EXHIBIT 10.35
ASSET PURCHASE AGREEMENT
ASSET PURCHASE AGREEMENT dated as of May 8, 1998, by and between
Digital Video Systems, Inc., a Delaware corporation ("DVS") and Hyundai
Electronics Industries Company, Ltd., a company organized under the laws
of Korea ("Hyundai").
W I T N E S S E T H:
WHEREAS, DVS desires to license from Hyundai and Hyundai desires to
license, directly to DVS, substantially all of the intangible assets (the
"Intangible Assets") of Hyundai used or useful in its DVD-ROM division
("DVD-ROM Business"), and to sell to a wholly-owned Korean subsidiary of
DVS ("DVS-Korea"), all of the tangible assets used or useful in the DVD-
ROM Business (the "Tangible Assets," and together with the Intangible
Assets, the "Assets") and in connection therewith grant to DVS certain
other rights, in exchange for, shares of common stock of DVS (the "Common
Stock") in the case of the Intangible Assets, and cash, in the case of
the Tangible Assets, as set forth herein (collectively, the
"Transaction");
WHEREAS, the parties desire to enter into this Asset Purchase
Agreement to set forth their mutual agreements concerning the above
matters;
NOW, THEREFORE, in consideration of the mutual promises of the
parties hereto, and of good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, it is mutually agreed by
and between the parties hereto as follows:
ARTICLE 1
LICENSE, SALE AND TRANSFER OF ASSETS AND SHARES; CLOSINGS
1.1 (a) Exclusive License of Intangible Assets. (i) Subject to the
terms and conditions of this Agreement, at the closing of the license of
the Intangible Assets (the "IP Closing"), Hyundai will grant to DVS a
perpetual, worldwide, royalty-free license to use the Intangible Assets,
and DVS will license the Intangible Assets from Hyundai for 2,000,000
shares of common stock of DVS (the "Common Stock"). Except as otherwise
noted on Schedule 1.1(a), the Intangible Assets shall be free and clear
of all liens, claims, and other liabilities, and shall include all of the
intangible personal property owned, licensed or otherwise held by Hyundai
in connection with the DVD-ROM Business, including, without limitation
all intellectual property associated with the development, ownership,
marketing and sale of Hyundai's DVD-ROM product, DVD licenses from the
DVD consortium and all of Hyundai's trademarks, patents, servicemarks,
copyrights, any pending applications for trademarks or patents or
servicemarks or copyrights (a complete schedule of all such property
shall be provided to DVS as soon as practicable after this Agreement is
signed by DVS and Hyundai, and shall be attached hereto as
Schedule 1.1(a)), trade secrets, design know-how, and engineering and
other plans, drawings and diagrams relating to the DVD-ROM Business (the
"Proprietary Technology"). With respect to any pending patent
applications included in the Proprietary Technology, DVS shall use its
best efforts to complete the application process and to obtain the patent
sought; provided, that Hyundai shall assist DVS in any manner, and take
any actions, required by law to ensure that the patent is obtained.
(ii) Notwithstanding Section 1.1(a)(i), DVS
acknowledges that in certain limited instances, Hyundai shall have the
right to cross-license the Intangible Assets to a third-party. Hyundai
shall not be permitted to cross-license any of the Intangible Assets
except where such cross-license is required by Hyundai in order for
Hyundai to obtain a counter party cross-license from a third-party who
asserts its intellectual property rights against Hyundai, or threatens to
initiate, or initiates a legal action against Hyundai. In all cases
where Hyundai grants such a third-party cross-license to the Intangible
Assets, Hyundai shall ensure that the grant of such license shall not in
any manner impair the rights of DVS under this Agreement. Further, in
connection with any such cross-license granted by Hyundai, Hyundai shall
obtain a written agreement from the cross-licensee that such cross-
licensee shall not use the licensed property to compete with DVS or its
subsidiaries, including, without limitation, DVS-Korea. Hyundai shall
provide both DVS and DVS-Korea with 30 days prior written notice of any
proprosed cross-license by Hyundai of any of the Intangible Assets.
(b) Sale of Tangible Assets; Assumption of Liabilities. Subject
to the terms and conditions of this Agreement, at the closing of the sale
of the Tangible Assets (the "Asset Closing"), Hyundai will sell, convey,
assign and transfer the Tangible Assets to DVS-Korea, and DVS-Korea will
purchase the Tangible Assets from Hyundai for $1,000,000 (United States
Dollars) in cash. The Tangible Assets shall be free and clear of all
liens, claims, and other liabilities, and shall include the following:
(i) all of the tangible personal property owned,
leased, operated or held by Hyundai in connection with the DVD-ROM
Business, including, but not limited to, fixed assets, equipment,
tooling, inventory, spare parts, manuals and other such tangible personal
property (a complete listing of such tangible assets shall be provided to
DVS as soon as practicable after this Agreement is signed by DVS and
Hyundai, and shall be attached hereto as Schedule 1.2(b)(i)) and all
books and records relating to the DVD-ROM Business.
(ii) all of the benefits and obligations of Hyundai's
supply contracts, pending sales, and customer database related to the
DVD-ROM Business, with a complete listing of the foregoing contracts,
including those with Xxxx Xxxxx, Matshushita and Dong-Ah SMT (the
"Contracts") (a complete listing of such Contracts shall be provided to
DVS as soon as practicable after this Agreement is signed by DVS and
Hyundai, and shall be attached hereto as Schedule 1.2(b)(ii)); and
(iii) all of Hyundai's rights to operate the DVD-ROM
Business, including all licenses, consents, certificates, authorizations
and privileges (a complete listing of such material licenses, consents,
certificates, authorizations and privileges shall be provided to DVS as
soon as practicable after this Agreement is signed by DVS and Hyundai,
and shall be attached hereto as Schedule 1.2(b)(iii)).
(c) Other Transactions. In connection with the sale of the
Assets to DVS:
(i) Hyundai will grant to DVS-Korea the exclusive right
to use the Hyundai name and logo in connection with the marketing and
sale of DVD-ROM, DVD-RAM, CD-R and CD-RW products of DVS and DVS-Korea in
the United States, Canada, Europe and China for a period of one year from
the IP Closing Date (as defined below). DVS-Korea may use the Hyundai
name and logo alone only: (A) if required in order to satisfy the
requirements of certain suppliers and governmental regulatory agencies,
and (B) on the existing 450 units of product made by the DVD-ROM Business
and containing the Hyundai name and logo. In all other cases, DVS shall
only use the Hyundai name and logo in conjunction with the DVS name and
logo. Hyundai shall have the right to approve the manner in which the
Hyundai name and logo are applied to products, packaging and marketing
materials. DVS shall give Hyundai 30 days in which to review any new
application of the Hyundai name and logo and if Hyundai does not notify
DVS within such 30 day-period that a proposed use is not acceptable, then
DVS shall have the right to apply the Hyundai name and logo in the manner
proposed. Hyundai shall not unreasonably reject any proposed use of its
name and logo by DVS for the purpose described in this Section 1.2(c).
Notwithstanding any use of the Hyundai name and logo by DVS-Korea, DVS
and/or DVS-Korea shall be liable to their respective customers or end-
users for any defective products, customer service and support, and
damages or costs associated therewith.
(ii) grant to DVS the right to exclusively use, for a
rental fee of 2,000,000 Korean Won per month, the current 10,000 square-
foot Hyundai DVD-ROM facility (the "Facility") for a period of six months
from the later to occur of the IP Closing Date and the Asset Closing Date
(as defined below) for final assembly and testing of DVD ROM drives; and
(iii) grant to DVS a five-year worldwide license for
all Hyundai DVD-video intellectual property, including, without
limitation, navigator software based upon certain chip sets of C-Cube and
Matshushita, for a royalty fee to be negotiated in good faith.
(d) Taxes. Hyundai shall be responsible for all taxes and
fees related to the transfer of the Assets customary for a seller under
the laws of Korea, and each of DVS or DVS-Korea, as the case may be,
shall be responsible for all taxes and fees related to the transfer of
the Assets customary for a buyer under the laws of Korea.
