UNITED STATES SECURITIES AND EXCHANGES 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):
January 3, 1997
Commission file number 33-86242
ProtoSource Corporation
(exact name of registrant as specified in its charter)
California 77-0190772
(State of other jurisdiction of (IRS Employer
Incorporation of organization) Identification No.)
2300 Tulare Street, Suite 210
Fresno, California 93721
(address of principal executive offices, zip code)
Registrant's telephone number, including area code: (209) 486-8638
2580 West Shaw
Fresno, California 93711
(Former name or former address, if changed since last report)
ITEM 5. OTHER EVENTS
On January 3, 1997, the Company sold the remaining assets
of the Classic line of products ("Classic Line") to SSC Technologies,
Inc. ("SSC") for $770,850 evidenced by a promissory note bearing
interest at 10% per annum payable in January 2007 and the
assumption by SSC of all of the liabilities of the Classic Line. Under
the terms of the asset sales agreement for the Classic Line (the
"Divestiture Agreement"), the Company purchased 25% of the
outstanding common stock of SSC for $500,000 in cash and the
remaining 75% of the outstanding common stock was issued to the
former management team of ProtoSource, including Charles T.
Howard, David L. Green, Ding Yang and Steven L. Wilson, all of
whom simultaneously resigned as officers and directors of the
Company (the "SSC Principals"). As a part of the Divestiture
Agreement, the SSC Principals also (i) canceled 857,140 shares of
Convertible Preferred Stock held by them which were previously
exercisable into an equal number of shares of Common Stock, (ii)
agreed (except for Mr. Robinson) not to sell an aggregate of 457,144
shares of Common Stock owned by them until October 1999 except
with the written consent of Andrew, Alexander, Wise & Company,
Incorporated ("AAWC"), a consultant to the Company, (iii) agreed
to assume a portion of the Company's capital lease obligation in
connection with its former corporate offices located at 2580 West
Shaw, Fresno, California 93711, and (iv) personally guaranteed on a
joint and several basis the $770,850 promissory note issued by SSC
to the Company and all other obligations of SSC to the Company.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(c) Exhibits:
10.12 Divestiture agreement
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.
PROTOSOURCE CORPORATION
(Regristrant)
By: /s/ Andrew Chu
Andrew Chu
Chief Financial Officer
Dated: January 16, 1997
Exhibits 10.12
DIVESTITURE AGREEMENT
dated, December __, 1996
by and between
PROTOSOURCE CORPORATION,
a California corporation
(the "Seller"),
and
SSC TECHNOLOGIES, INC.,
a California corporation
("Buyer")
TABLE OF CONTENTS
Page
Section 1. Definitions 2
Section 2. Divestiture Price; Closing; Transfer of Assets;
Payment of Purchase Price and Assumption of Liabilities;
Consistent Treatment 6
2.1. Divestiture Price 6
2.2. Closing Date 7
2.3. Transactions at Closing 7
2.3.1. Transfer of Assets 7
2.3.2. Payment of Divestiture Price and Assumption of
Liabilities 7
2.4. Consistent Treatment 7
Section 3. Representations, Warranties, Certain Agreements
and Covenants of Buyer 8
3.1. Organization 8
3.2. Authority 8
3.3. Consents 8
3.4. Litigation 8
Section 4. Representations, Warranties, Certain Agreements
and Covenants of the Seller 8
4.1. Organization 8
4.2. Due Authorization 8
4.3. Ownership 9
4.4. Title 9
4.5. Balance Sheet 9
4.6. Inventories 10
4.7. Certain Contracts 10
4.8. Fixed Assets 10
4.9. Intangible Rights 10
4.10. Litigation 11
4.11. Employees 11
4.12. Default 12
4.13. Material Adverse Change 12
4.14. Consents 13
4.15. Environmental 13
4.16. Real Property 13
4.17. Tax Matters 14
4.18. Insurance 14
4.19. Compliance; Governmental Authorizations; OSHA 15
4.20. Accounts and Notes Receivable 15
4.21. Customers and Suppliers 16
4.22. Miscellaneous Assets 16
4.23. Disclosures 16
Section 5. Employee Pension and Other Benefit Plans and
Programs 16
Section 6. Pre-Closing Covenants of Buyer 16
6.1. Corporate and Other Action 16
6.2. Consents and Approvals 16
6.3. Confidentiality 16
Section 7. Pre-Closing Covenants of the Seller 17
7.1. Corporate and Other Actions 17
7.2. Consents and Approvals 17
7.3. Access to Information 17
7.4. Ordinary Course of Business 17
Section 8. Prorated Taxes, Brokerage Fees, Product Liability
Claims, Expenses and Sales Taxes and Other Taxes 17
8.1. Proration of Taxes 18
8.2. Brokerage Fees 18
8.3. Product Liability 18
8.4. Expenses 18
8.5. Sales and Other Taxes 18
Section 9. Conditions 19
9.1. Conditions to Obligations of the Seller 19
9.1.1. Performance of Agreements and Covenants 19
9.1.2. Truth of Representations and Warranties. 19
9.1.3. Opinions of Counsel 19
9.1.4. Payment of Purchase Price and Assumption
of Liabilities 20
9.1.5. No Actions or Proceedings 20
9.1.6. Proceedings Satisfactory to the Seller 20
9.2. Conditions to Obligations of Buyer 20
9.2.1. Performance of Agreements and Covenants 20
9.2.2. Truth of Representations and Warranties 20
9.2.3. Updated Schedules 20
9.2.4. No Actions or Proceedings 21
9.2.5. Consents Obtained 21
9.2.6. Deliveries by the Seller at Closing 21
9.2.7. Proceedings Satisfactory to Buyer 21
Section 10. Non-Competition 22
Section 11. Post Closing Covenants of Buyer 22
11.1. Liabilities 22
11.2. Availability of Records 22
11.3. Use of Trade or Service Marks 23
Section 12. Statement of Source and Use of Funds. 23
12.1. Statement of Source and Use of Funds 23
12.2. Resolution 23
12.3. Settlement of Accounts 24
Section 13. Indemnification, Survival and Termination 24
13.1. Indemnification by the Seller 24
13.2. Indemnification by Buyer 25
13.3. Survival 25
13.4. Termination 26
13.4.1. With the mutual consent of Buyer and the
Seller 26
13.4.2. By the Seller 26
13.4.3. By Buyer 26
Section 14. Miscellaneous 26
14.1. Assignment 26
14.2. No Press Release Without Consent 26
14.3. Severability 27
14.4. Entire Agreement 27
14.5. No Third Party Beneficiaries 27
14.6. Waiver 27
14.7. Governing Law 27
14.8. Headings 27
14.9. Counterparts 27
14.10. Choice of Forum 27
14.11. Further Documents 27
14.12. Notices 28
DIVESTITURE AGREEMENT
THIS AGREEMENT, dated, December __, 1996, is entered into by and between
ProtoSource Corporation, a California corporation (the "Seller"), and
SSC Technologies, Inc., a California corporation (the "Buyer").
IT IS AGREED as follows:
Section 1. Definitions. The following terms have the following meanings
when used herein:
"Agreement" means this Divestiture Agreement, including all Exhibits and
Schedules hereto, as it may be amended from time to time in accordance with
its terms.
