EXHIBIT 2.12
MASTER SEPARATION AGREEMENT
This Master Separation Agreement (this "Agreement") is entered into as
of __________ __, 2000, between Catalytica, Inc. ("Catalytica"), a Delaware
corporation, and Catalytica Energy Systems, Inc. ("CESI"), a Delaware
corporation.
WHEREAS, Catalytica currently owns all of the issued and outstanding
common stock of CESI ("CESI Common Stock");
WHEREAS, CESI is engaged in the business of developing and
commercializing proprietary catalytic processes to achieve near-zero emissions
and improve the performance of hydro-carbon combustion systems (the "CESI
Business");
WHEREAS, Catalytica has entered into the Agreement and Plan of Merger
dated as of August 2, 2000 (the "Merger Agreement"), with Synotex Company, Inc.
and Synotex Acquisition Corporation pursuant to which, subsequent to the
distribution by Catalytica of its shares of CESI, Synotex Acquisition
Corporation will merge with and into Catalytica (the "Merger"), resulting in
Catalytica becoming a wholly-owned subsidiary of Synotex Company, Inc.
WHEREAS, the Boards of Directors of Catalytica and CESI have each
determined that it would be appropriate and desirable for Catalytica to
contribute and transfer to CESI, and for CESI to receive and assume, directly or
indirectly, certain assets and liabilities currently held by Catalytica and
associated with the CESI Business (the "Separation");
WHEREAS, Catalytica currently contemplates that, following the
transfer and assumption of such assets and liabilities to CESI and immediately
prior to and in connection with the Merger, Catalytica will distribute to the
holders of its common stock, $0.01 par value, pursuant to a registration
statement on Form S-1 pursuant to the Securities Act of 1933, as amended (the
"Registration Statement") by means of a pro rata distribution, all of the shares
of CESI Common Stock owned by Catalytica (the "Distribution"); and
WHEREAS, the parties intend in this Agreement, including the Exhibits
hereto, to set forth the principal arrangements between them regarding the
Separation.
NOW, THEREFORE, in consideration of the foregoing and the covenants
and agreements set forth below, the parties hereto agree as follows:
ARTICLE 1
DEFINITIONS
1.1 "Affiliated Company" of any Person means any entity that controls, is
controlled by, or is under common control with such Person. As used herein,
"control" means the possession, directly or indirectly, of the power to direct
or cause the direction of the management and policies of such entity, whether
through ownership of voting securities or other interests, by contract or
otherwise.
1.2 "CESI Assets" means those assets set forth in Exhibit J to this
---------
Agreement.[CCSI to provide Exhibit J]
1.3 "CESI Group" means CESI, each Subsidiary and Affiliated Company of
CESI immediately after the Separation Date or that is contemplated to be a
Subsidiary or Affiliated Company of CESI and each Person that becomes a
Subsidiary or Affiliate Company of CESI after the Separation Date.
1.4 "CESI's Auditors" means CESI's independent certified public
accountants.
1.5 "Catalytica Group" means Catalytica, each Subsidiary and Affiliated
Company of Catalytica (other than any member of the CESI Group) immediately
after the Separation Date.
1.6 "Catalytica's Auditors" means Catalytica's independent certified
public accountants.
1.7 "Commission" means the Securities and Exchange Commission.
1.8 " Distribution" has the meaning set forth in the Recitals hereof.
1.9 "Distribution Agent" has the meaning set forth in Section 4.1 hereof.
1.10 "Distribution Date" has the meaning set forth in Section 4.1 hereof.
1.11 "Exchange Act" means the Securities and Exchange Act of 1934, as
amended.
1.12 "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.
2
1.13 "Governmental Authority" shall mean any federal, state, local, foreign
or international court, government, department, commission, board, bureau,
agency, official or other regulatory, administrative or governmental authority.
1.14 "Information" means information, whether or not patentable or
copyrightable, in written, oral, electronic or other tangible or intangible
forms, stored in any medium, including studies, reports, records, books,
contracts, instruments, surveys, discoveries, ideas, concepts, know-how,
techniques, designs, specifications, drawings, blueprints, diagrams, models,
prototypes, samples, flow charts, data, computer data, disks, diskettes, tapes,
computer programs or other software, marketing plans, customer names,
communications by or to attorneys (including attorney-client privileged
communications), memos and other materials prepared by attorneys or under their
direction (including attorney work product), and other technical, financial,
employee or business information or data.
1.15 "Nasdaq" means the Nasdaq National Market.
1.16 "Person" means an individual, a partnership, a corporation, a limited
liability company, an association, a joint stock company, a trust, a joint
venture, an unincorporated organization and a governmental entity or any
department, agency or political subdivision thereof.
1.17 "Record Date" means the close of business on the date to be determined
by the Board of Directors of Catalytica as the record date for determining the
stockholders of Catalytica entitled to receive shares of common stock of CESI in
the Distribution.
1.18 "Subsidiary" of any Person means a corporation or other organization
whether incorporated or unincorporated of which at least a majority of the
securities or interests having by the terms thereof ordinary voting power to
elect at least a majority of the board of directors or others performing similar
functions with respect to such corporation or other organization is directly or
indirectly owned or controlled by such Person or by any one or more of its
Subsidiaries, or by such Person and one or more of its Subsidiaries; provided,
however, that no Person that is not directly or indirectly wholly-owned by any
other Person shall be a Subsidiary of such other Person unless such other Person
controls, or has the right, power or ability to control, that Person.
