DIVESTITURE AGREEMENT
dated, December 31, 1996
by and between
PROTOSOURCE CORPORATION
a California corporation
(the "Seller"),
and
SSC TECHNOLOGIES, INC.
a California corporation
("Buyer")
TABLE OF CONTENTS
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Page
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Section 1. Definitions .......................................... 2
Section 2. Divestiture Price; Closing; Transfer of Assets;
Payment of Purchase Price and Assumption of
Liabilities; Consistent Treatment .................... 6
2.1. Divestiture Price .................................... 6
2.2. Closing Date ......................................... 7
2.3. Transactions at Closing .............................. 7
2.3.1. Transfer of Assets ........................... 7
2.3.2. Payment of Divestiture Price and Assumption
of Liabilities ............................... 7
2.4. Consistent Treatment ................................. 7
Section 3. Representations, Warranties, Certain Agreements and
Covenants of Buyer ................................... 8
3.1. Organization ......................................... 8
3.2. Authority ............................................ 8
3.3. Consents ............................................. 8
3.4. Litigation ........................................... 8
Section 4. Representations, Warranties, Certain Agreements and
Covenants of the Seller .............................. 8
4.1. Organization ......................................... 8
4.2. Due Authorization .................................... 8
4.3. Ownership ............................................ 9
4.4. Title ................................................ 9
4.5. Balance Sheet ........................................ 9
4.6. Inventories .......................................... 10
4.7. Certain Contracts .................................... 10
4.8. Fixed Assets ......................................... 10
4.9. Intangible Rights .................................... 10
4.10. Litigation ........................................... 11
4.11. Employees ............................................ 11
4.12. Default .............................................. 12
4.13. Material Adverse Change .............................. 12
4.14. Consents ............................................. 13
4.15. Environmental ........................................ 13
4.16. Real Property ........................................ 13
4.17. Tax Matters .......................................... 14
4.18. Insurance ............................................ 14
4.19. Compliance; Governmental Authorizations; OSHA ........ 15
4.20. Accounts and Notes Receivable ........................ 15
4.21. Customers and Suppliers .............................. 16
4.22. Miscellaneous Assets ................................. 16
4.23. Disclosures .......................................... 16
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Section 5. Employee Pension and Other Benefit Plans
Programs ............................................. 16
Section 6. Pre-Closing Covenants of Buyer ....................... 16
6.1. Corporate and Other Action ........................... 16
6.2. Consents and Approvals ............................... 16
6.3. Confidentiality ...................................... 16
Section 7. Pre-Closing Covenants of the Seller .................. 17
7.1. Corporate and Other Actions .......................... 17
7.2. Consents and Approvals ............................... 17
7.3. Access to Information ................................ 17
7.4. Ordinary Course of Business .......................... 17
Section 8. Prorated Taxes, Brokerage Fees, Product Liability
Claims, Expenses and Sales Taxes and Other Taxes ..... 17
8.1. Proration of Taxes ................................... 18
8.2. Brokerage Fees ....................................... 18
8.3. Product Liability .................................... 18
8.4. Expenses ............................................. 18
8.5. Sales and Other Taxes ................................ 18
Section 9. Conditions ........................................... 19
9.1. Conditions to Obligations of the Seller .............. 19
9.1.1. Performance of Agreements and Covenants ...... 19
9.1.2. Truth of Representations and Warranties ...... 19
9.1.3. Opinions of Counsel .......................... 19
9.1.4. Payment of Purchase Price and Assumption
of Liabilities ............................... 20
9.1.5. No Actions or Proceedings .................... 20
9.1.6. Proceedings Satisfactory to the Seller ....... 20
9.2. Conditions to Obligations of Buyer ................... 20
9.2.1. Performance of Agreements and Covenants ...... 20
9.2.2. Truth of Representations and Warranties ...... 20
9.2.3. Updated Schedules ............................ 20
9.2.4. No Actions or Proceedings .................... 21
9.2.5. Consents Obtained ............................ 21
9.2.6. Deliveries by the Seller at Closing .......... 21
9.2.7. Proceedings Satisfactory to Buyer ............ 21
Section 10. Non-Competition ..................................... 22
Section 11. Post Closing Covenants of Buyer ..................... 22
11.1. Liabilities ......................................... 22
11.2. Availability of Records ............................. 22
11.3. Use of Trade or Service Marks ....................... 23
Section 12. Statement of Source and Use of Funds ................ 23
12.1. Statement of Source and Use of Funds ................ 23
12.2. Resolution .......................................... 23
12.3. Settlement of Accounts .............................. 24
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Section 13. Indemnification, Survival and Termination .............. 24
13.1. Indemnification by the Seller .......................... 24
13.2. Indemnification by Buyer ............................... 25
13.3. Survival ............................................... 25
13.4. Termination ............................................ 26
3.4.1. With the mutual consent of Buyer and the
Seller ......................................... 26
13.4.2. By the Seller .................................. 26
13.4.3. By Buyer ....................................... 26
Section 14. Miscellaneous .......................................... 26
14.1. Assignment ............................................. 26
14.2. No Press Release Without Consent ....................... 26
14.3. Severability ........................................... 27
14.4. Entire Agreement ....................................... 27
14.5. No Third Party Beneficiaries ........................... 27
14.6. Waiver ................................................. 27
14.7. Governing Law .......................................... 27
14.8. Headings ............................................... 27
14.9 Counterparts ........................................... 27
14.10 Choice of Forum ........................................ 27
14.11 Further Documents ...................................... 27
14.12. Notices ................................................ 29
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DIVESTITURE AGREEMENT
THIS AGREEMENT, dated, December 31, 1996, is entered into by and between
ProtoSource Corporation, a California corporation (the "Seller"), and SSC
Technologies, Inc., a California corporation (the "Buyer").
IT IS AGREED as follows:
Section 1. Definitions. The following terms have the following meanings
when used herein
"Agreement" means this Divestiture Agreement, including all Exhibits and
Schedules hereto, as it may be amended from time to time in accordance with its
terms.
"Assets" means the Software Division, Computer Training Center Division and
Market Street Division, including without limitation:
(a) all assets reflected on the Balance Sheets and supplies owned by the
Seller for use in the Software Division, Computer Training Center
Division and Market Street Division (except inventory and supplies
disposed of or used in the ordinary course of business as of August
31, 1996);
(b) all accounts and notes receivable of the Seller relating to the
Software Division, Computer Training Center Division and Market Street
Division listed on Schedule 4.20, which schedule will be updated on
the Closing Date to reflect all accounts and notes receivable of the
Seller relating to the Software Division, Computer Training Center
Division and Market Street Division existing on the Closing Date;
(c) inventory, stock in trade, work-in-progress, and raw materials
relating to the Software Division, Computer Training Center Division
and Market Street Division existing on the Closing Date;
(d) all sales order files, engineering order files, purchase order files,
manufacturing records, customer lists and business files of the Seller
relating exclusively to the Software Division, Computer Training
Center Division and Market Street Division;
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(e) all intellectual property rights including the Software Division,
Computer Training Center Division and Market Street Division, trade
secrets, know-how, trade names (with the exception of the tradename
"ProtoSource"), copyrights and copyright registrations, service marks
and trademarks (including applications and registrations therefor),
patents and patent applications, software and software documentation,
and all other licenses to or from third parties with respect to the
foregoing or rights related thereto used in the Software Division,
Computer Training Center Division and Market Street Division,
including such rights as the Seller may have to ▇▇▇ for past
infringement or misappropriation thereof;
(f) all right and interest of the Seller to or in all agreements, options,
contracts, distributor agreements, office equipment leases,
instruments, purchase orders, sales orders, bids, and product
liability insurance policies and contracts, if any relating
exclusively to the Software Division, Computer Training Center
Division and Market Street Division Businesses;
(g) all computer programs and like property, and all records thereof owned
by the Seller used exclusively in the Software Division, Computer
Training Center Division and Market Street Division;
(h) all machinery, equipment, tooling, dies and castings of the Seller
used exclusively in the Software Division, Computer Training Center
Division and Market Street Division;
(i) any claims, demands, causes of action, judgments and pending
litigation as to which the Seller is a claimant, plaintiff, judgment
creditor or beneficiary, relating to or arising out of the Software
Division, Computer Training Center Division and Market Street
Division;
(j) that certain five-year lease on the Pavilion West shopping center and
used exclusively in the Software Division, Computer Training Center
Division and Market Street Division, including all plants, buildings
and other improvements (leasehold or otherwise) thereon and including,
without limitation, that property listed on Schedule 4.16;
(k) goodwill and going concern value related to the Software Division,
Computer Training Center Division and Market Street Division
Businesses; and
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"Balance Sheet" means the consolidated balance sheets of the Software
Division, Computer Training Center Division and Market Street Division, as of
August 31, 1996 attached hereto as Exhibit A.
