EXHIBIT 2.02
Execution Copy
AMENDED AND RESTATED
SEPARATION AGREEMENT
This Amended and Restated Separation Agreement ("AGREEMENT") is entered
into effective as of April 12, 2004 by and between Celerity Group, Inc., a
Delaware Corporation dba Kinetics Holdings Corporation ("KHC"), Kinetics
Group, Inc., a Delaware corporation (the "COMPANY"), and Kinetic Systems, Inc.,
a California corporation ("KSI"). This Agreement amends restates and replaces
any and all prior executed version of the Separation Agreement. KHC, the Company
and KSI are sometimes referred to herein individually as a "PARTY" and
collectively as the "PARTIES."
RECITALS
WHEREAS, the Company is a direct wholly owned subsidiary of KHC, and KSI
is a direct wholly owned subsidiary of the Company;
WHEREAS, the Board of Directors of KHC and the Company have determined
that it is in the best interests of the Company and its stockholders to separate
the Company Business and the KSI Business by distributing to the holders of the
Company's Common Stock on a pro rata basis all of the shares of KSI capital
stock owned by the Company (the "DISTRIBUTION") (capitalized terms having the
meanings set forth below); and
WHEREAS, it is appropriate and desirable to set forth the principal
corporate transactions and agreements required with respect to the Distribution
and the relationship of the parties and their respective subsidiaries following
such events.
NOW, THEREFORE, in consideration of the foregoing premises and the mutual
agreements, provisions and covenants contained in this Agreement, the parties
hereby agree as follows:
ARTICLE I
DEFINITIONS
Section 1.1 Definitions. As used herein, the following terms have the
following meanings:
"ACTION" means any claim, action, cause of action, suit, arbitration,
proceeding, inquiry or investigation by or before any court, arbitrator,
governmental or regulatory or administrative agency or commission, or any other
tribunal or other Governmental Authority.
"AFFILIATE" of any specified Person means any other Person that, directly
or indirectly, controls, is controlled by or is under direct or indirect common
control with such specified Person.
"AGREEMENT" has the meaning specified in the preamble hereto, as such
agreement may be amended from time to time.
"ANCILLARY AGREEMENTS" means the Confidential Disclosure Agreement, the
Employee Matters Agreement, the Management Services Agreement, the Tax Sharing
Agreement, the Trademark License Agreement and the Restructuring Agreement.
"ASSIGNED ASSET" has the meaning set forth in Section 3.1.
"ASSIGNING PARTY" has the meaning set forth in Section 3.1.
"CLOSING DATE" means the date on which the Distribution shall be
consummated.
"CODE" means the Internal Revenue Code of 1986, as amended.
"COMPANY BALANCE SHEET" means the balance sheet of the Company, including
the notes thereto, as of March 26, 2004.
"COMPANY BUSINESS" means the business and operations of the Company and
its various divisions and subsidiaries engaged in the design and production of
high performance gas and chemical delivery modules for semiconductor
fabrication, but excludes the KSI Business.
"COMPANY GROUP" means the Company and KHC and each Person (other than KSI
and its respective subsidiaries and the LLC and its subsidiaries) that is an
Affiliate of the Company immediately after the Closing Date.
"COMPANY INDEMNITEES" has the meaning specified in Section 4.2.
"COMPANY IPO" means the initial sale of shares of Common Stock by the
Company to the Underwriters pursuant to the Initial Public Offering in
accordance with the terms of the Underwriting Agreement between the Company and
the Underwriters.
"COMPANY LIABILITIES" has the meaning specified in Section 3.2, but shall
exclude the KSI Liabilities.
"CONFIDENTIAL DISCLOSURE AGREEMENT" means the Confidential Disclosure
Agreement dated the date hereof between the Company and KSI providing for the
confidential treatment of certain information, as such agreement may be amended
from time to time.
"CONSENTS" means any consents, waivers or approvals from, or notification
requirements to, any third parties.
"COVERED CLAIMS" means any claim that is of a type covered by insurance or
self insurance of the Company in effect on the Closing Date.
"DISTRIBUTION" has the meaning specified in the Recitals.
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"EMPLOYEE MATTERS AGREEMENT" means the Employee Matters Agreement dated
the date hereof between the Company and KSI regarding certain employment and
benefits matters, as such agreement may be amended from time to time.
"ENTITLED PARTY" has the meaning set forth in Section 3.3.
"ESCALATION NOTICE" has the meaning set forth in Section 7.2.
"EXCLUDED ASSETS" has the meaning set forth in Section 3.1(b).
"EXCLUDED LIABILITIES" has the meaning set forth in Section 3.2(b).
"GOVERNMENTAL APPROVALS" means any notices, reports or other filings to be
made, or any consents, registrations, approvals, permits or authorizations to be
obtained from, any Governmental Authority.
"GOVERNMENTAL AUTHORITY" means any federal, state, local, foreign or
international court, government, department, commission, board, bureau, agency,
official or other regulatory, administrative or governmental authority.
"INDEMNIFIED PARTY" HAS the meaning set forth in Section 4.5(a).
"INDEMNIFYING PARTY" has the meaning set forth in Section 4.5(a).
"INITIAL PUBLIC OFFERING" means the Company's issuance of shares of Common
Stock to the public in an offering registered under the Securities Act.
"INTELLECTUAL PROPERTY" means (a) inventions, whether or not patentable,
whether or not reduced to practice or whether or not yet made the subject of a
pending patent application or applications, (b) ideas and conceptions of
potentially patentable subject matter, including, without limitation, any patent
disclosures, whether or not reduced to practice and whether or not yet made the
subject of a pending patent application or applications, (c) national (including
the United States) and multinational statutory invention registrations, patents,
patent registrations and patent applications (including all reissues, divisions,
continuations, continuations-in-part, extensions and reexaminations) and all
rights therein provided by multinational treaties or conventions and all
improvements to the inventions disclosed in each such registration, patent or
application, (d) trademarks, service marks, trade dress, logos, trade names and
corporate names, whether or not registered, including all common law rights, and
registrations and applications for registration thereof, including, but not
limited to, all marks registered in the United States Patent and Trademark
Office, the Trademark Offices of the States and Territories of the United States
of America, and the trademark offices of other nations throughout the world, and
all rights therein provided by multinational treaties or conventions, (e)
copyrights (registered or otherwise) and registrations and applications for
registration thereof, and all rights therein provided by multinational treaties
or conventions, (f) moral rights (including, without limitation, rights of
paternity and integrity), and waivers of such rights by others, (g) computer
software, including, without limitation, source code, operating systems and
specifications, data, data bases, files, documentation and other materials
related thereto, data and documentation, (h) trade secrets and confidential,
technical or business information (including ideas, formulas, compositions.
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inventions, and conceptions of inventions whether patentable or unpatentable and
whether or not reduced to practice), (i) whether or not confidential, technology
(including know-how and show-how), manufacturing and production processes and
techniques, research and development information, drawings, specifications,
designs, plans, proposals, technical data, copyrightable works, financial,
marketing and business data, pricing and cost information, business and
marketing plans and customer and supplier lists and information, (j) copies and
tangible embodiments of all the foregoing, in whatever form or medium, (k) all
rights to obtain and rights to apply for patents, and to register trademarks and
copyrights, and (l) all rights to xxx and recover and retain damages and costs
and attorneys' fees for present and past infringement of any of the Intellectual
Property rights hereinabove set out.
"INVENTORY" means all inventory, merchandise, finished goods, and raw
materials, packaging, supplies, works-in-progress and other personal property
and any prepaid deposits for any of the same.
"IPO DATE" means the time of the Company IPO.
"KSI BALANCE SHEET" means the balance sheet of KSI, including the notes
thereto, as of March 26, 2004.
"KSI BUSINESS" means the business and operations of KSI and its divisions
and subsidiaries engaged in the conceptual engineering, design, fabrication,
validation and installation of high purity piping and other process systems,
including modularized fab fit-up, manufacturing tool installation, and
after-market operating services to the electronics, biopharmaceutical and other
regulated industries.
"KSI GROUP" means KSI and each Person (other than the Company and its
subsidiaries) that is an Affiliate of KSI immediately after the Closing Date.
"KSI INDEMNITEES" has the meaning specified in Section 4.3.
"KSI LIABILITIES" has the meaning set forth in Section 3.2.
"LIABILITIES" means any and all losses, claims, charges, debts, demands,
Actions, causes of action, suits, damages, obligations, payments, costs and
expenses, accounts, bonds, indemnities and similar obligations, covenants,
contracts, agreements, promises, guarantees and other liabilities, including all
contractual obligations, whether absolute or contingent, matured or not matured,
liquidated or unliquidated, accrued or not accrued, known or unknown, whenever
arising, and including those arising under any law, rule, regulation, Action,
threatened or contemplated Action (including the costs and expenses of demands,
assessments, judgments, settlements and compromises relating thereto and
attorneys' fees and any and all costs and expenses (including allocated costs of
in-house counsel and other personnel), whatsoever reasonably incurred in
investigating, preparing or defending against any such Actions or threatened or
contemplated Actions), order or consent decree of any Governmental Authority or
any award of any arbitrator or mediator of any kind, and those arising under any
contract, commitment or undertaking, including those arising under this
Agreement or any Ancillary Agreement, in each case, whether or not recorded or
reflected or required to be recorded or reflected on the books and records or
financial statements of any Person.