1.19 "Tax Sharing Agreement" means that Tax Sharing Agreement between
Catalytica, CESI, and certain other parties named therein to be entered into in
connection with the Separation.
1.20 "WSGR" means Xxxxxx Xxxxxxx Xxxxxxxx & Xxxxxx, Professional
Corporation.
3
ARTICLE 2
SEPARATION
2.1 Separation Date. Except as otherwise provided in this Agreement, or
in any agreement to be executed in connection with this Agreement, the effective
time and date of each transfer of property, assumption of liability, license,
undertaking, or agreement in connection with the Separation shall be 12:01 a.m.,
Pacific Time, ___________, 2000 or such other date as may be fixed by the Board
of Directors of Catalytica (the "Separation Date").
2.2 Closing of Transactions. Except as otherwise provided in this
Agreement, the closing of the transactions contemplated in Article 2 shall occur
on the Separation Date at the offices of Xxxxxx Xxxxxx White & XxXxxxxxx LLP
("HEWM"), 0000 Xxxx Xxxx Xxxx, Xxxxx 000, Xxxxx Xxxx, Xxxxxxxxxx 00000.
ARTICLE 3
DOCUMENTS AND ITEMS
TO BE DELIVERED ON THE SEPARATION DATE
3.1 Documents to Be Delivered by Catalytica. On the Separation Date,
Catalytica will deliver, or will cause to be delivered, to CESI the following
items and agreements (collectively, together with all agreements and documents
contemplated by such agreements, the "Ancillary Agreements"):
(a) [A duly executed Master Technology Ownership and License Agreement
substantially in the form attached hereto as Exhibit C-1, a duly executed Master
-----------
Patent Ownership and License Agreement substantially in the form attached hereto
as Exhibit C-2 and a duly executed Master Trademark Ownership and License
-----------
Agreement substantially in the form attached as Exhibit C-3;]
-----------
(b) A duly executed Employee Matters Agreement substantially in the
form attached hereto as Exhibit D;
---------
(c) A duly executed Master Transitional Services Agreement
substantially in the form attached hereto as Exhibit E;
---------
(d) A duly executed Real Estate Matters Agreement substantially in the
form attached hereto as Exhibit F;
---------
4
(e) A duly executed Master Confidential Disclosure Agreement
substantially in the form attached hereto as Exhibit G;
---------
(f) A duly executed Indemnification Agreement (the "Indemnification
Agreement") substantially in the form attached hereto as Exhibit H;
---------
(g) Certificates representing the stock and/or investments in the
Subsidiaries and other holdings of Catalytica set forth on Schedule 3.1(h) with
--------------
duly executed stock powers in the form proper for transfer, if necessary or
requested by CESI;
(h) A duly executed Tax Sharing Agreement substantially in the form
attached hereto as Exhibit I;
---------
(i) [Resignations of each person who is an officer or director of
Catalytica or its Subsidiaries, immediately prior to the Separation Date, and
who will be employees of CESI from and after the Separation Date;] and
(j) Such other agreements, documents or instruments as the parties may
agree are necessary or desirable in order to achieve the purposes hereof.
3.2 Documents to Be Delivered by CESI. On the Separation Date, CESI will
deliver to Catalytica, in each case where CESI is a party to any agreement or
instrument referred to in Section 3.1, a duly executed counterpart of such
agreement or instrument.
ARTICLE 4
THE DISTRIBUTION
4.1 The Distribution.
(a) Delivery of Shares for Distribution. Subject to Section 4.4
hereof, on or prior to the date the Distribution is effective (the "Distribution
Date"), Catalytica will deliver to the distribution agent (the "Distribution
Agent") to be appointed by Catalytica to distribute to the stockholders of
Catalytica the shares of CESI Common Stock held by Catalytica pursuant to the
Distribution for the benefit of holders of record of common stock of Catalytica
on the Record Date, a single stock certificate, endorsed by Catalytica in blank,
representing all of the outstanding shares of CESI Common Stock then owned by
Catalytica, and shall cause the transfer agent for the shares of common stock of
Catalytica to instruct the Distribution Agent to distribute on the Distribution
Date the appropriate number of such shares of CESI Common Stock to each such
holder or designated transferee or transferees of such holder.
5
(b) Shares Received. Subject to Sections 4.4 and 4.5, each holder of
common stock of Catalytica on the Record Date (or such holder's designated
transferee or transferees) will be entitled to receive in the Distribution a
number of shares of CESI Common Stock equal to the number of shares of common
stock of Catalytica held by such holder on the Record Date multiplied by [insert
precise exchange ratio before signing].
(c) Obligation to Provide Information. CESI and Catalytica, as the
case may be, will provide to the Distribution Agent all share certificates and
any information required in order to complete the Distribution on the basis
specified above.
4.2 Actions Prior To The Distribution.
(a) Information Statement. Catalytica and CESI shall prepare and
mail, prior to the Distribution Date, to the holders of common stock of
Catalytica, such information concerning the CESI Business and the Distribution
and such other matters as Catalytica shall reasonably determine are necessary
and as may be required by law. Catalytica and CESI will prepare, and CESI will,
to the extent required under applicable law, file with the Commission any such
documentation which Catalytica and CESI determine is necessary or desirable to
effectuate the Distribution, and Catalytica and CESI shall each use its
reasonable commercial efforts to obtain all necessary approvals from the
Commission with respect thereto as soon as practicable.