"Buyer" has the meaning specified above.
"Computer Training Center Business" means the business conducted by the
Computer Training Center Division of ProtoSource Corporation.
"Computer Training Center Division" means the Computer Training Center
Division of ProtoSource Corporation.
"Closing Balance Sheet" has the meaning assigned to it in Section 12.1.
"Closing Date" and "Closing" refer to the date, time, and place for
transactions described in Section 2.2 and the closing therein referred to.
"Code" means the Internal Revenue Code of 1986, as amended.
"Excluded Assets" means:
(a) all assets of the Seller related to all state, local and Federal taxes
including but not limited to income, sales or use, franchise, payroll
and property taxes, and prepaid insurance; and
(b) any cash in excess of the amount reflected on the Balance Sheet or any
insurance policy coverage and other services furnished to or for the
benefit of the Software Division, Computer Training Center Division,
and Market Street Division by the Seller or any of its subsidiaries.
(c) All assets related to the Internet division of Seller, the principal
building, improvements and certain computer equipment and furnishings
that the Divested Divisions will lease from the Seller, including all
bank accounts and all other assets.
"Excluded Liabilities" means:
(a) any intercompany or intracompany payable and receivable balances
between the Seller, or any of its subsidiaries and the Software
Division, Computer Training Center Division, and Market Street
Division;
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(b) any sales, use, transfer or other tax or recording cost imposed upon
the sale or transfer of the Assets pursuant to this Agreement;
(c) the employee pension and welfare benefit obligations of the Company
referred to in Section 5;
(d) all vacation and accrued sickness and other benefits for all employees
of the Software Division, Computer Training Center Division, and
Market Street Division who are employed by the Seller as part of the
Software Division, Computer Training Center Division, and Market
Street Division on the Closing Date (whether or not such employees are
employed by Buyer immediately thereafter);
(e) all product liability claims for which Seller is liable under Section
8.3;
(f) any claims, demands, causes of action, judgments, and litigation made
or brought after the Closing Date which relate to the actual or
alleged use, generation, storage, disposal, burial, dumping, spilling,
or release of wastes, chemicals, pollutants, contaminant hazardous or
toxic substances by the Software Division, Computer Training Center
Division, and/or Market Street Division, whether before or after the
Closing Date.
"GAAP" shall have the meaning assigned to it in Section 4.5.
"Intangible Rights" shall have the meaning assigned to it in Section 4.8.
"Liabilities" means:
(a) all the obligations of the Software Division, Computer Training Center
Division, and Market Street Division under the agreements, options,
contracts, distributor agreements, sales representative agreements,
leases, instruments, purchase orders, sales orders, and commitments
(including outstanding bids) of the Software Division, Computer
Training Center Division, and Market Street Division which are to be
assigned to Buyer by the Seller pursuant to this Agreement;
(b) any claims, demands, causes of action, judgments, and pending
litigation related to or arising out of the Software Division,
Computer Training Center Division, and Market Street Division,
including, but not limited to those listed in Schedule 4.10; and
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(c) other current liabilities (i) of the Software Division, Computer
Training Center Division, and Market Street Division reflected in the
Balance Sheet to the extent not paid on the Closing Date and (ii)
incurred by the Seller in respect to the Software Division, Computer
Training Center Division, and Market Street Division in the ordinary
course of the business after the date of the Balance Sheet and
existing at the Closing Date.
"Market Street Division" means the Market Street Division of ProtoSource
Corporation
"Market Street Division Business" means the business conducted by the
Market Street Division of ProtoSource Corporation.
"Promissory Note" means a note issued by the Buyer in favor of Seller in
the amount of $770,850, with a ten year maturation date and 10% rate of interest
payable in monthly installments.
"Seller" has the meaning specified above.
"Software Division" means the software division of ProtoSource Corporation.
"Software Division Business" means the business conducted by the Software
Division of ProtoSource Corporation.
"Statement of Source and Use of Funds" means a comprehensive list of all of
the Divestiture Divisionts expenses, losses, accrued liabilities and cash
receipts from September 1, 1996, through the Closing.
"Total Cash Investment" means the $500,000 that the Seller, pursuant to
this Divestiture Agreement, agrees to invest in the Buyer.
Section 2. Divestiture Price; Closing; Transfer of Assets; Payment of
Purchase Price and Assumption of Liabilities; Consistent Treatment.
2.1. Divestiture Price. The Buyer will receive a total of $500,000 less the
amount of cash used by the Seller 1n respect to the Software Division, Computer
Training Center Division, and Market Street Division in the ordinary course of
the business after August 31, 1996, plus the assumption of the Liabilities
pursuant to Section 2.3.2, subject to adjustment as provided in Section 12.
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2.1.1. Seller will receive 25% equity ownership of Buyer as part of
the Divestiture Price.
2.2. Closing Date. The Closing hereunder shall take place at the office of
Freshman, Marantz, Orlanski, ▇▇▇▇▇▇ & ▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇
Tower, Eighth Floor, ▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇, at 10:00 a.m. Los Angeles time, on
October _, 1996, or at such other place, time or date as the Seller and Buyer
may agree.
2.3. Transactions at Closing. At the Closing, and on the basis of the
representations, warranties, covenants and agreements made herein and in the
exhibits hereto and in the certificates and other instruments delivered pursuant
hereto, and subject to the terms and conditions hereof:
2.3.1. Transfer of Assets. The Seller shall transfer, convey, sell,
assign and deliver to Buyer all of Seller's right, title and interest in the
Assets, delivering to Buyer bills of sale, assignments and documents of
conveyance (including assignments of leases), each duly executed and
acknowledged by the appropriate party, and such other good and sufficient
instruments of transfer and conveyance as shall be effective to vest in Buyer
all of Seller's right, title and interest in the Assets. In addition, the Seller
shall deliver the certificate required by Section 9.2.2 and the opinion required
by Section 9.2.3.
2.3.2.Payment of Divestiture Price and Assumption of Liabilities. In
consideration for the transfer of the Assets Buyer shall deliver to the Seller
that certain Promissory Note attached hereto as Exhibit C, and that certain
Assignment and Assumption Agreement attached hereto as Exhibit D, both executed
concurrently herewith. The Assignment and Assumption Agreement, together with
this Divestiture Agreement govern the Buyer's assumption of the Liabilities. In
addition, Buyer shall deliver the certificate required by Section 9.1.2 and the
opinion required by Section 9.1.3.
