EXHIBIT 10.27
EXECUTION COPY
POST-CLOSING AGREEMENT
THIS POST-CLOSING AGREEMENT (the "AGREEMENT"), is entered into as of
October 31, 2003, by and among SCM MICROSYSTEMS, INC., a Delaware corporation
("PARENT"), SCM MULTIMEDIA, INC., a Delaware corporation formerly known as
DAZZLE MULTIMEDIA, INC. ("SUB," and together with Parent and their respective
subsidiaries, "SCM"), and PINNACLE SYSTEMS, INC., a California corporation
("PINNACLE").
RECITALS
WHEREAS, SCM and Pinnacle have consummated certain asset sales pursuant
to that certain Asset Purchase Agreement, dated June 29, 2003 as modified by
that certain Closing Letter Agreement dated July 25, 2003 (collectively, the
"PURCHASE AGREEMENT"); and
WHEREAS, the Purchase Agreement contemplated that certain post-Closing
adjustments might be made to the Purchase Price, and the parties now desire to
conclusively settle such post-Closing adjustments and certain other matters
which have arisen subsequent to the Closing Date.
AGREEMENT
NOW THEREFORE, in consideration of the above recitals, and of the
mutual covenants contained herein, and other good and valuable consideration,
the receipt and adequacy of which are hereby acknowledged by the parties hereto,
the parties agree as follows:
1. Defined Terms. Capitalized terms used but not otherwise
defined herein shall have the meanings ascribed to such terms in the Purchase
Agreement.
2. Agreement. Pinnacle agrees to pay Two Million Dollars
($2,000,000) (the "NET ADJUSTMENT PAYMENT") to SCM within five business days
after the date hereof. Such payment shall be in addition to the Purchase Price,
as satisfaction and final settlement of each matter provided for below in this
Section 2.
(a) Realization Shortfall. Notwithstanding anything in
Section 2.12(d) of the Purchase Agreement to the contrary, Pinnacle agrees to
remit any Realization Shortfall due to SCM pursuant to Section 2.12(d) of the
Purchase Agreement on or before December 29, 2003.
(b) Inventory, Backlog and Receivables. Upon Pinnacle's
remittance of the Net Adjustment Payment to SCM, (i) the post-Closing Inventory
Purchase Price adjustment provided for by Section 2.7(c) of the Purchase
Agreement shall be deemed to have been paid in full, and there shall be no
further Purchase Price adjustments or payments due any party in respect of
Inventory pursuant to Sections 2.7(c), 2.9 and 2.10 and otherwise under the
Purchase Agreement; (ii) the Backlog Purchase Price adjustment provided for by
Section 2.8(c) of the Purchase Agreement shall be deemed to have been paid in
full, and there shall be no further Purchase Price adjustments or payments due
any party in respect of Backlog pursuant to Sections 2.8(c), 2.9 and 2.10 and
EXECUTION COPY
otherwise under the Purchase Agreement; and (iii) Pinnacle shall be discharged
and released from its obligation to assist Seller in the collection of
Receivables, as provided by Section 5.13 of the Purchase Agreement; and all fees
due Pinnacle in respect of its assistance in collecting Receivables, pursuant to
Section 5.13 of the Purchase Agreement, shall be deemed paid in full. Pinnacle
acknowledges that it has no authority to issue any credits, rebates or offsets
against SCM's Receivables and shall not interfere with SCM's continued
collection of such Receivables. SCM shall have no authority to issue any
credits, rebates or offsets against Pinnacle's Receivables, and shall not
interfere with Pinnacle's collection of any post-Closing accounts receivable
from such customers.
(c) Dell. Pinnacle acknowledges that it assumes SCM's
warranty obligation to Dell, Inc. in its entirety pursuant to that certain
Master Purchase Agreement by and between Sub and Dell, Inc., dated December 1,
2000 (the "DELL AGREEMENT"), and SCM shall have no further warranty obligation
to Dell pursuant to the Dell Agreement, which assumption has been taken into
account in the determination of the Net Adjustment Payment.
(d) Transition Services Agreement. The parties hereby
agree that upon Pinnacle's remittance of the Net Adjustment Payment to SCM all
amounts owed SCM pursuant to the Transition Services Agreement by and between
Parent and Pinnacle, dated July 25, 2003, and the Transition Services Schedules
attached thereto (collectively, the "TRANSITION SERVICES AGREEMENT"), shall be
deemed paid in full and all of SCM's obligations pursuant to the Transition
Services Agreement shall cease and be deemed to have been fully discharged.