(e) Liabilities. Except as otherwise expressly set forth
herein, DVS shall not assume any liabilities of or relating to Hyundai,
the Assets, or the DVD-ROM Business.
(f) Consents, Other Approvals, Etc.. Notwithstanding
anything in this Agreement to the contrary, DVS and Hyundai acknowledge
and agree that certain laboratory approvals will be required by DVS-Korea
in order to manufacture products. In addition, DVS and Hyundai
acknowledge and agree that in order for Matshushita to sell certain
components to DVS-Korea rather than to Hyundai, Matshushita will be
required to obtain an approval from the Japanese Ministry of Commerce.
During the time that such consents and approvals are being obtained (the
"Interim Period"), Hyundai agrees to take those actions and perform those
services necessary to ensure that: (i) DVS-Korea has a sufficient supply
of all components required from Matshushita in connection with the DVD-
ROM Business, and (ii) products sold by DVS-Korea contain necessary
certifications, whether governmental or otherwise. Hyundai agrees that
it shall enter into a subcontracting agreement pursuant to which it shall
take such actions and perform such services (the "Subcontracting
Agreement"), in form and substance to be negotiated in good faith by DVS
and Hyundai as soon as practicable after the signing of this Agreement.
1.2 Consideration.
(a) Payments at Closings.
(i) In consideration of the license by Hyundai of the
Intangible Assets to DVS, DVS at the IP Closing shall issue to Hyundai
2,000,000 shares of Common Stock.
(ii) In consideration of the transfer by Hyundai of
the Tangible Assets to DVS-Korea, DVS-Korea at the Asset Closing shall
pay to Hyundai $1,000,000 (United States Dollars) by wire transfer or
certified check, and DVS-Korea shall assume the liabilities under
Sections 1.4(c) and 1.5 hereof accrued through the Asset Closing Date (as
defined below).
(iii) The offer and sale of the Common Stock issued to
Hyundai hereunder has not been registered under the United States
Securities Act of 1933, as amended (the "Securities Act"). Such Common
Stock must be held by Hyundai until such Common Stock is registered
pursuant to an effective registration statement under the Securities Act
and all applicable state securities laws or any state of the United
States, as provided for in Section 8.5 hereof.
(iv) Hyundai agrees not to sell or otherwise transfer
the Common Stock for a period of 180 days from and after the Asset
Closing Date (as defined below). After the expiration of such 180 day
period and subject to Section 1.2(a)(iii) hereof, Hyundai shall be
entitled to transfer or sell all of such then existing shares of Common
Stock (as may be adjusted for stock splits or dividends).
1.3 Closings. (a) The IP Closing will take place at the offices
of Hyundai, Seoul, Korea, at 10:00 a.m. (local time) on the business day
following the date which is the last to occur of ten days following the
date all required consents and approvals, if any, have been received and
30 days following the signing of this Agreement, or at such other time
and place as the parties may agree (the "IP Closing Date"). Each party
shall use its best efforts to ensure that it obtains all required
consents and approvals, if any, in a timely manner.
(b) The Asset Closing will take place at the offices of
Hyundai, Seoul, Korea, at 10:00 a.m. (local time) on the business day
following the date which is the last to occur of ten days following the
date all required consents and approvals, if any, have been received and
30 days following the signing of this Agreement, or at such other time
and place as the parties may agree (the "Asset Closing Date," and
together with the IP Closing Date, the "Closing Dates"). Each party
shall use its best efforts to ensure that it obtains all required
consents and approvals, if any, in a timely manner.
Provided that all required consents and approvals have been obtained and
all applicable closing conditions have been met, the IP Closing and the
Asset Closing may occur concurrently, but nothing herein shall require
the Closings to occur concurrently. This Agreement shall be terminable
as provided in Section 12.1 hereof.
1.4 Closing Obligations. At each Closing, as applicable, DVS and
Hyundai shall take the following actions, in addition to such other
actions as may otherwise be required under this Agreement:
(a) Conveyance Instruments. Hyundai shall deliver to DVS
such warranty deeds, bills of sale, assignments, and other instruments of
conveyance and transfer as DVS may reasonably request to effect the
assignment to DVS of the Assets.
(b) Delivery of Stock. DVS shall deliver to Hyundai share
certificates duly endorsed for transfer to Hyundai representing 2,000,000
shares of DVS's issued and outstanding Common Stock.
(c) Assumption Agreement and Xxxx of Sale. Each party
shall execute and deliver an Assumption Agreement and Xxxx of Sale in the
form of Exhibit A hereto.
(d) Certificates. Each party shall deliver the certifi-
xxxxx as to the accuracy of the representations and warranties contained
herein, the compliance with the covenants and agreements contained
herein, and the satisfaction of the conditions to the applicable Closing
contained herein.
1.5 Post-Closing Obligations To Be Assumed By DVS. DVS agrees
that it will assume and will pay, perform and discharge all obligations
of the DVD-ROM Business that are specifically assumed by DVS in
connection with each Closing as provided herein or that arise from the
conduct of the DVD-ROM Business after the applicable Closing Date when
the same become due or are required to be performed or discharged.
1.6 Post-Closing Obligations To Be Paid By Hyundai. Hyundai
agrees that it will be solely liable for and shall pay, perform and
discharge all obligations of the DVD-ROM Business (including any
contingent liabilities relating to the conduct of the DVD-ROM Business
prior to the applicable Closing) that are not specifically assumed by DVS
as provided herein that relate to the conduct of the DVD-ROM Business
prior to the applicable Closing Date when the same become due or are
required to be performed or discharged.
ARTICLE 2
REPRESENTATIONS AND WARRANTIES OF HYUNDAI
Hyundai hereby represents and warrants to DVS as follows:
2.1 Organization. Hyundai is a company duly organized, validly
existing and in good standing under the laws of Korea with the power and
authority to conduct its business and to own and lease its properties and
assets (including the Assets) and, as to the conduct of the DVD-ROM
Business and the use and ownership of the Assets specifically, is duly
qualified or licensed to do business and is in good standing as a foreign
corporation in any jurisdictions in which it does business.
2.2 Power and Authority. Hyundai has the power and authority to
execute, deliver, and perform this Agreement and the other agreements and
instruments to be executed and delivered by it in connection with the
transactions contemplated hereby and thereby, has taken all necessary
company action (including obtaining the approval of its board of
directors) to authorize the execution and delivery of this Agreement and
such other agreements and instruments and the consummation of the
transactions contemplated hereby and thereby. This Agreement is, and the
other agreements and instruments to be executed and delivered by Hyundai
in connection with the transactions contemplated hereby when executed and
delivered shall be, the legal, valid, and binding obligations of Hyundai,
enforceable in accordance with their terms.
2.3 No Conflict. Neither the execution and delivery of this
Agreement and the other agreements and instruments to be executed and
delivered in connection with the transactions contemplated hereby or
thereby, nor the consummation, of the transactions contemplated hereby or
thereby, will violate or conflict with: (a) except insofar as required
consents are to be procured prior to the applicable Closing, any federal,
state, or local law, regulation, ordinance, zoning requirement,
governmental restriction, order, judgment or decree applicable to
Hyundai, the DVD-ROM Business, or the Assets; (b) any provision of any
charter, bylaw or other governing or organizational instruments of
Hyundai; or (c) except insofar as consents are to be procured prior to
the applicable Closing, any mortgage, indenture, license, instruments
trust, contract, agreement, or other commitment or arrangement to which
Hyundai is a party or by which Hyundai or any of the Assets is bound.
2.4 Required Government Consents. Except for the filing and/or
recording of deeds and other instruments of conveyance, transfer, or
assignment required by copyright, patent, or trademark laws or the laws
of the jurisdictions in which the Assets are located, to occur upon
applicable Closing and except as otherwise set forth herein, no approval,
authorization, certification, consent, variance, permission, license, or
permit to or from, or notice, filing, or recording to or with, federal,
state, or local governmental authorities is necessary for the execution
and delivery of this Agreement and other agreements and instruments to be
executed and delivered in connection with the transactions contemplated
hereby or thereby by Hyundai or the consummation by Hyundai of the
transactions contemplated hereby or thereby, or the ownership and use of
the Assets and the conduct of the related business (including by DVS or
DVS-Korea, as the case may be).