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"LICENSED INTELLECTUAL PROPERTY" means all Intellectual Property licensed
or sublicensed from a third party.
"LLC" means a limited liability company created to issue membership
interests to the Stockholders in exchange for their contribution of shares of
KHC in a merger with a wholly-owned subsidiary of such limited liability
company. Immediately following the dividend of KSI shares described in Section
2.1, the LLC shall own 100% of the capital stock of both KSI and KHC.
"MANAGEMENT SERVICES AGREEMENT" means the Management Services Agreement
dated the date hereof between the Company and KSI regarding the provision of
certain services between the parties, as such agreement may be amended from time
to time.
"MEDIATION DEMAND DATE" HAS the meaning set forth in Section 7.3.
"MEDIATION DEMAND NOTICE" has the meaning set forth in Section 7.3.
"MERGER" has the meaning set forth in Section 2.1.
"OWNED INTELLECTUAL PROPERTY" means all Intellectual Property in and to
which a party or its subsidiaries holds, or has a right to hold, right, title
and interest. "PERSON" means an individual, a general or limited partnership, a
corporation, a trust, a joint venture, an unincorporated organization, a limited
liability entity, any other entity and any Governmental Authority.
"POLICY" AND "POLICIES" have the meanings specified in Section 5.4(a).
"RECEIVABLES" means any and all accounts receivable, notes and other
amounts receivable from third parties, including, without limitation, customers
and employees, whether or not in the ordinary course, together with any unpaid
financing charges accrued thereon.
"RECEIVING PARTY" has the meaning specified in Section 3.1.
"RECEIVING PARTY'S BUSINESS", "BUSINESS OF THE RECEIVING PARTY" and
"BUSINESS" SHALL mean the Company Business or the KSI Business, as applicable.
"RESTRUCTURING AGREEMENT" means the Restructuring Agreement dated the date
hereof between the Company, its subsidiaries, and several of its equity and debt
holders, setting forth the detailed transaction steps to be undertaken by such
parties to effect a comprehensive recapitalization as directed and approved by
the Company's board of directors, as such agreement may be amended from time to
time.
"RETAINING PARTY" has the meaning set forth in Section 3.3.
"STOCKHOLDERS" means the holders of the issued and outstanding capital
stock of KHC as of March 26, 2004 (the "RECORD DATE").
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"TANGIBLE PERSONAL PROPERTY" means all machinery, equipment, tools,
supplies, furniture, fixtures, vehicles and other tangible personal property.
"TAX" and "TAXES" shall have the meanings given to such terms in the Tax
Sharing Agreement.
"TAX SHARING AGREEMENT" means the Tax Sharing Agreement dated the date
hereof between the Company and KSI providing for certain tax related matters, as
such agreement may be amended from time to time.
"THIRD-PARTY CLAIM" has the meaning set forth in Section 4.6.
"TRADEMARK LICENSE AGREEMENT" means the Trademark License Agreement dated
the date hereof between the Company and KSI providing for certain trademark
matters, as such agreement may be amended from time to time.
Unless otherwise specified, any reference to any "SUBSIDIARY" or "SUBSIDIARIES"
of the Company shall not include KSI or its subsidiaries, but shall include
Kinetics Japan K.K.
ARTICLE II
TRANSACTIONS TO EFFECT THE DISTRIBUTION
Section 2.1 Restructuring and Separation of Businesses. Subject only to
the occurrence of the Closing, the Company, KHC and KSI shall each (as
applicable) consummate the following transactions to effect the Distribution on
the Closing Date, to the extent that such transactions have not been consummated
prior to the date hereof:
(a) The Company shall distribute all of the issued and outstanding
capital stock of KSI to KHC;
(b) KHC shall distribute all of the issued and outstanding capital
stock of KSI to the LLC in accordance with Section 2.5; and
(c) The Company and KSI shall each execute the Restructuring
Agreement and shall comply with the terms and conditions contained therein.
The parties anticipate that upon the IPO Date, the parties and the Stockholders
(as applicable) will cause (i) the merger of Celerity Group, Inc., a California
corporation ("CELERITY") with and into the Company, and (ii) the merger of the
Company with and into KHC (in each case, in a statutory merger under Section 251
of the Delaware General Corporation Law), with KHC as the surviving corporation
of the mergers (these mergers together shall collectively be referred to as the
"MERGER"). The Merger shall have all of the effects provided under applicable
law.
Section 2.2 Acknowledgment of Certain Actions and Events. Upon entry into
this Agreement, the parties shall acknowledge that the following actions, events
and transactions have occurred, and to the extent that one or more of the
following actions, events or transactions
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have not occurred, take all reasonable steps necessary to cause such actions,
events or transactions to occur prior to the Closing Date:
(a) All necessary corporate governance actions shall have been taken
with respect to KSI to facilitate the Distribution, including any elections or
appointments of directors and officers of KSI and any amendments to such
entity's charters or bylaws;
(b) The Company's and KHC's Boards of Directors shall have formally
approved the Distribution and shall not have abandoned, deferred or modified the
Distribution;
(c) The transactions contemplated by this Agreement to be
consummated on or prior to the Closing Date shall have been consummated, each of
the Ancillary Agreements, in form and substance satisfactory to the Company,
shall have been executed by the parties thereto, and each of the transactions
contemplated by the Ancillary Agreements to be consummated on or prior to the
Closing Date shall have been consummated;
(d) No preliminary or permanent injunction or other order, decree or
ruling issued by a Governmental Authority, and no statute, rule, regulation or
executive order promulgated or enacted by any Governmental Authority, shall be
in effect preventing the consummation of the Distribution or any of the other
transactions contemplated by this Agreement or any Ancillary Agreement;
(e) Such other actions shall have been taken as the parties hereto
may, based upon the advice of counsel, reasonably request to be taken prior to
the Distribution in order to assure the successful completion of the
Distribution and the other transactions contemplated by this Agreement;
(f) Resignations of each person who is an officer or director of KSI
or its subsidiaries who will be an employee of only the Company or its
subsidiaries from and after the Closing Date, shall have been received by the
Company and such resignation shall be effective as of the Closing Date;
(g) This Agreement shall not have been terminated; and
(h) The Company shall have been released from any Liabilities,
guarantees or other obligations with respect to any indebtedness or otherwise of
KSI or its subsidiaries, or if impractical to do so, the Company shall have
secured an acceptable agreement of indemnity of KSI with respect to any such
liability.
Section 2.3 Omitted.
Section 2.4 Sole Discretion of Company. The Company's Board of Directors
shall, in its sole discretion, establish (i) any appropriate procedures and
sequence of transactions and actions in connection with the Distribution, (ii)
the Closing Date and all terms of the Distribution, including, without
limitation, the form, structure and terms of any transaction(s) to effect the
Distribution and (iii) the timing of and conditions to the consummation of the
Distribution (including those terms and conditions described in this Article
II), and may any time and from time to time until the completion of the
Distribution modify or change any of the
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foregoing. KSI shall cooperate with the Company in all respects to accomplish
the Distribution and shall, at the Company's direction, promptly take any and
all actions necessary or desirable to effect the Distribution.
Section 2.5 Distribution of KSI Stock. Subject to Section 2.2 above, the
Company and KSI shall each use their reasonable commercial efforts to consummate
the Distribution. Such efforts shall include, but not necessarily be limited to,
those specified in this Article II.
(a) Blue Sky. The parties shall take all such actions as may be
necessary or appropriate under the securities or blue sky laws of the United
States (and any comparable laws under any foreign jurisdiction) in connection
with the Distribution.
(b) Omitted.
ARTICLE III
TRANSFER OF ASSETS AND
ASSUMPTION OF LIABILITIES
Section 3.1 Transfer of Assets.
