EXHIBIT 10.5
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FORM
OF
TRANSITION SERVICES AGREEMENT
BY AND BETWEEN
THREE-FIVE SYSTEMS, INC.
AND
BRILLIAN CORPORATION
EFFECTIVE AS OF
__________ ____, 2003
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TABLE OF CONTENTS
PAGE
SECTION 1 TRANSITION SERVICES 1
1.1 Provision of Transition Services ............................... 1
SECTION 2 COMPENSATION .................................................... 1
2.1 Charges for Services ........................................... 1
2.2 Reimbursement for Extraordinary Expenses ....................... 2
2.3 Reimbursement for Ancillary Expenses ........................... 2
2.4 Payments ....................................................... 2
SECTION 3 OTHER MATTERS ................................................... 2
3.1 Status of Employees ............................................ 2
3.2 Proprietary Information and Rights ............................. 2
SECTION 4 DISPUTE RESOLUTION .............................................. 3
4.1 General ........................................................ 3
4.2 Negotiation .................................................... 3
4.3 Non-Binding Mediation .......................................... 3
4.4 Proceedings .................................................... 3
4.5 Pay and Dispute ................................................ 3
SECTION 5 MISCELLANEOUS ................................................... 3
5.1 Term ........................................................... 3
5.2 Effect of Termination .......................................... 4
5.3 Limitation of Liability ........................................ 4
5.4 Standard of Conduct ............................................ 4
5.5 Force Majeure .................................................. 4
5.6 Entire Agreement ............................................... 4
5.7 Amendment ...................................................... 4
5.8 No Third Party Beneficiaries ................................... 4
5.9 Governing Law .................................................. 4
5.10 Notices ........................................................ 4
5.11 Counterparts ................................................... 5
5.12 Binding Effect and Assignment .................................. 5
5.13 Severability ................................................... 5
5.14 Failure or Indulgence and Remedies ............................. 5
5.15 Authority ...................................................... 5
5.16 Interpretation ................................................. 5
5.17 No Joint Venture or Partnership ................................ 5
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SCHEDULES
Schedule 1 ............. MIS & Information Technology Services
Schedule 2 ............. Engineering Services
Schedule 3 ............. Shipping, Receiving, and Inventory Control Services
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TRANSITION SERVICES AGREEMENT
This
Transition Services Agreement (this "Agreement") is entered into
as of __________, 2003, by and between Three-Five Systems, Inc., a
Delaware
corporation ("TFS"), and
Brillian Corporation, a
Delaware corporation
("Brillian").
RECITALS
WHEREAS, TFS and Brillian are parties certain agreements including that
certain Master Separation and Distribution Agreement, dated as of __________,
2003 (the "Separation Agreement"); and
WHEREAS, as a material inducement to Brillian entering into the
Separation Agreement, TFS has agreed to provide, or cause to be provided,
certain services to Brillian for a certain period of time following the
"Separation" pursuant to the Separation Agreement.
AGREEMENT
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants and agreements set forth below and in the Separation Agreement, the
parties agree as follows:
SECTION 1
TRANSITION SERVICES
1.1. PROVISION OF TRANSITION SERVICES. TFS shall provide to, or cause
to be provided to, Brillian the Transition Services as provided herein. It is
understood by the parties that the scope of services to be provided under this
Section 1 is expected to be substantially consistent with TFS' recent historical
practice in providing the Transition Services to its microdisplay business unit
unless otherwise stated in this Agreement. Without limiting the generality of
the Transition Services to be provided by TFS to Brillian as described in the
Schedules hereto, the parties agree as follows:
(a) Brillian's auditor shall have the right at Brillian's
expense to audit any monthly summary statement; provided, however, that such
audit occurs within thirty (30) days after Brillian's receipt of the monthly
summary statement. All information provided by TFS to Brillian's auditor shall
be in accordance with a non-disclosure agreement executed between the auditor
and TFS;
(b) TFS shall provide Brillian an electronic copy of its
consolidated corporate financial records produced by TFS for each of fiscal
1999, 2000, 2001, and 2002; and
(c) TFS shall cooperate in good faith with Brillian with
respect to the transition of the employer relationship from TFS to Brillian
subsequent to the Separation, Brillian's permit and licensing requirements, and
similar transition matters.
SECTION 2
COMPENSATION
2.1. CHARGES FOR SERVICES. In consideration for the provision of the
Transition Services provided hereunder, Brillian shall pay TFS, not later than
the 15th day of each month a monthly fee for the services used by Brillian in
accordance with Schedules one (1) thru three (3) of this Agreement.
