-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, CYetXIAHaql9rOg4MZ3odLghGO2OeaVNI7bm3veaPg8TEC6njUmxQ1Mo+TnJZgKM itop2IsKjMbuy5u8xbYC9w== 0001021771-08-000056.txt : 20081229 0001021771-08-000056.hdr.sgml : 20081225 20081229161455 ACCESSION NUMBER: 0001021771-08-000056 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 6 CONFORMED PERIOD OF REPORT: 20081224 ITEM INFORMATION: Entry into a Material Definitive Agreement ITEM INFORMATION: Completion of Acquisition or Disposition of Assets ITEM INFORMATION: Creation of a Direct Financial Obligation or an Obligation under an Off-Balance Sheet Arrangement of a Registrant ITEM INFORMATION: Financial Statements and Exhibits FILED AS OF DATE: 20081229 DATE AS OF CHANGE: 20081229 FILER: COMPANY DATA: COMPANY CONFORMED NAME: HAUPPAUGE DIGITAL INC CENTRAL INDEX KEY: 0000930803 STANDARD INDUSTRIAL CLASSIFICATION: COMPUTER PERIPHERAL EQUIPMENT, NEC [3577] IRS NUMBER: 113227864 STATE OF INCORPORATION: DE FISCAL YEAR END: 1226 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-13550 FILM NUMBER: 081272859 BUSINESS ADDRESS: STREET 1: 91 CABOT COURT CITY: HAUPPAUGE STATE: NY ZIP: 11788 BUSINESS PHONE: 5164341600 MAIL ADDRESS: STREET 1: 91 CABOT COURT CITY: HAUPPAUGE STATE: NY ZIP: 11788 8-K 1 f8k.htm FORM 8-K DATED DECEMBER 24, 2008 f8k.htm
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549

_________________

FORM 8-K


CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934


Date of Report: December 24, 2008
(Date of earliest event reported)


HAUPPAUGE DIGITAL, INC.
(Exact Name of Registrant as Specified in Charter)

Delaware
1-13559
11-3227864
(State or Other Jurisdiction
of Incorporation)
(Commission File No.)
(IRS Employer Identification
Number)

91 Cabot Court, Hauppauge, NY                   11788
(Address of Principal Executive Offices)   (Zip Code)

Registrant's telephone number, including area code: (631) 434-1600

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))


Item 1.01.
Entry into a Material Definitive Agreement.

Effective December 24, 2008, pursuant to an Asset Purchase Agreement, dated as of October 25, 2008, as amended by that certain Amendment No. 1 to the Asset Purchase Agreement (the “Amendment”) (together with the Amendment, the “Asset Purchase Agreement”), PCTV Systems, S.a.r.l., a Luxembourg company (“Buyer”) and a wholly-owned subsidiary of Hauppauge Digital, Inc. (the “Company”), acquired certain assets and properties (the “Acquired Assets”) of Avid Technology, Inc. (“Avid”), a Delaware corporation, Pinnacle Systems, Inc., a California corporation (“Pinnacle”), Avid Technology GmbH, a limited liability company organized under the laws of Germany, Avid Development GmbH, a limited liability company organized under the laws of Germany, and Avid Technology International BV (collectively, the “Sellers”).  The purchase price consisted of $2,500,000 payable in cash; $2,500,000 payable pursuant to Promissory Note, dated December 24, 2008, made payable by the Buyer to Avid (the “Note”) and the assumption of certain liabilities.  In connection with the transaction, the Buyer or one or more of its affiliates intends to employ certain employees and occupy certain facilities located in Braunschweig, Germany.  Pursuant to the terms of the Asset Purchase Agreement, it is contemplated that the Buyer and the Company will also receive certain audited historical financial statements of the Sellers.  The Acquired Assets are used by the Sellers in the business of, among other things, the development, manufacture and sale of personal devices containing a television tuner for receiving over-the-air, satellite and/or cable television signals that are used in conjunction with personal computers for personal television viewing.

The principal amount due pursuant to the Note is payable in 12 equal monthly installments of $208,333.33, with the first such payment due and payable on January 24, 2009.   Interest on the outstanding principal amount of the Note is payable at a rate equal to (i) from December 24, 2008 until the Maturity Date (as defined in the Note), five percent (5%), (ii) from and after the Maturity Date, or during the continuance of an Event of Default (as defined in the Note), at seven percent (7%).  Pursuant to the terms of the Note, the Buyer and its affiliates are prohibited from (i) declaring or paying any cash dividend, or making a distribution on, repurchasing, or redeeming, any class of stock or other equity or ownership interest in the Buyer or its affiliates, (ii) selling, leasing, transferring or otherwise disposing of any assets or property of the Buyer or any of its affiliates, or attempting to or contracting to do so, other than (a) the sale of inventory in the ordinary course of business and consistent with past practice, (b) the granting of non-exclusive licenses of intellectual property in the ordinary course of business and consistent with past practice and (c) the sale, lease, transfer or disposition of any assets or property (other than the Acquired Assets) with a value not to exceed $500,000 in the aggregate, or (iii) dissolving or liquidating, or merging or consolidating with any other entity, or acquiring all or substantially all of the stock or assets of any other entity.

In connection with the transactions contemplated by the Asset Purchase Agreement, the Buyer, Hauppauge Digital Europe S.a.r.l. (“HDES”), and Hauppauge Computer Works, Inc. (“HCW”), each a wholly-owned subsidiary of the Company (collectively, the “Subsidiaries”) and the Sellers entered into a Transition Services Agreement, dated December 24, 2008 (the “TSA”), pursuant to which, among other things, the parties agreed to provide each other with certain services relating to infrastructure and systems, order processing and related matters and systems transition and related matters (the “Services”), as set forth in detail in the TSA.  The fees for such services are set forth in the TSA.  The term of the TSA shall be until the earlier to occur of (i) 18 months following the Closing or (ii) termination of the last of the Services to be provided pursuant to the TSA.  The TSA may be terminated by the Subsidiaries at any time upon thirty (30) days prior written notice to the Sellers and may be terminated with respect to any particular Service to be provided pursuant to the TSA upon ten (10) days prior written notice to Seller.

Further, Avid, Avid Technology International BV (collectively, the “Consignor”), and HCW and HDES (collectively, the “Consignee”) entered into an Inventory and Product Return Agreement, dated December 24, 2008 (the “Inventory Agreement”).  Pursuant to the terms of the Inventory Agreement, the Consignor is obligated to deliver the Consigned Inventory (as defined in the Inventory Agreement) to the Consignee and the Consignee is obligated to, as applicable, fill orders from products held as Consigned Inventory before filling any such orders with products or inventory other than the Consigned Inventory.  Upon the sale of Consigned Inventory by the Consignee, the Consignee has agreed to pay the Consignor for such Consigned Inventory as follows: (i) if Consignee sells Consigned Inventory for a price equal to or greater than Consignor’s Cost (as defined in the Inventory Agreement) for such Consigned Inventory, then Consignee has agreed to pay Consignor an amount equal to one hundred percent (100%) of the Consignor Cost for such Consigned Inventory; or (ii) if Consignee sells Consigned Inventory for a price less than the Consignor Cost for such Consigned Inventory, then Consignee has agreed to pay Consignor an amount equal to eighty percent (80%) of the sales price for such Consigned Inventory.  The term of the Inventory Agreement expires 18 months from the date of execution.

In connection with the transactions contemplated by the Asset Purchase Agreement, Avid, Pinnacle and the Buyer also entered into an Intellectual Property License Agreement, dated December 24, 2008 (the “IP Agreement”).  Pursuant to the terms of the IP Agreement, Avid and Pinnacle have granted the Buyer certain irrevocable, personal, non-exclusive, worldwide, fully paid, royalty-free and non-transferable licenses to certain copyrights and other intellectual property rights owned by Avid, Pinnacle and their respective subsidiaries, subject to certain termination provisions as set forth in the IP Agreement.

The descriptions of the Amendment, the Note, the TSA, the Inventory Agreement and the IP Agreement and the transactions contemplated thereby are qualified in their entirety by reference to such agreements as filed as Exhibits 2.1, 2.2, 2.3, 2.4 and 2.5, respectively, hereto.
 
Item 2.01
Completion of Acquisition or Disposition of Assets.
 
Reference is made to Item 1.01 hereof which is hereby incorporated herein.
 
Item 2.03
Creation of a Direct Financial Obligation or an Obligation under an Off-Balance Sheet Arrangement of a Registrant.
 
Reference is made to Item 1.01 hereof which is hereby incorporated herein.
 
Item 9.01.
Financial Statements and Exhibits.
 
(d)
Exhibits
 
 
2.1
Amendment No. 1 to the Asset Purchase Agreement, dated as of December 24, 2008, by and among Avid Technology, Inc., Pinnacle Systems, Inc., Avid Technology GmbH, Avid Development GmbH, Avid Technology International BV and PCTV Corp.
 
 
2.2
Secured Promissory Note, dated as of December 24, 2008, between PCTV Systems S.a.r.l. as Maker and Avid Technology, Inc. as Payee.
 
 
2.3
Transition Services Agreement, dated as of December 24, 2008, by and among Hauppauge Digital Europe S.a.r.l., PCTV Systems S.a.r.l., Hauppauge Computer Works, Inc., Avid Technology, Inc., Pinnacle Systems, Inc., Avid Technology GmbH, Avid Development GmbH and Avid Technology International BV.
 
 
2.4
Inventory and Product Return Agreement, dated as of December 24, 2008, by and among Avid Technology, Inc., Avid Technology International BV, Hauppauge Computer Works, Inc. and Hauppauge Digital Europe S.a.r.l.
 
 
2.5
Intellectual Property License Agreement, dated as of December 24, 2008, by and among between Avid Technology, Inc., Pinnacle Systems, Inc. and PCTV Systems S.a.r.l.
 
 

 
 
SIGNATURES
 
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
 
  HAUPPAUGE DIGITAL, INC.  
       
Dated:  December 24, 2008
By:
/s/ Gerald Tucciarone   
    Gerald Tucciarone   
    Chief Financial Officer  
       
 
EX-2.1 2 ex2_1.htm AMENDMENT NO. 1 TO ASSET PURCHASE AGREEMENT ex2_1.htm
AMENDMENT NO. 1
TO
ASSET PURCHASE AGREEMENT
 
This Amendment No. 1 to the Asset Purchase Agreement (this “Amendment”), is made as of December 23, 2008, by and among Avid Technology, Inc., a Delaware corporation (the “Parent”), Pinnacle Systems, Inc., a California corporation and a wholly owned subsidiary of the Parent (“Pinnacle”), Avid Technology GmbH, a limited liability company organized under the laws of Germany, Avid Development GmbH, a limited liability company organized under the laws of Germany, Avid Technology International BV (each a “Seller” and collectively with Parent and Pinnacle, the “Sellers”), and PCTV Corp., a Delaware corporation (the “Buyer”).  The Sellers and the Buyer are sometimes referred to collectively as the “Parties.”  Capitalized terms used and not otherwise defined herein shall have the respecting meanings assigned to such terms in the Agreement (as defined below).
 
RECITALS
 
A. The Sellers and the Buyer have entered into that certain Asset Purchase Agreement, dated October 25, 2008 (the “Agreement”).
 