(b) Blue Sky. Catalytica and CESI shall take and shall cause any of
their Subsidiaries to 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.
(c) Nasdaq Listing. CESI shall prepare and file, and shall use its
reasonable commercial efforts to have approved, an application for the listing
of CESI Common Stock to be distributed in the Distribution on the Nasdaq
National Market (the "Nasdaq"), subject to official notice of distribution.
(d) Conditions. Catalytica and CESI shall take and shall cause any of
their Subsidiaries to take all reasonable steps necessary and appropriate to
cause the conditions set forth in Section 4.4 to be satisfied and to effect the
Distribution on the Distribution Date.
4.3 Sole Discretion of Catalytica. Catalytica shall, in its sole and
absolute discretion, determine the date of the consummation of the Distribution
and all terms of the Distribution, including, without limitation, the form,
structure and terms of any transaction(s) and/or offering(s) to effect the
Distribution and the timing of and conditions to the consummation of the
Distribution. In addition, Catalytica may at any time and from time to time
until the completion of the Distribution modify or change the terms of the
Distribution, including, without limitation, by accelerating or delaying the
timing of the consummation of
6
all or part of the Distribution. CESI shall cooperate with Catalytica in all
respects to accomplish the Distribution and shall, at Catalytica's direction,
promptly take any and all actions necessary or desirable to effect the
Distribution, including, without limitation, the registration under the Exchange
Act of the common stock of CESI on an appropriate registration form or forms to
be designated by Catalytica. Catalytica shall select any financial printer,
solicitation and/or exchange agent and outside counsel for Catalytica; provided,
however, that nothing herein shall prohibit CESI from engaging (at its own
expense) its own financial, legal, accounting and other advisors in connection
with the Distribution.
4.4 Conditions To Distribution. The following are conditions to the
consummation of the Distribution. The conditions are for the sole benefit of
Catalytica and shall not give rise to or create any duty on the part of
Catalytica or the Catalytica Board of Directors to waive or not waive any such
condition.
(a) Registration Statement. The Registration Statement shall have
been filed and declared effective by the Commission, and there shall be no stop-
order in effect with respect thereto.
(b) Blue Sky. The actions and filings with regard to state securities
and blue sky laws of the United States (and any comparable laws under any
foreign jurisdictions) shall have been taken and, where applicable, have become
effective or been accepted.
(c) Nasdaq Listing. The CESI Common Stock to be distributed in the
Distribution shall have been accepted for listing on the Nasdaq, on official
notice of issuance.
(d) No Legal Restraints. No order, injunction or decree issued by any
court or agency of competent jurisdiction or other legal restraint or
prohibition preventing the consummation of the Separation or the Distribution or
any of the other transactions contemplated by this Agreement shall be in effect
and no other event outside the control of Catalytica shall have occurred or
failed to occur that prevents the consummation of the Distribution.
(e) Separation. The Separation shall have become effective by
execution of this Agreement and the Ancillary Agreements.
(f) Other Actions. Such other actions 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
shall have been taken.
(g) No Termination. This Agreement shall not have been terminated.
7
(h) Government Approvals. Any material governmental approvals and
consents necessary to consummate the Distribution shall have been obtained and
be in full force and effect.
4.5 Fractional Shares. As soon as practicable after the Distribution Date,
Catalytica shall direct the Distribution Agent to determine the number of whole
shares and fractional shares of CESI Common Stock allocable to each holder of
record or beneficial owner of common stock of Catalytica as of the Record Date,
to aggregate all such fractional shares and sell the whole shares obtained
thereby at the direction of Catalytica, in open market transactions, at then
prevailing trading prices, and to cause to be distributed to each such holder or
for the benefit of each such beneficial owner to which a fractional share shall
be allocable such holder's or owner's ratable share of the proceeds of such
sale, after making appropriate deductions of the amount required to be withheld
for federal income tax purposes and after deducting an amount equal to all
brokerage charges, commissions and transfer taxes attributed to such sale.
Catalytica and the Distribution Agent shall use their reasonable commercial
efforts to aggregate the shares of common stock of Catalytica that may be held
by any beneficial owner thereof through more than one account in determining the
fractional share allocable to such beneficial owner.
8
ARTICLE 5
COVENANTS AND OTHER MATTERS
5.1 Other Agreements. Catalytica and CESI agree to execute or cause to be
executed by the appropriate parties and deliver, as appropriate, such other
agreements, instruments and other documents as may be necessary or desirable in
order to effect the purposes of this Agreement and the Ancillary Agreements.
5.2 Further Instruments. At the request of CESI, and without further
consideration, Catalytica will execute and deliver, and will cause its
Subsidiaries to execute and deliver, to CESI such other instruments of transfer,
conveyance, assignment, substitution and confirmation and take such action as
CESI may reasonably deem necessary or desirable in order more effectively to
transfer, convey and assign to CESI and its Subsidiaries and confirm CESI's and
its Subsidiaries' title to all of the assets, rights and other things of value
contemplated to be transferred to CESI pursuant to this Agreement, the Ancillary
Agreements and any documents referred to therein, to put CESI in actual
possession and operating control thereof and to permit CESI to exercise all
rights with respect thereto (including, without limitation, rights under
contracts and other arrangements as to which the consent of any third party to
the transfer thereof shall not have previously been obtained). At the request of
Catalytica and without further consideration, CESI will execute and deliver to
Catalytica and its Subsidiaries all instruments, assumptions, novations,
undertakings, substitutions or other documents and take such other action as
Catalytica may reasonably deem necessary or desirable in order to have CESI
fully and unconditionally assume and discharge the liabilities contemplated to
be assumed by CESI under this Agreement or any document in connection herewith
and to relieve the Catalytica Group of any liability or obligation with respect
thereto and evidence the same to third parties. Neither Catalytica nor CESI
shall be obligated, in connection with the foregoing, to expend money other than
reasonable out-of- pocket expenses, attorneys' fees and recording or similar
fees. Furthermore, each party, at the request of the other party hereto, shall
execute and deliver such other instruments and do and perform such other acts
and things as may be necessary or desirable for effecting completely the
consummation of the transactions contemplated hereby.