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2.2. REIMBURSEMENT FOR EXTRAORDINARY EXPENSES. Except as provided in
the Schedules referred to in Section 2.1, above, it is understood by the parties
that all expenses paid or incurred by TFS in the ordinary course of providing
the Transition Services are included in the charges for such services described
in Section 2.1 above and will not be separately reimbursed by Brillian. In the
event that (a) TFS pays or incurs additional out-of-pocket expenses, not in the
ordinary course, in providing the Transition Services pursuant to this
Agreement, or (b) Brillian requests that TFS perform services outside the
current scope of the Transition Services (including any increase in the scope of
the Transition Services due to a material increase in Brillian's business),
Brillian shall, upon submission of supporting documentation, promptly reimburse
TFS for all such reasonable, extraordinary expenses; provided, however, that all
such expenses shall be approved in writing in advance by Brillian.
2.3. REIMBURSEMENT FOR ANCILLARY EXPENSES. Brillian shall promptly
reimburse TFS for any out-of-pocket costs and expenses that TFS incurs on behalf
of and at the request of Brillian with respect to telephone, freight, and other
outsourced services provided that such costs and expenses are consistent with
past practices when TFS performed such telephone, freight, and other services
for its microdisplay business unit and TFS provides reasonable supporting
documentation.
2.4. PAYMENTS. TFS shall deliver to Brillian an invoice and reasonable
supporting documentation for all out-of-pocket expenses contemplated by Section
2.2 and Section 2.3.
SECTION 3
OTHER MATTERS
3.1. STATUS OF EMPLOYEES. All employees and representatives of TFS
providing Transition Services hereunder to Brillian during the term of this
Agreement shall be deemed for purposes of all compensation and employee benefits
to be employees or representatives solely of TFS or its affiliates and not to be
employees or representatives of Brillian or any of its affiliates or to be
independent contractors thereof. In performing their respective duties
hereunder, all such employees and representatives of TFS or its affiliates shall
be under the direction, control, and supervision of TFS (and not of Brillian or
its affiliates) and TFS shall have the sole right to exercise all authority with
respect to the employment (including termination of employment), assignment, and
compensation of such employees and representatives.
3.2. PROPRIETARY INFORMATION AND RIGHTS. Each party acknowledges that
it possesses and will continue to possess information that belongs to the other,
which information has commercial value and is not in the public domain. The
proprietary information of each party will be and remain the sole property of
such party and its assigns. Each party shall use the same degree of care which
it normally uses to protect its own proprietary information to prevent the
disclosure to third parties of the other party's proprietary information.
Neither party shall make any use of the proprietary information of the other,
except as contemplated or required by the terms of this Agreement or any other
written agreement between the parties. Notwithstanding the foregoing, this
Section 3.2 shall not apply to any information that a party can demonstrate (a)
was, at the time of disclosure to it, in the public domain through no fault of
such party, (b) was received after disclosure to it from a third party who had a
lawful right to disclose such information to it, or (c) was independently
developed by the receiving party.
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SECTION 4
DISPUTE RESOLUTION
4.1. GENERAL. Resolution of any and all disputes arising from or in
connection with this Agreement, whether based on contract, tort, or otherwise
(collectively, "Disputes"), shall be exclusively governed by and settled in
accordance with the provisions of this Section 5.
4.2. NEGOTIATION. The parties shall make a good faith attempt to
resolve any Dispute through negotiation. Within thirty (30) days after notice of
a Dispute is given by either party to the other party, each party shall select a
negotiating team comprised of vice president-level or above employees of such
party and shall meet within thirty (30) days after the end of the first thirty
(30) day period to attempt to resolve the matter. During the course of
negotiations under this Section 5.2, all reasonable requests made by one party
to the other for Information, including requests for copies of relevant
documents, will be honored. The specific format for such negotiations will be
left to the discretion of the designated negotiating teams but may include the
preparation of agreed-upon statements of fact or written statements of position
furnished to the other party.
