EXECUTION COPY
ASSET PURCHASE AGREEMENT
by and between
PINNACLE SYSTEMS, INC.
and
HEWLETT-PACKARD COMPANY
June 30, 1999
TABLE OF CONTENTS
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TABLE OF CONTENTS.....................................................................................................i
ARTICLE I DEFINITIONS.................................................................................................1
ARTICLE II SALE AND PURCHASE OF ASSETS................................................................................7
2.1 Purchase and Sale of Assets.........................................................................7
2.2 Excluded Assets.....................................................................................8
2.3 Assumption of Liabilities...........................................................................9
2.4 Liabilities Not Assumed............................................................................10
2.5 Article II Schedules Update........................................................................11
ARTICLE III PURCHASE PRICE; CLOSING..................................................................................11
3.1 Payment of Purchase Price..........................................................................11
3.2 Allocation of Purchase Price.......................................................................12
3.3 The Closing........................................................................................12
3.4 Deliveries at the Closing..........................................................................12
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF SELLER..................................................................13
4.1 Organization of Seller.............................................................................13
4.2 Authorization of Transaction.......................................................................13
4.3 Noncontravention...................................................................................14
4.4 Financial Statements...............................................................................14
4.5 Indebtedness; Guaranties...........................................................................15
4.6 Title to Assets....................................................................................15
4.7 Sufficiency of Acquired Assets.....................................................................15
4.8 Absence of Changes.................................................................................15
4.9 Absence of Undisclosed Liabilities.................................................................16
4.10 Legal and Other Compliance.........................................................................16
4.11 Taxes..............................................................................................16
4.12 Restrictions on Business Activities................................................................16
4.13 Equipment..........................................................................................17
4.14 Agreements, Contracts and Commitments..............................................................17
4.15 Litigation.........................................................................................18
4.16 Insurance..........................................................................................18
4.17 Brokers' and Finders' Fees.........................................................................18
4.18 Employee Benefit Plans and Compensation............................................................19
4.19 Consents...........................................................................................20
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4.20 Business Records...................................................................................20
4.21 Year 2000..........................................................................................20
4.22 Non-Standard Product Warranties....................................................................21
ARTICLE V REPRESENTATIONS AND WARRANTIES OF BUYER....................................................................21
5.1 Organization of Buyer..............................................................................21
5.2 Authority..........................................................................................21
5.3 Noncontravention...................................................................................21
5.4 Capitalization.....................................................................................22
5.5 Buyer Shares.......................................................................................22
5.6 SEC Documents; Buyer Financial Statements..........................................................22
5.7 No Material Adverse Change.........................................................................23
5.8 Absence of Undisclosed Liabilities.................................................................23
5.9 Litigation.........................................................................................23
5.10 Brokers'and Finders'Fees...........................................................................23
5.11 Legal Compliance...................................................................................23
5.12 Consents...........................................................................................23
ARTICLE VI BUYER SHARES..............................................................................................24
6.1 Securities Act Exemption...........................................................................24
6.2 Stock Restriction and Registration Rights Agreement................................................24
ARTICLE VII PRE-CLOSING COVENANTS....................................................................................24
7.1 Conduct of the Business Pending Closing............................................................24
7.2 Sales Orders.......................................................................................25
7.3 Conduct of Business by Buyer.......................................................................25
7.4 Access and Review..................................................................................25
7.5 Update Schedules...................................................................................26
7.6 Notice of Adverse Developments.....................................................................26
7.7 Exclusivity........................................................................................27
ARTICLE VIII ADDITIONAL AGREEMENTS...................................................................................27
8.1 Additional Required Transfers......................................................................27
8.2 Access to Records After Closing....................................................................27
8.3 Public Disclosure..................................................................................27
8.4 Contractual Consents...............................................................................28
8.5 Legal Requirements.................................................................................28
8.6 Additional Documents and Further Assurances........................................................28
8.7 Notification of Certain Matters....................................................................28
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8.8 Nasdaq National Market Listing.....................................................................28
8.9 Pre-Closing Taxes..................................................................................28
8.10 Transfer Taxes.....................................................................................28
8.11 Employee Matters...................................................................................29
8.12 Confidentiality....................................................................................30
8.13 Noncompetition.....................................................................................30
8.14 Preparation of Audit of the Business...............................................................31
ARTICLE IX CONDITIONS TO OBLIGATION TO CLOSE.........................................................................31
9.1 Conditions to Obligation of Buyer..................................................................31
9.2 Conditions to Obligation of Seller.................................................................32
ARTICLE X INDEMNIFICATION............................................................................................33
10.1 Indemnification of Buyer...........................................................................33
10.2 Indemnification of Seller..........................................................................33
10.3 Limitations on Indemnification.....................................................................33
10.4 Procedure for Indemnification......................................................................34
10.5 Remedies Exclusive.................................................................................35
10.6 Arbitration........................................................................................35
ARTICLE XI TERMINATION...............................................................................................35
11.1 Termination of Agreement...........................................................................35
11.2 Effect of Termination..............................................................................35
ARTICLE XII MISCELLANEOUS............................................................................................36
12.1 Non-Survival of Representations, Warranties and Agreements.........................................36
12.2 Amendment..........................................................................................36
12.3 Extension; Waiver..................................................................................36
12.4 Notices............................................................................................36
12.5 Expenses...........................................................................................38
12.6 Counterparts.......................................................................................38
12.7 Entire Agreement...................................................................................38
12.8 Assignment.........................................................................................38
12.9 Severability.......................................................................................38
12.10 Other Remedies.....................................................................................38
12.11 Governing Law; Arbitration.........................................................................39
12.12 Rules of Construction..............................................................................39
12.13 No Third Party Beneficiaries.......................................................................39
12.14 Incorporation of Exhibits and Schedules............................................................39
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INDEX OF EXHIBITS
Exhibit Description
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Exhibit A Technology Transfer and License Agreement
Exhibit B Manufacturing, Supply and Transition Services Agreement
Exhibit C Purchase Price Allocation
Exhibit D Form of Assumption of Liabilities
Exhibit E Form of Xxxx of Sale and General Assignment of Assets
Exhibit F Form of Investment Representation Statement
Exhibit G Form of Stock Restriction and Registration Rights Agreement
Exhibit H Form of Opinion of Counsel to Seller
Exhibit I Form of Opinion of Counsel to Buyer
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INDEX OF SCHEDULES
Schedule Description
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2.1(a) Finished Goods Inventory
2.1(b) Equipment
2.1(d)(i) Sales Orders
2.1(d)(iii) Material Contracts
2.1(d)(iv) Cash Deposits
2.2(g) Other Excluded Assets
2.3(e) Customer Support Commitments, etc.
4.4(a) Seller Financial Statements
4.6 Title to Assets
4.9 Liabilities
4.14 Contracts
4.18 Employee Matters
4.19 Required Consents
4.21 Year 2000
4.22 Standard Terms and Conditions
5.10 Buyer's Brokers' Fees
8.11 Key Employees; Employee Incentive Programs
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ASSET PURCHASE AGREEMENT
This Asset Purchase Agreement (the "Agreement") is entered into on June
30, 1999 by and between Pinnacle Systems, Inc., a California corporation
("Pinnacle" or the "Buyer"), and Hewlett-Packard Company, a Delaware corporation
(the "Seller"). Buyer and Seller are referred to collectively herein as the
"Parties."
RECITALS
WHEREAS, Buyer desires to purchase from Seller, and Seller desires to
sell to Buyer, certain assets and certain liabilities of the Broadcast Video
Server, Broadcast Media Stream and Quality Advisor businesses of the Video
Communications Division of Seller (the "Business") in consideration of the
Purchase Price (as defined below) on the terms and conditions set forth herein
(the "Acquisition");
WHEREAS, in connection with the Acquisition, Buyer and Seller desire to
make certain representations, warranties, covenants and other agreements;
WHEREAS, concurrently with the execution of this Agreement, and as a
condition and inducement to each Parties' willingness to enter into this
Agreement, Buyer and Seller are entering into the Technology Transfer and
License Agreement attached hereto as Exhibit A (the "Technology Transfer
Agreement").
WHEREAS, concurrently with the execution of this Agreement and as a
condition and inducement to each Parties' willingness to enter into this
Agreement, Buyer and Seller are entering into a Manufacturing, Supply and
Transition Services Agreement attached hereto as Exhibit B (the "Transition
Agreement") pursuant to which, among other things, effective as of the Closing
Date (as hereafter defined): (a) Seller has agreed to manufacture certain
products for Buyer for a transition period and to provide certain manufacture
support services in connection therewith and (b) Seller has agreed to allow
former employees and sales individuals hired by Buyer to use Seller's facilities
for a limited period of time.
NOW, THEREFORE, in consideration of the covenants, promises, and
representations set forth herein, and for other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, the parties agree
as follows:
ARTICLE I
DEFINITIONS
1.1 "Acquired Assets" shall have the meaning set forth in Section 2.1.
1.2 "Acquisition" shall have the meaning set forth in the recitals
above.
1.3 "Affiliate" shall have the meaning set forth in Rule 12b-2 of the
regulations promulgated under the Exchange Act.
1.4 "Agreement" shall have the meaning set forth in the preamble above.
1.5 "Article II Schedules" shall mean Schedules 2.1(a), 2.1(b),
2.1(d)(i), 2.1(d)(iii), 2.1(d)(iv), 2.2(e) and 2.3(e)
1.6 "Assigned Contract" shall have the meaning set forth in Section
2.1(d).
1.7 "Assigned Technology" shall have the meaning set forth in Section
2.1(c).
1.8 "Assumed Liabilities" shall have the meaning set forth in Section
2.3.
1.9 "Backlog" shall have the meaning set forth in Section 3.1.
1.10 "Best Knowledge" shall mean actual knowledge.
1.11 "Business" shall have the meaning set forth in the recitals above.
1.12 "Business Records" shall mean all existing books and records
reasonably necessary to enable Buyer to continue the design, manufacture,
marketing and sale of Finished Goods Inventory, ownership or use of the Acquired
Assets and conduct of the Business including, without limitation, all lists,
information, records, files, literature, brochures, catalogs, correspondence,
displays and other similar data relating to financial, operating, Finished Goods
Inventory, customer, supplier, vendor, manufacturer and promotional matters or
relating to the design, manufacture, marketing and sale of Inventory, ownership
or use of the Acquired Assets or conduct of the Business.
1.13 "Buyer" has the meaning set forth in the preamble above.
1.14 "Buyer Financial Statements" shall have the meaning set forth in
Section 5.5.
1.15 "Buyer Shares" shall have the meaning set forth in Section 3.1(a).
1.16 "Chemical Substance" means any chemical substance which is
identified or regulated under any Environmental Law or Safety Law as defined
below, including but not limited to any: (i) pollutant, contaminant, irritant,
chemical, raw material, intermediate, product, by-product, slag, construction
debris; (ii) industrial, solid, liquid or gaseous toxic or hazardous substance,
material or waste; (iii) petroleum or any fraction thereof; (iv) asbestos or
asbestos-containing material; (v) polychlorinated biphenyl; (vi)
chlorofluorocarbons; and (vii) any other similarly regulated substance, material
or waste.
1.17 "Closing" has the meaning set forth in Section 3.3.
1.18 "Closing Date" has the meaning set forth in Section 3.3.
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1.19 "COBRA" shall mean the Consolidated Omnibus Budget Reconciliation
Act of 1985, as amended.
1.20 "Code" means the United States Internal Revenue Code of 1986, as
amended.
1.21 "Conflict" shall have the meaning set forth in Section 4.3.
1.22 "Employee" means any current, former, or retired employee,
consultant, independent contractor, sales representative, officer or director of
the Seller or any ERISA Affiliate employed or retained in connection with the
operation of the Business.
1.23 "Employee Agreement" means each employment, severance, consulting,
relocation, repatriation and expatriation or similar agreement, contract or
understanding, whether written or oral, between the Seller or any ERISA
Affiliate and any Employee.
1.24 "Employee Benefit Plan" means any plan, program, policy, practice,
contract, agreement or other arrangement providing for compensation, severance,
termination pay, deferred compensation, performance awards, stock or
stock-related awards, fringe benefits or other employee benefits or remuneration
of any kind, whether formal or informal, funded or unfunded and whether or not
legally binding, including, without limitation, any "employee benefit plan"
(within the meaning of Section 3(3) of ERISA) which is or has been maintained,
contributed to, or required to be contributed to, by the Seller or any ERISA
Affiliate (as defined below) for the benefit of any Employee, and pursuant to
which the Seller or any ERISA Affiliate has or may have any material Liability
or obligation, contingent or otherwise.
1.25 "Environment" means real property and any improvements thereon,
and also includes, but is not limited to, ambient air, surface water, drinking
water, groundwater, land surface, subsurface strata and water body sediments.
1.26 "Environmental Laws" mean any United States federal, state, or
local or any foreign law, regulation or legal requirement relating to pollution,
or protection or cleanup of the Environment, including, without limitation, all
laws, regulations, codes of practice and other similar controls issued by any
Governmental Entity; all laws, regulations, and directives made by the
legislative organs of the European Economic Community, the European Community,
and the European Union; the United States Comprehensive Environmental Response,
Compensation and Liability Act, as amended; the United States Resource
Conservation and Recovery Act, as amended; the United States Clean Air Act, as
amended; the United States Clean Water Act, as amended; and any other law or
legal requirement, as now in effect, relating to (a) the Release, containment,
removal, remediation, response, cleanup or abatement of any sort of any Chemical
Substance; (b) the manufacture, generation, formulation, processing, labeling,
distribution, introduction into commerce, use, treatment, handling, storage,
recycling, disposal or transportation of any Chemical Substance; (c) exposure of
persons, including employees, to any Chemical Substance; or, (d) the physical
structure, use or condition of a building, facility, fixture or other structure,
including, without
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limitation, those relating to the management, use, storage, disposal, cleanup or
removal of asbestos, asbestos-containing materials, polychlorinated biphenyls or
any other Chemical Substance.
1.27 "Environmental Liabilities and Costs" means all losses incurred:
(i) that are required by a governmental agency or third party in order to comply
with any Environmental Law or Environmental Permit; (ii) that are required by a
governmental agency or third party as a result of a Release of any Chemical
Substance; or (iii) that are required by a governmental agency or third party as
a result of any environmental conditions present at, created by or arising out
of the past or present operations of Seller through the Closing Date or, to the
Best Knowledge of Seller, of any prior owner or operator of a facility or site
at which Seller now operates or has previously operated.
1.28 "Environmental Permit" means any Permit or authorization from any
governmental authority required under, issued pursuant to, or authorized by any
Environmental Law.
1.29 "Equipment" shall have the meaning set forth in Section 2.1(b).
1.30 "ERISA" shall mean the United States Employee Retirement Income
Security Act of 1974, as amended.
1.31 "Estimated Purchase Price" shall have the meaning set forth in
Section 3.1(c).
1.32 "ERISA Affiliate" means any other Person (as defined below) under
common control with the Seller within the meaning of Section 414(b), (c), (m) or
(o) of the Code and the rules and regulations promulgated thereunder.
1.33 "Exchange Act" shall mean the United States Securities Exchange
Act of 1934, as amended.
1.34 "Excluded Assets" shall have the meaning set forth in Section 2.2.
1.35 "Excluded Liabilities" shall have the meaning set forth in Section
2.4.
1.36 "Extremely Hazardous Substance" has the meaning set forth in
Section 302 of the United States Emergency Planning and Community Right-to-Know
Act of 1986, as amended.
1.37 "Finished Goods Inventory" shall have the meaning set forth in
Section 2.1(a).
1.38 "GAAP" shall mean generally accepted accounting principles.
1.39 "Governmental Entity" shall have the meaning set forth in Section
4.3.
1.40 "HSR Act" shall have the meaning set forth in Section 4.3.
1.41 "Key Employee" shall mean those employees of Seller specified on
Schedule 8.11 hereto.
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1.42 "Liability" shall mean any liability, responsibility or obligation
(whether known or unknown, whether asserted or unasserted, whether absolute or
contingent, whether accrued or unaccrued, whether liquidated or unliquidated,
whether incurred or consequential and whether due or to become due), including
any liability for Taxes.
1.43 "Lien" means any mortgage, pledge, lien, security interest,
charge, claim, equity, encumbrance, restriction on transfer, conditional sale,
or other title retention device or arrangement (including, without limitation, a
capital lease), transfer for the purpose of subjection to the payment of any
indebtedness, or restriction on the creation of any of the foregoing, whether
relating to any property or right or the income or profits therefrom; provided,
however, that the term "Lien" shall not include (i) statutory liens for Taxes to
the extent that the payment thereof is not in arrears or otherwise due, (ii)
statutory or common law liens to secure landlords, lessors, or renters under
leases or rental agreements confined to the premises rented to the extent that
no payment or performance under any such lease or rental agreement is in arrears
or is otherwise due, (iii) deposits or pledges made in connection with, or to
secure payment of, worker's compensation, unemployment insurance, old age
pension programs mandated under applicable laws or other social security
regulations, and (iv) statutory or common law liens in favor of carriers,
landlords, warehousemen, processors, mechanics and materialmen, statutory or
common law liens to secure claims for labor, materials or supplies and other
like liens, which secure obligations to the extent that payment thereof is not
in arrears or otherwise due, and (v) purchase money liens.
1.44 "Material Adverse Effect on Buyer" shall mean any circumstance,
change in, or effect on Buyer, that is materially adverse to the earnings,
financial condition or prospects of Buyer or to the ability of Buyer to
consummate the transactions contemplated by this Agreement provided, however
that none of the following shall be deemed, either alone or in combination, to
constitute a Material Adverse Effect on Buyer: (i) a change that results from
conditions affecting the digital video editing industry generally, (ii) a change
that results from conditions affecting the U.S. or the world economy generally,
or (iii) a decline in Buyer's Common Stock price as quoted on Nasdaq (in and of
itself, as distinguished from the circumstances, change or effect that may have
triggered such decline).
1.45 "Material Adverse Effect on Seller" shall mean any circumstance,
change in, or effect on Seller that is materially adverse to the Business or the
Acquired Assets or to the ability of Seller to consummate the transactions
contemplated by this Agreement, provided that neither of the following shall be
deemed, either alone or in combination, to constitute a Material Adverse Effect
on Seller: (i) a change that results from conditions affecting the digital
broadcast video server industry generally, and (ii) changes in the amount of or
nature of Backlog or Finished Goods Inventory.
1.46 "Obsolete Inventory" shall mean all items of Finished Goods
Inventory which (i) are damaged, previously returned, obsolete, discontinued or
otherwise for any reason not saleable in the ordinary course of the Business
including, without limitation, any finished Goods Inventory items representing
more than a six-months supply of such item based on Seller's historical usage
records over the last six months (or for such shorter period of the existence of
a particular product) in connection with the Business or (ii) without limiting
clause (i), constitute discontinued product lines.
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1.47 "Person" means an individual, a partnership, a corporation, an
association, a joint stock company, a trust, a joint venture, an unincorporated
organization or a governmental entity (or any department, agency or political
subdivision thereof).
1.48 "Products" shall have the meaning set forth in Section 2.1(d).
1.49 "Purchase Price" shall have the meaning set forth in Section 3.1.
1.50 "Related Agreements" shall mean the Transition Agreement, the
Technology Transfer Agreement and the Stock Restriction and Registration Rights
Agreement.
1.51 "Release" means any actual or alleged spilling, leaking, pumping,
pouring, emitting, dispersing, emptying, discharging, injecting, escaping,
leaching, dumping or disposing of any Chemical Substance or Extremely Hazardous
Substance into the Environment that would cause an Environmental Liability and
Cost (including the abandonment or discarding of barrels, containers, tanks or
other receptacles containing or previously containing any Chemical Substance).
1.52 "Safety Laws" means any federal, state, local and foreign law,
regulation or legal requirement relating to health or safety, including the
United States Occupational Safety and Health Act, as amended, each as now or
hereinafter in effect, relating to (a) exposure of employees to any Chemical
Substance or (b) the physical structure, use or condition of a building,
facility, fixture or other structure, including, without limitation, those
relating to equipment or manufacturing processes, or the management, use,
storage, disposal, cleanup or removal of any Chemical Substance.
1.53 "Sales Orders" shall have the meaning set forth in Section 2.1(d).
1.54 "SEC" shall mean the United States Securities and Exchange
Commission.
1.55 "SEC Documents" shall have the meaning set forth in Section 5.5.
1.56 "Securities Act" shall mean the United States Securities Act of
1933, as amended.
1.57 "Seller" shall have the meaning set forth in the preamble above.
1.58 "Seller Financial Statements" shall have the meaning set forth in
Section 4.4(a).
1.59 "Stock Restriction and Registration Rights Agreement" shall have
the meaning set forth in Section 6.4.
1.60 "Tax" or "Taxes" shall mean any and all federal, state, local, and
foreign taxes, assessments, and other governmental charges, duties, impositions
and liabilities, including taxes based upon or measured by gross receipts,
income, profits, sales, use and occupation, and value added, ad valorem,
transfer, franchise, withholding, payroll, recapture, employment, excise and
property taxes, together with all interest, penalties, and additions imposed
with respect to such
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amounts and any obligations under any agreements or arrangements with any other
person with respect to such amounts and including any liability for taxes of a
predecessor entity.
1.61 "Tax Return" shall mean any return, declaration, report, claim for
refund, or information return or statement relating to Taxes, including any
schedule or attachment thereto, and including any amendment thereof.
1.62 "Tax Warranty" shall have the meaning set forth in Section 11.1.
1.63 "Technology Transfer Agreement" shall have the meaning set forth
in the Recitals.
1.64 "Transition Agreement" shall have the meaning set forth in the
Recitals.
ARTICLE II
SALE AND PURCHASE OF ASSETS
2.1 Purchase and Sale of Assets. Subject to and upon the terms and
conditions hereof, and in reliance upon the representations, warranties and
covenants made herein by each party to the other, on the Closing Date, Seller
agrees to sell, transfer, assign, convey and deliver to Buyer, and Buyer agrees
to purchase from Seller, free and clear of any Lien, all of Seller's right,
title and interest in and to the below-listed assets wherever situated of Seller
that are used in or associated with the Business except to the extent that any
such assets form a part of the Excluded Assets as provided in Section 2.2
(collectively, the "Acquired Assets"):
(a) The finished goods inventory of the Business specified in
Schedule 2.1(a) (collectively, the "Finished Goods Inventory").
(b) The equipment and other fixed assets of the Business,
associated spare parts, component parts, supplies, maintenance tools, assemblies
and accessories as set forth or described in Schedule 2.1(b) wherever located
(collectively, the "Equipment"), subject to the right of Seller to continue to
use the Equipment in accordance with the terms of the Transition Agreement;
(c) The rights and licenses to the "HP Business Intellectual
Property" and the "HP Related Intellectual Property" as set forth in the
Technology Transfer Agreement and executed by the Buyer and Seller concurrent
herewith;
(d) (i) The contracts, orders or commitments for the purchase
of the products of the Business ("Products") described in summary form in
Schedule 2.1(d)(i) (collectively, the "Sales Orders") and subject to the proviso
set forth in Section 2.3;
(ii) All warranty rights and claims against third
parties relating to or arising under any of the Acquired Assets (except to the
extent that such warranty rights and claims
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relate to or arise from Damages for which Buyer is entitled to indemnity from
Seller in accordance with Section 10.1 hereof).
(iii) The other contracts and agreements relating to
the design, manufacture, supply, marketing or sale of Products, relating to the
Acquired Assets or which may affect the conduct of the Business after Closing,
and which are set forth in Schedule 2.1(d)(iii) (but only to the extent that
required consents have been received); and
(iv) Any and all cash deposits that have not been
recognized as revenue associated with Sales Orders, as set forth and described
in Schedule 2.1(d)(iv).
All of the foregoing in this Section 2.1(d),
including Sales Orders, are collectively referred to as the "Assigned
Contracts".
(e) All customer, distribution, supplier and mailing lists of
Seller specific to the Business;
(f) All causes of action, judgments, claims and demands of
every nature whatsoever in favor of the Business and relating to the Acquired
Assets (except to the extent that such causes of action, judgments, claims and
demands relate to or arise from Damages for which Buyer is entitled to indemnity
from Seller in accordance with Section 10.1 hereof);
(g) All labels, signs, packaging, promotional materials,
point-of-purchase displays or cards, sales literature, advertising, catalogs,
brochures, documents and other such items relating to the sale of Products or
otherwise used in the Business, subject to the terms of the Technology Transfer
Agreement; and
(h) All existing books and records and other similar data
directly relating to financial, operating, Products, customer, supplier, vendor,
and manufacturer matters reasonably necessary to enable Buyer to continue the
uninterrupted design, manufacture, marketing and sale of Products, ownership or
use of the Acquired Assets and conduct of the Business.
2.2 Excluded Assets. There shall be excluded from the Acquired Assets
to be sold, assigned, transferred, conveyed and delivered to Buyer hereunder,
and to the extent in existence on the Closing Date, there shall be retained by
Seller all other assets of Seller, including the following assets, properties
and rights (collectively, the "Excluded Assets"):
(a) Trade accounts receivable of the Business arising on or
prior to the Closing Date;
(b) Cash and cash equivalents, other than the cash transferred
by Buyer pursuant to Section 2.1(d);
(c) Cash received after the Closing in payment of trade
accounts receivable retained by Seller pursuant to Section 2.2(a);
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(d) Equipment associated with Seller's facilities;
(e) Office equipment of Seller's employees engaged in the
Business and not hired by Buyer in connection with this Agreement;
(f) Raw materials, work-in-process and other inventory within
the manufacturing process; and
(g) All other assets set forth on Schedule 2.2(g).
2.3 Assumption of Liabilities. On the terms and subject to the
conditions set forth herein, and subject to Section 2.4 hereof, from and after
the Closing Date, the Buyer will assume and satisfy or perform when due only the
following Liabilities of Seller (the "Assumed Liabilities"):
(a) All Liabilities of Seller under the Assigned Contracts,
including any Liability for performance thereon, but only to the extent such
Assigned Contracts are set forth or described in the relevant Schedules to
section 2.1(d);
(b) All Liabilities in respect of claims made against Seller
and/or Buyer by or on behalf of third parties, seeking the recall, return,
replacement, retrofitting and/or repair of Products, and any labor or freight
costs, damages or expenses associated with any such claims, all warranty
obligations whether or not pursuant to any express Product warranties or
warranties or responsibilities imposed or implied by statutes, governmental
regulation or otherwise, regardless of whether the affected Products were
developed, manufactured or sold, or warranties were extended, on, prior or
subsequent to the Closing;
(c) The liabilities, responsibilities and obligations arising
out of Buyer's obligations under the Technology Transfer Agreement;
(d) Any and all Liabilities relating to the ownership, use, or
operation of the Acquired Assets arising after the Closing Date; and
(e) All Liabilities in respect of commitments as set forth on
Schedule 2.3(e), including extended warranty, customer support, upgrade and
product delivery commitments for the Products;
provided, however, that Buyer shall have no rights to, or obligation pursuant
to, any contract or agreement of Seller identified in Schedules 2.1(d)(i), (iii)
or (iv) that by its terms requires, prior to assignment, a consent to assignment
unless a written consent thereto has been obtained on or prior to the Closing
Date and such contracts shall neither be Acquired Assets nor Assumed Liabilities
unless and until such consent is obtained. With respect to each Sales Order not
assigned to Buyer, which would have been acquired by Buyer pursuant to Section
2.1(d)(i) but for the failure to obtain a required consent, Seller shall
continue to deal with the other contracting party(ies) to such Sales Order as
the prime contracting party, and the Buyer and Seller shall use commercially
reasonable efforts to obtain the consent(s) of all required parties to the
assignment of such Sales Order(s). Such
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Sales Order(s) shall be promptly assigned by Seller to the Buyer after receipt
of such consent(s) after the Closing Date and thereafter shall be deemed to be
an Assumed Liability hereunder as if such consent had been obtained prior to the
Closing Date. Notwithstanding the absence of any such consent, the Buyer shall
be entitled to the benefits of such Sales Order(s) accruing after the Closing
Date to the extent that Seller may provide the Buyer with such benefits without
violating the terms of such Sales Order, and Buyer agrees to perform at its sole
expense all of the obligations of Seller to be performed under such Sales
Order(s) from the Closing Date until such time as Buyer reasonably determines
that such consents cannot be obtained, after which Buyer shall have no further
obligation or benefit with respect to the performance of such Sales Order(s).
2.4 Liabilities Not Assumed. Except as expressly set forth in this
Agreement, the Buyer does not assume or agree to perform any Liabilities not
specifically contemplated by Section 2.3 hereof, including any of the following
Liabilities (collectively, the "Excluded Liabilities"):
(a) Any Liability of Seller, or any Affiliate of Seller, for
Taxes for any taxable period, and any Liability for Taxes attributable to the
Acquired Assets for all periods or any portion thereof prior to the Closing
Date;
(b) Any Liability of Seller, or any Affiliate of Seller, to
indemnify any person by reason of the fact that such person was a director,
officer, employee or agent of Seller, or any Affiliate of Seller, or that such
person was serving at the request of Seller, or any Affiliate of Seller, as a
partner, trustee, director, officer, employee or agent of another entity;
(c) Any Liability of Seller, or any Affiliate of Seller, as a
result of any legal or equitable action or judicial or administrative proceeding
initiated at any time caused by any action that occurred or condition that
existed on or prior to the Closing Date and in respect of anything done,
suffered to be done, or omitted to be done by Seller, or any Affiliate of
Seller, or any of their directors, officers, employees or agents, except for
such actions or proceedings arising from or directly related to those specific
Liabilities as the Buyer has assumed pursuant to Section 2.3 above;
(d) Any Liability of Seller, or any Affiliate of Seller, for
costs and expenses incurred in connection with this Agreement and the
transactions contemplated hereby;
(e) Any Liability or obligation of Seller, or any Affiliate of
Seller, arising out of any Employee Benefit Plan established or maintained by
Seller, or any Affiliate of Seller, for the benefit of past or present employees
of Seller, or Affiliate of Seller, or to which Seller, or Affiliate of Seller,
contributes, or any Liability on the termination of any such plan;
(f) Any Liability of Seller, or any Affiliate of Seller, for
making payments or providing benefits of any kind to their employees or former
employee engaged in the Business, including, without limitation, (A) as a result
of the sale of the Acquired Assets or as a result of the termination by Seller,
or any Affiliate of Seller, of any employees engaged in the Business or decision
by Buyer to hire or not to hire any such employees or to terminate such
employees within 180 days of the Closing Date, (B) any obligation to provide
former employees of Seller engaged in
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the Business (including individuals who become former employees by reason of the
consummation of the transactions contemplated by this Agreement) so-called COBRA
continuation coverage, (C) any Liability in respect of medical and other
benefits for existing and future retirees engaged in the Business and for claims
made after Closing Date in respect of costs and expenses incurred on or prior to
the Closing Date, (D) any Liability in respect of work-related employee injuries
or worker's compensation claims by employees or former employees of Seller
engaged in the Business, (E) any Liability in respect of employee bonuses
payable to former employees of Seller engaged in the Business and (F) any
Liability for vacation pay or similar accruals;
(g) Any Liability pertaining to Seller, or any Affiliate of
Seller, or their respective businesses and arising out of or resulting from
noncompliance on or prior to the Closing Date with any laws, statutes,
ordinances, rules, regulations, orders, determinations, judgments or directives,
whether legislatively, judicially or administratively promulgated (including,
without limitation, any Environmental Liabilities and Costs, whether or not
arising out of or resulting from noncompliance with Environmental Laws by
Seller, or any Affiliate of Seller) but excluding any warranty obligations
assumed by Buyer pursuant to Sections 2.3(b) and 2.3(e);
(h) Any Liability of Seller, or any Affiliate of Seller, under
any licenses, leases, contracts or agreements except as contemplated by Section
2.3;
(i) All Liabilities incurred by Seller in connection with the
conduct of its businesses other than the Business; and
(j) Any Liability in respect of trade accounts payable, or
payable obligations, incurred prior to the Closing Date.
