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EXHIBIT 10.7
TRANSITIONAL SERVICES AGREEMENT
This Transitional Services Agreement (this "Agreement") is made as of
this __ day of November 1998 between Stac, Inc., a Delaware corporation
("Stac"), and hi/fn, inc., a Delaware corporation ("Hi/fn").
RECITALS
WHEREAS, pursuant to a Distribution Agreement dated as of November __,
1998, (the "Distribution Agreement") between Stac and Hi/fn, Stac will separate
its software business and its semiconductor business (the "Spin-off") by way of
a special dividend by Stac to the stockholders of record of Stac's common stock,
consisting of the distribution on an approximately 1-for-4 basis, of all of the
outstanding shares of Hi/fn Common Stock held by Stac (following the conversion,
at Stac's election, of 6,000,000 shares of Series A Preferred Stock, par value
$.001 per share, of Hi/fn into 6,000,000 shares of Hi/fn Common Stock) (the
"Distribution"); and
WHEREAS, a condition of the closing of the transactions contemplated by
the Distribution Agreement is that Stac and Hi/fn enter into, among other
things, a transitional services agreement pursuant to which Stac shall provide
certain accounting services to Hi/fn.
AGREEMENT
NOW, THEREFORE, in consideration of the foregoing premises and the
mutual covenants hereinafter set forth, and intending to be legally bound
hereby, the parties agree as follows:
1. ACCOUNTING SERVICES. Stac agrees to use its employees and assets to
provide to Hi/fn the accounting services currently provided by Stac to Hi/fn,
which are listed on Exhibit A hereto (the "Accounting Services"). Stac shall
have no obligation to perform the accounting services currently provided by
Hi/fn personnel, which also are described on Exhibit A hereto. The monthly
charge for the Accounting Services from and after the date hereof shall be
$6,500.00. Such amount shall be prepaid through December 31, 1999 by Hi/fn prior
to the Distribution. If the term of this Agreement is extended past December 31,
1999 pursuant to Section 4 hereof, Stac shall invoice Hi/fn monthly for
Accounting Services performed during the prior month (beginning January 1,
2000), and Hi/fn shall pay Stac for such services not later than ten (10) days
from the receipt of invoice. Hi/fn may decline any or all of the Accounting
Services at any time in its sole discretion; provided that the monthly charge
for services will not be reduced below $6,500 (i) unless Hi/fn has given Stac at
least 30 days notice of its decision to decline all services (in which case no
monthly charge will be due) or (ii) unless otherwise agreed by the parties in
writing.
Hi/fn expressly acknowledges and agrees that (i) Stac and its officers,
directors, employees, agents and counsel shall not be responsible for the
contents of Hi/fn financial statements generated by Stac or for their
preparation in accordance with generally accepted accounting principles, (ii)
the contents and accuracy of Hi/fn's financial statements shall be solely the
responsibility of Hi/fn and (iii) Stac's responsibility shall be only to process
transactions and journal entries as instructed by Hi/fn and to generate the
resulting financial statements. Hi/fn understands and agrees that it shall be
responsible for all planning and reporting to its various constituencies,
including, but not limited to its board of directors, stockholders, employees,
the Securities and Exchange Commission, the Internal Revenue
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Service, the California Franchise Tax Board, other federal and state regulatory
agencies, other taxing authorities and any corresponding or other foreign
entities.
2. OUTSIDE SERVICES. In the event that the providing party is required
to retain outside consultant/contractor assistance to perform any of the
services hereunder, the providing party shall first obtain the consent of the
other party to such retention and the other party shall pay directly the fees of
such consultant/contractor. The providing party shall not be held responsible
for the performance of such consultant/contractor services and the other party
assumes the risk thereof.
3. CONTRACTUAL RELATIONSHIP. The relationship between Stac and Hi/fn
under this Agreement shall be that of principal and agent in respect of the
services to be performed hereunder. In no event is the relationship of the
parties intended to be that of employer and employee and in no event is either
party to be deemed or purported to be the partner or joint venturer of the other
for any purpose whatsoever.
