Exhibit 2.02
SEPARATION AGREEMENT
This Separation Agreement ("AGREEMENT") is entered into effective as of
_________, 2002 by and between Celerity Group, Inc., a Delaware corporation (the
"COMPANY", formerly known as Kinetics Holdings Corporation), Kinetic Systems,
Inc., a California corporation ("KSI"), and Kinetics Biopharm, Inc., a Delaware
corporation ("KBI"). The Company, KSI and KBI are sometimes referred to herein
individually as a "PARTY" and collectively as the "PARTIES."
RECITALS
WHEREAS, KSI and KBI are direct or indirect wholly owned subsidiaries
of the Company;
WHEREAS, the Board of Directors of the Company has determined that it
is in the best interests of the Company and its stockholders to separate the
Company Business, the KSI Business and the KBI Business in connection with the
consummation of the Company's Initial Public Offering, by distributing to the
holders of the Company's Common Stock on a pro rata basis all of the shares of
KSI capital stock and KBI 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.
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"ANCILLARY AGREEMENTS" means the Confidential Disclosure Agreement, the
Employee Matters Agreement, the Management Services Agreement, the Tax Sharing
Agreement, and the Trademark License Agreement.
"ASSIGNED ASSET" has the meaning set forth in Section 3.1.
"ASSIGNED CONTRACTS" means the following contracts and agreements to
which an Assigning Party or its subsidiaries is a party or by which it or any of
its subsidiaries or their respective assets is bound, whether or not in writing,
except for any such contract or agreement that is to be retained by the
Assigning Party or its subsidiaries pursuant to any provision of this Agreement
or any Ancillary Agreement:
(a) [all contracts or agreements listed or described on Schedule _____
(as such Schedule may be supplemented by mutual agreement of the parties hereto
after the date hereof and prior to the Distribution Date);]
(b) any contracts or agreements entered into in the name of, or
expressly on behalf of, the Receiving Party or any of its subsidiaries;
(c) any contract or agreement that relates exclusively to the Receiving
Party's Business;
(d) any guarantee, indemnity, representation, warranty or other
Liability of a party in respect of any other contract, any Liability or the
Business of the Receiving Party; and
(e) any contract or agreement that is otherwise expressly contemplated
pursuant to this Agreement or any of the Ancillary Agreements to be assigned to
the Receiving Party.
"ASSIGNING PARTY" has the meaning set forth in Section 3.1.
"CLOSING" 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.
"CLOSING DATE" means the time of the Closing.
"CODE" means the Internal Revenue Code of 1986, as amended.
"COMMISSION" means the Securities and Exchange Commission.
"COMMON STOCK" means the common stock, par value $0.01 per share, of
the Company.
"COMPANY BALANCE SHEET" means the audited balance sheet of the Company,
including the notes thereto, as of ____________, 2002.
"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
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chemical delivery modules for semiconductor fabrication, but excludes the KSI
Business and the KBI Business.
"COMPANY GROUP" means the Company and each Person (other than KSI, KBI
and their respective subsidiaries and the LLC and its subsidiaries) that is an
Affiliate of the Company immediately after the Distribution Date.
"COMPANY INDEMNITEES" has the meaning specified in Section 4.2.
"COMPANY LIABILITIES" has the meaning specified in Section 3.2, but
shall exclude the KBI Liabilities and the KSI Liabilities.
"CONFIDENTIAL DISCLOSURE AGREEMENT" means the Confidential Disclosure
Agreement dated the date hereof between the Company, KSI and KBI 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 Distribution Date and that is
a type of claim specified as a covered claim on Schedule 5.4(a).
"DISTRIBUTION" has the meaning specified in the Recitals.
"DISTRIBUTION DATE" means the date on which the Distribution shall be
consummated, which is contemplated to occur concurrent with the Closing.
"EFFECTIVE TIME" means the time as of which the Registration Statement
is declared effective by the Commission.
"EMPLOYEE MATTERS AGREEMENT" means the Employee Matters Agreement dated
the date hereof between the Company, KSI and KBI 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.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended.
"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.
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"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, 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 (1)
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.
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"KBI BALANCE SHEET" means the audited balance sheet of KBI, including
the notes thereto, as of ____________, 2002.
"KBI BUSINESS" means the business and operations of KBI and KMS and
their respective divisions and subsidiaries engaged in the design, engineering
and construction of turnkey and design/build process systems for the
biotechnology and pharmaceutical industries.