2.5 Article II Schedules Update. At the close of business on the date
that is one day prior to the Closing Date, Seller shall update the Article II
Schedules as of the Closing Date and, subject to the approval of Buyer (which
approval shall not be unreasonably withheld), Seller shall deliver such updated
Article II Schedules at the Closing; thereafter such updated Article II
Schedules shall constitute the definitive Article II Schedules.
ARTICLE III
PURCHASE PRICE; CLOSING
3.1 Payment of Purchase Price.
(a) As consideration for the sale, assignment, transfer, and
delivery by Seller to Buyer of the Acquired Assets, Buyer, on the terms and
conditions set forth herein, shall deliver to Seller at the Closing an aggregate
amount of $40,000,000, which amount shall be increased or decreased: (i) for
each dollar that Finished Goods Inventory, net of reserves for excess and
obsolescence calculated in accordance with GAAP, at the Closing Date is less
than or greater than $11,400,000; and (ii) by a sum equal to 1/2 of the amount
that the value of Products under Sales
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Orders that are shippable within 180 days of closing at the Closing Date
("Backlog") is less than or greater than $6,000,000 (as so adjusted, the
"Purchase Price").
(b) On the Closing Date, the Purchase Price shall be paid in a
combination of cash and stock as follows: (i) Buyer shall issue that number of
shares of its Common Stock, no par value, determined by dividing 2/3 of the
adjusted Purchase Price by the average closing sale price of Pinnacle's Common
Stock in trading on the Nasdaq National Market over 20 trading days ending on
the second trading day prior to Closing (the "Buyer Shares"), provided that no
fractional shares will be issued and (ii) Buyer shall wire to an account
designated by Seller two days prior to the Closing Date a cash payment equal to
1/3 of the adjusted Purchase Price plus the cash value of any fractional shares
(which shall be calculated by taking the product of any fraction from clause (i)
and the average closing sale price of Pinnacle's Common Stock in trading on the
Nasdaq National Market over 20 trading days ending on the second trading day
prior to Closing).
(c) The Parties agree and acknowledge that complete data
necessary for the Purchase Price adjustments described in Section 3.1(a) will
not be available on the Closing Date. Therefore, at the close of business on the
day before the Closing Date, Seller will provide Buyer with an estimate of the
Purchase Price that shall be subject to Buyer's approval, which approval shall
not be unreasonably withheld (the "Estimated Purchase Price"). At the Closing,
Buyer shall pay the Estimated Purchase Price in accordance with Section 3.1(b).
Within 10 days after the Closing, Seller shall confirm the Purchase Price
adjustments and calculate the final Purchase Price, subject to Buyer's approval
(which approval shall not be unreasonably withheld), and Buyer shall pay Seller
an amount equal to the difference, if any, between the final Purchase Price and
the Estimated Purchase Price. Any such difference shall be paid in accordance
with Section 3.1(b).
3.2 Allocation of Purchase Price. The parties agree that the
preliminary allocation of the purchase price for the Acquired Assets shall be as
determined by the allocation set forth on Exhibit C attached hereto, which shall
be binding on all parties. Such allocation may be amended or modified by the
Buyer at any time within 60 days after the Closing Date with the prior written
consent of Seller, which consent shall not be unreasonably withheld. All parties
shall use such final allocation in any Tax Return.
3.3 The Closing. The closing of the transactions contemplated by this
Agreement (the "Closing") shall take place at the offices of Xxxxxx Xxxxxxx
Xxxxxxxx & Xxxxxx, in Palo Alto, California, commencing at 10:00 a.m., within
three business days following satisfaction of the Closing conditions set forth
in Sections 8.1 and 8.2 or such other date as the Parties may mutually determine
(the "Closing Date").
3.4 Deliveries at the Closing. At the Closing, (i) Seller will deliver
to Buyer the various certificates, instruments and documents referred to in
Section 8.1 below; (ii) Seller will execute, acknowledge (if appropriate) and
deliver to Buyer (A) assignments of the Assigned Contracts and Intellectual
Property transfer documents in accordance with the Technology Transfer Agreement
(including an Assignment of Patents, an Assignment of Trademarks and an
Assignment of Copyrights in a form mutually agreed to by the Parties), and (B)
such other instruments of sale,
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transfer, conveyance and assignment as Buyer and its counsel may reasonably
request; (iii) Buyer and Seller will execute, acknowledge (if appropriate), and
deliver the Assignment and Assumption Agreement in the form attached hereto as
Exhibit D and the Xxxx of Sale and General Assignment of Assets in the form
attached hereto as Exhibit E; and (iv) subject to Section 3.1(c), Buyer will
deliver to Seller the consideration payable at Closing specified in Section 3.1
above, and such novations of assigned contracts, leases and other agreements as
Seller shall have delivered to Buyer as provided herein.
Simultaneously with such delivery, Seller will use its commercially
reasonable efforts and take all action as may be necessary to put Buyer in
possession of the Acquired Assets except to the extent such Acquired Assets are
to remain in the possession of Seller under the terms of the Transition
Agreement.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF
SELLER
Seller hereby represents and warrants to Buyer subject to the specific
exceptions disclosed in the schedules hereto (each referencing the appropriate
section numbers of this Article IV as to which an exception exists) delivered by
Seller to Buyer, as follows:
4.1 Organization of Seller.
(a) Seller is a corporation validly existing and in good
standing under the laws of the State of Delaware.
(b) There is no domestic state or jurisdiction or foreign
country where any Acquired Assets are located or the character or location of
the Business or the Acquired Assets requires qualification of Seller as a
foreign corporation except where such qualification has been obtained and is
validly in effect, or except where the failure to obtain such qualification
would not have a Material Adverse Effect on Seller.
(c) Seller has all requisite corporate power and authority to
(i) own the Acquired Assets and conduct the Business as and where it is now
being conducted; (ii) execute and deliver this Agreement, the Related Agreements
and the other documents and instruments required hereby and thereby; (iii)
assign, transfer, convey, sell and deliver to Buyer all right, title and
interest to all of the Acquired Assets under this Agreement, free and clear of
all Liens; and (iv) otherwise carry out and perform the terms, conditions and
provisions of this Agreement and such other documents and instruments.
4.2 Authorization of Transaction. All corporate actions to be taken by
or on the part of Seller to authorize and permit the execution and delivery by
it of this Agreement, the Related Agreements and the instruments required to be
executed and delivered by it pursuant hereto and
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thereto, the performance by Seller of its obligations hereunder and thereunder,
and the consummation by Seller of the transactions contemplated herein and
therein, have been duly and properly taken. This Agreement and each of the
Related Agreements have been duly executed and delivered by Seller and
constitute legal, valid and binding obligations of Seller, enforceable in
accordance with their respective terms and conditions subject to (i) bankruptcy,
insolvency, reorganization, moratorium or other similar laws affecting or
relating to creditors' rights generally and (ii) the availability of injunctive
relief and other equitable remedies.
4.3 Noncontravention. Neither the execution and the delivery of this
Agreement, nor the consummation of the transactions contemplated hereby
(including the assignments and assumptions referred to in Section 3.4 above),
will (i) violate any statute, regulation, rule, injunction, judgment, order,
decree, ruling, charge or other restriction of any government, governmental
agency or court to which Seller or the Acquired Assets is subject or any
provision of the charter or bylaws of Seller, except where such violation would
not have a Material Adverse Effect on Seller; or (ii) conflict with, result in a
breach of, constitute a default under, result in the acceleration of, create in
any party the right to accelerate, terminate, modify or cancel, (any such event,
a "Conflict") under any agreement, contract, lease, license, instrument, Lien or
other arrangement to which Seller is a party or by which it is bound or to which
any of the Acquired Assets is subject (or result in the imposition of any Lien
upon any of the Acquired Assets) except (i) where such violation, conflict,
breach, default, acceleration, termination, modification, cancellation, failure
to give notice or Lien would not have a Material Adverse Effect on Seller or
(ii) for applicable requirements, if any, of the Xxxx-Xxxxx-Xxxxxx Antitrust
Improvements Act of 1976, as amended (the "HSR Act"). Except as required by the
HSR Act, no consent, waiver, approval, order, or authorization of, or
registration, declaration or filing with, any court, administrative agency or
commission or other federal, state, county, local or foreign governmental
authority, instrumentality, agency or commission (any of the foregoing
authorities, instrumentalities, a "Governmental Entity"), is required by or with
respect to Seller in connection with the execution and delivery of this
Agreement, or the consummation of the transactions contemplated hereby.
4.4 Financial Statements.
(a) Set forth in Schedule 4.4(a) are the Seller's Statements
of Income relating to the Business for each month in the six-month period ended
May 31, 1999 (collectively, "Seller Financial Statements"). The Seller Financial
Statements are true and correct in all material respects and fairly present the
items set forth therein and the results of operations reflected thereby for each
of the related respective periods, all in conformity with GAAP.
(b) All Finished Goods Inventory consists of a quality and
quantity usable and saleable in the ordinary course of the Business at first
quality prices without discount or reduction, except for Obsolete Inventory. The
values at which all Finished Goods Inventories (other than excess and Obsolete
Inventory) are carried reflect the historical and consistent inventory valuation
policy of Seller stating such inventories at the lower of average cost or fair
market value.
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4.5 Indebtedness; Guaranties. Seller does not have indebtedness for
money borrowed or for the deferred purchase price of property or services,
capital lease obligations, conditional sale, or other title retention agreements
relating to any of the Acquired Assets. Seller is not a guarantor or otherwise
liable for any liability or obligation of any other person or entity for any
matter which relates to or affects or will affect the Acquired Assets.
4.6 Title to Assets. Except as set forth on Schedule 4.6, Seller has
good and valid title to, or a valid and subsisting leasehold or license interest
in, and the power to sell or assign the Acquired Assets (including all the HP
Business Intellectual Property) being sold or assigned by it, free and clear of
all Liens.
4.7 Sufficiency of Acquired Assets. The Acquired Assets (including the
HP Business Intellectual Property and the HP Related Intellectual Property
licensed to Buyer under the Technology Transfer Agreement) comprise all of the
material assets of Seller used by it to design, manufacture and deliver to
customers the Products in the ordinary course of the Business as currently
conducted and to conduct research and development activities specific to the
design and manufacture of the Products, other than the 743 Computers and the 744
Computers (as defined in the Transition Agreement) which are to be supplied by
Seller to Buyer under the terms of Article 3 of the Transition Agreement. The
Acquired Assets do not include other assets of Seller which are or have been
used by it not only in its conduct of the Business but in the conduct of other
parts of Seller's business, including without limitation the systems, hardware
and software, tools and people associated with corporate accounting, information
processing, facilities, purchasing, the HP Related Intellectual Property not
licensed to Buyer under the Technology Transfer Agreement, shipping, customer
support, telephone support, human resources, legal, business services functions
and other similar functions.
4.8 Absence of Changes. Since May 31, 1999, there has not been any
Material Adverse Effect on Seller. Without limiting the generality of the
foregoing, since that date:
(a) Seller has not accelerated, terminated, modified or
canceled any agreement, contract, lease or license (or series of related
agreements, contracts, leases, and licenses) involving payments of more than
$100,000 relating to the Acquired Assets;
(b) Seller has not delayed or postponed the payment of
material accounts payable and other Liabilities beyond their due date relating
to the Acquired Assets outside the ordinary course of business except with
respect to accounts or Liabilities subject to dispute in good faith by Seller;
(c) Seller has not canceled, compromised, waived, or released
any right or claim (or series of related rights and claims) relating to the
Acquired Assets involving payments of more than $100,000;
(d) The Acquired Assets have not been materially damaged,
destroyed or lost (whether or not covered by insurance).
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(e) Seller has not entered into any employment contract or
collective bargaining agreement, or modified the terms of any existing such
contract or agreement relating to the Business, except in the ordinary course of
business consistent with past practice;
(f) Seller has not changed employment or compensation terms
for any of the Key Employees, except in the ordinary course of business
consistent with past practice or as contemplated by this Agreement and the other
agreements entered into in connection herewith;
(g) Seller has not accelerated the collection or conversion of
accounts receivable or notes receivable relating to the Acquired Assets by
offering any incentive for such acceleration, including but not limited to
prepayment discounts, allowances or enhancements, except in the ordinary course
of business consistent with past practice; and
(h) Seller has not committed to do any of the foregoing.
4.9 Absence of Undisclosed Liabilities. To the Best Knowledge of
Seller, there is no Liability and no threatened action, suit, proceeding,
hearing, investigation, charge, complaint, claim or demand, which could give
rise to any Liability that would reasonably be expected to have a Material
Adverse Effect on Seller.
4.10 Legal and Other Compliance. To the Best Knowledge of Seller,
Seller is in full compliance with all applicable laws (including rules,
regulations, codes, plans, injunctions, judgments, orders, decrees, rulings, and
charges thereunder) of federal, state, local, and foreign governments (and all
agencies thereof), the violation of which would have a Material Adverse Effect
on Seller.
4.11 Taxes. To the extent a failure to do so would adversely affect
Buyer, any Acquired Asset, or Buyer's use of any Acquired Asset, Seller has (i)
timely filed within the time period for filing or any extension granted with
respect thereto all Tax Returns which it is required to file relating to or
pertaining to any and all Taxes attributable or levied upon any Acquired Asset
and (ii) paid any and all Taxes it is required to pay in connection with the
periods to which such Tax Returns relate except such taxes as are being
contested in good faith. There are (and immediately following the execution and
delivery of this Agreement there will be) no Liens on any Acquired Asset
relating to or pertaining to Taxes, except with respect to Taxes not yet due and
payable. To the Best Knowledge of Seller, no basis exists or will exist for the
assertion of any claim which, if adversely determined, would result in a Lien on
any Acquired Asset or otherwise adversely affect Buyer, any Acquired Asset, or
Buyer's use of any Acquired Asset.
4.12 Restrictions on Business Activities. There is no agreement
(noncompetition, field of use, or otherwise), judgment, injunction, order or
decree to which Seller is a party and which will be binding on Buyer after the
Closing which has or reasonably could be expected to have the effect of
prohibiting or impairing (i) any business practice of Seller with respect to any
Acquired Asset, or (ii) the conduct of the Business by the Seller (or, after the
Closing Date, Buyer). Without limiting the foregoing, Seller has not entered
into any agreement that will be binding on Buyer after the Closing
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that restricts the sale, license, or distribution of any products, services, or
technology of the Business to any class of customers, in any geographic area,
during any period of time or in any segment of the market.
4.13 Equipment. The Equipment is free from defects, has been reasonably
maintained in accordance with Seller's customary procedures, is in good
operating condition and repair (subject to normal wear and tear) and is suitable
in all respects for the purposes for which it presently is used.
4.14 Agreements, Contracts and Commitments. Except as contemplated by
this Agreement or as listed on Schedules 4.14 or 8.11 or on the Schedules
enumerated in Section 2.1 or 2.3, Seller currently has not, is not a party to,
or is not bound by with respect to the Business, any Acquired Asset or any Key
Employee:
(i) any collective bargaining agreements;
(ii) any agreements or arrangements that contain any severance
pay or post-employment liabilities or obligations;
(iii) any arrangements providing any stock option, stock
purchase, stock appreciation, bonus, deferred compensation, pension, severance,
profit sharing or retirement benefits, or any other employee benefit;
(iv) any agreement, contract, or commitment relating to the
disposition or acquisition of Acquired Assets other than Finished Goods
Inventory;
(v) any employment or consulting agreement with an employee or
individual consultant or salesperson or consulting or sales agreement; (vi) any
agreement of indemnification or guaranty (other than as set forth in standard
end-user license agreements entered into by Seller in the ordinary course of
business consistent with past practice);
(vii) any agreement entered otherwise than in the ordinary
course of business consistent with past practice;
(viii) any agreement (or group of related agreements) relating
to capital expenditures and involving future payments in excess of $100,000;
(ix) any agreement (or group of related agreements) under
which payment has already been received by Seller (whether in whole or in part)
but which requires the performance of services after the date hereof (including
invoicing any customer on services not fully delivered and performed at the date
of such invoice);
(x) any agreement or obligation pursuant to which Seller is
obligated to provide maintenance services for a period in excess of one year;
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(xi) any agreement (including invoices) relating to the
provision of maintenance or services outside the ordinary course of business;
(xii) any mortgages, indentures, loans or credit agreements,
security agreements or other agreements or instruments relating to the borrowing
of money by Seller or extension of credit to Seller, involving obligations in
excess of $100,000 or under which Seller has imposed any Lien on any of the
Acquired Assets;
(xiii) any agreement concerning confidentiality;
(xiv) any distribution, joint marketing, development, or
partnership or joint venture agreement;
(xv) any other agreement, contract, lease, or license (or
series of related agreements, contracts, leases, and licenses) that involves
payment of $100,000 or more by the Seller.
Seller has delivered, or will upon request of Buyer deliver, to the
Buyer a correct and complete copy of each written agreement listed in Schedule
4.14. Seller has not breached, violated or defaulted under, or received notice
that it has breached, violated or defaulted under, any of the terms of or
conditions of any Assigned Contract (except for any breach, violation or default
arising from a provision governing consent to assignment in connection with the
transactions contemplated hereby). Each Assigned Contract is in full force and
effect and, except as otherwise disclosed in Schedule 4.14, is not subject to
any default thereunder of which Seller has knowledge by any party obligated to
Seller pursuant thereto.
4.15 Litigation. There is no action, suit, proceeding, claim,
arbitration, or investigation pending before any court or administrative agency
against Seller (or any officer, director, or partner of Seller in their capacity
as such) that relates to any Acquired Asset, the adverse determination of which
could result, in a Material Adverse Effect on Seller, or that question the
validity of this Agreement or of any action taken to or to be taken pursuant to
or in connection with this Agreement. To the Best Knowledge of Seller, no such
action, proceeding, claim, arbitration, or investigation has been threatened,
and Seller is not aware of any basis for any such action, suit, proceeding,
claim, arbitration, or investigation. There are no judgments, orders, decrees,
citations, fines, or penalties heretofore assessed against Seller affecting the
Business or the Acquired Assets under any federal, state, local, or foreign law.
No Governmental Entity has since June 30, 1994 challenged or questioned the
legal right of Seller to manufacture, offer, or sell any product related to the
Acquired Assets in the present manner or style thereof.
4.16 Insurance. Seller maintains adequate self-insurance programs
covering the Acquired Assets, including the maintenance of sufficient reserves.
4.17 Brokers' and Finders' Fees. Seller has not incurred, nor will it
incur, directly or indirectly, any liability for brokerage or finders' fees or
agents' commissions or any similar charges in connection with this Agreement or
any transaction contemplated hereby
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4.18 Employee Benefit Plans and Compensation.
(a) Employee Benefit Plan Compliance. Except as set forth on
Schedule 4.18, (i) the Seller has performed all material obligations required to
be performed by it under each Employee Benefit Plan and each Employee Benefit
Plan has been established and maintained in all material respects in accordance
with its terms and in compliance with all applicable laws, statutes, orders,
rules and regulations including, without limitation, ERISA and the Code; (ii)
there are no audits, inquiries or proceedings pending or, to the knowledge of
the Seller or any ERISA Affiliate, threatened by the IRS or DOL with respect to
any Employee Benefit Plan; (iii) neither the Seller nor any ERISA Affiliate is
subject to any penalty or tax with respect to any Employee Benefit Plan under
Section 402(i) of ERISA or Sections 4975 through 4980 of the Code; (iv) no
"prohibited transaction," within the meaning of Section 4975 of the Code or
Sections 406 and 407 of ERISA, and not otherwise exempt under Section 408 of
ERISA, has occurred with respect to any Employee Benefit Plan; and (v) each
Employee Benefit Plan intended to qualify under Section 401(a) of the Code and
each trust intended to qualify under Section 501(a) of the Code that has either
received a favorable determination, opinion, notification or advisory letter
from the IRS with respect to each such Benefit Plan as to its qualified status
under the Code, including all amendments to the Code effected by the Tax Reform
Act of 1986 and subsequent legislation, or has remaining a period of time under
applicable Treasury regulations or IRS pronouncements in which to apply for such
a letter and make any amendments necessary to obtain a favorable determination
as to the qualified status of each such Employee Benefit Plan.
(b) Multiemployer Plans. At no time has the Seller contributed
to or been requested to contribute to any Multiemployer Plan.
(c) No Post-Employment Obligations. Except as set forth on
Schedule 4.18, no Employee Benefit Plan provides, or has any Liability to
provide, life insurance, medical or other employee benefits to any Key Employee
upon his or her retirement or termination of employment for any reason, except
as may be required by statute, and the Seller has not represented, promised or
contracted (whether in oral or written form) to any Key Employee (either
individually or to Key Employees as a group) that such Key Employee(s) would be
provided with life insurance, medical or other employee welfare benefits upon
their retirement or termination of employment, except to the extent required by
statute.
(d) Effect of Transaction. Except as set forth on Schedule
4.18, the execution of this Agreement and the consummation of the transactions
contemplated hereby will not (either alone or upon the occurrence of any
additional or subsequent events) constitute an event under any Employee Benefit
Plan, Employee Agreement, trust or loan that will or may result in any payment
(whether of severance pay or otherwise), acceleration, forgiveness of
indebtedness, vesting, distribution, increase in benefits or obligation to fund
benefits with respect to any Employee. No payment or benefit which will or may
be made by the Seller or Buyer or any of their respective Affiliates with
respect to any Employee will be characterized as a "parachute payment," within
the meaning of Section 280G(b)(2) of the Code.
-19-
(e) Employment Matters. The Seller (i) is in compliance in all
material respects with all applicable laws, rules and regulations respecting
employment, employment practices, terms and conditions of employment and wages
and hours, in each case, with respect to Key Employees; (ii) has withheld all
amounts required by law or by agreement to be withheld from the wages, salaries
and other payments to Key Employees; (iii) is not liable for any arrears of
wages or any Taxes or any penalty for failure to comply with any of the
foregoing; and (iv) is not liable for any payment to any trust or other fund or
to any Governmental Entity, with respect to unemployment compensation benefits,
social security or other benefits for Key Employees (other than routine payments
to be made in the ordinary course of business, consistent with past practices).
(f) Labor. No work stoppage or labor strike against the Seller
is pending or, to the knowledge of the Seller, threatened with respect to the
Business or involving or relating to any of the Key Employees. The Seller is not
involved in or threatened with any labor dispute, grievance or litigation
relating to labor, safety or discrimination matters involving any Key Employee,
including charges of unfair labor practices or discrimination complaints, which,
if adversely determined, would, individually or in the aggregate, result in
Liability to the Seller. The Seller has not engaged in any unfair labor
practices within the meaning of the National Labor Relations Act with respect to
the Business or involving or relating to any of the Key Employees which could,
individually or in the aggregate, directly or indirectly result in a Liability
to the Seller. The Seller is not presently, nor has it been in the past, a party
to, or bound by, any collective bargaining agreement, contract with or
commitment to any labor representatives with respect to the Business or
involving or relating to any of the Key Employees, and the Seller has not
conducted negotiations with respect to any such future contracts or commitments;
no labor representatives hold bargaining rights with respect to any Key
Employees; and there are no current or, to the knowledge of the Seller,
threatened attempts to organize or establish any trade union or employee
association with respect to the Seller involving or relating to the Business or
any of the Key Employees. The Seller has provided Buyer with all information
Buyer has requested with respect to the names, date of hire or compensation of
Key Employees.
4.19 Consents. Schedule 4.19 sets forth a true, correct, and complete
list of the identities of any person or entity (including a Governmental Entity)
whose consent or approval is required, and the matter, agreement, or contract to
which such consent relates, in connection with the transfer, assignment or
conveyance by Seller of any Acquired Asset.
4.20 Business Records. The Business Records of Seller (i) are accurate
in all material respects, (ii) have been maintained in accordance with
applicable laws and with generally accepted practices and standards in the
jurisdiction(s) in which Seller operates, and (iii) are in Seller's possession
or under its control.
4.21 Year 2000.
(a) Products. The Products set forth on Schedule 4.21 and any
Product shipped prior to the Closing Date that is subject to a warranty or
extended warranty obligation under Section 2.3(b) or Section 2.3(e), will
accurately process date data (including, but not limited to,
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calculating, comparing and sequencing) from, into, and between the twentieth and
twenty-first centuries, and the years 1999 and 2000, including leap year
calculations, when used in accordance with the Product documentation provided by
Seller (including any instructions for installing patches or upgrades), provided
that all other items (e.g. hardware, software, firmware) used in combination
with such Products properly exchange date data with it.
(b) Manufacturing Assets. Seller represents and warrants that
all manufacturing assets constituting part of the Equipment can be (or may be
modified to be) used prior to, during, and after the calendar year 2000 and that
such manufacturing assets will operate during each such time period without
error relating to date data, specifically including any error relating to, or
the product of, date data which represents or references different centuries or
more than a century except to the extent such inability to use and process such
date data would not give rise to any Liability that would reasonably be expected
to have a Material Adverse Effect on Seller.
4.22 Non-Standard Product Warranties. Except as set forth on Schedule
2.3(e), no product manufactured, sold, licensed, leased, or delivered by Seller
in its conduct of the Business is subject to any guaranty, warranty or other
indemnity beyond the applicable standard terms and conditions of sale, license,
or lease or beyond that implied or imposed by applicable law. Schedule 4.22
includes a copy of the standard terms and conditions of sale, license, or lease
for Seller.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer hereby represents and warrants to Seller as follows:
5.1 Organization of Buyer. Buyer is a corporation duly organized,
validly existing, and in good standing under the laws of the State of
California. Buyer has the corporate power to own its properties and to carry on
its business as now being conducted and, after the Closing, will have all
corporate power to own and operate the Acquired Assets.
5.2 Authority. Buyer has all requisite corporate power and authority to
execute and deliver this Agreement and the Related Agreements and the other
documents and instruments required hereby and thereby, and to consummate the
transactions contemplated hereby and thereby. The execution and delivery of this
Agreement, the Related Agreements and the consummation of the transactions
contemplated hereby and thereby have been duly authorized by all necessary
corporate action on the part of Buyer. This Agreement and each of the Related
Agreements have been duly executed and delivered by Buyer and constitute legal,
valid and binding obligations of Buyer, enforceable in accordance with their
respective terms and conditions subject to (i) bankruptcy, insolvency,
reorganization, moratorium or other similar laws affecting or relating to
creditors' rights generally and (ii) the availability of injunctive relief and
other equitable remedies.
5.3 Noncontravention. Neither the execution and the delivery of this
Agreement or the Related Agreement, nor the consummation of the transactions
contemplated hereby or thereby, will
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result in a Conflict with (i) any provisions of the Articles of Incorporation or
Bylaws of Buyer or (ii) any mortgage, indenture, lease, contract, or other
agreement or instrument, permit, concession, franchise, license, judgment,
order, decree, statute, law, ordinance, rule or representation applicable to
Buyer or on which Buyer's business, financial condition, operations or prospects
is substantially dependent, the breach, violation, default, termination, or
forfeiture of which would result in a Material Adverse Effect on Buyer. Except
as is required by the HSR Act, no consent, approval, order or authorization of,
or registration, declaration or filing with, any Governmental Entity, is
required by or with respect to Buyer in connection with the execution and
delivery of this Agreement by Buyer or the consummation by Buyer of the
transactions contemplated hereby, except for such consents, approvals, orders,
authorizations, registrations, declarations, and filings as may be required
under applicable state and federal securities laws.
5.4 Capitalization. The authorized capital stock of Buyer consists of
(i) 60,000,000 shares of Common Stock , no par value, and (ii) 5,000,000 shares
of preferred stock, no par value per share, 25,000 of which have been designated
as Series A Participating Preferred Stock. At the close of business on June 25,
1999, (i) 22,754,146 shares of Buyer Common Stock were issued and outstanding,
(ii) 623,550 shares of Buyer Common Stock were reserved for future issuance
pursuant to Buyer's employee stock purchase plan, (iii) 5,629,866 shares of
Buyer Common Stock were reserved for issuance upon the exercise of outstanding
options to purchase Buyer Common Stock, (iv) 674,798 shares of Buyer Common
Stock were available for future grant under Buyer's stock option plans, and (v)
22,536 shares of Buyer Common Stock were reserved for issuance upon exercise of
an outstanding warrant to purchase shares of Buyer Common Stock. As of the date
hereof, no shares of Buyer Preferred Stock were issued or outstanding. The Buyer
Common Stock has certain associated rights issued pursuant to a Preferred Shares
Rights Agreement between Buyer and ChaseMellon Shareholder Services, L.L.C.,
dated December 12, 1996, as amended, which rights will not become detached from
the Buyer Common Stock or exercisable or otherwise be affected by this
Agreement, the Related Agreements or the transactions contemplated hereby or
thereby. All of the outstanding shares of Buyer's capital stock have been duly
authorized and validly issued and are fully paid and nonassessable.
