAULT BY BUYER IN THE
PERFORMANCE OF ITS OBLIGATIONS HEREUNDER, SELLER SHALL HAVE THE
RIGHT TO TERMINATE THIS AGREEMENT FORTHWITH AND NEITHER PARTY SHALL
HAVE FURTHER OBLIGATIONS TO THE OTHER HEREUNDER EXCEPT SELLER'S
RIGHT TO OBTAIN IMMEDIATE DISBURSEMENT OF AND TO RETAIN THE EARNEST
MONEY DEPOSIT. SUCH RETENTION OF THE EARNEST MONEY DEPOSIT IS
INTENDED TO CONSTITUTE LIQUIDATED DAMAGES TO SELLER. SAID AMOUNT
SHALL BE THE FULL, AGREED AND LIQUIDATED DAMAGES FOR THE BREACH OF
THIS AGREEMENT BY BUYER, ALL OTHER CLAIMS TO DAMAGES OR OTHER
REMEDIES AT LAW OR EQUITY BEING HEREIN EXPRESSLY WAIVED BY SELLER.
THE PARTIES ACKNOWLEDGE THAT THE ACTUAL DAMAGES WHICH WOULD RESULT
TO SELLER AS A RESULT OF SUCH FAILURE WOULD BE EXTREMELY DIFFICULT
TO ESTABLISH. IN ADDITION, BUYER DESIRES TO HAVE A LIMITATION PUT
UPON ITS POTENTIAL LIABILITY TO SELLER IN THE EVENT THAT THIS
TRANSACTION SHALL FAIL TO CLOSE. BY PLACING THEIR RESPECTIVE
INITIALS IN THE SPACES HEREINAFTER PROVIDED, THE PARTIES ACKNOWLEDGE
THAT, AFTER THE EARNEST MONEY DEPOSIT IS DELIVERED BY BUYER TO
ESCROW HOLDER, UPON A DEFAULT BY BUYER UNDER THE TERMS OF THIS
AGREEMENT, SELLER SHALL ONLY BE ENTITLED TO LIQUIDATED DAMAGES IN
THE AMOUNT OF THE EARNEST MONEY DEPOSIT.
BUYER (/s/ EK) AND SELLER (/s/ RK) AGREE.
11. DEFAULT BY SELLER. In the event of a default by Seller and/or
Arrow under this Agreement, Buyer shall have the right to pursue any remedy
13
<PAGE> 18
available to Buyer at law or equity, including, without limitation, specific
performance of this Agreement and consequential damages.
12. MISCELLANEOUS
A. Leasing Commissions. Seller shall indemnify and hold Buyer
harmless from any leasing commissions payable in connection with any
leases affecting the Property. With respect to the Lease, each party
hereby agrees to indemnify and defend the other (by counsel
acceptable to the party seeking indemnification) against and hold
the other harmless from and against any and all loss, damage,
liability or expense, including costs and reasonable attorneys' fees
resulting from any claims for Real Estate Compensation (defined
below) by any person or entity based upon such acts.
B. Brokerage Commissions. Each party to this Agreement warrants
to the other that no person or entity can properly claim a right to
a real estate commission, finder's fee or other real estate
brokerage type compensation (collectively, "Real Estate
Compensation") based upon the acts of that party with respect to the
transaction contemplated by this Agreement. Each party hereby agrees
to indemnify and defend the other (by counsel acceptable to the
party seeking indemnification) against and hold the other harmless
from and against any and all loss, damage, liability or expense,
including costs and reasonable attorneys' fees, resulting from any
claims for Real Estate Compensation by any person or entity based
upon such acts.
C. No Liability. Seller agrees that, except for the Lease,
Buyer shall have no liability as a successor in interest for any
contracts or agreements entered into by Seller in connection with
its ownership or operation of the Property or the use, occupancy or
construction of the improvements located thereon, including, but not
limited to, the Service Contracts; and Seller shall fully perform
all of its commitments and obligations under any such contracts and
agreements and shall indemnify and defend Buyer against (by counsel
acceptable to Buyer) and hold Buyer harmless from any and all
losses, costs, damages, liabilities and expenses, including, without
limitation, reasonable counsel fees, brokerage commissions and lease
assumptions under any leases affecting the Property.