2.4. Consistent Treatment. The parties hereto agree to allocate the
Divestiture Price (which for purposes of this Section 2.4 shall include the
Liabilities assumed by Buyer) among the Assets and the covenant not to compete
set forth in Section 10 in accordance with Schedule 2.4 and Section 1060 of the
Code, (b) treat and report the transactions contemplated by this Agreement in
all respects consistently (including valuation of the Assets) for purposes of
any Federal, state, and local tax, and (c) not take any action inconsistent with
such allocation.
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Section 3. Representations, Warranties, Certain Agreements and Covenants of
Buyer. Buyer represents and warrants to, and agrees with the Seller as follows:
3.1. Organization. Buyer is, and at the Closing will be, a corporation duly
organized and validly existing in good standing under the laws of the State of
California, with all requisite corporate power and authority to own, lease and
operate its properties and to carry on its business as now being conducted.
3.2. Authority. Buyer has full corporate power and authority to enter into
and to perform this Agreement; the execution, delivery and performance of this
Agreement and of the instrument or instruments assuming the Liabilities have
been duly authorized by Buyer. The signing, delivery and performance of this
Agreement by Buyer is not prohibited or limited by, and will not result in the
breach of or a default under, any provision of the Articles of Incorporation or
By-Laws of Buyer, or of any agreement or instrument binding on Buyer, or of any
applicable order, writ, injunction or decree of any court or governmental
instrumentality. This Agreement has been duly executed and delivered by Buyer
and constitutes the legal, valid and binding obligation of Buyer, enforceable
against Buyer in accordance with its terms.
3.3. Consents. Except as set forth on Schedule 3.3, no notice to, filing
with, authorization of, exemption by, or consent of, any person, entity or
public or governmental authority is required for Buyer to consummate the
transactions contemplated hereby.
3.4. Litigation. Except as set forth on Schedule 3.4, there is no
litigation, proceeding or claim pending or threatened relating to the Buyer.
Section 4. Representations, Warranties, Certain Agreements and Covenants of
the Seller. The Seller represents and warrants to, and agrees with, Buyer as
follows:
4.1. Organization. The Seller is a corporation duly organized and validly
existing in good standing under the laws of the State of California. The Seller
has the full corporate power and authority to engage in the businesses in which
it is now engaged, and to deliver and perform this Agreement and all writings
relating hereto.
4.2. Due Authorization. The execution, delivery and performance of this
Agreement and all writings relating hereto by Seller have been duly and validly
authorized by the Board of Directors of Seller and no authorization by its
shareholders is required. This Agreement and all writings relating hereto to be
8
signed by Seller constitute valid and binding obligations of Seller enforceable
in accordance with their respective terms. Neither the execution and delivery of
this Agreement or any writing relating hereto nor the consummation by Seller of
the transactions contemplated hereby or thereby, nor compliance with any of the
provisions hereof or thereof will: (i) conflict with or result in a breach of
the Certificate of Incorporation or ByLaws of Seller; (ii) violate any statute,
law, rule or regulation or any order, writ, injunction or decree of any court or
governmental authority) or (iii) violate or conflict with or constitute a
default under (or give rise to any right of termination, cancellation or
acceleration under) any agreement or writing of any nature to which Seller is a
party or by which it or its assets or properties may be bound. No consent or
approval of or notification to any governmental authority is required in
connection with the execution and delivery by Seller of this Agreement or any
writing relating hereto or the consummation of the transactions contemplated
hereby or thereby.
4.3. Ownership. Except as set forth on Schedule 4.3, the Seller has good
and marketable title to all Assets and none of such Assets is held by the Seller
under any lease or conditional sales contract, except those specifically listed
herein, or is subject to any security agreement, lien (except for tax liens for
taxes not yet due and payable), encumbrance, charge, equity or claim.
4.4. Title. Upon delivery to Buyer of the deeds, bills of sale and
assignments referred to in Section 2.3.1, Buyer will receive good and marketable
title to all of the Assets, free and clear of all liens (except for tax liens
for taxes not yet due and payable), encumbrances, charges, equities and claims
of every kind, except as set forth on Schedule 4.3 and subject to obtaining any
consents of persons listed on Schedule 4.14.
4.5. Balance Sheet. The Balance Sheet fairly presents the financial
position of the Software Division, Computer Training Center Division, and Market
Street Division at such date and the results of its operation for such year in
accordance with generally accepted accounting principles ("GAAP") consistently
applied except as otherwise set forth on Exhibit A. Except as reflected on the
Balance Sheet, the Software Division, Computer Training Center Division, and
Market Street Division has no contingent liabilities which would be required by
GAAP to be reflected therein. The Balance Sheet reflects the cancellation of all
obligations and liabilities of the Software Division, Computer Training Center
Division, and Market Street Division to the Seller or its affiliates so that
such liabilities and obligations are, and on the Closing Balance Sheet will be,
reflected as equity.
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4.6. Inventories. All inventories of Seller reflected on the Balance Sheet
were in existence on August 31, 1996. The amounts thereof so shown reflect
valuations not in excess of the values of such inventories computed in
accordance with GAAP applied on a consistent basis.
4.7. Certain Contracts. Schedule 4.7 is a list of all agreements, options,
contracts, leases, license agreements and instruments which are of material
importance to the conduct of the Software Division, Computer Training Center
Division, and Market Street Division including, without limitation, (i) each
sales order and purchase order for goods and services which involves more than
$5,000 and which will be performed and assumed by Buyer, (ii) each other written
or oral agreement of the Seller related to the Software Division, Computer
Training Center Division, and Market Street Division to be assumed by Buyer and
which extends beyond 30 days from the Closing Date or which involves payments by
or to the Seller after the Closing Date of more than $5,000, (iii) all
agreements with distributors or sales representatives for the Software Division,
Computer Training Center Division, and Market Street Division, and (iv) letters
of credit. Schedule 4.7 also lists each outstanding proposal by the Software
Division, Computer Training Center Division, and Market Street Division that
involves payments to the Software Division, Computer Training Center Division,
and Market Street Division in excess of $5,000 and is subject to acceptance by
third parties or could otherwise become a new sales contract. Schedule 4.7 will
be updated at the Closing to reflect all purchase orders, sales orders and other
agreements entered into by the Software Division, Computer Training Center
Division, and Market Street Division after the date of this Agreement and prior
to the Closing Date which would otherwise be required to be listed on Schedule
4.7. Copies of all written~agreements and written summaries of all oral
agreements described on Schedule 4.7 have been furnished to Buyer.
4.8. Fixed Assets. Schedule 4.8 is a list of the fixed assets of the Seller
reflected on the Balance Sheet owned by the Seller and relating to the Software
Division, Computer Training Center Division, and Market Street Division, showing
costs accumulated book depreciation, if any, and net book value, as of the date
of the Balance Sheet; and a list of all other tangible Assets (other than
inventory) reflected on the Balance Sheet at an amount exceeding $10,000.