5.3 Agreement for Exchange of Information.
(a) Generally. Each of Catalytica and CESI agrees to provide, or
cause to be provided, to each other as soon as reasonably practicable after
written request therefor, any Information in the possession or under the control
of such party that the requesting party reasonably needs (i) to comply with
reporting, disclosure, filing or other requirements imposed on the requesting
party (including under applicable securities laws) by a Governmental Authority
having jurisdiction over the requesting party, (ii) for use in any other
judicial, regulatory, administrative or other proceeding or in order to satisfy
audit, accounting,
9
claims, regulatory, litigation or other similar requirements, (iii) to comply
with its obligations under this Agreement or any Ancillary Agreement or (iv) in
connection with the ongoing businesses of Catalytica or CESI, as the case may
be; provided, however, that in the event that any party determines that any such
provision of Information could be commercially detrimental, violate any law or
agreement, or waive any attorney-client privilege, the parties shall take all
reasonable measures to permit the compliance with such obligations in a manner
that avoids any such harm or consequence.
(b) Internal Accounting Controls; Financial Information. After the
Separation 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
customary representations (including, for example, management letters to
accountants) 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.
(c) Ownership of Information. Any Information owned by a party that
is provided to a requesting party pursuant to this Section 5.3 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.
(d) Record Retention. To facilitate the possible exchange of
Information pursuant to this Section 5.3 and other provisions of this Agreement,
each party agrees to use its reasonable commercial efforts to retain all
Information in its respective possession or control on the Separation Date
substantially in accordance with the policies of Catalytica as in effect on the
Separation Date. However, except as set forth in the Tax Sharing Agreement, each
party may amend its respective record retention policies at such party's
discretion; provided, however, that if a party desires to effect the amendment
within three (3) years after the Separation Date, the amending party must give
thirty (30) days prior written notice of such change in the policy to the other
party to this Agreement.
(i) No Destruction. No party will destroy, or permit any of its
Subsidiaries to destroy, any Information that exists on the Separation Date
(other than Information that is permitted to be destroyed under the current
record retention policies of either party) and that falls under the categories
listed in Section 5.3(a), without first using its reasonable commercial efforts
to notify the other party of the proposed destruction and giving the other party
the opportunity to take possession of such Information prior to such
destruction.
10
(ii) Limitation of Liability. No party shall have any liability
to any other party in the event that any Information exchanged or provided
pursuant to this Section 5.3 is found to be inaccurate, in the absence of gross
negligence or willful misconduct by the party providing such Information. No
party shall have any liability to any other party if any Information is
destroyed or lost after reasonable commercial efforts by such party to comply
with the provisions of Section 5.3(d).
(iii) Other Agreements Providing for Exchange of Information.
The rights and obligations granted under this Section 5.3 are subject to any
specific limitations, qualifications or additional provisions on the sharing,
exchange or confidential treatment of Information set forth in this Agreement
and any Ancillary Agreement.
(iv) Production of Witnesses; Records; Cooperation. After the
Separation Date, except in the case of a legal or other proceeding by one party
against another party (which shall be governed by such discovery rules as may be
applicable under Section 5.6 or otherwise), each party hereto shall use its
reasonable commercial efforts to make available to each other party, upon
written request, the former, current and future directors, officers, employees,
other personnel and agents of such party as witnesses and any books, records or
other documents within its control or which it otherwise has the ability to make
available, to the extent that any such person (giving consideration to business
demands of such directors, officers, employees, other personnel and agents) or
books, records or other documents may reasonably be required in connection with
any legal, administrative or other proceeding in which the requesting party may
from time to time be involved, regardless of whether such legal, administrative
or other proceeding is a matter with respect to which indemnification may be
sought hereunder. The requesting party shall bear all costs and expenses in
connection therewith.
5.4 Auditors and Audits; Annual and Quarterly Statements and Accounting.
Each party agrees that, for so long as Catalytica is required in accordance with
United States generally accepted accounting principles to consolidate CESI's
results of operations and financial position:
(a) Selection of Auditors. CESI shall not select a different
accounting firm from that used by Catalytica to serve as its (and its
Subsidiaries') independent certified public accountants ("CESI's Auditors") for
purposes of providing an opinion on its consolidated financial statements
without Catalytica's prior written consent (which shall not be unreasonably
withheld).