4.3. NON-BINDING MEDIATION. In the event that any Dispute is not
settled by the parties within fifteen (15) days after the first meeting of the
negotiating teams under Section 5.2, the parties will attempt in good faith to
resolve such Dispute by non-binding mediation in accordance with the American
Arbitration Association Commercial Mediation Rules. The mediation shall be held
within thirty (30) days of the end of such fifteen (15) day negotiation period
of the negotiating teams. Except as provided below in Section 5.4, no litigation
for the resolution of such dispute may be commenced until the parties attempt in
good faith to settle the dispute by such mediation in accordance with such rules
and either party has concluded in good faith that amicable resolution through
continued mediation of the matter does not appear likely. The costs of mediation
shall be shared equally by the parties to the mediation. Any settlement reached
by mediation shall be recorded in writing, signed by the parties, and shall be
binding on them.
4.4. PROCEEDINGS. Nothing herein shall prohibit either party from
initiating litigation or other judicial or administrative proceedings if such
party would be substantially harmed by a failure to act during the time that
such good faith efforts are being made to resolve the Dispute through
negotiation or mediation. In the event that litigation is commenced under this
Section 5.4, the parties agree to continue to attempt to resolve any Dispute
according to the terms of Section 5.2 and Section 5.3 during the course of such
litigation proceedings under this Section 5.4.
4.5. PAY AND DISPUTE. Except as provided herein or in any Ancillary
Agreement, in the event of any dispute regarding payment of a third-party
invoice (subject to standard verification of receipt of products or services),
the party named in a third party's invoice must make timely payment to such
third party, even if the party named in the invoice desires to pursue the
dispute resolution procedures outlined in this Section 5. If the party that paid
the invoice is found pursuant to this Section 5 to not be responsible for such
payment, such paying party shall be entitled to reimbursement, with interest
accrued at a compound annual rate of the Prime Rate plus 2%, from the party
found responsible for such payment.
SECTION 5
MISCELLANEOUS
5.1. TERM. This Agreement is intended to be a master agreement and
shall be construed as a separate agreement for each and every service provided
under this Agreement. Any termination of this Agreement with respect to any
service shall not terminate this Agreement with respect to any other service
then being provided under this Agreement. The parties anticipate that the
Transition
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Services will not be needed for more than two year(s) subsequent to the
Separation. Accordingly, the initial term of this Agreement shall be from the
Separation Date until two year(s) following the Separation Date, unless
terminated earlier pursuant to the terms of this Agreement or the Real Property
Sublease Agreement, which is hereby incorporated and made part of this Agreement
by reference. Any continuation of this Agreement after the initial Term, may
thereafter be mutually agreed to by the parties hereto in a written supplement
to this Agreement. Notwithstanding the above, either party may terminate this
Agreement by providing the other party sixty (60) days notice.
5.2. EFFECT OF TERMINATION. Following any termination of this Agreement
with respect to any or all of the Transition Services to be provided hereunder,
TFS and Brillian shall cooperate in good faith to transfer and/or retain all
records and take all other action necessary or reasonably requested by the other
to enable Brillian and its successors and assigns to make alternative service
arrangements substantially consistent with those contemplated by this Agreement.
The rights and obligations of the parties under Section 4 shall survive any
termination of this Agreement.
5.3. LIMITATION OF LIABILITY. IN NO EVENT SHALL TFS OR Brillian BE
LIABLE TO THE OTHER PARTY FOR ANY SPECIAL, CONSEQUENTIAL, INDIRECT, INCIDENTAL,
OR PUNITIVE DAMAGES OR LOST PROFITS, HOWEVER CAUSED AND ON ANY THEORY OF
LIABILITY (INCLUDING NEGLIGENCE) ARISING IN ANY WAY OUT OF THIS AGREEMENT,
WHETHER OR NOT SUCH PARTY HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES.
5.4. STANDARD OF CONDUCT. TFS shall use its commercially reasonable
efforts to perform the Transition Services consistent with the manner in which
such Transition Services have heretofore been provided by TFS with respect to
the Microdisplay Business.
5.5. FORCE MAJEURE. Each party will be excused for any failure or delay
in performing any of its obligations under this Agreement, other than the
obligations to make payments pursuant to Section 2 hereof for services rendered,
if such failure or delay is caused by any act of God or the public enemy, any
accident, explosion, fire, storm, earthquake, flood, or any other circumstance
or event beyond the reasonable control of such party.
5.6. ENTIRE AGREEMENT. This Agreement and the Schedules attached hereto
constitute the entire agreement between the parties with respect to the subject
matter hereof and supersede all prior negotiations, understandings, agreements,
and arrangements, both oral and written, among the parties hereto with respect
to such subject matter.
