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SHARE PURCHASE AND TRANSFER AGREEMENT

Stock Transfer Agreement

SHARE PURCHASE AND TRANSFER AGREEMENT | Document Parties: Pinnacle Systems, Inc | Steinberg Media | Yamaha Corporation You are currently viewing:
This Stock Transfer Agreement involves

Pinnacle Systems, Inc | Steinberg Media | Yamaha Corporation

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Title: SHARE PURCHASE AND TRANSFER AGREEMENT
Date: 1/27/2005
Industry: Computer Hardware     Law Firm: Paul Hastings     Sector: Technology

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EXHIBIT 2.1

 

Yamaha Corporation

 

Steinberg Media Technologies GmbH

 

Share Purchase and Transfer Agreement

 

dated December 20, 2004

 

 

Mainzer Landstraße 16

D-60325 Frankfurt am Main

Postfach 17 01 11

D-60075 Frankfurt am Main

 

Telephone (49-69) 7 10 03-0

Facsimilie (49-69) 7 10 03-333

 


Share Purchase and Transfer Agreement

 

between

 

(1) Pinnacle Systems GmbH ,

 

Frankfurter Straße. 3c, 38122 Braunschweig, Germany

 

- hereinafter referred to as “ Seller ” -,

 

and

 

(2) Yamaha Corporation ,

 

10-1 Nakazawa-cho, Hamamatsu-shi, Shizuoka-ken, 430-8650, Japan

 

- hereinafter referred to asPurchaser ” -

 

and

 

(3) Steinberg Media Technologies GmbH,

 

Neuer Höltigbaum 22-32, 22143 Hamburg, Germany

 

- hereinafter referred to as the “ Company

 

and

 

(4) Pinnacle Systems, Inc.

 

280 North Bernardo Avenue

Mountain View, CA 94043, USA

 

- hereinafter referred to as “ Pinnacle, Inc.

 

solely for the purpose of its own obligations pursuant to Clauses 4.6, 5.25, 6.2.2, 9.6, 9.7, 10.1, 10.2, 10.3, 10.4.2 and 12.

 

Any reference in this Agreement to “ Parties ” shall only refer to parties named under (1) and (2) above.

 

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Index

 

1    Sale and Transfer of Share and Inter-Company Loans    4
2    Consideration    5
3    Closing    6
4    Period up to Closing    10
5    Statements of the Seller    11
6    Indemnification for Taxes, other Public Charges and Employment Claims    24
7    [Intentionally left blank]    28
8    Statements of the Purchaser    28
9    Performance and Liability    29
10    Covenants    31
11    [Intentionally left blank]    35
12    Miscellaneous    36

 

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PREAMBLE

 

(A) The Company is a limited liability company under German law with registered seat in Hamburg, registered in the commercial register of the lower court of Hamburg under HRB 86534. The share capital of the Company amounts to EUR 6,891,310 which is divided into one share with a par value of EUR 6,891,310 (the “ Share ”).

 

(B) The Company develops software and hardware for digital audio recording, editing and publishing and renders services related to its products (the “ Steinberg Business ”). The Company forms an integrated part of a group of companies, the ultimate parent company of which is Pinnacle, Inc., seated in Mountain View, California. As result of such integration, (i) several legal and factual relations exist among the Company and other companies directly or indirectly controlled by Pinnacle, Inc. (the “ Pinnacle Group ”) as specified in more detail in Clause 10.4 hereof and (ii) Pinnacle, Inc. conducts / has conducted certain business activities that are related to the Steinberg Business in the United States (the “ Steinberg US Business ”), in particular distribution activities for products of the Company.

 

(C) The Seller is part of the Pinnacle Group and the sole shareholder of the Company and holds the Share with a par value of EUR 6,891,310.

 

(D) The Seller has made available to the Company (i) a subordinated loan with a principle amount of up to EUR 2,000,000 pursuant to a loan agreement dated January 2, 2003 and (ii) a further subordinated loan with a principle amount of up to EUR 850,000 pursuant to a loan agreement dated February 3, 2003; both of these loans have been drawn fully by the Company (hereinafter collectively the “ Inter-Company Loans ”). According to the terms of the loan agreements, the Inter-Company Loans shall bear interest at a fluctuating interest rate equal to the applicable EURIBOR at the last day of the previous calendar year plus 1%. As of November 26, 2004, the accrued and not paid interest amounted to EUR15,698.76.

 

(E) The Purchaser is a limited liability company under Japanese law with registered seat in Hamamatsu. Since its founding in 1987, the Purchaser has developed, manufactured, and sold musical instruments and software while also broadening its operational scope to include audio video (AV) equipment, semiconductor products, and diverse other business fields.

