INVENTORY AND PRODUCT RETURN AGREEMENT
INVENTORY
AND
PRODUCT
RETURN AGREEMENT
This Inventory and Product Return
Agreement (this “Agreement”), dated
December 24, 2008 (the “Effective Date”), is
made between Avid Technology, Inc., a Delaware corporation and Avid
Technology International BV, a Luxemburg corporation (collectively, the “Consignor”) and
Hauppauge Computer Works, Inc. and Hauppauge Digital Europe S.a.r.l.
(collectively, the “Consignee”). Capitalized
terms used herein but not defined shall have the meanings ascribed to such terms
in the Asset Purchase Agreement (as defined below).
RECITALS
A. Reference
is made to that certain Asset Purchase Agreement, dated October 25, 2008, as
amended by Amendment No. 1, dated December 23, 2008 (collectively, the “Asset Purchase
Agreement”), which provides for the purchase and sale of certain assets
and the assumption of certain liabilities.
B. In
connection with the transactions contemplated by the Asset Purchase Agreement,
Consignee desires to receive the inventory of Consignor as set forth on Exhibit A hereto
(collectively, the “Consigned Inventory”)
on consignment, to be sold by Consignee, and Consignor desires to deliver such
Consigned Inventory on consignment pursuant to the terms hereof.
NOW, THEREFORE, in
consideration of the mutual promises and agreements set forth herein, the
parties agree as follows:
AGREEMENT
1. The Consigned
Inventory.
(a) Exhibit A to this
Agreement sets forth (i) the description and material item number
(the “MIN”) of
each item of Consigned Inventory, (ii) the Consignor Cost (as defined below) of
each MIN of Consigned Inventory, (iii) the quantity of each MIN of Consigned
Inventory, (iv) the owner of record of each MIN of Consigned Inventory and (v)
the Distribution Center (as defined below) at which each such MIN of Consigned
Inventory is located.
(b) The
information set forth on Exhibit A hereto is
true, complete and accurate in all material respects. No person or
entity other than the entity listed on Exhibit A
is the owner of such item of Consigned Inventory or has any ownership interest
in such item of Consigned Inventory.
2. Location of Consigned
Inventory; Verification of Consigned Inventory. On the Closing
Date, the Consigned Inventory will be located at Consignor’s third party
distribution centers (the “Distribution
Centers”) as set forth on Exhibit A
hereto. On the Closing Date, Consignor and Consignee shall direct the
applicable Distribution Center to verify the quantity and condition of the
Consigned Inventory and submit a schedule (the “Schedule”) to
Consignor and Consignee setting forth (i) the type and number of each MIN of
Consigned Inventory, (ii) any discrepancies, shortages, overages, and damage to
such Consigned Inventory and (iii) such additional information as may be
reasonably requested by Consignor or Consignee. Consignor and
Consignee shall mutually verify and confirm the accuracy and completeness of the
Schedule. Upon completion of the Schedule in accordance with the
immediately preceding sentence, Exhibit A shall be amended and restated so as to
be consistent with the Schedule.
3. Maintenance of Consignee
Consigned Inventory. Consignee shall, and shall cause
the applicable Distribution Center, to (i) clearly xxxx all Consigned Inventory
as the property of Consignor, (ii) segregate all such Consigned Inventory from
all other products and inventory (including any products and other inventory
delivered by Consignor’s contract and third party manufacturers to Consignee
pursuant to purchase orders outstanding as of the Closing Date), and (iii)
provide appropriate designation of such Consigned Inventory as the property of
Consignor. Consignee shall, at Consignee’s
expense, instruct the applicable Distribution Center to store and maintain all
Consigned Inventory at the Distribution Center in a manner and in an environment
reasonably necessary to ensure that the Consigned Inventory does not become
damaged or degraded and consistent with such Distribution Center’s standard
storage procedures. Consignee shall, and shall cause
the Distribution Centers to, comply with Consignor’s reasonable requests with
respect to the manner in which the Consigned Inventory is stored and maintained.