(e) Product Returns. Notwithstanding the provisions of
Section 5.14 of the Purchase Agreement, the Net Adjustment Payment shall be
deemed to satisfy any payments that otherwise would be due from Pinnacle to SCM
in respect of Product Returns, provided that:
i. Promptly after the execution of this
Agreement, the parties shall issue a joint letter to all Distribution
Channel Participants, which letter shall instruct such Distribution
Channel Participants that all inquiries or requests regarding the
Transferred Products (including but not limited to inquiries and
requests regarding warranty obligations), and all returns of
Transferred Products, should be directed to Pinnacle from the date of
the letter going forward.
ii. Pinnacle shall accept any and all bona fide
warranty returns from end-users or Distribution Channel Participants
for any Transferred Products sold by SCM prior to the Closing Date, and
shall issue a credit against that Distribution Channel Participant's
account with Pinnacle or a refund, to be determined by Pinnacle in its
sole discretion.
iii. Pinnacle shall accept any and all
non-warranty returns by a Distribution Channel Participant, for any
Transferred Products sold by SCM prior to the Closing Date ("STOCK
RETURNS"). If the aggregate value of the Stock Returns after the date
hereof for any Distribution Channel Participant is less than or equal
to Ten Thousand Dollars ($10,000) (whether in one or more Stock Return
requests), Pinnacle shall issue a credit against that Distribution
Channel Participant's account with Pinnacle or a refund, to be
determined by Pinnacle in its sole discretion. If the aggregate value
of the Stock Returns for
-2-
EXECUTION COPY
any Distribution Channel Participant exceeds Ten Thousand Dollars
($10,000) (whether in one or more Stock Return requests), Pinnacle
shall notify SCM of such Stock Return request and transmit the request
for a Return Manufacturer's Authorization ("RMA") for such Stock
Returns to SCM, and SCM shall be solely responsible, for its own
account, for any credit or refund that may be due to such Distribution
Channel Participant.
iv. Pinnacle and SCM agree not to take any
affirmative steps to suggest, promote, or otherwise encourage any Stock
Returns, and in the event any Stock Returns arise that may be
attributable to any such activities, then the parties shall undertake
to reach a separate agreement regarding how to address such Stock
Returns, such agreements to be made on a case by case basis.
v. Pinnacle may retain all Transferred
Products, whether opened or unopened, returned to it or to SCM by a
Distribution Channel Participant. In the event that Pinnacle shall so
elect to retain any such Transferred Products returned to SCM, SCM
shall clearly xxxx all such Transferred Products returned to it so that
they can be identified by Pinnacle's packers, and Pinnacle shall be
responsible for packing, crating and shipping all such Transferred
Products returned to SCM, and for any transportation costs.
(f) Solectron. SCM hereby acknowledges that it remains
responsible for any and all obligations owed to Solectron Technology Sdn Bhd
pursuant to those certain Purchase Order Numbers 5000004708 and 5000004716.
(g) Sound Vision. Pinnacle acknowledges that it has
assumed responsibility for all changes that are or may be required with respect
to any and all Sound Vision products, and that SCM shall have no further
obligation to Sound Vision or to Pinnacle with respect to such products, which
assumption has been taken account in the determination of the Net Adjustment
Payment.
3. Mutual Release. Provided that the Net Adjustment Payment is
paid to SCM within five business days after the date hereof, then as of the date
hereof, Pinnacle and SCM, along with their respective affiliates, subsidiaries,
attorneys, insurers, reinsurers, predecessors, successors, directors, officers,
parents, subsidiaries, employees and assigns, release and forever discharge each
other and their respective affiliates, subsidiaries, attorneys, insurers,
reinsurers, predecessors, successors, directors, officers, parents,
subsidiaries, employees and assigns, from all claims arising from or in any way
relating to each of the matters set forth in Section 2 herein. Notwithstanding
anything in this Agreement to the contrary, any claims arising from or relating
to the Purchase Agreement except specifically as set forth in Section 2 herein
shall be preserved, and are not waived or released, including, without
limitation, any claim (i) in respect of Taxes pursuant to Article VII of the
Purchase Agreement, (ii) for indemnification in respect of any Losses pursuant
to Article IX of the Purchase Agreement, (iii) for breach of Section 5.8 of the
Purchase Agreement, or (iv) for fraud, in each case whether arising before, on
or after the date hereof.