"KBI GROUP" means KBI and each Person (other than the Company and KSI
and their respective subsidiaries) that is an Affiliate of KBI immediately after
the Distribution Date.
"KBI INDEMNITEES" has the meaning specified in Section 4.2.
"KBI LIABILITIES" has the meaning set forth in Section 3.2.
"KGI" means Kinetics Group, Inc., a Delaware corporation.
"KMS" means Kinetics Modular Systems, Inc., a company chartered under
the laws of Ontario, Canada.
"KSI BALANCE SHEET" means the audited balance sheet of KSI, including
the notes thereto, as of ____________, 2002.
"KSI BUSINESS" means the business and operations of KSI and KTS and
their respective divisions and subsidiaries engaged in the delivery of turnkey
high purity process systems, including the construction of high purity
installations and after-market operating services to the electronics and other
industries, but excluding the KBI Business.
"KSI GROUP" means KSI and each Person (other than the Company and KBI
and their respective subsidiaries) that is an Affiliate of KSI immediately after
the Distribution Date.
"KSI INDEMNITEES" has the meaning specified in Section 4.3.
"KSI LIABILITIES" has the meaning set forth in Section 3.2.
"KTS" means Kinetics Thermal Systems, Inc., a New York corporation.
"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,
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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.
"LICENSED INTELLECTUAL PROPERTY" means all Intellectual Property
licensed or sublicensed from a third party.
"LLC" means a limited liability corporation created and owned by the
Stockholders for the purpose of holding (directly or indirectly) all the
outstanding capital stock of KSI and KBI.
"MANAGEMENT SERVICES AGREEMENT" means the Management Services Agreement
dated the date hereof between the Company, KSI and KBI regarding the provision
of certain services among 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.
"NEW KSI CREDIT FACILITY" means the credit facility in the aggregate
commitment amount of $210,000,000 to be entered into by KSI and KBI, as
co-borrowers, and various lenders including the Bank of Nova Scotia as arranger
and administrative agent, the proceeds of which will be used to satisfy KSI's
obligations under the KSI Note.
"KSI NOTE" means the Promissory Note in the principal amount of
$150,000,000 to be executed by KSI, as maker, in favor of KGI, as payee, which
shall mature and require the payment by KSI of all outstanding principal and
accrued interest on the Closing Date.
"OWNER 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).
"PROSPECTUS" means each preliminary, final or supplemental prospectus
forming a part of the Registration Statement.
"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.
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"RECEIVING PARTY'S BUSINESS", "BUSINESS OF THE RECEIVING PARTY" and
"BUSINESS" shall mean the Company Business, the KSI Business or the KBI
Business, as applicable.
"REGISTRATION STATEMENT" means the registration statement on Form S-1
filed by the Company with the Commission to effect the registration of the
Common Stock pursuant to the Securities Act, as such registration statement may
be amended from time to time.
"RETAINING PARTY" has the meaning set forth in Section 3.3.
"SECURITIES ACT" means the Securities Act of 1933, as amended.
"STOCKHOLDERS" means the holders of the issued and outstanding capital
stock of the Company as of __________, 2002 (the "RECORD DATE").
"TANGIBLE PERSONAL PROPERTY" means all machinery, equipment, tools,
supplies, furniture, fixtures, personalty, 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, KSI and KBI (or in the case of KSI and KBI, their
respective shareholders) 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, KSI and KBI 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 KBI or their respective
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 following the Commission's declaration of
effectiveness of the Registration Statement, each of the Company, KSI and KBI
(as applicable) shall consummate the following transactions to effect the
Distribution on the Distribution Date, to the extent that such transactions have
not been consummated prior to the date hereof:
(a) KGI shall contribute all of the issued and outstanding capital
stock of KMS to KBI.
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(b) KGI shall distribute all of the issued and outstanding capital
stock of KBI to the Company.
(c) The Company shall distribute all of the issued and outstanding
capital stock of KBI to the Stockholders in accordance with Section 2.5.
(d) KGI shall contribute all of the issued and outstanding capital
stock of KTS to KSI.
(e) KGI shall distribute all of the issued and outstanding capital
stock of KSI to the Company.
(f) The Company shall distribute all of the issued and outstanding
capital stock of KSI to the Stockholders in accordance with Section 2.5.