4.9. Intangible Rights. Schedule 4.9 is a list of all trademarks, trade
names, service marks, know-how, patents and copyrights, patent applications and
all licenses and other rights related thereto which are owned or used by the
Seller in the Software Division, Computer Training Center Division, and Market
Street Division with the exception of the names "ProtoSource" or
10
ProtoSource Corporation" (hereinafter referred to collectively as the
"Intangible Rights"). All such licenses are in full force and effect and
constitute legal, valid and binding obligations of the respective parties
thereto; there have not been and there currently are not any material defaults
thereunder by any party; and no event has occurred which (whether with or
without notice, lapse of time or the happening or occurrence of any other event)
would constitute a material default thereunder. The validity, continuation and
effectiveness of all such licenses under the current material terms thereof will
in no way be affected by the transfer of such licenses to Buyer under this
Agreement or, if any would be affected, Seller shall use all necessary and
reasonable means at its disposal to cause an appropriate consent to such
transfer to be delivered to Buyer prior to the Closing Date at no cost or other
adverse consequence to the Software Division, Computer Training Center Division,
and Market Street Division. Seller owns all the trademarks, trade names, service
marks, copyrights, knowhow, patents and applications for patents listed on
Schedule 4.9 and, except as set forth thereon, pays no royalty under any of them
and has the exclusive right to bring actions for the infringement thereof. No
product made or sold by the Software Division, Computer Training Center
Division, and Market Street Division violates any such license or infringes any
trademark, trade name, service ▇▇▇▇, copyright, know-how or patent of another.
Except as listed on Schedule 4.9, there is no pending or, to the best of the
knowledge of Seller, threatened claim or litigation against Seller contesting
its right to use any of the trademarks, trade names and know-how or the validity
of any of the licenses, copyrights and patents listed on such Schedule or
asserting the misuse thereof.
On the Closing Date all the Intangible Rights shall have been duly
transferred to Buyer, so as to vest in Buyer all right, title and interest
therein, and the Seller shall make, execute and deliver recordable assignments
to effect and evidence such transfers as may be reasonably requested by Buyer.
Prior to the Closing no party other than the Seller shall acquire any interest
in any of the Intangible Rights.
4.10. Litigation. Schedule 4.10 is a list and brief description of all
material litigation, proceedings and claims by or against the Seller relating to
the Software Division, Computer Training Center Division, and Market Street
Division pending or, to the knowledge of the Seller, threatened against the
Seller relating to the Software Division, Computer Training Center Division, and
Market Street Division.
4.11. Employees. Schedule 4.11 is a list of all employee contracts, benefit
plans, and arrangements (including all collective bargaining, employment,
compensation, pension, retirement, separation, vacation, sickness, insurance,
11
welfare, profit sharing and bonus plans and agreements) under which the Seller,
with respect to any employee of the Seller employed in the Software Division,
Computer Training Center Division, and Market Street Division, has any
obligation, together with an itemization of all accrued vacation and sickness
benefits owing to employees of the Seller employed in the Software Division,
Computer Training Center Division, and Market Street Division as of August 31,
1996. The Seller has furnished to Buyer copies of instruments evidencing all
such contracts, benefit plans and arrangements. Schedule 4.11 includes a true
and complete list of all employees of the Software Division, Computer Training
Center Division, and Market Street Division who are on an approved leave of
absence. The Software Division, Computer Training Center Division, and Market
Street Division has generally enjoyed a good employer/employee relationship with
its employees. Buyer will assume the accrued vacation and sick pay. With respect
to the Software Division, Computer Training Center Division, or Market Street
Division, Seller is in compliance with all federal, state and local laws and
regulations respecting employment and employment practices, terms and conditions
of employment and hours. Except as listed on Schedule 4.11, there is no material
unfair labor practice complaint against Seller relating to the Software
Division, Computer Training Center Division, or Market Street Division pending
before the National Labor Relations Board or strike, dispute, slowdown or
stoppage pending or threatened against or involving the Software Division,
Computer Training Center Division, or Market Street Division, and none has
occurred. No representation question exists respecting the employees of the
Software Division, Computer Training Center Division, or Market Street Division
and no collective bargaining agreement is currently being negotiated by Seller
relating to the Software Division, Computer Training Center Division, or Market
Street Division. Except as listed on Schedule 4.11, no grievance procedure or
arbitration proceeding is pending under any collective bargaining agreements.
4.12. Default. Neither the Seller nor, to the knowledge of the Seller, any
other party to any material contract, agreement, lease or instrument of the
Seller relating to the Software Division, Computer Training Center Division, or
Market Street Division including, without limiting the generality of the
foregoing-, relating to continuing warranty or service obligations, is in
material default in complying with any material provisions thereof, and no
condition or event or facts exists which, with notice, lapse of time or both
would constitute a default thereof on the part of the Seller or, to the
knowledge of the Seller, on the part of any other party thereto.
4.13. Material Adverse Change. Except as specifically disclosed and
identified as such on the Exhibits and Schedules to this Agreement, there has
not been since August 31, 1996 (i) any
12
material adverse change in the business, condition (financial or otherwise),
assets, liabilities or obligations of the Software Division, Computer Training
Center Division, or the Market Street Division, or (ii) any damage, destruction
or loss (whether or not covered by insurance), materially and adversely
affecting the business, assets or properties of the Software Division, Computer
Training Center Division, or Market Street Division. Since August 31, 1996,
there have been no events, transactions or information which has come to the
attention of Seller which could be reasonably expected to have a material
adverse effect on the business and operations of the Software Division, Computer
Training Center Division, or Market Street Division.
4.14. Consents. Except as set forth on Schedule 4.14, no notice to, filing
with, authorization of, exemption by, or consent of, any person, entity, or
public or governmental authority is required for the Seller to consummate the
transactions contemplated hereby. Schedule 4.14 will be updated at the Closing
to reflect any consents required for the assignment of any agreements entered
into after the date of this Agreement.
4.15. Environmental. Except as set forth on Schedule 4.15, to the knowledge
of Seller, the real property included in the Assets and each portion thereof (a)
are not and have not been a site for the use, generation, manufacture, storage,
disposal or transportation of a material amount of any hazardous wastes,
carcinogenic, pathogenic or toxic substances or related materials, including,
without limitation, any substances defined as or included in the definition of
"hazardous substances" "hazardous wastes," "hazardous materials" or "toxic
substances" under any applicable Federal, state or local laws or regulations
(collectively, "Hazardous Materials") about which a government agency would,
under any and all Federal, state or local laws, ordinances, regulations, orders
and directives pertaining to Hazardous Materials (collectively, "Hazardous
Materials Laws"), require corrective action; and (b) are presently and at the
Closing will be in material compliance with all Hazardous Materials Laws. There
are no asbestos-containing materials incorporated into the buildings or interior
improvements that are part of that real property or into other of the Assets,
nor is there any electrical transformer, fluorescent light fixture with
ballasts, or other equipment containing PCBs on that real property. Disclosure
of any matter on Schedule 4.15 shall not constitute any admission by the Seller
that such matter is or was material or a violation of any Hazardous Materials
Laws.
4.16. Real Property. Schedule 4.16 is a complete and accurate legal
description of each parcel of real property owned by or leased by Seller in
connection with the operation of the Software Division, Computer Training Center
Division, and Market Street Division, together with a true and correct survey of
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each parcel. Schedule 4.16 contains a description of all buildings, fixtures and
other improvements located on the properties and list of the policies of title
insurance issued to Seller for these properties. Except as set forth on Schedule
4.16, to the knowledge of Seller, (a) all real property included in the Assets
has unqualified access to all utilities, including electricity, sanitary and
storm sewers, potable water, and natural gas, used in the operation of the
Software Division, Computer Training Center Division, and Market Street
Division; (b) all leases for real property included in the Assets, including,
without limitation, those listed on Exhibit A, are in full force and effect; (c)
all of the buildings, improvements and fixtures located on the real property
included in the Assets (whether owned or leased) are in all material respects in
good condition and repair (normal wear and tear excepted); (d) the zoning of
each parcel of property described on Schedule 4.16 permits the presently
existing improvements and the continuation of the business presently being
conducted on such parcel and Seller has not commenced, nor has it received
notice of, any proceeding that would affect the present zoning classification of
any such parcel; and (e) except as set forth on Schedule 4.16, Seller has not
received any notice of any violation of any law, ordinance, rule, statute,
order, writ, injunction, decree or regulation, or the existence of any
condemnation or eminent domain proceeding with respect to any real property
included in the Assets.