(a) Effective as of the Closing Date, each party (the "ASSIGNING
PARTY") hereby assigns, transfers, conveys and delivers to the other party (the
"RECEIVING PARTY"), and agrees to cause each of its subsidiaries to assign,
transfer, convey and deliver to the Receiving Party, and the Receiving Party
hereby accepts from the Assigning Party and its subsidiaries, all of the
Assigning Party's and its subsidiaries' respective right, title and interest in
or under the following, in each case as owned or held by the Assigning Party
immediately prior to the Closing Date and (except in the case of clause (xiii)
below) used exclusively in or relating exclusively to the Receiving Party's
Business immediately prior to the Closing Date (each such asset being an
"ASSIGNED ASSET"):
(i) all Tangible Personal Property;
(ii) all Inventory;
(iii) all books of account, general, financial and tax records
(except, as to tax records, as may otherwise be provided in the Tax Sharing
Agreement), invoices, shipping records, supplier lists, correspondence and other
documents, records and files, and all personnel records of persons employed by a
party that become employees of another party as of the Closing Date or
thereafter;
(iv) all goodwill exclusively relating to the Receiving
Party's Business;
(v) all claims, causes of action, rights of recovery and
rights of set-off of any kind (including rights to insurance proceeds and rights
under and pursuant to all warranties, representations and guarantees made by
suppliers of products, materials or equipment, or components thereof),
pertaining to, arising out of, and inuring to the benefit of the Assigning
Party;
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(vi) all sales and promotional literature, customer lists and
other sales-related materials owned, used, associated with or employed by the
Assigning Party relating exclusively to the Receiving Party's Business;
(vii) all municipal, state and federal franchises, permits,
licenses, agreements, waivers, exemptions, approvals and authorizations, in each
case to the extent transferable;
(viii) any assets reflected in the Receiving Party's Balance
Sheet as "Assets" of the Receiving Party, subject to any dispositions of such
assets subsequent to the date of the Receiving Party's Balance Sheet;
(ix) any and all other assets, rights and claims of every kind
and nature owned or held immediately prior to the Closing Date by the Assigning
Party and used exclusively in the Receiving Party's Business. The intention of
this clause is only to rectify any inadvertent omission of transfer or
conveyance of any asset, right or claim that, had the parties hereto given
specific consideration to such asset, right or claim as of the date hereof,
would have otherwise been classified as an Assigned Asset. No asset, right or
claim shall be deemed an Assigned Asset solely as a result of this clause if
such asset, right or claim is within the category or type of asset, right or
claim expressly covered by the subject matter of an Ancillary Agreement. In
addition, no asset, right or claim shall be deemed an Assigned Asset solely as a
result of this clause unless a claim with respect thereto is made by a Receiving
Party on or prior to the first anniversary of the Closing Date; and
(x) the assets, rights and claims of the Company listed in
Schedule 3.1(a)(x) to be assigned, transferred, conveyed and delivered to KSI as
provided in such Schedule.
The parties may agree to prepare and attach to this Agreement additional
Schedules (having numbers corresponding to the applicable subsections)
specifically listing Assigned Assets in one or more categories. Notwithstanding
the foregoing, the Assigned Assets shall not include the applicable Excluded
Assets referred to in Section 3.1(b) below.
(b) For the purposes of this Agreement, "EXCLUDED ASSETS" shall
mean:
(i) The assets, rights and claims listed or described on
Schedule 3.1(b)(i), if any, with respect to each party; and
(ii) Any and all assets, rights and claims that are expressly
contemplated by this Agreement or any Ancillary Agreement (or the Exhibits and
Schedules hereto or thereto) as assets, rights or claims to be retained by a
party.
Section 3.2 Assignment to and Assumption of Liabilities.
(a) Except as set forth in an Ancillary Agreement, from and after
the Closing Date, the Company and KSI each hereby assumes and agrees faithfully
to pay, perform and fulfill all obligations under the following in accordance
with their respective terms (the
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"COMPANY LIABILITIES" in the case of the Company, and the "KSI LIABILITIES" in
the case of KSI):
(i) any and all Liabilities that are expressly contemplated by
this Agreement or any Ancillary Agreement (or the Exhibits or Schedules hereto
or thereto) as Liabilities to be assumed by such party and all Liabilities under
this Agreement or any Ancillary Agreement;
(ii) all Liabilities, including but not limited to any
employee-related, environmental and hazardous waste-related Liabilities,
primarily relating to, arising out of or resulting from:
(A) the operation of such party's Business, as conducted
at any time prior to, on or after the Closing Date (including any Liability
relating to, arising out of or resulting from any act or failure to act by any
director, officer, employee, agent or representative of such party (whether or
not such act or failure to act is or was within such Person's authority)); and
(B) the operation of any business conducted by such
party or any of its subsidiaries at any time after the Closing Date (including
any Liability relating to, arising out of or resulting from any act or failure
to act by any director, officer, employee, agent or representative of such party
(whether or not such act or failure to act is or was within such Person's
authority)); and
(iii) all Liabilities reflected as "Liabilities" or
obligations of such party in the Company Balance Sheet or the KSI Balance Sheet,
as applicable, subject to any discharge of such Liabilities subsequent to the
date of any such Balance Sheet; and
(iv) all Liabilities relating to, arising out of, or resulting
from any of the events, transactions, causes of actions, programs, policies or
other business arrangements (as the case my be) as described and attributed to
such party on Schedule 3.2(a)(iv), as amended from time to time by mutual
written agreement of the parties.
Notwithstanding the foregoing, neither the Company Liabilities nor the KSI
Liabilities shall in any event include the applicable Excluded Liabilities
referred to in Section 3.2(b) below.
(b) For the purposes of this Agreement, "EXCLUDED LIABILITIES" shall
mean:
(i) the Liabilities listed or described on Schedule 3.2(b)(i),
if any, with respect to each party;
(ii) any and all Liabilities that are expressly contemplated
by this Agreement or any Ancillary Agreement (or Exhibits or Schedules hereto or
thereto) as Liabilities to be retained or assumed by a party; and
(iii) all agreements and obligations of a party under this
Agreement or any of the Ancillary Agreements.
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(c) KSI shall be responsible for all KSI Liabilities, regardless of
when or where such Liabilities arose or arise, or whether the facts on which
they are based occurred prior to or subsequent to the date hereof, regardless of
where or against whom such Liabilities are asserted or determined (including any
KSI Liabilities arising out of claims made by KSI's directors, officers,
employees, agents or Affiliates) or whether asserted or determined prior to the
date hereof, and regardless of whether arising from or alleged to arise from
negligence, recklessness, violation of law, fraud or misrepresentation by KSI or
any of its directors, officers, employees, agents or Affiliates (in the case of
Affiliates, other than the Company and its subsidiaries).
Section 3.3 Transfers Not Effected On or Prior to the Closing Date. The
parties agree that, as of the Closing Date, each party hereto shall be deemed to
have acquired complete and sole beneficial ownership over all of the assets,
together with all of the rights, powers and privileges incidental thereto, that
such party is entitled to acquire pursuant to the terms of this Agreement. To
the extent any transfers contemplated by this Article III shall not have been
fully effected on or prior to the Closing Date, the parties and their respective
subsidiaries shall cooperate to effect such transfers as promptly as possible
following the Closing Date. Nothing herein shall be deemed to require the
transfer of any assets or the assignment or assumption of any Liabilities that
by their terms or by operation of law cannot be so transferred, assigned or
assumed; provided, however, that any such assets shall be deemed an Assigned
Asset for purposes of determining whether any Liability is a Company Liability
or a KSI Liability, as the case may be; and provided, further, that the parties
and their respective Affiliates shall cooperate in seeking to obtain any
necessary Consents for the transfer of all assets and the assignment or
assumption of all Liabilities as contemplated by this Article III. In the event
that any transfer of assets or assignment or assumption of Liabilities
contemplated by this Article III has not been consummated effective as of the
Closing Date, (i) the party retaining such assets (at the expense of the party
entitled thereto); and (ii) the party retaining such Liabilities shall
thereafter hold such assets or Liabilities for the account of the party entitled
thereto or assuming such Liability or to whom such asset or Liability is to be
assigned pursuant hereto, and in each such case shall take such other actions as
may be reasonably required in order to place the parties, insofar as reasonably
possible, in the same position as would have existed had such asset been
transferred, or such Liability been assigned or assumed as contemplated hereby.
As and when any such asset or Liability becomes transferable, assignable or
assumable, as the case may be, such transfer, assignment or assumption, as the
case may be, shall be effected forthwith. If any Consent is not obtained with
respect to the transfer, assumption or assignment of any such asset or
Liability, then the parties will cooperate to establish an arrangement under
which the party entitled to such asset or to assume such Liability (the
"ENTITLED PARTY") would obtain, to the extent practicable, the claims, rights
and benefits and assume the corresponding Liabilities thereunder in accordance
with this Agreement or under which the party retaining such asset or liability
(the "RETAINING PARTY") would enforce for the benefit of the Entitled Party,
with the Entitled Party assuming and agreeing to pay the Retaining Party's
obligations, any and all claims, rights and benefits of the Retaining Party
against a third party thereto. In such event (i) the Retaining Party will
promptly pay to the Entitled Party when received all moneys received by the
Retaining Party under any such asset or any claim, right or benefit arising
thereunder and (ii) the Entitled Party will promptly pay, perform or discharge
when due any obligation or liability arising thereunder or under any such
Liability.
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Section 3.4 No Representations or Warranties; Consents.
(a) Each of the parties hereto understands and agrees that no party
hereto is, in this Agreement, any Ancillary Agreement or any other agreement or
document contemplated by this Agreement, any Ancillary Agreement or otherwise,
representing or warranting in any way as to the value or freedom from
encumbrance of, or any other matter concerning, any assets of such party, or as
to the legal sufficiency to convey title to an asset transferred pursuant to
this Agreement or any Ancillary Agreement, including, without limitation, any
conveyance or assumption instruments. It is also agreed and understood that
there are no warranties whatsoever, express or implied, given by any party to
this Agreement or any Ancillary Agreement as to the condition, quality,
merchantability, fitness or non-infringement of any of the assets, businesses or
other rights transferred or retained by the parties, as the case may be, and all
such assets, businesses and other rights shall be "as is, where is" and "with
all faults" (provided that the absence of warranties given by the parties shall
not affect the allocation of Liabilities under this Agreement and shall have no
effect on any manufacturers, sellers, or other third party warranties that are
intended to be transferred with such assets), and each Receiving Party shall
bear the economic and legal risks that any conveyance shall prove to be
insufficient to vest in it good and marketable title, free and clear of any
security interest, pledge, lien, charge, claim, option, right to acquire,
covenant, condition, restriction on transfer or other encumbrance of any nature
whatsoever.