(g) KGI shall merge into the Company in a statutory merger under
Section 251 of the Delaware General Corporation Law, with the Company as the
surviving corporation of the merger (the "MERGER"). The Merger shall have all of
the effects provided under applicable law.
(h) KSI shall pay to the Company all amounts due under the KSI Note.
The parties anticipate that the Stockholders will either (i) contribute the
capital stock of KSI and KBI to certain newly formed holding corporations owned
by the Stockholders, and that the Stockholders will exchange the capital stock
of such holding corporations for membership interests in the LLC, or (ii)
contribute the capital stock of KSI and KBI to the LLC in exchange for
membership interests in the LLC, which will form the holding corporations and
then contribute the KSI and KBI stock to such holding corporations.
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 have not occurred, take all reasonable steps
necessary to cause such actions, events or transactions to occur prior to the
Effective Time:
(a) All necessary Governmental Approvals and Consents shall have been
received, subject only to the Registration Statement being declared effective by
the Commission (and no stop-order being in effect with respect thereto);
(b) The Common Stock shall have been approved for quotation in the
Nasdaq National Market, subject to official notice of issuance;
(c) All necessary corporate governance actions shall have been taken
with respect to KSI and KBI to facilitate the Distribution, including any
elections or appointments of directors and officers of KSI and KBI and any
amendments to such entities' charters or bylaws;
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(d) The definitive documentation for the New KSI Credit Facility
transaction shall have been executed and placed in escrow and the KSI Note shall
have been executed and delivered by KSI to KGI;
(e) The Company's Board of Directors shall have formally approved the
Distribution and shall not have abandoned, deferred or modified the
Distribution;
(f) The transactions contemplated by this Agreement to be consummated
on or prior to the Effective Time 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
Effective Time shall have been consummated;
(g) 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 the Initial Public
Offering or any of the other transactions contemplated by this Agreement or any
Ancillary Agreement;
(h) 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;
(i) Resignations of each person who is an officer or director of KSI or
KBI or their respective subsidiaries who will be an employee of only the Company
or its subsidiaries from and after the Distribution Date, shall have been
received by the Company;
(j) This Agreement shall not have been terminated; and
(k) The Company shall have been released from any Liabilities,
guarantees or other obligations with respect to any indebtedness or otherwise of
KSI or KBI or their respective subsidiaries;
provided, however, that the occurrence of all or a portion the foregoing
actions, events and transactions shall not create any obligation on the part of
the Company to seek to have the Registration Statement declared effective or to
effect the Distribution or the Closing, or in any way limit the Company's power
of termination set forth in Section 8.2 or alter the consequences of any such
termination from those specified in such Section.
Section 2.3 Voiding of Transactions. If the Company in its sole
discretion elects not to proceed with the Closing, then in the Company's sole
discretion and upon written request to KSI and KBI, any transactions and actions
that have been consummated under this Agreement prior to the Closing to effect
the Distribution (including those under Article II, Article III, and Article V)
shall be (in whole or in part) revoked, rescinded, annulled or otherwise voided
and caused to be of no further force or effect.
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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 Distribution Date 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 (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 foregoing; provided, however, that the sole condition to the consummation
of the Distribution following the Effective Time shall be the occurrence of the
Closing. KSI and KBI 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 and KBI Stock. Subject to Section 2.2
above, the Company, KSI and KBI shall use their reasonable commercial efforts to
consummate the Distribution. Such efforts shall include, but not necessarily be
limited to, those specified in this Section 2.5.
(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) Shares Received. Each Stockholder (or such holder's
designated transferee or transferees) will be entitled to receive in the
Distribution a number of shares of capital stock of KSI and KBI, respectively,
equal to the number of shares of Common Stock of the Company held by such
Stockholder (on an as-converted basis), multiplied by a fraction the numerator
of which is the number of shares of capital stock of KSI and KBI, respectively,
beneficially owned by the Company on the Record Date and the denominator of
which is the number of shares of Common Stock of the Company outstanding on the
Record Date.
ARTICLE III
TRANSFER OF ASSETS AND
ASSUMPTION OF LIABILITIES
Section 3.1 Transfer of Assets.