"Assets" means the Software Division, Computer Training Center Division and
Market Street Division, including without limitation:
(a) all assets reflected on the Balance Sheets and supplies owned by
the Seller for use in the Software Division, Computer Training Center
Division and Market Street Division (except inventory and supplies disposed
of or used in the ordinary course of business as of August 31, 1996);
(b) all accounts and notes receivable of the Seller relating to the
Software Division, Computer Training Center Division and Market Street Division
listed on Schedule 4.20, which schedule will be updated on the Closing Date to
reflect all accounts and notes receivable of the Seller relating to the
Software Division, Computer Training Center Division and Market Street
Division existing on the Closing Date;
(c) inventory, stock in trade, work-in-progress, and raw materials
relating to the Software Division, Computer Training Center Division and Market
Street Division existing on the Closing Date;
(d) all sales order files, engineering order files, purchase order files,
manufacturing records, customer lists and business files of the Seller relating
exclusively to the Software Division, Computer Training Center Division and
Market Street Division;
(e) all intellectual property rights including the Software Division,
Computer Training Center Division and Market Street Division, trade secrets,
know-how, trade names (with the exception of the tradename "ProtoSource"),
copyrights and copyright registrations, service marks and trademarks (including
applications and registrations therefor), patents and patent applications,
software and software documentation, and all other licenses to or from third
parties with respect to the foregoing or rights related thereto used in the
Software Division, Computer Training Center Division and Market Street
Division, including such rights as the Seller may have to sue for past
infringement or misappropriation thereof;
(f) all right and interest of the Seller to or in all agreements, options,
contracts, distributor agreements, office equipment leases, instruments,
purchase orders, sales orders, bids, and product liability insurance policies
and contracts, if any relating exclusively to the Software Division,
Computer Training Center Division and Market Street Division Businesses;
(g) all computer programs and like property, and all records thereof
owned by the Seller used exclusively in the Software Division, Computer
Training Center Division and Market Street Division;
(h) all machinery, equipment, tooling, dies and castings of the Seller
used exclusively in the Software Division, Computer Training Center Division
and Market Street Division;
(i) any claims, demands, causes of action, judgments and pending
litigation as to which the Seller is a claimant, plaintiff, judgment creditor or
beneficiary, relating to or arising out of the Software Division, Computer
Training Center Division and Market Street Division;
(j) that certain five-year lease on the Pavilion West shopping center
and used exclusively in the Software Division, Computer Training Center
Division and Market Street Division, including all plants, buildings and
other improvements(leasehold or otherwise) thereon and including, without
limitation, that property listed on Schedule 4.16;
(k) goodwill and going concern value related to the Software
Division, Computer Training Center Division and Market Street Division
Businesses; and
"Balance Sheet" means the consolidated balance sheets of the Software
Division, Computer Training Center Division and Market Street Division, as of
August 31, 1996 attached hereto as Exhibit A.
"Buyer" has the meaning specified above.
"Computer Training Center Business" means the business conducted by the
Computer Training Center Division of ProtoSource Corporation.
"Computer Training Center Division" means the Computer Training Center
Division of ProtoSource Corporation.
"Closing Balance Sheet" has the meaning assigned to it in Section 12.1.
"Closing Date" and "Closing" refer to the date, time, and place for
transactions described in Section 2.2 and the closing therein referred to.
"Code" means the Internal Revenue Code of 1986, as amended.
"Excluded Assets" means:
(a) all assets of the Seller related to all state, local and Federal taxes
including but not limited to income, sales or use, franchise, payroll and
property taxes, and prepaid insurance; and
(b) any cash in excess of the amount reflected on the Balance Sheet
or any insurance policy coverages and other services furnished to or for the
benefit of the Software Division, Computer Training Center Division, and
Market Street Division by the Seller or any of its subsidiaries.
(c) All assets related to the Internet division of Seller, the principal
building, improvements and certain computer equipment and furnishings that the
Divested Divisions will lease from the Seller, including all bank accounts
and all other assets.
"Excluded Liabilities" means:
(a) any intercompany or intracompany payable and receivable
balances between the Seller, or any of its subsidiaries and the Software
Division, Computer Training Center Division, and Market Street Division;
(b) any sales, use, transfer or other tax or recording cost imposed
upon the sale or transfer of the Assets pursuant to this Agreement;
(c) the employee pension and welfare benefit obligations of the
Company referred to in Section 5;
(d) all vacation and accrued sickness and other benefits for all
employees of the Software Division, Computer Training Center Division, and
Market Street Division who are employed by the Seller as part of the Software
Division, Computer Training Center Division, and Market Street Division on the
Closing Date (whether or not such employees are employed by Buyer immediately
thereafter);
(e) all product liability claims for which Seller is liable under Section
8.3;
(f) any claims, demands, causes of action, judgments, and litigation
made or brought after the Closing Date which relate to the actual or alleged
use,generation, storage, disposal, burial, dumping, spilling, or release of
wastes, chemicals, pollutants, contaminant hazardous or toxic substances by
the Software Division, Computer Training Center Division, and/or Market
Street Division, whether before or after the Closing Date.
"GAAP" shall have the meaning assigned to it in Section 4.5.
"Intangible Rights" shall have the meaning assigned to it in Section 4.8.
"Liabilities" means:
(a) all the obligations of the Software Division, Computer Training
Center Division, and Market Street Division under the agreements, options,
contracts, distributor agreements, sales representative agreements, leases,
instruments, purchase orders, sales orders, and commitments (including
outstanding bids) of the Software Division, Computer Training Center
Division, and Market Street Division which are to be assigned to Buyer by the
Seller pursuant to this Agreement;
(b) any claims, demands, causes of action, judgments, and pending
litigation related to or arising out of the Software Division, Computer
Training Center Division, and Market Street Division, including, but not
limited to those listed in Schedule 4.10; and
(c) other current liabilities (i) of the Software Division, Computer
Training Center Division, and Market Street Division reflected in the Balance
Sheet to the extent not paid on the Closing Date and (ii) incurred by the
Seller in respect to the Software Division, Computer Training Center
Division, and Market Street Division in the ordinary course of the business
after the date of the Balance Sheet and existing at the Closing Date.
"Market Street Division" means the Market Street Division of ProtoSource
Corporation.
"Market Street Division Business" means the business conducted by the Market
Street Division of ProtoSource Corporation.
"Promissory Note" means a note issued by the Buyer in favor of Seller in the
amount of $770,850, with a ten year maturation date and 10% rate of interest
payable in monthly installments.
"Seller" has the meaning specified above.
"Software Division" means the software division of ProtoSource Corporation.
"Software Division Business" means the business conducted by the Software
Division of ProtoSource Corporation.
"Statement of Source and Use of Funds" means a comprehensive list of all of
the Divestiture Division's expenses, losses, accrued liabilities and cash
receipts from September 1, 1996, through the Closing.
"Total Cash Investment" means the $500,000 that the Seller, pursuant to this
Divestiture Agreement, agrees to invest in the Buyer.
Section 2. Divestiture Price; Closing; Transfer of Assets; Payment of Purchase
Price and Assumption of Liabilities; Consistent Treatment.
2.1. Divestiture Price. The Buyer will receive a total of $500,000 less the
amount of cash used by the Seller in respect to the Software Division,
Computer Training Center Division, and Market Street Division in the ordinary
course of the business after August 31, 1996, plus the assumption of the
Liabilities pursuant to Section 2.3.2, subject to adjustment as provided in
Section 12.
2.1.1. Seller will receive 25% equity ownership of Buyer as part of the
Divestiture Price.
2.2. Closing Date. The Closing hereunder shall take place at the office of
Freshman, Marantz, Orlanski, Cooper & Klein, 9100 Wilshire Boulevard, East
Tower, Eighth Floor, Beverly Hills, CA 90212, at 10:00 a.m. Los Angeles time,
on October __, 1996, or at such other place, time or date as the Seller and
Buyer may agree.
