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EXHIBIT 2.7
MASTER TRANSITIONAL SERVICES AGREEMENT
BETWEEN
ESS TECHNOLOGY, INC.
AND
VIALTA, INC.
EFFECTIVE AS OF ______, 2001
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MASTER TRANSITIONAL SERVICES AGREEMENT
This Master Transitional Services Agreement (the "AGREEMENT") is
effective as of ______, 2001 between ESS Technology, Inc., a California
corporation ("ESS"), having an office at ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇▇▇ and Vialta, Inc., a Delaware corporation ("VIALTA"), having an office
at ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇. ESS and Vialta are sometimes
referred to herein individually as a "PARTY" or collectively as the "PARTIES."
1. Definitions. The following terms, when capitalized herein, shall
have the meanings set forth below in this Section 1. Unless indicated otherwise,
all other capitalized terms which are used but are not otherwise defined herein
shall have the meanings ascribed to them in the Distribution Agreement.
1.1 "ESS TECHNOLOGY GROUP" shall have the meaning set forth in
Section 6.11 of the Master Distribution Agreement.
1.2 "ADDITIONAL SERVICES" shall have the meaning set forth in
Section 3.5.
1.3 "ANCILLARY AGREEMENTS" shall have the meaning set forth in
Section 2.1 of the Master Distribution Agreement.
1.4 "DISPUTES" shall have the meaning set forth in Section 4.6
of the Master Distribution Agreement.
1.5 "DISTRIBUTION DATE" shall have the meaning set forth in
Section 3.2(a) of the Master Distribution Agreement.
1.6 "IMPRACTICABLE" shall have the meaning set forth in
Section 3.3.
1.7 "MASTER CONFIDENTIAL DISCLOSURE AGREEMENT" shall mean that
certain Master Confidential Disclosure Agreement dated _______, 2001 between ESS
and Vialta.
1.8 "MASTER DISTRIBUTION AGREEMENT" shall mean that certain
Master Distribution Agreement dated ___________, 2001 between ESS and Vialta.
1.9 "SERVICE(s)" shall have the meaning set forth in Section
3.1.
1.10 "SUBCONTRACTOR" shall have the meaning set forth in
Section 9.
1.11 "SUBSIDIARY" shall have the meaning set forth in Section
6.26 of the Master Distribution Agreement.
1.12 "TRANSITION SERVICE SCHEDULE" shall have the meaning set
forth in Section 2.1.
1.13 "VIALTA GROUP" shall have the meaning set forth in
Section 6.29 of the Master Distribution Agreement.
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2. Transition Service Schedules.
2.1 Transition Service Schedules. This Agreement will govern
individual transitional services as requested by Vialta and provided by ESS, the
details of which are set forth in the Transition Service Schedules (each
transition service schedule, a "TRANSITION SERVICE SCHEDULE") attached to this
Agreement. Each Service shall be covered by this Agreement upon execution of a
Transition Service Schedule in the form attached hereto.
2.2 Operation of Schedules. For each Service, the Transition
Service Schedule shall be signed by a duly authorized representative of each
party and set forth, among other things, the time period during which the
Service will be provided if different from the term of this Agreement determined
pursuant to Section 4 a summary of the Service to be provided; a description of
the Service; and the estimated charge, if any, for the Service and any other
terms applicable thereto. Obligations regarding each Transition Service Schedule
shall be effective upon execution of this Agreement, or, if a particular
Transition Service Schedule is amended or a new Transition Service Schedule is
executed after the execution of this Agreement, the obligations created by such
amendment or new Transition Service Schedule shall be effective upon execution
of such amendment or such new Transition Service Schedule. This Agreement and
all the Transition Service Schedules shall be defined as the "AGREEMENT" and the
Transition Service Schedules are incorporated herein as though set forth in
full.
3. Services.
3.1 Services Generally. Except as otherwise provided herein,
for the term determined pursuant to Section 4, ESS shall provide or cause to be
provided to Vialta the service(s) described in the Transition Service
Schedule(s) attached hereto. The service(s) described on a single Transition
Service Schedule shall be referred to herein as a "SERVICE." Collectively, the
services described on all the Transition Service Schedules (including Additional
Services) shall be referred to herein as "SERVICES."