(a) Subject only to the occurrence of the Closing following
the Commission's declaration of the effectiveness of the Registration Statement,
and effective as of the Distribution Date, each party (the "ASSIGNING PARTY")
hereby assigns, transfers, conveys and delivers to another 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 Distribution Date and (except in the case of clause
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(xiii) below) used exclusively in the Receiving Party's Business immediately
prior to the Distribution Date (each such asset being an "ASSIGNED ASSET"):
(i) all Tangible Personal Property;
(ii) all Inventory;
(iii) all Receivables;
(iv) 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 Distribution Date or
thereafter;
(v) all goodwill exclusively relating to the Receiving Party's
Business;
(vi) all of the Owned Intellectual Property and Licensed
Intellectual Property that is to be transferred or licensed pursuant to the
Trademark License Agreement;
(vii) all of the Assigned Contracts;
(viii) all claims, causes of action, choses in 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;
(ix) 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;
(x) all municipal, state and federal franchises, permits,
licenses, agreements, waivers, exemptions, approvals and authorizations, in each
case to the extent transferable;
(xi) 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;
(xii) any and all other assets, rights and claims of every
kind and nature owned or held immediately prior to the Distribution Date by the
Assigning Party and used exclusively in the Receiving Party's Business. The
intention of this clause (xii) 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 (xii) 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
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Ancillary Agreement. In addition, no asset, right or claim shall be deemed an
Assigned Asset solely as a result of this clause (xii) unless a claim with
respect thereto is made by a Receiving Party on or prior to the first
anniversary of the Distribution Date; and
(xiii) the assets, rights and claims of the Company listed in
Schedule 3.1(a)(xiii) to be assigned, transferred, conveyed and delivered to KBI
and 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 Distribution Date, each party hereby assumes and agrees faithfully to
pay, perform and fulfill all obligations under the following in accordance with
their respective terms (the "COMPANY LIABILITIES" in the case of the Company,
the "KSI LIABILITIES" in the case of KSI, and the "KBI LIABILITIES" in the case
of KBI):
(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 Distribution 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));
(B) the operation of any business conducted
by such party or any of its subsidiaries at any time after the Distribution Date
(including any Liability relating to, arising out of or resulting from any act
or failure to act by any director, officer, employee, agent
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or representative of such party (whether or not such act or failure to act is or
was within such Person's authority));
(C) any Assigned Assets (as assigned to such
party hereunder); and
(D) in the case of KSI, the New KSI Credit
Facility and KSI Note; and
(iii) all Liabilities reflected as "Liabilities" or
obligations of such party in the Company Balance Sheet, the KSI Balance Sheet or
the KBI Balance Sheet, as applicable, subject to any discharge of such
Liabilities subsequent to the date of any such Balance Sheet.
Notwithstanding the foregoing, the Company Liabilities, the KSI
Liabilities and the KBI Liabilities shall not 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.
(c) Each of KSI and KBI shall be responsible for all KSI
Liabilities and KBI Liabilities, as the case may be, 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 or KBI Liabilities, as the case may be, arising out of claims made
by a party'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 KBI 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 Distribution
Date. The parties agree that, as of the Distribution 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 Distribution Date, the parties
and their respective subsidiaries shall cooperate to effect such transfers as
promptly as possible following the Distribution Date. Nothing herein shall be
deemed to require the transfer of any assets or the
13
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, a KSI Liability or a KBI
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 Distribution 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 it 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.
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
conveyancing 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,
14
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 Distribution 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, 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, the KSI
Liabilities and the KBI Liabilities by the Company, KSI and KBI, 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 Distribution 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
Distribution Date (or, to the extent contemplated by the proviso to the
immediately preceding
15
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, including the KSI Note);
(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 Distribution Date that are reflected in the books
and records of the parties or otherwise documented in writing in accordance with
past practices, 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 Distribution Date, and
(iv) any other agreements, arrangements, commitments
or understandings that this Agreement or any Ancillary Agreement expressly
contemplates will survive the Distribution Date [, including those listed or
described on Schedule 3.6(b)].
Section 3.7 Proceeds of the Initial Public Offering; Costs. The Initial
Public Offering will include a primary offering of Common Stock by the Company.
Other than certain of the Company's indebtedness that will be repaid concurrent
with the Closing, the Company will retain the net proceeds of such offering.
ARTICLE IV
INDEMNIFICATION
Section 4.1 Release of Claims.