2.3. Transactions at Closing. At the Closing, and on the basis of the
representations, warranties, covenants and agreements made herein and in the
exhibits hereto and in the certificates and other instruments delivered
pursuant hereto, and subject to the terms and conditions hereof:
2.3.1. Transfer of Assets. The Seller shall transfer, convey, sell, assign
and deliver to Buyer all of Seller's right, title and interest in the Assets,
delivering to Buyer bills of sale, assignments and documents of conveyance
(including assignments of leases),each duly executed and acknowledged by the
appropriate party, and such other good and sufficient instruments of transfer
and conveyance as shall be effective to vest in Buyer all of Seller's right,
title and interest in the Assets. In addition, the Seller shall deliver the
certificate required by Section 9.2.2 and the opinion required by Section 9.2.3.
2.3.2.Payment of Divestiture Price and Assumption of Liabilities. In
consideration for the transfer of the Assets Buyer shall deliver to the Seller
that certain Promissory Note attached hereto as Exhibit C, and that certain
Assignment and Assumption Agreement attached hereto as Exhibit D, both executed
concurrently herewith.The Assignment and Assumption Agreement, together with
this Divestiture Agreement govern the Buyer's assumption of the Liabilities.
In addition, Buyer shall deliver the certificate required by Section 9.1.2
and the opinion required by Section 9.1.3.
2.4.Consistent Treatment. The parties hereto agree to allocate the
Divestiture Price (which for purposes of this Section 2.4 shall include the
Liabilities assumed by Buyer) among the Assets and the covenant not to compete
set forth in Section 10 in accordance with Schedule 2.4 and Section 1060 of
the Code, (b) treat and report the transactions contemplated by this Agreement
in all respects consistently (including valuation of the Assets) for purposes of
any Federal, state, and local tax, and (c) not take any action inconsistent
with such allocation.
Section 3. Representations, Warranties, Certain Agreements and Covenants of
Buyer. Buyer represents and warrants to, and agrees with the Seller as follows:
3.1.Organization. Buyer is, and at the Closing will be, a corporation duly
organized and validly existing in good standing under the laws of the State of
California, with all requisite corporate power and authority to own, lease and
operate its properties and to carry on its business as now being conducted.
3.2.Authority. Buyer has full corporate power and authority to enter into and
to perform this Agreement; the execution, delivery and performance of this
Agreement and of the instrument or instruments assuming the Liabilities have
been duly authorized by Buyer. The signing, delivery and performance of this
Agreement by Buyer is not prohibited or limited by, and will not result in the
breach of or a default under, any provision of the Articles of Incorporation
or By-Laws of Buyer, or of any agreement or instrument binding on Buyer, or of
any applicable order, writ, injunction or decree of any court or governmental
instrumentality. This Agreement has been duly executed and delivered by Buyer
and constitutes the legal, valid and binding obligation of Buyer, enforceable
against Buyer in accordance with its terms.
3.3. Consents. Except as set forth on Schedule 3.3, no notice to, filing with,
authorization of, exemption by, or consent of, any person, entity or public or
governmental authority is required for Buyer to consummate the transactions
contemplated hereby.
3.4.Litigation. Except as set forth on Schedule 3.4, there is no litigation,
proceeding or claim pending or threatened relating to the Buyer.
Section 4. Representations, Warranties, Certain Agreements and Covenants of
the Seller. The Seller represents and warrants to, and agrees with, Buyer as
follows:
4.1.Organization. The Seller is a corporation duly organized and validly
existing in good standing under the laws of the State of California. The
Seller has the full corporate power and authority to engage in the businesses
in which it is now engaged, and to deliver and perform this Agreement and all
writings relating hereto.
4.2. Due Authorization. The execution, delivery and performance of this
Agreement and all writings relating hereto by Seller have been duly and
validly authorized by the Board of Directors of Seller and no authorization by
its shareholders is required. This Agreement and all writings relating hereto
to be signed by Seller constitute valid and binding obligations of Seller
enforceable in accordance with their respective terms. Neither the execution
and delivery of this Agreement or any writing relating hereto nor the
consummation by Seller of the transactions contemplated hereby or thereby, nor
compliance with any of the provisions hereof or thereof will: (i) conflict with
or result in a breach of the Certificate of Incorporation or ByLaws of Seller;
(ii) violate any statute, law, rule or regulation or any order, writ,
injunction or decree of any court or governmental authority; or (iii) violate or
conflict with or constitute a default under (or give rise to any right of termi-
nation, cancellation or acceleration under) any agreement or writing of any
nature to which Seller is a party or by which it or its assets or properties
may be bound. No consent or approval of or notification to any governmental
authority is required in connection with the execution and delivery by Seller
of this Agreement or any writing relating hereto or the consummation of the
transactions contemplated hereby or thereby.
4.3.Ownership. Except as set forth on Schedule 4.3, the Seller has good and
marketable title to all Assets and none of such Assets is held by the Seller
under any lease or conditional sales contract, except those specifically
listed herein, or is subject to any security agreement, lien (except for tax
liens for taxes not yet due and payable), encumbrance, charge, equity or claim.
4.4.Title. Upon delivery to Buyer of the deeds, bills of sale and assignments
referred to in Section 2.3.1, Buyer will receive good and marketable title to
all of the Assets, free and clear of all liens (except for tax liens for
taxes not yet due and payable),encumbrances, charges, equities and claims of
every kind, except as set forth on Schedule 4.3 and subject to obtaining any
consents of persons listed on Schedule 4.14.
4.5.Balance Sheet. The Balance Sheet fairly presents the financial position of
the Software Division, Computer Training Center Division, and Market Street
Division at such date and the results of its operation for such year in
accordance with generally accepted accounting principles ("GAAP")
consistently applied except as otherwise set forth on Exhibit A. Except as
reflected on the Balance Sheet, the Software Division, Computer Training
Center Division, and Market Street Division has no contingent liabilities
which would be required by GAAP to be reflected therein. The Balance Sheet
reflects the cancellation of all obligations and liabilities of the Software
Division, Computer Training Center Division, and Market Street Division to
the Seller or its affiliates so that such liabilities and obligations are,
and on the Closing Balance Sheet will be, reflected as equity.
4.6.Inventories. All inventories of Seller reflected on the Balance Sheet
were in existence on August 31, 1996. The amounts thereof so shown reflect
valuations not in excess of the values of such inventories computed in
accordance with GAAP applied on a consistent basis.
4.7. Certain Contracts. Schedule 4.7 is a list of all agreements, options,
contracts, leases, license agreements and instruments which are of material
importance to the conduct of the Software Division, Computer Training Center
Division, and Market Street Division including, without limitation, (i) each
sales order and purchase order for goods and services which involves more than
$5,000 and which will be performed and assumed by Buyer, (ii) each other
written or oral agreement of the Seller related to the Software Division,
Computer Training Center Division, and Market Street Division to be assumed
by Buyer and which extends beyond 30 days from the Closing Date or which
involves payments by or to the Seller after the Closing Date of more than
$5,000, (iii) all agreements with distributors or sales representatives for
the Software Division, Computer Training Center Division, and Market Street
Division, and (iv) letters of credit. Schedule 4.7 also lists each
outstanding proposal by the Software Division, Computer Training Center
Division, and Market Street Division that involves payments to the Software
Division, Computer Training Center Division, and Market Street Division in
excess of $5,000 and is subject to acceptance by third parties or could
otherwise become a new sales contract. Schedule 4.7 will be updated at the
Closing to reflect all purchase orders, sales orders and other agreements
entered into by the Software Division, Computer Training Center Division, and
Market Street Division after the date of this Agreement and prior to the
Closing Date which would otherwise be required to be listed on Schedule 4.7.
Copies of all written agreements and written summaries of all oral agreements
described on Schedule 4.7 have been furnished to Buyer.