B. The Parties desire to amend the Agreement in accordance with the terms of this Amendment.
 
C. Section 12.7 of the Agreement provides in relevant part that the Parties may mutually amend or waive any provision of the Agreement and no amendment or waiver of any provision of the Agreement shall be valid unless the same shall be in writing and signed by the Party to be charged therewith.
 
AGREEMENT
 
NOW, THEREFORE, in consideration of the foregoing and for good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the Buyer and the Sellers hereby agree as follows:
 
1. Amendment.
 
(a) Section 1.2(a) of the Agreement is hereby amended and restated as follows:
 
    “(a)           Purchase Price.  The purchase price payable by Buyer to the Sellers for the Acquired Assets shall be Two Million Five Hundred Thousand ($2,500,000) in cash and  Two Million Five Hundred Thousand ($2,500,000) payable in accordance with the Note.”
 
(b) Section 1.3(b)(xiii) of the Agreement is hereby amended and restated as follows:
 
                                        “(xiii) the Buyer shall pay to the Sellers Two Million Five Hundred Thousand ($2,500,000) of the Purchase Price in cash by wire transfer of immediately available funds into an account designated by the Sellers in writing not less than two (2) Business Days before the Closing Date and execute and deliver the Note.”
 
(c) Section 1.3(b) of the Agreement is hereby amended by adding the following:
 
    “(xvi) the Buyer shall execute and deliver the Note in substantially the form attached hereto as Exhibit F.”
 
(d) Section 3.1 of the Agreement is hereby amended by adding the following:
 
                “Each of the Applicable Subsidiaries is an entity duly organized, validly existing and in good standing under the laws of their respective jurisdiction of organization.”
 
(e) Section 3.2 of the Agreement is hereby amended by adding the following:
 
     “Each of the Applicable Subsidiaries has all requisite corporate power and authority to execute and deliver the Ancillary Agreements to which it will be a party and to perform its obligations thereunder.  The execution and delivery by each Applicable Subsidiary of such Ancillary Agreements and the consummation by each Applicable Subsidiary of the transactions contemplated thereby have been validly authorized by all necessary corporate action on the part of each such Applicable Subsidiary.  Such Ancillary Agreements will be validly executed and delivered by each applicable Applicable Subsidiary and, assuming each such Ancillary Agreement constitutes the valid and binding obligation of the Sellers, constitutes or will constitute a valid and binding obligation of each Applicable Subsidiary, enforceable against each such Applicable Subsidiary in accordance with its terms, except as enforceability may be limited by bankruptcy, insolvency, reorganization, fraudulent transfer, moratorium or other similar laws relating to or affecting the rights of creditors generally and by equitable principles, including those limiting the availability of specific performance, injunctive relief and other equitable remedies and those providing for equitable defenses.

 
(f) Section 3.6 of the Agreement is hereby amended and restated as follows:
 
                              “Subsidiary.  Each of Buyer, PCTV Systems S.a.r.l., Hauppauge Computer Works Inc., Hauppauge Digital Europe S.a.r.l. and PCTV Systems GmbH is a direct or indirect wholly-owned Subsidiary of Hauppauge Digital, Inc.
 
(g) Article III of the Agreement is amended to add the following:
 
      “3.8           Employees.  Upon consummation of the Transfer, the Business Employees shall be employed by PCTV Systems GmbH.
 
(h) Section 5.2 of the Agreement is hereby amended by adding the following:
 
      “(m)  the Buyer shall have executed and delivered the Note, in substantially the form of Exhibit F, and such Note shall be in full force and effect.
 
      (i) The definition of “Ancillary Agreements” is hereby amended and restated as follows:
 
      Ancillary Agreements” shall mean the agreements and instruments referred to in clauses (iii), (vii), (viii), (ix), (x), (xi) and (xvi) of Section 1.3(b).
 
(j) Article XI of the Agreement is hereby amended by adding the following:
 
      Applicable Subsidiaries” shall mean PCTV Systems S.a.r.l., Hauppauge Computer Works Inc. and Hauppauge Digital Europe S.a.r.l., collectively.
 
      Note” shall mean the Secured Promissory Note, dated December 19, 2008, between Buyer and Parent.
 
2. Counterparts.  This Amendment may be executed in any number of counterparts, each of which shall be an original, but all of which together shall constitute one instrument.
 
3. Effective Date of Amendment.  This Amendment shall become effective immediately upon the execution hereby by the Buyer and the Sellers.
 
4. Effectiveness of Agreement.  Except as expressly amended hereby, all terms, conditions and provisions of the Agreement shall remain in full force and effect in accordance with their respective terms.
 
[Remainder of Page Intentionally Left Blank]

 
IN WITNESS WHEREOF, the Seller and the Buyer have caused this Amendment to be executed as of the date first written above by their respective officers thereunto duly authorized.
 
THE SELLERS:
Avid Technology, Inc.
 
 
/s/ Ken Sexton                    
Ken Sexton
Executive Vice President, Chief
Administrative Officer and Chief Financial
Officer
 
Pinnacle Systems, Inc.
 
 
/s/ Ken Sexton                    
Ken Sexton
President
 
Avid Technology International BV
 
 
/s/ Joel Legon                   
Joel Legon
Director
 
Avid Development GmbH
 
 
/s/ Joerg Tewes                  
Joerg Tewes
Managing Director
 
 
Avid Technology GmbH
 
 
 
/s/ Joerg Tewes                    
Joerg Tewes
Procura
 
 
 
   
   
THE BUYER:
PCTV Corp.
 
 
/s/ Ken Plotkin                        
Ken Plotkin
Chief Executive Officer
 
 
[Signature Page to Amendment No. 1 to Asset Purchase Agreement]
EX-2.2 3 ex2_2.htm SECURED PROMISSORY NOTE ex2_2.htm
SECURED PROMISSORY NOTE
 

 
$2,500,000                                                                                                                      December 24, 2008

For Value Received, PCTV Systems S.a.r.l., a Luxembourg company (“Buyer”) and wholly owned subsidiary of Hauppauge Digital, Inc., a Delaware corporation, hereby unconditionally promises to pay to the order of Avid Technology, Inc., a Delaware corporation (“Seller”), in lawful money of the United States of America and in immediately available funds, the principal sum of Two Million Five Hundred Thousand Dollars ($2,500,000) (the “Payment”) together with accrued and unpaid interest thereon, each due and payable on the dates and in the manner set forth below.  This Note is issued as part of the “Purchase Price” under that certain Asset Purchase Agreement, entered into as of October 25, 2008, as amended by Amendment No. 1, dated December 23, 2008 (collectively, the “Purchase Agreement”), among Seller, Pinnacle Systems, Inc., a California corporation and a wholly owned subsidiary of the Seller, Avid Technology GmbH, a limited liability company organized under the laws of Germany, Avid Development GmbH, a limited liability company organized under the laws of Germany, Avid Technology International BV, and the Buyer.
 
1. Principal Repayment.  The outstanding principal amount of the Payment shall be due and payable on the earlier to occur of (i) December 24, 2009 and (ii) the date on which the Seller declares an Event of Default (as defined below) to have occurred (such date first to occur being referred to herein as the “Maturity Date”).  This Note may be prepaid in whole or in part at any time without premium or penalty.  The Buyer shall pay the outstanding principal in twelve (12) equal monthly installments of $208,333.33, with the first such payment due and payable on January 24, 2009, and subsequent payments due and payable on the same day of each calendar month thereafter (except for the principal payment which would be due on December 24, 2009, which shall be due on the Maturity Date)(each such date being a “Payment Date”), until the Maturity Date, when all unpaid principal shall be due and payable.  In addition to the payments required pursuant to the immediately preceding sentence and notwithstanding anything to the contrary herein or in the Purchase Agreement, the Seller may, in its sole discretion, without notice, and at any time and on one or more occasions, apply as a prepayment of the obligations of Buyer for principal under this Note, all amounts payable to Buyer or any of its Affiliates in accordance with the Inventory Agreement and Statement of Work 02 to the Transition Services Agreement (each as defined in the Purchase Agreement) from sales of Consigned Inventory (as defined in the Transition Services Agreement) pursuant to an invoice issued by the Seller or any of its Affiliates.  Any prepayments of principal (whether in accordance with the prior sentence or otherwise) shall be applied to the installments in the inverse order of maturity.
 
2. Interest Rate and Payments.  Interest shall be due and payable monthly in arrears, with the first such payment due and payable on January 24, 2009, and subsequent payments due and payable on each Payment Date thereafter, until the Maturity Date, when all unpaid interest shall be due and payable. The Buyer promises to pay interest on the outstanding principal amount hereof from the date hereof until payment in full at a per annum interest rate equal to (i) from the date hereof to the Maturity Date, five percent (5%), (ii) from and after the Maturity Date, or during the continuance of an Event of Default (as defined below), at the rate set forth in clause (i) plus two percent (2.0%), or (iii) if less than the rates applicable under both clauses (i) and (ii), the maximum rate permissible by law. Interest shall be calculated on the basis of a 365-day year for the actual number of days elapsed.
 
3. Place of Payment.  All amounts payable hereunder shall be payable in immediately available funds at the office of the Seller provided in Section 12.6 of the Purchase Agreement, unless another place of payment shall be specified in writing by the Seller.
 
4. Application of Payments.  Payment on this Note shall be applied first to costs and expenses due hereunder, then to accrued interest, and thereafter to the outstanding principal balance hereof.  Any principal repayment or interest payment hereunder not paid when due, whether at stated maturity, by acceleration or otherwise, shall bear interest at the rate set forth in clause (ii) of Section 2 hereof (or, if such rate exceeds the maximum rate permitted by law, then at such maximum rate permitted by law) until paid in full.
 
5. Secured Note.  This Note is the secured promissory note referred to in, and is executed and delivered in connection with, that certain Share Pledge Agreement, to be entered into, between the Buyer and the Seller (as the same may from time to time be amended, modified or supplemented or restated, the “Pledge Agreement”).  Additional rights of the Seller are set forth in the Pledge Agreement. The full amount of this Note (including, without limitation, all principal, interest and expenses) is secured by the collateral identified and described in the Pledge Agreement.

 
6. Representations and Warranties.  The Buyer represents and warrants to the Seller that:
 
(a) the Buyer has the all requisite corporate power and authority to execute and deliver this Note and the Pledge Agreement and to perform all of the obligations hereunder and thereunder.
 
(b) the execution and delivery by the Buyer of this Note and the Pledge Agreement and the consummation by the Buyer of the transactions contemplated hereby and thereby have been validly authorized by all necessary corporate action on the part of the Buyer.
 
(c) this Note has been validly executed and delivered by the Buyer and, assuming this Note constitutes the valid and binding obligation of the Seller, constitutes a valid and binding obligation of the Buyer, enforceable against the Buyer in accordance with its terms, except as enforceability may be limited by bankruptcy, insolvency, reorganization, fraudulent transfer, moratorium or other similar laws relating to or affecting the rights of creditors generally and by equitable principles, including those limiting the availability of specific performance, injunctive relief and other equitable remedies and those providing for equitable defenses; and
 
(d) the execution, delivery and performance by the Buyer of this Note does not (i) violate any provisions of the Buyer’s Certificate of Incorporation, bylaws or any contract, agreement, law, regulation, order, decree or writ to which the Buyer or any of its properties are subject, or (ii) require the consent or approval of any person, entity or authority, including, without limitation, any regulatory authority or governmental body of the United States of America or any state thereof or any political subdivision of any of the foregoing.
 
