EXHIBIT 2.1
SEPARATION AGREEMENT
Separation Agreement (the "Agreement") dated as of _______
____, 2000 between Xxxxx Corporation ("Xxxxx") and M-tron
Industries, Inc., a Delaware Corporation ("M-tron").
WHEREAS M-tron is selling stock to the public (the "Separation") in a
public offering registered under the Securities Act of 1933, as amended;
WHEREAS, Xxxxx and M-tron want to set forth certain matters concerning
the relationship between the parties after the Separation.
NOW, THEREFORE, the parties agree as follows:
ARTICLE I
DEFINITIONS
1.1 DEFINITIONS. As used in this Agreement, the following terms
shall have the following respective meanings:
"AFFILIATE" of any Person shall mean another Person that directly or
indirectly through one or more intermediaries, controls, is controlled by or is
under common control with, such first Person; PROVIDED HOWEVER, that for the
purposes of this Agreement from and after the Time of Separation, no Xxxxx
Company shall be deemed to be an Affiliate of any M-tron Company, and no M-tron
Company shall be deemed to be an Affiliate of any Xxxxx Company.
"CODE" shall mean the Internal Revenue Code of 1986, as amended.
"INFORMATION" of a party shall mean any and all information that
such party or any of its Representatives whether furnished orally or in
writing or by any other means or gathered by inspection and regardless of
whether the same is specifically marked or designated as "confidential" or
"proprietary", "together with any and all notes, memoranda, analyses,
compilations, studies or other documents (whether in hard copy or electronic
media) prepared by the receiving party of any of its Representatives which
contain or otherwise reflect such Information, together with any and all
copies, extracts or other
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reproductions of any of the same; PROVIDED HOWEVER, that for the purposes
hereof all information relating to the Xxxxx Companies and the Xxxxx Business
in the possession of any M-tron Company at the Time of Separation shall be
deemed to have been furnished by the M-tron Companies; and FURTHER PROVIDED
that the term" "Information" does not include information that:
(a) is or becomes generally available to the public
through no wrongful act of the receiving party or its
Representatives;
(b) is or becomes available to the receiving party on a
non-confidential basis from a source other than the providing party or
its Representatives, provided that such source is not known by the
receiving party to be subject to a confidentiality agreement with the
providing party; or
(c) has been independently acquired or developed by the
receiving party without violation of any of the obligations
of the receiving party or its Representatives under this
Agreement.
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"IRS" shall mean the United States Internal Revenue Service.
"LIABILITIES" shall mean any and all debts, liabilities, commitments
and obligations, whether fixed, contingent or absolute, matured or unmatured,
liquidated or unliquidated, accrued or not accrued, known or unknown, whenever
or however arising and whether or not the same would be required by generally
accepted accounting principles to be reflected in financial statements or
disclosed in the notes thereto.
"XXXXX ASSETS" shall mean all of the Assets of Xxxxx and its
Subsidiaries which are not M-tron Assets.
"XXXXX BUSINESSES" shall mean all of the businesses conducted at any
time prior to the Separation by Xxxxx or its Subsidiaries which are not M-tron
Businesses.
"XXXXX COMPANIES" shall mean Xxxxx and its Subsidiaries which are not
M-tron and M-tron's Subsidiaries.
"XXXXX LIABILITIES" shall mean (i) all Liabilities or portions of
Liabilities arising primarily out of or in connection with the Xxxxx Assets or
Xxxxx Businesses; (ii) all Liabilities
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under contracts included in the Xxxxx Assets, whether such Liabilities arise
before, upon or after the Reorganization or Separation; (iii) all Liabilities
of Xxxxx and its Subsidiaries pursuant to this Agreement; and (iv) all
Liabilities for payment of outstanding drafts and checks of Xxxxx Businesses
whether existing prior to or as of the Time of Separation.
"XXXXX SYSTEMS D" shall mean Xxxxx Systems, Inc., a Delaware
corporation which was merged into Xxxxx Systems SD on December 5,
2000.
"XXXXX SYSTEMS SD" shall mean Xxxxx Systems, Inc., a South
Dakota corporation formerly named M-tron Industries, Inc.
"MERGER" shall mean the merger of Xxxxx Systems D into Xxxxx Systems SD
on December 5, 2000.
"M-TRON ASSETS" shall mean all assets of M-tron and its Subsidiaries at
the Time of Separation (including the assets received by M-tron in the
Reorganization).
"M-TRON BUSINESSES" shall mean all of the businesses
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conducted at or at any time prior to the Separation by M-tron and persons
which are Subsidiaries of M-tron at the Time of the Separation (including the
businesses conducted by Xxxxx Systems (SD) prior to the Merger except for the
ownership of Spinnaker Industries, Inc. stock).