(b) Each party hereto understands and agrees that no party hereto
is, in this Agreement, any Ancillary Agreement or any other agreement or
document contemplated by this Agreement, any Ancillary Agreement or otherwise,
representing or warranting in any way that the obtaining of any Governmental
Approvals or Consents, the execution and delivery of any amendatory agreements
and the taking of any filings or applications contemplated by this Agreement
will satisfy the provisions of any or all applicable laws or judgments or other
instruments or agreements relating to such assets.
Notwithstanding the foregoing, the parties shall use their reasonable
commercial efforts to obtain all Governmental Approvals and Consents, to enter
into all reasonable amendatory agreements and to make all filings and
applications contemplated by this Agreement, and shall take all such further
actions as shall be deemed reasonably necessary to preserve for each party, to
the greatest extent reasonably feasible, consistent with this Agreement, the
economic and operational benefits of the allocation of assets and Liabilities
provided for in this Agreement. In case at any time after the Closing Date any
further action is necessary or desirable to carry out the purposes of this
Agreement, the proper officers and directors of each party to this Agreement
shall take all such necessary or desirable action, provided that any financial
cost shall be borne by the party receiving the benefit of the action.
Section 3.5 Documents Relating to Transfer of Assigned Assets and
Assignment and Assumption of Liabilities. In connection with the transfer of the
Assigned Assets pursuant to Section 3.1 of this Agreement and the assignment and
assumption of Liabilities pursuant to Section 3.2 of this Agreement,
simultaneously with the execution and delivery hereof or as promptly as
practicable thereafter, (i) the Assigning Party shall execute and deliver such
bills of sale, deeds, stock powers, certificates of title, assignments of
contracts and other instruments of transfer, conveyance and assignment as and to
the extent necessary to evidence the transfer,
12
conveyance and assignment of all of the Assigning Party's right, title and
interest in and to the Assigned Assets to the Receiving Party and (ii) the
Receiving Party shall execute and deliver to the Assigning Party such bills of
sale, certificates of title, assumptions of contracts and other instruments or
assumption as may be necessary to evidence the valid and effective assumption of
the Company Liabilities and the KSI Liabilities by the Company and KSI,
respectively.
Section 3.6 Termination of Agreements.
(a) Except as set forth in Section 3.6(b), in furtherance of the
releases and other provisions of Section 4.1, the parties hereby terminate,
effective as of the Closing Date, any and all agreements, arrangements,
commitments or understandings, whether or not in writing, between them;
provided, however, that to the extent any such agreement, arrangement,
commitment or understanding is inconsistent with any Ancillary Agreement, such
termination shall be effective as of the date of the effectiveness of the
applicable Ancillary Agreement. No such terminated agreement, arrangement,
commitment or understanding (including any provision thereof which purports to
survive termination) shall be of any further force or effect after the Closing
Date (or, to the extent contemplated by the proviso to the immediately preceding
sentence, after the effectiveness of the applicable Ancillary Agreement). Each
party shall, at the reasonable request of the other party, take, or cause to be
taken, such other actions as may be necessary to effect the foregoing.
(b) The provisions of Section 3.6(a) shall not apply to those
matters described in Section 4.1(d) or any of the following agreements,
arrangements, commitments or understandings (or any of the provisions thereof):
(i) this Agreement and the Ancillary Agreements (and each
other agreement or instrument expressly contemplated by this Agreement or any
Ancillary Agreement);
(ii) any agreements, arrangements, commitments or
understandings to which any Person other than the parties hereto or their
respective Affiliates is a party;
(iii) any inter-company accounts payable or accounts
receivable accrued as of the Closing Date that are reflected in the books and
records of the parties (or otherwise documented in writing in accordance with
past practices) that are not addressed in the Ancillary Agreements, and any
warranty or other Liabilities arising from any purchase and sale transactions
for goods or services between the parties entered into on or before the Closing
Date that are not addressed in the Ancillary Agreements, and
(iv) any other agreements, arrangements, commitments or
understandings that this Agreement or any Ancillary Agreement expressly
contemplates will survive the Closing Date, including those listed or described
on Schedule 3.6(b), if any.
Section 3.7 Omitted.
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ARTICLE IV
INDEMNIFICATION
Section 4.1 Release of Claims.
(a) Except for the obligations contained in this Agreement,
effective as of the Closing Date, KSI does hereby, for itself and its Affiliates
(other than any member of the Company Group), and its successors and assigns,
and all Persons who at any time prior to the Closing Date have been
shareholders, directors, officers, agents or employees of KSI and its Affiliates
(other than any member of the Company Group) (in each case, in their respective
capacities as such), remise, release and forever discharge the Company and each
member of the Company Group, their respective successors and assigns, and all
Persons who at any time prior to the Closing Date have been shareholders,
directors, officers, agents or employees of the Company or any member of the
Company Group (in each case, in their respective capacities as such), and their
respective heirs, executors, administrators, successors and assigns, from any
and all Liabilities whatsoever, whether at law or in equity (including any right
of contribution), whether arising under any contract or agreement, by operation
of law or otherwise, existing or arising from any facts or events occurring or
failing to occur or alleged to have occurred or to have failed to occur or any
conditions existing or alleged to have existed on or before the Closing Date,
including in connection with the transactions and all other activities to
implement the Distribution.
(b) Omitted.
(c) Except for the obligations contained in this Agreement,
effective as of the Closing Date, the Company does hereby, for itself and each
member of the Company Group, and its successors and assigns, and all Persons who
at any time prior to the Closing Date have been shareholders, directors,
officers, agents or employees of the Company or any member of the Company Group
(in each case, in their respective capacities as such), remise, release and
forever discharge KSI and its subsidiaries, their respective successors and
assigns, and all Persons who at any time prior to the Closing Date have been
shareholders, directors, officers, agents or employees of KSI or any of its
subsidiaries (in each case, in their respective capacities as such), and their
respective heirs, executors, administrators, successors and assigns, from any
and all Liabilities whatsoever, whether at law or in equity (including any right
of contribution), whether arising under any contract or agreement, by operation
of law or otherwise, existing or arising from any facts or events occurring or
failing to occur or alleged to have occurred or to have failed to occur or any
conditions existing or alleged to have existed on or before the Closing Date,
including in connection with the transactions and all other activities to
implement the Distribution.
(d) Nothing contained in Section 4.1 (a), (b) or (c) shall impair
any right of any Person to enforce this Agreement, any Ancillary Agreement or
any agreements, arrangements, commitments or understandings that are specified
in Section 3.6(b) or the applicable Schedule thereto not to terminate as of the
Closing Date, in each case in accordance with its terms. In addition, nothing
contained in Section 4.1 (a), (b) or (c) shall release any Person from:
14
(i) Any Liability provided in or resulting from any agreement
between the parties that is specified in Section 3.6(b) or the applicable
Schedule thereto as not to terminate as of the Closing Date, or any other
Liability specified in Schedule 3.6(b) as not to terminate as of the Closing
Date;
(ii) Any Liability, contingent or otherwise, assumed,
transferred or assigned to such Person in accordance with, or any other
Liability of any Person under, this Agreement or any Ancillary Agreement;
(iii) Any Liability for the sale, lease or receipt of goods,
property or services purchased, obtained or used in the ordinary course of
business between the parties or their respective subsidiaries;
(iv) Any Liability that the parties may have with respect to
indemnification or contribution pursuant to this Agreement for claims brought
against the parties by third Persons, which Liability shall be governed by the
provisions of this Article IV and, if applicable, the appropriate provisions of
the Ancillary Agreements; or
(v) Any Liability the release of which would result in the
release of any Person other than a Person released pursuant to this Section 4.1;
provided that the parties agree not to bring suit or permit any of their
subsidiaries to bring suit against any Person with respect to any Liability to
the extent that such Person would be released with respect to such Liability by
this Section 4.1 but for the provision of this clause (v).
(e) Each party agrees that it shall not make, and shall not permit
any of its subsidiaries to make, any claim or demand or commence any Action
asserting any claim or demand, including any claim of contribution or
indemnification, against another party or any member of such party's Group or
any other Person released pursuant to Section 4.1 (a), (b) or (c), as
applicable, with respect to any Liabilities released pursuant thereto.
(f) Omitted.
Section 4.2 Indemnification by KSI. Except as provided in Section 4.6 and
except as otherwise expressly provided in any of the Ancillary Agreements, from
and after the Closing Date, KSI shall indemnify, defend and hold harmless the
Company, each member of the Company Group and each of their respective
directors, officers and employees and each of the heirs, executors, successors
and assigns of any of the foregoing (collectively, the "COMPANY INDEMNITEES"),
from and against any and all Liabilities of the Company Indemnitees relating to.
arising out of or resulting from any of the following items (without
duplication):
(a) The failure of KSI or any other Person to pay, perform or
otherwise promptly discharge any KSI Liability in accordance with their
respective terms, whether prior to or after the Closing Date or the date hereof;
(b) The KSI Business or any KSI Liability; and
(c) Any breach by KSI or any of its subsidiaries of this Agreement
or any of the Ancillary Agreements.