7. Negative Covenants.  The Buyer and/or its Affiliates shall not:
 
(a) (i) declare or pay any cash dividend, or make a distribution on, repurchase, or redeem, any class of stock or other equity or ownership interest in the Buyer or any of Affiliates, or (ii) sell, lease, transfer or otherwise dispose of any assets or property of the Buyer or any of its Affiliates, or attempt to or contract to do so, other than (a) the sale of inventory in the ordinary course of business and consistent with past practice, (b)  the granting of non-exclusive licenses of intellectual property in the ordinary course of business and consistent with past practice and (c) the sale, lease, transfer or disposition of any assets or property (other than the Acquired Assets)  with a value not to exceed $500,000 in the aggregate; and
 
(b) dissolve or liquidate, or merge or consolidate with any other entity, or acquire all or substantially all of the stock or assets of any other entity.
 
8. Default.  Each of the following events shall be an “Event of Default” hereunder:
 
(a) the Buyer fails to pay any of the principal, interest or any other amounts payable under this Note or the Pledge Agreement when and as the same becomes due and payable and such failure to pay remains uncured for a period of more than five (5) days following the date of the notice of such default delivered by the Seller to the Buyer;
 
(b) the Buyer or any of its Affiliates file any petition or action for relief under any bankruptcy, reorganization, insolvency or moratorium law or any other law for the relief of, or relating to, debtors, now or hereafter in effect, or seeks the appointment of a custodian, receiver, trustee (or other similar official) of the Buyer or any of its Affiliates or all or any substantial portion of the Buyer’s or its Affiliate’s assets, or makes any assignment for the benefit of creditors or takes any action in furtherance of any of the foregoing, or fails to generally pay its debts as they become due;
 
(c) an involuntary petition is filed, or any proceeding or case is commenced, against the Buyer or any of its Affiliates (unless such proceeding or case is dismissed or discharged within sixty (60) days of the filing or commencement thereof) under any bankruptcy, reorganization, arrangement, insolvency, adjustment of debt, liquidation or moratorium statute now or hereafter in effect, or a custodian, receiver, trustee, assignee for the benefit of creditors (or other similar official) is applied for, appointed for the Buyer or any of its Affiliates or to take possession, custody or control of any property of the Buyer or its Affiliates, or an order for relief is entered against the Buyer or its Affiliates in any of the foregoing;

 
(d) the Buyer or any of its Affiliates shall fail to perform any covenant, condition or agreement under this Note or the Pledge Agreement and such failure to perform remains uncured for more than ten (10) days following the date of the notice of such default delivered by the Seller to the Buyer;
 
(e) any representation or warranty made or deemed made by the Buyer or any of its Affiliates under this Note or the Pledge Agreement shall have been false or misleading in any material respect when made or deemed made;
 
(f) the occurrence (after taking into account any applicable grace, notice or cure periods) of a breach or default under (i) the Purchase Agreement, (ii) any Ancillary Agreement (as defined in the Purchase Agreement), or (iii) any other agreement, instrument or document to which the Buyer or any of its Affiliates is a party or by which it is bound, involving in the case of this clause (iii) any obligation which singly or in the aggregate is more than $250,000 and excluding in the case of this clause (iii) any disputes alleging that the Buyer or any of its Affiliates is infringing the intellectual property of any third party;
 
(g) one or more judgments or other claims or awards involving an aggregate amount of $250,000, or more, is entered against the Buyer or any of its Affiliates, and the same is not released, discharged, bonded against, or stayed pending appeal before the date which is thirty (30) days after the date of entry thereof; or
 
(h)  an “Event of Default” shall have occurred under the Pledge Agreement.
 
For purposes of this Note and the Pledge Agreement, “Affiliate” shall have the meaning assigned to it in Rule 12b-2 under the Securities and Exchange Act of 1934.
 
9. Remedies.  Upon the occurrence and during the continuance of an Event of Default hereunder:
 
(a) all unpaid principal, accrued interest and other amounts owing hereunder shall automatically be immediately due, payable and collectible by the Seller pursuant to applicable law;
 
(b) any and all unpaid principal, interest or other amounts due under this Note shall thereafter bear interest at the maximum rate set forth in Section 2 hereof; and
 
(c) the Seller may exercise any and all rights and remedies it may have under this Note, the Pledge Agreement, or under applicable law.
 
All rights and remedies shall be cumulative and not exclusive.  The failure of the holder hereof to exercise all or any of its rights, remedies, powers or privileges hereunder, under the Pledge Agreement or any other agreement or applicable law in any instance shall not constitute a waiver thereof in that or any other instance.
 
10. Notices.  Promptly after the Buyer or any of its Affiliates knows or has reason to know that any Event of Default as occurred, the Buyer shall deliver to the Seller a notice of such Event of Default describing such Event of Default in reasonable detail and, together with such notice or as soon as possible thereafter, a description of the action taken or proposed to be taken by the Buyer and its Affiliates with respect to such Event of Default.
 
11. Expenses.  The Buyer agrees to and shall pay to the Seller on demand, any and all expenses, including, without limitation, reasonable attorney’s fees and disbursements, incurred or paid by the Seller for collection or enforcement of amounts outstanding hereunder and for protecting, preserving or enforcing the Seller’s rights or remedies (including fees, costs and expenses relating to any proceedings with respect to the bankruptcy, reorganization, insolvency, readjustment of debt, dissolution or liquidation of the Buyer, any of its Affiliates or any party to any agreement or instrument securing or guaranteeing this Note).
 
12. Waivers.  The Buyer, for itself and its legal representatives, successors and assigns, hereby expressly waives demand, protest, presentment, notice of dishonor, notice of acceptance, and notice of protest, and all other demands and notices in connection with the delivery, acceptance, performance, default or enforcement of this Note and agrees that any extension, renewal or postponement of the time of payment or any other indulgence to, or release of any person now or hereafter obligated for the payment of this Note shall not affect the Buyer’s or any of its Affiliates liability hereunder.
 
13. Governing Law; Consent to Jurisdiction.  This Note and any disputes hereunder shall be governed by and construed in accordance with the internal laws of the State of New York without giving effect to any choice or 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.  Each of the Buyer and the Seller (a) submits to the exclusive jurisdiction of any state or federal court sitting in New York, New York in any action or proceeding arising out of or relating to this Note, (b) agrees that all claims in respect of such action or proceeding may be heard and determined only in any such court, (c) waives any claim of inconvenient forum or other challenge to venue in such court, and (d) agrees not to bring any action or proceeding arising out of or relating to this Agreement in any other court.  The Buyer agrees to accept service of any summons, complaint or other initial pleading made in the manner provided for the giving of notices in Section 12.6 of the Purchase Agreement.
 
14. Successors and Assigns.  This Note and all obligations of the Buyer hereunder shall be binding upon the successors and assigns of the Buyer, and shall, together with the rights and remedies of the Seller hereunder, inure to the benefit of the Seller, any future holder of this Note and their respective successors and assigns, provided, however, the Buyer may not transfer or assign its rights or obligations hereunder without the express written consent of the Seller (such consent not to be unreasonably withheld or delayed), and any purported transfer or assignment by the Buyer without the Seller’s written consent shall be null and void. The Seller may assign, transfer, participate or endorse its rights under this Note and the Pledge Agreement, and may at any time pledge this Note to any of its secured lenders as collateral for any of the Seller’s obligations, in each case  without the consent or approval of the Buyer, and all such rights shall inure to the Seller’s successors and assigns.  Upon request, the Buyer shall, at its own expense, execute and deliver to the assignee of this Note, a replacement Note of equal and like tenor in an amount assigned to and assumed by such assignee.

 
15. Waiver of Jury Trial and Certain Damages.  The Buyer and the Seller each waives its right to a jury trial with respect to any action or claim arising out of any dispute in connection with this Note, any rights or obligations hereunder or the performance of any such rights or obligations.  Except as prohibited by law, the Buyer waives any right which it may have to claim or recover in any litigation referred to in the preceding sentence any special, exemplary, punitive or consequential damages or any damages other than, or in addition to, actual damages.  The Buyer (i) certifies that neither the Seller nor any representative, agent or attorney of the Seller has represented, expressly or otherwise, that the Seller would not, in the event of litigation, seek to enforce the foregoing waivers and (ii) acknowledges that, in entering into this Note, the Seller is relying upon, among other things, the foregoing waivers and certifications.
 
16. Replacement Note.  Upon the loss, theft, destruction, or mutilation of this Note, and upon surrender and cancellation of this Note if mutilated, upon the provision by the Buyer to the Seller of reasonably satisfactory affidavit of loss and indemnity, the Borrower will deliver a new Note of like tenor in lieu of this Note.  Any Note delivered in accordance with the provisions of this Section 16 shall be dated as of the date of this Note.
 
17. Notices.  All notices, requests, demands, claims and other communications hereunder shall be in writing.  Any notice, request, demand, claim or other communication hereunder shall be deemed duly delivered four (4) Business Days after it is sent by registered or certified mail, return receipt requested, postage prepaid, or one (1) Business Day after it is sent for next Business Day delivery via a reputable nationwide overnight courier service, or on the same day if sent via facsimile, in each case to the intended recipient as set forth below:
 
If to the Buyer:
Copy to:
Hauppauge Digital, Inc.
91 Cabot Court
Hauppauge, New York  11788
 
Certilman Balin Adler & Hyman, LLP
90 Merrick Avenue
East Meadow, New York  11444
Facsimile:                                (631) 434-3198
Attention:                                Kenneth Plotkin
 
Facsimile:                                (516) 296-7111
Attention:                                Steven J. Kuperschmid, Esq.
If to any Seller:
Copies to:
Avid Technology, Inc.
Avid Technology Park
One Park West
Tewksbury, MA  01876
 
Wilmer Cutler Pickering Hale and Dorr LLP
1117 S. California Avenue
Palo Alto, CA  94304
Facsimile:                                978 640 3366
Attention:                                Legal Department
Facsimile:                                650 858 6100
Attention:                                Rod J. Howard, Esq. and Joseph K. Wyatt, Esq.

 
18. Counterparts and Facsimile Signature.  This Agreement may be executed in one or more counterparts, each of which shall be deemed an original but all of which together shall constitute one and the same instrument.  This Agreement may be executed by facsimile signature.
 
19. Entire Agreement; Amendments; Invalidity.  This Note, the Pledge Agreement, the Purchase Agreement and the Ancillary Agreements (as defined in the Purchase Agreement) constitute the entire agreement and understanding of the parties, and supercede and replace in their entirety any prior discussions, agreements, etc., all of which are merged herein and therein.  None of the terms of this Note may be amended or otherwise modified except by an instrument executed by each of the Buyer and the Seller. If any term of this Note shall be held to be invalid, illegal or unenforceable, the validity of all other terms hereof shall in no way be affected thereby, and this Note shall be construed and be enforceable as if such invalid, illegal or unenforceable term had not been included herein.