4.17. Tax Matters. All federal, state, local and foreign tax returns and
tax reports, if any, required to be filed with respect to the Software Division,
Computer Training Center Division, and Market Street Division and the properties
of the Software Division, Computer Training Center Division, and Market Street
Division have been filed with the appropriate governmental agencies in all
jurisdictions in which such returns and reports are required to be filed, all of
the foregoing are true, correct and complete.
4.18. Insurance. Seller maintains in effect insurance covering the Assets
and the Software Division, Computer Training Center Division, and Market Street
Division and any liabilities relating thereto in an amount believed adequate by
Seller, and such insurance coverage shall be maintained by Seller through the
Closing Date. Between now and the Closing Date, Seller shall furnish to Buyer
and its agents such information as Buyer shall reasonably request regarding the
Software Division, Computer Training Center Division, and Market Street
Division's insurance. Seller shall use its best efforts to assist Buyer to
transfer such insurance to Buyer, if possible, and if desired by Buyer. Schedule
4.18 is a summary of information pertaining to material property damage and
personal injury claims against the Software Division, Computer Training Center
Division, and Market Street Division during the past five years.
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4.19. Compliance; Governmental Authorizations; OSHA. Except as set forth on
Schedule 4.19, Seller is in compliance with all federal, state, local or foreign
laws, ordinances, regulations and orders applicable to the Software Division,
Computer Training Center Division, and Market Street Division or properties of
the Software Division, Computer Training Center Division, and Market Street
Division, including, for example, matters relating to the environment,
anti-competitive practices, false advertising, discrimination, employment,
health and safety. Seller has all federal, state, local and foreign governmental
licenses and permits necessary in the conduct of the Software Division, Computer
Training Center Division, and Market Street Division, and such licenses and
permits are in full force and effect, and no violations are or have been
recorded in respect of any thereof, and no proceeding is pending or threatened
to revoke or limit any thereof. Schedule 4.19 contains a list of: (1) all such
governmental licenses and permits and (2) all consents, orders, decrees and
other compliance agreements relating to the Software Division, Computer Training
Center Division, and Market Street Division under which Seller is operating or
bound, copies of all of which have been furnished to Buyer. Seller has furnished
to Buyer copies of all reports of inspections of the Software Division, Computer
Training Center Division, and Market Street Division's business and properties
from January 1, 1995 through the date hereof under OSHA and under all other
applicable federal, state and local health and safety laws and regulations.
The deficiencies, if any, noted on such reports or any deficiencies noted
by inspection through the Closing Date shall be corrected by the Closing Date.
Seller does not know or have reason to know of any other safety, health,
environmental, anti-competitive or discrimination problems relating to the
business, assets or employment practices of the Software Division, Computer
Training Center Division, and Market Street Division.
4.20. Accounts and Notes Receivable. Schedule 4.20 is an aged list of
unpaid accounts and notes receivable relating to the Software Division, Computer
Training Center Division, and Market Street Division from third parties
("Accounts Receivable Schedule") as of August 31, 1996. Seller shall furnish to
Buyer prior to the Closing Date such updated Accounts Receivable Schedule and
other information pertaining to the Software Division, Computer Training Center
Division, and Market Street Division's receivables as Buyer shall reasonably
request on reasonable advance notice. All of the accounts and notes receivable
reflected on the Balance Sheet (other than the intercompany and intracompany
accounts receivable) and the accounts and notes receivable which will be
reflected on the Closing Balance Sheet and listed on each Accounts Receivable
Schedule constituted, and will constitute, only valid claims against third
parties not affiliated with Seller arising in the
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ordinary course of the business of the Software Division, Computer Training
Center Division, and Market Street Division.
4.21. Customers and Suppliers. Upon prior written consent as provided for
in Section 14.12 herein, Buyer may obtain access to client files of the
Divestiture Divisions for a period of one year following the Closing Date.
4.22. Miscellaneous Assets. The assets shown on the Balance Sheet do not
include, and the assets as shown on the Closing Balance Sheet will not include:
(i) any contracts for future services or prepaid items or deferred charges, the
full value or benefit of which will not be usable by or transferable to the
Buyer; or (ii) any goodwill or organization expense.
4.23. Disclosures. All copies of all writings furnished to the Buyer
hereunder or in connection with the transactions contemplated hereby are true
and complete. All Schedules to this Agreement are true and complete.
Section 5. Employee Pension and Other Benefit Plans and Programs. As of the
Closing Date, the Software Division, Computer Training Center Division, and
Market Street Division shall cease to be a participating employer under all
employee benefit plans and programs of the Seller and the Seller shall take all
such action as may be necessary to effect such cessation of participation. As of
the Closing Date, Seller shall assume or retain all liabilities with respect to
all benefits accrued by employees of the Software Division, Computer Training
Center Division, and Market Street Division under any employee benefit plan or
program applicable to such employees.
Section 6. Pre-Closing Covenants of Buyer.
6.1. Corporate and Other Action. Buyer shall take all necessary action
required to fulfill its obligations under this Agreement and the transactions
contemplated hereby.
6.2. Consents and Approvals. Buyer shall use its best efforts to obtain all
necessary consents and approvals to the performance of its obligations under
this Agreement and the transactions contemplated hereby. Buyer shall make all
filings, applications, statements and reports to all Federal or state government
agencies or entities which are required to be made prior to the Closing Date by
or on behalf of Buyer pursuant to any applicable statute, rule or regulation in
connection with this Agreement and the transactions contemplated hereby.
6.3. Confidentiality. Except as required by applicable law, all information
related to the Software Division, Computer Training Center Division, and Market
Street Division supplied to Buyer by the Seller shall be maintained in strict
confidence by Buyer.
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6.4. Impact on the Equity of the Seller. Buyer shall take all necessary
action required to insure that the Divestiture will not have any negative impact
on the equity of ProtoSource.
6.4.1. Value of Divested Assets. The total value of the Assets acquired by
Buyer shall not exceed the amount of the Promissory Note and the assumed
Liabilities.
Section 7. Pre-Closing Covenants of the Seller.
7.1. Corporate and Other Actions. The Seller shall take all necessary
action required to fulfill its obligations under this Agreement and the
transactions contemplated hereby.
7.2. Consents and Approvals. The Seller shall use its best efforts to
obtain all necessary consents and approvals to the performance of its
obligations under this Agreement and the transactions contemplated hereby. The
Seller shall make all filings, applications, statements and reports to all
Federal or state government agencies or entities which are required to be made
prior to the Closing Date by or on behalf of the Seller pursuant to any
applicable statute, rule or regulation in connection with this Agreement and the
transactions contemplated hereby.
7.3.Access to Information. The Seller will permit representatives of Buyer,
from and after the date hereof up to the Closing Date, to have full access at
all reasonable times to the books, accounts, records, properties, operations and
facilities of every kind pertaining to the Software Division, Computer Training
Center Division, and Market Street Division, and will furnish Buyer with such
financial and operating data concerning the Software Division, Computer Training
Center Division, and Market Street Division as Buyer shall from time to time
reasonably request.