2.5 Required Contract Consents. Except as set forth in Schedule
2.5, (such scheduled items shall be referred to herein as the "Required
Contract Consents," and such schedule shall be provided to DVS as soon as
practicable after this Agreement is signed by DVS and Hyundai, and
attached hereto), no approval, authorization, consent, license,
permission, or waiver to or from, or notice, filing, or recording to or
with, any person is necessary for: (a) the execution and delivery of
this Agreement and the other agreements and instruments to be executed
and delivered in connection with the transactions contemplated hereby or
thereby by Hyundai or the consummation by Hyundai of the transactions
contemplated hereby; (b) the transfer and assignment to DVS at the Asset
Closing of the Contracts; or (c) the ownership and use of the Assets and
the conduct of the DVD-ROM Business (including by DVS or DVS-Korea, as
the case may be).
2.6 Title to Assets; Sufficiency, etc. Hyundai has good and
marketable title to, or a valid leasehold interest in, all of the Assets,
free and clear of all liens, claims, encumbrances, security interests or
other restrictions on transfer, except for properties and assets disposed
of in the ordinary course of business since the date of the most recent
balance sheet provided by Hyundai to DVS. The Assets are sufficient to
conduct the DVD-ROM Business as presently conducted and as presently
proposed to be conducted in the Hyundai Business Plan dated April 1998
which was provided to DVS by Hyundai (the "Business Plan"). Hyundai owns
or leases all buildings (including the Facility), machinery, equipment,
and other tangible assets necessary for the conduct of the DVD-ROM
Business as presently conducted and as presently proposed to be conducted
and the Facility has a current capacity of not less than 50,000 units per
month (approximately 600,000 units per year).
2.7 Title to Intellectual Property.
(a) Subject to Section 1.1(a)(ii), DVS shall receive an
exclusive license the Proprietary Technology at the IP Closing, free and
clear of all liens, encumbrances or licenses (except as set forth on
Schedule 1.1(a);
(b) Except as set forth on Schedule 1.1(a) hereto, Hyundai
owns or will own on the IP Closing Date all of the Proprietary
Technology. The Proprietary Technology is sufficient for the operation
of the DVD-ROM Business as presently conducted and as presently proposed
to be conducted in the Business Plan. Each item of Proprietary Technology
owned by Hyundai for or in connection with the DVD-ROM Business
immediately prior to the IP Closing Date will be subject to an exclusive
license by DVS immediately subsequent to the IP Closing Date. Hyundai
has taken all necessary and desirable action to maintain and protect each
item of Proprietary Technology that it owns in connection with the
DVD-ROM Business.
(c) The use of the Assets and conduct of the DVD-ROM
Business does not interfere with, infringe upon, misappropriate, or
otherwise come into conflict with any proprietary technology rights of
third parties, and Hyundai has never received any charge, complaint,
claim, demand, or notice alleging any such interference, infringement,
misappropriation, or violation (including any claim that Hyundai must
license or refrain from using any proprietary technology rights of any
third party) in connection with the conduct of the DVD-ROM Business. To
the knowledge of Hyundai, no third party has interfered with, infringed
upon, misappropriated, or otherwise come into conflict with any
Proprietary Technology rights of Hyundai.
(d) Hyundai has delivered to DVS correct and complete
copies of all items of Proprietary Technology listed in Schedule 1.1(a).
With respect to each item of Proprietary Technology required to be
identified in Schedule 1.1(a):
(i) Hyundai possesses all right, title, and interest
in and to the item, free and clear of any security interest, license, or
other restriction;
(ii) the item is not subject to any outstanding
injunction, judgment, order, decree, ruling, or charge;
(iii) no action, suit, proceeding, hearing,
investigation, charge, complaint, claim, or demand is pending or, to the
knowledge of Hyundai, is threatened, which challenges the legality,
validity, enforceability, use, or ownership of the item; and
(iv) Hyundai has never agreed to indemnify any person
(other than its customers) for or against any interference, infringement,
misappropriation, or other conflict with respect to the item.
2.8 Financial Statements. Hyundai shall provide DVS, no later
than three business days prior to the earlier to occur of the IP Closing
Date and the Asset Closing Date, a balance sheet as of April 30, 1998.
Such balance sheet, including the notes thereto, if any, will properly
reflect all assets and liabilities as then in existence.
2.9 Conduct of Business.
(a) Ordinary Course of Business: No Removal or Disposal of
Assets. Since April 30, 1998, Hyundai has operated the DVD-ROM Business
in an ordinary course consistent with past practices, and has not removed
or disposed of any assets that were assets of the DVD-ROM Business as of
April 30, 1998, except in the ordinary course.
(b) No Material Adverse Change. Since April 30, 1998,
there has been no material adverse change in the DVD-ROM Business or the
Assets or in the financial condition, operations, or prospects of the
DVD-ROM Business.
(c) Absence of Particular Events. Since April 30, 1998
Hyundai has not: (i) suffered any damage or destruction adversely
affecting the DVD-ROM Business or involving the Assets in the amount of
$15,000 (United States Dollars) in any one instance; (ii) incurred any
liability or obligation relating to the DVD-ROM Business other than in
the ordinary course consistent with past practice; (iii) made any change
in any method, practice, or principle of accounting involving the DVD-ROM
Business or the Assets; or (iv) paid, loaned, or advanced any material
monetary amount or other asset to, or sold, transferred, or leased any
asset to, any employee involved in the DVD-ROM Business except for normal
compensation involving salary and benefits.
(d) Absence of Joint Ventures, etc. Hyundai is not a party
to any joint venture or other similar agreement or arrangement that
involves any sharing of profits of the DVD-ROM Business or the Assets or
is similar to or competitive with the DVD-ROM Business.
2.10 Major Vendors and Strategic Relationships. Schedule 2.11
lists each licensor, developer, and supplier of property or services to,
and each licensee, end-user, or customer of, the DVD-ROM Business, to
whom Hyundai paid or billed in the aggregate $10,000 (United States
Dollars) or more during the twelve-month period ended April 30, 1998,
together with, in each case, the amount paid or billed during such
period. In addition Schedule 2.11 lists each strategic relationship
which the DVD-ROM Business maintains (Schedule 2.11 shall be provided to
DVS as soon as practicable after this Agreement is signed by DVS and
Hyundai, and attached hereto). To the best knowledge of Hyundai, there
is no reason why the relationship with any such person or entity might
not be continued by DVS, after its acquisition of the DVD-ROM Business,
indefinitely at least at substantially the same level of business and on
substantially the same terms as Hyundai experienced during the twelve-
month period preceding the later to occur of the IP Closing and the Asset
Closing.
2.11 Litigation. No claim, action, suit, proceeding, inquiry,
hearing, arbitration, administrative proceeding, or investigation
(collectively, "Litigation") is pending, or, to Hyundai's best knowledge
threatened against Hyundai, its present or former directors, officers, or
employees, or any party to any contract, affecting, involving, or
relating to the DVD-ROM Business or any of the Assets. Hyundai knows of
no facts that could reasonably be expected to serve as the basis for
litigation against itself (or DVS upon acquisition of the DVD-ROM
Business), its present or former directors, officers, or employees
affecting, involving, or relating to the DVD-ROM Business or the Assets.
2.12 Personnel and Compensation. Hyundai shall have delivered to
DVS prior to Asset Closing a due and complete list of the names and
current compensation levels of: (a) all salaried, annual or other
employees materially involved in the DVD-ROM Business; and (b) all
consultants involved in the DVD-ROM Business.
2.13 No Liability for Terminated Employees. DVS shall not incur
any liability in connection with the termination by Hyundai of any
employees in connection with the sale of the Assets, including, without
limitation, any fees, costs or expenses described in Section 9.1(a)
hereof and those relating to or in connection with any threatened or
actual claims or litigation relating to such termination or to DVS's
determination, in its sole discretion, to not employ any such terminated
employees.
2.14 Inventory. The inventory of the DVD-ROM Business consists of
raw materials and supplies, manufactured and purchased parts, finished
goods and working prototypes.
