SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): April 3, 1998
Digital Link Corporation
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(Exact name of Registrant as specified in its charter)
California 0-23110 77-0067742
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(State or other jurisdiction (Commission File Number) (IRS Employer
of incorporation) Identification No.)
217 Humboldt Court, Sunnyvale, California 94089
(Address of principal executive offices, including zip code)
(408) 745-6200
(Registrant's telephone number, including area code)
Item 2: Acquisition or Disposition of Assets.
On April 3, 1998, Digital Link Corporation (the "Company") entered into
an Asset Sale Agreement (the "Agreement") with Semaphore Communications
Corporation, a Delaware corporation ("Semaphore"), to acquire substantially all
of Semaphore's non-cash assets (excluding furniture and fixtures) (the
"Assets"). This acquisition of assets (the "Asset Acquisition") was consummated
as of such date. Semaphore is a supplier of security management and virtual
private network solutions for Internet/intranet and Frame relay applications.
The provisions of the Agreement and related agreements described in this report
are qualified in their entirety by reference to the actual text of such
agreements, which are incorporated by reference as exhibits to this report.
The Assets acquired pursuant to the Agreement include intellectual
property, inventory, trade receivables and rights under certain assumed
contracts. Under the terms of the Agreement, the Company issued 291,182 shares
of the Company's Common Stock (the "Shares") to Semaphore on April 3, 1998 and
assumed certain liabilities (the "Liabilities"). The number of Shares issued was
determined by dividing $3,200,000 by the volume-weighted average price per share
(as reported by Bloomberg Financial Services) at which the Company's Common
Stock traded on the five business days immediately preceding the execution of
the Agreement by the parties. The Liabilities include certain obligations under
assumed contracts and under various outstanding purchase orders as well as
certain warranty obligations. The Company received $182,000 from Semaphore with
respect to the assumption of certain of such Liabilities. The Agreement provides
for a contingent reduction of $250,000 in the purchase price paid by the Company
in connection with the Asset Acquisition if certain rights held by Xerox
Corporation ("Xerox") under a License Agreement dated as of December 1, 1994
between Semaphore and Xerox are not waived by Xerox or if the existing
non-competition agreement with respect to such rights is not extended through
April 3, 2003. In addition, in connection with the Asset Acquisition,
approximately 25 of Semaphore's employees currently located in Semaphore's Santa
Clara, California headquarters are expected to become employees of the Company.
The amount of consideration paid in connection with the Asset
Acquisition was determined through arms' length negotiations between the parties
and their respective assessment of the value of the Assets, the Liabilities and
the Shares. There were no material relationships between the Company, or any of
its affiliates, directors or officers, and Semaphore prior to the Asset
Acquisition.
The Shares issued to Semaphore in the Asset Acquisition were issued in
a private placement pursuant to an exemption from registration under the
Securities Act of 1933, as amended (the "Securities Act") and consequently can
be transferred only pursuant to an effective registration statement filed under
the Securities Act or an exemption from the registration requirements of the
Securities Act. In connection with the Asset Acquisition, the Company and
Semaphore entered into a Registration Rights Agreement (the "Registration Rights
Agreement") which grants Semaphore certain "piggyback" and "shelf" registration
rights that are summarized below.
Under the Registration Rights Agreement, the Company, upon the request
of Semaphore, is obligated to file a registration statement on Form S-3 for a
continuous offering under Rule 415 of the Securities Act (the "Shelf
Registration") covering the registration of all of the Shares. The Company has
agreed to cause, as soon as practicable, the effectiveness of the Shelf
Registration and to continually maintain such effectiveness until the date that
is the first anniversary of the closing of the Asset Acquisition, subject to
certain limited exceptions. Any sale of Shares pursuant to the Shelf
Registration may be made only during certain permitted windows, which consist of
a period of thirty consecutive calendar days following the Company's notice to
Semaphore in response to a request from Semaphore to sell at least 5% of the
outstanding Shares. The Registration Rights Agreement provides for no more than
three such permitted windows. The parties have agreed that the number of Shares
sold by Semaphore pursuant to the Shelf Registration during any calendar quarter
will not exceed 2% of the outstanding shares of the Company.
In addition to the Shelf Registration, the Registration Rights
Agreement provides that in the event that the Company files a registration
statement under the Securities Act to register a public offering of its
securities, Semaphore may also elect to register the Shares under such
registration statement in certain circumstances.
The Company's obligations to register the Shares will expire (a) after
the expiration of one year from the closing of the Asset Acquisition; (b) with
respect to the Shelf Registration, if the Company has already effected three (3)
permitted windows pursuant to the Registration Rights Agreement; (c) if all the
Shares proposed to be sold may be sold in a three (3) month period without
registration under the Securities Act pursuant to Rule 144 promulgated under the
Securities Act or otherwise; or (d) if all Shares have been registered and sold
pursuant to a registration effected pursuant to the Registration Rights
Agreement and/or have been transferred in transactions in which registration
rights have not been assigned in accordance with the Registration Rights
Agreement. Semaphore may assign the rights under the Registration Rights
Agreement with the consent of the Company and under certain other circumstances.
Item 7: Financial Statements, Pro Forma Financial Information and Exhibits.
(a) Financial Statements of Business Acquired.
The audited financial statements of Semaphore required to be filed
pursuant to Item 7(a) of Form 8-K will be filed on a Form 8-K/A within 60 days
after the date this Form 8-K is required to be filed.
(b) Pro Forma Financial Information.
The pro forma financial information required to be filed pursuant to
Item 7(b) of Form 8-K will be filed on a Form 8-K/A within 60 days after the
date this Form 8-K is required to be filed.
(c) Exhibits.
The following exhibits are filed herewith:
2.01 Asset Sale Agreement dated April 3, 1998 by and among
Digital Link Corporation and Semaphore Communications
Corporation. Pursuant to Item 601(b)(2) of Regulation S-K,
certain schedules have been omitted from this filing but
will be furnished supplementally to the Commission upon
request.
4.01 Registration Rights Agreement dated April 3, 1998 by and
among Digital Link Corporation and Semaphore Communications
Corporation.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
Date: April 17, 1998 By: /s/ Stanley E. Kazmierczak
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Stanley E. Kazmierczak
Vice President, Finance and
Administration
and Chief Financial Officer
INDEX TO EXHIBITS
Exhibit Number Description of Exhibit
2.01 Asset Sale Agreement dated April 3, 1998 by and
among Digital Link Corporation and Semaphore
Communications Corporation. Pursuant to Item
601(b)(2) of Regulation S-K, certain schedules have
been omitted from this filing but will be furnished
supplementally to the Commission upon request.
4.01 Registration Rights Agreement dated April 3, 1998
by and among Digital Link Corporation and Semaphore
Communications Corporation.