4.8. Fixed Assets. Schedule 4.8 is a list of the fixed assets of the Seller
reflected on the Balance Sheet owned by the Seller and relating to the
Software Division, Computer Training Center Division, and Market Street
Division, showing costs accumulated book depreciation, if any, and net book
value, as of the date of the Balance Sheet; and a list of all other tangible
Assets (other than inventory) reflected on the Balance Sheet at an amount
exceeding $10,000.
4.9. Intangible Rights. Schedule 4.9 is a list of all trademarks, trade
names, service marks, know-how, patents and copyrights, patent applications
and all licenses and other rights related thereto which are owned or used by
the Seller in the Software Division, Computer Training Center Division, and
Market Street Division with the exception of the names "ProtoSource" or
ProtoSource Corporation" (hereinafter referred to collectively as the
"Intangible Rights"). All such licenses are in full force and effect and
constitute legal, valid and binding obligations of the respective parties
thereto; there have not been and there currently are not any material
defaults thereunder by any party; and no event has occurred which (whether
with or without notice, lapse of time or the happening or occurrence of any
other event) would constitute a material default thereunder. The validity,
continuation and effectiveness of all such licenses under the current
material terms thereof will in no way be affected by the transfer of such
licenses to Buyer under this Agreement or, if any would be affected, Seller
shall use all necessary and reasonable means at its disposal to cause an
appropriate consent to such transfer to be delivered to Buyer prior to the
Closing Date at no cost or other adverse consequence to the Software
Division, Computer Training Center Division, and Market Street Division.
Seller owns all the trademarks, trade names, service marks, copyrights,
knowhow, patents and applications for patents listed on Schedule 4.9 and,
except as set forth thereon, pays no royalty under any of them and has the
exclusive right to bring actions for the infringement thereof. No product
made or sold by the Software Division, Computer Training Center Division,
and Market Street Division violates any such license or infringes any
trademark, trade name, service mark, copyright, know-how or patent of
another. Except as listed on Schedule 4.9, there is no pending or, to the
best of the knowledge of Seller, threatened claim or litigation against
Seller contesting its right to use any of the trademarks, trade names and
know-how or the validity of any of the licenses, copyrights and patents
listed on such Schedule or asserting the misuse thereof.
On the Closing Date all the Intangible Rights shall have been duly
transferred to Buyer, so as to vest in Buyer all right, title and interest
therein, and the Seller shall make, execute and deliver recordable
assignments to effect and evidence such transfers as may be reasonably
requested by Buyer. Prior to the Closing no party other than the Seller
shall acquire any interest in any of the Intangible Rights.
4.10. Litigation. Schedule 4.10 is a list and brief description of all
material litigation, proceedings and claims by or against the Seller relating
to the Software Division, Computer Training Center Division, and Market
Street Division pending or, to the knowledge of the Seller, threatened
against the Seller relating to the Software Division,
Computer Training Center Division, and Market Street Division.
4.11. Employees. Schedule 4.11 is a list of all employee contracts, benefit
plans, and arrangements (including all collective bargaining, employment,
compensation, pension, retirement, separation, vacation, sickness, insurance,
welfare, profit sharing and bonus plans and agreements) under which the Seller,
with respect to any employee of the Seller employed in the Software Division,
Computer Training Center Division, and Market Street Division, has any
obligation, together with an itemization of all accrued vacation and sickness
benefits owing to employees of the Seller employed in the Software Division,
Computer Training Center Division, and Market Street Division as of August
31, 1996. The Seller has furnished to Buyer copies of instruments evidencing
all such contracts, benefit plans and arrangements. Schedule 4.11 includes a
true and complete list of all employees of the Software Division, Computer
Training Center Division, and Market Street Division who are on an approved
leave of absence. The Software Division, Computer Training Center Division,
and Market Street Division has generally enjoyed a good employer/employee
relationship with its employees. Buyer will assume the accrued vacation and
sick pay. With respect to the Software Division, Computer Training Center
Division, or Market Street Division, Seller is in compliance with all
federal, state and local laws and regulations respecting employment and
employment practices, terms and conditions of employment and hours. Except
as listed on Schedule 4.11, there is no material unfair labor practice
complaint against Seller relating to the Software Division, Computer Training
Center Division, or Market Street Division pending before the National Labor
Relations Board or strike, dispute, slowdown or stoppage pending or
threatened against or involving the Software Division, Computer Training
Center Division, or Market Street Division, and none has occurred. No
representation question exists respecting the employees of the Software
Division, Computer Training Center Division, or Market Street Division and no
collective bargaining agreement is currently being negotiated by Seller
relating to the Software Division, Computer Training Center Division, or
Market Street Division. Except as listed on Schedule 4.11, no grievance
procedure or arbitration proceeding is pending under any collective
bargaining agreements.
4.12. Default. Neither the Seller nor, to the knowledge of the Seller, any
other party to any material contract, agreement, lease or instrument of the
Seller relating to the Software Division, Computer Training Center Division,
or Market Street Division including, without limiting the generality of the
foregoing, relating to continuing warranty or service obligations, is in
material default in complying with any material provisions thereof, and no
condition or event or facts exists which, with notice, lapse of time or both
would constitute a default thereof on the part of the Seller or, to the
knowledge of the Seller, on the part of any other party thereto.
4.13. Material Adverse Change. Except as specifically disclosed and
identified as such on the Exhibits and Schedules to this Agreement, there has
not been since August 31, 1996 (i) any material adverse change in the
business, condition (financial or otherwise), assets, liabilities or
obligations of the Software Division, Computer Training Center Division,
or the Market Street Division, or (ii) any damage, destruction or loss
(whether or not covered by insurance), materially and adversely affecting
the business, assets or properties of the Software Division, Computer
Training Center Division, or Market Street Division. Since August 31, 1996,
there have been no events, transactions or information which has come to the
attention of Seller which could be reasonably expected to have a material
adverse effect on the business and operations of the Software Division, Computer
Training Center Division, or Market Street Division.
4.14. Consents. Except as set forth on Schedule 4.14, no notice to, filing
with, authorization of, exemption by, or consent of, any person, entity, or
public or governmental authority is required for the Seller to consummate the
transactions contemplated hereby. Schedule 4.14 will be updated at the
Closing to reflect any consents required for the assignment of any agreements
entered into after the date of this Agreement.
4.15. Environmental. Except as set forth on Schedule 4.15, to the knowledge
of Seller, the real property included in the Assets and each portion thereof
(a) are not and have not been a site for the use, generation, manufacture,
storage, disposal or transportation of a material amount of any hazardous
wastes, carcinogenic, pathogenic or toxic substances or related materials,
including, without limitation, any substances defined as or included in the
definition of "hazardous substances," "hazardous wastes," "hazardous
materials," or "toxic substances" under any applicable Federal, state or
local laws or regulations (collectively, "Hazardous Materials") about which a
government agency would, under any and all Federal, state or local laws,
ordinances, regulations, orders and directives pertaining to Hazardous
Materials (collectively, "Hazardous Materials Laws"), require corrective
action; and (b) are presently and at the Closing will be in material
compliance with all Hazardous Materials Laws. There are no
asbestos-containing materials incorporated into the buildings or interior
improvements that are part of that real property or into other of the Assets,
nor is there any electrical transformer, fluorescent light fixture with
ballasts, or other equipment containing PCBs on that real property.
Disclosure of any matter on Schedule 4.15 shall not constitute any admission
by the Seller that such matter is or was material or a violation of any
Hazardous Materials Laws.