 
In Witness Whereof, this Note has been duly executed as an instrument under seal as of the date first set forth above.
 
Buyer:
 
 
PCTV SYSTEMS S.A.R.L.
By: /s/ Ken Plotkin                        
Printed Name: Ken Plotkin                    
Title: Chairman                           
Address:
____________________________________
____________________________________
____________________________________
Attest:
By:  /s/ Gerald Tucciarone                
Title: Chief Financial Officer                
 
 
EX-2.3 4 ex2_3.htm TRANSITION SERVICES AGREEMENT ex2_3.htm
TRANSITION SERVICES AGREEMENT
 
This TRANSITION SERVICES AGREEMENT (the “Agreement”) is made this 24th day of December, 2008 (the “Effective Date”), by and between Hauppauge Digital Europe S.a.r.l., PCTV Systems S.a.r.l. and Hauppauge Computer Works, Inc. (collectively, the “Buyer”), each a wholly owned subsidiary of Hauppauge Digital, Inc. and Avid Technology, Inc., Pinnacle Systems, Inc., Avid Technology GmbH, Avid Development GmbH and Avid Technology International BV (collectively, the “Seller”).  Buyer and Seller are sometimes referred to herein individually as a “Party” and collectively as the “Parties.”
 
WHEREAS, certain of the Parties are party to that certain Asset Purchase Agreement, dated as of October 25, 2008, as amended by Amendment No. 1, dated December 23, 2008 (the “Asset Purchase Agreement”);
 
WHEREAS, certain of the Parties are party to that certain Inventory and Product Return Agreement, dated as of the date hereof providing for, among other things, the consignment of certain inventory (the “Consigned Inventory”) of the Business to Buyer (the “Inventory Agreement”); and
 
WHEREAS, in order to enable Buyer to operate the Business as Conducted by the Buyer in an effective manner, Seller has agreed to provide to Buyer, and Buyer has agreed to provide to Seller, certain services for the periods and on the terms and conditions set forth herein;
 
NOW, THEREFORE, in consideration of the mutual agreements and covenants set forth herein and other good and valuable consideration, the receipt and adequacy of which is hereby acknowledged, and intending to be legally bound hereby, the Parties agree:
 
1.  
        SERVICES
 
1.1 General.  During the term of this Agreement, Seller (or an Affiliate of Seller designated by Seller for this purpose) or Buyer (or an Affiliate of Buyer designated by Buyer for this purpose) (as applicable) shall provide, or cause such designated Affiliate to provide, the services (individually, a “Service” and collectively, the “Services”) set forth in the Statement of Work attached as exhibits hereto, each as amended and supplemented from time to time upon mutual agreement of the Parties (the “SOWs”).  The SOWs as of the Effective Date are as follows:
 
(i)  Service SOW 01 – Infrastructure and Systems (Exhibit A-1)
 
(ii)  Service SOW 02 – Order Processing and Related Matters (Exhibit A-2)
 
(iii)  Service SOW 03 – Systems Transition and Related Matters (Exhibit A-3)
 
1.2 Level of Services.   Specific performance standards for a Service may be set forth in the applicable Service SOW. Where none is set forth in the applicable SOW, the Services shall be provided to Buyer or Seller (as applicable) at commercially acceptable quality levels.
 
1.3 Cooperation.  Each Party shall cause its employees to reasonably cooperate with employees of the other to the extent required for the effective delivery of the Services.  In addition to the Consignor Representative (as defined in the Inventory Agreement) and Consignee Representative (as defined in the Inventory Agreement), each Party shall name a point of contact who shall be responsible for the day to day implementation of Services pursuant to this Agreement.
 

 
1.5 Additional Services.  If requested by either Party, the other Party may in its sole discretion provide services in addition to the Services to the other Party.  The scope of any such additional services, as well as the fees and other terms applicable to such additional services, shall be as mutually agreed by the Parties and an existing SOW shall be amended to reflect such additional services or such additional services shall be set forth in an additional SOW.
 
1.6 Buyer Employees to Remain on Premises.  Seller acknowledges and agrees that during the term of this Agreement (i) it may be necessary for certain employees of Buyer and/or its Affiliates, formerly employees of Seller or its Affiliates (“Transferred Employees”), to remain at such premises of Seller and/or its Affiliates where the employment of such Transferred Employees were based prior to the Closing (“Relevant Premises”), and have access, subject to Seller’s commercially reasonable restrictions, to resources used by such Transferred Employees prior to Closing and necessary for the operation of the Business as conducted by Buyer, including but not limited to communications networks, computers, phones and applications, (ii) such Transferred Employees shall be permitted to remain at the Relevant Premises and have such access, subject to Seller’s commercially reasonable restrictions, to such resources, and (iii) up to a maximum of three (3) employees of Buyer and/or its Affiliates (in addition to the Transferred Employees) shall be able to work at the Relevant Premises of Seller and/or its Affiliates and have such access, subject to Seller’s commercially reasonable restrictions, to such resources together with such Transferred Employees who remain on the Relevant Premises.  While on the Relevant Premises, Buyer and/or its Affiliates employees, including the Transferred Employees, will comply with Seller’s reasonable rules, policies, procedures and guidelines with respect to conduct, security, safety and similar matters existing as of the Closing at the Relevant Premises.
 
1.7 Insurance.  Seller and Buyer shall independently maintain in force the policies of insurance in the amounts set forth below, with terms and coverages reasonably acceptable to the other Party, including thirty (30) days’ written notice prior to the cancellation, termination or material change of any such insurance policy. Each party shall provide evidence of such policies to the other, upon its written request and upon each renewal of insurance during the term of this Agreement.
 

Workers Compensation Insurance
 
Statutory per jurisdictional law
Employers’ Liability Insurance
$1,000,000 per accident/disease (policy must contain an alternative employer endorsement such as WC 00 03 01 A and a waiver of subrogation in favor of the other party)
 
Commercial General Liability (“CGL”)
 
$5,000,000 per occurrence/aggregate (policy must include products and completed operations and a waiver of subrogation in favor of the other party)
Technology or Electronic Errors & Omissions Insurance
 
$5,000,000 per claim/aggregate
Employment Practices Liability Insurance
 
$5,000,000 per claim/aggregate (policy must contain an extension for third-party sexual harassment and discrimination)
Additionally, Buyer and Seller agree to maintain in force the policy of insurance in the amount set out below.
Automobile Liability Insurance
 
$1,000,000 per occurrence (policy must have SYMBOL 1 and a waiver of subrogation in favor of the other party)
Each of Seller and Buyer agree to include the other party as an additional insured on its own Commercial General Liability Insurance policy and its own Automobile Liability Insurance and provide evidence of such through a certificate of insurance. The foregoing insurance requirements and liability limits shall not limit nor qualify the liability of each party under this Agreement or the Asset Purchase Agreement.
 
2.  
        PAYMENTS
 
2.1 Services Fees.  Exhibit B sets forth, with respect to the Services, the fees to be charged pursuant to this Agreement (the “Service Fees”).
 
2.2 Invoicing and Payment.  Within thirty (30) days following the end of each calendar month during the term of this Agreement, each of Buyer and Seller shall, or shall cause, an invoice (an “Invoice”) to be delivered to the other setting forth the Service Fees for Services rendered hereunder during such month.  Such Invoice shall contain a summary description of the Services, the Service Fees for such Services and a listing of any third party charges included therein.  Buyer and Seller (as applicable) shall pay all amounts due under each applicable Invoice in the currency denominated by Buyer or Seller (as applicable) in such Invoice no later than thirty (30) days following receipt of an Invoice.  Every Invoice that is not paid when due shall bear interest from and after the date on which such Invoice first became overdue at an annual rate equal to ten percent (10%).  Buyer and Seller (as applicable) agrees to pay on demand all costs of collection, including reasonable attorneys’ fees, incurred by Buyer or Seller (as applicable) in collecting any such Invoice.
 
2.3 Taxes.  The fees payable by Buyer or Seller (as applicable) pursuant to this Section 2 shall be inclusive of any federal, state, municipal, or other U.S. or foreign government taxes, duties, excises, tariffs, fees, assessments or levies now or hereinafter imposed on the performance or delivery of Services.  Any taxes, duties, excises, tariffs, fees, assessments or levies imposed on the performance or delivery of Services hereunder shall be the responsibility of the Party receiving the Services.
 
2.4 Records.  In addition to the records, reports and statements required to be delivered pursuant to the SOWs, each of Seller and Buyer shall keep such full and adequate records as are necessary to determine the fees and expenses charged pursuant to this Section 2, and shall have reasonable access to such records of the other Party.
 
3.  
        CONFIDENTIALITY
 
3.1 Information Exchanges.  Subject to applicable law and good faith claims of privilege, each Party hereto shall provide the other Party with all information regarding itself and the transactions under this Agreement that the other Party reasonably believes are required to comply with all applicable laws, ordinances, regulations and codes in connection with the provision of Services pursuant to this Agreement.
 
3.2 Confidential Information.  Seller and Buyer shall hold in trust and maintain confidential all Confidential Information relating to the other Party.  “Confidential Information” shall mean all information disclosed by either Party to the other in connection with this Agreement (including but not limited to all information of Seller or its Affiliates or Buyer or its Affiliates (as applicable) that is stored or maintained on any server or other electronic storage device that is transferred (each a “Storage Device”) to, or utilized by, the other Party) whether orally, visually, in writing or in any other tangible form, and includes, but is not limited to, economic, scientific, technical, product and business data, business plans, and the similar information.  In addition, each Party shall delete any Confidential Information of the other Party that is not required in order to conduct the Business and that is stored, maintained or otherwise included in any Storage Device.  Confidential Information shall not include (i) information which becomes generally available to the public other than by disclosure in violation of the provisions of this Section 3.2, (ii) information which becomes available on a non-confidential basis to a Party from a source other than the other Party to this Agreement provided that the Party in question reasonably believes that such source is not or was not bound to hold such information confidential, (iii) information acquired or developed independently by a Party without violating this Section 3.2 or any other confidentiality agreement with the other Party, and (iv) information that any Party hereto reasonably believes it is required to disclose by law, provided that it first notifies the other Party hereto of such requirement and allows such Party a reasonable opportunity to seek a protective order or other appropriate remedy to prevent such disclosure.  Without prejudice to the rights and remedies of either Party to this Agreement, a Party disclosing any Confidential Information to the other Party in accordance with the provisions of this Agreement shall be entitled to seek equitable relief by way of an injunction if the other Party hereto breaches or threatens to breach any provision of this Section 3.2.

 
4.  
        TERM AND TERMINATION
 
4.1 Term.  Unless earlier terminated in accordance with Section 4.2 below, this Agreement shall be in effect from the date hereof until the earlier to occur of (i) 18 months following the Closing (as defined in the Asset Purchase Agreement) or (ii) termination of the last of the Services to be provided pursuant to this Agreement.
 
4.2 Termination.
 
(a) This Agreement may be terminated by either Party if the other Party (the “Defaulting Party”) has materially breached its obligations under this Agreement and if the Defaulting Party has not cured such default within ten (10) days following the date on which the other Party (the “Notifying Party”) has given written notice specifying the facts constituting the default.  Notwithstanding the foregoing sentence, this Agreement shall not be terminated due to a default by the Defaulting Party if such default is directly attributable to a breach of this Agreement by the Notifying Party.
 