D. Time of the Essence. Time is of the essence of every
provision of this Agreement.
E. Notices. Whenever Escrow Holder or any party hereto shall
desire to give or serve upon the other any notice, demand, request
or other communication, each such notice, demand, request or other
communication shall be in writing and shall be given or served upon
the other party by personal service or by certified, registered or
Express United States Mail, or Federal Express or other nationally
recognized
14
<PAGE> 19
commercial courier, postage prepaid, addressed as set forth above.
Any such notice, demand, request or other communication shall be
deemed to have been received upon the earlier of personal delivery
thereof or three (3) business days after having been mailed as
provided above, as the case may be.
F. Attorneys' Fees. If Buyer or Seller is required to employ
counsel to enforce any of the terms of this Agreement or for damages
by reason of any alleged breach of this Agreement or for a
declaration of rights hereunder or to enforce the judgment of any
judicial or quasi-judicial body with respect to the terms of this
Agreement, the prevailing party shall be entitled to recover its
reasonable attorneys' fees and court costs incurred.
G. Successors and Assigns. This Agreement shall be binding upon
the heirs, executors, administrators, successors and assigns of
Seller, Arrow and Buyer; neither Buyer, Arrow nor Seller shall have
the right to assign its respective rights hereunder to any party.
H. Captions. Paragraph titles or captions contained herein are
inserted as a matter of convenience and for reference, and in no way
define, limit, extend or describe the scope of this Agreement.
I. Exhibits. All exhibits attached hereto shall be incorporated
herein by reference as if set out herein in full.
J. Binding Effect. Regardless of which party prepared or
communicated this Agreement, this Agreement shall be of binding
effect between Buyer and Seller only upon its execution by an
authorized representative of each such party.
K. Construction. The parties acknowledge that each party and
its counsel have reviewed and revised this Agreement and that the
normal rule of construction to the effect that any ambiguities are
to be resolved against the drafting party shall not be employed in
the interpretation of this Agreement or any amendment or exhibits
hereto.
L. Counterparts. This Agreement may be executed in several
counterparts, each of which shall be an original, but all of such
counterparts shall constitute one such Agreement.
M. Further Assurances. Buyer and Seller shall make, execute,
and deliver such documents and undertake such other and further acts
as may be reasonably necessary to carry out the intent of the
parties hereto.
N. No Merger. The delivery of the Deed and any other documents
and instruments by Seller and the acceptance and recordation thereof
by Buyer shall not effect a merger, and the covenants,
representations and
15
<PAGE> 20
warranties by Seller, Arrow and Buyer shall survive the Close of
Escrow for a period of twenty-four (24) months.
O. Governing Law. This Agreement shall be governed by, and
construed in accordance with, the laws of the State wherein the Real
Property is located.
P. Confidentiality. No party to this Agreement shall disclose
to any third party (except their respective attorneys, accountants
and/or other financial advisors) any information, data, idea, report
or document which relates to the Property or the acquisition and/or
sale of the Property and each party agrees to keep all such matters
confidential until the consummation of the transactions contemplated
by this Agreement.
Q. Entire Agreement. This Agreement embodies the entire
agreement between Buyer, Seller and Arrow in connection with this
transaction. This Agreement cannot be modified except in writing
signed by all parties.
IN WITNESS WHEREOF, Buyer, Seller and Arrow have executed and
delivered this Agreement as of the Effective Date.
S E L L E R:
ANTHEM ELECTRONICS, INC., A DELAWARE
CORPORATION
By: /s/ Robert Klatell
_______________________________
Its: Exec. V.P.
By: /s/ Gregory Tarpinian
_______________________________
Its: Attorney
B U Y E R:
ASPECT TELECOMMUNICATIONS CORPORATION, A
CALIFORNIA CORPORATION
By: /s/ James R. Carreker
_______________________________
Its: Chairman and CEO
16
<PAGE> 21
By: /s/ Eric J. Keller
_______________________________
Its: Vice President
Arrow hereby executes this Agreement of Purchase and Sale for the
purpose of (i) making those representations and warranties set forth herein to
which Arrow has made to Buyer and (ii) agreeing to and acknowledging those other
provisions herein in which Arrow is referenced or otherwise been made a part
thereof.