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Section 4.3 Omitted.
Section 4.4 Indemnification by the Company. Except as provided in Section
4.6 and except as otherwise expressly provided in any of the Ancillary
Agreements, from and after the Closing Date, the Company shall indemnify, defend
and hold harmless the KSI Indemnitees from and against any and all Liabilities
of the KSI Indemnitees, relating to, arising out of or resulting from any of the
following items (without duplication):
(a) The failure of the Company or any other member of the Company
Group or any other Person to pay, perform or otherwise promptly discharge any
Company Liability in accordance with its terms, whether prior to or after the
Closing Date or the date hereof;
(b) The Company Business or any Company Liability;
(c) Any breach by the Company or any member of the Company Group of
this Agreement or any of the Ancillary Agreements.
Section 4.5 Notice and Payment of Claims. If any Company Indemnitee or KSI
Indemnitee (the "INDEMNIFIED PARTY") determines that it is or may be entitled to
indemnification under this Article IV (other than in connection with any Action
subject to Section 4.6), the Indemnified Party shall deliver to the Person from
whom such indemnification is sought (the "INDEMNIFYING PARTY"), a written notice
specifying, to the extent reasonably practicable, the basis for its claim for
indemnification and the amount for which the Indemnified Party reasonably
believes it is entitled to be indemnified. After the Indemnifying Party shall
have been notified of the amount for which the Indemnified Party seeks
indemnification, the Indemnifying Party shall, within 30 days after receipt of
such notice, either (i) pay the Indemnified Party such amount in cash or other
immediately available funds (or reach agreement with the Indemnified Party as to
a mutually agreeable alternative payment schedule) or (ii) object to the claim
for indemnification or the amount thereof by giving the Indemnified Party
written notice setting forth the grounds therefor. Any objection shall be
resolved in accordance with Article VII. If the Indemnifying Party does not give
such notice within such 30-day period, the Indemnifying Party shall be deemed to
have acknowledged its liability for such claim and the Indemnified Party may
exercise any and all of its rights under applicable law to collect such amount.
Section 4.6 Notice and Defense of Third-Party Claims. Promptly following
the earlier of (A) receipt of written notice of the commencement by a third
party of any Action against or otherwise involving any Indemnified Party or (B)
receipt of written information from a third party alleging the existence of a
claim against an Indemnified Party, in either case, with respect to which
indemnification may be sought pursuant to this Agreement (a "THIRD-PARTY
CLAIM"), the Indemnified Party shall give the Indemnifying Party prompt written
notice thereof. Failure of the Indemnified Party to give notice as provided in
this Section 4.6 shall not relieve the Indemnifying Party of its obligations
under this Agreement, except to the extent that the Indemnifying Party is
prejudiced by such failure to give notice. Such notice shall describe the
Third-Party Claim in reasonable detail.
(a) Within 30 days after receipt of such notice, the Indemnifying
Party may by giving written notice thereof to the Indemnified Party, (i) elect
to assume the defense of such
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Third-Party Claim at its sole cost and expense or (ii) object to the claim of
indemnification for such Third-Party Claim setting forth the grounds therefor.
Any objection shall be resolved in accordance with Article VII. If the
Indemnifying Party does not within such 30-day period give the Indemnified Party
such notice, the Indemnifying Party shall be deemed to have acknowledged its
liability for such Third-Party Claim.
(b) Any defense of a Third-Party Claim as to which the Indemnifying
Party has elected to assume the defense shall be conducted by counsel employed
by the Indemnifying Party and reasonably satisfactory to the Company in the case
of Company Indemnitees, and KSI in the case of KSI Indemnitees. The Indemnified
Party shall have the right to participate in such proceedings and to be
represented by counsel of its own choosing at the Indemnified Party's sole cost
and expense; provided that if the defendants or parties against which relief is
sought in any such claim include both the Indemnifying Party and one or more
Indemnified Parties and, in the reasonable judgment of the Company in the case
of Company Indemnitees, or KSI in the case of KSI Indemnitees, a conflict of
interest between such Indemnified Parties and such Indemnifying Party exists in
respect of such claim, such Indemnified Parties shall have the right to employ
one firm of counsel selected by the Company for Company Indemnitees, and KSI for
KSI Indemnitees, as the case may be, and in that event the reasonable fees and
expenses of such separate counsel (but not more than one separate counsel
reasonably satisfactory to the Indemnifying Party) shall be paid by such
Indemnifying Party.
(c) If the Indemnifying Party assumes the defense of a Third-Party
Claim, the Indemnifying Party may settle or compromise the claim without the
prior written consent of the Indemnified Party; provided that without the prior
written consent of the Company in the case of Company Indemnitees, and KSI in
the case of KSI Indemnitees, the Indemnifying Party may not agree to any such
settlement unless as a condition to such settlement the Indemnified Party
receives a written release from any and all liability relating to such
Third-Party Claim and such settlement or compromise does not include any remedy
or relief to be applied to or against the Indemnified Party, other than monetary
damages for which the Indemnifying Party shall be responsible hereunder.
(d) If the Indemnifying Party does not assume the defense of a
Third-Party Claim for which it has acknowledged liability for indemnification
under this Article IV, the Company in the case of Company Indemnitees, and KSI
in the case of KSI Indemnitees, may pursue the defense of such Third-Party Claim
and choose one firm of counsel in connection therewith. The Indemnifying Party
is required to reimburse the Company or KSI, as the case may be, on a current
basis for its reasonable expenses of investigation, reasonable attorney's fees
and reasonable out-of-pocket expenses incurred by the Company in the case of
Company Indemnitees, and KSI in the case of KSI Indemnitees, in defending
against such Third-Party Claim and the Indemnifying Party shall be bound by the
result obtained with respect thereto, provided that the Indemnifying Party shall
not be liable for any settlement effected without the consent of the
Indemnifying Party, which consent shall not be unreasonably withheld.
(e) The Indemnifying Party shall pay to the Indemnified Party in
cash the amount for which the Indemnified Party is entitled to be indemnified
(if any) no later than the later of (i) the date on which the Indemnified Party
makes any payment in satisfaction (partial or otherwise) of the Third-Party
Claim or (ii) the date on which such Indemnifying Party's
17
objection, if any, to its responsibility for indemnification under this Article
IV has been resolved pursuant to Article VII or by settlement or compromise or
the final nonappealable judgment of a court of competent jurisdiction.
(f) Notwithstanding the foregoing provisions of this Section 4.6, an
Indemnified Party shall have the right to defend any Action (or claim or cause
of action asserted therein) seeking injunctive or other non-monetary relief
affecting the Indemnified Party. Sections 4.6(a), (d) and (e) above shall apply
with respect to any such Action (or claim or cause of action asserted therein),
except that the Indemnifying Party shall not have the right to elect to assume
the defense of such Action (or claim or cause of action asserted therein).
Section 4.7 Insurance Proceeds. The amount that any Indemnifying Party is
or may be required to pay to any Indemnified Party pursuant to this Article IV
shall be reduced (including, without limitation, retroactively) by any insurance
proceeds or other amounts actually recovered by or on behalf of such Indemnified
Parties in reduction of the related Liability. If an Indemnified Party shall
have received the payment required by this Agreement from an Indemnifying Party
in respect of a Liability and shall subsequently actually receive insurance
proceeds, or other amounts in respect of such Liability as specified above, then
such Indemnified Party shall pay to such Indemnifying Party a sum equal to the
amount of such insurance proceeds or other amounts actually received after
deducting therefrom all of the Indemnifying Party's costs and expenses
associated with such Liability.
Section 4.8 Omitted.
Section 4.9 Subrogation. In the event of payment by an Indemnifying Party
to any Indemnified Party in connection with any Third-Party Claim, such
Indemnifying Party shall be subrogated to and shall stand in the first place of
such Indemnified Party as to any events or circumstances in respect of which
such Indemnified Party may have any right or claim relating to such Third-Party
Claim. Such Indemnified Party shall cooperate with such Indemnifying Party in a
reasonable manner, and at the cost and expense of such Indemnifying Party, in
prosecuting any subrogated right or claim.
Section 4.10 No Third-Party Beneficiaries. This Article IV shall inure to
the benefit of and be enforceable by the Company, the Company Indemnitees, and
KSI and the KSI Indemnitees, and their respective successors and permitted
assigns. The indemnification provided for by this Article IV shall not inure to
the benefit of any other third party or parties and shall not relieve any
insurer who would otherwise by obligated to pay any claim of the responsibility
with respect thereto or, solely by virtue of the indemnification provisions
hereof, provide any subrogation rights with respect thereto and each party
agrees to waive such rights against the other to the fullest extent permitted.
Section 4.11 Remedies Cumulative. The remedies provided in this Article IV
shall be cumulative and shall not preclude assertion by any Indemnified Party of
any other rights or the seeking of any and all other remedies against an
Indemnifying Party. The procedures set forth in this Article IV, however, shall
be the exclusive procedures governing any indemnity action brought under this
Article IV or otherwise relating to Liabilities.