(b) This Agreement may be terminated by Buyer at any time upon thirty (30) days prior written notice to Seller.  In addition, Buyer shall be permitted to terminate this Agreement with respect to any particular Service to be provided pursuant to this Agreement upon ten (10) days prior written notice to Seller.
 
(c) Upon termination of this Agreement for any reason or upon the expiration of this Agreement in accordance its terms, all rights and obligations of the Parties under this Agreement shall cease and be of no further force or effect, provided, however that (i) the provisions of Section 3.2, Section 4 and Section 5 of this Agreement and (ii) Buyer’s and Seller’s (as applicable) obligation to pay any Invoice for Services prior to any termination or expiration of this Agreement, in each case shall survive any such termination or expiration of this Agreement.
 
5.  
        GENERAL
 
5.1 Cooperation.
 
(a) To the extent permitted by law, Buyer and its Affiliates shall cooperate fully with Seller and its Affiliates in the defense or prosecution of any claims or actions which already have been brought, are currently pending, or which may be brought in the future against or on behalf of Seller or its Affiliates, whether before a state or federal court, any state or federal government agency, or a mediator or arbitrator.  Buyer’s and Buyer’s Affiliates full cooperation in connection with such claims or actions shall include, but not be limited to, making Buyer’s and its Affiliates’ officers, directors, employees, agents and other representatives available to meet with Seller’s counsel to prepare Seller’s claims or defenses, to prepare for trial or discovery or an administrative hearing or a mediation or arbitration and to act as a witness when requested by Seller at reasonable times designated by Seller.  Seller shall reimburse Buyer and its Affiliates for reasonably necessary and documented travel, food, and lodging expenses incurred by Buyer and its Affiliates for providing the services set forth in this Section 5.1(a).  Buyer shall notify Seller promptly in the event that Buyer or any of its Affiliates is served with a subpoena or in the event that Buyer or any of its Affiliates are requested to provide a third party with information concerning any actual or potential complaint or claim against Seller or its Affiliates.
 
(b) To the extent permitted by law, Seller and its Affiliates shall cooperate fully with Buyer and its Affiliates in the defense or prosecution of any claims or actions which already have been brought, are currently pending, or which may be brought in the future against or on behalf of Buyer or its Affiliates, whether before a state or federal court, any state or federal government agency, or a mediator or arbitrator.  Seller’s and Seller’s Affiliates full cooperation in connection with such claims or actions shall include, but not be limited to, making Seller’s and its Affiliates’ officers, directors, employees, agents and other representatives available to meet with Buyer’s counsel to prepare Buyer’s claims or defenses, to prepare for trial or discovery or an administrative hearing or a mediation or arbitration and to act as a witness when requested by Buyer at reasonable times designated by Buyer.  Buyer shall reimburse Seller and its Affiliates for reasonably necessary and documented travel, food, and lodging expenses incurred by Seller and its Affiliates for providing the services set forth in this Section 5.1(b).  Seller shall notify Buyer promptly in the event that Seller or any of its Affiliates is served with a subpoena or in the event that Seller or any of its Affiliates are requested to provide a third party with information concerning any actual or potential complaint or claim against Buyer or its Affiliates.
 
5.2 Assignment.  Neither Party shall assign any of its rights or obligations hereunder without the prior written consent of the other Party.   This Agreement shall be deemed to be for the benefit of Buyer and its Affiliates and Seller and its Affiliates (as applicable), and all rights of any Party under this Agreement may be exercised by any Affiliate of such Party.  This Agreement shall inure to the benefit of and be binding upon any successors or permitted assigns of the Parties.
 
5.3 Force Majeure.  No Party shall bear any responsibility or liability for any Damages arising out of any delay, inability to perform or interruption of its performance of its obligations under this Agreement due to any acts or omissions of the other Party or for events beyond its reasonable control including, without limitation, acts of God, acts of governmental authorities, acts of the public enemy or due to war, riot, flood, civil commotion, insurrection, labor difficulty, severe or adverse weather conditions, lack of or shortage of electrical power, malfunctions of equipment or software programs, or any other cause beyond the reasonable control of such Party.
 
5.4 Applicable Law and Jurisdiction. This Agreement shall be governed by and construed in accordance with the internal laws of the State of New York, without giving effect to any choice or 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 jurisdictions other than those of the State of New York.  Each Party (a) submits to the jurisdiction of any state or federal court sitting in New York, New York in any action or proceeding arising out of or relating to this Agreement, (b) agrees that all claims in respect of such action or proceeding may be heard and determined in any such court, (c) agrees not to bring any action or proceeding arising out of or relating to this Agreement in any other court and (d) waives any right it may have to a trial by jury with respect to any action or proceeding arising out of or relating to this Agreement.  Each Party hereby waives any defense of inconvenient forum to the maintenance of any action or proceeding so brought and waives any bond, surety or other security that might be required of the other Party with respect thereto.  Either Party may make service on the other Party by sending or delivering a copy of the process to the Party to be served at the address and in the manner provided for the giving of notices in Section 5.11.  Nothing in this Section 5.4, however, shall affect the right of either Party to serve legal process in any other manner permitted by law.

 
5.5 Relationship of the Parties.  The Parties shall for all purposes be considered independent contractors with respect to each other, and neither shall be considered an employee, employer, agent, principal, partner or joint venturer of the other.  Seller agrees that the employees of Seller or its Affiliates or subcontractors shall not be recognized as employees of Buyer, its Affiliates or subcontractors and shall solely be recognized as the employees of Seller or of an Affiliate or subcontractor of Seller and will receive no Buyer-sponsored benefits from Buyer where benefits include, but are not limited to, paid vacation, sick leave, group insurance and any pension related program or plan, including 401k participation or other similar programs, as applied in accordance with the local laws and customs of the relevant jurisdiction of Seller. Seller agrees to be solely liable for the conduct of its employees and shall require Affiliates and subcontractors of Seller to be liable for the conduct of their employees. Buyer agrees that the employees of Buyer or its Affiliates or subcontractors shall not be recognized as employees of Seller and shall solely be recognized as the employees of Buyer or of an Affiliate or subcontractor of Buyer and will receive no Seller-sponsored benefits from Seller where benefits include, but are not limited to, paid vacation, sick leave, group insurance and any pension related program or plan, including 401k participation or other similar programs, as applied in accordance with the local laws and customs of the relevant jurisdiction of Buyer.  Buyer agrees to be solely liable for the conduct of its employees and shall require Affiliates and subcontractors of Buyer to be liable for the conduct of their employees, in each case in connection with the transactions contemplated by this Agreement and the related SOWs. If a party’s employee or subcontractor is reclassified by a state or federal agency or court as an employee of the other party (the “Reclassified Employer”), such employee or subcontractor will become a reclassified employee and will receive no benefits from the Reclassified Employer, except those mandated by state or federal law, even if by the terms of the Reclassified Employer’s benefit plans or programs of the Reclassified Employer in effect at the time of such reclassification, such employees or subcontractors would otherwise be eligible for such benefits.  The provisions of this Section 5.5 shall not limit or alter either Party’s indemnification obligations pursuant to the Asset Purchase Agreement.
 
5.6 No Third Party Beneficiaries.  This Agreement shall not confer any rights or remedies upon any person other than the parties and their respective successors and permitted assigns and their respective Affiliates.
 
5.7 Registration.  In the event that this Agreement is required to be registered with any governmental authority, Seller and Buyer shall use their respective commercially reasonable efforts to cause such registration to be made.
 
5.8 Precedence.  In the event of a conflict between this Agreement and any SOW, this Agreement shall control and supersede the conflicting terms contained in any such SOW, unless expressly stated otherwise in the SOW.   In the event of a conflict between this Agreement and the Asset Purchase Agreement or the Inventory Agreement, the Asset Purchase Agreement or the Inventory Agreement (as applicable) shall control.
 
5.9 Entire Agreement; Amendment.  This Agreement, the Asset Purchase Agreement and the Inventory Agreement constitute the entire agreement between Seller and Buyer with respect to the subject matter hereof.  This Agreement shall not be amended, altered or changed except by a written agreement signed by the Parties.
 
5.10 No Waiver.  No delay or omission on the part of either Party to this Agreement in requiring performance by the other Party or in exercising any right hereunder shall operate as a waiver of any provision hereof or of any right or rights hereunder; and the waiver, omission or delay in requiring performance or exercising any right hereunder on any one occasion shall not be construed as a bar to or waiver of such performance or right, or of any right or remedy under this Agreement, on any future occasion.
 
5.11 Notices.  All notices, requests, demands, claims and other communications hereunder shall be in writing.  Any notice, request, demand, claim or other communication hereunder shall be deemed duly delivered four business days after it is sent by registered or certified mail, return receipt requested, postage prepaid, or one business day after it is sent for next business day delivery via a reputable nationwide overnight courier service, in each case to the intended recipient as set forth below:
 
If to the Buyer:
Copy to:
   
Hauppauge Digital, Inc.
91 Cabot Court
Hauppauge, New York  11788
Certilman Balin Adler & Hyman, LLP
90 Merrick Avenue
East Meadow, New York  11554
   
Facsimile: (631) 434-3198
Attention: Chief Executive Officer
Facsimile: (516) 296-7111
Attention: Steven J. Kuperschmid, Esq.
 
   
If to any Seller:
Copies to:
   
Avid Technology, Inc.
Avid Technology Park
One Park West
Tewksbury, MA  01876
Wilmer Cutler Pickering Hale and Dorr LLP
1117 S. California Avenue
Palo Alto, CA  94304
Facsimile: (650) 858-6100
   
Facsimile: (978) 640-3366
Attention:  Legal Department
 
Attention: Rod J. Howard, Esq. and Joseph K. Wyatt, Esq.
 
   
Any Party may give any notice, request, demand, claim, or other communication hereunder using any other means (including personal delivery, expedited courier, messenger service, telecopy, telex, ordinary mail, or electronic mail), but no such notice, request, demand, claim or other communication shall be deemed to have been duly given unless and until it actually is received by the Party for whom it is intended.  Any Party may change the address to which notices, requests, demands, claims and other communications hereunder are to be delivered by giving the other Party notice in the manner herein set forth.
 
5.12  Section Headings; Definitions.  Section headings are for descriptive purposes only and shall not control or alter the meaning of this Agreement.  Capitalized terms used herein but not otherwise defined herein shall have the respective meanings ascribed to them in the Asset Purchase Agreement.
 
5.13 Severability.  If any provision of this Agreement shall for any reason be held illegal or unenforceable, such provision shall be deemed separable from the remaining provisions of this Agreement and shall in no way affect or impair the validity or enforceability of the remaining provisions of this Agreement.
 
5.14 Incorporation of SOWs and Exhibits.  The SOWs identified in this Agreement are incorporated herein by reference and made a part hereof.
 
5.15 Counterparts.  This Agreement may be executed in one or more counterparts, each of which shall be deemed an original but all of which together shall constitute one and the same instrument.
 
5.16 Facsimile Signature.  This Agreement may be executed by facsimile signature.

 
IN WITNESS WHEREOF, Seller and Buyer have duly executed this Transition Services Agreement as of the day and year first above written.
 