2.15 Contracts. Hyundai has delivered to DVS a correct and
complete copy of each Contract (as amended to date) listed on Schedule
1.2(a)(iii). With respect to each Contract: (i) the Contract is legal,
valid, binding, enforceable, and in full force and effect; (ii) except as
otherwise expressly stated herein, the Contract will continue to be
legal, valid, binding, enforceable, and in full force and effect on
identical terms following the consummation of the transactions
contemplated hereby (subject to the assignments and assumptions provided
for in this Agreement); (iii) no party is in breach or default, and no
event has occurred which with notice or lapse of time would constitute a
breach or default, or permit termination, modification, or acceleration,
under the Contract; and (iv) no party has repudiated any provision of the
Contract.
2.16 Employees. With respect to the DVD-ROM Business, Hyundai:
(a) is not a party to or bound by any collective bargaining agreement,
nor has it experienced any strikes, grievances, claims of unfair labor
practices, or other collective bargaining disputes; and (b) is not a
party to any employment agreement with any officer, director or employee
(other than as set forth on Schedule 6.9) hereto).
2.17 Environmental, Health and Safety Matters. (a) Hyundai has
obtained and complied with, and is in compliance with, all material
permits, licenses and other authorizations that are required pursuant to
environmental, health, and safety laws, rules and regulations for the
occupation of its facilities and the operation of the DVD-ROM Business,
all of which are listed on Schedule 1.2(a)(ii) hereto.
(b) Hyundai has not received any written or oral
notice, report or other information regarding any actual or alleged
material violation of any environmental, health, and safety regulations,
or any liabilities or potential liabilities (whether accrued, absolute,
contingent, unliquidated or otherwise), including any investigatory,
remedial or corrective obligations, relating to any of them or its
facilities arising under environmental, health, and safety laws, rules
and regulations in connection with the DVD-ROM Business.
2.18 Investment. Hyundai understands that the Common Stock issued
to Hyundai pursuant to this Agreement has not been registered and will
not be registered for approximately 180 days following the later to occur
of the IP Closing and the Asset Closing. Until the registration of the
Common Stock has been effected, Hyundai agrees and acknowledges that it
will not, directly or indirectly, offer, transfer, sell, assign, pledge,
hypothecate or otherwise dispose of any shares of the Common Stock.
2.19 Broker's or Finder's Fees. Hyundai has not authorized any
person to act as broker or finder or in any other similar capacity in
connection with the transactions contemplated by this Agreement in any
manner that may or will impose liability on DVS.
2.20 Export and Sale of DVD Products. Hyundai knows of no facts
that would impair the ability of DVS or DVS-Korea to export substantially
all of the products of the DVD-ROM Business and to sell such products
outside of Korea. Hyundai has obtained all licenses and permits
necessary for the DVD-ROM Business to export and sell products outside of
Korea and has transferred all such licenses and permits to DVS pursuant
to this Agreement. All such licenses and permits are listed on Schedule
1.2(a)(iii).
2.21 Business Plan. The information contained in the Business
Plan is complete, current and accurate. The Business Plan does not any
untrue statement and does not omit to state any fact necessary to make
the statements therein not misleading.
2.22 Disclosure. No representation, warranty, or statement made
by Hyundai in this Agreement or in any document or certificate furnished
or to be furnished to DVS pursuant to this Agreement contains or will
contain any untrue statement or omits or will omit to state any fact
necessary to make the statements contained herein or therein not
misleading. Hyundai has disclosed to DVS all facts known or reasonably
available to Hyundai that are material to the financial condition,
operation, or prospects of the DVD-ROM Business and the Assets.
2.23 Truth at Closings. All of: (a) the representations,
warranties, and agreements of Hyundai contained in this Article 2 and (b)
the representations, warranties and agreements of Hyundai contained in
the Schedules and Exhibits attached hereto shall be true and correct and
in full force and effect on and as of each of the Closing Dates.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF DVS
DVS hereby represents and warrants to Hyundai as follows:
3.1 Organization. DVS is a corporation validly existing and in
good standing under the laws of the State of Delaware with the corporate
power and authority to conduct its business and to own and lease its
properties and assets. DVS is duly qualified or licensed to do business
and is in good standing as a foreign corporation in each state in which
the failure to be so qualified or licensed would have a material adverse
effect on its financial condition or operations.
3.2 Power and Authority. DVS has the power and authority to
execute, deliver, and perform this Agreement and the other agreements and
instruments to be executed and delivered by it in connection with the
transactions contemplated hereby and thereby, and, other than obtaining
the requisite shareholder approval, DVS has taken all necessary corporate
action to authorize the execution and delivery of this Agreement and such
other agreements and instruments and the consummation of the transactions
contemplated hereby and thereby. This Agreement is, and, when such other
agreements and instruments are executed and delivered, the other
agreements and instruments to be executed and delivered by DVS in
connection with the transactions contemplated hereby and thereby shall
be, the legal, valid, and binding obligation of DVS, enforceable in
accordance with their terms.
3.3 Broker's or Finder's Fees. DVS has not authorized any person
to act as broker, finder, or in any other similar capacity in connection
with the transactions contemplated by this Agreement.
3.4 No Conflict. Neither the execution and delivery by DVS of
this Agreement and of the other agreements and instruments to be executed
and delivered by DVS in connection with the transactions contemplated
hereby or thereby, nor the consummation by DVS of the transactions
contemplated hereby or thereby will violate or conflict with: (a) any
federal, state, or local law, regulation, ordinance, governmental
restriction, order, judgment or decree applicable to DVS; or (b) any
provision of any charter, bylaw, or other governing or organizational
instrument of DVS.
3.5 Required Contract Consents. No approval, authorization,
consent, permission, or waiver to or from, or notice, or recording to or
with, any person is necessary for the execution and delivery of this
Agreement and the other agreements and instruments to be executed and
delivered in connection with the transactions contemplated hereby or
thereby by DVS or the consummation by DVS of the transactions
contemplated hereby.
3.6 Disclosure. No representation, warranty, or statement made
by DVS in this Agreement or in any document or certificate furnished or
to be furnished to DVS pursuant to this Agreement contains or will
contain any untrue statement or omits or will omit to state any fact
necessary to make the statements contained herein or therein not
misleading. DVS has disclosed to Hyundai directly or through its filings
with the SEC pursuant to the Securities and Exchange Act of 1934, all
facts known or reasonably available to DVS that are material to the
financial condition, operation, or prospects of its business and assets.
3.7 Share Ownership. DVS warrants that the shares transferred to
Hyundai hereunder are duly authorized, fully paid and non assessable and
owned free and clear of any preemptive rights, liens, claims, charges or
encumbrances. DVS warrants that it has only one class of common stock,
there are no outstanding commitments to purchase, reacquire or redeem any
of its Capital Stock nor are there any declared but unpaid dividends on
such Capital Stock.
3.8 Truth at Closing. All of the representations, warranties,
and agreements of DVS contained in this Article 3 shall be true and
correct and in full force and effect on and as of each of the Closing
Dates.
ARTICLE 4
CONDUCT OF THE BUSINESS PRIOR TO CLOSINGS
4.1 Course of Business. Prior to each of the Closing Dates,
Hyundai shall conduct the DVD-ROM Business diligently and substantially
in the same manner heretofore conducted, and Hyundai shall not institute
any new methods of accounting or operation or engage in any transaction
or activity, enter into any agreement, or make any commitment, except in
the ordinary course of such business and consistent with past practice,
and except as would not reasonably be expected to have a material adverse
effect on the DVD-ROM Business.
4.2 Prohibited Actions. Until after both Closings, in no event,
without the prior written consent of the other party, shall Hyundai:
(a) Liens. Permit any of its assets to be subjected to any
mortgage, pledge, lien, or encumbrance.
(b) Disposition of Assets. Waive any claims or rights of
substantial value respecting their assets, or sell, transfer, or
otherwise dispose of any of their assets, except in the ordinary course
of business and consistent with past practice.
(c) Licenses. Other than in the ordinary course of its
licensing activities and consistent with past practice, dispose of,
license, or permit to lapse any rights in any intellectual property.
(d) Increases in Compensation. Increase the compensation
of officers, employees, or consultants with respect to the DVD-ROM
Business.