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Section 4.12 Survival. The rights and obligations of each party and their
respective Indemnitees under this Article IV shall survive the sale or other
transfer by it of any assets or businesses or the assignment by it of any
Liabilities.
Section 4.13 After-Tax Indemnification Payments. Except as otherwise
expressly provided herein or in an Ancillary Agreement, indemnification payments
made by a party under this Article shall give effect to, and be reduced by the
value of, any and all applicable deductions, losses, credits, offsets or other
items for Federal, state or other tax purposes attributable to the payment of
the indemnified liability by the Indemnified Party.
ARTICLE V
CERTAIN ADDITIONAL MATTERS
Section 5.1 Ancillary Agreements. At or prior to the Closing Date, each
party shall execute and deliver the Ancillary Agreements.
Section 5.2 Corporate Governance Matters. At or prior to the Closing Date,
the Company shall take all action necessary to appoint or elect directors and
amend the charter documents and bylaws of KSI as necessary to facilitate the
Distribution.
Section 5.3 Omitted.
Section 5.4 Insurance Policies and Claims Administration.
(a) Maintenance of Insurance Coverage Prior to Closing Date. Each
party shall use reasonable efforts to maintain in full force and effect at all
times up to and including the Closing Date its current property and casualty
programs, including, without limitation, primary and excess general liability,
automobile, workers' compensation, property and crime insurance policies
(collectively, the "POLICIES" and individually, a "POLICY"). The Company and its
subsidiaries shall retain with respect to any Covered Claims relating to periods
prior to the Closing Date all of their respective rights, benefits and
privileges, if any, under such Policies. To the extent not already provided for
by the terms of a Policy, the Company shall use reasonable efforts to cause KSI
or its respective subsidiaries, as appropriate, to be named as additional
insureds under such Policy in respect of Covered Claims arising or relating to
periods prior to the Closing Date; provided, however, that nothing contained
herein shall be construed to require the Company or any of its subsidiaries to
pay any additional premium or other charges in respect to, or waive or otherwise
limit any of its rights, benefits or privileges under, any such Policy to effect
the naming of KSI or its respective subsidiaries as such additional insureds.
(b) Responsibility for Establishing Insurance Coverage On and After
Closing Date. Commencing on and as of the Closing Date. KSI and its respective
subsidiaries shall be responsible for establishing and maintaining their own
separate insurance programs (including, without limitation, primary and excess
general liability, automobile, workers, compensation, property, director and
officer liability, fire, crime, surety and other similar insurance policies) for
activities and claims relating to any period on or after the Closing Date
involving KSI or its respective subsidiaries in accordance with and as set forth
in that certain Employee Matters Agreement executed concurrently with this
Agreement. Notwithstanding any other agreement or
19
understanding to the contrary, except as set forth in Section 5.4(c) with
respect to claims administration and financial administration of the Policies,
neither the Company nor any of its subsidiaries shall have any responsibility
for or obligation to KSI or its respective subsidiaries relating to liability
and casualty insurance matters for any period, whether prior to, at or after the
Closing Date.
(c) Administration and Procedure.
(i) KSI or a subsidiary of KSI, as appropriate, shall be
responsible for the claims administration and financial administration of all
Policies for Covered Claims relating to the assets, ownership or operation prior
to the Closing Date of the KSI Business; provided, however, that such retention
by KSI of the Policies and the responsibility for claims administration and
financial administration of the Policies are in no way intended to limit,
inhibit or preclude any right to insurance coverage for any Covered Claims under
the Policies by the Company. KSI or a subsidiary thereof, as appropriate, shall
be responsible for all administrative and financial matters relating to
insurance policies established and maintained by KSI and its subsidiaries, and
for claims relating to any period on or after the Closing Date involving KSI or
any of its subsidiaries.
(ii) KSI shall notify the Company of any Covered Claims
relating to KSI or a subsidiary thereof under one or more of the Policies
relating to a period prior to the Closing Date, and KSI agrees to cooperate and
coordinate with the Company concerning any strategy the Company may reasonably
elect to pursue to secure coverage and payment for such Covered Claim by the
appropriate insurance carrier. Notwithstanding anything contained herein, in any
other agreement or applicable Policy or any understanding to the contrary, KSI
or an appropriate subsidiary thereof assumes responsibility for, and shall pay
to the appropriate insurance carriers or otherwise, any premiums,
retrospectively-rated premiums, defense costs, indemnity payments, deductibles,
retentions or other charges, as appropriate (collectively, "INSURANCE CHARGES"),
whenever arising, which shall become due and payable under the terms and
conditions of any applicable Policy in respect of any liabilities, losses,
claims, actions or occurrences, whenever arising or becoming known, involving or
relating to any of the assets, businesses, operations or liabilities of KSI or
any of its subsidiaries, to the extent set forth in Section 5.4(a) and any such
charges that relate to the period after the Closing Date. To the extent that the
terms of any applicable Policy provide that the Company or a subsidiary thereof,
as appropriate, shall have an obligation to pay or guarantee the payment of any
Insurance Charges, the Company or such subsidiary shall be entitled to demand
that KSI or a subsidiary thereof, as appropriate, make such payment directly to
the person or entity entitled thereto. In connection with any such demand, the
Company shall submit to KSI or its subsidiary a copy of any invoice received by
the Company or its subsidiary pertaining to such Insurance Charges, together
with appropriate supporting documentation, if available. In the event that KSI
or its subsidiary, as the case may be, fails to pay any Insurance Charges when
due and payable, whether at the request of the party entitled to payment or upon
demand by the Company or a subsidiary of the Company, the Company or a
subsidiary of the Company may (but shall not be required to) pay such Insurance
Charges for and on behalf of KSI or its subsidiary, as appropriate, and,
thereafter, KSI or its subsidiary shall forthwith reimburse the Company or such
subsidiary of the Company for such payment.
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Section 5.5 Non-solicitation of Employees. During the one-year period
following the Closing Date, each party agrees not to solicit or to cause the
solicitation of, or to seek or make an offer for, the employment or consulting
services of any employee of another party, or to interfere with, disrupt or
attempt to disrupt the relationship between another party and any employees
thereof; provided, however, that a party shall not be prevented from engaging in
general solicitation and public advertising for employment or from hiring or
engaging an employee of another party whose employment or consulting services
were not solicited or sought in violation of this Section 5.5. In the event of a
breach of this Section 5.5, the aggrieved party shall be entitled to an
injunction against the soliciting party or its affiliates restraining such
breach, in addition to any other remedies provided by law or equity. In the
event that any covenant in this Section is held to be invalid, illegal or
unenforceable by any court of competent jurisdiction or any other Governmental
Authority, it is agreed and understood that such covenant will not be voided but
rather shall be construed to impose limitations upon the soliciting party's
activities no greater than allowable under then applicable law.
ARTICLE VI
ACCESS TO INFORMATION
Section 6.1 Provision of Corporate Records. Each party shall arrange as
soon as practicable following the Closing Date for the provision to the other of
existing corporate governance documents (e.g. minute books, stock registers,
stock certificates, documents of title, etc.) in its possession relating to the
other or to its business and affairs.
Section 6.2 Access to Information. From and after the Closing Date, each
party shall afford the other, including its accountants, counsel and other
designated representatives, reasonable access (including using reasonable
efforts to give access to persons or firms possessing information) and
duplicating rights during normal business hours to all records, books,
contracts, instruments, computer data and other data and information in such
party's possession relating to the business and affairs of the other (other than
data and information subject to an attorney/client or other privilege), insofar
as such access is reasonably required by the other party including, without
limitation, for audit, accounting and litigation purposes, as well as for
purposes of fulfilling disclosure and reporting obligations.
Section 6.3 Litigation Cooperation. Each party shall use reasonable
efforts to make available to the other, upon written request, its officers,
directors, employees and agents as witnesses to the extent that such persons may
reasonably be required in connection with any legal, administrative or other
proceedings arising out of the business of the other prior to the Closing Date
in which the requesting party may from time to time be involved.
Section 6.4 Reimbursement. Each party providing witnesses under Section
6.3 to the other shall be entitled to receive from the party for whom the
witness is provided, upon the presentation of invoices therefor, payment for all
out-of-pocket costs and expenses as may be reasonably incurred in providing such
witnesses.
Section 6.5 Retention of Records. Except as otherwise required by law or
agreed to in writing, each party shall, and shall cause each of its respective
subsidiaries to, retain all
21
information relating to another party's business in accordance with such party's
written record retention policy or, if no such policy exists, the past practice
of such party. Notwithstanding the foregoing, any party may destroy or otherwise
dispose of any such information at any time, provided that, prior to such
destruction or disposal, (i) such party shall provide no less than 30 days prior
written notice to the other party, specifying the information proposed to be
destroyed or disposed of and (ii) if the recipient of such notice shall request
in writing prior to the scheduled date for such destruction or disposal that any
of the information proposed to be destroyed or disposed of be delivered to such
requesting party, the party proposing the destruction or disposal shall promptly
arrange for the delivery of such of the information as was requested at the
expense of the requesting party.