4.16. Real Property. Schedule 4.16 is a complete and accurate legal
description of each parcel of real property owned by or leased by Seller in
connection with the operation of the Software Division, Computer Training
Center Division, and Market Street Division, together with a true and
correct survey of each parcel. Schedule 4.16 contains a description
of all buildings, fixtures and other improvements located on the properties and
list of the policies of title insurance issued to Seller for these
properties. Except as set forth on Schedule 4.16, to the knowledge of
Seller, (a) all real property included in the Assets has unqualified access
to all utilities, including electricity, sanitary and storm sewers, potable
water, and natural gas, used in the operation of the Software Division,
Computer Training Center Division, and Market Street Division; (b) all leases
for real property included in the Assets, including, without limitation,
those listed on Exhibit A, are in full force and effect; (c) all of the
buildings, improvements and fixtures located on the real property included
in the Assets (whether owned or leased) are in all material respects in good
condition and repair (normal wear and tear excepted); (d) the zoning of each
parcel of property described on Schedule 4.16 permits the presently existing
improvements and the continuation of the business presently being conducted
on such parcel and Seller has not commenced, nor has it received notice of,
any proceeding that would affect the present zoning classification of any
such parcel; and (e) except as set forth on Schedule 4.16, Seller has not
received any notice of any violation of any law, ordinance, rule, statute,
order, writ, injunction, decree or regulation, or the existence of any
condemnation or eminent domain proceeding with respect to any real property
included in the Assets.
4.17. Tax Matters. All federal, state, local and foreign tax returns and tax
reports, if any, required to be filed with respect to the Software Division,
Computer Training Center Division, and Market Street Division and the
properties of the Software Division, Computer Training Center Division, and
Market Street Division have been filed with the appropriate governmental
agencies in all jurisdictions in which such returns and reports are required
to be filed, all of the foregoing are true, correct and complete.
4.18. Insurance. Seller maintains in effect insurance covering the Assets
and the Software Division, Computer Training Center Division, and Market
Street Division and any liabilities relating thereto in an amount believed
adequate by Seller, and such insurance coverage shall be maintained by Seller
through the Closing Date. Between now and the Closing Date, Seller shall
furnish to Buyer and its agents such information as Buyer shall reasonably
request regarding the Software Division, Computer Training Center Division,
and Market Street Division's insurance. Seller shall use its best efforts to
assist Buyer to transfer such insurance to Buyer, if possible, and if desired
by Buyer. Schedule 4.18 is a summary of information pertaining to material
property damage and personal injury claims against the Software Division,
Computer Training Center Division, and Market Street Division during
the past five years.
4.19. Compliance; Governmental Authorizations; OSHA. Except as set forth on
Schedule 4.19, Seller is in compliance with all federal, state, local or
foreign laws, ordinances, regulations and orders applicable to the Software
Division, Computer Training Center Division, and Market Street Division or
properties of the Software Division, Computer Training Center Division, and
Market Street Division, including, for example, matters relating to the
environment, anti-competitive practices, false advertising, discrimination,
employment, health and safety. Seller has all federal, state, local and
foreign governmental licenses and permits necessary in the conduct of the
Software Division, Computer Training Center Division, and Market Street
Division, and such licenses and permits are in full force and effect, and no
violations are or have been recorded in respect of any thereof, and no
proceeding is pending or threatened to revoke or limit any thereof. Schedule
4.19 contains a list of: (1) all such governmental licenses and permits and
(2) all consents, orders, decrees and other compliance agreements relating
to the Software Division, Computer Training Center Division, and Market
Street Division under which Seller is operating or bound, copies of all of
which have been furnished to Buyer. Seller has furnished to Buyer copies of
all reports of inspections of the Software Division, Computer Training Center
Division, and Market Street Division's business and properties from January
1, 1995 through the date hereof under OSHA and under all other applicable
federal, state and local health and safety laws and regulations.
The deficiencies, if any, noted on such reports or any deficiencies noted by
inspection through the Closing Date shall be corrected by the Closing Date.
Seller does not know or have reason to know of any other safety, health,
environmental, anticompetitive or discrimination problems relating to the
business, assets or employment practices of the Software Division, Computer
Training Center Division, and Market Street Division.
4.20. Accounts and Notes Receivable. Schedule 4.20 is an aged list of unpaid
accounts and notes receivable relating to the Software Division, Computer
Training Center Division, and Market Street Division from third parties
("Accounts Receivable Schedule") as of August 31, 1996. Seller shall furnish
to Buyer prior to the Closing Date such updated Accounts Receivable Schedule
and other information pertaining to the Software Division, Computer Training
Center Division, and Market Street Division's receivables as Buyer shall
reasonably request on reasonable advance notice. All of the accounts and
notes receivable reflected on the Balance Sheet (other than the intercompany
and intracompany accounts receivable) and the accounts and notes receivable
which will be reflected on the Closing Balance Sheet and listed on each
Accounts Receivable Schedule constituted, and will constitute, only valid
claims against third parties not affiliated with Seller arising in the
ordinary course of the business of the Software Division, Computer Training
Center Division, and Market Street Division.
4.21. Customers and Suppliers. Upon prior written consent as provided for in
Section 14.12 herein, Buyer may obtain access to client files of the
Divestiture Divisions for a period of one year following the Closing Date.
4.22. Miscellaneous Assets. The assets shown on the Balance Sheet do not
include, and the assets as shown on the Closing Balance Sheet will not
include: (i) any contracts for future services or prepaid items or deferred
charges, the full value or benefit of which will not be usable by or
transferable to the Buyer; or (ii) any goodwill or organization
expense.
4.23. Disclosures. All copies of all writings furnished to the Buyer
hereunder or in connection with the transactions contemplated hereby are
true and complete. All Schedules to this Agreement are true and complete.
Section 5. Employee Pension and Other Benefit Plans and Programs. As of the
Closing Date, the Software Division, Computer Training Center Division, and
Market Street Division shall cease to be a participating employer under all
employee benefit plans and programs of the Seller and the Seller shall take
all such action as may be necessary to effect such cessation of
participation. As of the Closing Date, Seller shall assume or retain all
liabilities with respect to all benefits accrued by employees of the Software
Division, Computer Training Center Division, and Market Street Division under
any employee benefit plan or program applicable to such employees.
Section 6. Pre-Closing Covenants of Buyer.
6.1. Corporate and Other Action. Buyer shall take all necessary action
required to fulfill its obligations under this Agreement and the transactions
contemplated hereby.
6.2. Consents and Approvals. Buyer shall use its best efforts to obtain all
necessary consents and approvals to the performance of its obligations under
this Agreement and the transactions contemplated hereby. Buyer shall make
all filings, applications, statements and reports to all Federal or state
government agencies or entities which are required to be made prior to the
Closing Date by or on behalf of Buyer pursuant to any applicable statute,
rule or regulation in connection with this Agreement and the transactions
contemplated hereby.
6.3. Confidentiality. Except as required by applicable law, all
information related to the Software Division, Computer Training Center
Division, and Market Street Division supplied to Buyer by the Seller
shall be maintained in strict confidence by Buyer.
6.4. Impact on the Equity of the Seller. Buyer shall take all necessary
action required to insure that the Divestiture will not have any negative
impact on the equity of ProtoSource.
6.4.1. Value of Divested Assets. The total value of the Assets acquired
by Buyer shall not exceed the amount of the Promissory Note and the assumed
Liabilities.
Section 7. Pre-Closing Covenants of the Seller.
7.1.Corporate and Other Actions. The Seller shall take all necessary action
required to fulfill its obligations under this Agreement and the transactions
contemplated hereby.
7.2.Consents and Approvals. The Seller shall use its best efforts to obtain
all necessary consents and approvals to the performance of its obligations
under this Agreement and the transactions contemplated hereby. The Seller
shall make all filings, applications, statements and reports to all Federal
or state government agencies or entities which are required to be made prior
to the Closing Date by or on behalf of the Seller pursuant to any applicable
statute, rule or regulation in connection with this Agreement and the
transactions contemplated hereby.