(a) Except as provided in Section 4.1(d), effective as of the
Distribution Date, KSI does hereby, for itself and its Affiliates (other than
any member of the Company Group or the KBI Group), and its successors and
assigns, and all Persons who at any time prior to the Distribution Date have
been shareholders, directors, officers, agents or employees of KSI and its
Affiliates (other than any member of the Company Group or the KBI Group) (in
each case, in their respective capacities as such), remise, release and forever
discharge (i) the Company and each member of the Company Group, their respective
successors and assigns, and all Persons who at any time prior to the
Distribution 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, and (ii) KBI and each member of the KBI
Group, their respective successors and assigns, and all Persons who at any time
prior to the Distribution Date have been shareholders,
16
directors, officers, agents or employees of KBI or any member of the KBI 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 Distribution
Date, including in connection with the transactions and all other activities to
implement the Distribution and the Initial Public Offering.
(b) Except as provided in Section 4.1(d), effective as of the
Distribution Date, KBI does hereby, for itself and its Affiliates (other than
any member of the Company Group or the KSI Group), and its successors and
assigns, and all Persons who at any time prior to the Distribution Date have
been shareholders, directors, officers, agents or employees of KBI and its
Affiliates (other than any member of the Company Group or the KSI Group) (in
each case, in their respective capacities as such), remise, release and forever
discharge (i) the Company and each member of the Company Group, their respective
successors and assigns, and all Persons who at any time prior to the
Distribution 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, and (ii) KSI and each member of the KSI
Group, their respective successors and assigns, and all Persons who at any time
prior to the Distribution Date have been shareholders, directors, officers,
agents or employees of KSI or any member of the KSI 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 Distribution Date, including in
connection with the transactions and all other activities to implement the
Distribution and the Initial Public Offering.
(c) Except as provided in Section 4.1(d), effective as of the
Distribution 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 Distribution 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 (i) KSI and its subsidiaries, their respective successors and assigns,
and all Persons who at any time prior to the Distribution 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, and (ii)
KBI and its subsidiaries, their respective successors and assigns, and all
Persons who at any time prior to the Distribution Date have been shareholders,
directors, officers, agents or employees of KBI 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 Distribution Date,
including in
17
connection with the transactions and all other activities to implement the
Distribution and the Initial Public Offering.
(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 Distribution 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:
(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 Distribution Date, or
any other Liability specified in Schedule 3.6(b) as not to terminate as of the
Distribution 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) It is the intention of each of the parties by virtue of
the provisions of this Section 4.1 to provide for a full and complete release
and discharge of all Liabilities existing or arising from all acts and events
occurring or failing to occur or alleged to have occurred or failed to occur and
all conditions existing or alleged to have existed on or before the Distribution
Date, between or among the parties (including any contractual agreements or
arrangements existing or alleged to exist between or among such Persons on or
before the Distribution Date), except as expressly set forth in Section 4.1(d).
At any time, at the request of any other party, each party
18
shall execute and deliver, or shall cause such other appropriate Persons to
execute and deliver, releases reflecting the provisions hereof.
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 Distribution Date, KSI shall indemnify, defend and hold
harmless (i) 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") and (ii) KBI, each member of the KBI 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 "KBI
INDEMNITEES"), from and against any and all Liabilities of the Company
Indemnitees and KBI Indemnitees, respectively, 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 or Assigned Contract (as assigned
to KSI) in accordance with their respective terms, whether prior to or after the
Distribution Date or the date hereof;
(b) The KSI Business, any KSI Liability or any Assigned
Contract (as assigned to KSI); and
(c) Any breach by KSI or any of its subsidiaries of this
Agreement or any of the Ancillary Agreements.
Section 4.3 Indemnification by KBI. Except as provided in Section 4.6
and except as otherwise expressly provided in any of the Ancillary Agreements,
from and after the Distribution Date, KBI shall indemnify, defend and hold
harmless (i) the Company Indemnitees and (ii) KSI, each member of the KSI 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 "KSI INDEMNITEES"), from and against any and all Liabilities of the Company
Indemnitees and KSI Indemnitees, respectively, relating to, arising out of or
resulting from any of the following items (without duplication):
(a) The failure of KBI or any other Person to pay, perform or
otherwise promptly discharge any KBI Liability or Assigned Contract (as assigned
to KBI) in accordance with their respective terms, whether prior to or after the
Distribution Date or the date hereof;
(b) The KBI Business, any KBI Liability or any Assigned
Contract (as assigned to KBI); and
(c) Any breach by KBI or any of its subsidiaries of this
Agreement or any of the Ancillary Agreements.