Section 6.6 Internal Accounting Controls, Financial Information;
Ownership. Until the fifth anniversary of the Closing Date, (i) each party shall
maintain in effect at its own cost and expense adequate systems and controls for
its business to the extent necessary to enable the other party to satisfy its
reporting, accounting, audit and other obligations, and (ii) each party shall
provide, or cause to be provided, to the other party and its subsidiaries in
such form as such requesting party shall request, at no charge to the requesting
party, all financial and other data and information as the requesting party
determines necessary or advisable in order to prepare its financial statements
and reports or filings with any Governmental Authority. Any information owned by
a party that is provided to a requesting party to this Section 6.6 shall be
deemed to remain the property of the providing party. Unless specifically set
forth herein, nothing contained in this Agreement shall be construed as granting
or conferring rights of license or otherwise in any such information. No party
shall release or disclose any such information to any other person, except its
auditors, attorneys, financial advisors, bankers and other consultants and
advisors who shall be advised of and agree to comply with the provisions of this
Section 6.6; provided, that with respect to the matters identified on Schedule
6.6 hereof, no information may be disclosed by a party under any circumstance
without the prior written consent of the other party hereto. No party shall have
any liability to any other party in the event that any information exchanged or
provided pursuant to this Section 6.6 is found to be inaccurate, in the absence
of willful misconduct by the party providing such information, or if any
information is destroyed or lost after reasonable commercial efforts by such
party to comply with the provisions of this Section 6.6. The rights and
obligations granted under this Section 6.6 are subject to any specific
limitations, qualifications or additional provisions on the sharing, exchange or
confidential treatment of information set forth in this Agreement, the
Confidential Disclosure Agreement and any other Ancillary Agreement.
Section 6.7 Mail. After the Closing Date, each party may receive mail,
telegrams, facsimiles, packages and other communications property belonging to
another party. Accordingly, at all times after the Closing Date, each party
authorizes the other to receive and open all mail, telegrams, facsimiles,
packages and other communications received by it and not unambiguously intended
for another party or any of such other party's officers or directors
specifically in their capacities as such, and to retain the same to the extent
that they relate to the business of the receiving party or, to the extent that
they do not relate to the business of the receiving party and do relate to the
business of such other party, or to the extent that they relate to both
businesses, the receiving party shall promptly contact such other party by
telephone for delivery instructions and such mail, telegrams, facsimiles,
packages or other communications (or, in case the same relate to both
businesses, copies thereof) shall promptly be forwarded to the
22
other party in accordance with its delivery instructions. The foregoing
provisions of this Section 6.7 shall constitute full authorization to the postal
authorities, all telegraph and courier companies and all other persons to make
deliveries to the Company and KSI, addressed to either of them or to any of
their officers or directors specifically in their capacities as such. The
provisions of this Section 6.7 are not intended to and shall not be deemed to
constitute an authorization by any party to permit another party to accept
service of process on its behalf, and no party is or shall be deemed to be the
agent of another party for services of process purposes or for any other
purpose.
ARTICLE VII
DISPUTE RESOLUTION
Section 7.1 Agreement to Mediate. Except as otherwise specifically
provided in any Ancillary Agreement, the procedures for discussion, negotiation
and mediation set forth in this Article VII shall apply to all disputes,
controversies or claims (whether sounding in contract, tort or otherwise) that
may arise out of or relate to, or arise under or in connection with this
Agreement or any Ancillary Agreement, or the transactions contemplated hereby or
thereby (including all actions taken in furtherance of the transactions
contemplated hereby or thereby on or prior to the date hereof), or the
commercial or economic relationships of the parties relating hereto or thereto,
between the Company and its subsidiaries, and KSI and its subsidiaries.
Section 7.2 Escalation. It is the intent of the parties to use their
respective reasonable best efforts to resolve expeditiously any dispute,
controversy or claim between or among them with respect to the matters covered
hereby that may arise from time to time on a mutually acceptable negotiated
basis. In furtherance of the foregoing, any party involved in a dispute,
controversy or claim may deliver a notice (an "ESCALATION NOTICE") demanding an
in person meeting involving representatives of the parties at a senior level of
management of the parties (or if the parties agree, of the appropriate strategic
business unit or division within such entity). A copy of any such Escalation
Notice shall be given to the General Counsel, or like officer or official, (or
if no General Counsel or like officer or official has been appointed, to the
Chief Financial Officer) of each party involved in the dispute, controversy or
claim (which copy shall state that it is an Escalation Notice pursuant to this
Agreement). Any agenda, location or procedures for such discussions or
negotiations between the parties may be established by the parties from time to
time; provided, however, that the parties shall use their reasonable best
efforts to meet within 30 days of the Escalation Notice.
Section 7.3 Demand for Mediation. At any time after the first to occur of
(i) the date of the meeting actually held pursuant to the applicable Escalation
Notice or (ii) 90 days after the delivery of an Escalation Notice (as
applicable, the "MEDIATION DEMAND DATE"), any party involved in the dispute,
controversy or claim (regardless of whether such party delivered the Escalation
Notice) may make a written demand (the "MEDIATION DEMAND NOTICE") that the
dispute be submitted to mediation. Any opinion expressed by the mediator shall
not be binding on the parties, nor shall any opinion expressed by the mediator
be admissible in any subsequent proceedings. The mediator may be chosen from a
list of mediators previously selected by the parties or by other agreement of
the parties. Costs of the mediation shall be borne equally by the parties
involved in the matter, except that each party shall be responsible for its own
attorney's
23
fees and other costs and expenses. The site of the mediation shall be Santa
Clara, California, unless otherwise agreed by the parties. No party may assert
that the failure to resolve any matter during any discussions or negotiations,
the course of conduct during the discussions or negotiations or the failure to
agree on a mutually acceptable time, agenda, location or procedures for the
meeting, in each case, as contemplated by Section 7.2, is a prerequisite to a
demand for mediation under Section 7.3.
Section 7.4 Certain Additional Matters.
(a) Notwithstanding anything herein to the contrary, either party
may apply to any court having jurisdiction and seek injunctive or other
non-monetary relief so as to maintain the status quo until such time as any
mediation or arbitration is concluded or the dispute, controversy or claim is
otherwise resolved.
(b) Except as required by law, the parties shall hold, and shall
cause their respective officers, directors, employees, agents and other
representatives to hold, the existence, content and result of mediation in
confidence in accordance with the provisions of the Confidential Disclosure
Agreement. Each of the parties shall request that any mediator comply with such
agreement.
(c) In the event that a dispute, controversy or claim is not settled
by the parties within thirty (30) days after the conclusion of the mediation as
described in Section 7.3, such dispute, controversy or claim shall be submitted
to binding arbitration, to be held in Santa Xxxxx County, California, in
accordance with the Commercial Arbitration Rules of the American Arbitration
Association, before a single arbitrator selected in accordance with such
Commercial Arbitration Rules. After affording the parties a reasonable
opportunity to present written and testimonial evidence in support of their
respective positions, the arbitrator shall issue his/her decision and award,
which shall be (i) in writing, stating the reasons therefor; (ii) based solely
on the terms and conditions of this Agreement or the applicable Ancillary
Agreement(s) (or other applicable agreements relating to the relevant
transaction(s)), as interpreted under the laws of the State of California; and
(iii) final and binding upon the parties. The decision and award of the
arbitrator in any arbitration proceeding under this Section 7.4(c) may be
enforced in any court of competent jurisdiction. The affected parties shall make
reasonable good faith efforts to resolve any such dispute, controversy or claim
prior to the commencement, and during the pendency of, any such arbitration.
(d) Notwithstanding anything herein to the contrary, in the event
that any party determines in good faith that the amount in controversy in any
dispute, controversy or claim (or any series of related disputes, controversies
or claims) under this Agreement or any Ancillary Agreement is, or is reasonably
likely to be, in excess of $10 million, the provisions of Section 7.3 and
Section 7.4(c) shall not apply and any party may elect, in lieu of mediation and
arbitration, to commence an Action with respect to such dispute, controversy or
claim (or such series of related disputes, controversies or claims) in any court
of competent jurisdiction; provided, however, that the affected parties shall
make reasonable good faith efforts to resolve any such dispute, controversy or
claim prior to the commencement, and during the pendency of, any such Action.
24
Section 7.5 Continuity of Service and Performance. Unless otherwise agreed
in writing, the parties will continue to provide service and honor all other
commitments under this Agreement and each Ancillary Agreement during the course
of dispute resolution pursuant to the provisions of this Article VII with
respect to all matters not subject to such dispute, controversy or claim.
ARTICLE VIII
MISCELLANEOUS
Section 8.1 LIMITATION OF LIABILITY. IN NO EVENT SHALL ANY MEMBER OF THE
COMPANY GROUP BE LIABLE TO ANY MEMBER OF THE KSI GROUP, NOR SHALL ANY MEMBER OF
THE KSI GROUP BE LIABLE TO ANY MEMBER OF THE COMPANY GROUP, 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; PROVIDED, HOWEVER, THAT THE FOREGOING LIMITATIONS
SHALL NOT LIMIT EACH PARTY'S INDEMNIFICATION OBLIGATIONS FOR LIABILITIES TO
THIRD PARTIES AS SET FORTH IN ARTICLE IV OR SECTION 5,4 OF THIS AGREEMENT.