"M-TRON COMPANIES" shall mean M-tron and its Subsidiaries.
"M-TRON LIABILITIES" shall mean (i) all Liabilities or portions of
Liabilities arising out of or in connection with the M-tron Assets or M-tron
Businesses; (ii) all Liabilities under contracts included in the M-tron Assets,
whether such Liabilities arise before, upon or after the Reorganization or
Separation, (iii) all Liabilities or portions of Liabilities received by M- tron
from Xxxxx Systems SD in the Reorganization; (iv) any Liabilities resulting from
the consummation of the Reorganization or the Public Offering (including
actions, claims or proceedings relating thereto); (v) all Liabilities of M-tron
and its Subsidiaries pursuant to this Agreement; and (vi) all Liabilities for
payment of outstanding drafts and checks of M-tron Businesses whether existing
prior to or as of the Time of the Separation.
"PERSON" shall mean any natural person, corporation, general
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or limited partnership, limited liability company, joint venture, trust,
association or entity of any kind.
"PUBLIC OFFERING" shall mean the public offering referred to in the
Recitals hereto.
"REORGANIZATION" shall mean the transfer of all of the assets and
liabilities of Xxxxx Systems SD, (except for (i) the assets and liabilities
received by Xxxxx Systems as a result of the Merger, and (ii) the stock of
Spinnaker Industries, Inc.) from Xxxxx Systems SD to M-tron and the assumption
of such liabilities by M-tron.
"REPRESENTATIVES" of a party shall mean such party's officers,
directors, employees, accountants, counsel, investment bankers, financial
advisors, consultants and other representatives.
"SUBSIDIARY" shall mean, with respect to any Person, any corporation or
other organization, whether incorporated or unincorporated, of which (i) such
Person or any other Subsidiary of such Person is a general partner or (ii) at
least 50% of the
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securities or other interests having by their terms ordinary voting power to
elect a majority of the board of directors or others performing similar
functions with respect to such corporation or other organization or at least
50% of the value of the outstanding equity is directly or indirectly owned or
controlled by such Person or by any one or more of its Subsidiaries, or by
such Person and one or more of its Subsidiaries.
"TAXES" shall mean any federal, state, county, local or foreign taxes,
charges, fees, levies or other assessments, including all net income, gross
income, sales and use, ad valorem, transfer, gains, profits, excise, franchise,
real and personal property, gross receipt, capital stock, share, production,
business and occupation, disability, employment, payroll, license, estimated,
stamp, custom duties, severance or withholding taxes or charges imposed by any
governmental entity, and includes any interest and penalties (civil or criminal)
on or additions to any such taxes.
"TAX RETURN" shall mean any report, return or other information
required to be supplied to a governmental entity with
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respect to Taxes.
"TAX SHARING AGREEMENT" shall mean that certain Tax Sharing Agreement
between Xxxxx and its subsidiaries, as amended, a copy of which is attached
hereto as Exhibit A.
"TIME OF MEMBERSHIP TERMINATION" shall mean the time when M- tron
ceases to be a member of Xxxxx'x consolidated group for Federal income tax
purposes.
"TIME OF SEPARATION" shall mean the time as of which the Public
Offering is consummated.
ARTICLE II
TAX MATTERS
2.1 TAX SHARING AGREEMENT. After the Time of Separation, M-tron and its
Subsidiary shall continue to be bound by the Tax Sharing Agreement until the
Time of Membership Termination. Thereafter, except as provided in Section 2.2,
M-tron and its
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Subsidiary shall no longer participate in the Tax Sharing Agreement, and
neither party shall pay any amount to the other in connection with such
cessation of participation or as a result of past participation.
2.2 ASSUMPTION AND INDEMNIFICATION OF TAX LIABILITIES. The respective
Tax Liabilities of the Xxxxx Companies and of the M-tron Companies, whether
arising before, at or after the Time of Membership Termination, will continue to
be the Tax Liabilities of each such party, and each party hereto agrees to save,
indemnify, defend and hold harmless the other, its Subsidiaries and each of
their respective directors, officers, employees, agents, successors and assigns
from and against all such Tax Liabilities. For purposes of this Section 2.2, the
Tax Liabilities of (a) the Xxxxx Companies shall include, without limitation,
the liabilities under the Tax Sharing Agreement of the Xxxxx Companies
attributable to periods through the Time of Membership Termination and (b) the
M-tron Companies shall include, without limitation, (i) the Tax Liabilities of
Xxxxx of any of the Xxxxx Companies which is a predecessor in interest to any of
the M-tron Companies, but only to the extent attributable to the M-tron Business
and not Distribution Taxes (as defined below) for which Xxxxx and its
Subsidiaries are responsible under
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Section 2.3(c) and (ii) the liabilities under the Tax Sharing Agreement of
the M-tron Companies attributable to periods through the Time of Membership
Termination.