Notwithstanding anything in this section or in this Agreement to the contrary,
Consignee’s and Consignor’s duties and obligations with respect to the
administration, holding and maintenance of the Consigned Inventory under this
Agreement shall be consistent with the manner in which the Consigned Inventory
was administered, held and maintained by the applicable Distribution Center for
the benefit of Consignor on the date of the execution and delivery of the Asset
Purchase Agreement.
4. Consignor Representative and
Consignee Representative; Rights of
Inspection. Representatives of Consignor (each, a “Consignor
Representative”) and representatives of Consignee (each, a “Consignee
Representative”) shall be entitled to (i) verify the quantity of
Consigned Inventory in inventory, (ii) examine the condition of the Consigned
Inventory and the manner in which the Consigned Inventory is stored and
maintained, (iii) inspect sales records, purchase orders, warranty claims and
other documents related to the Consigned Inventory and (iv) make such other
inspections and inquiries as the Consignor Representative or Consignee
Representative (as applicable) shall deem reasonably necessary or reasonably
advisable in connection with the transactions contemplated by this Agreement;
provided, however that
nothing herein shall require the Consignor or the Consignee (i) to provide
any information or documents that are the subject of confidentiality agreements,
or (ii) to provide any information, documents or access that would
(A) violate the provisions of any applicable laws or regulations (including
without limitation those relating to security clearance or export controls) or
any confidentiality agreement to which it is a party or (B) cause the loss of
the attorney-client privilege with respect thereto; provided, however in each case that the
Consignor and the Consignee (as applicable) shall use commercially reasonable
efforts to provide such information in a manner that does not violate the
provisions of applicable law or the confidentiality provisions set forth in the
applicable agreement or cause the loss of attorney-client
privilege. Each party shall provide all reasonably requested
assistance to the other party in connection with such inspections and inquiries
by the Consignor Representative or Consignee Representatives (as
applicable). In the event of any issues or deficiencies identified in
connection with the manner in which the Consigned Inventory is stored and
maintained or the condition of the Consigned Inventory, the parties shall
promptly make, or cause the applicable Distribution Center to make, such
reasonably requested changes to correct such issues and deficiencies and
Consignor Representative and Consignee Representative (as applicable) shall be
entitled to confirm
compliance with such requested changes. Consignee shall reimburse
Consignor on the fifteenth (15th) day of
each calendar month for (A) all reasonable costs and expenses of the
Distribution Center to the extent not paid directly by Consignee to the
Distribution Center, and (B) all reasonable wages, reasonable costs and other
reasonable expenses of the Consignor Representative, in each case paid by
Consignor during the immediately preceding calendar month with respect to the
Consigned Inventory. On the fifth (5th) day of
each calendar month, Consignor shall deliver to Consignee a statement of the
items set forth in the immediately preceding sentence for the immediately
preceding calendar month.
5. Sales of Consigned
Inventory.
(a) Within
the time periods set forth in SOW-2 to the Transition Services Agreement (as
defined below), Consignee shall, or shall cause
the Distribution Center to, deliver to the applicable Consignor Representative a
monthly report (“Monthly Report”)
containing such information as required pursuant to the Transition Services
Agreement, dated the Closing Date, between Consignor and Consignee (the “Transition Services
Agreement”).
(b) Consignee
shall pay Consignor for the Consigned Inventory (on a per MIN basis) sold by the
Consignee as follows:
(i) If
Consignee sells a MIN of Consigned Inventory for a price equal to or greater
than Consignor’s Cost for such MIN of Consigned Inventory, then Consignee shall
pay Consignor an amount equal to one hundred percent (100%) of the Consignor
Cost for such MIN of Consigned Inventory; and
(ii) If
Consignee sells a MIN of Consigned Inventory for a price less than the Consignor
Cost for such MIN of Consigned Inventory, then Consignee shall pay Consignor an
amount equal to eighty percent (80%) of the sales price for such MIN of
Consigned Inventory.