ARROW ELECTRONICS, INC., A DELAWARE
CORPORATION
By: /s/ Robert Klatell
_______________________________
Its: Exec. V.P.
By: /s/ Gregory Tarpinian
_______________________________
Its: Attorney
17
<PAGE> 1
ASPECT TELECOMMUNICATIONS CORPORATION
EXHIBIT 11.1:
Statement Re: Computation of Earnings per Share
(in thousands, except per share amounts)
<TABLE>
<CAPTION>
Three Months Ended June 30, Six Months Ended June 30,
--------------------------- -------------------------
1996 1995 1996 1995
-------- --------- ------- --------
<S> <C> <C> <C> <C>
Primary:
Weighted average common shares
outstanding during the period 21,098 20,590 21,039 20,526
Common share equivalents:
Dilutive effect of stock options 1,967 1,018 1,889 1,022
------- ------- ------- -------
Total 23,065 21,608 22,928 21,548
======= ======= ======= =======
Net income $ 8,913 $ 5,833 $17,154 $10,982
======= ======= ======= =======
Primary earnings per share $ 0.39 $ 0.27 $ 0.75 $ 0.51
======= ======= ======= =======
</TABLE>
<PAGE> 2
ASPECT TELECOMMUNICATIONS CORPORATION
EXHIBIT 11.1 (CONTINUED):
Statement Re: Computation of Earnings Per Share
(in thousands, except per share amounts)
<TABLE>
<CAPTION>
Three Months Ended June 30, Six Months Ended June 30,
--------------------------- -------------------------
1996 1995 1996 1995
------- ---------- ------- --------
<S> <C> <C> <C> <C>
Fully Diluted:
Weighted average common shares
outstanding during the period 21,098 20,590 21,039 20,526
Common share equivalents:
Dilutive effect of stock options 1,967 1,144 1,957 1,182
Weighted average shares issuable
upon assumed conversion of debt 2,830 2,830 2,830 2,830
------- ------- ------- -------
Total 25,895 24,564 25,826 24,538
======= ======= ======= =======
Earnings:
Net income $ 8,913 $ 5,833 $17,154 $10,982
Interest expense during the period on
convertible subordinated debentures,
net of tax 461 460 922 915
------- ------- ------- -------
Net income adjusted for
fully diluted calculation $ 9,374 $ 6,293 $18,076 $11,897
======= ======= ======= =======
Fully diluted earnings per share $ 0.36 $ 0.26 $ 0.70 $ 0.48
======= ======= ======= =======
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM (A) THE
BALANCE SHEET AND INCOME STATEMENT AS OF AND FOR THE SIX MONTHS ENDED JUNE 30,
1996 INCLUDED IN THE FORM 10-Q FOR THE QUARTERLY PERIOD ENDED JUNE 30, 1996
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH (B) FORM 10-Q FILING.
</LEGEND>
<MULTIPLIER> 1,000
<CURRENCY> US DOLLARS
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> JUN-30-1996
<EXCHANGE-RATE> 1
<CASH> 34,865
<SECURITIES> 74,515
<RECEIVABLES> 43,747
<ALLOWANCES> 825
<INVENTORY> 11,926
<CURRENT-ASSETS> 173,731
<PP&E> 71,486
<DEPRECIATION> 37,484
<TOTAL-ASSETS> 241,511
<CURRENT-LIABILITIES> 48,793
<BONDS> 59,500
0
0
<COMMON> 66,012
<OTHER-SE> 67,206
<TOTAL-LIABILITY-AND-EQUITY> 241,511
<SALES> 104,431
<TOTAL-REVENUES> 137,353
<CGS> 34,479
<TOTAL-COSTS> 58,239
<OTHER-EXPENSES> 52,442
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (556)
<INCOME-PRETAX> 27,228
<INCOME-TAX> 10,074
<INCOME-CONTINUING> 17,154
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 17,154
<EPS-PRIMARY> .75
<EPS-DILUTED> .70
</TABLE>