2.3 DISTRIBUTION TAXES. (a) Xxxxx may, at a later date,
distribute its stock ownership in M-tron to its shareholders (the
"Distribution") in a tax free transaction pursuant to Sections
355 and 368(a)(1)(D) of the Code.
(b) "Distribution Taxes" means Taxes of any member of the Xxxxx
consolidated group for Federal income tax purposes (as in existence prior to the
Time of Membership Termination) resulting from, or arising in connection with
(i) the failure of the Distribution to be tax-free to such member under Code
Sections 355 and 368(a)(1)(D) (including without limitation by reason of the
application of Code Sections 355(d) or (e))___________ extent such Taxes would
not have been incurred but for the Merger or the Reorganization.
(c) The Xxxxx Companies shall be liable for any Distribution Taxes
that are primarily attributable to one or more of the following:
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(i) any inaccurate statement or representation of fact or
intent (or omission to state a material fact) with respect to any of the
Xxxxx Companies in any representations made to tax counsel or the Internal
Revenue Service in obtaining a tax opinion or ruling on the Distribution;
(ii) any action or omission by any of the Xxxxx Companies
after the Time of Membership Termination, including without limitation, a
cessation, transfer to affiliates or disposition of its active trades or
businesses, or an issuance of stock, stock buyback or payment of an
extraordinary dividend by any of the Xxxxx Companies following the Time of
Membership Termination:
(iii) any acquisition of any stock or assets of any of the
Xxxxx Companies by one or more other persons prior to or following the Time of
Membership Termination;
(iv) any issuance of stock by any of the Xxxxx Companies or
change in ownership of stock in any of the Xxxxx Companies that causes Code
Sections 355(d) or 355(e) to apply to the Distribution; or
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(v) the Merger or the Reorganization (and without regard to
whether or not such Distribution Taxes otherwise would constitute M-tron
Liabilities.
(d) The M-tron Companies shall be liable for any Distribution Taxes
that are primarily attributable to one or more of the following;
(i) any inaccurate statement or representation of fact or
intent (or omission to state a material fact) in the representations that
relates to any of the M-tron Companies made to tax counsel or the Internal
Revenue Service in obtaining a tax opinion or ruling on the Distribution;
(ii) any action or omission by any of the M-tron Companies
after the Time of Membership Termination, including without limitation, a
cessation, transfer to affiliates or disposition of its active trades or
businesses, or an issuance of stock, stock buyback or payment of an
extraordinary dividend by any of the M-tron Companies following the
Distribution;
(iii) any acquisition of any stock or assets of any of
the M-tron Companies by one or more other persons following the
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Time of Membership Termination; or
(iv) any issuance of stock by any of the M-tron Companies or
change in ownership of stock in any of the M-tron Companies that causes Code
Sections 355(d) or 355(e) to apply to the Distribution.
(d) The provisions of this Section 2.3 shall apply notwithstanding
any other provisions of this Agreement.
2.4 TAX RETURNS/COOPERATION. (a) Xxxxx will be responsible
for the preparation and filing of all Tax Returns with respect to
all periods ending on or before the Time of Membership Termination. M-tron and
its Subsidiaries will be responsible for the preparation and filing of all other
Tax Returns relating to them or their assets or the M-tron Businesses which are
required to be filed after the Time of Membership Termination and for the
payment of all Taxes shown on those Tax Returns to be due and all related
estimated Taxes payable after the Distribution.
(b) Each of Xxxxx and M-tron will, and will cause their respective
personnel to, cooperate fully with each other in connection with the
preparation and review of Tax Returns and in connection with any examinations
of any Tax Returns filed by either of them or their respective Subsidiaries.
2.5 INDEMNIFICATION PROCEDURES. (a) Any claim for indemnification under
this Article II shall be made by written notice from the party seeking to be
indemnified (the "TAX
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INDEMNITEE") to the party from which indemnification is sought (the "TAX
INDEMNIFYING PARTY"). If a Tax Indemnitee becomes aware during an examination
of a Tax Return that the tax authority conducting the examination is
considering asserting a Tax subject to indemnification, the Tax Indemnitee
will (i) promptly notify the Tax Indemnifying Party of this fact, (ii) to the
extent reasonably practicable, segregate the issue from any other issues
being examined, (iii) permit the Tax Indemnifying Party to control the Tax
examination insofar as it relates to that issue and any administrative or
judicial appeals relating to the issue (including whether to settle the issue
or to appeal from an adverse determination with regard to the issue) and (iv)
cooperate with the Tax Indemnifying Party in all reasonable respects to
establish that such Tax is not due and payable.