7.4. Ordinary Course of Business. Except as shown on Schedule 7.4,
subsequent to the date hereof and prior to the Closing Date, the Seller will, to
the extent it is within the Seller's control, continue to conduct the Software
Division, Computer Training Center Division, and Market Street Division and
maintain the Assets in substantially the same manner as heretofore and engage
only in business in the usual and normal course consistent with past practice.
Section 8. Prorated Taxes, Brokerage Fees, Product Liability Claims,
Expenses and Sales Taxes and Other Taxes.
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8.1. Proration of Taxes. All real estate, personal property and ad valorem
taxes relating to the Assets which shall have accrued and become payable prior
to the Closing Date shall be paid by the Seller. All such taxes which shall be
accrued but unpaid or which have been paid in advance shall be properly
reflected on the Closing Balance Sheet. In connection with such proration of
taxes, in the event that actual tax figures are not available at the Closing
Date, the taxes reflected on the Closing Balance Sheet shall be based upon the
actual taxes for the preceding year for which actual tax amounts are available
and such taxes shall be reprobated upon request of either party made within
sixty days of the date that the actual amounts become available, provided that
the actual amount is at least 5% more or 5% less than the amount on which the
original proration was based.
8.2. Brokerage Fees. The Seller and Buyer each represent, covenant, warrant
and agree with the other that it has not engaged any broker or any other person
who would be entitled to any brokerage fee or commission in respect of the
execution of this Agreement or the consummation of the transactions contemplated
hereby.
8.3. Product Liability. The Seller agrees with Buyer that the Seller is
solely responsible for any and all claims for injury (including death) or claims
for damage (other than warranty claims which Buyer has assumed pursuant to
Section 2.3.2), direct or consequential, resulting from or connected with
finished products or services manufactured or sold by it prior to the Closing
Date, Provided such claims are not fully covered by the product liability
insurance policies, if any, assigned to Buyer by the Seller under this
Agreement, and Buyer shall have no liability for such claims. Buyer agrees with
the Seller that Buyer is solely responsible for any and all claims for injury
(including death) or claims for damage including warranty claims, direct or
consequential, resulting from or connected with finished products or services of
the Seller, or connected with products or services of the Software Division,
Computer Training Center Division, and Market Street Division, provided such
claims are made on or after the Closing Date and relate to finished products or
service manufactured or sold after the Closing Date.
8.4. Expenses. Each party shall bear its own expenses with respect to this
transaction. Any sales, transfer, use or other tax (other than income tax) or
recording cost incurred upon the sale or transfer of the Assets shall be the
liability of Seller.
8.5. Sales and Other Taxes. Seller shall pay all sales and use taxes
arising out of the transfer of the Assets. Buyer shall not be responsible for
any business, occupation, withholding, or similar tax, or any taxes of any kind
related to any period before the Closing Date.
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Section 9. Conditions.
9.1. Conditions to Obligations of the Seller. The obligations of the Seller
to consummate the transactions contemplated by this Agreement shall be subject
to fulfillment at or prior to Closing of the following conditions (any one or
more of which may be waived in whole or in part by the Seller):
9.1.1. Performance of Agreements and Covenants. All agreements and
conditions to be performed and satisfied by Buyer hereunder on or prior to the
Closing Date shall have been duly performed and satisfied in all material
respects.
9.1.2. Truth of Representations and Warranties. The representations
and warranties of Buyer contained in this Agreement shall be true in all
material respects on and as of the Closing Date, with the same effect as though
made on and as of the Closing Date, and there shall be delivered to the Seller
on the Closing Date a certificate, in form and substance reasonably satisfactory
to the Seller and its counsel duly signed by the President or Vice President of
Buyer to that effect.
9.1.3. Opinions of Counsel. The Seller shall have received from
counsel to Buyer, an opinion dated the Closing Date and in form and substance
satisfactory to the Seller to the effect that:
(a) Buyer is a corporation duly organized, validly existing and
in good standing under the laws of the State of California;
(b) Buyer has full corporate power and authority to execute,
deliver and perform this Agreement;
(c) this Agreement and the instrument or instruments of
assumption provided for in Section 2.3.2 hereof, have been duly authorized,
executed and delivered by Buyer and constitute valid and legally binding
obligations of Buyer enforceable in accordance with their respective terms
except as enforcement thereof may be limited by bankruptcy, insolvency and other
laws affecting the enforcement of creditors' rights generally; and
(d) neither the execution and delivery nor the performance by Buyer of
this Agreement or such instruments will violate of Buyer of any material
instrument known to such which it is bound.
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9.1.4. Payment of Purchase Price and Assumption of Liabilities. Buyer
shall have paid the Purchase Price and assumed the Liabilities as provided in
Section 2.3.
9.1.5. No Actions or Proceedings. No action or proceeding by any
governmental agency shall have been instituted or threatened which would enjoin,
restrain or prohibit, or might result in substantial damages in respect of, this
Agreement or the complete consummation of the transactions as contemplated by
this Agreement, and which would in the reasonable judgment of the Seller make it
inadvisable to consummate such transactions, and no court order shall have been
entered in any action or proceeding instituted by any party which enjoins,
restrains, or prohibits this Agreement or the complete consummation of the
transactions as contemplated by this Agreement.
9.1.6. Proceedings Satisfactory to the Seller. All proceedings to be
taken by Buyer in connection with the consummation of the Closing on the Closing
Date and the other transactions contemplated hereby and all certificates,
opinions, instruments and other documents required to effect the transaction
contemplated hereby reasonably requested by the Seller will be reasonably
satisfactory in form and substance to the Seller.
9.2. Conditions to Obligations of Buyer. The obligations of Buyer to
consummate the transactions contemplated by this Agreement shall be subject to
fulfillment at or prior to the Closing of the following conditions (any one or
more of which may be waived in whole or in part by Buyer):
9.2.1. Performance of Agreements and Covenants. All agreements and
conditions to be performed and satisfied by the Seller hereunder on or prior to
the Closing Date shall have been duly performed and satisfied in all material
respects.
9.2.2. Truth of Representations and Warranties The representations and
warranties of the Seller contained in this Agreement, as updated by Schedules
delivered pursuant to Section 9.2.4, shall be true in all material respects on
and as of the Closing Date with the same effect as though made in and as of the
Closing Date and there shall be delivered by the Seller on the Closing Date a
certificate, in form and substance reasonably satisfactory to Buyer and its
counsel, duly signed by an officer of the Seller to that effect.
9.2.3. Updated Schedules. The Seller shall have delivered new
Schedules to reflect changes in Schedules hereto from the date of this Agreement
to the Closing Date.
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9.2.4. No Actions or Proceedings. No action or proceeding by any
governmental agency shall have been instituted or threatened which would enjoin,
restrain or prohibit, or might result in substantial damages in respect of, this
Agreement or the complete consummation of the transactions as contemplated by
this Agreement, and which would in the reasonable judgment of Buyer make it
inadvisable to consummate such transactions, and no court order shall have been
entered in any action or proceeding instituted by any party which enjoins,
restrains, or prohibits this Agreement or the complete consummation of the
transactions as contemplated by this Agreement.
9.2.5. Consents Obtained. All consents by third parties that are
required for the transfer of the Assets to Buyer or that are required for the
consummation of the transactions contemplated hereby, or that are required in
order to prevent a breach of or a default under or a termination of any
agreement material to the Software Division, Computer Training Center Division,
and Market Street Division to which the Seller is a party or to which any
material portion of property of the Software Division, Computer Training Center
Division, and Market Street Division is subject, will have been obtained, and
releases of all security interests held by third parties on the Assets will have
been obtained.