4. Waiver of Civil Code Section 1542. To the extent of the
release set forth in Section 3 above, the parties expressly waive and relinquish
any and all rights and benefits they now have or may have in the future under
the terms of Section 1542 of the Civil Code of the State of California,
-3-
EXECUTION COPY
which section reads in full as follows: "A GENERAL RELEASE DOES NOT EXTEND TO
CLAIMS WHICH THE CREDITOR DOES NOT KNOW OR SUSPECT TO EXIST IN HIS FAVOR AT THE
TIME OF EXECUTING THE RELEASE, WHICH IF KNOWN BY HIM MUST HAVE MATERIALLY
AFFECTED HIS SETTLEMENT WITH THE DEBTOR." The parties being aware of said Code
Section, hereby expressly, knowingly and intentionally waive any rights they may
have thereunder, as well as any other statute or common law of similar effect.
The parties and each of them understand and acknowledge the significance of this
specific waiver of California Civil Code Section 1542, and thereby assume full
responsibility for any damages or losses that they have incurred or hereafter
incur in connection with the facts and claims which are the subject of the
releases as set forth in Section 2 above.
5. Voluntary Execution of Post-Closing Agreement. This Agreement
is executed voluntarily and without any duress or undue influence on the part or
behalf of the parties hereto with the full intent of releasing all claims set
forth herein. The parties acknowledge that:
(a) They have read this Agreement;
(b) They have been represented in the preparation,
negotiation and execution of this Agreement by legal counsel of their own
choice;
(c) They understand the terms and consequences of this
Agreement and of the agreements it contains; and
(d) They are fully aware of the legal and binding effect
of this Agreement.
6. Effects on Purchase Agreement.
(a) Except as specifically modified hereby, the Purchase
Agreement shall remain in full force and effect.
(b) Sections 11.4 (Headings), 11.5 (Severability), 11.10
(Governing Law), 11.11 (Jurisdiction and Venue), and 11.2 (Counterparts) of the
Purchase Agreement shall apply with the same force and effect to this Agreement.
7. Miscellaneous.
(a) Each party understands that if the facts with respect
to which this Agreement is executed and found hereafter to be other than or
different from the facts now believed by them to be true, the parties expressly
accept and assume the risk of such possible differences in facts and agree that
this Agreement shall be and remain effective notwithstanding such difference in
facts.
(b) Each person executing this Agreement on behalf of any
other person(s) hereby warrants that he has full authority to do so.
-4-
EXECUTION COPY
(c) This Agreement represents the entire agreement and
understanding between the parties regarding settlement of their claims as set
forth herein and this Agreement supersedes any and all prior and contemporaneous
settlement agreements, representations and negotiations. This Agreement may be
modified or amended only by a writing signed by all parties hereto.
[The remainder of this page is intentionally left blank]
-5-
EXECUTION COPY
IN WITNESS WHEREOF, SCM and Pinnacle have caused this Agreement to be
executed as of the date first written above by their respective officers
thereunto duly authorized.
SCM MICROSYSTEMS, INC.
By /S/ XXXXXX X. XXXXX
------------------------------------------------
Name: Xxxxxx X. Xxxxx
Title: Chief Financial Officer and
Secretary
000 Xxxx Xxxxxxx
Xxxxxxx, Xxxxxxxxxx 00000
Attention: _______________________________________
Telecopy: _______________________________________
SCM MULTIMEDIA, INC.
By /S/ XXXXXX X. XXXXX
------------------------------------------------
Name: Xxxxxx X. Xxxxx
Title: Chief Financial Officer and
Secretary
000 Xxxx Xxxxxxx
Xxxxxxx, Xxxxxxxxxx 00000
Attention: _______________________________________
Telecopy: _______________________________________
PINNACLE SYSTEMS, INC.
By /S/XXXXXX XXXXXXXX
------------------------------------------------
Name: Xxxxxx Xxxxxxxx
Title: Chief Financial Officer and V.P. of
Finance
000 Xxxxx Xxxxxxxx Xxxxxx
Xxxxxxxx Xxxx, Xxxxxxxxxx 00000
Attention: _______________________________________
Telecopy: _______________________________________
[Signature Page to Post-Closing Agreement]