 

(F) The Seller is interested in selling and the Purchaser is interested in acquiring the Steinberg Business, including, without limitation, the Steinberg US Business, and the Share in the Company on the terms and conditions set forth in this Agreement (the “ Transaction ”).

 

Now, thereupon, the Parties, Pinnacle, Inc. and the Company agree as follows:

 

1 Sale and Transfer of Share and Inter-Company Loans

 

  1.1 Sale and Transfer of Share

 

On the terms and subject to the conditions set forth in this Agreement, the Seller hereby sells to the Purchaser and the Purchaser hereby purchases from the Seller the Share together with all ancillary rights including all rights to profits of the current fiscal year and all non-distributed profits of previous fiscal years. The Seller hereby assigns and transfers the Share conditionally upon signing of the Closing Memorandum the form of which is attached hereto as Exhibit 1.1 (the “ Closing Memorandum ”) by both Parties on Closing. The Purchaser accepts such conditional assignment and transfer of the Share.

 

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  1.2 Sale and Transfer of the Inter-Company Loans

 

On the terms and subject to the conditions set forth in this Agreement, the Seller hereby sells to the Purchaser and the Purchaser hereby purchases from the Seller the Inter-Company Loans together with all ancillary rights including all rights to any accrued and not paid interest. The Seller hereby assigns and transfers the Inter-Company Loans conditionally upon signing of the Closing Memorandum by both Parties on Closing. The Purchaser accepts such conditional assignment and transfer of the Inter-Company Loans and the Company hereby consents to the sale and transfer of the Inter-Company Loans to the Purchaser.

 

2 Consideration

 

  2.1 Aggregate Purchase Price

 

The aggregate consideration to be paid by the Purchaser to the Seller for the sale and transfer of the Share and the sale and transfer of the Inter-Company Loans and the Returned Products (as defined in Clause 10.4.2 (i)) shall be an amount of US$ 28,470,000 (in words: Twenty-Eight Million Four Hundred Seventy Thousand United States Dollars) (the “ Aggregate Purchase Price ”).

 

  2.2 Allocation of the Purchase Price

 

The consideration to be paid by the Purchaser to the Seller for the sale and transfer of the Share shall be the Aggregate Purchase Price minus the Loan Purchase Price as converted from Euro into United States Dollars on the business day immediately preceding the Closing and minus the Product Purchase Price as converted from Euro into United States Dollars on the business day of the respective delivery (the “ Share Purchase Price ”).

 

  2.3 Purchase Price for the Inter-Company Loans

 

The consideration to be paid by the Purchaser to the Seller for the sale and transfer of the Inter-Company Loans shall be the outstanding principal amount (in Euro) of the Inter-Company Loans plus all accrued and unpaid interest thereon (in Euro) as of the Closing (as defined below) (the “ Loan Purchase Price ”).

 

  2.4 Product Purchase Price for the Returned Products

 

The consideration to be paid for the sale and delivery of the Returned Products pursuant to Clause 10.4.2 (i) (b) by the Purchaser (or by the Purchaser on behalf of its designee) to the Seller on behalf of that Affiliated Company that has sold the Returned Product to the Purchaser or the Company, as the case may be) for the sale and delivery of the Returned Products shall be the aggregate of the material costs of the Returned Products sold and delivered to the Purchaser or its designee pursuant to Clause 10.4.2 (i) (b) (as the case may be) (the “ Product Purchase Price ”). Material cost in the meaning of the preceding sentence shall be the price per unit calculated pursuant to the US-Distribution Agreement (as defined in the Company Separation Agreement), consistent with the past practice.

 

  2.5 Payment of Aggregate Purchase Price

 

The Aggregate Purchase Price shall be due on Closing and shall be paid by the Purchaser to the Seller by money transfer into the bank account of the Seller on or before Closing. Seller shall notify Purchaser in writing about bank and account details at a time reasonably in advance of the Closing Date.

 

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  2.6 Value Added Tax

 

The Parties understand that the sale and transfer of the Share and the Inter-Company Loans is not subject to value added tax (“ VAT ”). If, to the contrary, VAT is payable, it shall increase the Aggregate Purchase Price accordingly and shall be due as soon as the Purchaser has received from the Seller proof of assessment of VAT and a respective invoice which conforms to the provisions of sec. 14 German Value Added Tax Act. In case the sale and delivery of Returned Products pursuant to Clause 10.4.2 (i) (b) is subject to VAT with the Seller or any of its Affiliates, the Seller or any of its Affiliates is obliged to submit a corrected invoice matching the respective legal requirements, which allows Purchaser to claim for a refund of the respective VAT in the respective jurisdiction.