ARTICLE 5
COVENANTS OF HYUNDAI AND DVS PRIOR TO CLOSINGS
5.1 Access. From the date of this Agreement to each of the
Closing Dates, Hyundai shall: (a) provide DVS with such information as
DVS may from time to time reasonably request with respect to the DVD-ROM
Business and the transactions contemplated by this Agreement; (b) provide
DVS and its officers, counsel, and other authorized representatives
access during regular business hours and upon reasonable notice to its
books, records, and offices, as DVS may from time to time reasonably
request; and (c) permit DVS to make such inspections thereof as it may
reasonably request. Any investigation shall be conducted in such a
manner as not to interfere unreasonably with the operation of the DVD-ROM
Business.
5.2 Updating of Information. From the date of this Agreement to
each of the Closing Dates, Hyundai shall deliver revised or supplementary
Schedules to this Agreement, containing accurate information as of the
applicable Closing Date, in order to enable DVS to confirm the accuracy
of its representations and warranties and otherwise to give full effect
to the provisions of this Agreement. Delivery of revised Schedules by
Hyundai shall not reduce or impair any of the rights that any party may
have under Article 6 hereof.
5.3 Negotiations with Third Parties. Hyundai shall not, directly
or indirectly, engage in sale discussions with any potential third party
buyers for any of the Assets (whether or not solicited by Hyundai) unless
DVS and Hyundai mutually agree to terminate this Agreement.
5.4 Strategic Relationship. Hyundai shall use its best efforts
to facilitate the introduction of DVS to Matshushita prior to the earlier
to occur of the IP Closing and the Asset Closing, and to ensure the
continuity of Hyundai's current relationship with Matshushita with
respect to the DVD-ROM Business following its acquisition by DVS.
ARTICLE 6
CONDITIONS TO HYUNDAI'S OBLIGATIONS
Each of the obligations of Hyundai to be performed hereunder shall
be subject to the satisfaction (or waiver by Hyundai) at or prior to each
Closing Date of each of the following conditions:
6.1 Representations and Warranties True at Closing Date. DVS's
representations and warranties contained in this Agreement shall be true
on and as of the applicable Closing Date with the same force and effect
as though made on and as of such date; DVS shall have complied with the
covenants and agreements set forth herein to be performed by it on or
before such Closing Date; and DVS shall have delivered to Hyundai a
certificate dated at such Closing Date and signed by a duly authorized
officer of DVS to all such warrants.
6.2 Litigation. No Litigation shall be threatened or pending
against DVS or Hyundai before any court or governmental agency that, in
the reasonable opinion of counsel for Hyundai, could result in the
restraint or prohibition of any such party, or the obtaining of damages
or other relief from such party, in connection with this Agreement or the
consummation of the transactions contemplated hereby.
6.3 Documents Satisfactory in Form and Substance. All
agreements, certificates, and other documents delivered by DVS to Hyundai
hereunder shall be in form and substance satisfactory to counsel for
Hyundai, in the exercise of such counsel's reasonable judgment.
6.4 Consents. All required consents shall have been obtained.
6.5 Investigations. Neither any investigation of DVS by Hyundai,
nor the Schedules hereto, nor any other document delivered to Hyundai as
contemplated by this Agreement, shall have revealed any facts or
circumstances that, in the good faith judgment of Hyundai, reflect in a
material adverse way on the business, operations, or prospects of the DVS
and its business.
6.6 No Material Adverse Change. From the date of this Agreement
until each Closing Date, DVS shall not have suffered any material
adverse change (whether or not such change is referred to or described in
any supplement to the Schedules), or the financial condition, operations,
or prospects of DVS's business.
6.7 Opinion of Counsel. At the earlier to occur of the IP
Closing and the Asset Closing, Hyundai shall have received an opinion of
Xxxx & Xxxxx, counsel to DVS, in form and substance reasonably
satisfactory to Hyundai and its counsel and covering the matters to be
agreed upon in good faith by DVS and its counsel and Hyundai as soon as
practicable after the signing of this Agreement.
6.8 Formation of DVS Korea. DVS shall have formed, or caused to be
formed, DVS-Korea to hold the Tangible Assets and to conduct the DVD-ROM
Business.
6.9 Hiring of DVD-ROM Product Development Team. DVS shall use its
reasonable best efforts to cause DVS-Korea to employ Hyundai's DVD-ROM
product development team, which consists of approximately 38 engineers
and managers whose names are set forth on Schedule 6.9 (such schedule
shall be provided to DVS as soon as practicable after this Agreement is
signed by DVS and Hyundai, and attached hereto) on terms no less
favorable to DVS-Korea than those currently enjoyed by Hyundai. However,
during the Interim Period, to the extent that certain employees directly
involved in the manufacture and testing of DVD-ROM products are required
to be employed by Hyundai to ensure that products sold by DVS-Korea
contain necessary certifications, such employees shall remain employees
of Hyundai and DVS-Korea shall reimburse Hyundai for their salaries.
Following the termination of the Interim Period, DVS shall use its
reasonable best efforts to cause such employees to become employees of
DVS-Korea.
ARTICLE 7
CONDITIONS TO DVS'S OBLIGATIONS
Each of the obligations of DVS to be performed hereunder shall be
subject to the satisfaction (or the waiver by DVS) at or prior to each
Closing Date of each of the following conditions:
7.1 Representations and Warranties True at Each Closing Date.
Hyundai's representations and warranties contained in this Agreement
shall be true on and as of the applicable Closing Date with the same
force and effect as though made on and as of such date; Hyundai shall
have complied with the covenants and agreements set forth herein to be
performed by it on or before such Closing Date; and Hyundai shall have
delivered to DVS a certificate dated at such Closing Date and signed by a
duly authorized officer of Hyundai to all such effects.
7.2 Performance. Hyundai, shall have performed and complied with
all agreements, obligations, and conditions required by this Agreement to
be performed or complied with by it on or prior to the applicable
Closing.
7.3 Investigations. Neither any investigation of Hyundai by DVS,
nor the Schedules hereto, nor any other document delivered to DVS as
contemplated by this Agreement, shall have revealed any facts or
circumstances that, in the good faith judgment of DVS, reflect in a
material adverse way on the Assets or the business, operations, or
prospects of the DVD-ROM Business.
7.4 Consents. All required consents (including all Required
Contract Consents and DVS shareholder approval) have been obtained.
7.5 No Litigation. No Litigation shall be threatened or pending
against DVS or Hyundai before any court or governmental agency that, in
the reasonable opinion of counsel for DVS, could result in the restraint
or prohibition of any such party, or the obtaining of damages or other
relief from such party, in connection with this Agreement or the
consummation of the transactions contemplated hereby.
7.6 No Material Adverse Change. From the date of this Agreement
until the applicable Closing Date, Hyundai shall not have suffered any
material adverse change (whether or not such change is referred to or
described in any supplement to the Schedules) in the financial condition,
operations, or prospects of the DVD-ROM Business.
7.7 Non-Compete Agreement. At or prior to the earlier to occur
of the IP Closing and the Asset Closing, Hyundai shall have entered into
a three-year Non-Compete Agreement in substantially the form attached
hereto as Exhibit B.
7.8 Opinion of Counsel. At each of of the IP Closing and the
Asset Closing, DVS shall have received an opinion of the general counsel
to Hyundai, in form and substance reasonably satisfactory to DVS and its
counsel and covering matters to be agreed upon by DVS and its counsel and
Hyundai as soon as practicable after the signing of this Agreement.
7.9 Condition of Tangible Assets. To the reasonable satisfaction
of DVS, each tangible asset shall be free from defects (patent and
latent), shall have been maintained in accordance with normal industry
practice, shall be in good operating condition and repair (subject to
normal wear and tear), and shall be suitable for the purposes for which
it presently is used and presently is proposed to be used in the Business
Plan.
7.10 Hiring of DVD-ROM Product Development Team. Hyundai shall
use its reasonable best efforts to enable DVS or DVS-Korea, as the case
may be, to retain the services of all or substantially all of Hyundai's
DVD-ROM product development team, which consists of approximately 38
engineers and managers whose names are set forth on Schedule 6.9, on
terms no less favorable to DVS-Korea than those currently enjoyed by
Hyundai (other than those employees who will remain with Hyundai during
the Interim Period).