(b) Date of Auditors' Opinion and Quarterly Reviews. CESI shall use
its reasonable commercial efforts to enable the CESI Auditors to complete their
audit such that they will date their opinion on CESI's audited annual financial
statements on the same date that Catalytica's independent certified public
accountants ("Catalytica's Auditors") date their opinion on Catalytica's audited
annual financial statements, and to enable Catalytica to meet
11
its timetable for the printing, filing and public dissemination of Catalytica's
annual financial statements. CESI shall use its reasonable commercial efforts to
enable the CESI Auditors to complete their quarterly review procedures such that
they will provide clearance on CESI's quarterly financial statements on the same
date that Catalytica's Auditors provide clearance on Catalytica's quarterly
financial statements.
(c) Annual and Quarterly Financial Statements. CESI shall provide to
Catalytica on a timely basis all Information that Catalytica reasonably requires
to meet its schedule for the preparation, printing, filing, and public
dissemination of Catalytica's annual and quarterly financial statements. Without
limiting the generality of the foregoing, CESI will provide all required
financial Information with respect to CESI and its Subsidiaries to CESI's
Auditors in a sufficient and reasonable time and in sufficient detail to permit
CESI's Auditors to take all steps and perform all reviews necessary to provide
sufficient assistance to Catalytica's Auditors with respect to financial
Information to be included or contained in Catalytica's annual and quarterly
financial statements. Similarly, Catalytica shall provide to CESI on a timely
basis all financial Information that CESI reasonably requires to meet its
schedule for the preparation, printing, filing, and public dissemination of
CESI's annual and quarterly financial statements. Without limiting the
generality of the foregoing, Catalytica will provide all required financial
Information with respect to Catalytica and its Subsidiaries to Catalytica's
Auditors in a sufficient and reasonable time and in sufficient detail to permit
Catalytica's Auditors to take all steps and perform all reviews necessary to
provide sufficient assistance to CESI's Auditors with respect to Information to
be included or contained in CESI's annual and quarterly financial statements.
(d) Identity of Personnel Performing the Annual Audit and Quarterly
Reviews. CESI shall authorize CESI's Auditors to make available to Catalytica's
Auditors both the personnel who performed or will perform the annual audits and
quarterly reviews of CESI and work papers related to the annual audits and
quarterly reviews of CESI, in all cases within a reasonable time prior to CESI's
Auditors' opinion date, so that Catalytica's Auditors are able to perform the
procedures they consider necessary to take responsibility for the work of CESI's
Auditors as it relates to Catalytica's Auditors' report on Catalytica's
financial statements, all within sufficient time to enable Catalytica to meet
its timetable for the printing, filing and public dissemination of Catalytica's
annual and quarterly statements. Similarly, Catalytica shall authorize
Catalytica's Auditors to make available to CESI's Auditors both the personnel
who performed or will perform the annual audits and quarterly reviews of
Catalytica and work papers related to the annual audits and quarterly reviews of
Catalytica, in all cases within a reasonable time prior to Catalytica's
Auditors' opinion date, so that CESI's Auditors are able to perform the
procedures they consider necessary to take responsibility for the work of
Catalytica's Auditors as it relates to CESI's Auditors' report on CESI's
statements, all within sufficient time to enable CESI to meet its timetable for
the printing, filing and public dissemination of CESI's annual and quarterly
financial statements.
12
(e) Access to Books and Records. CESI shall provide Catalytica's
internal auditors and their designees access to CESI's and its Subsidiaries'
books and records so that Catalytica may conduct reasonable audits relating to
the financial statements provided by CESI pursuant hereto as well as to the
internal accounting controls and operations of CESI and its Subsidiaries.
Similarly, Catalytica shall provide CESI's internal auditors and their designees
access to Catalytica's and its Subsidiaries' books and records so that CESI may
conduct reasonable audits relating to the financial statements provided by
Catalytica pursuant hereto as well as to the internal accounting controls and
operations of Catalytica and its Subsidiaries
(f) Notice of Change in Accounting Principles. CESI shall give
Catalytica as much prior notice as reasonably practical of any proposed
determination of, or any significant changes in, its accounting estimates or
accounting principles from those in effect on the Separation Date. CESI will
consult with Catalytica and, if requested by Catalytica, CESI will consult with
Catalytica's independent public accountants with respect thereto. Catalytica
shall give CESI as much prior notice as reasonably practical of any proposed
determination of, or any significant changes in, its accounting estimates or
accounting principles from those in effect on the Separation Date.
(g) Conflict with Third-Party Agreements. Nothing in Sections 5.3 and
5.4 shall require CESI to violate any agreement with any third party regarding
the confidentiality of confidential and proprietary information relating to that
third party or its business; provided, however, that in the event that CESI is
required under Sections 5.3 and 5.4 to disclose any such Information, CESI shall
use all commercially reasonable efforts to seek to obtain such third party's
consent to the disclosure of such information.
5.5 Payment of Expenses. Except as otherwise provided in this Agreement,
the Ancillary Agreements or any other agreement between the parties relating to
the Separation or the Distribution, all costs and expenses of the parties hereto
in connection with the Separation and the Distribution (including underwriting
discounts and commissions) shall be allocated between CESI and Catalytica. CESI
and Catalytica shall each be responsible for their own internal fees, costs and
expenses incurred in connection with the Separation and the Distribution.