 

3 Closing

 

Closing shall take place at the offices of Linklaters Oppenhoff & Rädler in Frankfurt am Main at 10:00am on the second business day immediately after the day on which the last Closing Condition in Clauses 3.1 and 3.2 has been satisfied, but within the timeframe as provided by Clauses 4.8.1 (ii) and 4.8.2 or at any other time and place as the Parties may mutually agree (the “ Closing Date ”) if the following conditions (“ Closing Conditions ”) have been met (the “ Closing ”):

 

  3.1 Purchaser’s Closing Conditions

 

The Purchaser shall only be obligated to close as provided in Clause 3.3 if all of the following Closing Conditions have been met:

 

  3.1.1 (i) All of the Statements of Seller and Pinnacle, Inc., where applicable, contained in this Agreement are true and correct on and as of the Closing as if made on and as of the Closing (except for such representations and warranties that speak specifically as of the date hereof or as of another date, which shall be true and correct as of such date), and (ii) Seller and Pinnacle, Inc., as applicable, shall have performed or complied or delivered, as the case may be, all covenants, agreements, conditions or documents required by this Agreement to be performed, complied with or delivered by Seller or Pinnacle, Inc., as applicable, prior to or on the Closing, except in each case of clause (i) or (ii) of the foregoing, which has not caused or would not reasonably be expected to cause a Material Adverse Change.

 

Notwithstanding the foregoing, there shall not exist a breach of a representation or warranty on the part of Seller (a) regarding legal rights (Rechte), title (Eigentum) or economic interest (wirtschaftliches Eigentum) that would impair Purchaser’s ability to acquire by this Transaction the Share free and clear from any encumbrances, liens or any other rights or interests of third parties of any type whatsoever and to become sole and unrestricted shareholder of the Company or (b) that would materially and adversely affect the right or power of Purchaser or the Company to own and operate the Steinberg Business or the Steinberg US Business or

 

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create a material adverse restriction, impediment or cessation of the manufacture and/or marketing of any material product presently manufactured and/or marketed by the Company, in each case which shall not have been cured within ten (10) business days following receipt by Seller of written notice of such breach from Purchaser;

 

  3.1.2 there shall not be instituted and pending or threatened any action before any court or governmental entity to restrain or prohibit this Agreement or the consummation of the transactions contemplated hereby; and no preliminary or permanent injunction or other order issued by any court of competent jurisdiction preventing consummation of the sale of the Share to Purchaser shall be in effect;

 

  3.1.3 Pinnacle, Inc. and the Purchaser (or any party as designated by the Purchaser) have entered into an Asset Purchase and Sale Agreement relating to the Steinberg US-Business, the form of which is attached hereto as Exhibit 3.1.3 (the “ Asset Purchase and Sale Agreement ”) and the transactions contemplated thereby shall have been consummated concurrently with Closing hereunder;

 

  3.1.4 the Company Separation Agreement, the form of which is attached hereto as Exhibit 3.1.4 (the “ Company Separation Agreement ”) has been duly executed by the parties thereto and the transactions contemplated thereby to occur on or prior to the Closing shall have occurred prior to or simultaneously with the Closing;

 

  3.1.5 the IP Cross License Agreement, the form of which is attached hereto as Exhibit 3.1.5a (the “ IP Cross License Agreement” ), the OEM Distribution Agreement, the form of which is attached hereto as Exhibit 3.1.5b (the “ OEM Agreement ”), and the Transitional Services Agreements, the form of which is attached hereto as Exhibit 3.1.5c (the “ Transitional Services Agreement ”) have been duly executed by the respective parties concurrently with the Closing;

 

  3.1.6 the German Federal Cartel Office ( Bundeskartellamt ) has served a written notice to the Seller and/or the Purchaser declaring that it will not prohibit the Transaction or, alternatively, fails to notify the Seller and/or the Purchaser within one month after the pre-merger filing pursuant to Section 40 para 1 sentence 1 of the German Act Against Constraints on Competition ( GWB ) that it has commenced a formal investigation of the Transaction, or finally, the German Federal Cartel Office fails to issue an order pursuant to Section 40 para 2 sentence 1 GWB within the required time periods pursuant to Section 40 para 2 GWB. Neither Party shall grant its consent to any extension to the aforementioned time periods without the prior written approval of the respective other Party; and

 

  3.1.7 the Seller has provided a copy of a shareholders’ resolution by which Oliver Hellmold and Christoph Schwieter are removed from office as Managing Directors of the Company as of the Closing Date; this shareholders’ resolution may include an approval of their management of the Company, which shall not, however, reduce the Seller’s obligations under this Agreement.