4. TERM. The term of this Agreement shall expire on December 31, 1999;
provided, however, that each party shall have the right, Hi/fn upon thirty (30)
days advance notice to Stac, and Stac upon six (6) months advance notice to
Hi/fn, to terminate all or part of the services it performs hereunder. This
Agreement may be extended on a month-to-month basis following December 31, 1999
upon mutual agreement of the parties. Upon the termination of all services,
payment therefor and payment of all consultants/contractors, this Agreement
shall terminate and any payments due the other party shall be immediately
payable.
5. LIMITATION OF LIABILITY. Stac shall not have any liability whatsoever
to Hi/fn or to any third party for any loss, liability, damage, cost or
deficiency (collectively, "Losses"), or for any claim for Losses, including,
without limitation, Losses or claims for personal injury, death or property
damage, warranty, tort or products liability, resulting from, caused by or
arising out of Stac's performance under this Agreement except for claims arising
out of the negligence or willful default or breach of Stac hereunder. In no
event shall Stac have liability to Hi/fn or to any third party for indirect,
special or consequential damages or loss of profits (except with respect to its
willful default or breach), or for punitive damages for any reason whatsoever.
6. INDEMNIFICATION. Hi/fn agrees to indemnify, protect, defend and hold
harmless Stac (for purposes of this Section 6 "Stac" shall include the officers,
directors, employees, agents and counsel of Stac), from and against any and all
losses, claims, damages, expenses or liabilities, including the fees of not more
than one counsel to Stac, arising out of or based upon allegations that
financial statements or other accounting records prepared by Hi/fn with Stac's
assistance pursuant to this Agreement contain inaccuracies or omit to state a
material fact required to be stated therein or necessary to make the statements
therein not misleading.
7. NOTICES. All notices and other communications hereunder shall be in
writing and shall be delivered by hand or mailed by registered or certified mail
(return receipt requested) to the parties at the following addresses (or at such
other addresses for a party as shall be specified by like notice) and shall be
deemed given on the date on which such notice is received:
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To Stac:
Stac, Inc.
00000 Xxxx Xxxxx Xxxxx, 0xx Xxxxx
Xxx Xxxxx, XX 00000
Attention: Xxxxx Xxxxxxx
To Hi/fn:
Hi/fn, Inc.
0000 Xxxxxxxx Xxx., Xxxxx 000
Xxx Xxxx, XX 00000
Attention: Xxxxxxx Xxxxxx
8. ASSIGNMENT. This Agreement and all of the provisions hereof shall be
binding upon and inure to the benefit of the parties hereto and their respective
successors and permitted assigns but neither this Agreement nor any of the
rights, interests or obligations hereunder shall be assigned by any party hereto
without the prior written consent of the other party (other than to an
affiliate). Any purported assignment in violation of the provisions hereof shall
be void.
9. GOVERNING LAW. This Agreement shall be governed by the laws of the
State of California (regardless of the laws that might otherwise govern under
applicable California conflict of laws principles) as to all matters, including
but not limited to matters of validity, construction, effect, performance and
remedies.
10. COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
11. INTERPRETATION. The article and section headings contained in this
Agreement are solely for the purpose of reference, are not part of the agreement
of the parties and shall not in any way affect the meaning or interpretation of
this Agreement.
12. SEVERANCE. In the event that any provision of this Agreement is
declared illegal, invalid or unenforceable or contrary to law, it shall not
affect any other provision in the Agreement.
13. ENTIRE AGREEMENT. This Agreement and the Distribution Agreement
embody the entire agreement and understanding of the parties hereto in respect
of the subject matter hereof. This Agreement supersedes all prior agreements and
understandings between the parties with respect to the transactions contemplated
hereby.
14. DISPUTES. Any disputes arising under this Agreement shall be
resolved by binding arbitration in the manner contemplated by Section 8.13 of
the Distribution Agreement, including the attorneys' fees provision referenced
therein.
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IN WITNESS WHEREOF, each of Stac and Hi/fn has caused this Agreement to
be executed by its duly authorized officer as of the date first above written.
STAC, INC.
By:_______________________________________
Name:_____________________________________
Title:_____________________________________
HI/FN, INC.
By:_______________________________________
Name:_____________________________________
Title:_____________________________________
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EXHIBIT A
The following work is currently performed by Hi/fn personnel and will continue
to be done by them or such other persons as Hi/fn appoints.
1) Purchasing - preparation of purchase orders for all hi/fn product materials
and services, receipt of orders, verification of receipt vs. purchase orders
and other duties associated with purchasing function.