5.6 Dispute Resolution. If a dispute, controversy or claim ("Dispute")
arises between the parties relating to the interpretation or performance of this
Agreement or the Ancillary Agreements, or the grounds for the termination
hereof, appropriate senior executives (e.g., director or V.P. level) of each
party who shall have the authority to resolve the matter shall meet to attempt
in good faith to negotiate a resolution of the Dispute prior to pursuing other
available remedies. The initial meeting between the appropriate senior
executives shall be referred to herein as the "Dispute Resolution Commencement
Date." Discussions and correspondence relating to trying to resolve such
Dispute shall be treated as confidential information developed for the purpose
of settlement and shall be exempt from
13
discovery or production and shall not be admissible. If the senior executives
are unable to resolve the Dispute within thirty (30) days from the Dispute
Resolution Commencement Date, and either party wishes to pursue its rights
relating to such Dispute, then the Dispute will be mediated by a mutually
acceptable mediator appointed pursuant to the mediation rules of JAMS/Endispute
within thirty (30) days after written notice by one party to the other demanding
non-binding mediation. Neither party may unreasonably withhold consent to the
selection of a mediator or the location of the mediation. Both parties will
share the costs of the mediation equally, except that each party shall bear its
own costs and expenses, including attorney's fees, witness fees, travel
expenses, and preparation costs. The parties may also agree to replace mediation
with some other form of non-binding or binding ADR.
(a) Any Dispute which the parties cannot resolve through mediation
within ninety (90) days of the Dispute Resolution Commencement Date, unless
otherwise mutually agreed, shall be submitted to final and binding arbitration
under the then current Commercial Arbitration Rules of the American Arbitration
Association ("AAA"), by three (3) arbitrators in Santa Xxxxx County, California.
Such arbitrators shall be selected by the mutual agreement of the parties or,
failing such agreement, shall be selected according to the aforesaid AAA rules.
The arbitrators will be instructed to prepare and deliver a written, reasoned
opinion stating their decision within thirty (30) days of the completion of the
arbitration. The prevailing party in such arbitration shall be entitled to
expenses, including costs and reasonable attorneys' and other professional fees,
incurred in connection with the arbitration (but excluding any costs and fees
associated with prior negotiation or mediation). The decision of the arbitrator
shall be final and non-appealable and may be enforced in any court of competent
jurisdiction. The use of any ADR procedures will not be construed under the
doctrine of laches, waiver or estoppel to adversely affect the rights of either
party.
(b) Any Dispute regarding the following is not required to be
negotiated, mediated or arbitrated prior to seeking relief from a court of
competent jurisdiction: breach of any obligation of confidentiality;
infringement, misappropriation, or misuse of any intellectual property right;
any other claim where interim relief from the court is sought to prevent serious
and irreparable injury to one of the parties or to others. However, the parties
to the Dispute shall make a good faith effort to negotiate and mediate such
Dispute, according to the above procedures, while such court action is pending.
(c) 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 Section 5.6 with
respect to all matters not subject to such dispute, controversy or claim.
5.7 Governmental Approvals. To the extent that the Separation requires
any Governmental Approvals, the parties will use their reasonable commercial
efforts to obtain any such Governmental Approvals.
14
5.8 No Representation or Warranty. Catalytica does not, in this Agreement
or any other agreement, instrument or document contemplated by this Agreement,
make any representation as to, warranty of or covenant with respect to:
(a) the value of any asset or thing of value to be transferred to
CESI;
(b) the freedom from encumbrance of any asset or thing of value to be
transferred to CESI;
(c) the absence of defenses or freedom from counterclaims with
respect to any claim to be transferred to CESI; or
(d) the legal sufficiency of any assignment, document or instrument
delivered hereunder to convey title to any asset or thing of value upon its
execution, deliver and filing.
Except as may expressly be set forth herein or in any Ancillary Agreement, all
assets to be transferred to CESI shall be transferred "AS IS, WHERE IS" and CESI
shall bear the economic and legal risk that any conveyance shall prove to be
insufficient to vest in CESI good and marketable title, free and clear of any
lien, claim, equity or other encumbrance.
5.9 Employee Agreements - Definition. As used in this Section 5.9,
"Employee Agreement" means the Conflicts, Confidential Information and
Assignment of Inventions Agreement and corresponding agreements in foreign
countries executed by each Catalytica employee.
(a) Survival of Catalytica Employee Agreement Obligations and
Catalytica's Common Law Rights. The Catalytica Employee Agreements of all former
Catalytica employees transferred to CESI as of the Distribution Date shall
remain in full force and effect according to their terms; provided, however,
that none of the following acts committed by former Catalytica employees within
the scope of their CESI employment shall constitute a breach of such Catalytica
Employee Agreements: (i) the use or disclosure of Confidential Information (as
that term is defined in the former Catalytica employee's Catalytica Employee
Agreement) for or on behalf of CESI, if such disclosure is consistent with the
rights granted to CESI and restrictions imposed on CESI under this Agreement,
any Ancillary Agreement or any other agreement between the parties; (ii) the
disclosure and assignment to CESI of rights in proprietary developments authored
or conceived by the former Catalytica employee after the Separation Date and
resulting from the use of, or based upon intellectual property (whether patented
or not) which is retained by Catalytica; provided, however, that in no event
shall such disclosure and assignment be regarded as assigning the underlying
intellectual property to CESI; (iii) the rendering of any services, directly or
indirectly, to CESI to the extent such services are consistent with the
assignment or license of rights granted to CESI and the restrictions imposed on
CESI under this Agreement, any
15
Ancillary Agreement or any other agreement between the parties; and (iv)
solicitation of the employees of one party by the other party prior to the
Distribution Date (so long as such solicitation does not violate Section 5.8
hereof). Further, Catalytica retains any rights it has under statute or common
law with respect to actions by its former employees to the extent such actions
are inconsistent with the rights granted to CESI and restrictions imposed on
CESI under this Agreement, any Ancillary Agreement or any other agreement
between the parties.