 

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  3.2 Seller’s Closing Conditions

 

The Seller shall only be obligated to close as provided in Clause 3.3 if all of the following Closing Conditions have been met:

 

  3.2.1 (i) All of the Statements of Purchaser contained in this Agreement are true and correct on and as of the Closing as if made on and as of the Closing (except for such representations and warranties that speak specifically as of the date hereof or as of another date, which shall be true and correct as of such date), and (ii) Purchaser shall have performed or complied or delivered, as the case may be, all covenants, agreements, conditions or documents required by this Agreement to be performed, complied with or delivered by Purchaser prior to or on the Closing, except, in each case of clause (i) or (ii) of the foregoing, which has not caused or would not reasonably be expected to cause a Material Adverse Change;

 

  3.2.2 there shall not be instituted and pending or threatened any action before any governmental entity to restrain or prohibit this Agreement or the consummation of the transactions contemplated hereby; and no preliminary or permanent injunction or other order issued by any court of competent jurisdiction preventing consummation of the sale of the Share to Purchaser shall be in effect;

 

  3.2.3 Pinnacle, Inc. and the Purchaser (or any party as designated by the Purchaser) have entered into the Asset Purchase and Sale Agreement and the transactions contemplated thereby shall have been consummated concurrently with Closing hereunder;

 

  3.2.4 the IP Cross License Agreement, the OEM Agreement and the Transitional Services Agreement have been duly executed by the respective parties concurrently with the Closing; and

 

  3.2.5 the Closing condition contained in Clause 3.1.6 has been fulfilled.

 

  3.3 Closing Actions and Obligations

 

At Closing Purchaser shall pay the Aggregate Purchase Price according to Clause 2.5 and simultaneously ( Zug-um-Zug ) the Parties, including Pinnacle, Inc., shall sign the Closing Memorandum to confirm that the Closing Conditions have been satisfied, sign the Assignment Agreement (evidencing assignment of the Inter Company Loans), the form of which is attached hereto as Exhibit 3.3 (the “ Assignment Agreement ”) and take the following actions:

 

  3.3.1 Seller’s Deliveries

 

On Closing, the Seller shall deliver, or cause to be delivered, to the Purchaser, the following:

 

  (i) the Seller shall confirm in writing the receipt of the Aggregate Purchase Price and the receipt of the payments payable under Article 2 of the Asset Purchase Agreement; and

 

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  (ii) all other documents, certificates, instruments or writings required to be delivered by the Seller on Closing in order to consummate the transactions contemplated by this Agreement.

 

  3.3.2 Purchaser’s Deliveries

 

On Closing, the Purchaser shall deliver, or cause to be delivered, to Seller, all other documents, certificates, instruments or writings required to be delivered by the Purchaser on Closing in order to consummate the transactions contemplated by this Agreement.

 

The Closing Conditions to be effected by the Seller or by the Purchaser, as the case may be, shall be fulfilled simultaneously ( Zug-um-Zug ) with the Closing Conditions to be effected by the respective other Party.

 

  3.4 Cartel Approval

 

  3.4.1 The Parties shall use their respective best efforts to promptly prepare and file any filings necessary to notify the German Federal Cartel Office of the Transaction (the “ Cartel Filings ”); the Cartel Filings shall be made by the Purchaser and the Seller jointly in close cooperation. The text of the respective filings shall be prepared by Purchaser and agreed upon between the Parties provided that the Seller and the Purchaser agree not to unreasonably delay any such filings. For the purpose of expediting consummation of the Transaction, the Parties shall promptly respond to any request for additional information made by the German Federal Cartel Office with respect thereto. The Purchaser shall be responsible for filing fees relating to the Cartel Filings. All other costs and expenses (including, without limitation, all legal fees and expenses) incurred in connection with the Cartel Filings shall be paid for by the Party incurring the same.

 

  3.4.2 In the event the German Federal Cartel Office has (i) finally and absolutely prohibited or (ii) finally and absolutely permitted the Transaction only under certain conditions or requirements, the Parties shall conduct negotiations in good faith to determine whether the Transaction agreed upon in this Agreement can be realized in another way while furthering the economic interests of both Parties. If no agreement can be reached concerning a joint proceeding within three months after the Parties receive the above-described decision of the German Federal Cartel Office, each Party shall be entitled to withdraw from this Agreement and the Related Agreements to which it is a party by written statement submitted to the respective other Party. In case the Parties agree to file an objection to the prohibition or to the permission granted the Parties shall jointly decide on such objection or remedy and the content thereof.

 

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4 Period up to Closing

 

For the period between the date hereof (“ Signing ”) and Closing, the Seller covenants and agrees with the Purchaser as follows:

 

  4.1 the Seller shall use all commercially reasonable efforts to cause the management of the Company to operate the Company diligently and in good faith with due skill and care of a prudent business man and only in the ordinary course of business, in the manner as previously conducted and consistent with past management and business practices.