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 Distribution Date, the Company shall indemnify,
defend and hold harmless (i) the KSI Indemnitees and (ii) the KBI Indemnitees,
from and against any and all Liabilities of the KSI
19
Indemnitees and KBI Indemnitees, respectively, 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 Distribution Date or the date hereof;
(b) The Company Business, any Company Liability or any
Assigned Contract (to the Company);
(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,
KSI Indemnitee or KBI 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 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
20
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, KSI in the case of KSI Indemnitees,
and KBI in the case of KBI 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, KSI
in the case of KSI Indemnitees, or KBI in the case of KBI 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, KSI for KSI Indemnitees, and KBI for KBI 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, KSI in the case of KSI Indemnitees, and KBI in the case of KBI
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, KSI in
the case of KSI Indemnitees, and KBI in the case of KBI Indemnitees, as the case
may be, 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, KSI or KBI, 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, KSI in the case of KSI Indemnitees, and KBI in the case of KBI
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 objection, if any, to
its responsibility for indemnification under this Article IV has been resolved
21
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 Contribution. If the indemnification provided for in this
Article IV is unavailable to an Indemnified Party in respect of any Liability
arising out of or related to information contained in or omitted from the
Registration Statement or the Prospectus, then the Indemnifying Party, in lieu
of indemnifying the Indemnified Party, shall contribute to the amount paid or
payable by the Indemnified Party as a result of such Liability in such
proportion as is appropriate to reflect the relative fault of the parties in
connection with the statements or omissions which resulted in such Liability.
The relative fault of the parties shall be determined by reference to, among
other things, whether the untrue or alleged untrue statement of a material fact
or the omission or alleged omission to state a material fact relates to
information concerning the Company, KSI or KBI.
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,
KSI and the KSI Indemnitees, and KBI and the KBI 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
22
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.
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 Effective Time,
each party shall execute and deliver the Ancillary Agreements.
Section 5.2 Corporate Governance Matters. At or prior to the Effective
Time, the Company shall take all action necessary to appoint or elect directors
and amend the charter documents and bylaws of KSI and KBI as necessary to
facilitate the Distribution.
Section 5.3 New KSI Credit Facility.
(a) At or prior to the Effective Time, the parties shall take
all necessary action for KSI to execute and place into escrow definitive
documentation for the New KSI Credit Facility. The delivery of such definitive
documentation and the consummation of the New KSI Credit Facility transaction
may be subject to the occurrence of the Closing.
(b) At or prior to the Effective Time, KSI and KBI and their
respective subsidiaries shall take all necessary action to release the Company
from any Liabilities, guarantees, or other obligations with respect to
indebtedness or other obligations of KSI or KBI or their respective subsidiaries
(provided that the release of the Company's guarantee and related obligations in
respect of certain indebtedness of KSI, KBI and their respective subsidiaries
will not be effective until concurrent with the Closing).
Section 5.4 Insurance Policies and Claims Administration.
(a) Maintenance of Insurance Coverage Prior to Distribution
Date. Each party shall use reasonable efforts to maintain in full force and
effect at all times up to and
23
including the Distribution 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 as set forth on Schedule 5.4(a)
relating to periods prior to the Distribution 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 KBI or their 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 Distribution 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 KBI or their
respective subsidiaries as such additional insureds.
(b) Responsibility for Establishing Insurance Coverage On and
After Distribution Date. Commencing on and as of the Distribution Date, KSI and
KBI and their 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 Distribution Date involving KSI or KBI or their
respective subsidiaries. Notwithstanding any other agreement or 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 KBI or their respective subsidiaries relating to liability and casualty
insurance matters for any period, whether prior to, at or after the Distribution
Date.
(c) Administration and Procedure.
(i) KSI or a subsidiary of KSI, or KBI or a
subsidiary of KBI, 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 Distribution Date of
the KSI Business and the KBI Business, as the case may be; provided, however,
that such retention by KSI and KBI 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,
or KBI 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 KBI and its subsidiaries, as the
case may be, for claims relating to any period on or after the Distribution Date
involving KSI or any of its subsidiaries, or KBI or its subsidiaries, as the
case may be.