(c) In
no event shall Consignee sell any Consigned Inventory for an amount less than
the applicable Consignor Cost for such Consigned Inventory without the prior
written consent of the Consignor Representative which written consent may be
granted or withheld in the Consignor Representative’s sole
discretion.
For
purposes of this Agreement, “Consignor Cost” is the Consignor’s true and correct
cost of each MIN of Consigned Inventory as determined in accordance with
Consignor’s existing first in/first out moving average basis continuously
updated method (including inbound freight cost and applicable duties tariffs as
a component of the consigned inventory cost). The Consignor Cost for
each MIN is set forth on Exhibit A
hereto.
6. Ownership; Risk of Loss;
Payment.
(a) Consignor
shall retain ownership and risk of loss in each MIN of Consigned Inventory sold
pursuant to a Consignee Invoice (as hereinafter defined) until such MIN of
Consigned Inventory is delivered to the carrier for shipment from the relevant
Distribution Center (“Delivery to the
Carrier”), and upon such Delivery to the Carrier, all right, title and
interest in and to such MIN of Consigned Inventory, and the risk of loss with
respect to such MIN of Consigned Inventory, shall pass to
Consignee.
(b) Consignor
shall retain ownership and risk of loss in each MIN of Consigned Inventory sold
pursuant to a Consignor Invoice (as hereinafter defined) notwithstanding
Delivery to the Carrier with respect to such MIN of Consigned Inventory, and
right, title and interest in and to such MIN of Consigned Inventory, and the
risk of loss with respect to such MIN of Consigned Inventory, shall not pass to
Consignee.
(c) All
right, title and interest in and to payments from customers in respect of
Consigned Inventory sold pursuant to a Consignee Invoice shall be vested in
Consignee. All right, title and interest in and to payments from
customers in respect of Consigned Inventory sold pursuant to a Consignor Invoice
shall be vested in Consignor.
(d) The owner
of record of each MIN of Consigned Inventory, as set forth on Exhibit A hereto,
owns such MIN of Consigned Inventory free and clear of any Security Interest (as
defined in the Asset Purchase Agreement) or other encumbrance of any kind, and
Consignor covenants and aggress that neither Consignor nor any of its
subsidiaries or Affiliates shall cause or permit any of the Consigned Inventory
to be subject to, or encumbered by, and the Consigned Inventory shall remain
free and clear of, any Security Interest or other encumbrance of any
kind. Except as explicitly set forth in the Transition Services
Agreement with respect to sales of Consigned Inventory to be made pursuant to a
Consignor Invoice, and subject to the terms of Section 9 hereof,
Consignor hereby grants to Consignee the exclusive right to sell the Consigned
Inventory.
(e) All
invoicing, payment remittance, shipping and other procedures shall be conducted
in accordance with the Transition Services Agreement.
7. Sales of
Inventory. Consignee shall fill any and all orders for any MIN
of Business Products from the Consigned Inventory, prior to filling any such
order for any such MIN of Business Products with products or inventory outside
of the Consigned Inventory. Notwithstanding the foregoing provisions of this
section, Consignor acknowledges and agrees that nothing shall restrict or limit
the right of Consignee and its or their respective subsidiaries and Affiliates
(“Consignee
Parties”) to sell any and all other products heretofore and/or hereafter
manufactured, sold, marketed and/or distributed by any such Consignee Party,
including, but not limited to, such other products as are and/or have been
manufactured, sold, marketed and/or distributed by the Consignee Parties as of
and/or prior to the Effective Date.
8. Returned
Products. Any (A) Consigned Inventory and (B) any Business
Products sold by Consignor prior to the date hereof , that are returned by the
customer to Consignor or Consignee (collectively, the “Returned Products”)
shall be subject to the following:
(a) Returned
Products.
(i) If
any Returned Product was originally sold pursuant to a sales invoice issued by
Consignor (a “Consignor Invoice”),
then Consignor shall (i) issue a “return material authorization” setting forth
the original order number and invoice price (an “RMA”) to the
applicable customer, (ii) accept for return such Returned Product and (iii)
issue a credit or refund (as required by the applicable customer) to such
customer in an amount equal to the amount originally set forth on the Consignor
Invoice.