7.3.Access to Information. The Seller will permit representatives of Buyer,
from and after the date hereof up to the Closing Date, to have full access
at all reasonable times to the books, accounts, records, properties,
operations and facilities of every kind pertaining to the Software Division,
Computer Training Center Division, and Market Street Division, and will
furnish Buyer with such financial and operating data concerning the Software
Division, Computer Training Center Division, and Market Street Division as
Buyer shall from time to time reasonably request.
7.4. Ordinary Course of Business. Except as shown on Schedule 7.4, subsequent
to the date hereof and prior to the Closing Date, the Seller will, to the
extent it is within the Seller's control, continue to conduct the Software
Division, Computer Training Center Division, and Market Street Division and
maintain the Assets in substantially the same manner as heretofore and engage
only in business in the usual and normal course consistent with past practice.
Section 8. Prorated Taxes, Brokerage Fees, Product Liability Claims,
Expenses and Sales Taxes and Other Taxes.
8.1. Proration of Taxes. All real estate, personal property and ad valorem
taxes relating to the Assets which shall have accrued and become payable
prior to the Closing Date shall be paid by the Seller. All such taxes which
shall be accrued but unpaid or which have been paid in advance shall be
properly reflected on the Closing Balance Sheet. In connection with such
proration of taxes, in the event that actual tax figures are not available
at the Closing Date, the taxes reflected on the Closing Balance Sheet shall
be based upon the actual taxes for the preceding year for which actual tax
amounts are available and such taxes shall be reprobated upon request of
either party made within sixty days of the date that the actual amounts
become available, provided that the actual amount is at least 5% more or 5%
less than the amount on which the original proration was based.
8.2. Brokerage Fees. The Seller and Buyer each represent, covenant,
warrant and agree with the other that it has not engaged any broker or any
other person who would be entitled to any brokerage fee or commission in
respect of the execution of this Agreement or the consummation of the
transactions contemplated hereby.
8.3. Product Liability. The Seller agrees with Buyer that the Seller is
solely responsible for any and all claims for injury (including death) or
claims for damage (other than warranty claims which Buyer has assumed
pursuant to Section 2.3.2), direct or consequential, resulting from or
connected with finished products or services manufactured or sold by it
prior to the Closing Date, provided such claims are not fully covered by the
product liability insurance policies, if any, assigned to Buyer by the
Seller under this Agreement, and Buyer shall have no liability for such
claims. Buyer agrees with the Seller that Buyer is solely responsible for
any and all claims for injury (including death) or claims for damage
including warranty claims, direct or consequential, resulting from or
connected with finished products or services of the Seller, or connected
with products or services of the Software Division, Computer Training Center
Division, and Market Street Division, provided such claims are made on or
after the Closing Date and relate to finished products or service manufactured
or sold after the Closing Date.
8.4. Expenses. Each party shall bear its own expenses with respect to this
transaction. Any sales, transfer, use or other tax (other than income tax)
or recording cost incurred upon the sale or transfer of the Assets shall be
the liability of Seller.
8.5. Sales and Other Taxes. Seller shall pay all sales and use taxes
arising out of the transfer of the Assets. Buyer shall not be responsible
for any business, occupation, withholding, or similar tax, or any taxes of
any kind related to any period before the Closing Date.
Section 9. Conditions.
9.1. Conditions to Obligations of the Seller. The obligations of the
Seller to consummate the transactions contemplated by this Agreement shall
be subject to fulfillment at or prior to Closing of the following conditions
(any one or more of which may be waived in whole or in part by the Seller):
9.1.1. Performance of Agreements and Covenants. All agreements and
conditions to be performed and satisfied by Buyer hereunder on or prior to
the Closing Date shall have been duly performed and satisfied in all material
respects.
9.1.2. Truth of Representations and Warranties. The representations and
warranties of Buyer contained in this Agreement shall be true in all material
respects on and as of the Closing Date, with the same effect as though made
on and as of the Closing Date, and there shall be delivered to the Seller on
the Closing Date a certificate, in form and substance reasonably
satisfactory to the Seller and its counsel duly signed by the President
or Vice President of Buyer to that effect.
9.1.3. Opinions of Counsel. The Seller shall have received from counsel
to Buyer, an opinion dated the Closing Date and in form and substance
satisfactory to the Seller to the effect that:
(a) Buyer is a corporation duly organized, validly existing and in
good standing under the laws of the State of California;
(b) Buyer has full corporate power and authority to execute,
deliver and perform this Agreement;
(c) this Agreement and the instrument or instruments of
assumption provided for in Section 2.3.2 hereof, have been duly authorized,
executed and delivered by Buyer and constitute valid and legally binding
obligations of Buyer enforceable in accordance with their respective terms
except as enforcement thereof may be limited by bankruptcy, insolvency and
other laws affecting the enforcement of creditors' rights generally; and
(d) neither the execution and delivery nor the performance by
Buyer of this Agreement or such instrument or instruments will violate the
Articles of Incorporation or By-Laws of Buyer of any material indenture,
loan agreement, contract or instrument known to such counsel and to which
it is a party or by which it is bound.
9.1.4. Payment of Purchase Price and Assumption of Liabilities. Buyer
shall have paid the Purchase Price and assumed the Liabilities as provided
in Section 2.3.
9.1.5. No Actions or Proceedings. No action or proceeding by any
governmental agency shall have been instituted or threatened which would
enjoin, restrain or prohibit, or might result in substantial damages in
respect of, this Agreement or the complete consummation of the transactions
as contemplated by this Agreement, and which would in the reasonable
judgment of the Seller make it inadvisable to consummate such transactions,
and no court order shall have been entered in any action or proceeding
instituted by any party which enjoins, restrains, or prohibits this
Agreement or the complete consummation of the transactions as contemplated
by this Agreement.
9.1.6. Proceedings Satisfactory to the Seller. All proceedings to be taken
by Buyer in connection with the consummation of the Closing on the Closing
Date and the other transactions contemplated hereby and all certificates,
opinions, instruments and other documents required to effect the transaction
contemplated hereby reasonably requested by the Seller will be reasonably
satisfactory in form and substance to the Seller.
9.2. Conditions to Obligations of Buyer. The obligations of Buyer to
consummate the transactions contemplated by this Agreement shall be subject
to fulfillment at or prior to the Closing of the following conditions
(any one or more of which may be waived in whole or in part by Buyer):
9.2.1. Performance of Agreements and Covenants. All agreements and
conditions to be performed and satisfied by the Seller hereunder on or prior to
the Closing Date shall have been duly performed and satisfied in all material
respects.
9.2.2. Truth of Representations and Warranties The representations and
warranties of the Seller contained in this Agreement, as updated by Schedules
delivered pursuant to Section 9.2.4, shall be true in all material respects
on and as of the Closing Date with the same effect as though made in and as
of the Closing Date and there shall be delivered by the Seller on the Closing
Date a certificate, in form and substance reasonably
satisfactory to Buyer and its counsel, duly signed by an officer of the
Seller to that effect.
9.2.3. Updated Schedules. The Seller shall have delivered new Schedules
to reflect changes in Schedules hereto from the date of this Agreement to
the Closing Date.
9.2.4. No Actions or Proceedings. No action or proceeding by any
governmental agency shall have been instituted or threatened which would
enjoin, restrain or prohibit, or might result in substantial damages in
respect of, this Agreement or the complete consummation of the transactions
as contemplated by this Agreement, and which would in the reasonable judgment
of Buyer make it inadvisable to consummate such transactions, and no court
order shall have been entered in any action or proceeding instituted by any
party which enjoins, restrains, or prohibits this Agreement or the complete
consummation of the transactions as contemplated by this Agreement.