 

  4.2 the Seller shall use all commercially reasonable efforts to cause the Company to (i) maintain, preserve, renew and keep in full force and effect the existing rights of the Company, (ii) maintain the assets in good working order, (iii) not allow the disposal or lapse of any Intellectual Property Rights (as defined in Clause 5.11), (iv) preserve for Purchaser the present Company’s relationships with suppliers, distributors, vendors, manufacturers, customers, communities and all others having business relations with the Company, and (v) not to allow any event or occurrence within Seller’s control which might, individually or in the aggregate, have a Material Adverse Change on the Company.

 

  4.3 if the Seller becomes aware of any internal or external measures, events or occurrences, whether within the Seller’s control or not, which might, individually or in the aggregate, have a Material Adverse Change on the Company or its business, the Seller shall without undue delay notify the Purchaser about such measure, event or occurrence.

 

  4.4 unless as provided for in Clause 10.4 or elsewhere in this Agreement, the Seller shall not pass any shareholders’ resolution with respect to the Company without prior written consent of the Purchaser and refrain from any other actions or transactions which might have any negative impact on the financial condition, operating results and cash flows of the Company or its businesses.

 

  4.5 the Seller shall use all commercially reasonable efforts to cause the management of the Company to operate the Company and its business in such manner that the statements in Clause 5.9 will be correct also for the period from Signing to Closing unless agreed otherwise in writing with Purchaser or as provided for in this Agreement.

 

  4.6 the Seller shall cause the Company to use commercially reasonable efforts to enter into confidentiality agreements with Ralf Kürschner, Michael Michaelis, Roland Mange, Dave Nicholson, Werner Kracht and Wolfgang Kundrus prior to the Closing.

 

  4.7 Pinnacle, Inc. shall use commercially reasonable efforts to (i) maintain, preserve, renew and keep in full force and effect the Steinberg US Business, (ii) not allow the disposal or lapse of any Intellectual Property Rights (as defined in Clause 5.11), (iii) preserve for the Purchaser the present relationships of the Steinberg US Business with distributors, vendors, customers and all others having business relations with the Steinberg US Business, and (v) not allow any event or occurrence within Pinnacle, Inc.’s control which might, individually or in the aggregate, have a Material Adverse Change on the Steinberg US Business and/or the Intellectual Property Rights.

 

  4.8 Termination of Agreement

 

  4.8.1 The Purchaser may terminate this Agreement by giving written notice to the Seller at any time prior to the Closing if

 

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  (i) the Seller does not comply with the covenants as set forth in this Clause 4, or Pinnacle, Inc. does not comply with Clause 4.7, and such noncompliance results in or could reasonably be expected to result in a Material Adverse Change (as defined in Clause 4.8.3), or

 

  (ii) any of the Closing Conditions set out in Clause 3.1. have not been fulfilled within 2 months from the Signing Date and if the Cartel Office commences formal investigations, within 6 months from Signing, or

 

  (iii) a Material Adverse Change (as defined in Clause 4.8.3) has occurred since Signing.

 

  4.8.2 The Seller may terminate this Agreement by giving written notice to the Purchaser at any time prior to the Closing if any of the Closing Conditions set out in Clause 3.2 have not been fulfilled within 2 months from the Signing Date and if the Cartel Office commences formal investigations, within 6 months from Signing.

 

  4.8.3 Material Adverse Change ” shall mean any change, circumstance or effect which, individually or in the aggregate, is materially adverse to the business, operations, assets, affairs or condition (financial or otherwise) of the Company or the Steinberg US Business; provided, however, that none of the following shall be a Material Adverse Change: (i) changes in the industry or markets in which the Steinberg Business and the Steinberg US Business operates; (ii) changes resulting from the permitted disclosure of this Agreement or by the transactions contemplated hereby; (iii) changes in the U.S., German or world economy or business condition and (iv) not achieving any estimated or projected results of the Steinberg Business;

 

5 Statements of the Seller

 

The Seller hereby guarantees by way of an independent guaranty agreement pursuant to § 311 BGB with legal consequences as conclusively set forth in Clause 9 that the following statements are, subject to the disclosures made pursuant to this Clause 5 and the Exhibits to this Clause 5, true and correct as of Signing and will be true and correct as of the Closing, unless expressly otherwise provided hereunder. The Parties expressly agree that these statements shall not constitute a quality guarantee concerning the purchase object within the meaning of the Sections 443 and 444 BGB ( Garantie für die Beschaffenheit eines Kaufgegenstandes ).