(b) Assignment, Cooperation for Compliance and Enforcement.
(i) Catalytica retains all rights under the Catalytica
Employee Agreements of all former Catalytica employees necessary to permit
Catalytica to protect the rights and interests of Catalytica, but hereby
transfers and assigns to CESI its rights under the Catalytica Employee
Agreements of all former Catalytica employees to the extent required to permit
CESI to enjoin, restrain, recover damages from or obtain specific performance of
the Catalytica Employee Agreements or obtain other remedies against any employee
who breaches his/her Catalytica Employee Agreement.
(ii) Catalytica and CESI each may separately enforce the
Catalytica Employee Agreements of former Catalytica employees to the extent
necessary to reasonably protect their respective interests, provided, however,
that (i) CESI shall not commence any legal action relating thereto without first
consulting with Catalytica's General Counsel or his/her designee and (ii)
Catalytica shall not commence any legal action relating thereto against any
former Catalytica employee who is at the time an CESI employee without first
consulting with CESI's General Counsel or his/her designee. If either party, in
seeking to enforce any Catalytica Employee Agreement, notifies the other party
that it requires, or desires, such party to join in such action, then the other
party shall do so. In addition, if either party commences or becomes a party to
any action to enforce a Catalytica Employee Agreement of a former Catalytica
employee, the other party shall, whether or not it becomes a party to the
action, cooperate with the other party by making available its files and
employees who have information or knowledge relevant to the dispute, subject to
appropriate measures to protect the confidentiality of any proprietary or
confidential information that may be disclosed in the course of such cooperation
or action and subject to any relevant privacy laws and regulations. Any such
action shall be conducted at the expense of the party bringing the action and
the parties shall agree on a case by case basis on compensation, if any, of the
other party for the value of the time of such other party's employees as
reasonably required in connection with the action.
(iii) Catalytica and CESI understand and acknowledge that
matters relating to the making, performance, enforcement, assignment and
termination of employee agreements are typically governed by the laws and
regulations of the national, federal, state or local governmental unit where an
employee resides, or where an employee's services are rendered, and that such
laws and regulations may supersede or limit the applicability or
16
enforceability of this Section 5.9. In such circumstances, Catalytica and CESI
agree to take action with respect to the employee agreements that best
accomplishes the parties' objectives as set forth in this Section 5.9 and that
is consistent with applicable law.
5.10 Cooperation in Obtaining New Agreements. Catalytica understands
that, prior to the Separation Date, CESI has derived benefits under certain
agreements and relationships between Catalytica and third parties, which
agreements and relationships are not being assigned or transferred to CESI in
connection with the Separation. Upon the request of CESI, Catalytica agrees to
make introductions of appropriate CESI personnel to Catalytica's contacts at
such third parties, and agrees to provide reasonable assistance to CESI, at
Catalytica's own expense, so that CESI may enter into agreements or
relationships with such third parties under substantially equivalent terms and
conditions, including financial terms and conditions, that apply to Catalytica.
Such assistance may include, but is not limited to, (i) requesting and
encouraging such third parties to enter into such agreements or relationships
with CESI, (ii) attending meetings and negotiating sessions with CESI and such
third parties, and (iii) participating in buying consortiums with CESI.
Catalytica also understands that certain agreements between Catalytica and third
parties which are being assigned to CESI in connection with the Separation may
require the consent of the applicable third party. Catalytica shall assist CESI
in seeking and obtaining the consent of such third parties to such assignment.
The parties expect that the activities contemplated by this Section 5.10 will be
substantially completed by the Distribution Date, but in no event will
Catalytica have any obligations hereunder after the first anniversary of the
Distribution Date.
5.11 Property Damage to CESI Assets Prior to the Separation Date. In the
event of any property damage, other than ordinary wear and tear, to any CESI
Assets held by Catalytica which occurs prior to the Separation Date, Catalytica
shall repair or otherwise address such damage in the ordinary course of business
consistent with past practices; provided, however, that nothing in this clause
shall restrict Catalytica from disposing of any Assets in the ordinary course of
business consistent with past practices.
ARTICLE 6
MISCELLANEOUS
6.1 IN NO EVENT SHALL ANY MEMBER OF THE CATALYTICA GROUP OR CESI GROUP
BE LIABLE TO ANY OTHER MEMBER OF THE CATALYTICA GROUP OR CESI 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
17
SHALL NOT LIMIT EACH PARTY'S INDEMNIFICATION OBLIGATIONS FOR LIABILITIES AS SET
FORTH IN THE INDEMNIFICATION AGREEMENT.
6.2 Entire Agreement. This Agreement, the Merger Agreement, the Ancillary
Agreements and the Exhibits and Schedules referenced or attached hereto and
thereto, constitute the entire agreement between the parties with respect to the
subject matter hereof and thereof and shall supersede all prior written and oral
and all contemporaneous oral agreements and understandings with respect to the
subject matter hereof and thereof.
6.3 Governing Law. This Agreement shall be construed in accordance with
and all Disputes hereunder shall be governed by the laws of the State of
California, excluding its conflict of law rules. The Superior Court of Santa
Xxxxx County and/or the United States District Court for the Northern District
of California shall have jurisdiction and venue over all Disputes between the
parties that are permitted to be brought in a court of law pursuant to Section
5.6 above.