 SELLER:
 
    BUYER:  
/s/ Ken Sexton
   
/s/  Ken Plotkin
 
Title: Chief Financial Officer
   
Title: Chief Executive Officer
 
 
   
 
 
 
 
 
 
 

SIGNATURE PAGE TO TRANSITION SERVICES AGREEMENT


EXHIBIT A-1
 
SERVICE SOW 01 – INFRASTRUCTURE AND SYSTEMS
 
 

 
EXHIBIT A-2
 
SERVICE SOW 02 – ORDER PROCESSING AND RELATED MATTERS

 
EXHIBIT A-3
 
SERVICE SOW 03 – SYSTEMS TRANSITION AND RELATED MATTERS

 
EXHIBIT B
 
SERVICE FEES
EX-2.4 5 ex2_4.htm INVENTORY AND PRODUCT RETURN AGREEMENT ex2_4.htm
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 mark 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.
91 Cabot Court
Hauppauge, New York  11788
Facsimile:  (631) 434-3198
Attention:Chief Executive Officer
 
Copy to:
 
Certilman Balin Adler & Hyman, LLP
90 Merrick Avenue
East Meadow, New York  11554
Facsimile: (516) 296-7111
Attention: Steven J. Kuperschmid, Esq.
 
If to any Consignor:
 
Avid Technology, Inc.
Avid Technology Park
One Park West
Tewksbury, MA  01876
Facsimile: (978) 640-3366
Attention:  Legal Department
 
Copies to:
 
Wilmer Cutler Pickering Hale and Dorr LLP
1117 S. California Avenue
Palo Alto, CA 94304
Facsimile: (650) 858-6100
Attention: Rod J. Howard and Joseph K.  Wyatt
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/ Ken Sexton                                                                
Title: Chief Financial Officer        




AVID TECHNOLOGY INTERNATIONAL BV
CONSIGNOR

By:  /s/ Ken Sexton                                                                
Title: Director                

 


















SIGNATURE PAGE TO INVENTORY AND PRODUCT RETURN AGREEMENT

 
HAUPPAUGE COMPUTER WORKS, INC.
CONSIGNEE

By:  Ken Plotkin            
Title: Chief Executive Officer        



HAUPPAUGE DIGITAL EUROPE, S.a.r.l.
CONSIGNEE

By:  Ken Plotkin            
Title: Chief Executive Officer        



























SIGNATURE PAGE TO INVENTORY AND PRODUCT RETURN AGREEMENT

EXHIBIT A

CONSIGNEE CONSIGNED INVENTORY
EX-2.5 6 ex2_5.htm INTELLECTUAL PROPERTY LICENSE AGREEMENT ex2_5.htm
INTELLECTUAL PROPERTY LICENSE AGREEMENT
 
This Intellectual Property License Agreement (the “Agreement”) is effective as of the Closing Date (as defined herein), between Avid Technology, Inc., a Delaware corporation (“Parent”) and Pinnacle Systems, Inc., a California corporation and wholly owned subsidiary of Parent, (“Pinnacle” and together with Parent, individually and collectively, “Seller”), and PCTV Systems S.a.r.l., a Luxembourg company (“Buyer”).
 
WHEREAS, Seller and certain direct and indirect Subsidiaries of Seller are engaged in, among other things, the Business (as defined below);
 
WHEREAS, Seller and Buyer have entered into an Asset Purchase Agreement, dated as of October 25, 2008, as amended by Amendment No. 1, dated December 23, 2008 (collectively, “Asset Purchase Agreement”), pursuant to which Buyer, through one or more of its direct or indirect Subsidiaries, shall purchase and assume, and Seller, through itself and one or more of its direct or indirect Subsidiaries, shall sell, transfer and assign, certain assets and liabilities of the Business to Buyer; and
 
WHEREAS, as part of the foregoing, Seller desires to license to Buyer, or one or more of its direct or indirect Subsidiaries, certain of the Intellectual Property Rights that have not been assigned or transferred to Buyer or its Subsidiaries under the Asset Purchase Agreement.
 
NOW, THEREFORE, in consideration of the mutual promises of the parties, and of good and valuable consideration, it is agreed by and between the parties as follows:
 
 
ARTICLE I
DEFINITIONS
 
For the purpose of this Agreement, (i) all capitalized terms used herein that are defined in the Asset Purchase Agreement shall have the meaning ascribed thereto and (ii) the following capitalized terms are defined in this Article I and shall have the meaning specified herein:
 
1.1 Confidential Information” has the meaning set forth in Article III.
 
1.2 Exploit,” with respect to Technology, means use, operate, design, develop, integrate, optimize, test, modify, debug, manufacture, sell, import, offer for sale, distribute, reproduce, service, maintain, repair and create derivative works of such Technology and to have any of the foregoing done.  Related terms such as “Exploitation” shall have their correlative meanings.
 
1.3 Improvements” to Technology means (a) with respect to works of authorship, any modifications, derivative works, and translations of works of authorship; (b) with respect to databases, any database that is created by extraction or re-utilization of another database; and (c) with respect to other items included within the definition of Technology and not covered by Sections (a) – (b) above, any improvements of Technology.  For the purposes of clarification, an item of Technology will be deemed to be an Improvement of another item of Technology only if it is actually derived from such other item of Technology and not merely because it may have the same or similar functionality or use as such other item of Technology.
 
1.4 Intellectual Property Rights” means, except as expressly set forth below, all intellectual property rights, including, without limitation, the rights associated with the following:  (a) trade secret rights and all other rights in or to confidential business or technical information (“Trade Secrets”); (b) copyrights in any original works of authorship fixed in any tangible medium of expression as set forth in 17 U. S.C. Section 101 et. seq., any foreign copyrights under the laws of any jurisdiction, in each case, whether registered or unregistered, and any applications for registration thereof, and moral rights under the laws of any jurisdiction (“Copyrights”); and (c) rights in databases and data collections (including knowledge databases, customer lists and customer databases), under the laws of the United States or any other jurisdiction, whether registered or unregistered, and any applications for registration thereof (“Database Rights”).  “Intellectual Property Rights” specifically excludes patents, utility models, design patents, design registrations, certificates of invention and other governmental grants for the protection of inventions or industrial designs anywhere in the world and all reissues, renewals, re-examinations, continuations, divisionals, substitutions and extensions of any of the foregoing; and contractual rights (including license grants) and also excludes the tangible embodiment of any of the foregoing.
 
1.5 Licensed Business Intellectual Property Rights” means all Intellectual Property Rights that are owned by Seller or any Subsidiary of Seller as of the Closing Date in and to the Licensed Business Technology.  For clarity, Licensed Business Intellectual Property Rights excludes the Seller PCTV Intellectual Property.
 
1.6 Licensed Business Technology” means the Technology that is owned by Seller or any Subsidiary of Seller and set forth in Schedule A hereto.  For clarity, Licensed Business Technology excludes Seller PCTV Intellectual Property and all products and Technology of Seller and its Subsidiaries that are not expressly set forth in Schedule A, such as, without limitation, Seller’s “VideoSpin” product.
 
1.7 Licensed Field of Use” means the development, manufacture and sale of personal devices containing a television tuner for receiving over-the-air, satellite and cable television signals that are used in conjunction with personal computers for personal television viewing and the application software designed to operate directly with such personal devices for device management, playback and programming received through such personal devices.
 
1.8 Subsidiary” or “Subsidiaries” of Buyer, Seller or any other Person means any corporation, partnership or other legal entity of which Buyer, Seller or such other Person, as the case may be (either alone or through or together with any other Subsidiary), owns, directly or indirectly, more than 50% of the stock or other equity interests the holder of which is generally entitled to vote for the election of the board of directors or other governing body of such corporation or other legal entity.
 
1.9 Technology” means tangible embodiments, whether in electronic, written or other media, of technology, including inventions, ideas, designs, documentation (such as bill of materials, build instructions and test reports), schematics, layouts, reports, algorithms, routines, software (including source code and object code), data, databases, lab notebooks, equipment, processes, prototypes and devices.  Technology does not include Intellectual Property Rights in any of the foregoing.
 
1.10 Third Party” means a Person other than Seller and its Subsidiaries or Buyer and its Subsidiaries.
 
1.11 VideoSpin” means the VideoSpin software (a) owned by Seller and marketed by Seller under the name VideoSpin and (b) installed on physical media in the inventory delivered by Seller to Buyer on the Closing Date.

 
ARTICLE II
LICENSE GRANTS
 
2.1 LICENSE TO BUYER.
 
(a)            Seller grants to Buyer and its Subsidiaries the following irrevocable (except as set forth in Article IV), personal, non-exclusive, worldwide, fully paid, royalty-free and non-transferable (except as specified in Section 7.5 below) licenses, in perpetuity, under its and their applicable Licensed Business Intellectual Property Rights, solely within the Licensed Field of Use:
 
(i) under its and their Copyrights in and to the Licensed Business Technology, (A) to reproduce and have reproduced the works of authorship included in such Licensed Business Technology, (B) to prepare Improvements or have Improvements prepared for it based upon the works of authorship included in such Licensed Business Technology, (C) to distribute (by any means and using any technology, whether now known or unknown, including without limitation electronic transmission) copies of the works of authorship included in such Licensed Business Technology and Improvements thereof prepared by or for Buyer to the public in accordance with Sections 2.1(b) and 2.1(c) below, (D) to perform (by any means and using any technology, whether now known or unknown, including without limitation electronic transmission) and display the works of authorship included in such Licensed Business Technology and Improvements thereof prepared by or for Buyer; and (E) subject to Sections 2.1(b) and 2.1(c) below, to otherwise Exploit the works of authorship included in such Licensed Business Technology.
 
(ii) under its and their Database Rights in and to the Licensed Business Technology, to extract data from the databases included in such Licensed Business Technology and to re-utilize such data to Exploit products or services in the Licensed Field of Use; and
 
(iii) under its and their Trade Secrets in and to the Licensed Business Technology, to use such Licensed Business Technology and Improvements thereof prepared by or for Buyer to Exploit products or services in the Licensed Field of Use.
 
(b)            With respect to software included within the Licensed Business Technology, such licenses include the right to use, modify, make Improvements and reproduce such software and Improvements thereof made by or for Buyer or its Subsidiaries, in source code and object code form, to create products and services in the Licensed Field of Use, and to distribute and maintain such software and Improvements thereof made by or for Buyer or its Subsidiaries, in object code form only, as part products or services in the Licensed Field of Use.
 
(c)            Buyer may grant sublicenses within the scope of the licenses granted under Sections 2.1(a) above solely as follows:
 
(i) Buyer may grant sublicenses to its Subsidiaries for so long as they remain its Subsidiaries, with no right to grant further sublicenses, provided that Buyer shall be deemed responsible for the acts of such Subsidiaries as if they were a party to this Agreement; and
 
(ii) Buyer may grant sublicenses with respect to products solely in the Licensed Field of Use in the form of software, in object code form only, to its distributors, resellers, contractors, OEM customers, VAR customers, VAD customers, systems integrators and other channels of distribution and to its end user customers; provided that, such sublicenses shall be consistent in all respects with this Agreement and shall include standard terms and conditions consistent with end-user object code license agreements of Seller prior to the date hereof, including, without limitation, prohibitions on reverse engineering of object code and limitations of liability.
 
