EXHIBIT 2.1
ASSET PURCHASE AGREEMENT
ASSET PURCHASE AGREEMENT dated as of May , 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
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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
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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
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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
1.
patent sought; provided, that Hyundai shall assist DVS in any manner, and take
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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
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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))
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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
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1.2(b)(ii)); and
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(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)).
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2.
(c) Other Transactions. In connection with the sale of the Assets to DVS:
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(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
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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
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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
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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
3.
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.
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(a) Payments at Closings.
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(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
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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.
4.
(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
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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
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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
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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
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and deliver an Assumption Agreement and Xxxx of Sale in the form of Exhibit A
hereto.
(d) Certificates. Each party shall deliver the certificates as to the
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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
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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
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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.
5.
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
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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
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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
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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
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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).
6.
2.5 Required Contract Consents. Except as set forth in Schedule 2.5,
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(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
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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.
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(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);
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(b) Except as set forth on Schedule 1.1(a) hereto, Hyundai owns
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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
7.
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
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item of Proprietary Technology required to be identified in Schedule 1.1(a):
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(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
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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.
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(a) Ordinary Course of Business: No Removal or Disposal of Assets.
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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
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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
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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.
8.
(d) Absence of Joint Ventures, etc. Hyundai is not a party to any
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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
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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
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strategic relationship which the DVD-ROM Business maintains (Schedule 2.11 shall
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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,
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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
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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
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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
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materials and supplies, manufactured and purchased parts, finished goods and
working prototypes.
2.15 Contracts. Hyundai has delivered to DVS a correct and complete
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copy of each Contract (as amended to date) listed on Schedule 1.2(a)(iii). With
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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
9.
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
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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).
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2.17 Environmental, Health and Safety Matters. (a) Hyundai has obtained
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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
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1.2(a)(ii) hereto.
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(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
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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
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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
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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).
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10.
2.21 Business Plan. The information contained in the Business Plan
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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
11.
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.
12.
(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.
13.
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.
14.
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.
15.
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
16.
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
17.
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.
18.
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 representation, 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:
19.
(a) Breach of Obligation. Any breach of any representation,
--------------------
warranty, or agreement of DVS contained in or made pursuant to this Agreement,
including the agreements and other instruments contemplated hereby.
(b) Assumed Liabilities. Any of 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
20.
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.
21.
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.
22.
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. Xxxxxxxxx, President
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
23.
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
24.
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.
25.
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: 5-8-98
[Corporate seal]
HYUNDAI ELECTRONICS INDUSTRIES COMPANY, LTD.
By: /s/ Youn Huh
-----------------------------
Title: Senior Vice President
Date: May 8, 1998
[Company seal]
26.
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
27.