(ii) If
any Returned Product was originally sold pursuant to a sales invoice issued by
Consignee (a “Consignee Invoice”),
then Consignee shall (A) issue an RMA to the applicable customer, (B) accept for
return such Returned Product and (C) issue a credit to such customer in an
amount equal to the amount originally set forth on the Consignee
Invoice.
(iii) Any
Returned Product that was sold pursuant to a Consignor Invoice other than
Warranty Returned Products (as defined below) that (i) was not previously sold
to an end-customer, (ii) is a current product of the Business at the time such
product is returned by the customer, (iii) is intact, undamaged and unopened at
the time of return and available for sale as a new product at the time of return
and (iv) was returned by a customer which at the time of such return has not
provided notice of the termination of the customer relationship with Consignor
or Consignee, shall be included in the Consigned Inventory and shall constitute
Consigned Inventory for all purposes of this Agreement.
(iv) Any
Returned Product that was sold pursuant to a Consignee Invoice (“Consignee Invoiced Returned
Product”) shall not be subject to the terms of the first sentence of
Section 7 of this Agreement, and Consignee may fill any and all orders with such
Consignee Invoiced Returned Product prior to filling any such orders with
Consigned Inventory.
(v) Any
Returned Product not included in the Returned Products described in Section
8(a)(iii) (“Not
Included Returned Products”) shall not be included in the Consigned
Inventory, and the disposition and re-processing of such Not Included Returned
Products shall be completed in accordance with procedures mutually acceptable to
Consignor and Consignee and otherwise in accordance with the terms of the
Transition Services Agreement. Not Included Returned Products shall
include, but not be limited to, Warranty Returned Products, any Returned Product
sold pursuant to a Consignor Invoice that is not included in Section 8(a)(iii),
and any Returned Product sold pursuant to a Consignee Invoice.
For
purposes of this Agreement, “Warranty Returned
Product” means any Returned Product that is returned by any customer for
return, repair or replacement in accordance with the warranty terms for such
product.
(b) Warranty
Obligations. Consignor shall assume all after-sales service
and warranty obligations with respect to Consigned Inventory (the “Assumed Warranty
Obligations”). Consignor shall pay to Consignee an amount
equal to the Consignee’s standard charges for parts and labor (which are
consistent with the charges imposed on the Consignee’s other customers) in
satisfying the Assumed Warranty Obligations. Consignee shall invoice
Consignor monthly for all charges for parts and labor, and Consignor’s shall pay
such invoice within thirty (30) days after receipt.
9. Term and
Termination. This Agreement shall commence on the Effective
Date and continue for a term of eighteen (18) months (the “Term”). Upon
the occurrence of a breach by Consignee of any material obligation of Consignee
hereunder and the failure of Consignee to cure such breach within thirty (30)
days after receiving written notice thereof from the Consignor Representative,
this Agreement may be terminated by Consignor by giving written notice of
termination to Consignee, such termination shall be immediately effective upon
the giving of such notice. In the event of (i) a filing of a petition
in bankruptcy, insolvency or reorganization against or by Consignee, (ii)
Consignee becoming subject to a composition for creditors, whether by law or
agreement, or (iii) Consignee going into receivership or otherwise becoming
insolvent, this Agreement may be terminated by Consignor by giving written
notice of termination to Consignee, such termination shall be immediately
effective upon the giving of such notice. Upon any termination of
this Agreement in accordance with this Section 9, Consignor
shall have the right in its sole discretion to cause the applicable Distribution
Center to immediately return all Consigned Inventory to
Consignor. Upon expiration of the Term (absent a termination of this
agreement pursuant to this Section 9), Consignor
and Consignee shall mutually agree in good faith as to the treatment and
disposition of any then unsold Consigned Inventory.