5.5 Buyer Shares. The Buyer Shares to be issued pursuant to this
Agreement will, when issued and delivered in accordance with this Agreement, be
duly authorized, validly issued, fully paid, and non-assessable and free from
any preemptive right created by statute, Buyer's Articles of Incorporation, or
Buyer's Bylaws; provided, however, that the Buyer Shares to be issued hereunder
will be subject to restrictions on transfer under applicable federal and state
securities laws.
5.6 SEC Documents; Buyer Financial Statements. Buyer has filed all
forms, reports, and documents required to be filed by it with the SEC and has
furnished or made available to Seller true and complete copies of its Annual
Report on Form 10-K for the fiscal year ended June 30, 1998 and its Quarterly
Reports on Form 10-Q for the quarters ended September 30, 1998, December 31,
1998 and March 31, 1999 (collectively, the "SEC Documents"), which Buyer has
filed with the SEC under the Exchange Act. As of their respective filing dates,
the SEC Documents complied in all material respects with the requirements of the
Exchange Act, and none of the SEC Documents contained any untrue statement of a
material fact or omitted to state a material fact required to be stated therein
or
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necessary to make the statements made therein, in light of the circumstances in
which they were made, not misleading, except to the extent corrected by a
publicly available document subsequently filed with the SEC. The consolidated
financial statements of Buyer, including the notes thereto, included in the SEC
Documents (the "Buyer Financial Statements") comply as to form in all material
respects with applicable accounting requirements and with the published rules
and regulations of the SEC with respect thereto, have been prepared in
accordance with GAAP consistently applied (except as may be indicated in the
notes thereto or, in the case of unaudited statements, as permitted by Form 10-Q
of the SEC), and fairly present the consolidated financial position of Buyer and
the results of its operations and cash flows as of the respective dates and for
the periods indicated therein (subject, in the case of unaudited statements, to
normal audit adjustments). There has been no change in Buyer's accounting
policies except as described in the notes to the Buyer Financial Statements.
5.7 No Material Adverse Change. Since March 31, 1999, Buyer has
conducted its business in the ordinary course of business, and there has not
occurred any event, occurrence, or condition that would result in a Material
Adverse Effect on Buyer.
5.8 Absence of Undisclosed Liabilities. To the Best Knowledge of Buyer,
there is no Liability and no threatened action, suit, proceeding, hearing,
investigation, charge, complaint, claim or demand, which could give rise to any
Liability that would reasonably be expected to have a Material Adverse Effect on
Buyer.
5.9 Litigation. There is no action, suit or proceeding of any nature
pending or, to the Best Knowledge of Buyer, threatened that could reasonably be
expected to (i) interfere with the consummation of the transactions contemplated
by this Agreement or that questions the validity of this Agreement or of any
action taken or to be taken pursuant to or in connection with the provisions of
this Agreement or (ii) result in a Material Adverse Effect on Buyer.
5.10 Brokers' and Finders' Fees. Buyer has not incurred, nor will it
incur, directly or indirectly, any liability for brokerage or finders' fees or
agents' commissions or any similar charges in connection with this Agreement or
any transaction contemplated hereby.
5.11 Legal Compliance. To the Best Knowledge of Buyer, Buyer is in full
compliance with all applicable laws (including rules, regulations, codes, plans,
injunctions, judgments, orders, decrees, rulings, and charges thereunder) of
federal, state, local, and foreign governments (and all agencies thereof) the
violation of which would have a Material Adverse Effect on Buyer.
5.12 Consents. No consent or approval of any Person is required in
connection with the acquisition by the Buyer of any of the Acquired Assets or
the payment by the Buyer of the Purchase Price, except for applicable
requirements, if any, under the HSR Act.
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ARTICLE VI
BUYER SHARES
6.1 Securities Act Exemption. The issuance of the Buyer Shares pursuant
to this Agreement will not be registered under the Securities Act in reliance on
the exemptions from the registration requirements of Section 5 of the Securities
Act set forth in Section 4(2) thereof. Simultaneous with the execution and
delivery of this Agreement, Seller has delivered to Buyer an investment
representation statement in the form attached hereto as Exhibit F. Prior to the
Closing Date, Seller, as the Buyer may determine, shall have provided Buyer such
additional representations, warranties, certifications, and additional
information as Buyer may reasonably request to ensure the availability of an
exemption from the registration requirements of the Securities Act.
6.2 Stock Restriction and Registration Rights Agreement. Buyer agrees
that Seller shall be entitled to registration rights with respect to a portion
of the Buyer Shares as set forth in the Stock Restriction and Registration
Rights Agreement substantially in the form of Exhibit G hereto (the "Stock
Restriction and Registration Rights Agreement") and Seller agrees that the
portion of the Buyer Shares not entitled to registration rights shall be subject
to additional restriction on transfer as set forth in the Stock Restriction and
Registration Rights Agreement.
ARTICLE VII
PRE-CLOSING COVENANTS
7.1 Conduct of the Business Pending Closing. Between the date hereof
and the Closing Date, except as otherwise agreed to in advance and in writing by
Buyer, Seller covenants and agrees with Buyer that as follows:
(a) Seller shall operate the Business diligently and in good
faith and only in the ordinary course, in the manner as heretofore conducted and
consistent with Seller's past management and business practices.
(b) Seller shall use reasonable efforts to (i) maintain,
preserve, renew and keep in full force and effect the existence, rights and
franchises of the Business; (ii) maintain the Equipment in good working order;
(iii) not allow the disposal or lapse of any HP Business Intellectual Property
or any HP Related Intellectual Property; (iv) preserve for Buyer Seller's
present relationships with its suppliers, distributors, vendors, manufacturers,
customers, communities and others having business relations with Seller in the
Business; and (v) not allow any event or occurrence within its control which
might, individually or in the aggregate, have a Material Adverse Effect on
Seller.
(c) Seller shall not, without the prior written consent of
Buyer enter into any new original equipment manufacturing contracts, contracts
with potential obligations in excess of $100,000 or contracts binding Seller for
a period of time longer than 60 days.
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(d) Other than in the ordinary course of business or as
contemplated by this Agreement, Seller shall not pay any bonuses or make any
salary or wage increases or other adjustments affecting the Key Employees.
(e) Seller shall not create any indebtedness that would
constitute an Assumed Liability other than short-term indebtedness incurred in
the usual and ordinary course of the Business pursuant to Assigned Contracts or
Open Orders.
(f) Seller will not act or omit to act, or consent to any act
or omission to act by another party, which will cause a breach or violation of,
or default under, any Assigned Contracts or other commitments or other
obligations adversely affecting the Acquired Assets or the Business.
7.2 Sales Orders. Between the date hereof and the Closing Date, Seller
will use reasonable efforts to revise the terms of Sales Orders entered into
after the date hereof so that the consent of a third-party for the assignment of
such Sales Order to Buyer as part of Buyer's purchase of the Acquired Assets
will not be required.
7.3 Conduct of Business by Buyer. During the period from the date of
this Agreement and continuing until the earlier of the termination of this
Agreement pursuant to its terms or the Closing Date, without the prior written
consent of Seller, Buyer shall not do any of the following:
(a) Declare, set aside or pay any dividends on or make any
other distributions (whether in cash, stock, equity securities or property) in
respect of any capital stock or split, combine or reclassify any capital stock
or issue or authorize the issuance of any other securities in respect of, in
lieu of or in substitution for any capital stock;
(b) Engage in any action with the intent to directly or
indirectly adversely impact any of the transactions contemplated by this
Agreement or the Related Agreements;
(c) Except as contemplated by this Agreement and the Related
Agreements, make, effect, cause or participate in any tender offer, exchange
offer, merger, business combination, recapitalization, restructuring,
liquidation, dissolution or other extraordinary transaction involving Buyer or
any of its securities, assets or subsidiaries; or
(d) Agree in writing or otherwise to take any of the actions
described in clauses (a) through (c) of this Section 7.3.
7.4 Access and Review. Between the date hereof and the Closing Date,
Seller will cooperate in providing access during normal business hours for
Buyer's agents and employees to conduct a comprehensive review and inspection of
all the records, documents, assets, liabilities and physical facilities relating
to or used in connection with the conduct of the Business, including without
limitation the right to:
(a) Review all assets of the Seller that will be Acquired
Assets.
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(b) Review and inspect all documents and records relating to
customer relationships, including accounts receivable, software maintenance and
warranty claims and conduct due diligence interviews with customers pre-approved
by Seller.
(c) Review and inspect all Business Records.
(d) Review and inspect all compensation plans, contracts and
documents, including without any limitation any employment agreements, bonus and
incentive plans, stock option plans, pension plans, deferred compensation plans
and other Employee Benefit Plans as they relate to the Key Employees.
(e) Review and inspect all financial statements, records and
work papers with respect to Business.
(f) Review and inspect all documents and records relating to
relationships with vendors, suppliers, resellers and distributors.
(g) Review and inspect all documents and records relating to
licenses of "HP Business Intellectual Property" and "HP Related Intellectual
Property" and confidentiality agreements with employees and third parties,
subject to restrictions to maintain the confidentiality of other Seller
businesses and licensees.
(h) Review and inspect any other books, documents, records and
matters not expressly stated herein, but directly related to the Business or the
Acquired Assets which Buyer, in its reasonable judgment, may deem material.
Buyer shall provide Seller with copies of such publicly
available information and limited additional information about Buyer as Seller
may request and shall provide Seller (and its agents and employees) with
reasonable access to appropriate members of its management in this regard.
7.5 Update Schedules. On the close of business on the date that is one
business day prior to the Closing Date, Seller will cause the Schedules set
forth pursuant to Article IV, and Buyer will cause any Schedules set forth
pursuant to Article V, to be updated to reflect then current circumstances and
any resulting additions, deletions or modifications to the Schedules set forth
herein provided, however, that the delivery of any such updates pursuant to this
Section 7.5 shall not affect the delivery of such representations and warranties
as of the date of this Agreement. Such additions, deletions or modifications to
the Schedules set forth herein shall be separately transmitted by facsimile to
Buyer or Seller, as the case may be and its counsel on such date and to the
extent practicable shall be clearly marked to indicate the changes made to the
then existing Schedules.
7.6 Notice of Adverse Developments. Between the date hereof and the
Closing Date, the Parties will give immediate written notice to each other by
facsimile transmission of any development which has or might have a Material
Adverse Effect on Buyer or a Material Adverse Effect on Seller, as the case may
be. No disclosure pursuant to this Section 7.6, however, shall be
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deemed to amend or supplement the Schedules to this Agreement or to prevent or
cause any misrepresentation or breach of representations, warranties or
covenants made by Seller herein.
7.7 Exclusivity. Between the date hereof and the Closing Date, neither
Seller nor any of its directors, officers, employees, financial advisors or
agents will (i) solicit, encourage, initiate or participate in any negotiations
or discussions with any third party with respect to any offer or proposal to
sell all or substantially all of the Acquired Assets or the Business, (ii)
disclose to any third party any information concerning the business and
properties of the Acquired Assets or the Business or afford any third party
access to the Business Records, except in the ordinary course of business or as
customarily disclosed or accessed or as compelled by law, or (iii) cooperate
with any third party to make any proposal to acquire all or substantially all of
the Acquired Assets or the Business, other than Finished Goods Inventory in the
ordinary course of business or non-essential or excess assets.
ARTICLE VIII
ADDITIONAL AGREEMENTS
8.1 Additional Required Transfers. At any time and from time to time
after the date hereof, Seller will execute and deliver such further instruments
of sale, transfer, conveyance, assignment, and confirmation and take such
actions as Buyer may reasonably determine necessary to transfer, convey, and
assign to the Buyer, and to confirm Buyer's title to or interest in, the
Acquired Assets, to put Buyer in actual possession and operating control
thereof, and to assist Buyer in exercising all rights with respect thereto. At
any time and from time to time after the Closing, at the request of Buyer and
without further consideration, Buyer shall deliver or cause to be delivered to
Seller such other instruments and documents necessary or appropriate to evidence
the due execution, delivery and performance of this Agreement.
8.2 Access to Records After Closing. For a period of eighteen months
after the Closing Date, Seller and its representatives, on the one hand, and the
Buyer and its representatives, on the other hand, shall have reasonable access
to any Business Records to the extent that such access may reasonably be
required in connection with matters relating to or affected by the operation of
the businesses conducted with the Acquired Assets, in the case of Seller prior
to the Closing Date and, in the case of the Buyer, after the Closing Date. Such
access shall be afforded upon reasonable advance written notice, during normal
business hours and at the expense of the party seeking access.
8.3 Public Disclosure. The Parties shall issue a mutually acceptable
press release regarding the subject matter of this Agreement. No Party shall
issue any press release or make any public announcement relating to the subject
matter of this Agreement prior to the Closing without the prior written approval
of the other Party; provided, however, that any Party may make any public
disclosure it reasonably believes in good faith that it is required by
applicable law or any listing or trading agreement concerning its
publicly-traded securities (in which case the disclosing Party will advise the
other Party prior to making the disclosure).
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8.4 Contractual Consents. Seller shall use reasonable efforts to obtain
any third-party consents set forth on Schedule 4.19. Buyer shall use reasonable
efforts to assist Seller in connection with Seller's attempt to obtain such
consents provided, however, that Buyer shall not be required to agree to any
changes in the material terms of any agreement or contract for which such
consent is sought. To the extent not obtained as of the date of this Agreement
and subject to the proviso set forth in Section 2.3, Seller shall promptly apply
for or otherwise seek and use its reasonable efforts to obtain, all consents and
approvals required to be obtained by it for the consummation of the transactions
contemplated hereby, and Seller shall use its reasonable efforts to obtain all
required consents, waivers, or approvals under any of the agreements, contracts,
licenses, or leases of Seller in order to preserve for the Buyer the benefits of
the businesses associated with the Acquired Assets.
8.5 Legal Requirements. Each Party will take all reasonable actions
necessary to comply promptly with all legal requirements which may be imposed on
such Party with respect to this Agreement and the transactions contemplated
hereby and will promptly cooperate with and furnish information to any other
Party hereto in connection with any such requirements imposed upon such other
Party in connection herewith. Each Party will take all reasonable actions to
obtain (and will cooperate with the other parties in obtaining) any consent,
authorization, order or approval of, or any registration, declaration, or filing
with, or an exemption by, any Governmental Entity, or other third party,
required to be obtained or made by such Party (or its subsidiaries) in
connection with this Agreement and consummating the transactions contemplated
hereby or the taking of any action contemplated thereby or by this Agreement.
8.6 Additional Documents and Further Assurances. Each party hereto, at
the request of another party hereto, shall execute and deliver such other
instruments and do and perform such other acts and things as may be reasonably
necessary or desirable for effecting completely the consummation of the
transactions contemplated by this Agreement.
8.7 Notification of Certain Matters. Seller shall give prompt notice to
Buyer, and Buyer shall give prompt notice to Seller of any failure of Seller or
Buyer, as the case may be, to comply with or satisfy in any material respect any
representation, warranty, covenant or agreement to be complied with or satisfied
by it hereunder; provided, however, that the delivery of any notice pursuant to
this Section 8.7 shall not limit or otherwise affect any remedies available to
the party receiving such notice.
8.8 Nasdaq National Market Listing. Prior to Closing, Buyer shall
authorize for listing on the Nasdaq National Market the Buyer Shares issuable in
connection with the transactions contemplated by this Agreement, upon official
notice of issuance.
8.9 Pre-Closing Taxes. Seller shall file all Tax Returns in accordance
with applicable law and shall pay all Taxes required to be paid by them.
8.10 Transfer Taxes. Except as otherwise provided herein, Buyer and
Seller shall be equally responsible for and shall each pay one-half all sales,
use, excise, value added or other similar transfer taxes ("Transfer Taxes").
Buyer and Seller shall cooperate to take all reasonable steps to
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reduce or eliminate any Transfer Taxes, including, where available, electronic
transmission and delivery of Acquired Assets.
8.11 Employee Matters.
(a) Schedule 8.11 lists the employees who are engaged in the
business relating to the Acquired Assets with respect to whom Buyer will use
reasonable efforts to hire after the Closing (the "Key Employees"); provided,
however, that Buyer shall not be obligated to employ, and shall have no
Liability with respect to the continued employment of, any of the Key Employees.
The Seller agrees that any disclosure of confidential information of Seller
relating to the Business by a Key Employee to Buyer or any of its Affiliates
shall not constitute a breach of any confidentiality agreement between such Key
Employee and the Seller and Seller agrees that Buyer's employment of a Key
Employee shall not constitute a breach of any noncompetition agreement between
such Key Employee and Seller. Seller agrees to (i) cooperate with Buyer in
Buyer's recruitment of the Key Employees, (ii) terminate the employment of the
Key Employees who have agreed to become employees of Buyer with Seller at
Closing and to pay any and all Liabilities relating to such termination,
including, without limitation any payments and benefits due such Key Employees
pursuant to accrued salary and wages, pension, retirement, savings, health,
welfare and other benefits and severance payments or similar payments of the Key
Employees under any Seller plans, policies or practices, including accrued
vacation and (iii) provide to each Key Employee any notice (which notice shall
be reasonably acceptable to Buyer) required under any law or regulations in
respect of such termination including , without limitation COBRA. Buyer will
offer to such Key Employees as part of its recruitment thereof cash compensation
and stock option grants pursuant to Buyer's stock plans in each case in
accordance with Schedule 8.11, and participation in Buyer's 1994 Employee Stock
Purchase Plan, Buyer's 401(k) Plan and other benefit plans and policies,
including life and health insurance and vacation benefits in each case subject
to the terms and conditions of each such plan. For purposes of satisfying the
terms and conditions of such plans and policies of Buyer, Buyer shall give full
credit for previous service by the Key Employees with the Seller under such
Seller's comparable employee benefit plans, including but not limited to
vacation and sick leave pay, and a 401(k) savings plan (for purposes of
eligibility to participate, early commencement of benefits and vesting).
(b) In connection with the cooperation between Seller and
Buyer with respect to Buyer's recruitment of the Key Employees, the Parties
agree that Buyer shall provide a program including stock options and cash
incentives and Seller shall provide a program including acceleration of the
vesting schedule of options to purchase Seller common stock held by Key
Employees, as well as cash incentives all as set forth on Schedule 8.11. The
Parties agree the programs undertaken by Buyer and Seller pursuant to this
Section 8.11(b) shall be paid by Buyer and Seller, as the case may be in
accordance with Schedule 8.11.
(c) The Parties further agree that if Buyer is unsuccessful in
securing the employment of any Key Employee, Seller will use reasonable efforts
to establish with Buyer a consulting arrangement pursuant to which such Key
Employee shall remain an Employee of Seller but work as a consultant to Buyer
for a reasonable period of time not to exceed one year and that
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Buyer shall pay for such consulting services beyond a nominal level determined
at Seller's discretion an amount equal to the salary and incentive-based pay
paid by Seller to such Key Employee plus health and welfare benefits (but
excluding stock options), and, to the extent such consultant is located on
Seller's premises, overhead, for the period that the consulting arrangement
remains in effect.
(d) The Seller shall be solely responsible for providing
continuation health coverage, to the extent required under COBRA, to all
Employees and their eligible dependents who have experienced a qualifying event
before or on the Closing Date and who (i) elect continuation coverage within the
time period prescribed by COBRA and (ii) who are otherwise qualified
beneficiaries (as defined in Section 4980B(g)(1) of the Code).
(e) The Seller and Buyer agree to use their best efforts to
enable individual rollovers of Key Employees' account balances in the Seller's
401(k) Plan to Buyer's 401(k) Plan, which balances may include plan loans. In
the furtherance and not in limitation of the foregoing, provided that Key
Employees have satisfied the Seller's 401(k) termination distribution
administrative requirements, the Seller shall complete Buyer's standard rollover
form (which shall be reasonably acceptable to Seller) for each Key Employee
electing to rollover his or her account balance into Buyer's 401(k) Plan in a
timely manner.
8.12 Confidentiality. The parties acknowledge that Buyer and Seller
have previously executed a Confidentiality Agreement, dated as of May 19, 1999
(the "Confidentiality Agreement"), which Confidentiality Agreement will continue
in full force and effect in accordance with its terms.
8.13 Noncompetition. Seller agrees, for itself and its successors,
assigns and any entity which it controls, that during the period commencing on
the Closing Date and ending on the three year anniversary of the Closing Date,
in consideration of the purchase of the Acquired Assets by Buyer hereunder, (i)
prior to Seller's proposed spinoff of the measurement organization (the
"Measurement Organization") of Seller into a separate company ("Newco"), the
Measurement Organization shall not use the HP Business Intellectual Property
licensed back to it under Article 3 of the Technology Transfer Agreement to
compete in the digital broadcast video server business and (ii) subsequent to
the spinoff of Newco, Newco shall not use the HP Business Intellectual Property
licensed back to it under the Technology Transfer Agreement to compete in the
digital broadcast video server business. The parties acknowledge that (i) prior
to the spinoff of Newco, the remainder of Seller (other than the Measurement
Organization), and (ii) after the spinoff of Newco, HPCo. (as defined in the
Technology Transfer Agreement) has no rights to use the HP Business Intellectual
Property after the Closing Date for any purpose, including competing with Buyer.
In addition, Seller agrees, for itself and its successors, assigns and any
entity which it controls, that, in consideration of the purchase of the Acquired
Assets by Buyer hereunder, it shall not, on or prior to the date which is 21
months after the Closing Date, solicit any of the Key Employees who have been
hired by Buyer for purposes of obtaining their employment services provided,
however, that the foregoing shall not prohibit Seller from hiring any such Key
Employee, if such hiring (x) results exclusively from such Key Employee's
affirmative response to a general recruitment effort carried out through a
public solicitation or a general solicitation, (y) is of a Key Employee whose
employment with Buyer has
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been terminated by Buyer or (z) results from such Key Employee's initiatives in
seeking employment with Seller in the absence of solicitation by Seller.
7.14 Preparation of Audit of the Business. Within 60 days after the
Closing Date, Seller will provide to Buyer audited financial statements for the
Business prepared in compliance with Regulation S-X and as required to allow
Buyer to satisfy its reporting obligations under the Securities Act of 1933, as
amended, and the Securities Exchange Act of 1934. Buyer and Seller shall share
equally the fees, costs and expenses relating to Seller's engagement of
independent auditors to conduct the audit of such financial statements.
ARTICLE IX
CONDITIONS TO OBLIGATION TO CLOSE
9.1 Conditions to Obligation of Buyer. The obligation of Buyer to
consummate the transactions to be performed by it in connection with the Closing
is subject to satisfaction of the following conditions:
(a) Representations and Warranties. The representations and
warranties set forth in Article IV above shall be true and correct in all
material respects (except for such representations and warranties which are
qualified by their terms by a reference to materiality, which representations
and warranties as so qualified shall be true and correct in all respects) when
made and on and as of the Closing Date except to the extent that the aggregate
of all breaches thereof do not constitute a Material Adverse Effect on Seller;
(b) Performance by Seller. Seller shall have performed and
complied with all of its covenants, agreements and obligations hereunder in all
material respects through the Closing;
(c) Absence of Litigation. No action, suit or proceeding shall
be pending or threatened before any court or quasi-judicial or administrative
agency of any federal, state, local or foreign jurisdiction wherein an
unfavorable injunction, judgment, order, decree, ruling or charge would (i)
prevent consummation of any of the transactions contemplated by this Agreement,
(ii) cause any of the transactions contemplated by this Agreement to be
rescinded following consummation, (iii) prevent Buyer from owning the Acquired
Assets (and no such injunction, judgment, order, decree, ruling or charge shall
be in effect);
(d) Backlog. At the Closing Date, the value of Products under
Sales Orders that are recognizable as revenue in accordance with GAAP within 60
days after the Closing Date shall be at least $4.0 million.
(e) Certificate. Seller shall have delivered to Buyer a
certificate to the effect that each of the conditions specified above in this
Section 9.1 are satisfied in all respects;
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(f) Opinion. Buyer shall have received from Seller a corporate
opinion, in form and substance as set forth in Exhibit H attached hereto,
addressed to Buyer, and dated as of the Closing Date;
(g) Employee Notices. At least 31 of the Key Employees shall
have agreed to become employees of Buyer upon the Closing and Seller shall have
sent termination notices to any such Key Employees as contemplated by Section
8.11.
(h) Stock Restriction and Registration Rights Agreement. Buyer
and Seller shall have entered into and delivered the Registration Rights
Agreement.
(i) HSR Act. Any waiting period applicable to the consummation
of the Acquisition under the HSR Act shall have expired or been terminated, and
no action shall have been instituted by the Department of Justice or the Federal
Trade Commission challenging or seeking to enjoin the consummation of the
Acquisition, which action shall not have been withdrawn or terminated.
9.2 Conditions to Obligation of Seller. The obligation of Seller to
consummate the transactions to be performed by it in connection with the Closing
is subject to satisfaction of the following conditions:
(a) Representations and Warranties. The representations and
warranties set forth in Article V above shall be true and correct in all
material respects (except for such representations and warranties which are
qualified by their terms by a reference to materiality, which representations
and warranties as so qualified shall be true and correct in all respects) at and
as of the Closing Date except to the extent that the aggregate of all breaches
thereof do not constitute a Material Adverse Effect on Buyer;
(b) Performance by Buyer. Buyer shall have performed and
complied with all of its covenants hereunder in all material respects through
the Closing;
(c) Absence of Litigation. No action, suit or proceeding shall
be pending or threatened before any court or quasi-judicial or administrative
agency of any federal, state, local or foreign jurisdiction wherein an
unfavorable injunction, judgment, order, decree, ruling or charge would (i)
prevent consummation of any of the transactions contemplated by this Agreement
or (ii) cause any of the transactions contemplated by this Agreement to be
rescinded following consummation (and no such injunction, judgment, order,
decree, ruling or charge shall be in effect);
(d) Certificate. Buyer shall have delivered to Seller a
certificate to the effect that each of the conditions specified above in this
Section 9.2 is satisfied in all respects;
(e) Opinion. Seller shall have received from counsel to Buyer
an opinion in form and substance as set forth in Exhibit I attached hereto,
addressed to Seller and dated as of the Closing Date;
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(f) Employees. Each of the Key Employees shall have received
an offer of employment from Buyer.
(g) Stock Restriction and Registration Rights Agreement. Buyer
and Seller shall have entered into and delivered the Registration Rights
Agreement.
(h) HSR Act. Any waiting period applicable to the consummation
of the Acquisition under the HSR Act shall have expired or been terminated, and
no action shall have been instituted by the Department of Justice or the Federal
Trade Commission challenging or seeking to enjoin the consummation of the
Acquisition, which action shall not have been withdrawn or terminated.
ARTICLE X
INDEMNIFICATION
10.1 Indemnification of Buyer. Seller shall indemnify and hold Buyer
harmless from and against any Liabilities, loss, cost, expense, claim, Lien or
other damage including, without limitation, reasonable attorneys' fees and
expenses (all of the foregoing items for purposes of this Article X, or as
otherwise specified in this Agreement, are referred to herein as "Damages"),
resulting from, arising out of, or incurred with respect to:
(a) the falsity or breach of any representation, warranty,
covenant or agreement by Seller herein or in the schedules or exhibits hereto
without giving effect to any update to the Article IV Schedules pursuant to
Section 7.5 given by Seller to Buyer after the date of this Agreement, subject
to a claim being made before the expiration of the applicable period specified
in Section 12.1 with respect to the falsity or breach of any representation or
warranty by Seller herein; or
(b) the Excluded Liabilities.
10.2 Indemnification of Seller. Buyer shall indemnify and hold Seller
harmless from and against any Damages, resulting from, arising out of, or
incurred with respect to:
(a) the falsity or breach of any representation, warranty,
covenant or agreement by Buyer herein or in the schedules or exhibits hereto
without giving effect to any update to the Article V Schedules pursuant to
Section 7.5 given by Buyer to Seller after the date of this Agreement, subject
to a claim being made before the expiration of the applicable period specified
in Section 12.1 with respect to the falsity or breach of any representation or
warranty by Buyer herein; or
(b) the Assumed Liabilities.
10.3 Limitations on Indemnification. Neither Seller nor Buyer shall
have any liability under the indemnification provisions of Sections 10.1(a) or
10.2(a) until the gross aggregate amount of claims for Damages exceeds $250,000,
and then only to the extent of such excess amount, and the maximum aggregate
amount of indemnification that Buyer may obtain from Seller pursuant to
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Section 10.1(a) (other than for willful or fraudulent breach) shall be equal to
15% of the final Purchase Price (in accordance with Sections 3.1(a) and (c)).
10.4 Procedure for Indemnification.
(a) The indemnified party shall give notice to the
indemnifying party within 45 days after an executive officer thereof obtains
actual knowledge of any claim as to which recovery may be sought against the
indemnifying party because of the indemnity in this Article X. If such claim
does not arise from the claim of a third party, the indemnifying party shall
have 45 days after such notice to either cure the conditions giving rise to such
claim or to provide the indemnified party with evidence that such claim is not
subject to indemnity under this Article X, in either case, to the indemnified
party's satisfaction. If such indemnity shall arise from the claim of a third
party, the indemnified party shall permit the indemnifying party to assume the
defense of any such claim or any litigation resulting from such claim; provided,
however, Seller shall have no right to assume the defense of any claim or
litigation which could, in the reasonable good faith judgment of Buyer, result
in the interruption or cessation of the Business as then conducted by Buyer.
Notwithstanding the foregoing, the right to indemnification hereunder shall not
be affected by any failure or delay of the indemnified party in giving such
notice unless, and then only to the extent that, the rights and remedies of the
indemnifying party shall have been prejudiced as a result of the failure to
give, or the delay in giving, such notice. Failure by the indemnifying party to
notify an indemnified party of its election to defend any such claim or action
by a third party within 30 days after notice thereof shall have been given to
the indemnifying party shall be deemed a waiver by the indemnifying party of its
right to defend such claim or action.