6.4 Termination. This Agreement and all Ancillary Agreements may be
terminated and the Distribution abandoned at any time prior to the Distribution
Date by and in the sole discretion of Catalytica without the approval of CESI.
This Agreement may be terminated at any time after the Distribution Date by
mutual consent of Catalytica and CESI. In the event of termination pursuant to
this Section 6.4, no party shall have any liability of any kind to the other
party.
6.5 Notices. Notices, offers, requests or other communications required
or permitted to be given by either party pursuant to the terms of this Agreement
shall be given in writing to the respective parties to the following addresses:
if to Catalytica: Catalytica, Inc.
000 Xxxxxxxx Xxxxx, Xxxxxxxx 0
Xxxxxxxx Xxxx, Xxxxxxxxxx 00000
Attention: President
Fax: (000) 000-0000
if to CESI: Catalytica Energy Systems, Inc.
000 Xxxxxxxx Xxxxx, Xxxxxxxx 0
Xxxxxxxx Xxxx, Xxxxxxxxxx 00000
Attention: Chief Financial Officer
Fax: (000) 000-0000
or to such other address as the party to whom notice is given may have
previously furnished to the other in writing as provided herein. Any notice
involving non-performance, termination, or renewal shall be sent by hand
delivery, recognized overnight courier or, within the United States, may also be
sent via certified mail, return receipt requested. All other
18
notices may also be sent by fax, confirmed by first class mail. All notices
shall be deemed to have been given and received on the earlier of actual
delivery or three (3) days from the date of postmark.
6.6 Counterparts. This Agreement, including the Ancillary Agreement and
the Exhibits and Schedules hereto and thereto and the other documents referred
to herein or therein, may be executed in counterparts, each of which shall be
deemed to be an original but all of which shall constitute one and the same
agreement.
6.7 Binding Effect; Assignment. This Agreement shall inure to the benefit
of and be binding upon the parties hereto and their respective legal
representatives and successors, and nothing in this Agreement, express or
implied, is intended to confer upon any other Person any rights or remedies of
any nature whatsoever under or by reason of this Agreement. This Agreement may
be enforced separately by each member of the Catalytica Group and each member of
the CESI Group. Neither party may assign this Agreement or any rights or
obligations hereunder, without the prior written consent of the other party, and
any such assignment shall be void; provided, however, either party may assign
this Agreement to a successor entity in conjunction with such party's
reincorporation.
6.8 Severability. If any term or other provision of this Agreement or the
Exhibits or Schedules attached hereto is determined by a court, administrative
agency or arbitrator to be invalid, illegal or incapable of being enforced by
any rule of law or public policy, all other conditions and provisions of this
Agreement shall nevertheless remain in full force and effect so long as the
economic or legal substance of the transactions contemplated hereby is not
affected in any manner materially adverse to either party. Upon such
determination that any term or other provision is invalid, illegal or incapable
of being enforced, the parties hereto shall negotiate in good faith to modify
this Agreement so as to effect the original intent of the parties as closely as
possible in an acceptable manner to the end that transactions contemplated
hereby are fulfilled to the fullest extent possible.
6.9 Failure or Indulgence Not Waiver; Remedies Cumulative. No failure or
delay on the part of either party hereto in the exercise of any right hereunder
shall impair such right or be construed to be a waiver of, or acquiescence in,
any breach of any representation, warranty or agreement herein, nor shall any
single or partial exercise of any such right preclude other or further exercise
thereof or of any other right. All rights and remedies existing under this
Agreement or the Exhibits or Schedules attached hereto are cumulative to, and
not exclusive of, any rights or remedies otherwise available.
6.10 Amendment. No change or amendment will be made to this Agreement or
the Exhibits or Schedules attached hereto except by an instrument in writing
signed on behalf of each of the parties to such agreement.
19
6.11 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 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.
6.12 Interpretation. The headings contained in this Agreement, in any
Exhibit or Schedule hereto and in the table of contents to this Agreement are
for reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement. Any capitalized term used in any Exhibit or
Schedule but not otherwise defined therein, shall have the meaning assigned to
such term in this Agreement. When a reference is made in this Agreement to an
Article or a Section, Exhibit or Schedule, such reference shall be to an Article
or Section of, or an Exhibit or Schedule to, this Agreement unless otherwise
indicated.
6.13 Conflicting Agreements. In the event of conflict between this
Agreement and the Merger Agreement, the provisions of the Merger Agreement shall
prevail.
6.14 WHEREFORE, the parties have signed this Master Separation Agreement
effective as of the date first set forth above.
CATALYTICA, INC. CATALYTICA ENERGY SYSTEMS,
INC.
_________________________ _______________________
By: By:
Name: Name:
Title: Title:
20
EXHIBITS
Exhibit A Certificate of Secretary of Catalytica
Exhibit B Certificate of Secretary of CESI
Exhibit C-1 Master Technology Ownership and License Agreement
Exhibit C-2 Master Patent Ownership and License Agreement
Exhibit C-3 Master Trademark Ownership and License Agreement
Exhibit D Employee Matters Agreement
Exhibit E Master Transitional Services Agreement
Exhibit F Real Estate Matters Agreement
Exhibit G Master Confidentiality and Non-Disclosure Agreement
Exhibit H Indemnification Agreement
Exhibit I Tax Sharing Agreement
Exhibit J CESI Assets
21