9.2.5. Consents Obtained. All consents by third parties that are required
for the transfer of the Assets to Buyer or that are required for the
consummation of the transactions contemplated hereby, or that are required
in order to prevent a breach of or a default under or a termination of any
agreement material to the Software Division, Computer Training Center
Division, and Market Street Division to which the Seller is a party or to
which any material portion of property of the Software Division, Computer
Training Center Division, and Market Street Division is subject, will have
been obtained, and releases of all security interests held by third parties
on the Assets will have been obtained.
9.2.6. Deliveries by the Seller at Closing. On the Closing Date, the Seller
will have delivered to Buyer all of the following:
(a) Copies of all necessary third party and governmental
consents that Buyer is required to obtain in order to effect the
transactions contemplated by this Agreement;
(b) Such instruments of sale, transfer, assignment, conveyance
and delivery, in form and substance reasonably satisfactory to counsel for
Buyer, as are required in order to transfer to Buyer good and marketable
title to the Assets;
(c) Such other documents or instruments as Buyer reasonably
requests which are reasonably necessary to effect the transactions
contemplated hereby.
9.2.7. Proceedings Satisfactory to Buyer. All proceedings to be taken by
the Seller in connection with the consummation of the Closing on the Closing
Date and the other transactions contemplated hereby and all certificates,
opinions, instruments and other documents required to effect the transaction
contemplated hereby reasonably requested by Buyer will be reasonably
satisfactory in form and substance to Buyer.
Section 10. Non-Competition. The Seller, in order to induce Buyer to
enter into this Agreement, expressly covenants and agrees that for a period
of five years from and after the Closing Date, neither the Seller nor any of
its subsidiaries will directly or indirectly, own, manage, operate, join,
control, or participate in or be connected with any business, individual,
partnership, firm or corporation, which is at the time engaged, wholly or
partly, in any of the businesses engaged in by the Software Division,
Computer Training Center Division, and Market Street Division on the
Closing Date.
The Seller may own an aggregate of not more than five percent of the
outstanding stock of any class of any corporation engaged in any such
business, if such stock is listed on a national securities exchange or
regularly traded in the over-the-counter market by a member of a national
securities exchange, without violating the provisions of this Section 10,
provided that the Seller does not have the power to control or direct the
management or affairs of such corporation and is not otherwise associated
with it. The Seller expressly covenants and agrees that the remedy at law
for any breach of this Section 10 will be inadequate and that, in addition
to any other remedies Buyer may have, Buyer shall be entitled to temporary
and permanent injunctive relief without the necessity of proving actual
damage. To the extent that any part of this provision may be invalid,
illegal or unenforceable for any reason, it is intended that such part
shall be enforceable to the extent that a court of competent jurisdiction
shall determine that such part if more limited in scope would have
been enforceable and such part shall be deemed to have been so written and
the remaining parts shall as written be effective and enforceable in all
events. The Seller and Buyer agree that the total consideration for the
covenant contained in this Section 10 is $50,000.
Section 11. Post Closing Covenants of Buyer.
11.1. Liabilities. Buyer agrees to keep a list describing in detail the
Liabilities paid by Buyer and to retain all documentation supporting actual
payment of each Liability. Buyer will submit such list and such
documentation to the Seller within thirty days after the end of each calendar
month until all such Liabilities have been paid, satisfied or discharged
by Buyer.
11.2. Availability of Records. After the Closing, Buyer shall make
available to the Seller as reasonably requested by either the Seller or any
taxing authority all information, records or documents relating to the Assets,
the personnel records referred to in Section 5.4 or the Software Division,
Computer Training Center Division, and Market Street Division for all
periods prior to Closing and shall preserve all such information, records
and documents until the later of six years after the Closing or the
expiration of all statutes of limitations or extensions thereof applicable
to the Seller. Buyer shall also make available to the Seller, as
reasonably requested by the Seller, personnel responsible for preparing
or maintaining information, records and documents, both in connection with
tax matters as well as litigation. Prior to destroying any records related
to the Software Division, Computer Training Center Division, and Market
Street Division prior to the Closing Date, Buyer shall notify the Seller of
its intent to destroy such records, and Buyer will permit the Seller to
retain any such records. With respect to any claims which are the Seller's
responsibility under Section 8.3, Buyer shall render all reasonable
assistance which the Seller may request in defending such claim and shall
make available to the Seller technical personnel most knowledgeable about
the product in question.
11.3. Use of Trade or Service Marks. Buyer shall not use or permit its
distributors to use the name "ProtoSource." Any other corporate trade or
service marks owned or used by the Seller or any of its subsidiaries may
not be used by the Buyer unless (i) such marks or names are included in the
Assets, (ii) such use is permitted in writing by the Seller or (iii) such
marks or names are located on the Assets, in which case Buyer may use, and
permit its distributors to use, such marks or names for a period of six
months following the Closing Date.
Section 12. Statement of Source and Use of Funds.
12.1.Statement of Source and Use of Funds. On the Closing Date, Seller will
present to Buyer a Statement of Source and Use of Funds of the Software
Division, Computer Training Center Division, and Market Street Division as
of the Closing Date (the "Statement of Source and Use of Funds"). The
Statement of Source and Use of Funds shall be prepared by Seller with the
assistance of Buyer if necessary, from the Seller's books and records of
the Software Division, Computer Training Center Division, and Market Street
Division. The Statement of Source and Use of Funds shall be prepared on a
basis consistent with those practices applied in preparation of the
Cash Flow Statement. All normal year-end closing adjustments, including
accruals of expenses through the Closing Date, will be made in the Statement
of Source and Use of Funds as if the Closing Date were at fiscal year end.
12.2. Resolution. In the event the Buyer in good faith disputes any
amounts in the Statement of Source and Use of Funds, determined as provided
in Section 12.1 above, the party disputing such amount shall give written
notice thereof to the other party within 30 days of the date Buyer had
proposed adjustments as provided in Section 12.1. The parties
shall then attempt to resolve such dispute amicably within 30 days after
the date of such notice, or within any extension of such period agreed to
in writing by the Seller and Buyer. If the matter is not resolved, then as
their exclusive method of resolving the dispute, the Seller and Buyer shall
select within 14 days after said 30-day period a nationally recognized
independent public accounting firm other than the Seller's independent
public accountants, to resolve such dispute or, if the Seller and Buyer are
unable to agree upon such accounting firm within said 14-day period, then
shall thereupon be deemed selected by both parties such accounting firm as
designated by the Seller, which shall render their determination within 30
days of receiving the work papers and preliminary opinion other than the
Seller's independent public accountants and any written challenges thereto
by Buyer or the Seller. The fees and charges of any such accounting firm so
selected shall be born equally by the Buyer and Seller. Such accounting
firm's decision as to the Statement of Source and Use of Funds shall be
final and binding on both parties.
12.3. Settlement of Accounts. The net change in cash position of the
Software Division, Computer Training Center Division, and Market Street
Division as shown on the Statement of Source and Use of Funds will be
adjusted against the Total Cash Investment (attached hereto as Exhibit B).
The Seller shall pay Buyer the adjusted amount.
Section 13. Indemnification, Survival and Termination.
13.1. Indemnification by the Seller. The Seller agrees to indemnify and
hold harmless the Buyer and its affiliates at all times, and against and in
respect of all losses, liabilities, costs and expenses (including reasonable
attorneys' fees) which arise out of or are based on any breach of the
representations, warranties, covenants and agreements of Seller set forth in
this Agreement, the operation of the business of the Software Division,
Computer Training Center Division, and Market Street Division prior to the
Closing Date or the noncompliance with any applicable bulk sales or similar
laws, insofar as such losses, liabilities, costs and expenses (including
reasonable attorney's fees) exceed in the aggregate $50,000.