3.2 Service Boundaries. Except as provided in a Transition
Service Schedule for a specific Service: (i) ESS shall be required to provide
the Services only to the extent and only at the locations such Services are
being provided by ESS for Vialta immediately prior to the Distribution Date; and
(ii) the Services will be available only for purposes of conducting the business
of Vialta substantially in the manner it was conducted prior to the Distribution
Date.
3.3 Impracticability. ESS shall not be required to provide any
Service to the extent the performance of such Service becomes "Impracticable" as
a result of a cause or causes outside the reasonable control of ESS despite the
ESS's good faith diligent efforts to provide the relevant Service including
unfeasible technological requirements, or to the extent the performance of such
Services (i) would require ESS to violate any applicable laws, rules or
regulations or (ii) would result in the material breach of any software license
or other applicable contract.
3.4 Additional Resources. Except as provided in a Transition
Service Schedule for a specific Service, in providing the Services, ESS shall
not be obligated to: (i) hire any additional
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employees; (ii) maintain the employment of any specific employee; (iii)
purchase, lease or license any additional equipment or software; or (iv) pay any
costs related to the transfer or conversion of Vialta's data to Vialta or any
alternate supplier of Services. Prior to executing a Transition Service
Schedule, the parties shall in good faith attempt to determine whether any of
actions described in immediately preceding clauses (i), (ii) or (iii) would be
required for ESS to perform the contemplated Services.
3.5 Additional Services. From time to time after the
Distribution Date, the parties may identify Services other than those described
on the Transition Service Schedules attached hereto, that ESS shall provide to
Vialta in accordance with the terms of this Agreement (the "ADDITIONAL
SERVICES"). Accordingly, the parties shall execute additional Transition Service
Schedules for such Additional Services pursuant to Section 2.1.
3.6 Obligations As To Additional Services. Except as set forth
in the next sentence, ESS shall be obligated to perform, at a charge determined
using the principles for determining fees under Section 5.1, any Additional
Service that: (i) was provided by ESS immediately prior to the Distribution Date
and that Vialta reasonably believes was inadvertently or unintentionally omitted
from the list of Services described in the Transition Service Schedules attached
hereto, or (ii) is in the reasonable opinion of the parties necessary or
desirable to effectuate an orderly transition of Vialta's business under the
Master Distribution Agreement unless such performance would significantly
disrupt ESS's operations or materially increase the scope of its responsibility
under this Agreement. If ESS reasonably believes the performance of Additional
Services required under subparagraphs (i) or (ii) would materially and adversely
disrupt its operations or materially increase the scope of its responsibility
under this Agreement, ESS and Vialta shall negotiate in good faith to establish
terms under which ESS shall provide such Additional Services, but ESS shall not
be obligated to provide such Additional Services if, following good faith
negotiation, the parties are unable to reach agreement on such terms.
4. Term. The term of this Agreement shall commence on the Distribution
Date and shall remain in effect until one (1) year after the Distribution Date
(the "EXPIRATION DATE"), unless earlier terminated under Section 7. This
Agreement may be extended by the parties in writing, either in whole or with
respect to one or more of the Services; provided, however, that such extension
shall only apply to the Services for which the Agreement was extended. The
parties shall be deemed to have extended this Agreement with respect to a
specific Service if the Transition Service Schedule for such Service specifies a
completion date beyond the aforementioned Expiration Date. The parties may agree
on an earlier expiration date respecting a specific Service by specifying such
date on the Transition Service Schedule for that Service.
5. Compensation.
5.1 Charges For Services. Vialta shall pay ESS the charges, if
any, set forth on the Transition Service Schedules for each of the Services
listed therein as adjusted, from time to time, in accordance with the processes
and procedures established under Section 5.4 and Section 5.5. Such fees shall
include the actual costs, as determined using the process described in such
Transition Service Schedule, of providing the Services, unless specifically
indicated otherwise on a Transition
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Service Schedule. The parties also intend for charges to be easy to administer
and justify and, therefore, they hereby acknowledge it may be counterproductive
to try to recover every cost, charge or expense, particularly those that are
insignificant or de minimus. The parties shall use good faith efforts to discuss
any situation in which the actual charge for a Service is reasonably expected to
exceed the estimated charge, if any, set forth on a Transition Service Schedule
for a particular Service; provided, however, that the incurrence of charges in
excess of any such estimate on such Transition Service Schedule shall not
justify stopping the provision of, or payment for, Services under this
Agreement.