(ii) KSI and KBI, as appropriate, shall notify the
Company of any Covered Claims relating to KSI or KBI or a subsidiary thereof
under one or more of the Policies relating to a period prior to the Distribution
Date, and KSI and KBI agree 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
24
carrier. Notwithstanding anything contained herein, in any other agreement or
applicable Policy or any understanding to the contrary, KSI or KBI, as the case
may be, 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, or KBI 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
Distribution 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 KBI 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 such party 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 KBI 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 KBI or its subsidiary, as appropriate, and, thereafter,
KSI or KBI or its subsidiary shall forthwith reimburse the Company or such
subsidiary of the Company for such payment.
Section 5.5 Non-solicitation of Employees. During the one-year period
following the Distribution 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 Distribution Date for the provision to the
other of existing corporate
25
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 Distribution
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 Distribution
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 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 Distribution 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
26
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 Distribution Date, each party may receive
mail, telegrams, facsimiles, packages and other communications property
belonging to another party. Accordingly, at all times after the Distribution
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 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, KSI and KBI, as the case may be, 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
27
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,
KSI and its subsidiaries, and KBI 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 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
28
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.
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 OR THE KBI GROUP, NOR
SHALL ANY MEMBER OF THE KSI GROUP BE LIABLE TO ANY MEMBER OF THE COMPANY GROUP
OR THE KBI GROUP, NOR SHALL ANY MEMBER OF THE KBI GROUP BE LIABLE TO XXX MEMBER
OF THE COMPANY GROUP OR THE KSI GROUP, FOR ANY SPECIAL, CONSEQUENTIAL, INDIRECT,
INCIDENTAL OR PUNITIVE DAMAGES OR LOST PROFITS, HOWEVER
29
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 and/or the Initial Public Offering may be deferred, modified or
abandoned at any time prior to Distribution Date or the Closing Date, as
applicable, by and in the sole discretion of the Board of Directors of the
Company without the approval of KSI or KBI. 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) Underwriting commissions and discounts attributable to the
shares of Common Stock sold by the Company in the Initial Public Offering shall
be paid by the Company.
(c) It is understood and agreed that the Company shall pay the
legal, filing, accounting, printing and other out-of-pocket expenditures in
connection with (i) the preparation, printing and filing of the Registration
Statement and Prospectus and (ii) sale of the shares of Common Stock in the
Initial Public Offering, including, without limitation, third party costs, fees
and expenses relating to the Initial Public Offering, all of the reimbursable
expenses of the Underwriters pursuant to the Underwriting Agreement, and all of
the costs of producing, printing, mailing and otherwise distributing the
Prospectus.
(d) The costs and expenses incurred in connection with
obtaining the New KSI Credit Facility, and the KSI Note, shall be paid by such
party or parties as determined 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.
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 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
30
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 the Company, to:
(b) If to KSI, to:
(c) If to KBI, to:
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, nor 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 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
31
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, KSI and KBI, 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 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
32
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.
IN WITNESS WHEREOF, the parties hereto have duly executed and delivered
this Agreement on the day and year first above written.
CELERITY GROUP, INC. (formerly known
as Kinetics Holdings Corporation)
By:
Name:
Title:
KINETIC SYSTEMS, INC.
By:
Name:
Title:
KINETICS BIOPHARM, INC.
By:
Name:
Title:
[SIGNATURE PAGE TO SEPARATION AGREEMENT]
33
SCHEDULE 3.1(a)(xiii)
CERTAIN ASSETS TO BE TRANSFERRED BY COMPANY
The detailed list of Assigned Assets being transferred by the Company
will be specifically agreed to by the parties on or before the Distribution
Date.
34
SCHEDULE 3.1(b)(i)
EXCLUDED ASSETS
The detailed list of Excluded Assets will be specifically agreed to by
the parties on or before the Distribution Date.
35
SCHEDULE 3.2(b)(i)
EXCLUDED LIABILITIES
The detailed list of Excluded Liabilities will be specifically agreed
to by the parties on or before the Distribution Date.
36
SCHEDULE 3.6(b)
AGREEMENTS NOT TO TERMINATE
The detailed list of agreements not to terminate will be specifically
agreed to by the parties on or before the Distribution Date.
37
SCHEDULE 5.4(a)
COVERED CLAIMS
The detailed list of Covered Claims will be specifically agreed to by
the parties on or before the Distribution Date.
38
SCHEDULE 6.6
NON-DISCLOSURE CONFIDENTIAL INFORMATION
The detailed list of non-disclosure confidential information will be
agreed to by the parties on or before the Distribution Date.
39