7.11 Subcontracting Agreement. At or prior to the earlier to
occur of the IP Closing and the Asset Closing, Hyundai and DVS shall have
entered into the Subcontracting Agreement.
7.12 Fairness Opinion. At or prior to the IP Closing DVS shall
have entered obained a fairness opinion in form and substance reasonably
satisfactory to DVS and its counsel.
ARTICLE 8
COVENANTS OF HYUNDAI AND DVS FOLLOWING CLOSINGS
8.1 Tax Matters.
(a) Hyundai's Right and Responsibility for Preclosing Tax
Matters. Hyundai shall have the right and responsibility to direct the
handling of all tax matters affecting or relating to the conduct of the
DVD-ROM Business prior to the later to occur of the IP Closing Date and
the Asset Closing Date, including the prosecution of all administrative
and judicial remedies, the settlement of all issues, and the execution of
agreements, consents, or waivers, extending the statute of limitations,
provided that no such action, agreement, or stipulation shall have any
effect on the tax position or liability of DVS, including as successor to
the DVD-ROM Business.
(b) DVS's Cooperation. DVS shall use its reasonable
efforts to provide Hyundai such assistance as it may reasonably request
in connection with matters relating to taxes, including information with
respect to Hyundai's preparation of any returns of taxes, any audit or
other examination by any taxing authority, any judicial or administrative
proceeding relating to Hyundai's liability for taxes, or any claims
arising hereunder respecting the DVD-ROM Business. DVS shall retain and
provide Hyundai with records or information which may be relevant to any
such return, audit, examination, proceeding, or determination, and DVS
shall retain all such books and records for examination so long as
necessary in keeping with applicable statutes of limitations.
8.2 Allocation of Purchase Price. The purchase price shall be
allocated to the Assets in accordance with the requirements of Section
1060 of the Internal Revenue Code of 1986, as amended, based on mutual
agreement between Hyundai and DVS, and all tax returns and reports filed
or prepared by Hyundai and DVS with respect to the transactions
contemplated by this Agreement shall be consistent with that allocation.
8.3 Transfer Taxes. Subject to 1.1(d), all sales, transfer, and
similar taxes and fees (including all recording fees, if any) incurred in
connection with this Agreement and the transactions contemplated hereby
shall be borne by Hyundai, and Hyundai shall file all necessary
documentation with respect to such taxes.
8.4 Stock Options. DVS shall, subject to obtaining the approval of
DVS's shareholders, establish a pool of 1,000,000 shares of Common Stock
(including options to be granted to Sung Xxx Xxx) to be available for
option grants to employees of DVS-Korea.
8.5 Registration of Common Stock. DVS shall use its best efforts to
register the Common Stock under the United States Securities Act of 1933,
as amended, within 180 days following the later to occur of the IP
Closing and the Asset Closing. Hyundai shall provide all information and
assistance to DVS necessary to enable DVS to effect such registration of
the Common Stock.
8.6 Further Assurances. Subject to the terms and conditions of
this Agreement, each party agrees to use all of its reasonable efforts to
take, or cause to be taken, all actions and to do or cause to be done,
all things necessary and proper or advisable to consummate and make
effective the transactions contemplated by this Agreement (including the
execution and delivery of such further instruments and documents) as the
other party may reasonably request.
ARTICLE 9
CERTAIN TRANSACTION MATTERS
9.1 Transition Services Provided by Hyundai; Use of Facility.
(a) Commitment. Hyundai shall continue to provide the
Transition Services, as defined in Section 9.3(b) to DVS following the
Closings until June 30, 1998 or such earlier time as DVS-Korea is able to
secure services similar to the Transition Services provided by Hyundai.
(b) Definition of Transition Services. For purposes of
this Agreement, "Transition Services" shall mean administrative support
services of a nature previously rendered by the headquarters of Hyundai
to the DVD-ROM Business such as the processing of payroll and insurance
claims, accounting and billing, legal compliance work, clerical support,
maintenance of facilities, and similar services.
(c) Manner and Time of Performance. Hyundai shall perform
the Transition Services with the degree of care, skill, and diligence
with which it previously performed, or may continue to perform, similar
services for itself or others. Hyundai will make every reasonable effort
to maintain sufficient resources such that it may provide the Transition
Services. Hyundai reserves the right to determine staffing and
scheduling of Transition Services, and to engage contractors as needed,
provided that Hyundai shall make every reasonable effort to conform to
the priorities and timeframes given by DVS. Hyundai shall not be
required to devote substantial time of its executives to the Transition
Services such as would interfere with their other responsibilities to
Hyundai. To the extent possible, DVS shall advise Hyundai in advance of
its projected requirements, according to skill level of personnel and
estimated worktime, and provide priorities and timeframes with respect to
the urgency of completion.
(d) Funding and Reimbursement. As payment for the
Transition Services, DVS shall reimburse Hyundai according to the fee
schedule set forth in Schedule 9.3(e). Hyundai and DVS agree that the
rates noted on such fee schedule may change from time to time to take
into account variations in accordance with actual costs. Hyundai shall
invoice DVS on a monthly basis for fees accruing for Transition Services,
and DVS shall remit payment in full of the invoiced amount within 30 days
of receipt of Hyundai's invoice.
(e) Records. Hyundai shall maintain complete and accurate
accounting records, in a form consistent with prior practice and standard
accounting procedures, to substantiate its fees accruing for Transition
Services.
(f) Use of Facility. Hyundai shall grant to DVS the right
to exclusively use, for a rental fee of 2,000,000 Korean Won per month,
the Facility for a period of six months from the later to occur of the IP
Closing Date and the Asset Closing Date for final assembly and testing
of DVD-ROM drives.
ARTICLE 10
INDEMNITY
10.1 Indemnification by Hyundai. Hyundai shall indemnify, defend,
and hold harmless DVS and DVS-Korea and their respective successors and
assigns and the directors, officers, employees, and agents of each
(collectively, the "DVS Group"), at, and at any time after, the Closings,
from and against any and all demands, claim, actions, or causes of
action, assessments, losses, damages, liabilities, costs, and expenses,
including reasonable fees and expenses of counsel, other expenses of
investigation, handling, and litigation, and settlement amounts, together
with interest and penalties (collectively, a "Loss" or "Losses"),
asserted against, resulting to, imposed upon, or incurred by the DVS
Group, directly or indirectly, by reason of, resulting from, or arising
in connection with any of the following:
(a) Breach or Obligation. Any breach of any repre-
sentation, warranty, or agreement of Hyundai contained in or made
pursuant to this Agreement, including the agreements and other
instruments contemplated hereby.
(b) Excluded Liabilities. Any liabilities or obligations
of any kind or nature whatsoever, whether accrued, absolute, contingent
or otherwise, known or unknown, arising out of or in connection with the
conduct of the DVD-ROM Business or the ownership or use of the Assets
prior to the applicable Closing Date, except for the liabilities
specifically assumed by DVS hereunder.
(c) Termination of Employees. Any fees, costs or expenses
incurred by DVS in connection with the termination by Hyundai of any
employees in connection with the sale of the Assets and those relating to
or in connection with any threatened or actual claims or litigation
relating to such termination or to DVS's determination, in its sole
discretion, to not employ any such terminated employees.
(d) Incidental Matters. To the extent not covered by the
foregoing, any and all demands, claims, actions or causes of action,
assessments, losses, damages, liabilities, costs, and expenses, including
reasonable fees and expenses of counsel, other expenses of investigation,
handling, and litigation and settlement amounts, together with interest
and penalties, incident to the foregoing.
10.2 Indemnification by DVS. DVS shall indemnify, defend, and
hold harmless Hyundai and its successors and assigns and the directors,
officers, employees, and agents of each (collectively, the "Hyundai
Group"), at, and at any time after, the Closings, from and against any
and all demands, claims, actions or causes of action, assessments,
losses, damages, liabilities, costs, and expenses, including reasonable
fees and expenses of counsel, other expenses of investigation, handling,
and litigation, and settlement amounts and including any net income tax
amount associated with all such indemnification recoveries (collectively,
a "Loss" or "Losses"), asserted against, resulting to, imposed upon, or
incurred by the Hyundai Group, to the extent arising from any of the
following:
(a) Breach of Obligation. Any breach of any representa-
tion, warranty, or agreement of DVS contained in or made pursuant to this
Agreement, including the agreements and other instruments contemplated
hereby.