10. Miscellaneous.
(a) Consignee
may not delegate any duties hereunder other than
to a Distribution Center in accordance with this
Agreement. Consignee’s rights and obligations under this
Agreement may be transferred and/or assigned, without the prior written consent
of Consignor, to any Person that acquires all or substantially all of the assets
of Consignee or to any subsidiary or Affiliate of Consignee, provided that any
such assignee agrees in writing (in a form acceptable to Consignor in its sole
discretion) to be bound by the provisions hereof as they apply to Consignee and
that the Buyer Parent Guaranty remains in full force and effect with respect to
the obligations of any such assignee under this Agreement. Except as
specifically set forth in this Section 10(a),
Consignee may not delegate any duties under this Agreement, or transfer or
assign this Agreement, without Consignor’s prior written consent, which will not
be unreasonably withheld, and any such attempted delegation, transfer or
assignment shall be void. Subject to the foregoing provisions of this
paragraph, this Agreement shall be binding upon the parties and their respective
successors and assigns.
(b) This
Agreement and any disputes hereunder shall be governed by and construed in
accordance with the internal laws of the State of New York without regard to
(i) any conflict of law provision or rule (whether of the State of
New York or any other jurisdiction) that would cause the application of laws of
any jurisdiction other than those of the State of New York; (ii) the United
Nations Convention on Contracts for the International Sale of Goods; (iii) the
1974 Convention on the Limitation Period in the International Sale of Goods (the
“1974
Convention”); or (iv) the Protocol amending the 1974 Convention, done at
Vienna April 11, 1980.
(c) Any
term or provision of this Agreement that is invalid or unenforceable in any
situation in any jurisdiction shall not affect the validity or enforceability of
the remaining terms and provisions hereof or the validity or enforceability of
the offending term or provision in any other situation or in any other
jurisdiction. If the final judgment of a court of competent
jurisdiction declares that any term or provision hereof is invalid or
unenforceable, the parties agree that the body making the determination of
invalidity or unenforceability shall have the power to reduce the scope,
duration or area of the term or provision, to delete specific words or phrases,
or to replace any invalid or unenforceable term or provision with a term or
provision that is valid and enforceable and that comes closest to expressing the
intention of the invalid or unenforceable term or provision, and this Agreement
shall be enforceable as so modified.
(d) EXCEPT
AS EXPRESSLY PROVIDED UNDER THE ASSET PURCHASE AGREEMENT, THE INTELLECTUAL
PROPERTY LICENSE AGREEMENT OR HEREUNDER OR AS PROVIDED IN CONSIGNOR’S STANDARD
WARRANTY TERMS APPLICABLE TO THE CONSIGNED INVENTORY, CONSIGNOR DISCLAIMS ALL
WARRANTIES, REPRESENTATIONS, AND GUARANTEES, WHETHER EXPRESS OR IMPLIED, WRITTEN
OR ORAL, STATUTORY, OR ARISING BY CUSTOM OR TRADE USAGE, INCLUDING ANY WARRANTY
OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE OR OF
NON-INFRINGEMENT. NOTWITHSTANDING ANYTHING HEREIN TO THE CONTRARY, IN
NO EVENT SHALL CONSIGNOR OR CONSIGNEE BE LIABLE FOR SPECIAL, INCIDENTAL,
PUNITIVE, INDIRECT OR CONSEQUENTIAL DAMAGES, INCLUDING, BUT NOT LIMITED TO, LOSS
OF PROFITS OR LOSS OF USE DAMAGES, ARISING HEREUNDER OR OTHERWISE.
(e) Consignee shall, from time to time
at the reasonable request of Consignor, file or cause to be filed, such notices
or take other actions such that there is evidence as a matter of public record
that Consignor has all right, title and interest in the Consigned
Inventory.
(f) All
notices, requests, demands, claims and other communications hereunder shall be
in writing and sent by (i) electronic transmission (which notice shall be deemed
delivered on the date of transmission), (ii) facsimile (which notice shall be
deemed on delivered the date of transmission), (iii) registered or certified
mail, return receipt requested (which notice shall be deemed delivered four (4)
days after deposit), or (iv) via a reputable nationwide overnight courier
service (which notice shall be deemed delivered on the day following the date of
transmission), in each case to the intended recipient as set forth
below:
|
If to any
Consignee:
c/o
Hauppauge Digital, Inc.