(d)            Buyer shall own all Intellectual Property Rights in any Improvements to the Licensed Business Technology made by or for Buyer or its Subsidiaries in accordance with this Article II.
 
2.2 NO IMPLIED LICENSES.  Nothing contained in this Agreement shall be construed as conferring any rights by implication, estoppel or otherwise, under any Intellectual Property Right, other than the rights expressly granted in this Agreement.
 
2.3 LIMITATIONS.  Buyer shall not, and shall cause its Subsidiaries and require its sublicensees not to, (a) use or allow the use of any Licensed Business Technology or Licensed Business Intellectual Property Rights for any purpose outside of the Licensed Field of Use, including, without limitation, in support of the design, development or distribution of product or service for use outside of the Licensed Field of Use, or (b) distribute or allow the distribution of any source code version of the software included in the Licensed Business Technology, except to Buyer’s.  Any breach of this Section 2.3 by an Subsidiary or sublicensee of Buyer shall be deemed to be a breach of this Agreement by Buyer.
 
2.4 LIMITED GRANT-BACK.  In the event that Buyer fails to provide the Assumed Warranty Obligations set forth in Section 10.7 of the Asset Purchase Agreement, then, if Seller sends Buyer written notice thereof and such failure continues unremedied for a period of thirty (30) days following receipt of such notice, Buyer hereby grants to Seller and its Subsidiaries a personal, non-exclusive, worldwide, fully paid, royalty-free and non-transferable (except as specified in Section 7.5 below) license, under its Intellectual Property Rights in and to the Seller PCTV Intellectual Property, to use, reproduce, have reproduced, prepare Improvements, distribute (by any means and using any technology, whether now known or unknown, including without limitation electronic transmission), to perform (by any means and using any technology, whether now known or unknown, including without limitation electronic transmission) and display, and otherwise perform all acts necessary to provide such Assumed Warranty Obligations.  Further, Buyer shall cooperate with reasonable requests of Seller to facilitate or enable Seller to perform such Assumed Warranty Obligations.  The provisions of this Section 2.4, shall expire two (2) years following the Closing Date, provided that the provisions of this Section 2.4 shall survive thereafter with respect to any failure of support occurring prior to the expiration of such two (2) year period.
 
2.5 VIDEOSPIN SOFTWARE DISTRIBUTION LICENSE TO BUYER.
 
                      (a) Seller grants to Buyer a royalty-free, non-transferable, limited, non-exclusive license to distribute copies of VideoSpin solely pursuant to such end-user terms and conditions as are provided or made available by Seller to Buyer and/or such end user.  Buyer’s rights granted under this Section 2.5 are limited to the executable object code version of VideoSpin as it is incorporated in the inventory delivered to Buyer by Seller on the Closing Date.
 
                      (b) Seller and its Subsidiaries and/or licensors reserve all rights not expressly granted in this Section 2.5 to VideoSpin and, except as stated in this Section 2.5, Buyer shall make no other utilization of VideoSpin, or use VideoSpin for the benefit of any other person or entity, or permit any Third Party to make such utilization, and Buyer shall have no other rights or licenses with respect to VideoSpin (including rights under any copyrights, patents or other intellectual property of Seller).
 
           (c) Without limiting the generality of clause (b) above, and except as expressly permitted by this Agreement, Buyer agrees: (i) not to copy, modify, port, translate, localize, or create derivative works of VideoSpin; (ii) not to disassemble, decompile, reverse engineer or otherwise reduce VideoSpin to source code form; (iii) not to remove, or allow to be removed, any patent, trademark, copyright, trade secret, or other proprietary rights notice placed by Seller or its supplier on VideoSpin; (iv) not to use VideoSpin, or any portion thereof on a service bureau, time sharing or ASP basis; and (v) not to appoint any subdistributor, reseller, sales agent or other representative to market or distribute VideoSpin.
 
           (d) Seller and Buyer shall negotiate in good faith the terms of any additional Buyer distribution rights to VideoSpin.

 
ARTICLE III
CONFIDENTIALITY
 
3.1 CONFIDENTIAL INFORMATION. (a) “Confidential Information” means information, technical data and know-how which is not otherwise in the public domain and of which the owner actively undertakes to restrict or control the disclosure to third parties in a manner reasonably intended to maintain its confidentiality, and which is either (i) the subject of this Agreement and known to or in the possession of the receiving party as of the Closing Date or (ii) disclosed to the receiving party pursuant to this Agreement.
 
(b)            To be considered Confidential Information, information disclosed after the Closing Date must (i) be marked as confidential at the time of disclosure; or (ii) if unmarked (e.g. orally disclosed), be treated as confidential at the time of disclosure and designated as confidential in a written memorandum sent to the receiving party’s primary representative within thirty (30) days of disclosure, summarizing the information sufficiently for identification.
 
 
(c)            Confidential Information of Third Parties that is known to, in the possession of or acquired by a receiving party pursuant to this Agreement shall be deemed the disclosing party’s Confidential Information for purposes herein.
 
(d)            For purposes of clarification, Confidential Information of the Seller includes, but is not limited to, Licensed Business Technology, subject to the terms of Section 3.2 below.
 
3.2 EXCEPTIONS.  Confidential Information shall not include information that, as of the Closing Date or thereafter, (i) is or becomes generally available to the public other than as a result of disclosure made after the execution of the Asset Purchase Agreement by the party desiring to treat such information as non-confidential or any of its Affiliates or representatives thereof, (ii) was or becomes readily available to the party desiring to treat such information as non-confidential or any of its Affiliates or representatives thereof on a non-confidential basis, (iii) is or becomes available to the party desiring to treat such information as non-confidential or any of its Affiliates or representatives thereof on a non-confidential basis from a source other than its own files or personnel or the other party or its Affiliates, provided that such source is not known by the party desiring to treat such information as non-confidential to be bound by confidentiality agreements with the other party or its Affiliates or by legal, fiduciary or ethical constraints on disclosure of such information, or (iv) is required to be disclosed pursuant to a governmental order or decree or other legal requirement (including the requirements of the U.S. Securities and Exchange Commission and the listing rules of any applicable securities exchange), provided that the party required to disclose such information shall give the other party prompt notice thereof prior to such disclosure and, at the request of the other party, shall cooperate in all reasonable respects in maintaining the confidentiality of such information, including obtaining a protective order or other similar order.  Nothing in this Section 3.2 shall limit in any respect either party’s ability to disclose information in connection with the enforcement by such party of its rights under this Agreement; provided that the proviso of clause (iv) in the immediately preceding sentence shall apply to the party desiring to disclose such information.
 
3.3 CONFIDENTIALITY AND NON-USE OBLIGATIONS.  The receiving party shall (i) protect the Confidential Information of the disclosing party by using the same degree of care, but no less than a reasonable degree of care, to prevent the unauthorized use, dissemination, or publication of the Confidential Information as receiving party uses to protect its own confidential information of a like nature, (ii) not use such Confidential Information in violation of the restrictions set forth in this Agreement, and (iii) not disclose such Confidential Information to any Third Party, except as expressly permitted under this Agreement, without prior written consent of the Disclosing Party.
 
3.4 DISCLOSURE TO SUBLICENSEES.  The receiving party has the right to disclose to its sublicensees permitted under this Agreement portions of Confidential Information as reasonably necessary in the exercise of the receiving party’s sublicense rights under this Agreement, subject to the sublicensee’s agreement in writing to confidentiality and non-use terms at least as protective of the disclosing party as the provisions of this Article III.
 
3.5 DURATION.  The obligations of the parties set forth in this Article III, with respect to the protection of Confidential Information, shall remain in effect until five (5) years after (i) the Closing Date, with respect to Confidential Information of one party that is known to or in the possession of the other party as of the Closing Date, or (ii) the date of disclosure, with respect to Confidential Information that is disclosed by the one party to the other party after the Closing Date.
 
ARTICLE IV
TERMINATION
 
4.1 TERMINATION FOR BREACH.  In the event of a material breach of this Agreement, the nonbreaching party shall be entitled to terminate this Agreement by written notice to the breaching party, if such breach is not cured within ninety (90) days after written notice is given by the nonbreaching party to the breaching party specifying the breach.  Further, upon an “Event of Default” as defined either in the Secured Promissory Note of even date herewith between Parent and Buyer, or the Share Pledge Agreement, to be entered into between Parent and Buyer, Seller shall have the right, immediately upon written notice to Buyer, to terminate this Agreement and all rights and licenses of Buyer hereunder, subject only to Section 4.2.
 
4.2 SURVIVAL.  The following provisions shall survive any termination of this Agreement: Sections 2.2, 2.3, 2.4, this 4.2, and Articles III, V, VI and VII.  Upon termination of this Agreement, all rights and licenses of Buyer under Section 2.1 shall terminate, provided that any and all sublicenses properly granted pursuant hereto shall survive to the extent necessary such that end-user sublicenses of product granted in accordance with Section 2.1 shall survive, and Buyer shall have the right to dispose of all then existing product inventory.

 
ARTICLE V
ADDITIONAL OBLIGATIONS, REPRESENTATIONS AND WARRANTIES
 
5.1            Buyer acknowledges that its employees and contractors who are former Seller employees and contractors have a continuing duty to assist Seller with in connection with any Third Party infringement claim or action against Seller, and accordingly, Buyer agrees to make available, to Seller or its counsel, inventors and other persons employed by Buyer for interviews and/or testimony to assist in connection therewith, including the signing of documents related thereto.  Any actual and reasonable out-of-pocket expenses associated with such assistance shall be borne by Seller, expressly excluding the value of the time of such Buyer personnel; provided, however, that in the case of assistance with litigation or any other assistance that requires significant time commitment by Buyer’s personnel, the parties shall agree on a case by case basis on compensation of Buyer for the value of the time of Buyer’s employees as reasonably required in connection with such litigation.
 
5.2 On the Closing Date,  Seller shall provide to Buyer the source code and object code to the Licensed Business Technology, together with database schemas, user interface specifications, logic flow diagrams, development documentation comprising a part of such Licensed Business Technology, including developer notes and memoranda for such Licensed Business Technology, and a listing of development tools currently used in creating, enhancing and maintaining the Licensed Business Technology, and a listing of required third party software currently used by Seller with respect to the Licensed Business Technology, in each case, to the extent that such information or Technology is reasonably available to Seller on the Closing Date and Seller may provide such information or Technology without violating any right of any third party (collectively, the “Source Code Materials”).  Such material shall be provided in a usable electronic format.
 
 
ARTICLE VI
LIMITATIONS; DISCLAIMERS

6.1            IN NO EVENT SHALL EITHER PARTY OR ITS AFFILIATES BE LIABLE TO THE OTHER PARTY OR ITS AFFILIATES FOR ANY SPECIAL, CONSEQUENTIAL, INDIRECT, INCIDENTAL OR PUNITIVE DAMAGES OR LOST PROFITS, HOWEVER CAUSED AND ON ANY THEORY OF LIABILITY (INCLUDING NEGLIGENCE) ARISING IN ANY WAY OUT OF THIS AGREEMENT, WHETHER OR NOT SUCH PARTY HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES.  THE FOREGOING SHALL NOT, HOWEVER, LIMIT THE DAMAGES AVAILABLE TO EITHER PARTY UNDER APPLICABLE LAW FOR INFRINGEMENT OR MISAPPROPRIATION OF ITS OR ITS AFFILIATES’ INTELLECTUAL PROPERTY RIGHTS BY THE OTHER PARTY OR SUCH OTHER PARTY’S AFFILIATES.
 