 

  5.1 Organization and Authority of the Seller

 

The Seller is duly incorporated and validly existing under German Law and has the corporate power to own its respective properties and to carry on its businesses as now being conducted. It has all requisite power and authority to enter into this Agreement and any related agreement (each a “ Related Agreement ”) to which it is a party and to consummate the transactions contemplated hereby and thereby.

 

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  5.2 Execution and Delivery

 

This Agreement and any Related Agreement to which the Seller is a party has been duly executed and delivered by it and, assuming the due authorization, execution and delivery by the other Parties hereto and thereto, constitute valid and binding obligations of the Seller enforceable in accordance with their respective terms, subject to the laws of general application relating to bankruptcy, insolvency and the relief of debtors and to rules of law governing specific performance, injunctive relief or other equitable remedies.

 

  5.3 No Conflict

 

Except as set forth in Exhibit 5.3 , the execution and delivery of this Agreement and any Related Agreement to which the Company is a party do not, and, the consummation of the transactions contemplated hereby and thereby will not, conflict with, or result in a conflict with, or default under (with or without notice or lapse of time, or both), or give rise to a right of termination, cancellation, modification or acceleration of any obligation or loss of any benefit under (any such event, a “ Conflict ”) (i) any mortgage, indenture, lease, contract or other agreement or instrument, permit, concession, franchise or license to which the Company or the Seller is subject, or (ii) any judgment, order, decree, statute, law, ordinance, rule or regulation applicable to the Company or the Seller or their respective properties or assets.

 

  5.4 Consents

 

The Seller has obtained all necessary corporate consents and taken all necessary corporate action, if any, required for the consummation of the transactions contemplated by this Agreement. Except as set forth in Exhibit 5.4 , no consent, waiver, approval, order or authorization of, or registration, declaration or filing with, any court, administrative agency or commission or federal, state, county, local or other foreign governmental authority, instrumentality, agency or commission or any third party, is required by or with respect to the Seller or the Company, as applicable, in connection with the execution and delivery of this Agreement and any Related Agreement to which it is a party or the consummation of the transactions contemplated hereby and thereby. The Seller has or will have obtained all such consents, waivers, approvals and authorizations prior to Closing.

 

  5.5 Due Existence of the Company and the Shares

 

The statements of the Preamble with respect to the Company are correct in every respect.

 

  5.5.1

The Company is duly established and validly existing under German law as limited liability company which has been formed by change in legal form pursuant to Secs. 190 et seq. of the German Transformation Act ( Umwandlungsgesetz) . The change in legal form ( Umwandlung ) has been validly resolved and registered. The Company is not and will not be insolvent on or immediately after the Closing, in particular but without limitation, due to the implementation of this Agreement and the Related Agreements. None of the Company, its Managing Directors or a third party has applied for insolvency proceedings with respect to the Company, and there are no facts or reasons known to the Seller which would require the filing of insolvency proceedings. No hidden or open repayment

 

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of capital ( Einlagenrückgewähr ) has occurred. The Company has the corporate power to own its properties and to carry on its business as now being conducted. The certified excerpt of the commercial register of the Company attached hereto as Exhibit 5.5.1a fully and correctly reflects the legal status of the Company. The articles of association dated March 5, 2003 and attached hereto as Exhibit 5.5.1b (“ Articles of Association ”) are the currently valid Articles of Association of the Company. No shareholder resolution has been passed or action taken or is pending which would change the Articles of Association or the content of the certified excerpt of the commercial register attached as Exhibit 5.5.1a.

 

  5.5.2 The Share is existing, fully paid in by conversion of the former stock corporation under the name STEINBERG Media Technologies AG in a limited liability company, without additional payment obligations (Nachschusspflichten) and except as set out in the current Articles of Association of the Company free of ancillary ( Nebenpflichten ) or other obligations or restrictions.

 

  5.5.3 No resolution to liquidate the Company has been adopted, nor is there any action or request pending to accomplish such liquidation. Further, the Company has not been terminated and no resolution to redeem or to transfer the Share has been adopted except for a resolution with respect to this Transaction.

 

  5.5.4 All shareholders’ resolutions required by law or by the Articles of Association of the Company have duly been passed in accordance with the law and the Company’s Articles of Association, in particular, but not limited to resolutions regarding the appropriation of profits and the adoption of the annual financial statements.

 

  5.5.5 The Company is in compliance with all legal requirements with respect to the filing and the maintaining of corporate documents and to the filing of respective notifications to the commercial register. No resolutions have been passed or filed with the commercial register which have not yet been registered and which are not reflected in Exhibit 5.5.1a.

 

  5.6 Title to Share and Interests in the Company

 

The statement of the Preamble about the Seller’s shareholding in the Company is complete and correct in every respect.