9.2.6. Deliveries by the Seller at Closing. On the Closing Date, the
Seller will have delivered to Buyer all of the following:
(a) Copies of all necessary third party and governmental consents
that Buyer is required to obtain in order to effect the transactions
contemplated by this Agreement;
(b) Such instruments of sale, transfer, assignment, conveyance
and delivery, in form and substance reasonably satisfactory to counsel for
Buyer, as are required in order to transfer to Buyer good and marketable title
to the Assets;
(c) Such other documents or instruments as Buyer reasonably
requests which are reasonably necessary to effect the transactions contemplated
hereby.
9.2.7. Proceedings Satisfactory to Buyer. All proceedings to be taken
by the Seller in connection with the consummation of the Closing on the Closing
Date and the other transactions contemplated hereby and all certificates,
opinions, instruments and other documents required to effect the transaction
contemplated hereby reasonably requested by Buyer will be reasonably
satisfactory in form and substance to Buyer.
21
Section l0. Non-CompetitiOn. The Seller, in order to induce Buyer to enter
into this Agreement, expressly covenants and agrees that for a period of five
years from and after the Closing Date, neither the Seller nor any of its
subsidiaries will directly or indirectly, own, manage, operate, join, control,
or participate in or be connected with any business, individual, partnership,
firm or corporation, which is at the time engaged, wholly or partly, in any of
the businesses engaged in by the Software Division, Computer Training Center
Division, and Market Street Division on the Closing Date.
The Seller may own an aggregate of not more than five percent of the
outstanding stock of any class of any corporation engaged in any such business,
if such stock is listed on a national securities exchange or regularly traded in
the over-the-counter market by a member of a national securities exchange,
without violating the provisions of this Section 10, provided that the Seller
does not have the power to control or direct the management or affairs of such
corporation and is not otherwise associated with it. The Seller expressly
covenants and agrees that the remedy at law for any breach of this Section 10
will be inadequate and that, in addition to any other remedies Buyer may have,
Buyer shall be entitled to temporary and permanent injunctive relief without the
necessity of proving actual damage. To the extent that any part of this
provision may be invalid, illegal or unenforceable for any reason, it is
intended that such part shall be enforceable to the extent that a court of
competent jurisdiction shall determine that such part if more limited in scope
would have been enforceable and such part shall be deemed to have been so
written and the remaining parts shall as written be effective and enforceable in
all events. The Seller and Buyer agree that the total consideration for the
covenant contained in this Section 10 is $50,000.
Section 11. Post Closing Covenants of Buyer.
11.1. Liabilities. Buyer agrees to keep a list describing in detail the
Liabilities paid by Buyer and to retain all documentation supporting actual
payment of each Liability. Buyer will submit such list and such documentation to
the Seller within thirty days after the end of each calendar month until all
such Liabilities have been paid, satisfied or discharged by Buyer.
11.2. Availability of Records. After the Closing, Buyer shall make
available to the Seller as reasonably requested by either the Seller or any
taxing authority all information, records or documents relating to the Assets,
the personnel records referred to in Section 5.4 or the Software Division,
Computer Training Center Division, and Market Street Division for all periods
prior to Closing and shall preserve all such information, records and documents
until the later of six years
22
after the Closing or the expiration of all statutes of limitations or extensions
thereof applicable to the Seller. Buyer shall also make available to the Seller,
as reasonably requested by the Seller, personnel responsible for preparing or
maintaining information, records and documents, both in connection with tax
matters as well as litigation. Prior to destroying any records related to the
Software Division, Computer Training Center Division, and Market Street Division
prior to the Closing Date, Buyer shall notify the Seller of its intent to
destroy such records, and Buyer will permit the Seller to retain any such
records. With respect to any claims which are the Seller's responsibility under
Section 8.3, Buyer shall render all reasonable assistance which the Seller may
request in defending such claim and shall make available to the Seller technical
personnel most knowledgeable about the product in question.
11.3. Use of Trade or Service Marks. Buyer shall not use or permit its
distributors to use the name "ProtoSource." Any other corporate trade or service
marks owned or used by the Seller or any of its subsidiaries may not be used by
the Buyer unless (i) such marks or names are included in the Assets, (ii) such
use is permitted in writing by the Seller or (iii) such marks or names are
located on the Assets, in which case Buyer may use, and permit its distributors
to use, such marks or names for a period of six months following the Closing
Date.
Section 12. Statement of Source and Use of Funds.
12.1.Statement of Source and Use of Funds. On the Closing Date, Seller will
present to Buyer a Statement of Source and Use of Funds of the Software
Division, Computer Training Center Division, and Market Street Division as of
the Closing Date (the "Statement of Source and Use of Funds"). The Statement of
Source and Use of Funds shall be prepared by Seller with the assistance of Buyer
if necessary, from the Seller's books and records of the Software Division,
Computer Training Center Division, and Market Street Division. The Statement of
Source and Use of Funds shall be prepared on a basis consistent with those
practices applied in preparation of the Cash Flow Statement. All normal year-end
closing adjustments, including accruals of expenses through the Closing Date,
will be made in the Statement of Source and Use of Funds as if the Closing Date
were at fiscal year end.
12.2. Resolution. In the event the Buyer in good faith disputes any amounts
in the Statement of Source and Use of Funds, determined as provided in Section
12.1 above, the party disputing such amount shall give written notice thereof to
the other party within 30 days of the date Buyer had proposed adjustments as
provided in Section 12.1. The parties shall then attempt to resolve such dispute
amicably within 30 days after the date of such notice, or within any extension
of such period agreed to in
23
writing by the Seller and Buyer. If the matter is not resolved, then as their
exclusive method of resolving the dispute, the Seller and Buyer shall select
within 14 days after said 30-day period a nationally recognized independent
public accounting firm other than the Seller's independent public accountants,
to resolve such dispute or, if the Seller and Buyer are unable to agree upon
such accounting firm within said 14-day period, then shall thereupon be deemed
selected by both parties such accounting firm as designated by the Seller, which
shall render their determination within 30 days of receiving the work papers and
preliminary opinion other than the Seller's independent public accountants and
any written challenges thereto by Buyer or the Seller. The fees and charges of
any such accounting firm so selected shall be born equally by the Buyer and
Seller. Such accounting firm's decision as to the Statement of Source and Use of
Funds shall be final and binding on both parties.
12.3. Settlement of Accounts. The net change in cash of the Software
Division, Computer Training Center Division, and Market Street Division as shown
on the Statement of Source and Use of Funds will be adjusted against the Total
Cash Investment (attached hereto as Exhibit B) The Seller shall pay Buyer the
adjusted amount.
Section 13. Indemnification, Survival and Termination.
13.1. Indemnification by the Seller. The Seller agrees to indemnify and
hold harmless the Buyer and its affiliates at all times, and against and in
respect of all losses, liabilities, costs and expenses (including reasonable
attorneys' fees) which arise out of or are based on any breach of the
representations, warranties, covenants and agreements of Seller set forth in
this Agreement, the operation of the business of the Software Division, Computer
Training Center Division, and Market Street Division prior to the Closing Date
or the noncompliance with any applicable bulk sales or similar laws, insofar as
such losses, liabilities, costs and expenses (including reasonable attorney's
fees) exceed in the aggregate $50,000.