5.2 Payment Terms. ESS shall ▇▇▇▇ ▇▇▇▇▇▇ monthly for all
charges pursuant to this Agreement. Such bills shall be accompanied by
reasonable documentation or other reasonable explanation supporting such
charges. Vialta shall pay ESS for all Services provided hereunder within
forty-five (45) days after receipt of an invoice therefor. Late payments shall
bear interest at the lesser of 12% per annum or the maximum rate allowed by law.
5.3 Performance Under Ancillary Agreements. Notwithstanding
anything to the contrary contained herein, Vialta shall not be charged under
this Agreement for any obligations that are specifically required to be
performed under the Master Distribution Agreement or any other Ancillary
Agreement and any such other obligations shall be performed and any charge
therefore levied in accordance with the terms of the Master Distribution
Agreement or such other Ancillary Agreement.
5.4 Error Correction; True-Ups; Accounting. The parties shall
reasonably agree in writing on a process and procedure for conducting internal
audits and making adjustments to charges as a result of the movement of
employees and functions between parties, the discovery of errors or omissions in
charges, as well as a true-up of amounts owed. In no event shall such processes
and procedures extend beyond two (2) years after completion of a Service.
5.5 Pricing Adjustments. In the event of a tax audit
adjustment relating to the pricing of any or all Services provided pursuant to
this Agreement in which it is determined by a taxing authority that any of the
charges, individually or in combination, did not result in an arm's-length
payment, as determined under internationally accepted arm's-length standards,
then the parties, including any ESS subcontractor providing Services hereunder,
may agree to make corresponding adjustments to the charges in question for such
period to the extent necessary to achieve arm's-length pricing. Any adjustment
made pursuant to this Section 5.5, at any time during the term of this Agreement
or after termination of this Agreement shall be reflected in the parties' legal
books and records, and the resulting underpayment or overpayment shall create,
respectively, an obligation to be paid in the manner specified in Section 5.2
("Payment Terms") or shall create a credit against amounts owed under this
Agreement.
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6. General Obligations; Standard Of Care.
6.1 Performance Metrics: ESS. Subject to Section 3.4 and any
other terms and conditions of this Agreement, ESS shall maintain sufficient
resources to perform its obligations hereunder and under the Transition Service
Schedules. Specific performance metrics for ESS for a specific Service may be
set forth in the corresponding Transition Service Schedule. Where none are set
forth, ESS shall provide Services in accordance with the policies, procedures
and practices in effect before the Distribution Date relating to or in
connection with Vialta's business operations and shall exercise the same care
and skill as it exercises in performing similar services for itself.
6.2 Performance Metrics: Vialta. Specific performance metrics
for Vialta for a specific Service may be set forth in the corresponding
Transition Service Schedule. Where none is set forth, Vialta shall use
reasonable efforts, in connection with receiving Services, to follow the
policies, procedures and practices in effect before the Distribution Date
including providing information and documentation sufficient for ESS to perform
the Services as they were performed before the Distribution Date and making
available, as reasonably requested by ESS, adequate personnel and timely
decisions, approvals and acceptances in order that ESS may accomplish its
obligations hereunder in a timely manner.
6.3 Transitional Nature Of Services; Changes. The parties
acknowledge the transitional nature of the Services and that ESS may make
changes from time to time in the manner of performing the Services if (i) ESS is
making similar changes in performing similar services for itself (ii) such
change does not adversely impact Vialta, and (iii) if ESS furnishes to Vialta
sixty (60) days prior written notice regarding such changes.
6.4 Responsibility For Errors; Delays. ESS's sole
responsibility to Vialta:
6.4.1 for errors or omissions in Services, other than
errors or omissions attributable to ESS's gross negligence or willful
misconduct, shall be to furnish correct information, payment and/or adjustment
in the Services, at no additional cost or expense to Vialta; provided Vialta
must advise ESS of any such error or omission of which it becomes aware.