5.7. AMENDMENT. No change or amendment will be made to this Agreement
except by an instrument in writing signed on behalf of each of the parties to
this Agreement.
5.8. NO THIRD PARTY BENEFICIARIES. This Agreement is solely for the
benefit of the parties hereto and their respective Subsidiaries, successors, and
permitted assigns and shall not confer upon any other Person any rights or
remedies hereunder.
5.9. GOVERNING LAW. This Agreement shall be governed, construed, and
enforced in accordance with the laws of the state of
Delaware as to all matters
regardless of the laws that might otherwise govern under the principles of
conflicts of laws applicable thereto.
5.10. NOTICES. Any notice, demand, offer, request or other
communication required or permitted to be given by either party pursuant to the
terms of this Agreement shall be in writing and shall be deemed effectively
given the earlier of (a) when received, (b) when delivered personally, (c) one
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business day after being delivered by facsimile (with receipt of appropriate
confirmation), (d) one business day after being deposited with an overnight
courier service, or (e) four days after being deposited in the U.S. mail, First
Class with postage prepaid, and addressed to the attention of the party's Chief
Executive Officer at the address of its principal executive office or such other
address as a party may request by notifying the other in writing.
5.11. COUNTERPARTS. This Agreement, including the Schedules attached
hereto and the other documents referred to herein, may be executed in
counterparts, each of which shall be deemed to be an original but all of which
shall constitute one and the same agreement.
5.12. BINDING EFFECT AND ASSIGNMENT. This Agreement shall inure to the
benefit of and be binding upon the parties hereto and their respective legal
representatives and successors, and nothing in this Agreement, express or
implied, is intended to confer upon any other Person any rights or remedies of
any nature whatsoever under or by reason of this Agreement. This Agreement may
not be assigned by any party hereto. This Agreement may be enforced separately
by TFS and Brillian.
5.13. SEVERABILITY. If any term or other provision of this Agreement or
the Schedules attached hereto is determined by a nonappealable decision by a
court, administrative agency, or arbitrator to be invalid, illegal, or incapable
of being enforced by any rule of law or public policy, all other conditions and
provisions of this Agreement shall nevertheless remain in full force and effect
so long as the economic or legal substance of the transactions contemplated
hereby is not affected in any manner materially adverse to either party. Upon
such determination that any term or other provision is invalid, illegal, or
incapable of being enforced, the parties hereto shall negotiate in good faith to
modify this Agreement so as to effect the original intent of the parties as
closely as possible in an acceptable manner to the end that transactions
contemplated hereby are fulfilled to the fullest extent possible.
5.14. FAILURE OR INDULGENCE AND REMEDIES. No failure or delay on the
part of either party hereto in the exercise of any right hereunder shall impair
such right or be construed to be a waiver of, or acquiescence in, any breach of
any representation, warranty, or agreement herein, nor shall any single or
partial exercise of any such right preclude other or further exercise thereof or
of any other right. All rights and remedies existing under this Agreement or the
Schedules attached hereto are cumulative to, and not exclusive of, any rights or
remedies otherwise available.
5.15. AUTHORITY. Each of the parties hereto represents to the other
that (a) it has the corporate or other requisite power and authority to execute,
deliver, and perform this Agreement, (b) the execution, delivery, and
performance of this Agreement by it have been duly authorized by all necessary
corporate or other actions, (c) it has duly and validly executed and delivered
this Agreement, and (d) this Agreement is a legal, valid, and binding
obligation, enforceable against it in accordance with its terms subject to
applicable bankruptcy, insolvency, reorganization, moratorium, or other similar
laws affecting creditors' rights generally and general equity principles.
5.16. INTERPRETATION. The headings contained in this Agreement, in any
Schedule hereto, and in the table of contents to this Agreement are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement. Any capitalized term used in any Schedule but
not otherwise defined therein, shall have the meaning assigned to such term in
this Agreement. When a reference is made in this Agreement to a Section or
Schedule, such reference shall be to a Section of, or a Schedule to, this
Agreement unless otherwise indicated.
5.17. NO JOINT VENTURE OR PARTNERSHIP. Notwithstanding anything to the
contrary, this Agreement shall not be deemed to create a joint venture or
partnership among the parties hereto.
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IN WITNESS WHEREOF, the parties have executed and delivered this
Transition Services Agreement as of the date first written above.
THREE-FIVE SYSTEMS, INC.
By:
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Name:
--------------------------
Title:
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BRILLIAN CORPORATION
By:
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Name:
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Title:
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