(b) If the indemnifying party assumes the defense of such
third-party claim or litigation resulting therefrom, the obligations of the
indemnifying party hereunder as to such claim shall include taking all steps
necessary in the defense or settlement of such claim or litigation and holding
the indemnified party harmless against any and all Damages caused by or arising
out of any settlement approved by the indemnifying party or any judgment in
connection with such claim or litigation. Except with the prior written consent
of the indemnified party, which shall not be unreasonably withheld, the
indemnifying party shall not, in the defense of such claim or any litigation
resulting therefrom, consent to the entry of any judgment (other than a judgment
of dismissal on the merits without costs), or enter into any settlement which
does not include as an unconditional term thereof the giving by the claimant or
the plaintiff to the indemnified party a release from all Damages in respect of
such claim or litigation.
(c) If the indemnifying party does not assume the defense of
any such third-party claim or litigation resulting therefrom, the indemnified
party may defend against such claim or litigation in such manner as it deems
appropriate but may not settle such claim or litigation without the prior
written consent of the indemnifying party, which consent shall not be
unreasonably withheld.
(d) Within 30 days of the indemnified party's written request,
the indemnifying party shall reimburse the indemnified party in cash for the
amount of any judgment or settlement
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rendered with respect to any claim by a third party in such litigation and for
all Liabilities incurred by the indemnified party in connection with the defense
against such claim or litigation, and for all Damages suffered or incurred by
the indemnified party with respect to the matters specified in Section 10.1.
10.5 Remedies Exclusive. The remedies provided in this Article X shall
be exclusive as to any claims by a party under this Agreement or arising out of
the transactions provided for herein and shall preclude assertion by any party
of any other rights or the seeking of any other remedies against another party;
provided, however, that nothing in this Section 10.5 shall limit rights or
remedies for fraud or deceit or other rights or remedies which, as a matter of
applicable law or public policy, cannot be limited or waived.
10.6 Arbitration. Any controversy involving a claim by an indemnified
party pursuant to this Article X after the Closing shall be finally settled by
arbitration in accordance with the provisions set forth in Section 12.10 hereof.
ARTICLE XI
TERMINATION
11.1 Termination of Agreement. Each of the Parties may terminate this
Agreement as provided below.
(a) The Parties may terminate this Agreement by mutual written
consent at any time prior to the Closing;
(b) Buyer may terminate this Agreement by giving written
notice to Seller at any time prior to the Closing (A) in the event Seller has
breached any representation, warranty or covenant contained in this Agreement in
any material respect, Buyer has notified Seller of the breach, and the breach
has continued without cure for a period of 15 days after the notice of breach or
(B) if the Closing shall not have occurred on or before August 31, 1999, by
reason of the failure of any condition precedent under Section 8.1 hereof
(unless the failure results primarily from Buyer itself breaching any
representation, warranty or covenant contained in this Agreement); and
(c) Seller may terminate this Agreement by giving written
notice to Buyer at any time prior to the Closing (A) in the event Buyer has
breached any representation, warranty or covenant contained in this Agreement in
any material respect, Seller has notified Buyer of the breach, and the breach
has continued without cure for a period of 15 days after the notice of breach or
(B) if the Closing shall not have occurred on or before August 31, 1999, by
reason of the failure of any condition precedent under Section 8.2 hereof
(unless the failure results primarily from Seller itself breaching any
representation, warranty, or covenant contained in this Agreement).
11.2 Effect of Termination. In the event of termination of this
Agreement as provided in this Article XI, the terminating Party shall provide
written notice of such termination to the other
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Party, the provisions of this Agreement shall forthwith become void, except that
the agreements contained or referred to in Sections 4.19 (Brokers; Finders) and
5.8 (Brokers; Finders) and 8.13 (Confidentiality) and 11.1 (Termination of
Agreement) and Article XII (Miscellaneous) shall survive. Notwithstanding the
foregoing, in the event of a termination of this Agreement by any Party hereto,
nothing herein shall limit the remedies at law or in equity of any Party with
respect to any breaches hereof by any other Party.
ARTICLE XII
MISCELLANEOUS
12.1 Non-Survival of Representations, Warranties and Agreements. All
representations, warranties, covenants and agreements in this Agreement or in
any instrument delivered pursuant to this Agreement shall not survive the
Closing, except that (i) the representations and warranties contained in
Articles IV and V shall survive for a period of one year from the Closing Date,
except Section 4.11 which shall survive until the expiration of the applicable
statutes of limitations and (ii) the covenants contained in Section 8.11
(Employee Matters), Section 8.2 (Access to Records After Closing), Section 8.12
(Confidentiality) and Section 8.13 (Noncompetition) shall survive for the period
of time as set forth in such section and, in the case Section 8.10 (Transfer
Taxes), the applicable statutes of limitations. Article XII (Miscellaneous)
shall survive the Closing.
12.2 Amendment. Except as is otherwise required by applicable law, this
Agreement may be amended by the parties hereto at any time by execution of an
instrument in writing signed by Buyer and Seller.
12.3 Extension; Waiver. Buyer and Seller may, to the extent legally
allowed, (i) extend the time for the performance of any of the obligations of
the other party hereto, (ii) waive any inaccuracies in the representations and
warranties made to such party contained herein or in any document delivered
pursuant hereto, and (iii) waive compliance with any of the agreements or
conditions for the benefit of such party contained herein. Any agreement on the
part of a party hereto to any such extension or waiver shall be valid only if
set forth in an instrument in writing signed on behalf of such party.
12.4 Notices. Any request, communication, or other notice required or
permitted hereunder shall be in writing and shall be deemed to have been duly
given if sent by facsimile or delivered by recognized overnight or international
courier service or personal delivery (as the situation may require) at the
respective address or facsimile number of the party receiving notice as set
forth below. Any party hereto may by notice so given change its address or
facsimile number for future notice hereunder. All such notices and other
communications hereunder shall be deemed given (i) upon confirmation of
delivery, if sent by facsimile and (ii) upon delivery, if sent by recognized
overnight or international courier service or personal delivery.
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(a) if to Buyer, to:
Pinnacle Systems, Inc.
000 Xxxxx Xxxxxxxx Xxxxxx
Xxxxxxxx Xxxx, Xxxxxxxxxx 00000
Attn: Chief Executive Officer
Telephone No.: (000) 000-0000
Facsimile No.: (000) 000-0000
with a copy (which shall not constitute notice) to:
Xxxxxx Xxxxxxx Xxxxxxxx & Xxxxxx, P.C.
000 Xxxx Xxxx Xxxx
Xxxx Xxxx, Xxxxxxxxxx 00000-0000
Attn: Xxxxx X. Xxxxxxx, Esq.
Telephone No.: (000) 000-0000
Facsimile No.: (000) 000-0000
(b) if to Seller, to:
Hewlett-Packard Company
0000 Xxxxxxx Xxxxxx
Xxxx Xxxx, Xxxxxxxxxx 00000
Attn: General Counsel
Telephone No.: (000) 000-0000
Facsimile No.: (000) 000-0000
with a copy (which shall not constitute notice) to:
HP Measurement, Inc.
0000 Xxxxxxx Xxxxxx
Xxxx Xxxx, Xxxxxxxxxx 00000
Attn: D. Xxxxx Xxxxxxxx
Telephone No.: (000) 000-0000
Facsimile No.: (000) 000-0000
with a copy (which shall not constitute notice) to:
Xxxxxx, Xxxx & Xxxxxxxx LLP
No. Xxx Xxxxxxxxxx Xxxxxx, 00xx Xxxxx
Xxx Xxxxxxxxx, XX 00000
Attn: Xxxx X. Xxxxx, Esq.
Telephone No.: (000) 000-0000
Facsimile No.: (000) 000-0000
\
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12.5 Expenses. All fees and expenses incurred in connection with this
Agreement including, without limitation, all legal, accounting, financial
advisory, consulting and all other fees and expenses of third parties incurred
by a party hereto, in connection with the negotiation and effectuation of the
terms and conditions of this Agreement and the transactions contemplated hereby,
shall be the obligation of the respective party incurring such fees and
expenses.
12.6 Counterparts. This Agreement may be executed in one or more
counterparts, all of which shall be considered one and the same agreement and
shall become effective when one or more counterparts have been signed by each of
the parties and delivered to the other party, it being understood that all
parties need not sign the same counterpart.
12.7 Entire Agreement. This Agreement, the schedules and exhibits
hereto, and the documents and instruments and other agreements among the parties
hereto referenced herein constitute the entire agreement among the parties with
respect to the subject matter hereof and supersede all prior agreements and
understandings, both written and oral, among the parties with respect to the
subject matter hereof.
12.8 Assignment. Neither party may, directly or indirectly, in whole or
in part, neither by operation of law or otherwise, assign or transfer this
Agreement or delegate any of its obligations under this Agreement without the
other party's prior written consent. Any attempted assignment, transfer or
delegation without such prior written consent will be void. Notwithstanding the
foregoing, Seller, or its permitted successive assignees or transferees, may
assign or transfer this Agreement or delegate any rights or obligations
hereunder without consent: (1) to any entity controlled by, or under common
control with, Seller, or its permitted successive assignees or transferees; or
(2) in connection with a merger, reorganization, transfer, sale of assets or
product lines, or change of control or ownership of Seller or its permitted
successive assignees or transferees. Without limiting the foregoing, this
Agreement will be binding upon and inure to the benefit of the parties and their
permitted successors and assigns.
12.9 Severability. In the event that any provision of this Agreement or
the application thereof, becomes or is declared by a court of competent
jurisdiction to be illegal, void or unenforceable, the remainder of this
Agreement will continue in full force and effect and the application of such
provision to other persons or circumstances will be interpreted so as reasonably
to effect the intent of the parties hereto. The parties further agree to replace
such void or unenforceable provision of this Agreement with a valid and
enforceable provision that will achieve, to the extent possible, the economic,
business and other purposes of such void or unenforceable provision.
12.10 Other Remedies. Except as otherwise provided herein, any and all
remedies herein expressly conferred upon a party will be deemed cumulative with
and not exclusive of any other remedy conferred hereby, or by law or equity upon
such party, and the exercise by a party of any one remedy will not preclude the
exercise of any other remedy.
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12.11 Governing Law; Arbitration. This Agreement shall be governed by
and construed in accordance with the internal laws of the State of California,
regardless of the laws that might otherwise govern under applicable principles
of conflicts of laws thereof. From and after the Closing, any claim or dispute
arising out of or related to this Agreement, or the interpretation, making,
performance, breach or termination thereof, shall be finally settled by binding
arbitration in the County of Santa Clara, California in accordance with the then
current Commercial Arbitration Rules of the American Arbitration Association and
judgment upon the award rendered by the arbitrator(s) may be entered in any
court having jurisdiction thereof. The arbitrator(s) shall have the authority to
grant any equitable and legal remedies that would be available in any judicial
proceeding instituted to resolve a dispute. Such arbitration shall be conducted
by a single arbitrator chosen by mutual agreement of Buyer and Seller. Failing
such agreement, the arbitration shall be conducted by three independent
arbitrators, none of whom shall have any competitive interests with Buyer or
Seller. Buyer shall choose one such arbitrator, Seller shall choose one such
arbitrator, and such two arbitrators shall mutually select a third arbitrator.
Any decision of two such arbitrators shall be binding on Buyer and Seller. The
parties to the arbitration may apply to a court of competent jurisdiction for a
temporary restraining order, preliminary injunction or other interim or
conservatory relief, as necessary, without breach of this arbitration provision
and without abridgement of the powers of the arbitrator(s). Each party shall pay
its own costs and expenses (including counsel fees) of any such arbitration,
except that the arbitrator(s) can compel one party to pay all or a portion of
the other party's costs and expenses, including without limitation AAA
administrative fees, arbitrator fees, attorney's fees, expert fees, witness
fees, travel expenses and out of pocket expenses.
12.12 Rules of Construction. The parties hereto agree that they have
been represented by counsel during the negotiation and execution of this
Agreement and, therefore, waive the application of any law, regulation, holding
or rule of construction providing that ambiguities in an agreement or other
document will be construed against the party drafting such agreement or
document.
12.13 No Third Party Beneficiaries. This Agreement shall not confer any
rights or remedies upon any person or entity other than the parties hereto and
their respective successors and permitted assigns.
12.14 Incorporation of Exhibits and Schedules. The exhibits and
schedules identified in this Agreement are incorporated herein by reference and
made a part hereof.
[Remainder of Page Intentionally Left Blank]
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IN WITNESS WHEREOF, Buyer and Seller have caused this Asset Purchase
Agreement to be signed as of the date first written above.
"BUYER" PINNACLE SYSTEMS, INC.
a California Corporation
By: /s/ XXXXXX X. XXXXXXXX
-------------------------------------------------------
Xxxxxx X. Xxxxxxxx
Vice President, Finance and Chief Financial Officer
"SELLER" HEWLETT-PACKARD COMPANY
a Delaware corporation
By: /s/ XXXXXX XXXXX
-------------------------------------------------------
Xxxxxx Xxxxx
Vice President, Communications Solutions Group
EXHIBIT A
TECHNOLOGY TRANSFER AND LICENSE AGREEMENT
EXHIBIT A
to
ASSET PURCHASE AGREEMENT
TECHNOLOGY TRANSFER AND LICENSE AGREEMENT
This Technology Transfer and License Agreement is entered into and is
effective this 30th day of June, 1999, by and between Hewlett-Packard Company, a
Delaware corporation having a place of business at 0000 Xxxxxxx Xxxxxx, Xxxx
Xxxx Xxxxxxxxxx 00000, XXX ("HP"), and Pinnacle Systems, Inc., a California
corporation having a place of business at 000 X. Xxxxxxxx Xxxxxx, Xxxxxxxx Xxxx,
Xxxxxxxxxx 00000 ("Pinnacle" and, together with HP, the "Parties").
RECITALS
WHEREAS, HP owns or controls, and has the right to license or to
transfer, certain Business Intellectual Property (as defined below) and Related
Intellectual Property (as defined below) in connection with the Business (as
defined in the APA); and
WHEREAS, pursuant to that certain Asset Purchase Agreement (the "APA"),
dated June 30, 1999, by and between HP and Pinnacle, HP has agreed to sell, and
Pinnacle has agreed to buy, certain Acquired Assets (the "Acquired Assets" as
defined in the APA), related to the Business; and
WHEREAS, Pinnacle desires to operate a business enterprise, equivalent
to the Business, based on its acquisition of the Acquired Assets; and
WHEREAS, Pinnacle's operation of the said business enterprise requires
ownership of, or the right to use, the HP Business Intellectual Property and the
HP Related Intellectual Property; and
WHEREAS, it is a condition to the effectiveness of the APA that HP and
Pinnacle execute and deliver this Agreement;
NOW, THEREFORE, in consideration of the terms, covenants, and
conditions hereinafter set forth, the Parties agree as follows:
1.0 DEFINITIONS
"Acquired Assets" shall have the meaning set forth in the APA.
"Assigned Technology" shall have the meaning set forth in the APA.
"Business" shall have the meaning set forth in the APA.
"Closing Date" shall have the meaning set forth in the APA.
"Computer Organization" shall mean the business divisions and groups,
within HP, including but not limited to the computer and printer divisions and
groups, but not including the Measurement Organization, which are to make up
HPCo. following the Split.
"Deliverables" shall mean, collectively, the file histories of each
pending HP Business Patent Application and foreign counterpart applications, as
listed in Exhibit A.
"Excluded Assets" shall have the meaning set forth in the APA.
"HP Business Confidential Information" shall mean that information or
inventions (a) which are specifically related to the Business, (b) which is not
generally available to the public, and (c) which HP has desired to keep secret.
HP Business Confidential Information includes, but is not limited to, business
and technical information.
However, "HP Business Confidential Information" shall not include information
(i) which is previously known to Pinnacle without obligation of confidentiality,
(ii) becomes a matter of public knowledge through no fault of Pinnacle, as of
the time it becomes public knowledge, (iii) is rightfully received by Pinnacle
from a third party without obligation of confidentiality, as of the time it is
so received, (iv) is disclosed by HP to a third party without obligation of
confidentiality on the third party, as of the time it is so disclosed, (v) is
independently developed by Pinnacle, (vi) is disclosed under operation of the
law, or (vii) is disclosed by Pinnacle with HP's prior written approval, as of
the time the written approval is given.
"HP Business Copyright Rights" shall mean those rights to works of
authorship and derivative works thereof (a) which are provided for by the
copyright laws of the United States and of various other countries under
copyrights and copyright applications, (b) which are based on works of
authorship prepared (i) prior to the date hereof, by employees of HP, or (ii) by
others, as to whose works of authorship HP shall have the right, as of the date
hereof, to make the grants provided for in this Agreement without accounting to
others, subject, however, to the conditions under which HP acquires or has
acquired the right from the others to make the grants; and (d) which are listed
in Exhibit F.
"HP Business Intellectual Property" shall mean, collectively:
(a) HP Business Patent Rights;
(b) HP Business Copyright Rights;
(c) HP Business Trademarks; and
(d) HP Business Confidential Information.
"HP Business Patent Rights" shall mean (a) those rights to Inventions
which are provided for by the patent laws of the United States and of various
other countries under patents issued as of the Closing Date or the claims
thereof, and (b) those rights to Inventions which are provided for by the patent
laws of the United States and of various other countries under patent
applications pending as of the Closing Date, including continuing applications,
reissue applications, and reexaminations, or the claims thereof; provided,
however, that such patents or applications (i) are based on inventions
conceived, prior to the Closing Date, by employees of HP, and (ii) are listed in
Exhibit A of this Agreement.
2
"HP Business Trademarks" shall mean any trade names, trademarks,
service marks, logos and designs used by HP for specific products and services
of the Business, including without limitation the name "MediaStream" and any
variation thereof which HP has used in the Business.
"HPCo." shall mean a successor corporate organization to HP, following
the Split, which shall include the Computer Organization.
"HP Related Confidential Information" shall mean that information (a)
which is applicable to, but not specific to, the Business, (b) which is not
generally available to the public, and (c) which HP desires to keep secret, and
which includes, but is not limited to, the items listed in Exhibit E; which HP
makes available to Pinnacle under this Agreement. HP related Confidential
Information includes, but is not limited to, business and technical information.
However, HP Related Confidential Information shall not include information (i)
which is previously known to Pinnacle without obligation of confidentiality,
(ii) becomes a matter of public knowledge through no fault of Pinnacle, as of
the time it becomes public knowledge, (iii) is rightfully received by Pinnacle
from a third party without obligation of confidentiality, as of the time it is
so received, (iv) is disclosed by HP to a third party without obligation of
confidentiality on the third party, as of the time it is so disclosed, (v) is
independently developed by Pinnacle, (vi) is disclosed under operation of the
law, or (vii) is disclosed by Pinnacle with HP's prior written approval, as of
the time the written approval is given.
"HP Related Copyright Rights" shall mean those rights to works of
authorship and derivative works thereof (a) which are provided for by the
copyright laws of the United States and of various other countries under
copyrights and copyright applications; (b) which are related to the Business, to
the extent, and only to the extent, of such relation; (c) which are based on
works of authorship prepared (i) prior to the date hereof, by employees of HP,
or (ii) by others, as to whose works of authorship HP shall have the right, as
of the date hereof, to make the grants provided for in this Agreement without
accounting to others, subject, however, to the conditions under which HP
acquires or has acquired the right from the others to make the grants; and (d)
which include, but are not limited to, the items listed in Exhibit G.
"HP Related Intellectual Property" shall mean, collectively:
(a) HP Related Patent Rights;
(b) HP Related Copyright Rights;
(c) HP Related Confidential Information.
"HP Related Patent Rights" shall mean (a) those rights to Inventions
which are provided for by the patent laws of the United States and of various
other countries under patents issued as of the Closing Date or the claims
thereof, and (b) those rights to Inventions which are provided for by the patent
laws of the United States and of various other countries under patent
applications pending on or after the Closing Date, including continuing
applications, reissue applications, and reexaminations, or the claims thereof;
provided, however, that such patents or applications (i) are based on inventions
conceived, prior to the Closing Date, by employees of HP; and (ii) cover subject
matter which is necessary or useful to carry on the Business, or to carry on a
reasonable extension of the Business, but other than the HP Business Patent
Rights.
"HP Trademarks" shall mean any trade names, trademarks, service marks,
logos and designs other than HP Business Trademarks, including without
limitation the name "Hewlett-
3
Packard," "HP" and any variation thereof, and any trade names, trademarks,
service marks, logos or designs incorporating such name and the "HP" logo, and
any trade names, trademarks, service marks, logos or designs confusing
therewith.
"Intellectual Property" shall mean any or all of the following and all
rights in, arising out of, or associated therewith: (i) all United States and
foreign patents and utility models and applications therefor and all reissues,
divisions, renewals, extensions, provisionals, continuations and
continuations-in-part thereof, and equivalent or similar rights anywhere in the
world in inventions and discoveries; (ii) all inventions (whether patentable or
not), invention disclosures, improvements, trade secrets, proprietary
information, know how, technology, technical data and customer lists, and all
documentation embodying or evidencing any of the foregoing; (iii) all
copyrights, copyrights registrations and applications therefor and all other
rights corresponding thereto throughout the world; (iv) all industrial designs
and any registrations and applications therefor throughout the world; (v) all
trade names, logos, common law trademarks and service marks, trademark and
service xxxx registrations and applications therefor and all goodwill associated
therewith throughout the world; (vi) all databases and data collections and all
rights therein throughout the world; and (vii) all computer software including
all source code, object code, firmware, development tools, files, records and
data, all media on which any of the foregoing is recorded; (viii) all World Wide
Web addresses, sites and domain names; and (ix) any similar, corresponding or
equivalent rights to any of the foregoing anywhere in the world.
"Manufacturing, Supply and Transition Services Agreement" or "MS&TSA"
shall mean the Manufacturing, Supply and Transition Services Agreement, dated
the date hereof, by and between HP and Pinnacle, which is attached to the APA as
Exhibit J thereof.
"Measurement Organization" shall mean the business divisions and
groups, within HP, including but not limited to the test, measurement,
component, and medical instrumentation divisions and groups, but not including
the Computer Organization, which are to make up NewCo.
following the Split.
"NewCo." shall mean a successor corporate organization to HP, following
the Split, which shall include the Measurement Organization.
"Other Confidential Information" shall mean any information, other than
HP Business Confidential Information or HP Related Confidential Information, (a)
which either Party owns or possesses, (b) which is not generally available to
the public, and (c) which the owning or possessing Party desires to keep secret,
and (d) which is revealed by the owning or possessing Party to the other Party
in the course of the negotiations and communications between the Parties leading
to the sale of the Acquired Assets by HP to Pinnacle.
"Representative" shall mean a party's subsidiaries and affiliates and
the directors, officers, employees, agents or advisors (including without
limitation attorneys, accountants, consultants, bankers and financial advisors)
thereof.
"Split" shall mean the planned division of HP into two successor
corporate organizations, which is to be finalized in spring 2000.
"Subsidiary" shall mean any corporation, company, or other entity:
(a) more than 50% of whose outstanding shares or securities,
representing the right to vote for the election of directors or for other
managing authority, are now or hereafter owned or controlled, directly or
indirectly, by one of the parties of this Agreement, only so long as such
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ownership or control exists; or
(b) which does not have outstanding shares or securities, as may be the
case in a partnership, joint venture, or unincorporated association, but more
than 50% of whose ownership interest, including the right to make the decisions
for such corporation, company, or other entity, is now or hereafter owned or
controlled, directly or indirectly, by one of the parties of this Agreement,
only so long as such ownership interest exists.
"Transition Period" shall have the meaning set forth in the
Manufacturing, Supply and Transition Services Agreement between the Parties,
executed concurrently herewith.
2.0 TRANSFER OF THE HP BUSINESS PATENT RIGHTS
2.1 HP hereby transfers and assigns to Pinnacle all title and ownership to HP's
Business Patent Rights. Such HP Business Patent Rights shall be deemed to be
Acquired Assets, and to be Assigned Technology.
2.2 HP shall provide reasonable, timely assistance for preparing and filing for
recordation all applicable patent assignments for the HP Business Patent Rights,
either at the Closing Date, or within 60 days thereafter.
2.3 HP shall provide to Pinnacle as part of the Acquired Assets transferred
under the APA, the United States Patent and Trademark Office file histories for
the HP Business Patent Rights, either at the Closing Date, or within 60 days
thereafter.
2.4 The transfer of the HP Business Patent Rights to Pinnacle made herein is
subject to all pre-existing licenses granted by HP on the HP Business Patent
Rights. HP shall not be required to divulge to Pinnacle the identities of any
pre-existing licensees. However, HP represents that it does not have licenses
covering video broadcast server technology with any of the following parties:
Tektronix, ASC, Xxxxxx, Seachange, IBM, Compaq, and Dell.
2.5 It is expressly understood that HP makes no representation as to the right
of Pinnacle to use the patent rights of any third party, such patent rights not
being included in the HP Business Patent Rights. HP's transfer to Pinnacle of
the HP Business Patent Rights, and of any other of the HP Intellectual Property,
shall in no way be construed as an inducement to Pinnacle to infringe such
patent rights of any third party.
3.0 GRANT OF LICENSE BACK TO HP OF THE HP BUSINESS PATENT RIGHTS
3.1 Subject to the terms and conditions of this Agreement, Pinnacle hereby
grants to HP a fully paid-up, irrevocable, non-exclusive, non-transferable
(except pursuant to Section 3.2 below) and worldwide right to use, have used,
and to make, have made, sell, and otherwise exploit the HP Business Patent
Rights. This grant of license applies only to the HP Business Patent Rights
listed in Exhibit A attached hereto, and to any patents which issue from
inventions included in the HP Business Confidential Information. Prior to the
Split, the Measurement Organization shall have the rights given herein, but the
Computer Organization shall have no such rights. Subsequent to the Split, NewCo.
shall have the license given herein, and HPCo. shall have no license. This grant
of rights is without limitation, except that any use by the Measurement
Organization and NewCo. of the HP Business Patent Rights in the video broadcast
server business shall be limited as set forth in Section 8.13 of the APA.
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3.2 HP shall have the right to make any transfers of rights, assignments of
rights, licenses, etc., which shall be necessary for NewCo. to realize and
perfect the rights granted in Section 3.1 of this Agreement.
3.3 It is expressly understood that neither this Agreement nor the grants made
herein confer upon HP any immunity from suit under any patent rights owned or
possessed by Pinnacle and not included in the HP Business Patent Rights. It is
further understood that Pinnacle makes no representation as to the right of HP
to use the patent rights of any third party, such patent rights not being
included in the HP Business Patent Rights. Pinnacle's grant to HP of the right
to use the HP Business Patent Rights shall in no way be construed as an
inducement to HP to infringe such patent rights of third parties.
3.4 No license is granted or implied under any patent applications or patents
arising out of Pinnacle inventions made outside the scope of the Business.
4.0 GRANT OF LICENSE TO THE HP RELATED PATENT RIGHTS
4.1 HP hereby grants to Pinnacle a fully paid-up, irrevocable, non-exclusive,
non-transferable, and worldwide right to use, have used, and to make, have made,
sell, and otherwise exploit the HP Related Patent Rights for the operation and
maintenance of the Business, including without limitation the right to
manufacture and have manufactured products in connection with the Business.
4.2 Such HP Related Patent Rights shall be deemed to be Excluded Assets, but the
license granted to Pinnacle hereunder shall be deemed an Assigned Asset.
4.3 It is expressly understood that neither this Agreement nor the grants made
herein confer upon Pinnacle any immunity from suit under any patent rights not
included in either the HP Business Patent Rights or the HP Related Patent
Rights. It is further understood that HP makes no representation as to the right
of Pinnacle to use the patent rights of any third party, such patent rights not
being included in the HP Business Patent Rights or the HP Related Patent Rights.
HP's grant to Pinnacle of the right to use the HP Related Patent Rights and any
other of the HP Intellectual Property shall in no way be construed as an
inducement to Pinnacle to infringe such patent rights of others.
4.4 No license is granted or implied under any patent applications or patents
arising out of HP inventions made outside the scope of the Business.
5.0 CONFIDENTIAL INFORMATION
5.1 HP hereby agrees that it and its Representatives shall keep Pinnacle's Other
Confidential Information, the HP Business Confidential Information, and the HP
Related Confidential Information confidential, using at least the same degree of
care (but no less than a reasonable degree of care) as HP uses to prevent the
unauthorized use, dissemination or publication of its own confidential
information of a like nature, and HP and its Representatives will not disclose
or use, for purposes other than are necessary for the performance of HP's
obligations under the APA or the Additional Agreements, or as permitted by this
Agreement, any of Pinnacle's Other Confidential Information, the HP Business
Confidential Information, and the HP Related Confidential Information. Each
party will provide to the other party, upon request, its standard policies and
guidelines governing the protection, use, dissemination and publication of
confidential information.
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5.2 Pinnacle hereby agrees that it and its Representatives shall keep HP's Other
Confidential Information and the HP Related Confidential Information
confidential, using at least the same degree of care (but no less than a
reasonable degree of care) as Pinnacle uses to prevent the unauthorized use,
dissemination or publication of its own confidential information of a like
nature, and Pinnacle and its Representatives will not disclose or use, for
purposes other than are necessary for the performance of Pinnacle's obligations
under the APA or the Additional Agreement or as permitted by this Agreement, any
of HP's other Confidential Information or the HP Related Confidential
Information.
5.3 Any exchange of Other Confidential Information covered by this Agreement
shall be solely for the purpose of performing the respective obligations of the
parties under the APA and any additional agreements between the parties relating
to the sale and purchase of the Acquired Assets. The Other Confidential
Information disclosed by each party to the other party shall be only that
information which is reasonably necessary to such performance. In addition,
competitively sensitive information such as information concerning product
development or marketing plans, product prices or pricing plans, cost data,
customers or similar information which is reasonably necessary to the
performance of such obligations shall be limited only to those employees and
Representatives of the receiving party who are involved in such performance or
otherwise have a need to know such information in connection with such
performance.