6.4.2 for failure to deliver any Service because of
Impracticability, shall be to make any portion of the Services which are not
Impracticable available and/or to resume performing the Services which are or
have become Impracticable as promptly as reasonably practicable.
6.5 Good Faith Cooperation; Consents. The parties will use
good faith efforts to cooperate with each other in all matters relating to the
provision and receipt of Services. Such cooperation shall include exchanging
information, performing true-ups and adjustments, and obtaining all third party
consents, licenses, sublicenses or approvals necessary to permit each party to
perform its obligations hereunder and under any Transition Service Schedule
(including by way of example, not by way of limitation, rights to use third
party software needed for the performance of Services). The reasonable and
documented costs of obtaining such third party consents, licenses, sublicenses
or approvals shall be borne by Vialta. The parties will maintain in accordance
with their
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respective standard document retention procedures, documentation supporting the
information relevant to cost calculations contained in the Transition Service
Schedules and cooperate with each other in making such information available as
needed in the event of a tax audit, whether in the United States or any other
country.
6.6 Alternatives. If ESS is unable to provide any Service
because of a failure to obtain necessary consents, licenses, sublicenses or
approvals pursuant to Section 6.6 or because of Impracticability, the parties
shall mutually and reasonably determine the best alternative approach. Until
such alternative approach is found or the problem otherwise resolved to the
satisfaction of the parties, ESS shall use diligent efforts to continue
providing the Service. To the extent a mutually agreed upon alternative approach
requires payment above and beyond that which is included in ESS's charge for the
Service in question, the parties shall share equally in making any such payment
unless they otherwise agree in writing.
7. Termination. Vialta may terminate this Agreement, either with
respect to all or with respect to any one or more of the Services provided to
Vialta hereunder, for any reason or for no reason, at any time upon thirty (30)
days prior written notice to ESS. In addition, subject to the provisions of
Section 11 ("Dispute Resolution"), either party may terminate this Agreement
with respect to a specific Service if the other party materially breaches a
material provision with regard to that particular Service and does not cure such
breach (or does not take substantial steps required under the circumstances to
cure such breach) within thirty (30) days after being given written notice of
the breach.
7.1 Survival. In the event of any termination with respect to
one or more, but less than all Services, this Agreement shall continue in full
force and effect with respect to any Services not terminated in accordance with
the terms of this Agreement.
7.2 User Ids, Passwords. Each of the parties shall use good
faith efforts at the termination or expiration of this Agreement, any specific
Service hereunder or any Transition Service Schedule attached hereto to ensure
that all applicable user IDs and passwords issued to such party by the other
party are canceled or returned, as applicable.
8. Relationship Between the Parties. It is expressly acknowledged that
the parties are "independent contractors," and nothing in this Agreement is
intended and nothing shall be construed to allow either party to exercise
control or direction over the manner or method by which the other party performs
the Services that are the subject matter of this Agreement; provided, that the
Services to be provided hereunder shall be furnished in a manner consistent with
the standards governing such Services and the provisions of this Agreement. Each
party understands and agrees that (i) neither party will withhold on behalf of
the other party any sums for income tax, unemployment insurance, social security
or any other withholding pursuant to any law or requirement of any governmental
body or make available any of the benefits afforded to its employees, (ii) all
of such payments, withholdings and benefits, if any, are the sole responsibility
of the party incurring the liability, and (iii) each party will indemnify and
hold the other harmless from any and all loss or liability arising with respect
to such payments, withholdings and benefits, if any.
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9. Subcontractors. With Vialta's prior written consent, ESS may engage
a "Subcontractor" to perform all or any portion of ESS's duties under this
Agreement, provided that any such Subcontractor agrees in writing to be bound by
confidentiality obligations at least as protective as the terms of Section 10,
regarding confidentiality, and provided further that ESS remains responsible for
the performance of such Subcontractor. As used in this Agreement,
"SUBCONTRACTOR" will mean any individual, partnership, corporation, firm,
association, unincorporated organization, joint venture, trust or other entity
engaged to perform hereunder.
10. Confidentiality. The terms of the Master Confidential Disclosure
Agreement between the parties shall apply to any Confidential Information (as
defined therein) which is the subject matter of this Agreement.