Section 8.2 Termination. This Agreement may be terminated and the
Distribution may be deferred, modified or abandoned at any time prior to the
Closing Date by and in the sole discretion of the Board of Directors of the
Company without the approval of KSI. In the event of such termination, no party
hereto (or any of its respective directors or officers) shall have any liability
to any other party pursuant to this Agreement.
Section 8.3 Expenses.
(a) Except as specifically provided in this Agreement or in an
Ancillary Agreement, all costs and expenses incurred in connection with the
execution, delivery and implementation of this Agreement and with the
consummation of the transactions contemplated by this Agreement shall be paid by
the party incurring the expense. The determination of who has incurred an
expense shall be made by the Chief Financial Officer of the Company, which
determination shall be binding and final upon each of the parties hereto and not
subject to further review.
(b) Omitted.
(c) Omitted.
(d) Omitted.
Section 8.4 Notices. Any notice, demand, offer, request or other
communication required or permitted to be given by a party pursuant to the terms
of this Agreement shall be in writing and shall be deemed effectively given the
earlier of (i) when received, (ii) when delivered
25
personally, (iii) one (1) Business Day after being delivered by facsimile (with
receipt of appropriate confirmation), (iv) one (1) Business Day after being
deposited with a nationally recognized overnight courier service or (v) four (4)
days after being deposited in the U.S. mail, First Class with postage prepaid,
and addressed to the attention of:
(a) If to KHC, to:
Kinetics Holdings Corporation
0000 Xxxxxxx Xxxxxxx Xxxx.
Xxxxx Xxxxx, XX 00000
Attn: General Counsel
(b) If to the Company, to:
Kinetics Group, Inc.
0000 Xxxxxxx Xxxxxxx Xxxx.
Xxxxx Xxxxx, XX 00000
Attn: General Counsel
(c) If to KSI, to:
Kinetic Systems, Inc.
0000 Xxxxxxx Xxxxxxx Xxxx.
Xxxxx Xxxxx, XX 00000
Attn: General Counsel
Or to such other addresses or telecopy numbers as may be specified by like
notice to the other parties.
Section 8.5 Amendment and Waiver. This Agreement may not be altered or
amended, not may rights hereunder be waived, except by an instrument in writing
executed by the party or parties to be charged with such amendment or waiver. No
waiver of any terms, provision or condition of or failure to exercise or delay
in exercising any rights or remedies under this Agreement, in any one or more
instances shall be deemed to be, or construed as, a further or continuing waiver
of any such term, provision, condition, right or remedy or as a waiver of any
other term, provision or condition of this Agreement.
Section 8.6 Counterparts. This Agreement may be executed in one or more
counterparts each of which shall be deemed an original instrument, but all of
which together shall constitute but one and the same Agreement.
Section 8.7 Governing Law; Jurisdiction; Forum. This Agreement shall be
construed in accordance with the laws of the State of California, excluding its
conflict of law rules and the United Nations Convention on Contracts for the
International Sale of Goods. The Superior Court of Santa Xxxxx County,
California and/or the United States District Court for the Northern District of
California, San Xxxx Division, shall have jurisdiction and venue over all
disputes
26
between the parties that are permitted to be brought in a court of law pursuant
to Article VII hereof.
Section 8.8 Entire Agreement. This Agreement, including the Schedules
hereto, together with the Ancillary Agreements and the Exhibits and Schedules
thereto, constitute the entire understanding of the parties hereto with respect
to the subject matter hereof, superseding all negotiations, prior discussions
and prior discussions and prior agreements and understandings relating to such
subject matter. To the extent that the provisions of this Agreement are
inconsistent with the provisions of any Ancillary Agreements, the provisions of
such Ancillary Agreement shall prevail.
Section 8.9 Nonassignability; Binding Effect. A party may not assign or
transfer this Agreement or any of its rights or obligations hereunder
(including, without limitation, in connection with a sale of all or
substantially all of such party's assets), without the prior written consent of
each of the other parties. This Agreement shall be binding upon, and shall inure
to the benefit of, the parties hereto and their respective legal
representatives, successors and permitted assigns. Nothing contained in this
Agreement, express or implied, is intended to confer any benefits, rights or
remedies upon any person or entity other than the Company and KSI, and their
respective Indemnitees under Article IV hereof, or as expressly provided in this
Agreement.
Section 8.10 Tax Sharing Agreement. Notwithstanding any other provision of
this Agreement to the contrary, any and all matters relating to Taxes shall be
exclusively governed by the Tax Sharing Agreement.
Section 8.11 Further Assurances and Consents. In addition to the actions
specifically provided for elsewhere in this Agreement, each of the parties
hereto will use its reasonable efforts to (i) execute and deliver such further
instruments and documents and take such other actions as any other party may
reasonably request in order to effectuate the purposes of this Agreement and to
carry out the terms hereof and (ii) take, or cause to be taken, all actions, and
to do, or cause to be done, all things, reasonably necessary, proper or
advisable under applicable laws, regulations and agreements or otherwise to
consummate and make effective the transactions contemplated by this Agreement,
including, without limitation, using its reasonable efforts to obtain any
Governmental Approvals and Consents and to make any filings and applications
necessary or desirable in order to consummate the transactions contemplated by
this Agreement; provided that no party hereto shall be obligated to pay any
consideration therefor (except for filing fees and other similar charges) to any
third party from whom such Governmental Approvals, Consents and amendments are
requested or to take any action or omit to take any action if the taking of or
the omission to take such action would be unreasonably burdensome to the party
or its business.
Section 8.12 Exhibits and Schedules. The Exhibits and Schedules shall be
construed with and as an integral part of this Agreement to the same extent as
if the same had been set forth verbatim herein.
Section 8.13 Authority. Each of the parties hereto represents to the other
that (a) it has the corporate or other requisite power and authority to execute,
deliver and perform this Agreement, (b) the execution, delivery and performance
of this Agreement by it have been duly
27
authorized by all necessary corporate or other actions, (c) it has duly and
validly executed and delivered this Agreement, and (d) this Agreement is a
legal, valid and binding obligation, enforceable against it in accordance with
its terms subject to applicable bankruptcy, insolvency, reorganization,
moratorium or other similar laws affecting creditors' rights generally and
general equity principles.
Section 8.14 Legal Enforceability. Any provision of this Agreement that is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof. Any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction. Without prejudice to any
rights or remedies otherwise available to any party hereto, each party hereto
acknowledges that damages would be an inadequate remedy for any breach of the
provisions of this Agreement and agrees that the obligations of the parties
hereunder shall be specifically enforceable.
Section 8.15 Gender and Number. Whenever the context of this Agreement
requires, the gender of all words herein shall include the masculine, feminine
and neuter, and the number of all words herein shall include the singular and
plural.
Section 8.16 Titles and Headings. Titles and headings to Sections herein
are inserted for convenience of reference only and are not intended to be a part
of or to affect the meaning or interpretation of this Agreement.
Section 8.17 Force Majeure. A party shall not be liable or deemed to be in
default for any delay or failure in performance under this Agreement or other
interruption of service deemed to result, directly or indirectly, from acts of
God, civil or military authority, acts of public enemy, war, accidents,
explosions, earthquakes, floods, failure of transportation, strikes or other
work interruptions by a party's employees, or any other similar cause beyond the
reasonable control of a party unless such delay or failure in performance is
expressly addressed elsewhere in this Agreement.
[Remainder of page intentionally left blank, Signature page follows.]
28
IN WITNESS WHEREOF, the parties hereto have duly executed and delivered
this Agreement on the day and year first above written.
KINETICS GROUP, INC., a Delaware
corporation
By: /s/ XXXX XXXXXXX
---------------------------------
Name: XXXX XXXXXXX
Title: EVP
KINETIC SYSTEMS, INC., a California
corporation
By: /s/ XXXX XXXXXXX
---------------------------------
Name: XXXX XXXXXXX
Title: EVP
CELERITY GROUP, INC. a Delaware
corporation, dba Kinetics Holdings
Corporation
By: /s/ XXXX XXXXXXX
---------------------------------
Name: XXXX XXXXXXX
Title: EVP
[SIGNATURE PAGE TO SEPARATION AGREEMENT]
29
SCHEDULE 3.1(a)(x)
CERTAIN ASSETS TO BE TRANSFERRED BY COMPANY
NONE.
30
SCHEDULE 3.1(b)(i)
EXCLUDED ASSETS
NONE.
31
SCHEDULE 3.2(a)(iv)
By way of clarification, KSI Liabilities expressly include the following:
1. Contract Surety Programs relating to any KSI Business, including all
claims arising thereunder and fees incurred in connection therewith; and
2. Claims or liabilities of any sort (including any tax liabilities) arising
out of or related to the sale or proposed sale of the following business
entities or their operation during the periods of Kinetics ownership prior
to such sale:
a. BioKinetics, Inc
b. Kinetics Modular Systems, Inc.
c. Kinetics Tote Systems, Ltd.
x. Xxxxxx Conveyor Company
e. ProComp, Inc.
f. QAM
32
SCHEDULE 3.2(b)(i)
EXCLUDED LIABILITIES
NONE
33
SCHEDULE 3.6(b)
AGREEMENTS NOT TO TERMINATE
NONE.
34