2) Inventory - ordering, shipping, maintenance and control of physical
inventory including periodic counts and reconciliation, in conjunction with
Stac accounting personnel, of any differences.
3) Property, plant and equipment - ordering, delivery and maintenance, tagging
and tracking, input into asset accounting system and recording monthly
depreciation expense. Also responsible for conducting physical inventories
as needed, and reconciling the fixed asset accounting system to the general
ledger.
4) Accounts Payable - matching of invoices against supporting documents, coding
of account distribution, obtaining approvals and other preparation of data
for input into accounts payable system, printing of checks, responding to
vendor calls, reconciliation of accounts payable ledger, signing checks and
other duties associated with the accounts payable function.
5) Payroll - preparation of payroll input for delivery to Stac personnel,
including hours worked, distribution of hours, time-off information and any
special or bonus pay information. Beginning February 1, 1999 assume
responsibility for payroll input, tax filings and deposits.
6) Order entry and invoicing - entry of sales orders into sales order entry
system, tracking of orders, preparation of picking tickets and shipping
documents, sales reconciliation, returns processing, responding to customer
calls re orders and shipments and other duties associated with the sales
accounting function.
7) Journal entries - preparation of journal entries other than payroll journal
entries which are prepared by Stac. Includes journal entries that adjust
reserves, allowances, revenue recognition, accruals for expenses, prepaid
amortization and other journal entries.
8) SEC reports - prepare and file all SEC filings, answer SEC questions and
comments. Preparation may require adjustment of standard internal reports
provided by Stac to comply with SEC requirements.
9) Audits and reviews - plan, schedule and control annual audit and quarterly
reviews by outside independent auditors.
10) Accounting systems maintenance - in addition to the monthly $6,500 fee to
Stac for accounting services, pay to outside vendors or reimburse Stac for
any costs associated with licensing and maintaining the accounting software
for Hi/fn's use.
11) Credit check and approval-request credit references, D&B reports and make
decisions as to level of credit to be granted to new customers.
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12) Option/stock accounting-track all option/stock/ESPP activity, reconcile with
transfer agent, perform valuation and run reports necessary for quarterly
reporting.
The following work is currently performed by Stac personnel and will continue to
be done by them during the term of this agreement or by such other persons as
Stac appoints, unless Hi/fn takes on performance of a function or service
directly.
1) Payroll - input of payroll data provided by Hi/fn, processing of payroll,
delivery of checks or automatic deposits, preparation of payroll tax
returns, preparation of payroll general ledger entries and other duties
associated with payroll not performed by Hi/fn as described above. After
February 1, Hi/fn will input their own payroll and be responsible for all
tax filings and other deposits, and Stac will only do the related journal
entries.
2) Cash - reconciliation of Hi/fn cash accounts, management of Hi/fn cash in
the manner currently done through BT Xxxx Xxxxx, preparation and delivery of
cash investment reports as previously done and other duties associated with
accounting for cash.
3) Accounts Receivable - collection of and deposit of Hi/fn trade accounts
receivable including collection calls and other duties normally associated
with the accounts receivable function and not performed by Hi/fn as
described above.
4) Inventory - maintenance of accounting records in detail currently
maintained, reconciliation of differences between book and physical counts
with Hi/fn personnel.
5) General ledger accounts -, preparation and entry of payroll journal entries.
6) Reports - run reports currently run by Stac for Hi/fn including those listed
below. Provide Hi/fn personnel access to reporting modules for purpose of
designing and running own reports.
Income Statement
Balance Sheet
Departmental expense reports
7) Closing schedules - on a best efforts basis, provide reports listed above by
the 7th workday following the end of each month.
8) SEC reports - provide historical (defined as "pre-spinoff") information in
addition to normal reports as reasonably requested by Hi/fn for Hi/fn's
preparation of SEC filings.
9) Audits and reviews - provide historical information as requested by
independent accounts for annual audit and quarterly reviews.
10) Access and turnover - provide Hi/fn personnel with access to accounting
systems as authorized by Hi/fn's CFO, assist Hi/fn personnel as reasonably
necessary to turn over accounting records and know-how in order for Hi/fn or
their appointees to take over the Stac provided accounting functions.
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11) Accounting systems maintenance - maintain accounting systems software in
working order and maintain backups of accounting data.
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