 

  5.6.1 The Seller holds all legal rights ( Rechte ), title ( rechtliches Eigentum ) and economic interest ( wirtschaftliches Eigentum ) in and to the Share, free and clear from any encumbrances, liens or any other rights or interests of third parties of any type whatsoever and there are no claims for the granting of such rights or transfer of the Share.

 

  5.6.2 The Company has not granted any direct or indirect equity interest of any type whatsoever in the Company other than the Share nor granted any right to participate in the turnover, profits or assets of the Company, and there are no rights, options or claims for the granting of any such interests or rights. The Company has not issued any financial instruments in addition to the Inter-Company Loans entered into with the Seller.

 

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  5.6.3 With the transfer of the Share to the Purchaser at Closing, the Purchaser will acquire full, unrestricted and unencumbered title to the transferred Share at its free disposal and all of the outstanding shares of ( alle ausstehenden Geschäftsanteile ) and equity interests in ( Beteiligungen an ) the Company.

 

  5.6.4 Neither the Seller, nor any Affiliated Company holds any equity interest in any enterprise which is developing, marketing, distributing or selling products similar to the products currently developed, marketed, distributed and sold by the Company. “ Affiliated Company ” shall mean Pinnacle, Inc., PS Miro Holdings Inc. & Co. KG and any further affiliates of these companies and/or Seller in the meaning of Sections 15 et seq. of the German Stock Corporation Act ( Aktiengesetz ), excluding the Company. For purposes of this Agreement, any reference to the Seller and its Affiliated Companies shall be deemed to be the same as a reference to the “companies of the Pinnacle Group” with the exclusion of the Company.

 

  5.6.5 Except for the Articles of Association of the Company ( Gesellschaftsvertrag ) dated March 5, 2003 as well as other agreements, resolutions and promises specifically referenced in Exhibit 5.6.5 and this Agreement, there are no agreements, resolutions or promises concerning the relationship between the Seller and the Affiliated Companies on the one hand and the Company on the other hand or any obligations to enter into such agreements, resolutions or promises.

 

  5.7 Participations

 

  5.7.1 The Company does not have any places of business, offices, branches or divisions outside of its principal place of business at Neuer Höltigbaum 22-32 in 22143 Hamburg.

 

  5.7.2 The Company does not hold any direct or indirect equity interest in any other enterprises.

 

  5.7.3 The Company is not party to an agreement between undertakings in the sense of Section 291 et seq. German Stock Corporation Act (AktG) ( Unternehmensvertrag ).

 

  5.8 Financial Statements

 

The Company’s financial statement as of June 30, 2003 ( “Financial Statement 2003” ) and the Company’s financial statement as of June 30, 2004 ( “Financial Statement 2004”) (together with the Financial Statement 2003 the “Financial Statements” ), which are attached as Exhibit 5.8a and 5.8b to this Agreement have been prepared with the care of a prudent businessman on the basis of proper book-keeping and in accordance with accounting, valuation and depreciation principles generally accepted in Germany and such principles have been applied consistently and without change as in the preceding accounting period. All risks, devaluations and losses ascertainable at the time of the preparation of the respective financial statements have been duly provided for by sufficient depreciations, changes of evaluation or reserves or have been provided for in one of the aforesaid Financial Statements. The Company does not have any pension or similar obligation. The Financial

 

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Statements are complete and correct in all material respects and present completely and correctly the financial condition, net assets, operating results and cash flows of the Company or of the Company and its consolidated subsidiaries, respectively, as of the dates and for the periods indicated therein in all material respects.

 

  5.9 Ordinary Course of Business

 

Except as stated specifically in Exhibit 5.9 , or elsewhere in this Agreement or its Exhibits, since June 30, 2004 until Closing, the Company has been and will be operated in the ordinary course of business with the due skill and care of a prudent business man, in particular

 

  5.9.1 the Company has carried on its business in the ordinary and usual course and without entering into any transaction, assuming any liability or making any payment which is not in the ordinary course of its business and without any interruption or alteration in the nature, scope or manner of its business;

 

  5.9.2 there have been no distributions of any kind to the Seller or Affiliated Companies nor has any such distribution been authorized;

 

  5.9.3 the Company has not sold or otherwise transferred to the Seller or Affiliated Companies or any third party any part or line of its business or any corporate opportunities;

 

  5.9.4 there has been no sale, lease, license or other disposition of any of the assets or properties of the Company, except in the ordinary course of business, or any creation of any security interest in such assets or properties;

 

  5.9.5 there has been no damage or loss, whether or not covered by insurance, which materially affects the value of the Company’s assets or the operation of their businesses;

 