(b) Assumed Liabilities. Any of the liabilities assumed
hereunder by DVS.
(c) Misuse of Hyundai Name. Any liabilities arising from
misrepresentation by DVS in connection with DVS's use of the Hyundai name
on products and product packaging and in marketing materials of the DVD-
ROM Business.
(d) Incidental Matters. To the extent not covered by the
foregoing, any and all demands, claims, actions or causes of action,
assessments, losses, damages, liabilities, costs, and expenses, including
reasonable fees and expenses of counsel, other expenses of investigation,
handling, and litigation, and settlement amounts, together with interest
and penalties, incident to the foregoing.
10.3 Notice of Claim. The party entitled to indemnification
hereunder (the "Claimant") shall promptly deliver to the party liable for
such indemnification hereunder (the "Obligor") notice in writing (the
"Required Notice") of any claim for recovery under Section 10.1 or
Section 10.2, specifying in reasonable detail the nature of the Loss,
and, if known, the amount, or an estimate of the amount of the liability
arising therefrom (the "Claim"). The Claimant shall provide to the
Obligor as promptly as practicable thereafter information and
documentation reasonably requested by the Obligor to support and verify
the claim asserted, provided that, in so doing, it may restrict or
condition any disclosure in the interest of preserving privileges of
importance in any foreseeable litigation.
10.4 Defense. If the facts pertaining to the Loss arise out of
the claim of any third party (other than a member of the DVS Group or
Hyundai Group, whichever is entitled to indemnification for such matter)
available by virtue of the circumstances of the Loss, the Obligor may
assume the defense or the prosecution thereof, including the employment
of counsel or accountants, at its cost and expense. The Claimant shall
have the right to employ counsel separate from counsel employed by the
Obligor in any such action and to participate therein, but the fees and
expenses of such counsel employed by the Claimant shall be at its
expense. The Claimant shall have the right to determine and adopt (or,
in the case of a proposal by Obligor, to approve) a settlement of such
matter in its reasonable discretion, except that Claimant need not
consent to any settlement that: (a) imposes any nonmonetary obligation
or (b) Obligor does not agree to pay in full. The Obligor shall not be
liable for any settlement of any such claim effected without its prior
written consent, which shall not be unreasonably withheld. Whether or
not the Obligor chooses to so defend or prosecute such claim, all the
parties hereto shall cooperate in the defense or prosecution thereof and
shall furnish such records, information, and testimony, and attend such
conferences, discovery proceedings, hearings, trials, and appeals, as may
be reasonably requested in connection therewith.
10.5 Recovery of Attorney Fees For Frivolous Actions. The Obligor
shall be entitled to recover its reasonable out-of-pocket costs
(including court costs and actual attorney fees) incurred in defending
any Claim brought by the Claimant on frivolous grounds or pursued for the
purpose of delay or harassment. The Claimant shall be entitled to
recover its reasonable out-of-pocket costs (including court costs and
actual attorney fees) incurred in pursuing any Claim defended by the
Obligor on frivolous grounds or opposed for the purpose of delay or
harassment. A frivolous claim shall include any Claim that is not bona
fide and that is not brought in good faith after consultation with
counsel.
ARTICLE 11
CONFIDENTIALITY
11.1 Confidentiality Obligation of DVS Prior to Closings. Until
the later to occur of the IP Closing and the Asset Closing (and, if this
Agreement is terminated for any reason, for three years thereafter), DVS
shall, and shall use its best efforts to cause its personnel and agents
to, hold in strict confidence, not disclose to any person without the
prior written consent of Hyundai, and not use in any manner except in
connection with the transactions contemplated hereby, any confidential
business or technical information obtained from Hyundai in connection
with the transactions contemplated hereby concerning Hyundai, the DVD-ROM
Business or Assets that has been designated by Hyundai as confidential.
This obligation shall cease to apply to DVS upon the occurrence of later
to occur of the IP Closing and the Asset Closing, provided however that
confidential information concerning Hyundai's other businesses shall be
kept confidential. In the event this Agreement terminates for any
reason, DVS shall return to Hyundai or destroy all materials in its
possession containing any such confidential information, including all
copies, extracts, adaptations, and transcriptions thereof.
11.2 Confidentiality Obligation of Hyundai Following Closings.
For a period of three years from the date hereof, Hyundai shall, and
shall use its best efforts to cause its personnel and agents to, hold in
strict confidence, not disclose to any person without the prior written
consent of DVS, and not use in any manner whatsoever (except as otherwise
provided herein), any confidential business or technical information
retraining in its possession concerning DVS's business or assets. In the
event that this Agreement terminates for any reason, Hyundai shall
surrender to DVS or destroy all materials remaining in its possession
containing any such confidential information, including all copies,
extracts, adaptations, and transcriptions thereof.
11.3 Permitted Disclosures. Notwithstanding Sections 11.1 and
11.2, either party may disclose confidential information (a) where
necessary to any regulatory authorities or governmental agencies pursuant
to legal process, (b) if required by court order or decree or (c) if
required in the opinion of counsel to a party for that party to comply
with SEC disclosure requirements.
11.4 Scope of Confidential Information. For purposes of this
Agreement, information shall not be deemed confidential (a) if such
information is available in full from public sources; (b) if such
information is received from a third party not under an obligation to
keep such information confidential; or (c) if die recipient can
conclusively demonstrate that such information was independently
developed by the recipient.
ARTICLE 12
TERMINATION PRIOR TO CLOSINGS
12.1 Termination of Agreement. This Agreement may be terminated
at any time prior to the earlier to occur of the IP Closing and the Asset
Closing:
(a) Mutual Consent. By the mutual consent of DVS and
Hyundai;
(b) Deadline. By either DVS or Hyundai without liability,
if both Closings shall not have occurred on or before June 23, 1998
through no fault of the party seeking to terminate this Agreement; or
(c) Material Breach. By DVS or Hyundai in writing, without
liability, if the other party shall (i) fail to perform in any material
respect its agreements contained herein required to be performed by it on
or prior to the applicable Closing Date or (ii) materially breach any of
its representations, warranties, agreements, or covenants contained
herein, provided that such failure or breach is not cured within ten days
after such party has been notified of the other party's intent to
terminate this Agreement pursuant hereto.
12.2 Termination of Obligations. Termination of this Agreement
pursuant to this Article 12 shall terminate all obligations of the
parties hereunder, except for the obligations set forth in Article 11 and
except for any damages incurred by the non-defaulting party in the event
of a termination under Section 12.1(c) hereof.
ARTICLE 13
MISCELLANEOUS
13.1 Entire Agreement. This Agreement (including the Schedules
and Exhibits), and the other certificates, agreements, and other
instruments to be executed and delivered by the parties in connection
with the transactions contemplated hereby; constitute the sole
understanding of the parties with respect to the subject matter hereof.
No amendment, modification, or alteration of the terms or provisions of
this Agreement shall be binding unless the same shall be in writing and
duly executed by the parties hereto.
13.2 Parties Bound by Agreement; Successors and Assigns. The
terms, conditions, and obligations of this Agreement shall inure to the
benefit of and be binding upon the parties hereto and the respective
successors and assigns thereof.
13.3 Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall for all purposes be deemed to be an
original and all of which shall constitute the same instrument.
13.4 Headings. The headings of the Sections and paragraphs of
this Agreement are inserted for convenience only and shall not be deemed
to constitute part of this Agreement or to affect the construction
hereof.
13.5 Modification and Waiver. Any of the terms or conditions of
this Agreement may be waived in writing at any time by the party that is
entitled to the benefits thereof. No waiver of any of the provisions of
this Agreement shall he deemed to or shall constitute a waiver of any
other provision hereof (whether or not similar).
13.6 Expenses. Hyundai and DVS shall each pay all costs and
expenses incurred by it or on its behalf in connection with this
Agreement and the transactions contemplated hereby, including fees and
expenses of its own financial consultants, accountants, and counsel.