Buyer shall promptly notify the Seller in writing of all matters which may
give rise to the right to indemnification hereunder, but the failure to notify
Seller shall not relieve Buyer from any liability it may have to Seller to the
extent Seller is not prejudiced as a result of such failure. The Seller shall
have the right, with the consent of Buyer which shall not be unreasonably
withheld, to settle all indemnifiable matters related to claims by third parties
which are susceptible to being settled, and to defend (without the consent of
Buyer) through counsel of its own choosing, at its own expense, any action which
may be brought by a third party in connection therewith, provided, however, that
Buyer shall have the right to have its
24
counsel participate fully in such defense at its own expense. Buyer and the
Seller shall keep each other informed of all settlement negotiatiOns with third
parties and of the progress of any litigation with third parties, Buyer and the
Seller shall permit each other reasonable access to books and records and
otherwise cooperate with all reasonable requests of each other in connection
with any matter or claim for indemnification by a third party.
13.2. Indemnification by Buyer. The Buyer agrees to indemnify and hold
harmless the Seller and its affiliates at all times, and against and in respect
of all losses, liabilities,costs and expenses (including reasonable attorneys"
fees) which arise out of or are based on any breach of the representations,
warranties, covenants and agreements of Buyer set forth in this Agreement or the
operation of the business of the Software Division, Computer Training Center
Division, and Market Street Division after the Closing Date insofar as such
losses, liabilities, costs and expenses (including reasonable attorney's fees)
exceed in the aggregate $10,000.
Seller shall promptly notify the Buyer in writing of all matters which may
give rise to the right to indemnification hereunder, but the failure to notify
Buyer shall not relieve Seller from any liability it may have to Buyer to the
extent Buyer is not prejudiced as a result of such failure. The Buyer shall have
the right, with the consent of Seller which shall not be unreasonably withheld,
to settle all indemnifiable matters related to claims by third parties which are
susceptible to being settled, and to defend (without the consent of Seller)
through counsel of its own choosing, at its own expense, any action which may be
brought by a third party in connection therewith, provided, however, that Seller
shall have the right to have its counsel participate fully in such defense at
its own expense. Buyer and the Seller shall keep each other informed of all
settlement negotiations with third parties and of the progress of any litigation
with third parties, and Buyer and the Seller shall permit each other reasonable
access to books and records and otherwise cooperate with all reasonable requests
of each other in connection with any matter or claim for indemnification by a
third party.
13.3. Survival. The representations and warranties contained in this
Agreement shall survive the Closing for a period of five years at which the time
they shall expire. No claim may be made based upon an alleged breach of any of
such representations or warranties whether for indemnification in respect
thereof or otherwise, unless written notice of such claim, in reasonable detail,
is given to Buyer, or to the Seller, as the case may be, within said five year
period.
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13.4. Termination. This Agreement may be terminated any time prior to the
Closing Date:
13.4.1. With the mutual consent of Buyer and the Seller; or
13.4.2. By the Seller, if by the Closing Date any of the conditions
provided in Section 9.1 shall not have been satisfied, complied with or
performed in any material respect, and the Seller shall not have waived such
failure of satisfaction, noncompliance or nonperformance; or
13.4.3. By Buyer, if by the Closing Date any of the conditions
provided in Section 9.2 shall not have been satisfied, complied with or
performed in any material respect, and Buyer shall not have waived such failure
of satisfaction, noncompliance or nonperformance.
In the event of any termination pursuant to this Section 13.4 (other than
pursuant to Section 13.4.1), written notice setting forth the reasons thereof
shall forthwith be given the terminating party to the other. This Agreement
shall terminate automatically if the Closing Date shall not have occurred on or
before December 31, 1996, or such later date as shall have been agreed to by the
parties hereto.
If this Agreement shall be terminated as herein set forth, Buyer agrees
that it will remain obligated under, and will comply with, the provisions of
Section 6.3.
Section 14. Miscellaneous.
14.1. Assignment. This Agreement shall be binding upon and inure to the
benefit of the parties hereto and their respective successors and assigns. If
however, an assignment shall be made on or prior to the Closing Date, Buyer
shall remain responsible for its obligations under this Agreement.
14.2. No Press Release Without Consent. No press release related to this
Agreement or the transactions contemplated herein, or other announcement to the
employees, customers or suppliers of the Software Division, Computer Training
Center Division, and Market Street Division will be issued without the joint
approval of the Seller and Buyer, except any public disclosure which the Seller
or Buyer in its good faith judgment believes is required by law or, in the case
of the Seller, by any stock exchange on which its securities are listed (in
which case the party making the disclosure will consult with the other party
prior to making such disclosure). Buyer and the Seller will cooperate to prepare
a joint press release to be issued on the
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Closing Date or upon the request of the Seller, at the time o the signing of
this Agreement.
14.3. Severability. Each of the provisions contained in this Agreement
shall be severable and the unenforceability of one shall not affect the
enforceability of any others or of the remainder of this Agreement.
14.4. Entire Agreement. This Agreement may not be amended, supplemented or
otherwise modified except by an instrument in writing signed by all of the
parties hereto. This Agreement contains the entire agreement of the parties
hereto with respect to the transactions covered hereby, superseding all
negotiations, prior discussions and preliminary agreements made prior to the
date hereof.
14.5. No Third Party Beneficiaries. This Agreement is solely for the
benefit of the parties hereto and their respective affiliates and no provision
of this Agreement shall be deemed to confer upon third parties any remedy,
claim, liability, reimbursement, claim of action or other right in excess of
those existing without reference to this Agreement.
14.6. Waiver. The failure of any party to enforce any condition or part of
this Agreement at any time shall not be construed as a waiver of that condition
or part, nor shall it forfeit any rights to future enforcement thereof.
14.7. Governing Law. This Agreement shall be construed and enforced in
accordance with and governed by the laws of the State of California without
regard to the conflicts of laws provisions thereof.
14.8. Headings. The headings of the sections and subsections of this
Agreement are inserted for convenience only and shall not be deemed to
constitute a part hereof.
14.9. CounterParts. More than one counterpart of this Agreement may be
executed by the parties hereto, and each full~, executed counterpart shall be
deemed an original.
14.10. Choice of Forum. Buyer and the Seller agree that any suit or action
or proceeding brought by either party against the other party to this Agreement
in connection with or arising out of this Agreement shall be brought solely
before Courts of the Central District of California or, if such court lacks
jurisdiction, in the Superior Court for the State of California for the County
of Fresno.
14.11. Further Documents. Buyer and the Seller will, at the request of
another party, execute and deliver to such other party
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all such further instruments, assignments, assurances and other documents as
such other party may reasonably request in connection with the carrying out of
this Agreement.
14.12. Notices. All communications, notices and consents provided for
herein shall be in writing and be given in person or by means of telex,
facsimile or other means of wire transmission (with request for assurance of
receipt in a manner typical with respect to communications of that type) or by
mail, and shall become effective (x) on delivery if given in person, (y) on the
date of transmission if sent by telex, facsimile or other means of wire
transmission, or (z) four business days after being deposited in the United
States mails, with proper postage, for first-class registered or certified mail,
prepaid.
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Notices shall be addressed as follows:
If to Buyer, to:
SSC Technologies, Inc.
▇▇▇▇ ▇. ▇▇▇▇ ▇▇▇▇, #▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
If to the Seller, to:
ProtoSource Corporation
▇▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇,
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attn: ▇▇▇▇ ▇▇▇
provided, however, that if any party shall have designated a different address
by notice to the others, then to the last address so designated.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their officers as of the date first above written.
PROTOSOURCE CORPORATION
By: /S/ ▇▇▇▇ ▇▇▇
-------------------------------------
▇▇▇▇ ▇▇▇
President and Chief Executive Officer
SSC TECHNOLOGIES, INC.
By: /S/ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
------------------------------------
▇▇▇▇▇▇▇ ▇▇▇▇▇▇
President
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