5.4 Information shall not be deemed confidential which
(i) is or becomes generally available to the public other than as a
result of a disclosure by the receiving party or its Representatives in
violation of this Agreement,
(ii) was within the possession of the receiving party or any of its
Representative prior to its being furnished to the receiving party by or on
behalf of the disclosing party, provided that the source of such information was
not known by the receiving party or such Representative to be bound by a
confidentiality agreement with or other contractual, legal or fiduciary
obligation of confidentiality to the other party to this Agreement,
(iii) is or becomes available to the receiving party or any of its
Representatives on a non- confidential basis from a source other than the
disclosing party or any of its Representatives, provided that such source is not
known by the receiving party or such Representative to be bound by a
confidentiality agreement with or other contractual, legal or fiduciary
obligation of confidentiality to the disclosing party with respect to such
information,
(iv) is independently developed by the recipient or any of its
Representatives without use of Confidential Information,
(v) is disclosed under operation of law, or
(vi) is disclosed by the recipient or any of its Representatives with
the disclosing party's prior written approval.
Neither HP Business Confidential Information nor HP Related Confidential
Information shall include any information for which any of the above apply.
6.0 TRANSFER OF HP BUSINESS CONFIDENTIAL INFORMATION; GRANT OF RIGHTS TO HP
RELATED CONFIDENTIAL INFORMATION
6.1 HP hereby transfers and assigns to Pinnacle the HP Business Confidential
Information. HP shall deliver the HP Business Confidential Information at the
Closing Date, or within 60 days thereafter.
6.2 HP shall keep and maintain such of the HP Business Confidential Information
as is
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necessary to permit HP to meet all applicable legal and financial requirements.
Further, HP shall keep and maintain such of the HP Business Confidential
Information as is necessary to permit HP to meet its obligations under the
MS&TSA, and under other related agreements. HP will make no other use of the HP
Business Confidential Information. HP shall continue to hold the HP Business
Confidential Information in confidence as per Article 5 of This Agreement;
provided, however, that HP's confidentiality obligations shall cease to apply in
the event that any of the conditions of section 5.3 are met.
6.3 HP hereby grants to Pinnacle a fully paid-up, irrevocable, non-exclusive,
non-transferable and worldwide right to use the HP Related Confidential
Information for the operation and maintenance of the Business. This grant of
license applies to the HP Related Confidential Information listed in Exhibit E
attached hereto.
6.4 Pinnacle's rights concerning the HP Related Confidential Information shall
be subject to the limitations given in Article 5 of this Agreement; provided,
however, that HP Related Confidential Information which would inherently and
inevitably be disclosed by normal operation of the Business shall be deemed
covered by Section 5.3(i) of this Agreement.
6.5 Notwithstanding any other provision of this and the related Agreements, both
parties shall have the right to use Residuals of the HP Business Confidential
Information and the HP Related Confidential Information for any purpose, without
accounting to the other party. For the purpose of this provision, "Residuals"
shall mean knowledge, ideas, concepts, techniques, and "know-how", in intangible
form, kept by Representatives of the Parties; provided, however, that Residuals
shall not include information deliberately memorized by any Representative of a
Party for the purpose of contravening any provision of this Agreement.
7.0 COPYRIGHT RIGHTS: TRANSFER; GRANT OF RIGHTS
7.1 HP hereby transfers and assigns to Pinnacle all title and ownership to HP's
Business Copyright Rights.
7.2 HP grants to Pinnacle a fully paid-up, irrevocable, non-exclusive,
non-transferable and worldwide license under the HP Related Copyright Rights to
display, distribute copies of, execute, import, make, have made, offer for sale,
perform, prepare derivative works based on, reproduce, sell, use and have used
materials covered by the HP Copyright Rights for the operation and maintenance
of the Business. This grant of license applies only to the HP Related Copyright
Rights for copyrighted works listed in Exhibit G attached hereto.
8.0 TRANSFER OF THE HP BUSINESS TRADEMARKS; LICENSE TO USE HP NAME
8.1 HP hereby transfers and assigns to Pinnacle all rights in connection with
the use of the HP Business Trademarks, including all good will associated
therewith.
8.2 HP retains all rights to the HP Trademarks. No license or permission is
granted to Pinnacle for the use of the HP Trademarks in connection with
Pinnacle's operation of the Business subsequent to the date hereof.
8.3 Notwithstanding section 8.2, HP licenses Pinnacle to use HP's name for the
limited purpose of making verbal statements that products are designed and
manufactured by HP. The license to such usage is limited, in all particulars, to
the terms and conditions given in the MS&TSA. In
8
particular, this license shall not last beyond the end of the Transition Period.
Such verbal statements may be made in direct association with product units; for
instance, this license authorizes stickers printed with the verbal statement to
be affixed to product units shipped during the Transition Period. Also, similar
stickers applied to existing supplies of product literature, such literature to
be distributed to customers before the end of the Transition Period are
authorized hereby. All such usage of HP's name shall be in accordance with the
Hewlett-Packard Corporate Identity Trademarks Standards (Exhibit C).
9.0 LICENSES TO SUBSIDIARIES
9.1 All licenses granted to either party under this Agreement shall include the
right to grant revocable or irrevocable sublicenses to that party's
Subsidiaries, such sublicenses to include the right of the sublicensed
Subsidiaries, correspondingly, to sublicense other Subsidiaries.
10.0 THIRD-PARTY COMPETITION
10.1 If, during the term of this Agreement, one party (as "Discovering Party")
becomes aware of any third party which is making, using or selling a product, or
is practicing a process, which is covered by any intellectual property rights
owned by the other party (as "Owning Party"), the Discovering Party, at its
option, may bring the name of such third party to the Owning Party's attention.
However, the Owning Party shall have sole, unfettered discretion to enforce its
intellectual property rights against such third party, without accounting to the
Discovering Party. Nothing in this Agreement shall be construed to require the
Owning Party to divulge to the Discovering Party any information concerning the
Owning Party's licenses of its intellectual property rights with any third
party.
11.0 OWNERSHIP OF INTELLECTUAL PROPERTY
11.1 HP shall retain full ownership and control of all HP intellectual property
not expressly provided for otherwise in this Agreement. Such ownership and
control shall include, but not be limited to, statutory rights conferred for
Inventions under patent statutes and for works of authorship under copyright
statutes, statutory and common-law trademark rights, and rights to seek redress
for divulgations of trade secret information under legal theories including but
not limited to contract and tort.
11.2 The Owning Party has sole and unfettered discretion regarding the
enforcement and the maintenance in force of the Owning Party's intellectual
property.
11.3 HP and its Subsidiaries shall retain the right to use the HP intellectual
property for any purpose without accounting to Pinnacle, including but not
limited to the right freely to license the HP Related Patent Rights.
11.4 HP shall execute documents reasonably requested by Pinnacle to perfect
Pinnacle's rights in and to the HP Business Intellectual Property.
12.0 REPRESENTATIONS AND WARRANTIES; DISCLAIMERS
12.1 HP hereby remakes the representations and warranties of Article IV of the
Asset
9
Purchase Agreement with respect to the Intellectual Property.
12.2 EXCEPT FOR THE REPRESENTATIONS AND WARRANTIES REFERRED TO IN THIS ARTICLE
12, HP MAKES NO OTHER WARRANTIES, EITHER EXPRESS OR IMPLIED, REGARDING ANY
INFORMATION OR MATERIALS LICENSED TO PINNACLE UNDER THIS AGREEMENT, INCLUDING
NONINFRINGEMENT OF THIRD PARTY INTELLECTUAL PROPERTY RIGHTS. ANY INFORMATION
EXCHANGED UNDER THIS AGREEMENT IS PROVIDED "AS IS."
12.3 Neither party shall have any obligation to change, correct, maintain,
modify, update or otherwise support any materials licensed under this Agreement.
12.4 Neither party shall have any obligation to apply for, prosecute, perfect,
or enforce any Intellectual Property Right covered by this Agreement. In the
event that one of the Parties, which shall have had ownership and control of any
Intellectual Property Right covered by this Agreement (the "Controlling Party"),
shall decide not to do any of the above, or shall fail to do any of the above,
then the Controlling Party shall notify the other party in a timely manner. At
the other party's option, the Controlling Party shall assign such Intellectual
Property Right to the other party, so that the other party may apply for,
prosecute, perfect, or enforce the Intellectual Property right.
12.5 HP makes no representation or warranty as to the validity or the
enforceability of any HP Business Patent Right, or of any HP Related Patent
Right.
12.6 Both Parties represent and warrant that they have the right and the ability
to enter into this Agreement, the right to grant the respective licenses granted
herein, and the right to transfer the Acquired Assets and rights transferred in
this Agreement.
12.7 All HP Business Intellectual Property was written and created solely by
either (i) employees of HP acting within the scope of their employment or (ii)
by third parties who have validly assigned all of their rights, including
Intellectual Property rights in such products to HP, and no third party owns or
has any rights to the HP Business Intellectual Property.
12.8 To HP's Best Knowledge, all HP Related Intellectual Property was written
and created solely by either (i) employees of HP acting within the scope of
their employment or (ii) by third parties who have validly assigned all of their
rights, including Intellectual Property rights in such products to HP, and no
third party owns or has any rights to the HP Related Intellectual Property.
12.9 To the Best Knowledge of HP, Pinnacle's use and exercise of the HP Business
Intellectual Property, and of the HP Related Intellectual Property, in the
manner used or exercised by HP in the operation of the Business prior to the
Closing Date, and as permitted in this Agreement, will not infringe or
misappropriate the Intellectual Property Rights of any third party.
12.10 Exhibit I lists all actions, including the payment of any fees, that must,
or should be performed by, or on behalf of, HP in the ninety-day period
following the Closing Date, with respect to any application for, perfection of,
preservation of, or continuation of any rights of HP with respect to any HP
Business Intellectual Property, including the filing of any patent applications,
response to Patent Office actions, or payment of fees, including renewal fees.
12.11 All employees of HP related to the Business have entered into a valid and
binding agreement with HP sufficient to vest title in HP of all Intellectual
Property created by such employees in the scope of his or her employment with
HP.
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12.12 Neither the consummation of the transaction contemplated by this Agreement
nor the transfer to Pinnacle of any contracts, licenses, agreements or HP
Business Intellectual Property will cause or obligate Pinnacle to grant to any
third party any rights or licenses with respect to any Intellectual Property of
Pinnacle.
12.13 HP has taken all steps reasonable under the circumstances to protect the
confidentiality and trade secret status of any material confidential information
of HP and knows of no basis on which it could be claimed that HP has failed to
protect the confidentiality of any material HP Business Confidential
Information.
12.14 Except as set forth in Exhibit J, HP has not transferred ownership of, or
granted any license of or right to use or authorized the retention of any rights
to use, any Intellectual Property that is HP Business Confidential Information
or HP Business Copyright Rights, to any other person.
12.15 The contracts, licenses and agreements listed in Exhibit K include all
material contracts, licenses and agreements pursuant to which any person has
licensed any Intellectual Property to HP related to the Business. HP is neither
in breach of, nor has it failed to perform under any of the foregoing contracts,
licenses and agreements and, to the Best Knowledge of HP, no other party to such
contracts, licenses and agreements is in breach of or has failed to perform
thereunder.
12.16 Except for any pre-existing licenses to the HP Business Patent Rights, all
material HP Business Intellectual Property, including any item thereof, will be
fully, transferable, alienable or licensable by, or between, HP or Pinnacle
without restriction and without payment of any kind to any third party.
12.17 Except as set forth in Exhibit M, to the Best Knowledge of HP, no person
is infringing or misappropriating any HP Business Intellectual Property or any
HP Related Intellectual Property.
12.18 To HP's Best Knowledge, there are no facts or circumstances that would
render any HP Business Patent Rights invalid or unenforceable. Without limiting
the foregoing, to HP's Best Knowledge, there are no information, materials,
facts, or circumstances, including any information or fact that would constitute
prior art, that would render any of HP Business Patent Rights invalid or
unenforceable, or would adversely effect any pending application for any HP
Business Patent Rights. HP has not misrepresented, or failed to disclose, and,
to HP's Best Knowledge, HP is not aware of, any misrepresentation or failure to
disclose, any fact or circumstances in any application for any HP Business
Patent Rights that would constitute fraud or a material misrepresentation with
respect to such application or that would otherwise effect the validity or
enforceability of any HP Business Patent Rights.
13.0 INDEMNIFICATION
13.1 HP will indemnify Pinnacle for losses pertaining to the subject matter of
this Agreement as provided for in Article 10 of the APA.
14.0 LIMITED TRANSFERABILITY OF LICENSES
14.1 All licenses granted to Pinnacle hereunder shall be transferable by
Pinnacle only in connection with:
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(a) any consolidation, merger, reorganization, recapitalization or sale
in one or more related transactions of Pinnacle with or into any other
corporation or other entity or person, or any other corporate reorganization or
sale of securities of Pinnacle, in which the stockholders of Pinnacle
immediately prior to such consolidation, merger, recapitalization or sale, own
less than fifty percent (50%) of Pinnacle's voting power immediately after such
consolidation, merger, reorganization or sale, or any transaction or series of
related transactions in which in excess of fifty percent (50%) of Pinnacle's
voting power is transferred;
(b) any sale, lease or other disposition of all or substantially all of
the assets of Pinnacle; provided, however, that, as soon as possible but not
more than thirty (30) days after the consummation, or 3 days after the first
public announcement, of any such transaction in which Pinnacle proposes to
transfer such licenses, Pinnacle shall provide HP written notice of such
proposed transaction and the identity of the other party or parties thereto; or
(c) any sale, lease or other disposition of all or substantially all of
the assets of the Business; provided, however, that, as soon as possible but not
more than thirty (30) days after the consummation, or 3 days after the first
public announcement, of any such transaction in which Pinnacle proposes to
transfer such licenses, Pinnacle shall require, shall provide HP written notice
of such proposed transaction and the identity of the other party or parties
thereto, provided, further, that if such sale, etc., is to be consummated within
3 years of the Closing Date, the licenses shall be transferable only with HP's
consent; or
14.2 Where Pinnacle sells less than substantially all of the Business to a
third-party purchaser, the licenses granted hereunder to Pinnacle shall be
applicable to the third-party purchaser only with HP's prior notice and consent,
such consent to be communicated by HP to Pinnacle within 30 days of such notice.
In view of the pending split of HP into two successor corporate organizations,
provisionally designated "HPCo." and "NewCo.", such notice shall be given to the
general legal counsels of HPCo. and of NewCo., and the appropriate one, having
ownership of the relevant HP Business Intellectual Property, shall respond.
14.3 The parties acknowledge that HP is in the process of splitting into two
separate successor corporate organizations. All rights granted to HP under this
Agreement shall be applicable to both successor corporate organizations.
15.0 TERM AND TERMINATION
15.1 Unless sooner terminated as provided for in this Agreement, the term for
any license granted hereunder shall be the full and natural term of the
respective underlying licensed intellectual property right.
15.2 If either party (as "Breaching Party") breaches any material provision of
this Agreement, then the other party (as "Aggrieved Party") shall give the
Breaching Party timely notice of the breach, and an opportunity, of 30 days'
duration, for the Breaching Party to cure the breach. Upon failure of the
Breaching Party to cure the breach within the cure period, or within a
reasonable extension thereof at the discretion of the Aggrieved Party, the
licenses to the Breaching Party granted herein shall, at the Aggrieved Party's
option, terminate. The Aggrieved Party shall give the Breaching Party notice of
the breach, and notice of the termination, in the manner provided for in the
APA.
15.3 Any termination pursuant to this Article x shall not relieve either party
of any obligation or liability accrued hereunder prior to such termination. Such
termination shall not affect in any manner any rights of the Aggrieved Party
under this Agreement, nor rescind, nor give rise to any
12
right to rescind, anything done by the Breaching Party, or any payments made, or
any consideration given, to the Aggrieved Party by the Breaching Party hereunder
prior to the time such termination becomes effective.
15.4 In the event of termination of this Agreement, all rights and obligations
which, by their nature, survive the expiration or termination of this Agreement
shall remain in effect, including but not limited to the confidentiality
provisions given in Article 5 and the warranty provisions given in Article 12.
16.0 MISCELLANEOUS
16.1 This Agreement does not create a joint venture, partnership or any other
collaborative business relationship between the Parties. This Agreement makes no
provisions for any joint or collaborative research or development. No
inventions, discoveries, or works of authorship subject to patent or copyright
protection, respectively, shall be made jointly by the Parties pursuant to this
Agreement.
16.2 In case of any conflict between the terms of the Asset Purchase Agreement
and the terms of this Agreement, the latter shall govern, except with respect to
the provisions of Article 13 of the Asset Purchase Agreement, which shall govern
the provisions of Section 9 hereof.
16.3 This Agreement shall be construed in accordance with the laws of the State
of California.
16.4 the headings used in this Agreement are for reference and convenience only,
and shall not be used in interpreting or construing the provisions of this
Agreement.
16.5 In the event that any provision of this Agreement shall be held to be
unenforceable, such ruling shall not affect the validity or the enforceability
of the remaining provisions of this Agreement.
16.6 This Agreement and its Exhibits, Attachments, and/or Appendices, when
executed by both Parties, shall constitute the entire agreement between the
parties relating o the subject matter of this Agreement, and shall supersede app
prior proposals, agreements, representations, drafts, and other communications
between the Parties with respect to the subject matter of this Agreement.
16.7 No change to the provisions of this Agreement shall be valid, unless the
change is in writing, and is signed bu both parties.
16.8 Any notice or acceptance provided for in this Agreement shall be in
writing, and shall be deemed to have been given on the date such communication
is deposited in certified or registered first-class mail, in an appropriately
stamped envelope, as addressed to the appropriate parties in the Notice
provision of the APA, section 12.5.
16.9 This Agreement is binding upon, and shall inure to the benefit of, the
legal successors and assigns of the parties, including without limitation both
of the two successor corporate organizations into which HP is presently being
split.
16.10 The failure or delay of either party in exercising any of such party's
rights hereunder, including any rights with respect to a breach or default by
the other party, shall in no way operate as a waiver of such rights, nor shall
any such failure or delay prevent the assertion of such rights
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with respect to any later breach or default by the other party.
16.11 Capitalized terms, used in this Agreement but not defined herein, shall
have the meanings given in the APA.
17.0 EXHIBITS
The following is a list of Exhibits attached to this Agreement, which
are incorporated into this Agreement by this reference and by references
elsewhere in this Agreement, and which are made a part hereof:
EXHIBIT A HP Business Patents transferred to Pinnacle
EXHIBIT B HP Related Patents Licensed to Pinnacle
EXHIBIT C Hewlett-Packard Corporate Identity Trademarks
Standards
EXHIBIT D (reserved)
EXHIBIT E HP Related Confidential Information licensed
to Pinnacle
EXHIBIT F HP Business Copyright Rights transferred to Pinnacle
EXHIBIT G HP Related Copyright Rights licensed to Pinnacle
EXHIBIT H HP Business Trademarks
EXHIBIT I IP actions due within 90 days after the Closing Date
EXHIBIT J Third Party licenses to HP Business Copyrights,
confidential Information
EXHIBIT K HP licenses to third-party IP
EXHIBIT L (reserved)
EXHIBIT M third-party infringers of HP IP
14
IN WITNESS WHEREOF, HP and Pinnacle have each caused a duly authorized
representative to execute this Agreement on the dates given.
HEWLETT-PACKARD COMPANY PINNACLE SYSTEMS, INC.
By: __________________________ By: ____________________________
Print name: __________________ Print name: ____________________
Title: _______________________ Title: _________________________
Date:_________________________ Date:___________________________
EXHIBIT B
MANUFACTURING, SUPPLY AND TRANSITION SERVICES AGREEMENT
MANUFACTURING, SUPPLY AND TRANSITION SERVICES AGREEMENT
by and between
HEWLETT-PACKARD COMPANY
and
PINNACLE SYSTEMS, INC.
June 30, 1999
MANUFACTURING, SUPPLY AND TRANSITION SERVICES AGREEMENT
This Manufacturing, Supply and Transition Services Agreement (the
"Agreement") is entered into as of the 30th day of June, 1999, by and between
Hewlett-Packard Company, a Delaware corporation ("HP") and Pinnacle Systems,
Inc., a California corporation ("Pinnacle").
RECITALS
WHEREAS, HP and Pinnacle have entered into that certain Asset Purchase
Agreement, dated as of even date herewith (the "APA"), pursuant to which HP (a)
has agreed to sell to Pinnacle certain assets of the Broadcast Video Server,
Broadcast Media Stream and Quality Advisor businesses of HP's Video
Communications Division (the "Business"), and (b) Pinnacle has agreed to assume
certain liabilities of the Business;
WHEREAS, in connection with the APA, HP has agreed effective as of the
Closing Date to, among other things: (a) Manufacture (as defined below) certain
Products (as defined below) for Pinnacle for a transition period and to provide
certain manufacture support services in connection therewith; (b) supply certain
components for the Products; (c) allow former HP employees hired by Pinnacle to
remain in HP's facilities for 45 days; and (d) allow former HP sales individuals
hired by Pinnacle to use their HP offices during a transition period.
WHEREAS, HP is willing to provide the above-described assistance on the
terms and conditions set forth below.
AGREEMENT
NOW, THEREFORE, in consideration of the premises and the mutual
covenants and agreements contained herein, the parties hereto hereby agree as
follows:
ARTICLE 1
DEFINITIONS
1.1. Definitions. In this Agreement, terms not elsewhere defined shall
have the meanings specified or referred to in this Section 1.1 and shall be
equally applicable to both the singular and plural forms. Any agreement referred
to below shall mean such agreement as it may be amended, supplemented and
modified from time to time to the extent permitted by the applicable provisions
thereof and by this Agreement.
"Acquired Equipment" shall mean all equipment and fixed assets
specified in Schedule 2.1(b) to, and transferred to Pinnacle pursuant to, the
APA.
"Agreement" has the meaning specified in the preamble to this
Agreement.
"APA" has the meaning specified in the recitals to this Agreement.
"Closing Date" has the meaning specified in the APA.
"Consulting Employees" has the meaning specified in Section 4.3.
"Continuing HP Sales Individuals" has the meaning specified in Section
4.5(a).
"Continuing Key Employees" has the meaning specified in Section 4.4.
"Damages" has the meaning specified in the APA.
"Delivery Date" has the meaning specified in Section 2.4.
"Finished Good" means any Product that is 100% complete and packed in a
shipping carton awaiting shipment to Pinnacle.
"FOB Point" has the meaning specified in Section 2.5(b).
"Foreign Employee" has the meaning specified in Section 4.3.
"Former HP Employees" has the meaning specified in Section 4.1(a).
"Former HP Sales Individuals" has the meaning specified in Section
4.2(a).
"HP" has the meaning specified in the preamble of this Agreement.
"Identified Manufacturing Employees" has the meaning set forth in
Section 2.7(c).
"Manufacture" or "Manufactured" shall mean the complete process of
assembling the Products into Finished Goods as required under this Agreement.
"Manufacture Support Services" has the meaning specified in Section
2.2.
"Materials" shall mean all materials required by HP to Manufacture the
Products.
"Monthly Maximum Amount " has the meaning specified in Section 2.3(b).
"Order" has the meaning specified in Section 2.4.
"Person" means any individual, corporation, partnership, joint venture,
association, joint-stock company, trust, unincorporated organization or
Governmental Entity (as defined in the APA).
"Pinnacle" has the meaning specified in the preamble of this Agreement.
"Products" means the products of the Broadcast Video Server, Broadcast
Media Stream and Quality Advisor businesses of the Video Communications Division
of HP which are being
2
Manufactured as of the date hereof and, provided the prior written consent of HP
is obtained, other products relating to the foregoing products which are
introduced during the Transition Period. For purposes of Sections 2.8 and 2.9,
Products shall include those products that are obsolete but still have a support
life obligation.
"Production and Delivery Schedule" has the meaning specified in Section
2.3(b).
"743 Computers" has the meaning specified in Section 3.1.
"744 Computers" has the meaning specified in Section 3.2.
"Supplier" has the meaning specified in Section 3.1.
"Transition Period" shall mean the six-month period from and including
the Closing Date, unless earlier terminated by written agreement of HP and
Pinnacle.
"TTLA" shall mean the Technology Transfer and License Agreement, dated
the date hereof, by and between HP and Pinnacle.
"WIP Inventory" means the work-in-process inventory of Products.
ARTICLE 2
MANUFACTURING AGREEMENT
2.1. In General.
(a) During the Transition Period, HP agrees to Manufacture the
Products that Pinnacle requests it Manufacture utilizing the tools, machinery,
equipment, fixtures and computer systems of HP and the Acquired Equipment. HP
agrees that the Manufacture of the Products hereunder shall be carried out in a
good and workmanlike manner in substantial conformity with the manner in which
such Products were Manufactured by HP prior to the date hereof. HP shall have
available to Manufacture the Products such facilities, employees, technical,
spare parts and computer systems as are necessary to Manufacture the Products.
(b) During the Transition Period, HP will develop a monthly
purchase plan for the procurement of Materials. Such purchase plan will be
subject to the review and approval of Pinnacle.
2.2. Manufacture Support Services. During the Transition Period, HP
shall maintain customary manufacturing support services such as new product
introduction, finance, procurement and Manufacture engineering (the "Manufacture
Support Services") at a level of service and availability substantially
equivalent to that provided to the Business immediately prior to the date
hereof.
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2.3. Production and Delivery Schedule.
(a) Prior to the Closing Date, the parties shall use
commercially reasonable efforts to agree to a production requirements schedule
showing estimated quantities of the Products, estimated delivery dates, "do not
ship before" dates and priorities for the entire Transition Period (the
"Production and Delivery Schedule"). Prior to the commencement of each month
during the Transition Period, Pinnacle shall provide HP with an update to the
Production and Delivery Schedule for the remaining term of the Transition
Period.
(b) The maximum amount of servers which HP may be required to
Manufacture each month shall not exceed forty (the "Monthly Maximum Amount"). No
increase in such amount shall be permitted without the prior written consent of
HP.
2.4. Purchase Order. From time to time during the term hereof, Pinnacle
will place a written order (an "Order") for a specific number of Products with
HP. Each Order will show the quantity of the Product requested, delivery dates
(each, a "Delivery Date"), "do not ship before" dates and priorities. All Orders
must conform to the terms and conditions of this Agreement. If there are any
discrepancies between this Agreement and any Order, this Agreement will prevail.
No amendment, modification or adjustment may be made by Pinnacle to an Order
without the consent of HP. Pinnacle shall be responsible for any costs and
expenses incurred by HP resulting from any amendments, modifications or
adjustments agreed to by HP with respect to any Order previously delivered by
Pinnacle to HP. Prior to the Closing Date, Pinnacle shall submit its initial
order pursuant to this Agreement to HP.
2.5. Deliveries.
(a) Deliveries. HP will Manufacture the Products as required
by this Agreement and each Order, in the priority sequence reasonably requested
by Pinnacle and within the reasonably requested time frames. HP will use
commercially reasonable efforts to deliver Products subject to an Order by the
Delivery Date. If any Product cannot be delivered by the Delivery Date, as set
forth in the Order, Pinnacle shall nevertheless accept such deliveries, when
made (generally, an order must be received within five (5) weeks prior to the
first scheduled Delivery Date in order to ensure that deliveries will be made by
the Delivery Date).
(b) FOB Point. Once Manufacture of the Products has been
completed, HP shall be responsible for delivering the Finished Goods FOB factory
(the "FOB Point") by loading such Finished Goods onto delivery trailers provided
or designated by Pinnacle. HP agrees to load the Finished Goods onto the
delivery trailers in accordance with the Order and any other reasonable written
priority instructions provided by Pinnacle. Pinnacle will be responsible for
moving the delivery trailers on and off HP's factory.
(c) Risk of Loss. Pinnacle assumes all risk of loss at such
time as the Product is delivered by HP to the FOB Point and delivery of the
Product is taken either by Pinnacle or by a shipper on behalf of Pinnacle.
Pinnacle shall, in its discretion, insure against any risk of loss at the
removal of the Product from the FOB Point.
4
2.6. Price and Payment. Pinnacle shall pay to HP an amount equal to the
actual cost to the Business of the Materials procured by HP to Manufacture the
Products (such cost to be determined under HP's standard accounting procedures).
Such payments shall be made on a monthly basis in accordance with Section 7.4
hereof. If the number of servers Manufactured by HP pursuant to the terms hereof
during the Transition Period exceeds the aggregate of the Monthly Maximum
Amounts (subject to Section 2.3(b) hereof), Pinnacle will pay an additional
amount to HP to compensate HP for HP's actual incremental manufacturing cost,
which amount will be determined based on good faith negotiations between HP and
Pinnacle.
2.7. Inspection and Access by Pinnacle; Training, Etc.
(a) Inspection. During the Transition Period, HP agrees, upon
reasonable advance notice, to allow Pinnacle's personnel to have access to the
premises at which the Products are being Manufactured during regular business
hours, in order for Pinnacle's personnel to ascertain compliance on the part of
HP with all of the terms and conditions of this Agreement.
(b) Training. During the Transition Period, HP agrees to cause
its employees who are engaged in the Manufacture of the Products to use
commercially reasonable efforts to train and educate Pinnacle's representatives
in order to aid Pinnacle's establishment of its own manufacturing operation.
(c) Retention of Manufacturing Employees. As soon as
practicable after the Closing Date, but in no event later than three months
after the Closing Date, Pinnacle shall identify for HP those employees of HP who
are engaged in the Manufacture of the Products and who Pinnacle wishes to employ
as of the end of the Transition Period (the "Identified Manufacturing
Employees"). HP and Pinnacle shall use commercially reasonable efforts to
transfer the Identified Manufacturing Employees to Pinnacle effective as of the
end of the Transition Period.
(d) Vendor Relationships. During the Transition Period, HP
agrees to use commercially reasonable efforts to facilitate the transfer to
Pinnacle of the vendor relationships which primarily relate to the Manufacture
of the Products.
2.8. Warranty.
(a) Without prejudice to the assumption by Pinnacle of all
warranty obligations on the terms set forth in the APA, HP agrees that, during
the Transition Period, HP will repair Products that are returned by customers
for breach of warranty or are otherwise faulty. The actual material costs
incurred by HP under this Section 2.8 will be paid by Pinnacle on a monthly
basis in accordance with Section 7.4 hereof. HP's obligations under this Section
2.8(a) will terminate automatically at the end of the Transition Period.