  5.9.6 there has been no material deterioration in the financial condition, net assets, prospects or turnover of the Company;

 

  5.9.7 there has been no increase of the credit lines of the Company and no credit or loan facilities have been taken up by the Company;

 

  5.9.8 there has been no waiver or release of any right or claim of the Company, including any write-off or other compromise of any account receivable of the Company;

 

  5.9.9 there has been no change in pricing or royalties relating to the Company’s products or charged by the Company to its customers or licensees or in pricing or royalties set or charged by persons who have licensed intellectual property to the Company which is not in the ordinary course of business;

 

  5.9.10 the Company has not effected a change in the number or composition of the Company’s employees or the salaries, wages or other remuneration payable to them which is not in the ordinary course of business; and

 

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  5.9.11 there has been no notification by any customer of the Company of termination of its relationship with the Company (except for customers generating less than US$ 20,000 in revenues during last 12 months prior to Closing).

 

If any of the statements contained in Clauses 5.9.6 and 5.9.11 would in fact be correct as of the Signing but incorrect as of the Closing, this shall not be deemed to be an Incorrect Statement (as defined in Clause 9.1) if (i) the incorrectness is based on a fact that occurs after the Signing and is not under Seller’s or the Company’s control, this fact has occurred notwithstanding that the Seller has acted duly and in accordance with Clause 4 and the Seller has informed the Purchaser about the occurrence of such fact without undue delay after becoming aware of such fact or (ii) the Purchaser has agreed in writing to the particular measure or transaction that triggered such incorrectness, provided that these exceptions shall not reduce or limit any of the guarantees set forth in any other subsection of this Clause 5 or other statements, covenants or warranties of the Seller or Pinnacle, Inc. elsewhere in this Agreement.

 

  5.10 Tangible Assets

 

To the Best Knowledge of the Seller, by the acquisition of the Company pursuant to this Agreement and the agreements set forth in Clause 10.4.1, the Purchaser will be able to continue the business of the Company as it has been conducted until Closing including, without limitation, the Steinberg US Business. On Closing the Company will have full, unrestricted and unencumbered title to, and possession of, all tangible assets which serve or are destined to serve its business which are listed in Exhibit 5.10d , including those tangible assets which are being transferred to the Company by the Affiliated Companies prior to Closing as listed in Exhibit 5.10a (the “ Returning Tangible Assets ”) and except for those tangible assets which are leased from persons and companies other than the Seller and the Affiliated Companies in the ordinary course of business on normal market terms under leases listed in Exhibit 5.10b (the “ Leased Tangible Assets ”) and those listed in Exhibit 5.10c which are still subject to usual reservations of title by suppliers and conditional upon payment ( Eigentumsvorbehalt ). Exhibit 5.10d contains a true and complete list of all fixed assets of the Company except for low value assets ( geringwertige Wirtschaftsgüter) as of November 26, 2004 (“ Tangible Assets ”).

 

The Tangible Assets together with the Returning Tangible Assets and the Leased Tangible Assets comprise all of the material tangible assets of the Company used by the Company to conduct its business as it has been conducted until Signing and will be conducted until Closing, and as contemplated to be conducted by the Company, as described in any product roadmaps, business plans or the like existing as of Closing. The Tangible Assets together with the Returning Tangible Assets and the Leased Tangible Assets have been well maintained and are in good and serviceable condition, exempt from normal wear and tear.

 

All inventories of the Company that existed on June 30, 2004 are reflected in the Financial Statement 2004 on the basis of the principles generally accepted in Germany and such principles have been applied consistently and without changes as in the preceding accounting period. The present inventories will be, by quantity and quality, usable and saleable in the ordinary course of business, taking into consideration

 

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any devaluation made in respect thereof in the Financial Statement 2004 and which would be made by an diligent business man in the ordinary course of business for the period commencing after June 30, 2004.

 

  5.11 Intangible Assets / Intellectual Property Rights

 

Exhibit 5.11 contains a complete and correct list of patents, utility models, design patents, trademarks and respective applications and a list of all other material intellectual property rights and a list of all licenses granted to the Company or being transferred to the Company by Affiliated Companies prior to or on Closing pursuant to Clause 10.4.1 which licenses are necessary for the Steinberg Business to continue operating as it is currently being operated, except for such licenses granted to the Company by third parties for (i) software which is used for administrative purposes and (ii) general software tools, such as assemblers, compilers, source code editors, run-time modules, libraries, test programs and the like, which are readily available on the market, provided that, in the case of (i) and (ii) above, the market price of which (and in absence the of a market price, the replacement cost of which) does not exceed EUR 10,000 in the individual case, which shall not apply for any software relating to the SAP System (together the “ Intellectua


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