11. Dispute Resolution. Any and all controversies, disputes or claims
arising out of, relating to, in connection with or resulting from this Agreement
(or any amendment thereto or any transaction contemplated hereby or thereby),
including as to its existence, interpretation, performance, non-performance,
validity, breach or termination, including any claim based on contract, tort,
statute or constitution and any claim raising questions of law, whether arising
before or after termination of this Agreement, shall be deemed a Dispute as
defined in Section 4.6 of the Distribution Agreement and shall be resolved
exclusively by, in accordance with, and subject to the procedures and
limitations set forth in, Section 4.6 of the Distribution Agreement.
12. Miscellaneous.
12.1 Incorporation of Distribution Agreement. The
miscellaneous provisions provided in Article V of the Distribution Agreement are
incorporated herein by reference as though set forth in full, excepting only
Section 5.15 of the Distribution Agreement.
12.2 Other Agreements. This Agreement is not intended to
address, and should not be interpreted to address, the matters expressly covered
by the Distribution Agreement and/or the other Ancillary Agreements. In the
event of a conflict between this Agreement and the Distribution Agreement and/or
any other Ancillary Agreement executed in connection herewith, the provisions of
this Agreement shall prevail.
IN WITNESS WHEREOF, each of the parties has caused this Agreement to be
executed in duplicate originals by its duly authorized representatives.
ESS TECHNOLOGY, INC., VIALTA, INC.,
By: By:
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Name: Name:
-------------------------------- ---------------------------------
Title: Title:
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TRANSITION SERVICE SCHEDULE TO MASTER TRANSITIONAL SERVICES AGREEMENT
1. TRANSITION SERVICE SCHEDULE #:__________________ (To be inserted
by responsible individual or department.)
2. FUNCTIONAL AREA:
3. START/END DATE: The Services start on the effective date of the
Master Transitional Services Agreement between ESS Technology, Inc.
("ESS") and Vialta, Inc. ("VIALTA") to which this Transition Service
Schedule is attached and end on the conclusion of the term of the
Master Services Agreement unless otherwise indicated below.
Indicate below if other start/end date:
START DATE:
----------------------
END DATE:
------------------------
If Start and End dates vary by service and/or country, please indicate
in Section 5 ("List of Services to be Provided per Country and Site").
4. SUMMARY OF SERVICES (Describe the service to be provided in
appropriate detail.)
SERVICE NAME DESCRIPTION
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5. LIST OF SERVICES TO BE PROVIDED PER COUNTRY AND SITE: (List all the
services to be provided at each site. Enter Start Date and End Date
if different than Section 3 ("Start/End Date").
COUNTRY SITE SERVICE(s) START DATE END DATE
-------------------------- ----------------------- ----------------------- ----------------------- ------------------------
-------------------------- ----------------------- ----------------------- ----------------------- ------------------------
6. PERFORMANCE PARAMETERS/SERVICE LEVEL: (State minimum performance
expected from each service, if applicable.):
7. ESTIMATED TOTAL COMPENSATION:
8. DESCRIBE COST METHODOLOGY AND COST DRIVERS AFFECTING ESTIMATED TOTAL
COMPENSATION (Describe on an individual service basis if
necessary.):
9. DESCRIBE THE PROCESS BY WHICH THE COST OF SERVICES WILL BE ADJUSTED
IN THE INSTANCE OF AN INCREASE/REDUCTION IN THE SERVICES PROVIDED:
(Describe on an individual service basis if necessary.)
10. SOFTWARE: Will software be used or included with the Services to be
provided under this Transition Service Schedule? ____ Yes ____ No
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If yes, will source code be provided? ____ Yes ____ No
List software to be provided:
Software Application Number of Licenses to be Provided
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Upon execution of this Transition Service Schedule by both parties, this
Transition Service Schedule is hereby deemed incorporated into and made part of
that certain Master Transitional Services Agreement between ESS, Inc. and
Vialta, Inc.
ESS TECHNOLOGY, INC., VIALTA, INC.,
By: By:
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(Authorized Signature) (Authorized Signature)
Name: Name:
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Title: Title:
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