(b) THE OBLIGATION TO REPAIR SET FORTH IN SECTION 2.8(a) IS AN
EXCLUSIVE REMEDY AND IN LIEU OF ALL EXPRESS AND IMPLIED WARRANTIES WHATSOEVER,
INCLUDING BUT NOT LIMITED TO ANY IMPLIED WARRANTIES OF MERCHANTABILITY OR
FITNESS FOR PARTICULAR PURPOSE.
5
2.9. Customer Support.
(a) Customer Support Contracts. Without prejudice to the
assumption by Pinnacle of all support obligations on the terms set forth in the
APA, the parties have reached the following agreements with respect to customer
support matters:
(i) HP and Pinnacle shall use commercially reasonable efforts
to transfer all existing customer support commitments relating
to the Business (i.e., contracts under which a customer has
purchased support beyond that covered by the basic warranty)
(the "Customer Support Contracts") to Pinnacle prior to the
end of the Transition Period. Such Customer Support Contracts
are included in Schedule 2.9(a)(i) to the APA. Pinnacle will
assume all obligations under, and will be entitled to the
revenues to be received under or, to the extent such revenues
are prepaid, a pro rata share of the revenues already received
under, such transferred Customer Support Contracts. In
addition, Pinnacle will use commercially reasonable efforts to
build, as soon as practicable after the Closing Date, the
support capabilities and infrastructure needed to deliver the
required level of support to customers under all transferred
Customer Support Contracts.
(ii) Pending the assumption of a Customer Support Contract by
Pinnacle in accordance with subsection (i) above, the
appropriate division of HP will continue to honor such
Contract. Further, to the extent a Customer Support Contract
cannot be transferred to Pinnacle pursuant to subsection (i)
or it is not practicable to transfer such Contract to Pinnacle
pursuant to subsection (i), the appropriate division of HP
will honor such Contract for its remaining term. Such division
will retain the revenues received, and absorb the cost of
performing, under the Contracts described in this subsection
(ii). Upon termination of a Customer Support Contract at the
end of its current term, all obligations of HP under this
subparagraph (ii) with respect to such Contract shall cease,
provided that, should any such Contract expire during the
Transition Period, HP may, in the exercise of its sole
discretion and if the customer agrees, extend the Contract to
the end of the Transition Period.
(iii) From and after the Closing Date, Pinnacle will provide
such on-line technical support to HP's customer support
division as is necessary to enable such division to perform
under subsection (ii) above. From and after the end of the
Transition Period, Pinnacle will provide such parts support to
HP's customer support division as is necessary to enable such
division to perform under subsection (ii) above. The cost for
the services rendered by Pinnacle to HP under this subsection
(iii) will be materially equivalent to the price currently
being paid by the Business for such services.
6
(b) Field Support By HP. During the Transition Period, the
field support resources of HP shall use commercially reasonable efforts to
provide such on site customer support and any other warranty support that is
reasonably required by Pinnacle. The price for the services rendered by HP to
Pinnacle under this subsection (b) will be paid by Pinnacle and will be
materially equivalent to the price being currently paid by the Business for such
services.
(c) Call Centers. During the Transition Period, the HP call
centers and 800 numbers shall remain available to customers of the Business. At
the end of the Transition Period, Pinnacle shall assume responsibility for all
call-in services and HP shall use commercially reasonable efforts to transfer
its 800 numbers to Pinnacle.
2.10. Other Necessary Items.
(a) Pinnacle will use commercially reasonable efforts to enter
into an agreement with a third party for the manufacture and supply, from and
after the end of the Transition Period, of the Quality Advisor product which is
part of the Products. If Pinnacle is unable to enter into such an agreement, HP
agrees to use commercially reasonable efforts to cause its appropriate division
to manufacture and supply such product for Pinnacle during the period commencing
at the end of the Transition Period and ending on December 31, 2000, at a
purchase price materially equivalent to the price currently being paid by the
Business to such division.
(b) Pinnacle will use commercially reasonable efforts to enter
into an agreement with a third party for the manufacture and supply, from and
after the end of the Transition Period, of the PC boards which are part of the
Products. If Pinnacle is unable to enter into such an agreement, HP agrees to
use commercially reasonable efforts to cause its PC board manufacturing facility
in Spokane, Washington to manufacture and supply such boards for Pinnacle during
the period commencing at the end of the Transition Period and ending on the one
year anniversary of the end of the Transition Period, at a purchase price
materially equivalent to the price currently paid by the Business to such board
manufacturing facility.
2.11. Ownership of Acquired Equipment.
(a) Ownership. HP understands and acknowledges that it shall
under no circumstances be considered to have any ownership or proprietary
interest in the Acquired Equipment. HP will not mortgage, pledge, assign or
borrow against such equipment.
(b) Obsolete Equipment. From and after the Closing Date and as
set forth in the APA, all Acquired Equipment shall be owned by Pinnacle and
Pinnacle bears the risk of such Equipment becoming obsolete. In addition,
Pinnacle will be responsible for repairing the Acquired Equipment and replacing
any Acquired Equipment that is non-repairable or requires an upgrade.
(c) Storage. HP shall use the same degree of care with respect
to the Acquired Equipment as HP exercises in respect of its own similar
property. HP shall use reasonable efforts to inform Pinnacle of any needed
repairs or upgrades to the Acquired
7
Equipment. HP agrees to comply, at Pinnacle's expense, with Pinnacle's
reasonable instructions as to the performance of any preventive maintenance on
any Acquired Equipment.
(d) Insurance. Pinnacle shall be responsible for insuring all
of the Acquired Equipment and any other Pinnacle personal property located on HP
property. Pinnacle shall maintain all risk insurance on such property and hereby
grants a waiver of subrogation to HP with respect to any such insurance.
2.12. Purchase Upon Termination of Agreement.
(a) At the end of the Transition Period or, if earlier, upon
termination of Article 2 of this Agreement, Pinnacle will purchase from HP, at
actual material cost net of reserves at the Closing Date, all remaining
inventory relating to the Business including, without limitation, (i) all raw
materials, (ii) all WIP Inventory, (iii) all Materials and any other items
purchased by HP for its performance under this Article 2, and (iv) all Finished
Goods.
(b) At the end of the Transition Period or, if earlier, upon
termination of Article 2 of this Agreement, HP shall assemble and deliver to
Pinnacle at the FOB Point all Acquired Equipment; provided that all amounts owed
by Pinnacle to HP under this Agreement have been paid in full.
2.13. Termination.
(a) Unless terminated earlier hereunder, Article 2 of this
Agreement shall terminate on the last day of the Transition Period (unless a
section hereof expressly provides that it will continue to apply after the end
of the Transition Period).
(b) Article 2 of this Agreement may be terminated prior to the
date specified in Section 2.13(a):
(i) at any time by mutual written agreement executed by HP and
Pinnacle; or
(ii) by either party if the other party shall fail to perform
or observe in any material respect any of the covenants or
agreements set forth herein to be performed or observed by
such party and such breach shall not be remedied by the
breaching party within ten (10) business days of receipt of
written notice of the breach given by the non-breaching party.
(c) In the event of termination of Article 2 of this Agreement
as provided in this Section 2.13, the terminating Party shall provide written
notice of such termination to the other Party, the provisions of Article 2 of
this Agreement shall forthwith become void, except that the agreements contained
or referred to in this Section 2.13, Section 2.12, Section 2.14, Article 5,
Article 6 and Article 7 shall survive. Notwithstanding the foregoing but subject
to the other provisions hereof, in the event of a termination of Article 2 of
this Agreement by any Party
8
hereto, nothing herein shall limit the remedies at law or in equity of any Party
with respect to any breaches hereof by any other Party.
2.14. Limitation of Damages. NEITHER PARTY SHALL BE LIABLE TO THE OTHER
FOR PERFORMANCE OR NONPERFORMANCE UNDER THIS AGREEMENT, EXCEPT FOR ACTUAL
DAMAGES INCURRED BY THE OTHER PARTY AS A RESULT OF BREACH OF PERFORMANCE OF THIS
AGREEMENT. IN NO EVENT SHALL EITHER PARTY BE LIABLE TO THE OTHER UNDER THE TERMS
OF THIS AGREEMENT, OR UPON ANY BREACH THEREOF, FOR ANY INDIRECT, SPECIAL,
CONSEQUENTIAL OR INCIDENTAL DAMAGES OF ANY TYPE INCURRED IN CONNECTION WITH THIS
AGREEMENT, INCLUDING BUT NOT LIMITED TO ATTORNEY FEES AND LOST PROFITS,
REGARDLESS OF FORM OF ACTION AND WHETHER OR NOT SUCH DAMAGES ARE FORESEEABLE.
ARTICLE 3
SUPPLY AGREEMENT
3.1. 743 Computers. During the period commencing on the date hereof and
ending on November 30, 1999, HP agrees to supply through its appropriate
division (in such capacity, the "Supplier") to HP or to Pinnacle (if the
Transition Period ends or Article 2 of this Agreement is terminated prior to
November 30, 1999), such number of 743 real time computers (the "743 Computers")
as are ordered by HP or Pinnacle, as applicable, to enable HP or Pinnacle, as
applicable, to manufacture the Products. The purchase price for each 743
Computer shall not exceed $2,050 and shall include a license to use the HPRT in
accordance with Section 7.2 of the Technology Transfer Agreement.
3.2. 744 Computers. During the period commencing on November 30, 1999
and ending on December 31, 2001, Supplier agrees to supply to HP or to Pinnacle
(upon the ending of the Transition Period or termination of Article 2 of this
Agreement), such number of 744 real time computers (the "744 Computers") as are
ordered by HP or Pinnacle, as applicable, to enable HP or Pinnacle, as
applicable, to manufacture the Products; provided, however, that the actual
number of 744 Computers so ordered and supplied shall approximate existing
forecast levels of 30 per month. The purchase price for each 743 Computer shall
not exceed $2,500 and shall include a license to use the HPRT in accordance with
Section 7.2 of the Technology Transfer Agreement.
3.3. Warranty. The 743 Computers and the 744 Computers shall have
Supplier's standard warranty for a one-year period.
3.4. Support. Supplier agrees to provide to HP or Pinnacle, as
applicable, the following backup technical support services to Pinnacle with
respect to the 743 and the 744 Computers: (a) the equivalent of one-quarter of
an engineer, (b) phone-in support to the RT laboratory, and (c) software
upgrades to fix bugs. The price for the foregoing backup technical support
services shall be $50,000 per year, such price to be paid in arrears in
quarterly installments commencing on the three month anniversary of the Closing
Date and continuing at
9
the end of each following three month period. The parties shall negotiate in
good faith with respect to any support requested by Pinnacle beyond the levels
indicated in the first sentence of this Section 3.4 and the cost of any such
additional support shall also be determined based on good faith negotiations
between HP and Pinnacle.
ARTICLE 4
EMPLOYEE MATTERS
4.1. HP Employees Who Are Hired By Pinnacle.
(a) During the period commencing on the Closing Date and
ending on a date that is no later than 45 days after the Closing Date, HP shall
allow employees of HP who have been hired by Pinnacle and who will be identified
on Schedule 4.1(a) (the "Former HP Employees") to remain in the facilities which
they occupy as of the Closing Date at no cost to Pinnacle (Schedule 4.1(a) will
be attached to this Agreement on the Closing Date). Pinnacle will use reasonable
efforts to reduce the amount of time required by the Former HP Employees in HP's
facilities. Such Former HP Employees shall execute HP's standard confidentiality
and nondisclosure agreement.
(b) During the time period set forth in Section 4.1(a), the
Former HP Employees shall have access to computer systems and related equipment
of HP necessary for the operation of the Business and which will be specified in
Schedule 4.1(b), subject to restrictions to maintain the confidentiality of
other HP businesses (Schedule 4.1(b) will be attached to this Agreement on the
Closing Date).
4.2. HP Sales Individuals Who Are Hired By Pinnacle.
(a) During the period commencing on the Closing Date and
ending on a date that is no later than the last day of the Transition Period, HP
shall allow, to the extent practical and legally permissible, sales individuals
formerly employed by HP who have been hired by Pinnacle and who will be
identified on Schedule 4.2(a) (the "Former HP Sales Individuals") to continue to
use the offices which they use as of the Closing Date at no additional charge to
Pinnacle (Schedule 4.2(a) will be attached to this Agreement on the Closing
Date). Pinnacle will use reasonable efforts to reduce the amount of time
required by the Former HP Sales Individuals in HP's offices. Such Former HP
Sales Individuals shall execute HP's standard confidentiality and nondisclosure
agreement. Such Former HP Sales Individuals shall also return their HP company
cars to HP on or before the Closing Date and such cars shall remain the property
of HP.
(b) During the time period set forth in Section 4.2(a), the
Former HP Sales Individuals shall have access to computer systems and related
equipment of HP necessary for the operation of the Business and which will be
specified in Schedule 4.2(b), to restrictions to maintain the confidentiality of
other HP businesses (Schedule 4.2(b) will be attached to this Agreement on the
Closing Date).
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4.3 Consulting Employees. HP agrees to use reasonable efforts to
establish with Pinnacle a consulting arrangement whereby up to six Key Employees
who do not elect to transfer to Pinnacle (collectively, the "Consulting
Employees") shall work as consultants for Pinnacle, for a period of up to six
months, to assist in engineering and manufacturing transition matters. There
shall be no additional price paid by Pinnacle for this consulting arrangement
for the six-month period. If the parties agree to any extension of this
consulting arrangement beyond the initial six-month period, Pinnacle shall pay
for the consulting services during the extended period in an amount equal to the
salary and incentive-based pay paid by HP to such Consulting Employees plus
health and welfare benefits (but excluding stock options), and, to the extent
such Consulting Employee is located on HP's premises, overhead, for the period
that the arrangement described in this Section 4.3 remains in effect.
4.4. Key Employees Who Are Not Hired By Pinnacle. The parties'
agreement with respect to HP employees engaged in the Business who were offered
jobs with Pinnacle in connection with the transactions contemplated by the APA
but did not elect to become employees of Pinnacle (the "Continuing Key
Employees") is set forth in Section 8.11(c) of the APA.
4.5. HP Sales Individuals Who Are Not Hired By Pinnacle.
(a) During the period commencing on the date hereof and ending
on October 31, 1999, HP's sales individuals who support the Business and are not
Former HP Sales Individuals hereunder (the "Continuing HP Sales Individuals")
shall, so long as such Continuing HP Sales Individuals remain employees of HP,
continue working on sales transactions relating to the Business that are in
process and, to the extent such transactions are not closed prior to October 31,
1999, will transfer the management of such transactions to a Pinnacle
representative.
(b) If a sales transaction described in Section 4.5(a) closes
during the period commencing on the date hereof and ending on October 31, 1999,
the Continuing HP Sales Individual shall be entitled to his/her standard quota
and bonus credit, which shall be paid by HP.
(c) If a sales transaction described in Section 4.5(a) closes
after October 31, 1999 and before January 1, 2000, Pinnacle shall pay to the
applicable Continuing HP Sales Individual a commission beyond a nominal level,
the exact amount of which will be determined by HP in the exercise of its sole
discretion.
4.6. Employment Matters.
(a) Wages, Payroll Taxes and Benefits.
(i) From and after the Closing Date, Pinnacle shall be solely
responsible for the payment of all wages, fringe benefits,
social security, unemployment and similar expenses and taxes
in respect of the Former HP Employees and the Former HP Sales
Individuals.
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(ii) From and after the Closing Date, HP shall be solely
responsible for the payment of all wages, fringe benefits,
social security, unemployment and similar expenses and taxes
in respect of (w) HP's employees engaged in the Manufacture of
the Products and the performance of the Support Services
contemplated under Article 2 of this Agreement; (x) the
Consulting Employees while employed by HP; (y) the Continuing
Key Employees and (z) the Continuing HP Sales Individuals. As
required by any applicable law, HP agrees that it shall
maintain in effect full statutory coverage for workers'
compensation, employers' liability and disability insurance
for all of such employees. HP further agrees that it has and
shall comply with all applicable state, federal, foreign and
other applicable wage and hour and other labor laws, including
without limitation, all child labor, minimum wage, overtime
and safety related laws.
(b) Conduct.
(i) Pinnacle shall be solely responsible for the proper
conduct of the Former HP Employees and the Former HP Sales
Individuals. Immediately upon the written request from an
authorized representative of HP, Pinnacle will remove from
HP's facilities or offices any Former HP Employee or Former HP
Sales Individual. HP will not be notified of or participate in
any disciplinary action regarding any Former HP Employee or
Former HP Sales Individual.
(ii) HP shall be solely responsible for the proper conduct of
(w) HP's employees engaged in the Manufacture of the Products
and the performance of the Support Services contemplated under
Article 2 of this Agreement; (x) the Consulting Employees
while employed by HP; (y) the Continuing Key Employees and (z)
the Continuing HP Sales Individuals. Pinnacle will not be
notified of or participate in any disciplinary action
regarding any such employee.
ARTICLE 5
USE OF HP'S FACILITIES, INSURANCE, ETC.
5.1. Termination for Noncompliance. In the event HP, in its reasonable
discretion, determines that Pinnacle's use of HP's facilities or offices
pursuant to Article 4 hereof is not in conformance with any term or condition of
this Agreement, HP may terminate Pinnacle's use of HP's facilities and offices
immediately. Upon such termination, the Former HP Employees and the Former HP
Sales Individuals shall vacate HP's facilities and offices within one business
day.
5.2. Certain Uses Forbidden. Pinnacle shall not commit or permit the
commission of any act on HP's facilities or offices, or use or permit the use of
HP's facilities or offices in any way, that:
12
(a) Increases the existing rates for or causes cancellation of
any fire, casualty, liability or other insurance policy insuring the
above-described facilities and/or offices;
(b) Obstructs or interferes with the rights of other users of
the above-described facilities and/or offices;
(c) Constitutes the commission of waste or the maintenance of
a nuisance on the above-described facilities and/or offices;
(d) Involves the use, sale, or consumption of alcoholic
beverages on the above-described facilities and/or offices;
(e) Involves the use, sale, or introduction onto the
above-described facilities and/or offices of any hazardous or toxic substances;
or
(f) Constitutes an alteration of the above-described
facilities and/or offices.
5.3. Condition of Premises. By entering upon the above-described
facilities and/or offices, Pinnacle agrees that the above-described facilities
and/or offices are in good, clean, and safe condition. After entering the
above-described facilities and/or offices, Pinnacle shall maintain the
above-described facilities and/or offices in the same condition at its sole
cost. Upon vacating of the above-described facilities and/or offices in
accordance with this Article 5, Pinnacle shall surrender the above-described
facilities and/or offices in their condition at the time of entry by Pinnacle.
If Pinnacle does not so surrender the Premises, Pinnacle shall reimburse HP upon
demand for all expenses incurred by HP in restoring the above-described
facilities and/or offices to such condition.
5.4. Insurance. During the period that Pinnacle is using HP's
facilities and/or offices, it shall maintain in full force and effect, at its
own cost and expense, insurance coverage to include:
(a) Workers' Compensation insurance as required by law or
regulation and employer's liability insurance in amounts not less than
$1,000,000 per accident for bodily injury by accident, $1,000,000 policy limit
by disease, and $1,000,000 per employee for bodily injury by disease. Where
permitted by law, the foregoing policies shall contain waivers of the insurer's
subrogation rights against HP.
(b) Pinnacle shall carry either Comprehensive General
Liability Insurance or Commercial General Liability Insurance with limits of
liability and coverage as indicated below: (i) Premises and operations; (ii)
Products and Completed Operations; (iii) Contractual Liability; (iv) Broad Form
Property Damage (including Completed Operations); and (v) Personal Injury
Liability. Comprehensive General Liability policy limits shall be not less than
a Combined Single Limit for Bodily Injury, Property Damage, and Personal Injury
Liability of the Coverage Amount per occurrence and the Coverage Amount in the
aggregate. Commercial General Liability (Occurrence) policy limits shall be not
less than the Coverage Amount per occurrence (combined single limit for bodily
injury and property damage), the Coverage Amount for
13
Personal Injury Liability, the Coverage Amount in the Aggregate for Products and
Completed Operations, and the Coverage Amount in the General Aggregate. The
foregoing policies shall name HP as an Additional Insured and shall stipulate
that the insurance afforded the Additional Insured shall apply as primary
insurance and that no other insurance carried by any of them shall be called
upon to contribute to a loss covered thereunder. The Coverage Amount shall be
equal to Pinnacle's existing primary and excess liability insurance and in no
event shall it be less than $2,000,000.
(c) Pinnacle shall carry bodily injury, property damage, and
automobile contractual liability coverage for owned, hired, and non-owned autos
with a combined single limit of liability for each accident of not less than the
Coverage Amount.
(d) Certificates of Insurance evidencing the required
coverages and limits shall be furnished to HP before the Former HP Employees and
the Former HP Sales Individuals may enter HP's facilities and offices and shall
provide that there will be no cancellation or reduction of coverage without
thirty (30) days prior written notice to HP. All insurance policies shall be
written by a company authorized to do business in the state where HP's
facilities and offices are located. Pinnacle shall furnish copies of any
endorsements subsequently issued which amend coverage or limits.
5.5. No Liability. HP's sole obligation shall be to use commercially
reasonable efforts to make the facilities and offices described in Sections 4.1
and 4.2 available to the Former HP Employees and the Former HP Sales
Individuals. Except as contemplated by Section 6.1 hereof, under no
circumstances shall HP incur any liability for its failure or inability, for any
cause, to make such facilities and offices available to the Former HP Employees
and the Former HP Sales Individuals.
5.6. No Representation. HP has made no representations or warranties of
any kind, whether express or implied, as to the condition of the facilities and
offices described in Sections 4.1 and 4.2 or the suitability of such facilities
and offices for Pinnacle's activities. Pinnacle enters the facilities and
offices described in Sections 4.1 and 4.2 and agrees to use such facilities and
offices at its sole risk, "as is", and subject to all defects (whether patent or
latent).
5.7. Compliance with Laws. Pinnacle shall comply with all federal,
state, and local laws, statutes, ordinances, rules, regulations, and orders
applicable to its use of the facilities and offices described in Sections 4.1
and 4.2.
5.8. Confidential Information. Pinnacle shall not disclose to any
person or entity any confidential information of HP, whether written or oral,
which Pinnacle may inadvertently or intentionally obtain from HP or otherwise
discover while on the facilities and offices described in Sections 4.1 and 4.2.
As used in this Section 5.8, the term "confidential information" shall include,
without limitation, all information or data concerning or related to HP's
products (including the discovery, invention, research, improvement,
development, manufacture, or sale of HP products) or general business operations
(including sales costs, profits, pricing methods, organization, employee lists,
and processes).
14
5.9. Development Software. During the period commencing on the Closing
Date and ending on the one-year anniversary of the Closing Date, HP agrees to
use commercially reasonable efforts to provide Pinnacle with reasonable access
to the development software licenses included in Schedule 2.1(d)(iii) to the
APA, to enable Pinnacle to operate the Business and to the extent such licenses
are not assigned to Pinnacle pursuant to the APA.
ARTICLE 6
INDEMNIFICATION
6.1. Indemnification.
(a) HP's Indemnification. Subject to Section 6.3, HP shall
indemnify and hold Pinnacle harmless from and against any Damages, resulting
from, arising out of, or incurred with respect to, or alleged to result from or
arise out of any negligent act or omission or any act of intentional misconduct
by HP, its employees, agents or subcontractors in connection with this
Agreement.
Any liability of HP under this Section 6.1(a) shall be subject
to Article X of the APA.
(b) Pinnacle's Indemnification. Subject to Section 6.3,
Pinnacle shall indemnify and hold HP harmless from and against any Damages,
resulting from, arising out of, or incurred with respect to, or alleged to
result from or arise out of:
(i) Any of the Products manufactured under the terms of this
Agreement or claims of any customers of the Business arising
subsequent to the Closing Date with respect thereto.
(ii) The acts or omissions of Pinnacle, its employees,
suppliers, agents or subcontractors in connection with this
Agreement.
(iii) Any negligent act or omission or any act of intentional
misconduct by Pinnacle or its employees, agents or
subcontractors (including without limitation the Former HP
Employees and the Former HP Sales Individuals) on HP's
premises.
6.2. Indemnification Procedures/Remedies Exclusive/Arbitration.
Sections 10.4, 10.5 and 10.6 of the APA shall apply with respect to any claim
for indemnification under this Article 6 and are, by this reference,
incorporated in and made a part of this Agreement.
6.3. Property Damage. Each of HP and Pinnacle agrees to hold the other
harmless for all loss or damage to HP's or Pinnacle's property, as the case may
be, regardless of negligence, and agrees to waive any subrogation rights any
insurer may have with respect thereto.
15
ARTICLE 7
GENERAL PROVISIONS
7.1. Effectiveness of Agreement. Although this Agreement is dated as of
the date first set forth above, this Agreement shall not be effective until the
Closing Date.
7.2. Implementation Committee. The parties hereby appoint an
implementation committee to jointly draft a detailed implementation plan to be
completed by Closing and covering matters relating to the transfer of the
Business to Pinnacle such as research and development, marketing, manufacturing,
sales, marketing communications, support, finance and administration, human
resources and international operations. This committee will consist of a HP
"stay transition manager" (Xxxxxxx Xxxxxxxx), a HP "go transition manager" (Xxxx
Xxxxxx) and a Pinnacle "transition manager" (Xxxx Xxxxxx) and the relevant
functional specialists from each party. Meetings of this committee will take
place as and where agreed, via teleconference or face-to-face.
7.3. Notices. Any request, communication, or other notice required or
permitted hereunder shall be in writing and shall be deemed to have been duly
given if sent by facsimile or delivered by recognized overnight or international
courier service or personal delivery (as the situation may require) at the
respective address or facsimile number of the party receiving notice as set
forth in Section 12.4 of the APA. Any party hereto may by notice so given change
its address or facsimile number for future notice hereunder. All such notices
and other communications hereunder shall be deemed given (i) upon confirmation
of delivery, if sent by facsimile and (ii) upon delivery, if sent by recognized
overnight or international courier service or personal delivery.
7.4. Billing and Payment Procedure. To the extent practicable, xxxxxxxx
under this Agreement will be billed on or before the 20th day of each month for
services rendered in the previous month. Payment is due 30 days from the date of
the xxxx. HP shall send bills to Pinnacle at the following address:
Pinnacle Systems, Inc.
000 Xxxxx Xxxxxxxx Xxxxxx
Xxxxxxxx Xxxx, XX 00000
Attention: Chief Financial Officer
Pinnacle shall remit all payments to HP at the following address:
Hewlett-Packard Company
0000 Xxxxxxx Xxxxx Xxxxxxxxx
Xxxxx Xxxxx, XX 00000
Attention: Xxxxxx Xxxxxxxxx
All payments due hereunder shall be paid in United States dollars. Any
amount owed under this Agreement which is not paid on or before the date such
amount is due shall bear
16
interest on a per annum basis until paid at twelve percent (12%), but in any
event not to exceed the maximum rate of interest permitted by applicable law.
7.5. Expenses. Except as otherwise provided in this Agreement, all fees
and expenses incurred in connection with this Agreement including, without
limitation, all legal, accounting, financial advisory, consulting and all other
fees and expenses of third parties incurred by a party hereto, in connection
with the negotiation and effectuation of the terms and conditions of this
Agreement and the transactions contemplated hereby, shall be the obligation of
the respective party incurring such fees and expenses.
7.6. Entire Agreement. This Agreement, the schedules and exhibits
hereto, and the documents and instruments and other agreements among the parties
hereto referenced herein: constitute the entire agreement among the parties with
respect to the subject matter hereof and supersede all prior agreements and
understandings, both written and oral, among the parties with respect to the
subject matter hereof.
7.7. Assignment. Neither party may, directly or indirectly, in whole or
in part, neither by operation of law or otherwise, assign or transfer this
Agreement or delegate any of its obligations under this Agreement without the
other party's written consent. Any attempted assignment, transfer or delegation
without such prior written consent will be void. Notwithstanding the foregoing,
HP, or its permitted successive assignees or transferees, may assign or transfer
this Agreement or delegate any rights or obligations hereunder without consent:
(1) to any entity controlled by, or under common control with, HP, or its
permitted successive assignees or transferees; or (2) in connection with a
merger, reorganization, transfer, sale of assets or product lines, or change of
control or ownership of HP, or its permitted successive assignees or
transferees. Without limiting the foregoing, this Agreement will be binding upon
and inure to the benefit of the parties and their permitted successors and
assigns.
7.8. Severability. In the event that any provision of this Agreement or
the application thereof, becomes or is declared by a court of competent
jurisdiction to be illegal, void or unenforceable, the remainder of this
Agreement will continue in full force and effect and the application of such
provision to other Persons or circumstances will be interpreted so as reasonably
to effect the intent of the parties hereto. The parties further agree to replace
such void or unenforceable provision of this Agreement with a valid and
enforceable provision that will achieve, to the extent possible, the economic,
business and other purposes of such void or unenforceable provision.
7.9. Governing Law/Arbitration. Section 12.10 of the APA is, by this
reference, incorporated in and made a part of this Agreement.
7.10. Counterparts. This Agreement may be executed in one or more
counterparts, all of which shall be considered one and the same agreement and
shall become effective when one or more counterparts have been signed by each of
the parties and delivered to the other party, it being understood that all
parties need not sign the same counterpart.
17
7.11. Public Disclosure. Section 8.3 of the APA is, by this reference,
incorporated in and made a part of this Agreement.
7.12. No Third-Party Beneficiaries. This Agreement shall not confer any
rights or remedies upon any Person other than the parties hereto and their
respective successors and permitted assigns.
7.13. Amendment of Agreement. Except as is otherwise required by
applicable law, this Agreement may be amended by the parties hereto at any time
by execution of an instrument in writing signed by HP and Pinnacle.
7.14. Extension; Waiver. HP and Pinnacle may, to the extent legally
allowed, (i) extend the time for the performance of any of the obligations of
the other party hereto, and (ii) waive compliance with any of the agreements or
conditions for the benefit of such party contained herein. Any agreement on the
part of a party hereto to any such extension or waiver shall be valid only if
set forth in an instrument in writing signed on behalf of such party.
7.15. Interpretation. Article titles and section headings herein are
inserted for convenience of reference only and are not intended to be a part of
or to affect the meaning or interpretation of this Agreement. The Schedules
referred to herein shall be construed with and as an integral part of this
Agreement to the same extent as if it were set forth verbatim herein.