00
Xxxxx Xxxxx
Xxxxxxxxx,
Xxx Xxxx 00000
Facsimile: (000)
000-0000
Attention:Chief
Executive Officer
|
Copy
to:
Certilman
Balin Xxxxx & Xxxxx, LLP
00
Xxxxxxx Xxxxxx
Xxxx
Xxxxxx, Xxx Xxxx 00000
Facsimile:
(000) 000-0000
Attention:
Xxxxxx X. Xxxxxxxxxxx, Esq.
|
|
If to any
Consignor:
Avid
Technology, Inc.
Avid
Technology Park
Xxx
Xxxx Xxxx
Xxxxxxxxx,
XX 00000
Facsimile:
(000) 000-0000
Attention: Legal
Department
|
Copies
to:
Xxxxxx
Xxxxxx Xxxxxxxxx Xxxx and Xxxx LLP
0000
X. Xxxxxxxxxx Xxxxxx
Xxxx
Xxxx, XX 00000
Facsimile:
(000) 000-0000
Attention:
Xxx X. Xxxxxx and Xxxxxx
X. Xxxxx
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Any party
may change the address to which notices, requests, demands, claims and other
communications hereunder are to be delivered by giving the other parties notice
in the manner herein set forth.
(g) Neither
party nor any of its officers, employees, agents or representatives is an
employee or agent of the other party for any purpose
whatsoever. Rather, each party is, and at all times remains, an
independent contractor of the other party.
(h) This
Agreement shall constitute a purchase money security agreement for the purpose
of protecting the rights of Consignor as owner and consignor under Article 9 of
the Uniform Commercial Code as enacted in any relevant
jurisdiction. For the avoidance of doubt, the status of this
Agreement as a security agreement shall in no way reduce, impair, or otherwise
adversely affect the rights of Consignor as owner and consignor hereunder or any
other rights of Consignor in the Consigned Inventory or against the
Consignee.
(i) Nothing
herein shall be construed to constitute any “sale or return” transaction as
described in Article 2, Section 326 of the Uniform Commercial Code as enacted in
any relevant jurisdiction, and the parties specifically intend to avoid any such
characterization. The parties intend and agree that the consignment
transactions described herein are “consignments” as defined in Article 9,
Section 102(a)(20) of the Uniform Commercial Code as enacted in any relevant
jurisdiction.
(j) The
parties may mutually amend or waive any provision of this Agreement at any
time. No amendment or waiver of any provision of this Agreement shall
be valid unless the same shall be in writing and signed by the party to be
charged therewith.
(k) The
terms and provisions of this Agreement are intended solely for the benefit of
the Consignor and the Consignee, and their respective successors and permitted
assigns, and it is not the intention of the parties to confer third party
beneficiary rights, and this Agreement does not confer third-party beneficiary
rights, on any other person or entity.
IN WITNESS WHEREOF, the parties hereby
have duly executed this Inventory and Product Return Agreement as of the
Effective Date.
AVID
TECHNOLOGY, INC.
CONSIGNOR
By: /s/ Xxx Xxxxxx
Title: Chief Financial Officer
AVID
TECHNOLOGY INTERNATIONAL BV
CONSIGNOR
By: /s/ Xxx Xxxxxx
Title: Director
SIGNATURE
PAGE TO INVENTORY AND PRODUCT RETURN AGREEMENT
HAUPPAUGE
COMPUTER WORKS, INC.
CONSIGNEE
By: Xxx Xxxxxxx
Title: Chief Executive Officer
HAUPPAUGE
DIGITAL EUROPE, S.a.r.l.
CONSIGNEE
By: Xxx Xxxxxxx
Title: Chief Executive Officer
SIGNATURE
PAGE TO INVENTORY AND PRODUCT RETURN AGREEMENT
EXHIBIT
A
CONSIGNEE
CONSIGNED INVENTORY