13.7 Notices. All notices, requests, demands, claims, and other
communications which are required or may be given under this Agreement
shall be in writing and shall be deemed to have been duly given: when
received, if personally delivered; when transmitted, if transmitted by
telecopy, electronic or digital transmission method; five business days
after such notice, request, demand claim or other communication is sent,
if sent by registered or certified mail, return receipt requested,
postage prepaid, and addressed to the intended recipient as set forth
below:
If to DVS to:
DIGITAL VIDEO SYSTEMS, INC.
000 Xxxxxxx Xxxxx
Xxx Xxxxx, Xxxxxxxxxx XXX 00000
Attention: Xxxxxx X. Xxxxxx, CEO
Fax: (000) 000-0000
Copy to:
XXXX & XXXXX
0000 Xxxxxxx Xxxx Xxxx
Xxxxx 0000
Xxx Xxxxxxx, Xxxxxxxxxx XXX 00000
Attention: Xxxxxxx X. Xxxxxxxxx, Esq.
Fax: (000) 000-0000
If to Hyundai to:
HYUNDAI ELECTRONICS INDUSTRIES COMPANY, LTD.
12th Fl. Hyundai Jeonja Xxxx.
00, Xxxxxxxx-xxxx Xxxxxx-xx
Xxxxx, Xxxxx
Attention: Xxxxx X. Xxx, Esq.
Fax: (00) 000-0000, or 2146 or 2147
Copy to:
HYUNDAI ELECTRONICS INDUSTRIES COMPANY, LTD.
International Finance Department, 12th Fl.
000-0 Xxx-Xxxx Xxxxxxx-Xx
Xxxxx, Xxxxx
Attention: X.X. Xxx
Fax: (00) 000-0000
Any party may send any notice, request, demand, claim, or other
communication hereunder to the intended recipient at the address set
forth above using any other means, but no such notice, request, demand,
claim, or other communication shall be deemed to have been duly given
unless and until it actually is received by the intended recipient. Any
party may change the address to which notices, requests, demands, claims,
and other communications hereunder are to be delivered by giving the
other parties notice in the manner herein set forth.
13.8 Bulk Sales Law. The parties waive compliance with any bulk
sales laws or similar laws relating to notices to creditors.
13.9 Governing Law. This Agreement shall be construed in
accordance with and governed by the laws of the State of California
without giving effect to the principles of conflicts of law thereof.
13.10 Arbitration; Choice of Law. (a) Any dispute, controversy or
claim whether based on contract, tort, statute or other legal theory
(including, but not limited to, any claim of fraud or misrepresentation),
arising out of or related to this Agreement, or any subsequent agreement
between the parties, shall be fully and finally resolved by arbitration
pursuant to this Section 13.10 and the then-current commercial rules and
supervision of the American Arbitration Association (the "AAA"). The
duty to arbitrate shall extend to any officer, employee, shareholder,
principal, agent, trustee in bankruptcy or otherwise, affiliate,
subsidiary, or guarantor of a party hereto making or defending any claim
that would otherwise be arbitrable hereunder.
(b) Prior to demanding arbitration, the parties shall first
in good faith consult among appropriate officers of DVS and Hyundai,
which officers shall begin promptly after one party has delivered to the
other a written request for consultation in accordance with the notice
provisions contained in Section 13.7 hereof. At any time thereafter,
either party may request in writing, in accordance with the notice
provisions set forth in Section 13.7 hereof, that the dispute be referred
to appropriate senior officers of DVS and Hyundai. Within ten business
days after such request, such senior officers shall meet and attempt in
good faith to resolve the dispute. Neither DVS or Hyundai shall file a
demand for arbitration until 15 business days after a request is made for
such meeting.
(c) Any arbitration occurring pursuant to this Section 13.10
shall be held in San Jose, California, USA before three arbitrators, one
of which shall be selected by Hyundai, one of which shall be selected by
DVS and one of which shall be selected by the arbitrators selected by
Hyundai and DVS, respectively. The decision, and award, if any, of such
arbitrators shall be final and binding upon each of DVS and Hyundai. DVS
and Hyundai agree that the arbitrators shall not have the power to award
punitive damages. DVS and Hyundai agree that in order to prevent
irreparable harm to the party claiming harm, such arbitrators may grant
temporary or permanent injunctive or other equitable relief for in order
to protect the intellectual property rights of any party.
(d) Issues of arbitrability shall be determined in
accordance with any applicable federal substantive and procedural laws.
All other aspects of this Agreement shall be interpreted in accordance
with, and the arbitrators shall apply and be bound to follow the
substantive laws of the State of California. Each party shall bear its
own attorney's fees, associated with any arbitration, and the other costs
and expenses of any arbitration shall be borne by each party as provided
by the rules of the AAA.
(e) Each of DVS and Hyundai agrees not to submit a dispute
subject to this Section 13.10 to any federal, state, local or foreign
court or arbitration association except as may be necessary to enforce
the arbitration procedures of, or any award under, this Section 13.10.
If court proceedings to stay litigation or compel arbitration are
necessary, the party who unsuccessfully opposes such proceedings shall
pay all associated costs, expenses and attorneys' fees that are
reasonably incurred by the non-opposing party.
(f) Notwithstanding anything to the contrary in this Section
13.10, in the event of an alleged violation of a party's intellectual
property rights under this Agreement, such party may seek temporary
injunctive relief from any court of competent jurisdiction in the State
of California, pending the appointment of an arbitration panel. The
party requesting such relief shall simultaneously file a demand for
arbitration of the alleged dispute, and shall request the AAA to proceed
under its rules for an expedited hearing.
13.11 Severability. Any term or provision of this Agreement that
is invalid or unenforceable in any situation in any jurisdiction shall
not affect the validity or enforceability of the remaining terms and
provisions hereof or the validity or enforceability of the offending term
or provision in any other situation in any other jurisdiction.
13.12 Public Announcements. Hyundai and DVS shall consult with
each other before issuing any press releases or otherwise making any
public statements with respect to this Agreement and the transactions
contemplated hereby. Neither Hyundai nor DVS shall issue any such press
release or make any public statement without the agreement of the other
party, except as such party's counsel advises in writing and as may be
required by law.
13.13 Third-Party Beneficiaries. With the exception of: (a) the
parties to this Agreement and (b) the DVS Group and the Hyundai Group
with respect to the matters inuring to their benefit under Article 10,
there shall exist no right of any person to claim a beneficial interest
in this Agreement or any rights occurring by virtue of this Agreement.
13.14 "Including." Words of inclusion shall not be construed as
terms of limitation herein, so that references to "included" matters
shall be regarded as nonexclusive, noncharacterizing illustrations.
13.15 References. Whenever reference is made in this Agreement to
any Article, Section, Schedule, or Exhibit, such reference shall be
deemed to apply to the specified Article or Section of this Agreement or
the specified Schedule or Exhibit to this Agreement.
13.16 Survival of Agreements. All covenants, agreements,
representations, and warranties made herein shall survive the execution
and delivery of this Agreement and the Closings.
IN WITNESS WHEREOF, each of the parties hereto has caused this
Agreement to be executed on its behalf on the date indicated.
DIGITAL VIDEO SYSTEMS, INC.
By: /s/ Xxxxxx X. Xxxxxxxxx
Title: President and COO
Date: May 8, 1998
[Corporate seal]
HYUNDAI ELECTRONICS INDUSTRIES COMPANY, LTD.
By: /s/ Youn Huh
Title: Senior Vice President
Date: May 8, 1998
[Company seal]
INDEX
Schedules
Schedule 1.1(a) - Proprietary Technology
Schedule 1.2(b)(i) - Tangible Assets
Schedule 1.2(b)(ii) - Contracts
Schedule 1.2(b)(iii) - Licenses, Permits, etc.
Schedule 2.5 - Required Contract Consents
Schedule 2.11 - Major Vendors and Strategic
Relationships
Schedule 6.9 - Employees
Schedule 9.3(e) - Transition Services Fees
Exhibits
Exhibit A - Assumption Agreement and Xxxx of Sale
Exhibit B - Non-Compete Agreement