7.16. No Agency. Nothing in this Agreement shall be construed to
constitute any agency, employment or other relationship between any of the
parties to this Agreement.
7.17. Precedence of APA. In the event of any conflict between the terms
and conditions of this Agreement and the terms and conditions of the APA, the
terms and conditions of the APA shall prevail.
18
IN WITNESS WHEREOF, HP and Pinnacle have caused this Manufacturing,
Supply and Transition Services Agreement to be executed and delivered by their
duly authorized representatives as of the date first written above.
"PINNACLE" PINNACLE SYSTEMS, INC.
a California Corporation
By:
-------------------------------------------------------
Xxxxxx X. Xxxxxxxx
Vice President, Finance and Chief Financial Officer
"HP" HEWLETT-PACKARD COMPANY
a Delaware corporation
By:
-------------------------------------------------------
Xxxxxx Xxxxx
Vice President, Communications Solutions Group
19
EXHIBIT C
PURCHASE PRICE ALLOCATION
Preliminary Purchase Price Allocation
-------------------------------------
Inventory: 11.7 million
Fixed assets: .3 million
In process research and development: 8.0 million
Intellectual property: 3.0 million
Other intangibles 2.0 million
Goodwill 15.0 million
-------------
Total: 40.0 million
EXHIBIT D
FORM OF ASSUMPTION OF LIABILITIES
ASSUMPTION OF LIABILITIES
THIS ASSUMPTION OF LIABILITIES (the "Instrument") is made, executed and
delivered as of the ______ day of August, 1999, by Pinnacle Systems, Inc.,
a California corporation (the "Buyer").
WHEREAS Hewlett-Packard Company, a Delaware corporation (the "Seller"),
and the Buyer are parties to that certain Asset Purchase Agreement effective as
of June 30, 1999 (the "Agreement") (capitalized terms not otherwise defined
herein shall have the meanings assigned to them in the Agreement) regarding the
sale to the Buyer of certain of the assets of the Seller for consideration in
the amount and on the terms and conditions set forth in the Agreement;
WHEREAS pursuant to Section 2.3 of the Agreement the Buyer has agreed
to assume only certain obligations of the Seller (the "Assumed Liabilities); and
WHEREAS the parties desire to carry out the intent and purposes of the
Agreement by the Buyer's execution and delivery to the Seller of this
Instrument.
1. NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, Buyer hereby assumes and agrees to
discharge when due the Assumed Liabilities.
2. Other than with respect to the Assumed Liabilities, the Buyer does
not assume, agree to perform, discharge or indemnify the Seller against or
otherwise have any liability or obligation with respect to any liability, debt,
contract or obligation not specifically assumed (including, without limitation,
any Excluded Liabilities). The Seller shall remain solely responsible for
satisfying, discharging or performing all of such liabilities, debts, contracts
and obligations on a timely basis in accordance with their respective terms.
3. This Instrument is subject to, and shall be construed in accordance
with, the Agreement, and in the event of a conflict between the provisions of
this Instrument and the provisions of the Agreement, the provisions of the
Agreement shall prevail.
4. This Instrument shall be construed in accordance with and be
governed by the laws of the State of California applicable to contracts made and
to be performed in California.
IN WITNESS WHEREOF, the Buyer has duly executed this Instrument as of
the day and year first set forth above.
PINNACLE SYSTEMS, INC.
By:
---------------------------------------------
Xxxxxx X. Xxxxxxxx,
Chief Financial Officer and Vice President,
Finance and Administration
EXHIBIT E
FORM OF XXXX OF SALE AND GENERAL ASSIGNMENT OF ASSETS
XXXX OF SALE AND GENERAL ASSIGNMENT OF ASSETS
KNOW ALL MEN AND WOMEN BY THESE PRESENTS THAT:
1. Transfer. Hewlett-Packard Company, a Delaware corporation (the
"Seller"), pursuant to that certain Asset Purchase Agreement effective as of
June 30, 1999 (the "Agreement"), by and among the Seller and Pinnacle Systems,
Inc., a California corporation ("Buyer"), for and in consideration of good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, does hereby grant, bargain, sell, convey, transfer, assign, set
over and deliver to Buyer, its successors and assigns, all of the Seller's
right, title and interest in and to all of the Acquired Assets (as defined in
Section 2.1 of the Agreement).
TO HAVE AND TO HOLD all of the properties, assets and rights granted
and transferred hereby, with the appurtenances thereof, unto the Buyer, its
successors and assigns forever, to and for their own use and benefit.
2. Power of Attorney. For the consideration aforesaid, the Seller
hereby constitutes and appoints the Buyer, its successors and assigns, the true
and lawful attorney or attorneys of the Seller, with full power of substitution,
for the Seller and in its name and stead, or otherwise, but on behalf and for
the benefit of the Buyer, its successors and assigns, to demand and receive from
time to time, any and all properties hereby given, granted, bargained, sold,
assigned, transferred, conveyed, set over, confirmed or delivered and give
receipts and releases for and in respect of the same and any part thereof, and
from time to time to institute and prosecute any and all proceedings at law, in
equity or otherwise, which the Buyer, its successors or assigns, may deem proper
in order to collect, assert or enforce any claim, right or title of any kind in
and to the properties hereby given, granted, bargained, sold, assigned,
transferred, set over, confirmed, delivered or conveyed, and to defend or
compromise any or all actions, suits or proceedings in respect of any of said
properties and do all such acts and things in relation thereto as the Buyer, its
successors and assigns, shall deem advisable, the Seller hereby declaring that
the appointment made and the powers hereby granted are coupled with an interest
and are and shall be irrevocable by the Seller in any manner and for any reason.
3. Covenants. The Seller, for itself and its successors and assigns,
does hereby covenant with the Buyer, its successor and assigns, that the Seller
and its successors and assigns will do, execute, acknowledge and deliver, or
will cause to be done, executed, acknowledged and delivered all such further
acts, deeds, bills of sale, transfers, assignments, conveyances, powers of
attorney, conveying and confirming unto the Buyer, its successors and assigns,
all and singular, the properties hereby granted, sold, assigned, transferred,
conveyed and delivered as the Buyer, its successors or assigns, shall reasonably
require.
4. Required Consents. To the extent that the assignment of any claim,
suit, contract, license, lease, charter, commitment, sales order or purchase
order to be assigned to the Buyer hereby shall require the consent of the other
party thereto, this instrument shall not constitute an assignment of the same if
such consent has not been given and if an assignment or attempted assignment
without such consent of said other party would constitute a breach thereof or in
any way adversely affect the rights, powers, privileges, or liabilities of the
Seller or the Buyer thereunder.
5. Counterparts; Headings. This Xxxx of Sale and General Assignment of
Assets may be executed in one or more counterparts, each of which shall be an
original, but together shall constitute one and the same instrument. The
headings contained herein are for reference purposes only and shall not affect
in any way the meaning or interpretation of this Xxxx of Sale and General
Assignment of Assets.
6. Conflict with Agreement. In the event that any provision of this
Xxxx of Sale and General Assignment of Assets be constructed to conflict with a
provision in the Agreement, the provision in the Agreement shall be deemed to be
controlling.
IN WITNESS WHEREOF, the parties have caused this Assignment to be duly
executed and delivered as of August __, 1999.
SELLER:
HEWLETT-PACKARD COMPANY
By: ______________________________________________
Name: ____________________________________________
Title: ___________________________________________
PINNACLE SYSTEMS, INC.
By: ______________________________________________
Name: ____________________________________________
Title: ___________________________________________
-2-
EXHIBIT F
FORM OF INVESTMENT REPRESENTATION STATEMENT
EXHIBIT F
PINNACLE SYSTEMS, INC.
INVESTMENT REPRESENTATION STATEMENT
In connection with its acquisition of shares of Common Stock (the
"Shares") of Pinnacle Systems, Inc. (the "Company") pursuant to that certain
Asset Purchase Agreement dated June 30, 1999 (the "Agreement"), Hewlett-Packard
Company, a Delaware corporation (the "Purchaser"), hereby represents and
warrants to the Company as follows:
1. Investment Intent; Capacity to Protect Interests. Purchaser is
purchasing the Shares for investment only and not with any present intention or
view toward selling or otherwise disposing of the Shares or any portion thereof
in any transaction other than a transaction exempt from registration under the
Securities Act or pursuant to an effective registration statement under that
act. Purchaser also represents that the entire legal and beneficial interest of
the Shares is being purchased and will be held for the Purchaser's account only
and neither in whole nor in part for any other person. Purchaser has such
business and financial experience as is required to give it the capacity to
protect its own interests in connection with the purchase of the Shares.
2. Authorization. Purchaser's purchase of the Shares has been duly
authorized by all requisite corporate action of Purchaser.
3. Information Concerning Company. Purchaser has received all
information Purchaser has deemed appropriate to enable the Purchaser to evaluate
the financial risk inherent in investing in the Shares; provided, however, that
the foregoing shall not be deemed to limit or affect in any manner the
representations and warranties made by the Company in connection with
Purchaser's acquisition of the Shares. Purchaser either has a preexisting
business or personal relationship with the Company or any of its officers,
directors, or controlling persons or by reason of Purchaser's business or
financial experience or the business or financial experience of Purchaser's
professional advisors who are unaffiliated with and who are not compensated by
the Company, directly or indirectly, could be reasonably assumed to have the
capacity to evaluate the merits and risks of an investment in the Company and to
protect Purchaser's own interests in connection with this transaction.
4. Restricted Securities. The Purchaser acknowledges that the sale of
the Shares will not be registered under the Securities Act. The Shares must be
held indefinitely unless subsequently registered under the Securities Act or an
exemption from such registration is available, and the Company is under no
obligation to register the Shares except as set forth in the Agreement or in the
Stock Restriction and Registration Rights Agreement, which is to be entered into
by the Company in connection with closing of the transactions contemplated by
the Agreement. Purchaser further acknowledges that it is familiar with Rule 144
promulgated under the Securities Act and understands the resale limitations
imposed thereby and the limitations imposed by the Securities Act. Purchaser
understands that the certificate(s) evidencing the Shares will be imprinted with
a legend that prohibits the transfer of the Shares unless (i) they are
registered under the Securities Act or such registration is not required, and
(ii) if the transfer if pursuant to an exemption from registration, an opinion
of counsel reasonably satisfactory to the Company that the transaction is so
exempt. Purchaser will refrain from selling, transferring, or otherwise
disposing of any of the Shares in such manner as to cause the Company to be in
violation of the registration requirements of the Securities Act or applicable
state securities or Blue Sky laws.
5. Tax Representation. Purchaser has reviewed with its own tax advisors
the federal, state, local, and foreign tax consequences of this investment.
Purchaser is relying solely on such advisors and not on any statements or
representations of the Company or any of its agents. Purchaser understands that
it (and not the Company) will be responsible for its own tax liability that may
arise as a result of this investment or the transactions contemplated by this
agreement.
Executed effective June 30, 1999.
HEWLETT-PACKARD COMPANY
By: ___________________________________
Name: _________________________________
Title: ________________________________
EXHIBIT G
FORM OF STOCK RESTRICTION AND REGISTRATION RIGHTS AGREEMENT
EXHIBIT G
STOCK RESTRICTION AND
REGISTRATION RIGHTS AGREEMENT
THIS STOCK RESTRICTION AND REGISTRATION RIGHTS AGREEMENT (this
"Agreement") is made effective as of July __, 1999 by and between PINNACLE
SYSTEMS, INC., a California corporation (the "Company"), and HEWLETT-PACKARD
COMPANY, a Delaware corporation ("HP").
RECITALS
A. Pursuant to the terms of the Asset Purchase Agreement dated
June 30, 1999 (the "Purchase Agreement"), by and between the
Company and HP, HP shall acquire from the Company
____________________ (__________) fully paid and nonassessable
shares (the "Pinnacle Shares") of the Company's Common Stock,
no par value (the "Common Stock") as partial payment of the
Purchase Price (as such term is defined in the Purchase
Agreement) for the sale of certain assets and the transfer of
certain liabilities of HP to the Company.
B. The transactions contemplated by the Purchase Agreement are to
be consummated at the "Closing Date", as such term is defined
in the Purchase Agreement.
C. In connection with the Asset Purchase Agreement, the Company
has agreed to provide the registration rights set forth in
this Agreement with respect to one-half of the Pinnacle Shares
issued to HP at the Closing Date and one-half of any
additional shares of Common Stock issued to HP on a later date
in accordance with Section 3.1(c) of the Purchase Agreement
and HP has agreed to certain restrictions with respect to the
disposition of the remainder of such shares.
NOW, THEREFORE, in consideration of the representations, warranties,
covenants and conditions herein and in the Purchase Agreement, the parties
hereto hereby agree as follows:
SECTION 1
DEFINITIONS
1.1 Certain Definitions. As used in this Agreement:
(a) The term "beneficially owned" refers to the meaning of such terms
as provided in Rule 13d-3 promulgated under the Exchange Act.
(b) The term "Company Public Sale Event" shall mean any sale by the
Company of Common Stock for its own account as contemplated by Section 3.2
pursuant to an effective Registration Statement filed by the Company, filed on
Form S-1 or any other form for the general registration of securities with the
Commission (other than a Registration Statement filed by the Company on either
Form S-4 or Form S-8 or any registration in connection with a standby
underwriting in connection with the redemption of outstanding convertible
securities).
(c) The term "Company Sale Notice" shall mean a Notice of Offering
pursuant to Subsection 3.1 from the Company to each Holder stating that the
Company proposes to effect a Company Public Sale Event.
(d) The term "Exchange Act" means the Securities Exchange Act of 1934,
as amended, or any similar federal statute and the rules and regulations of the
SEC thereunder, all as the same shall be in effect from time to time.
(e) The term "person" shall mean any person, individual, corporation,
partnership, limited liability company, joint stock company, unincorporated
association, joint venture, trust or other nongovernmental entity or any
governmental agency, court, authority or other body (whether foreign, federal,
state, local or otherwise).
(f) The term "Holder" means HP and any transferee of Registrable
Securities pursuant to Section 3.9 of this Agreement, provided that any such
person shall cease to be a Holder on the Termination Date.
(g) The term "Preliminary Prospectus" shall mean each preliminary
prospectus included in a Registration Statement or in any amendment thereto
prior to the date on which such Registration Statement is declared effective
under the Securities Act, including any prospectus filed with the SEC pursuant
to Rule 424(a) under the Securities Act.
(h) The term "Prospectus" shall mean each prospectus included in a
Registration Statement (including, without limitation, a prospectus that
discloses information previously omitted from a prospectus filed as part of an
effective Registration Statement in accordance with Rule 430A), together with
any supplement thereto, and any material incorporated by reference into such
Prospectus, all as filed with, or transmitted for filing to, the SEC pursuant to
Rule 424(b) under the Securities Act.
(i) The terms "register," "registered" and "registration" refer to a
registration effected by preparing and filing a registration statement in
compliance with the Securities Act, and the declaration or ordering by the SEC
of the effectiveness of such registration statement.
(j) The term "Registration Expenses" shall have the meaning contained
in Section 3.2 hereof.
(k) The term "Registrable Securities" shall refer to ______ of the
Pinnacle Shares [representing 1/2 of the total number of shares issued on the
Closing Date] issued in connection with Purchase Agreement, (ii) 1/2 of any
shares of Common Stock issued to HP pursuant to Section 3.1(c) of the
-2-
Purchase Agreement, and (iii) any Common Stock of the Company issued by the
Company to HP in respect of the shares identified in clause (i) or (ii) upon any
stock split, stock dividend, recapitalization, or similar event; provided, that
if, upon any stock dividend, recapitalization or similar event, the Company
issues securities which are not immediately convertible into Common Stock, the
term "Registrable Securities" shall also include such securities.
(l) The term "Registration Statement" shall mean any registration
statement (including the Preliminary Prospectus, the Prospectus, any amendments
(including any post-effective amendments) thereof, any supplements and all
exhibits thereto and any documents incorporated therein by reference pursuant to
the rules and regulations of the SEC), filed by the Company with the SEC under
the Securities Act in connection with the SEC provisions of Section 3.
(m) The term "Restricted Securities" shall mean the securities of the
Company required to bear the legend set forth in Section 2.2 hereof.
(n) The term "Securities Act" means the Securities Act of 1933, as
amended, or any similar federal statute and the rules and regulations of the SEC
thereunder, all as the same shall be in effect at the time.
(o) The term "SEC" means the Securities and Exchange Commission or any
other federal agency at the time administering the Securities Act.
(p) The term "Termination Date" means shall mean the earlier of the
respective dates on which the Company has no further obligation under the terms
of this Agreement to file or keep effective the Shelf Registration Statement
under Subsection 3.1(b).
(q) The term "Unregistered Shares" shall mean all of the shares of
common stock issued to HP in connection with the Acquisition that are not
Registrable Securities.
1.2 Definitions Generally. Capitalized terms used herein but otherwise not
defined herein shall have the meanings ascribed to them in the Purchase
Agreement.
SECTION 2
RESTRICTIONS ON TRANSFERABILITY;
COMPLIANCE WITH SECURITIES ACT
2.1 Restrictions on Transferability. HP agrees that the Pinnacle Shares
shall not be sold, assigned, transferred or pledged unless (i) such sale,
transfer or other disposition is within the limitations of and in compliance
with Rule 144 promulgated by the SEC under the Securities Act and HP furnishes
Pinnacle with reasonable proof of compliance with such Rule, (ii) in the opinion
of counsel to the transferring shareholder, reasonably satisfactory to Pinnacle
and its counsel, some other exemption from registration under the Securities Act
is available with respect to any such
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proposed sale, transfer, or other disposition of Pinnacle Shares, or (iii) the
offer and sale of the Pinnacle Shares is registered under the Securities Act or
(iv) such sale, transfer or other disposition is otherwise in compliance with
the Securities Act and the rules and regulations thereunder. HP will cause any
proposed purchaser, assignee, transferee, or pledgee of the Pinnacle Shares held
by HP to agree to take and hold such securities subject to the provisions and
upon the conditions specified in this Section 2.
2.2 Restrictive Legends.
(a) Each certificate representing the Pinnacle Shares, including any
new certificates issued upon any stock split, stock dividend, recapitalization,
merger, consolidation or similar event, shall (unless otherwise permitted by the
provisions of Section 2.3 below) be stamped or otherwise imprinted with a legend
in the following form (in addition to any legend required under applicable state
securities laws):
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED FOR
INVESTMENT AND NOT FOR DISTRIBUTION, AND HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"). SUCH SHARES MAY NOT
BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED (1) IN THE ABSENCE
OF A REGISTRATION STATEMENT IN EFFECT WITH RESPECT THERETO UNDER THE
ACT (2) UNLESS SOLD PURSUANT TO RULE 144 OF THE ACT, (3) IN THE OPINION
OF COUNSEL TO THE TRANSFERRING SHAREHOLDER (WHICH SHALL BE REASONABLY
SATISFACTORY TO THE ISSUER) SOME OTHER EXEMPTION FROM REGISTRATION
UNDER THE ACT IS AVAILABLE OR (4) UNLESS THE SALE IS OTHERWISE EXEMPT
FROM REGISTRATION UNDER THE ACT.
Each holder of a certificate evidencing the Restricted Securities as
set forth in this Section 2.2(a) consents to the Company making a notation on
its records and giving instructions to any transfer agent of the Common Stock in
order to implement the restrictions on transfer established in this Section 2.
(b) Each certificate representing the Unregistered Shares, including
any new certificates issued upon any stock split, stock dividend,
recapitalization, merger, consolidation or similar event, shall (unless
otherwise permitted by the provisions of Section 2.3 below) be stamped or
otherwise imprinted with an additional legend in the following form (in addition
to any legend required under applicable state securities laws):
THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO THE TERMS OF
THAT CERTAIN STOCK RESTRICTION AND REGISTRATION RIGHTS AGREEMENT DATED
JULY __, 1999 AND MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR
HYPOTHECATED UNTIL __________, 2001 EXCEPT IN ACCORDANCE WITH THE TERMS
OF SUCH AGREEMENT.
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Each holder of a certificate evidencing the Unregistered Shares as set
forth in this section 2.2(b) consents to the Company making a notation on its
records and giving instructions to any transfer agent of the Company's Common
Stock in order to implement the restrictions on transfer established in this
Section 2.
2.3 Notice of Proposed Transfers. The holder of each certificate
representing Restricted Securities by acceptance thereof agrees to comply in all
respects with the provisions of this Section 2.3. Prior to any proposed sale,
assignment, transfer or pledge of any Restricted Securities (other than a
transfer not involving a change in beneficial ownership), and, in the case of
Unregistered Shares, for a period of two years after the Closing Date, unless in
either case there is in effect a registration statement under the Securities Act
covering the proposed transfer, the holder thereof shall give written notice to
the Company of such holder's intention to effect such transfer, sale, assignment
or pledge. Each such notice shall describe the manner and circumstances of the
proposed transfer, sale, assignment or pledge in sufficient detail, and shall be
accompanied, at such holder's expense by evidence of satisfaction of Section 2.1
hereof, and, as applicable such documentation or opinions as necessary under
Section 2.1, whereupon the holder of such Restricted Securities shall be
entitled to transfer such Restricted Securities in accordance with the terms of
the notice delivered by the holder to the Company. Each certificate evidencing
the Restricted Securities transferred as above provided shall bear, except if
such transfer is made pursuant to Rule 144, the appropriate restrictive legend
set forth in Section 2.2 above, except that such certificate shall not bear such
restrictive legend if in the opinion of counsel for such holder and the Company
such legend is not required in order to establish compliance with any provision
of the Securities Act.
SECTION 3
REGISTRATION RIGHTS
3.1 Shelf Registration.
(a) Form S-3 Registration. As promptly as practicable and in any event
within 5 days after the issuance of the Pinnacle Shares in connection with the
Closing under the Purchase Agreement, the Company shall file a registration
statement on Form S-3 under the Securities Act covering the resale of the
Registrable Securities by the Holders thereof. Within 5 days after the issuance
of any shares of Common Stock to HP pursuant to Section 3.1(c) of the Purchase
Agreement, Pinnacle shall amend such Form S-3 to cover 1/2 of such additional
shares of Common Stock as necessary so that all of the Registrable Securities
are covered by such Form S-3. Nothing herein shall be deemed to provide any
registration rights with respect to the Unregistered Shares.
(b) Obligations of the Company. In connection with any registration of
Registrable Securities pursuant to this Section 3.1, the Company shall use its
best efforts to cause such registration statement to become effective as soon as
practicable thereafter and to remain effective until the earlier of (A) the
second anniversary of the date of issuance of the Pinnacle Shares, (B) the sale
of all of such shares of Registrable Securities so registered or (C) ninety days
after the
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date as all of the Registrable Securities can be sold by Holders within a
three-month period without compliance with the volume requirements of the
Securities Act pursuant to Rule 144 thereunder.
3.2 Company Sale Events.
(a) Determination. Subject to Section 3.5(b) the Company may at any
time effect a Company Public Sale Event pursuant to a Registration Statement
filed by the Company if the Company gives each Holder a Company Sale Notice,
provided that such Company Sale Notice is given not less than 21 days prior to
the initial filing of the related Registration Statement. The obligation of the
Company to give to each Holder a Company Sale Notice and to permit piggyback
registration rights to Holders with respect to Registrable Securities in
connection with Company Sale Events in accordance with this Section 3.2 shall
terminate in accordance with Section 3.11.
(b) Notice. The Company Sale Notice shall offer the Holders the
opportunity to participate in such offering and include the number of shares of
Registrable Securities which represents the best estimate of the lead managing
underwriter (or, if not known or applicable, the Company) that will be available
for sale by the Holders in the proposed offering.
(c) Piggyback Rights of Holders. (A) If the Company shall have
delivered a Company Sale Notice, Holders shall be entitled to participate on the
same terms and conditions as the Company in the Company Public Sale Event to
which such Company Sale Notice relates and to offer and sell shares of
Registrable Securities therein only to the extent provided in this Section
3.2(a). Each Holder desiring to participate in such offering shall notify the
Company no later than ten (10) days following receipt of a Company Sale Notice
of the aggregate number of shares of Registrable Securities that such Holder
then desires to sell in the offering. (B) Each Holder desiring to participate in
a Company Public Sale Event may include shares of Registrable Securities in any
Registration Statement relating to a Company Public Sale Event to the extent
that the inclusion of such shares shall not reduce the number of shares of
Common Stock to be offered and sold by the Company to be included therein. If
the lead managing underwriter selected by the Company for a Company Public Sale
Event advises the Company in writing that the total number of shares of Common
Stock to be sold by the Company together with the shares of Registrable
Securities which such Holders intend to include in such offering would be
reasonably likely to adversely affect the price or distribution of the Common
Stock offered in such Company Public Sale Event or the timing thereof, then
there shall be included in the offering only that number of shares of
Registrable Securities, if any, that such lead managing underwriter reasonably
and in good faith believes will not jeopardize the marketing of the offering;
provided that if the lead managing underwriter determines that such factors
require a limitation on the number of shares of Registrable Securities to be
offered and sold as aforesaid and so notifies the Company in writing, the number
of shares of Registrable Securities to be offered and sold by Holders desiring
to participate in the Company Public Sale Event, shall be allocated among those
Holders desiring to participate in such Company Public Sale Event on a pro rata
basis based on their holdings of Registrable Securities. If any Holder does not
request inclusion of the maximum number of shares of Registrable Securities
allocated to it pursuant to the above-described procedure, the remaining portion
of its allocation shall be reallocated among those requesting Holders whose
allocation did not satisfy their requests pro
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rata on the basis of the number of shares of Registrable Securities held by such
Holders, and this procedure shall be repeated until all of the shares of
Registrable Securities which may be included in the underwriting have been so
allocated.
(d) Discretion of the Company. In connection with any Company Public
Sale Event, subject to the provisions of this Agreement, the Company, in its
sole discretion, shall determine whether (a) to proceed with, withdraw from or
terminate such Company Public Sale Event, (b) to enter into a purchase agreement
or underwriting agreement for such Company Public Sale Event, and (c) to take
such actions as may be necessary to close the sale of Common Stock contemplated
by such offering, including, without limitation, waiving any conditions to
closing such sale which have not been fulfilled.
(e) Market-Standoff Agreement. In connection with a Company Public
Sale Event, securities in connection with an effective registration statement
under the Securities Act, each Holder agrees, upon the request of the Company or
the underwriters managing any underwritten offering of the Company's securities,
not to sell, make any short sale of, loan, grant any option for the purchase of,
or otherwise dispose of any securities of the Company (other than those included
in the registration) without the prior written consent of the Company or such
underwriters, as the case may be, for such period of time after the
effectiveness of the registration statement as specified by such underwriters,
not to exceed one hundred eighty (180) days; provided that all officers,
directors and 5% stockholders of the Company are bound by and have entered into
similar agreements. Each Holder agrees that the Company may instruct its
transfer agent to place stop-transfer notations in its records to enforce the
provisions of this Section 3.2(e).
3.3 Agreements Concerning Offerings. Subject to the terms and conditions
hereof, in connection with any Registration Statement, the Company will:
(a) Prepare and file with the SEC such amendments and supplements to
such registration statement and the prospectus (the "Prospectus") used in
connection therewith as may be necessary to make and to keep such registration
statement effective and to comply with the provisions of the Securities Act with
respect to the sale or other disposition of all securities proposed to be
registered in such registration statement.
(b) Furnish to the participating Holders or the underwriters such
number of copies of any Prospectus (including any preliminary Prospectus and any
amended or supplemented Prospectus), in conformity with the requirements of the
Securities Act, as the Holders may reasonably request in order to effect the
offering and sale of the shares of Registrable Securities to be offered and
sold, but only while the Company shall be required under the provisions hereof
to cause the registration statement to remain current.
(c) Provide to any Holder requesting to include Registrable Securities
in such Registration Statement and any managing underwriter(s) participating in
any distribution thereof and to any attorney, accountant or other agent retained
by such Holder or managing underwriter(s), reasonable access to appropriate
officers and directors of the Company, its independent auditors and counsel to
ask questions and to obtain information (including any financial and other
records and
-7-
pertinent corporate documents) reasonably requested by any such Holder, managing
underwriter(s), attorney, accountant or other agent in connection with such
Registration Statement or any amendment thereto, provided, however, that (i) in
connection with any such access or request, any such requesting persons shall
cooperate to the extent reasonably practicable to minimize any disruption to the
operation by the Company of its business and (ii) any records, information or
documents shall be kept confidential by such requesting persons, unless (i) such
records, information or documents are in the public domain or otherwise publicly
available or (ii) disclosure of such records, information or documents is
required by court or administrative order or by applicable law (including,
without limitation, the Securities Act).
(d) Use its best efforts to register or qualify the shares of
Registrable Securities covered by such registration statement under the
securities or Blue Sky laws of such states as the participating Holders shall
reasonably request, maintain any such registration or qualification current
until the earlier of (A) the second anniversary of the date of this Agreement,
(B) the sale of all the shares of Registrable Securities so registered or (C)
such time as all of the Registrable Securities can be sold by Holders within a
three-month period without compliance with the registration requirements of the
Securities Act pursuant to Rule 144 thereunder; provided, however, that the
Company shall not be required to take any action that would subject it to the
general jurisdiction of the courts of any jurisdiction in which it is not so
subject or to qualify as a foreign corporation in any jurisdiction where the
Company is not so qualified.
(e) Take all such other action either necessary or desirable to permit
the shares of Registrable Securities held by the Holders to be registered and
disposed of in accordance with the method of disposition described herein.
(f) Enter into and perform its obligations under an underwriting
agreement, in usual and customary form, with the managing underwriter of such
offering. Each participating Holder participating in such underwriting shall
also enter into and perform its obligations under any such agreement.
(g) Cause all Registrable Securities registered pursuant to this
Section 3.13(g)to be listed on The Nasdaq National Market or such other exchange
as the Company's Common Stock is then listed or quoted.
(h) Provide for or designate a transfer agent and registrar (which may
be the same entity) for the Registrable Securities covered by the Registration
Statement from and after the effective date of such Registration Statement.
(i) Cooperate with the selling Holders of Registrable Securities and
any managing underwriters to facilitate the timely issuance and delivery to any
underwriters to which any Holder may sell Registrable Securities in such
offering certificates evidencing shares of the Registrable Securities not
bearing any restrictive legends and in such denominations and registered in such
names as the managing underwriters may request.