6.2            DISCLAIMER.  EXCEPT AS OTHERWISE SET FORTH HEREIN OR IN THE ASSET PURCHASE AGREEMENT, EACH PARTY ACKNOWLEDGES AND AGREES THAT ALL TECHNOLOGY AND INTELLECTUAL PROPERTY RIGHTS LICENSED HEREUNDER, ARE LICENSED “AS IS” AND WITHOUT ANY WARRANTIES WHATSOEVER, WHETHER EXPRESS, IMPLIED OR STATUTORY, WITH RESPECT THERETO, INCLUDING WITHOUT LIMITATION ANY IMPLIED WARRANTIES OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE, TITLE, NON-INFRINGEMENT OR ENFORCEABILITY.  Except as otherwise set forth herein or in the Asset Purchase Agreement, neither party nor any of its Affiliates makes any warranty or representation that any Exploitation of any product or service will be free from infringement of any patent or other intellectual property right of any third party.  Except as otherwise set forth herein or in the Asset Purchase Agreement, neither Seller nor any of its Subsidiaries makes any warranty or representation as to the validity and/or scope of any Intellectual Property Right licensed by it to Buyer hereunder or any warranty or representation that any Exploitation of any product or service will be free from infringement of any Intellectual Property Right of any Third Party.
 
6.3            INFRINGEMENT SUITS.  Neither party shall have any obligation hereunder to institute any action or suit against Third Parties for infringement or misappropriation of any Intellectual Property Right in or to any Technology licensed to the other party hereunder, or to defend any action or suit brought by a Third Party which challenges or concerns the validity of any of such rights or which claims that any Technology licensed to the other party hereunder infringes or constitutes a misappropriation of any Intellectual Property Right of any Third Party.  Seller shall not have any right to institute any action or suit against Third Parties for infringement of any of the Seller PCTV Intellectual Property occurring after the date hereof.  Buyer shall not have any right to institute any action or suit against Third Parties for infringement of any of the Licensed Business Intellectual Property Rights.
 
6.4            NO OBLIGATION TO SUPPORT OR PROVIDE TECHNOLOGY. Except as otherwise set forth herein or in the Asset Purchase Agreement (or other documents referred to therein), neither party, nor any of its Affiliates, shall be obligated to provide the other party with any technical assistance, support, maintenance or to furnish the other party with, or obtain, any documents, materials or other information or Technology.  Neither party is required hereunder to furnish or disclose to the other any technical or other information (including copies of the Licensed Business Technology or Seller PCTV Intellectual Property), except as specifically provided herein or in the Asset Purchase Agreement (or any other agreements referred to therein).
 
ARTICLE VII
MISCELLANEOUS PROVISIONS
 
7.1            PRESS RELEASES AND ANNOUNCEMENTS.  Immediately after the execution and delivery of this Agreement, the Parties will issue a joint press release announcing the execution and delivery of this Agreement, substantially in the form previously delivered to each other.  No Party shall issue (and each Party shall cause its Affiliates not to issue) any other press release or public disclosure relating to the subject matter of this Agreement without the prior written approval of the other Party or Parties; provided, however, that any Party may make any public disclosure it believes in good faith is required by law, regulation or stock exchange rule (in which case the disclosing Party shall advise the other Party or Parties and the other Party or Parties shall, if practicable, have the right to review such press release or announcement prior to its publication).
 
7.2            NO THIRD PARTY BENEFICIARIES.  This Agreement shall not confer any rights or remedies upon any person other than the Parties and their respective successors and permitted assigns and, to the extent specified herein, their respective Affiliates.

 
7.3            ACTION TO BE TAKEN BY AFFILIATES.  The Parties shall cause their respective Affiliates to comply with all of the obligations specified in this Agreement to be performed by such Affiliates.
 
7.4            ENTIRE AGREEMENT. This Agreement and the Asset Purchase Agreement (including the documents referred to therein) constitute the entire agreement between the Buyer and the Seller.  This Agreement, together with the Asset Purchase Agreement, supersede any prior agreements or understandings between the Buyer and the Seller, and any representations or statements made by or on behalf of any Seller or any of their respective Affiliates to the Buyer, whether written or oral, with respect to the subject matter hereof, and the parties hereto specifically disclaim reliance on any such prior representations or statements to the extend not embodied in this Agreement or the Asset Purchase Agreement.
 
7.5            ASSIGNMENT.  No Party may assign either this Agreement or any of its rights, interests, or obligations hereunder without the prior written approval of the Parent (in the case of an assignment by the Buyer) or the Buyer (in the case of an assignment by any Seller), which written approval shall not be unreasonably withheld or delayed.  Notwithstanding the foregoing, this Agreement, and all rights, interests and obligations hereunder, may be assigned, without such consent, to an Affiliate of a Party or to any entity that acquires all or substantially all of a Party's business or assets, or a division thereof.  This Agreement shall be binding upon and inure to the benefit of the Parties and their respective successors and permitted assigns.
 
7.6 NOTICES.  All notices, requests, demands, claims and other communications hereunder shall be in writing.  Any notice, request, demand, claim or other communication hereunder shall be deemed duly delivered four business days after it is sent by registered or certified mail, return receipt requested, postage prepaid, or one business day after it is sent for next business day delivery via a reputable nationwide overnight courier service, in each case to the intended recipient as set forth below:
 
If to the Buyer:
 
Hauppauge Digital, Inc.
91 Cabot Court
Hauppauge, New York  11788
 
Facsimile:  (631) 434-3198
Attention:Kenneth Plotkin
Copy to:
 
Certilman Balin Adler & Hyman, LLP
90 Merrick Avenue
East Meadow, New York  11444
 
Facsimile: (516) 296-7111
Attention: Steven J. Kuperschmid, Esq.
 
If to any Seller:
 
Avid Technology, Inc.
Avid Technology Park
One Park West
Tewksbury, MA  01876
 
Facsimile:  (978) 640-3366
Attention:Legal Department
 
Copies to:
 
Wilmer Cutler Pickering Hale and Dorr LLP
1117 S. California Avenue
Palo Alto, CA 94304
 
Facsimile: (650) 858-6100
Attention: Rod J. Howard and Joseph K.  Wyatt
 

 
Any Party may give any notice, request, demand, claim, or other communication hereunder using any other means (including personal delivery, expedited courier, messenger service, telecopy, telex, ordinary mail, or electronic mail), but no such notice, request, demand, claim or other communication shall be deemed to have been duly given unless and until it actually is received by the party for whom it is intended.  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.
 
7.7            AMENDMENTS AND WAIVERS.  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 all of the Parties.  No waiver by any Party of any default, misrepresentation, or breach of warranty or covenant hereunder, whether intentional or not, shall be deemed to extend to any prior or subsequent default, misrepresentation or breach of warranty or covenant hereunder or affect in any way any rights arising by virtue of any prior or subsequent such occurrence.
 
7.8            SEVERABILITY.  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.
 
7.9            EXPENSES.  Except as otherwise specifically provided to the contrary in this Agreement, each of the Parties shall bear its own costs and expenses (including legal fees and expenses) incurred in connection with this Agreement and the transactions contemplated hereby.
 
7.10 SPECIFIC PERFORMANCE.  Each Party acknowledges and agrees that the other Party or Parties would be damaged irreparably in the event any of the provisions of this Agreement are not performed in accordance with their specific terms or otherwise are breached.  Accordingly, each Party agrees that the other Party or Parties may be entitled to an injunction or injunctions to prevent breaches of the provisions of this Agreement and to enforce specifically this Agreement and the terms and provisions hereof in any action instituted in any court of the United States or any state thereof having jurisdiction over the Parties and the matter.
 
7.11 GOVERNING LAW.  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 giving effect to any choice or 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.
 
7.12 SUBMISSION TO JURISDICTION.  Each Party (a) submits to the exclusive jurisdiction of any state or federal court sitting in New York, New York in any action or proceeding arising out of or relating to this Agreement, (b) agrees that all claims in respect of such action or proceeding may be heard and determined only in any such court, (c) waives any claim of inconvenient forum or other challenge to venue in such court, and (d) agrees not to bring any action or proceeding arising out of or relating to this Agreement in any other court.  Each Party agrees to accept service of any summons, complaint or other initial pleading made in the manner provided for the giving of notices in Section 7.6.  Nothing in this Section 7.12 however, shall affect the right of any Party to serve such summons, complaint or initial pleading in any other manner permitted by law.

 
7.13 CONSTRUCTION.
 
(a)  The language used in this Agreement shall be deemed to be the language chosen by the Parties to express their mutual intent, and no rule of strict construction shall be applied against any Party.
 
(b) Any reference to any federal, state, local, or foreign statute or law shall be deemed also to refer to all rules and regulations promulgated thereunder, unless the context requires otherwise.
 
(c) The section headings contained in this Agreement are inserted for convenience only and shall not affect in any way the meaning or interpretation of this Agreement.
 
(d) Any reference herein to an Article, section or clause shall be deemed to refer to an Article, section or clause of this Agreement, unless the context clearly indicates otherwise.
 
(e) All references to “$”, “Dollars” or “US$” refer to currency of the United States of America.
 
(f) As used in this Agreement, the word “including” and its variants shall mean “including, without limitation,” the masculine gender shall include the feminine and the neuter, and the singular number shall include the plural, and vice versa.
 
7.14 INCORPORATION OF SCHEDULES.  The Exhibits and Schedules identified in this Agreement are incorporated herein by reference and made a part hereof.
 
7.15 COUNTERPARTS AND FACSIMILE SIGNATURE.  This Agreement may be executed in one or more counterparts, each of which shall be deemed an original but all of which together shall constitute one and the same instrument.  This Agreement may be executed by facsimile signature.
 
7.16 ACTION OR CONSENT BY SELLER.  For purposes of this Agreement (including any notice or consent to be given or action to be taken hereunder or thereafter or in connection herewith or therewith), the act or consent of any Seller shall constitute the act or consent of each other Person that is a Seller.

 
IN WITNESS WHEREOF, the Parties have executed this Agreement as of the date first above written.
 

 
SELLERS:
 
Avid Technology, Inc.
 
By: /s/ Ken Sexton                
 
Name: Ken Sexton                
 
Title: Chief Financial Officer            
 

 
Pinnacle Systems, Inc.
 
By: /s/ Ken Sexton                
 
Name: Ken Sexton                
 
Title: President                    
 

 

 

 

 

 

 

 
[Signature page to Intellectual Property License Agreement]

 
BUYER:
 
PCTV Systems S.a.r.l.
 
By: /s/ Ken Plotkin                
 
Name: Ken Plotkin                
 
Title: Chairman                    
 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 
[Signature page to Intellectual Property License Agreement]

 

 
SCHEDULE A
 
LICENSED BUSINESS TECHNOLOGY
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