Buyer shall promptly notify the Seller in writing of all matters which may
give rise to the right to indemnification hereunder, but the failure to
notify Seller shall not relieve Buyer from any liability it may have to
Seller to the extent Seller is not prejudiced as a result of such failure.
The Seller shall have the right, with the consent of Buyer which shall not
be unreasonably withheld, to settle all indemnifiable matters related to
claims by third parties which are susceptible to being settled, and to
defend (without the consent of Buyer) through counsel of its own choosing,
at its own expense, any action which may be brought by a third party in
connection therewith, provided, however, that Buyer shall have the right to
have its counsel participate fully in such defense at its own expense.
Buyer and the Seller shall keep each other informed of all settlement
negotiations with third parties and of the progress of any litigation with
third parties, Buyer and the Seller shall permit each other reasonable
access to books and records and otherwise cooperate with all reasonable
requests of each other in connection with any matter or claim for
indemnification by a third party.
13.2. Indemnification by Buyer. The Buyer agrees to indemnify and hold
harmless the Seller and its affiliates at all times, and against and in
respect of all losses, liabilities, costs and expenses (including reasonable
attorneys' fees) which arise out of or are based on any breach of the
representations, warranties, covenants and agreements of Buyer set forth in
this Agreement or the operation of the business of the Software Division,
Computer Training Center Division, and Market Street Division after the
Closing Date insofar as such losses, liabilities, costs and expenses
(including reasonable attorney's fees) exceed in the aggregate $10,000.
Seller shall promptly notify the Buyer in writing of all matters which may
give rise to the right to indemnification hereunder, but the failure to
notify Buyer shall not relieve Seller from any liability it may have to
Buyer to the extent Buyer is not prejudiced as a result of such failure.
The Buyer shall have the right, with the consent of Seller which shall not
be unreasonably withheld, to settle all indemnifiable matters related to
claims by third parties which are susceptible to being settled, and to
defend (without the consent of Seller) through counsel of its own choosing,
at its own expense, any action which may be brought by a third party in
connection therewith, provided, however, that Seller shall have the right
to have its counsel participate fully in such defense at its own expense.
Buyer and the Seller shall keep each other informed of all settlement
negotiations with third parties and of the progress of any litigation with
third parties, and Buyer and the Seller shall permit each other reasonable
access to books and records and otherwise cooperate with all reasonable
requests of each other in connection with any matter or claim for
indemnification by a third party.
13.3. Survival. The representations and warranties contained in this
Agreement shall survive the Closing for a period of five years at which the
time they shall expire. No claim may be made based upon an alleged breach
of any of such representations or warranties whether for indemnification in
respect thereof or otherwise, unless written notice of such claim, in
reasonable detail, is given to Buyer, or to the Seller, as the case may be,
within said five year period.
13.4. Termination. This Agreement may be terminated any time prior to the
Closing Date:
13.4.1. With the mutual consent of Buyer and the Seller; or
13.4.2. By the Seller, if by the Closing Date any of the conditions
provided in Section 9.1 shall not have been satisfied, complied with or
performed in any material respect, and the Seller shall not have waived such
failure of satisfaction, non-compliance or nonperformance; or
13.4.3. By Buyer, if by the Closing Date any of the conditions provided in
Section 9.2 shall not have been satisfied, complied with or performed in any
material respect, and Buyer shall not have waived such failure of
satisfaction, noncompliance or nonperformance.
In the event of any termination pursuant to this Section 13.4 (other than
pursuant to Section 13.4.1), written notice setting forth the reasons
thereof shall forthwith be given the terminating party to the other. This
Agreement shall terminate automatically if the Closing Date shall not have
occurred on or before December 31, 1996, or such later date as shall have
been agreed to by the parties hereto.
If this Agreement shall be terminated as herein set forth, Buyer agrees that it
will remain obligated under, and will comply with, the provisions of
Section 6.3.
Section 14. Miscellaneous.
14.1. Assignment. This Agreement shall be binding upon and inure to the
benefit of the parties hereto and their respective successors and assigns.
If however, an assignment shall be made on or prior to the Closing Date,
Buyer shall remain responsible for its obligations under this Agreement.
14.2. No Press Release Without Consent. No press release related to this
Agreement or the transactions contemplated herein, or other announcement to
the employees, customers or suppliers of the Software Division, Computer
Training Center Division, and Market Street Division will be issued without
the joint approval of the Seller and Buyer, except any public disclosure
which the Seller or Buyer in its good faith judgment believes is required
by law or, in the case of the Seller, by any stock exchange on which its
securities are listed (in which case the party making the disclosure will
consult with the other party prior to making such disclosure). Buyer and
the Seller will cooperate to prepare a joint press release to be issued on
the Closing Date or upon the request of the Seller, at the time of the
signing of this Agreement.
14.3. Severability. Each of the provisions contained in this Agreement shall
be severable and the unenforceability of one shall not affect the
enforceability of any others or of the remainder of this Agreement.
14.4. Entire Agreement. This Agreement may not be amended, supplemented or
otherwise modified except by an instrument in writing signed by all of the
parties hereto. This Agreement contains the entire agreement of the parties
hereto with respect to the transactions covered hereby, superseding all
negotiations, prior discussions and preliminary agreements made prior to
the date hereof.
14.5. No Third Party Beneficiaries. This Agreement is solely for the benefit
of the parties hereto and their respective affiliates and no provision of
this Agreement shall be deemed to confer upon third parties any remedy,
claim, liability, reimbursement, claim of action or other right in excess
of those existing without reference to this Agreement.
14.6. Waiver. The failure of any party to enforce any condition or part of
this Agreement at any time shall not be construed as a waiver of that
condition or part, nor shall it forfeit any rights to future enforcement
thereof.
14.7. Governing Law. This Agreement shall be construed and enforced in
accordance with and governed by the laws of the State of California without
regard to the conflicts of laws provisions thereof.
14.8. Headings. The headings of the sections and subsections of this
Agreement are inserted for convenience only and shall not be deemed to
constitute a part hereof.
14.9. Counterparts. More than one counterpart of this Agreement may be
executed by the parties hereto, and each fully executed counterpart shall
be deemed an original.
14.10. Choice of Forum. Buyer and the Seller agree that any suit or action
or proceeding brought by either party against the other party to this
Agreement in connection with or arising out of this Agreement shall be
brought solely before Courts of the Central District of California or,
if such court lacks jurisdiction, in the Superior Court for the State
of California for the County of Fresno.
14.11. Further Documents. Buyer and the Seller will, at the request of
another party, execute and deliver to such other party all such further
instruments, assignments, assurances and other documents as such other
party may reasonably request in connection with the carrying out of
this Agreement.
14.12.Notices. All communications, notices and consents provided for herein
shall be in writing and be given in person or by means of telex, facsimile
or other means of wire transmission (with request for assurance of receipt
in a manner typical with respect to communications of that type) or by
mail, and shall become effective (x) on delivery if given in person,
(y) on the date of transmission if sent by telex, facsimile or other means
of wire transmission, or (z) four business days after being deposited in
the United States mails, with proper postage, for first-class registered
or certified mail, prepaid.
Notices shall be addressed as follows:
If to Buyer, to:
SSC Technologies, Inc.
2580 W. Shaw Lane, #102
Fresno, California 93711
Attn: Charles Howard
If to the Seller, to:
ProtoSource Corporation
2580 West Shaw Lane, Suite 102
Fresno, California 93711-2765
Attn: Andy Chu
provided, however, that if any party shall have designated a different
address by notice to the others, then to the last address so designated.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their officers as of the date first above written.
PROTOSOURCE CORPORATION
By:________________________________
Andy Chu
Chief Financial Officer
SSC TECHNOLOGIES, INC.
By:________________________________
Charles Howard
President