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(j) The Company will keep the Holders informed of the Company's best
estimate of the earliest date on which such Registration Statement or any
post-effective amendment thereto will become effective and will notify each
Holder, Holders' Counsel and the managing underwriter(s), if any, participating
in the distribution pursuant to such Registration Statement promptly (i) when
such Registration Statement or any post-effective amendment to such Registration
Statement is filed or becomes effective, (ii) of any request by the Commission
for an amendment or any supplement to such Registration Statement or any related
Prospectus, or any other information request by any other governmental agency
directly relating to the offering, and promptly deliver to each Holder
participating in the offering and the managing underwriter(s), if any, copies of
all correspondence between the Commission or any such governmental agency or
self-regulatory body and all written memoranda relating to discussions with the
Commission or its staff with respect to the Registration Statement or proposed
sale of shares, to the extent not covered by attorney-client privilege or
constituting attorney work product, (iii) of the issuance by the Commission of
any stop order suspending the effectiveness of such Registration Statement or of
any order preventing or suspending the use of any related Prospectus or the
initiation or threat of any proceeding for that purpose, (iv) of the suspension
of the qualification of any shares of Common Stock included in such Registration
Statement for sale in any jurisdiction or the initiation or threat of a
proceeding for that purpose, (v) of any determination by the Company that an
event has occurred (the nature and pendency of which need not be disclosed
during a "black-out period" pursuant to Section 3.5(a)) which makes untrue any
statement of a material fact made in such Registration Statement or any related
Prospectus or which requires the making of a change in such Registration
Statement or any related Prospectus in order that the same will not contain any
untrue statement of a material fact or omit to state a material fact required to
be stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading, and (vi) of the
completion of the distribution contemplated by such Registration Statement if it
relates to a Company Sale Event.
(k) In the event of the issuance of any stop order suspending the
effectiveness of such Registration Statement or of any order suspending or
preventing the use of any related Prospectus or suspending the qualification of
any shares of Common Stock included in such Registration Statement for sale in
any jurisdiction, the Company will obtain its withdrawal at the earliest
possible time.
3.4 Expenses.
(a) All expenses, other than discounts and commissions, incurred in
connection with any registration pursuant to Sections 3.1 and 3.2 shall be borne
by the Company. The costs and expenses of any such registration shall include,
without limitation, the reasonable fees and expenses of the Company's counsel
and its accountants, the reasonable fees and expenses of one counsel for the
Holders and all other costs and expenses of the Company incident to the
preparation, printing and filing under the Securities Act of the registration
statement and all amendments and supplements thereto and the cost of furnishing
copies of each preliminary prospectus, each final prospectus and each amendment
or supplement thereto to underwriters, dealers and other purchasers of the
securities so registered, the costs and expenses incurred in connection with the
qualification of such securities
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so registered under the "blue sky" laws of various jurisdictions, the fees and
expenses of the Company's transfer agent and all other costs and expenses of
complying with the provisions of this Section 3 with respect to such
registration (collectively, "Registration Expenses").
(b) Excluding the Registration Expenses, the participating Holders
shall pay all other expenses incurred on their behalf with respect to any
registration pursuant to Sections 3.1 and 3.2 including any counsel for the
participating Holders (other than counsel as provided in Section 3.4(a)) and all
underwriting discounts and selling commissions with respect to the Registrable
Securities sold by them pursuant to such registration statement.
3.5 Blackout Periods.
(a) Black-Out Periods for Holders. No Holder shall offer to sell or
sell any shares of Registrable Securities pursuant to the Shelf Registration
Statement, and the Company shall not be required to supplement or amend any
Registration Statement or otherwise facilitate the sale of Registrable
Securities pursuant thereto, during the 30-day period (or such lesser number of
days until the Company makes its next required filing under the Exchange Act)
immediately following the receipt by each Holder of a certificate of an
authorized officer of the Company to the effect that the Board of Directors of
the Company has determined in good faith that such offer, sale, supplement or
amendment is likely to require the disclosure of confidential information that
would materially and adversely affect the Company. The Company may not exercise
this postponement right more than once in any twelve (12) month period. Any
period described in Section 3.5(a) during which Holders are not able to sell
shares of Registrable Securities pursuant to the Shelf Registration Statement is
herein referred to as a "black-out" period. The Company shall notify each Holder
of the expiration or earlier termination of any "black-out" period (the nature
and pendency of which need not be disclosed during such "black-out" period).
(b) The period during which the Company is required pursuant to
Subsection 3.1 to keep the Shelf Registration Statement continuously effective
shall be extended by a number of days equal to the number of days, if any, of
any "black-out" period applicable to Holders pursuant to this Section 3.5
occurring during such period, plus a number of days equal to the number of days
during such period, if any, of any period during which the Holders are unable to
sell any shares of Registrable Securities pursuant to the Shelf Registration
Statement as a result of the happening of any event of the nature described in
Sections 3.7(b)(ii), 3.7(b)(iii) or 3.7(b)(v).
3.6 Black-Out Period for the Company. Except for offers to sell and sales
of Common Stock pursuant to a Registration Statement on Form S-8 or on Form S-4,
standby underwritings in connection with the redemption of outstanding
convertible securities, the conversion of outstanding convertible securities or
in connection with the acquisition by the Company of another company or
business, the Company shall not publicly offer to sell or sell any shares of
capital stock of the Company during the 60-day period immediately following the
initial sale of shares by any Holder in an underwritten public offering of
shares in connection with a Company Sale Event.
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3.7 Indemnification and Contribution.
(a) To the extent permitted by law, the Company agrees to indemnify
and hold harmless each Holder and each person, if any, who controls such Holder
within the meaning of Section 15 of the Securities Act or Section 20 of the
Exchange Act, and each of their respective officers, directors and employees
against any losses, claims, damages or liabilities, or actions in respect
thereof to which such Holder or persons may become subject under the Securities
Act, or otherwise (collectively, "Losses"), insofar as such Losses arise out of,
or are based upon, any untrue statement or alleged untrue statement of any
material fact contained in Registration Statement, any related Preliminary
Prospectus or any related Prospectus, or any amendment or supplement thereto, or
arise out of, or are based upon the omission or alleged omission to state
therein a material fact required to be stated therein or necessary to make the
statements therein not misleading, and will reimburse such Holder or persons for
any legal or other expenses reasonably incurred by them in connection with
investigating or defending any such Losses; provided, however, that the Company
shall not be so liable to the extent that any such Losses arise out of, or are
based upon, an untrue statement or alleged untrue statement of a material fact
or an omission or alleged omission to state a material fact in said Registration
Statement in reliance upon, and in conformity with, written information
furnished to the Company by or on behalf of such Holder specifically for use
therein. Notwithstanding the foregoing, the Company shall not be liable in any
such instance to the extent that any such Losses arise out of, or are based
upon, an untrue statement or alleged untrue statement or omission or alleged
omission made in any Preliminary Prospectus if (i) after the Company had made
available sufficient number of copies of the Prospectus, such Holder failed to
send or deliver a copy of the Prospectus with or prior to the delivery of
written confirmation of the sale of Registrable Securities to the person
asserting such Losses or who purchased the Registrable Securities the purchase
of which is the basis of the action if, in either instance, such delivery by
such Holder is required by the Securities Act and (ii) the Prospectus would have
corrected such untrue statement or alleged untrue statement or alleged omission;
and the Company shall not be liable in any such instance to the extent that any
such Losses arise out of, or are based upon, an untrue statement or alleged
untrue statement of a material fact or omission or alleged omission to state a
material fact in the Prospectus, if such untrue statement or alleged untrue
statement, omission or alleged omission is corrected in an amendment or
supplement to the Prospectus and if, having previously been furnished by or on
behalf of the Company with copies of the Prospectus as so amended or
supplemented, such Holder thereafter fails to deliver such Prospectus as so
amended or supplemented, prior to or concurrently with the sale of Registrable
Securities if such delivery by such Holder is required by the Securities Act.
This indemnity agreement will be in addition to any liability which the Company
may otherwise have and shall remain in full force and effect regardless of any
investigation made by or on behalf of such Holder or any such Person and shall
survive the Termination Date and the transfer of Registrable Securities by such
Holder as otherwise permitted hereby.
(b) To the extent permitted by law, each Holder severally agrees to
indemnify and hold harmless the Company, each other Holder and each person, if
any, who controls the Company or such other Holder within the meaning of Section
15 of the Securities Act or Section 20 of the Exchange Act, and their respective
officers, directors and employees, against any Losses to which the Company, such
other Holder or such persons may become subject under the Securities Act, or
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otherwise, insofar as such Losses arise out of, or are based upon, any untrue
statement or alleged untrue statement of any material fact contained in such
Registration Statement, any related Preliminary Prospectus or any related
Prospectus, or any amendment or supplement thereto, or arise out of, or are
based upon the omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements therein not
misleading, and will reimburse the Company, such other Holder or such persons
for any legal or other expenses reasonably incurred by them in connection with
investigating or defending any such Losses, in each instance to the extent, but
only to the extent, that any such Losses arise out of, or are based upon, an
untrue statement or alleged untrue statement of a material fact or an omission
or alleged omission to state a material fact in said Registration Statement,
said Preliminary Prospectus or said Prospectus, or any said amendment or
supplement thereto in reliance upon, and in conformity with, written information
furnished to the Company by or on behalf of such Holder specifically for use
therein; provided, however, that the liability of each Holder under this Section
3.7(b) shall be limited to an amount equal to the proceeds of the sale of shares
of Registrable Securities by such Holder in the offering which gave rise to the
liability (net of underwriting commissions paid or incurred by such Holder in
connection with the registration, if any, and sale). This indemnity agreement
will be in addition to any liability which Holder may otherwise have and shall
remain in full force and effect regardless of any investigation made by or on
behalf of the Company or any such person and shall survive the Termination Date
and the transfer of Registrable Securities by such Holder as otherwise permitted
hereby.
(c) Promptly after any person entitled to indemnification under this
Section 3.8 receives notice of any claim or the commencement of any action, the
indemnified party shall, if a claim in respect thereof is to be made against the
indemnifying party pursuant to the indemnification provisions of this Section
3.7, notify the indemnifying party in writing of the claim or the commencement
of such action; provided, however, that the failure or delay to so notify the
indemnifying party shall not relieve it from any liability which it may have to
the indemnified party hereunder unless and to the extent such failure or delay
has prejudiced the rights of the indemnifying party and shall not, in any event,
relieve it from any liability which it may have to the indemnified party other
than pursuant to the indemnification provisions of this Section 3.7. If any such
claim or action shall be brought against an indemnified party, and it has
notified the indemnifying party thereof in accordance with the terms hereof, the
indemnifying party shall be entitled to participate in the defense of such
claim, or, to the extent that it wishes, jointly with any other similarly
notified indemnifying party, to assume the defense thereof with counsel
reasonably satisfactory to the indemnified party, upon written notice to the
indemnified party of such assumption. After notice from the indemnifying party
to the indemnified party of its election to assume the defense of such claim or
action, (i) the indemnifying party shall not be liable to the indemnified party
pursuant to the indemnification provisions hereof for any legal or other
expenses subsequently incurred by the indemnified party in connection with the
defense thereof other than reasonable costs of investigation, (ii) the
indemnifying party shall not be liable for the costs and expenses of any
settlement of such claim or action unless such settlement was effected with the
consent of the indemnifying party (which consent shall not be unreasonably
withheld or delayed) and (iii) the indemnified party shall be obligated to
cooperate with the indemnifying party in the investigation of such claim or
action; provided, however, that any indemnified party hereunder shall have the
right to employ separate
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counsel and to participate in the defense of such claim assumed by the
indemnifying party, but the fees and expenses of such counsel shall be at the
expense of such indemnified party unless (a) the employment of such counsel has
been specifically authorized in writing by the indemnifying party, (b) the
indemnifying party shall have failed to assume the defense of such claim from
the person entitled to indemnification hereunder and failed to employ counsel
within a reasonable period following such assumption, or (c) in the reasonable
judgment of the indemnified party, based upon advice of its counsel, a material
conflict of interest may exist between such indemnified party and the
indemnifying party with respect to such claims or there may be one or more
material legal defenses available to it which are different from or additional
to those available to the indemnifying party (in which case, if the indemnified
party notifies the indemnifying party in writing that the indemnified party
elects to employ separate counsel at the expense of the indemnifying party, the
indemnifying party shall not have the right to assume the defense of such claim
on behalf of the indemnified party). Notwithstanding the foregoing, the Holders
(together with their respective controlling persons and officers, directors and
employees) shall have the right to employ at the expense of the Company only one
separate counsel to represent such Holders (and their respective controlling
persons and officers, directors and employees) who may be subject to liability
arising out of any one action (or separate but substantially similar actions in
the same jurisdiction arising out of the same general allegations or
circumstances) in respect of which indemnity may be sought by such Holders
against the Company pursuant to the indemnification provisions of this Section
3.7. If such defense is not assumed by the indemnifying party, the indemnifying
party will not be subject to any liability for any settlement made without its
consent (but such consent will not be unreasonably withheld or delayed). No
indemnifying party will consent to entry of any judgment or enter into any
settlement that does not include as an unconditional term thereof the giving by
the claimant or plaintiff to such indemnified party of a release from all
liability in respect to such claim or litigation. All fees and expenses to be
paid by the indemnifying party hereunder shall be paid a commercially reasonable
time after they are billed to the indemnified party, subject to receipt of a
written undertaking from the indemnified party to repay such fees and expenses
if indemnity is not ultimately determined to be available to such indemnified
party under this Section 3.7.
(d) In order to provide for just and equitable contribution between
the Company and such Holders in circumstances in which the indemnification
provisions of this Section 3.7 are for any reason insufficient or inadequate to
hold the indemnified party harmless, the Company and such Holders shall
contribute to the aggregate Losses (including any investigation, legal and other
fees and expenses reasonably incurred in connection with, and any amount paid in
settlement of, any action, suit or proceeding or any claims asserted, but after
deducting any contribution actually received from persons other than the Company
and such Holders) to which the Company and one or more of its directors or its
officers who sign such Registration Statement or such Holders or any controlling
person of any of them, or their respective officers, directors or employees may
become subject, under the Securities Act, under any other statute, at common law
or otherwise, insofar as such Losses or actions in respect thereof arise out of,
or are based upon, any untrue statement or alleged untrue statement of any
material fact contained in such Registration Statement or arise out of, or are
based upon, the omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements therein not
misleading. Such contributions shall be in such amounts that the portion of such
Losses for which each such Holder shall be responsible
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under this Section 3.7(d) shall be limited to the portion of such Losses which
are directly attributable to an untrue statement of a material fact or an
omission to state a material fact in said Registration Statement in reliance
upon, and in conformity with, written information furnished to the Company by or
on behalf of any such Holder specifically for use therein, and the Company shall
be responsible for the balance of such Losses; provided, however, that the
liability of each such Holder to make such contribution shall be limited to an
amount equal to the proceeds of the sale of shares of Registrable Securities by
such Holder in the offering which gives rise to the liability (net of
underwriting commissions and disbursements) paid or incurred in connection with
the registration, if any, and sale). As among themselves, such Holders agree to
contribute to amounts payable by other such Holders in such manner as shall, to
the extent permitted by law, give effect to the provisions in Section 3.7(b).
The Company and such Holders agree that it would not be just and equitable if
their respective obligations to contribute pursuant to this Section were to be
determined by pro rata allocation (other than as set forth above) of the
aggregate Losses by reference to the proceeds realized by such Holders in a sale
pursuant to said Registration Statement or said Prospectus or by any other
method of allocation which does not take account of the considerations set forth
in this Section 3.7(d). No Person guilty of fraudulent misrepresentation (within
the meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution under this Section from any person who was not guilty of such
fraudulent misrepresentation.
3.8 Information by Holder. The Holders whose securities are included in any
registration effected pursuant to this Section 3 shall furnish in writing to the
Company such information regarding such persons and the distribution proposed by
such persons as the Company may request in writing and as shall be required in
connection with any registration, qualification or compliance referred to in
this Section 3. The Company's obligations under this Section 3 are conditioned
upon compliance by such persons with the provisions of this Section 3.8.
3.9 Transfer of Registration Rights. The rights to cause the Company to
register securities granted by the Company under Sections 3.1 and 3.2 may be
assigned by HP to the transferee or assignee of not less than 20% of Registrable
Securities (as adjusted for stock splits and the like) and provided that the
Company is given written notice of any such transfer within thirty (30) days of
the date of said transfer, stating the name and address of said transferee or
assignee and identifying the securities with respect to which such registration
rights are being assigned and provided further that the transferee or assignee
of such rights is not deemed by the Board of Directors of the Company, in its
reasonable judgment, to be a competitor of the Company and provided further that
the transferee or assignee of such rights assumes in writing in a form
reasonably acceptable to the Company the obligations of any Holder under this
Agreement. If the stock certificates of a transferring Holder bear a restrictive
legend, the stock certificates of its transferee to whom the rights hereunder
are being transferred shall, subject to the terms of this Agreement, also bear
such a restrictive legend. Except with respect to transfers pursuant to this
Section 3.9, a transferee of Registrable Securities shall neither assume any
liabilities or obligations nor enjoy any rights hereunder and shall not be bound
by any of the terms hereof Each Holder hereby agrees that any transfer of shares
of Registrable Securities by such Holder shall be made (i) in compliance with
the registration requirements of the Securities Act or (ii) in a transaction
exempt from the registration requirements of the Securities Act. The Company may
request, as a condition
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to the transfer of any Registrable Securities, that the transferring Holder
provide the Company with an opinion of securities counsel reasonably
satisfactory to it with regard to compliance with the terms of this Agreement.
3.10 Termination of Registration Rights. The registration rights granted
pursuant to this Section 3 shall terminate as to any Holder on the Termination
Date.
3.11 Limitations on Subsequent Registration Rights. From and after the date
of this Agreement, the Company shall not, without the prior written consent of
the Holders of a majority of the outstanding Registrable Securities, enter into
any agreement with any holder or prospective holder of any securities of the
Company which would allow such holder or prospective holder to include such
securities in any registration filed under Sections 3.1 or 3.2 hereof, unless
under the terms of such agreement, such holder or prospective holder may include
such securities in any such registration only to the extent that the inclusion
of his securities will not reduce the amount of the Registrable Securities of
the Holders which is included.
SECTION 4
UNREGISTERED SHARES
4.1 Lock-Up. HP irrevocably agrees that it will not, directly or
indirectly, sell, lend, offer, contract to sell, transfer the economic risk of
ownership in, make any short sale, pledge or otherwise dispose of the
Unregistered Shares without the prior written consent of Pinnacle until
__________, 2001.
SECTION 5
EXCHANGE ACT REPORTING
5.1 Exchange Act Reporting. At any time until the sale of all of the
Registrable Shares and the Unregistered Shares, the Company agrees to:
(a) file with the Commission in a timely manner all reports and other
documents required of the Company under the Securities Act or the Exchange Act;
and
(b) furnish to any Holder, forthwith upon request (A) a written
statement by the Company that it has complied with the current public
information and reporting requirements of Rule 144 and the Exchange Act, (B) a
copy of the most recent annual or quarterly report of the Company and such other
reports and documents so filed by the Company, and (C) such other information as
may be reasonably requested in connection with any Holder availing itself of any
rule or regulation of the SEC which permits the selling of any such securities
without registration or pursuant to such rule or regulation.
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5.2 Form 144. If any Holder is required to file a Form 144 with respect to
any sale of shares of Registrable or Restricted Securities, such Holder shall
promptly deliver to the Company a copy of such completed Form 144 filed with the
SEC.
SECTION 6
MISCELLANEOUS
6.1 Governing Law. This Agreement shall be governed in all respects by the
laws of the State of California as applied to contracts entered into solely
between residents of, and to be performed entirely within, such state.
6.2 Successors and Assigns. Except for transfers permitted by Section 2.1
and 3.10, neither party may, directly or indirectly, in whole or in part,
neither by operation of law or otherwise, assign or transfer this Agreement or
delegate any of its obligations under this Agreement without the other party's
written consent. Any attempted assignment, transfer or delegation without such
prior written consent will be void. Notwithstanding the foregoing, HP, or its
permitted successive assignees or transferees, may assign or transfer this
Agreement or delegate any rights or obligations hereunder without consent: (1)
to any entity controlled by, or under common control with, HP, or its permitted
successive assignees or transferees; or (2) in connection with a merger,
reorganization, transfer, sale of assets or product lines, or change of control
or ownership of HP, or its permitted successive assignees or transferees.
Without limiting the foregoing, this Agreement will be binding upon and inure to
the benefit of the parties and their permitted successors and assigns.
6.3 Entire Agreement; Amendment. This Agreement contains the entire
understanding and agreement between the parties with regard to the subject
matter hereof and thereof and supersedes all prior agreements and understandings
among the parties relating to the subject matter hereof. Neither this Agreement
nor any term hereof may be amended, waived, discharged or terminated other than
by a written instrument signed by the party against whom enforcement of any such
amendment, waiver, discharge or termination is sought.
6.4 Notices and Dates. All notices or other communications required or
permitted under this Agreement shall be made in the manner provided in Section
12.4 of the Purchase Agreement. In the event that any date provided for in this
Agreement falls on a Saturday, Sunday or legal holiday, such date shall be
deemed extended to the next business day.
6.5 Counterparts. This Agreement may be executed in one or more
counterparts, all of which shall be considered one and the same agreement, and
shall become a binding agreement when one or more counterparts have been signed
by each party and delivered to the other party.
6.6 Severability. If any provision of this Agreement or portion thereof is
held by a court of competent jurisdiction to be invalid, void or unenforceable,
the remainder of the terms, provisions, covenants and restrictions of this
Agreement shall remain in full force and effect and shall in no way be affected,
impaired or invalidated.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective authorized officers as of the date aforesaid.
"COMPANY" PINNACLE SYSTEMS, INC.,
a California corporation
By: ________________________________________
Name: ______________________________________
Title: _____________________________________
"HP" HEWLETT-PACKARD COMPANY,
a Delaware corporation
By: ________________________________________
Name: ______________________________________
Title: _____________________________________
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EXHIBIT H
FORM OF OPINION OF COUNSEL TO SELLER
EXHIBIT H
FORM OF OPINION OF COUNSEL TO SELLER**
1. The Seller is a corporation validly existing under the laws of the State
of Delaware and is duly qualified to transact business in the State of
California.
2. The Seller has the corporate power and authority to enter into and
consummate the transactions contemplated by the Asset Purchase Agreement and the
Related Agreements (collectively, the "Transaction Documents").
3. The Transaction Documents have been duly authorized by all necessary
corporate actions on the part of the Seller, and have been duly executed and
delivered. The Transaction Documents constitute valid obligations of the Seller,
enforceable against the Seller in accordance with their respective terms.
4. The execution, delivery and performance of the Transaction Documents do
not conflict with or result in a violation or breach of, or constitute a default
under, the Articles of Incorporation or Bylaws of the Seller.
5. No consent, approval, order or authorization of, or declaration, filing
or registration with, any court or governmental authority is required to be
obtained or made by the Seller or under any applicable federal or state law,
rule or regulation in connection with the execution, delivery or performance by
the Seller of the Transaction Documents or the consummation of the transactions
contemplated therein, except as contemplated by the Purchase Agreement.
--------
**Subject to customary qualifications. Certain of the opinions may be
issued in reliance upon an opinion of in-house counsel of Seller.
EXHIBIT I
FORM OF OPINION OF COUNSEL TO BUYER
EXHIBIT I
FORM OF OPINION OF BUYER'S COUNSEL
July __, 1999
Hewlett-Packard Company
0000 Xxxxxxx Xxxxxx
Xxxx Xxxx, Xxxxxxxxxx 00000
Ladies and Gentlemen:
We have acted as counsel to Pinnacle Systems, Inc., a California
corporation ("Pinnacle"), in connection with the acquisition (the "Acquisition")
by Pinnacle of certain assets and liabilities of Hewlett-Packard Company, a
corporation organized under the laws of Delaware (the "Seller"), pursuant to the
Asset Purchase Agreement dated June __, 1999 among Pinnacle and the Seller (the
"Purchase Agreement"). This opinion is furnished to you pursuant to Section
9.2(e) of the Purchase Agreement. Unless otherwise defined herein, the
capitalized terms used in this opinion have the meaning given to them in the
Purchase Agreement.
We have acted as counsel for Pinnacle in connection with the
negotiation of the Purchase Agreement, the Technology Transfer Agreement and the
Manufacturing, Supply and Transition Services Agreement each dated as of June
__, 1999, and the Stock Restriction and Registration Rights Agreement dated as
of July __, 1999 each between Pinnacle and the Seller and the effectuation of
the Acquisition. In addition, we have examined copies of each of the
above-mentioned agreements. As such counsel, we have made such legal and factual
examinations and inquiries as we have deemed advisable or necessary for the
purposes of rendering this opinion. In addition, we have examined originals or
copies of documents, corporate records and other writings that we consider
relevant for the purposes of this opinion. In such examination, we have assumed
the genuineness of all signatures on original documents, the conformity to
original documents of all copies submitted to us and the due execution and
delivery of all documents by any party other than Pinnacle where due execution
and delivery are a prerequisite to the effectiveness thereof.
As used in this opinion, the expression "to our knowledge" or "known to
us" with reference to matters of fact means that, after an examination of
documents made available to us by Pinnacle, and after inquiries of officers of
Pinnacle, but without any further independent investigation, we find no reason
to believe that the opinions expressed herein are factually incorrect. Further,
the expression "to our knowledge" with reference to matters of fact refers to
the current actual knowledge of the attorneys of this firm who
Hewlett-Packard Company
July ___, 1999
Page 2 of 4
have worked on matters for Pinnacle solely in connection with the Purchase
Agreement and the transactions contemplated thereby. Except to the extent
expressly set forth herein or as we otherwise believe necessary to our opinion,
we have not undertaken any independent investigation to determine the existence
or absence of any fact, and no inference as to our knowledge of the existence or
absence of any fact should be drawn from our representation of Pinnacle or the
rendering of the opinion set forth below.
For purposes of this opinion, we are assuming that you have all
requisite power and authority, and have taken any and all necessary company and
stockholder action, to execute and deliver the Purchase Agreement and the
Related Agreements and we assume that the representations and warranties made by
you in the Purchase Agreement and the Related Agreements pursuant thereto are
true and correct. We are also assuming that you have purchased the shares of
Pinnacle Common Stock for value, in good faith and without notice of any adverse
claims within the meaning of California Uniform Commercial Code.
The opinions hereinafter expressed are subject to the following
qualifications and assumptions:
A. We express no opinion as to the effect of rules of law
governing specific performance, injunctive relief or other
equitable remedies (regardless of whether such remedy is
considered in a proceeding at law or in equity);
B. We express no opinion as to the effect of applicable
bankruptcy, insolvency, reorganization, moratorium or other
similar laws affecting the rights of creditors generally;
C. We express no opinion as to the enforceability of any of the
agreements attached as exhibits to the Purchase Agreement
other than the Related Agreements;
D. We express no opinion as to compliance with the anti-fraud
provisions of applicable securities laws;
E. We express no opinion as to the enforceability of the
indemnification provisions of Section 3.7 of the Stock
Restriction and Registration Rights Agreement to the extent
the provisions thereof may be subject to limitations of public
policy and the effect of applicable statutes and judicial
decisions;
F. We are members of the Bar of the State of California and we
are not expressing any opinion as to any matter relating to
laws of any jurisdiction other than the laws of the United
States of America and the laws of the State of California.
Hewlett-Packard Company
July ___, 1999
Page 3 of 4
Based upon and subject to the foregoing, and except as set forth in the
Purchase Agreement, we are of the opinion that:
1. Pinnacle is a corporation duly organized, validly existing and in
good standing under the laws of the State of California.
2. The shares of Pinnacle Common Stock issuable in connection with the
Acquisition are duly and validly issued, fully paid and nonassessable.
3. All corporate action on the part of Pinnacle, its directors and
shareholders necessary for the authorization, execution and delivery of the
Purchase Agreement and the Related Agreements by Pinnacle, the authorization,
sale, issuance and delivery of the shares of Pinnacle Common Stock issuable in
connection with the Acquisition and the performance of Pinnacle's obligations
under the Purchase Agreement and the Related Agreements has been taken. The
Purchase Agreement and the Related Agreements have been duly and validly
executed and delivered by Pinnacle and constitute valid and binding obligations
of Pinnacle, enforceable against Pinnacle in accordance with their respective
terms.
4. To our knowledge, there is no action, suit, proceeding, claim or
investigation pending or threatened against Pinnacle which challenges or seeks
to prevent, enjoin, alter or delay any of the transactions contemplated by the
Purchase Agreement or the Related Agreements.
5. The execution, delivery, and performance of and compliance with the
terms of the Purchase Agreement and the Related Agreements and the issuance of
the shares of Pinnacle Common Stock issuable in connection with the Acquisition
do not violate any provision of the Amended and Restated Articles of
Incorporation or Bylaws of Pinnacle.
6. No consent, approval, order or authorization of, or declaration,
filing or registration with any court or governmental authority is required to
be obtained or made by Pinnacle or under any applicable federal or state law,
rule or regulation in connection with the execution, delivery or performance by
Pinnacle of the Purchase Agreement or the Related Agreements or the transactions
contemplated thereby, except as contemplated by the Purchase Agreement.
7. The shares of Pinnacle Common Stock issued to Seller on the Closing
Date have been duly authorized for listing by the Nadaq National Market upon
official notice of issuance.
8. The offer and sale of the shares of Pinnacle Common Stock to you
pursuant to the terms of the Purchase Agreement are exempt from the registration
requirements of Section 5 of the Securities Act of 1933.
Hewlett-Packard Company
July ___, 1999
Page 4 of 4
9. To our knowledge, no person has registration rights with respect to
any securities of Pinnacle.
This opinion is solely for your benefit and is not to be made available
to or relied on by any other person without our express prior written consent.
We assume no obligation to inform you of any facts, circumstances, events or
changes in the law that may hereafter be brought to our attention that may
alter, affect or modify the opinions expressed herein.
Very truly yours,
XXXXXX XXXXXXX XXXXXXXX & XXXXXX
Professional Corporation