(b) Upon a determination that a Tax Indemnifying Party is liable for a
payment of Taxes to a Tax Indemnitee, the Tax
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Indemnifying Party shall pay the Tax Indemnitee such Taxes. Such payment will
be made on an after-Tax basis promptly following the submission by the Tax
Indemnitee of written evidence of the payment of indemnified Tax.
ARTICLE III
PAYMENT OF LIABILITIES
3.1 PAYMENT OF LIABILITIES. From and after the Time of Separation, (i)
M-tron shall indemnify Xxxxx and its Representatives with respect to any claims
relating to M-tron Businesses, M-tron Companies or M-tron Liabilities, and (ii)
Xxxxx shall indemnify M-tron and its Representatives with respect to any claims
relating to Xxxxx Businesses, Xxxxx Companies or Xxxxx Liabilities.
ARTICLE IV
OTHER AGREEMENTS
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4.1 USE OF NAMES. M-tron shall have all rights in and use
of the name M-tron Industries, Inc. and all derivatives thereof and Xxxxx
shall have all rights in and use of the name Xxxxx Corporation or Xxxxx
Corporation, Xxxxx Display Technology, Inc., and Xxxxx Systems, Inc. and all
derivatives thereof.
4.2 BOOKS AND RECORDS. Prior to or as promptly as practicable after the
Time of Public Offering, Xxxxx shall deliver to M-tron all corporate books and
records of the M-tron Companies in the possession of Xxxxx and the relevant
portions (or copies thereof) of all corporate books and records of Xxxxx
relating directly and primarily to the M-tron Companies, the M-tron Businesses
or the M-tron Liabilities, including, in each case, all agreements, litigation
files and government filings. From and after the Time of Public Offering, all
such books, records and copies shall be the property of M-tron. Xxxxx may retain
copies of all such corporate books and records.
4.3 ACCESS TO INFORMATION. Upon reasonable notice, each party shall,
and shall cause its Subsidiaries to, afford to Representatives of the other
reasonable access, during normal
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business hours throughout the period prior to and following the Time of
Separation, to all of its properties, books, contracts, commitments and
records (including, but not limited to, Tax Returns) and, during such period,
each party shall, and shall cause its Subsidiaries to, furnish promptly to
the other (i) access to each report, schedule and other document filed or
received by it or any of its Subsidiaries pursuant to the requirements of
federal or state securities laws or filed with or sent to the United States
Securities and Exchange Commission or any other federal or state regulatory
agency or commission and (ii) access to all Information concerning
themselves, their Subsidiaries, directors, officers and stockholders and such
other matters as may be reasonably requested by the other party in connection
with any filings, applications or approvals under Federal or State securities
laws or otherwise required or contemplated by this Agreement or for any other
reason related to the transactions contemplated by this Agreement. In
addition:
(i) So long as M-tron is a Subsidiary of Xxxxx, M-tron shall keep Xxxxx
fully informed of all Information relating to M-tron, the M-tron Businesses and
its financial and other performance.
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(ii) Each party will maintain adequate internal accounting to allow the
other party to satisfy its own reporting obligations and prepare its own
financial statements.
(iii) Each party will use commercially reasonable efforts to provide
the other party with directors, officers, employees, other personnel and agents
who may be used as witnesses in and books, records and other documents which may
reasonably be required in connection with legal, administrative or other
proceedings. Each of Xxxxx and M-tron shall provide to the other copies of all
documents filed with the Securities and Exchange Commission pursuant to the
periodic and interim reporting requirement of the Securities Exchange Act of
1934, as amended.
Nothing in this Section 4.3 shall require the parties to take any
action or furnish any access or information which would cause or could
reasonably be expected to cause the waiver of any applicable attorney client
privilege. In addition, nothing herein shall require the parties to provide
information other than with respect to itself and its Subsidiaries, or the
conduct of their businesses.
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4.4 RETENTION OF RECORDS. If any information relating to the
businesses, assets or liabilities of a Xxxxx Company or M-tron Company is
retained by a M-tron Company or Xxxxx Company, respectively, each of the Xxxxx
and M-tron shall, and shall cause the other Xxxxx Companies and M-tron
Companies, respectively, to retain all such information in the Xxxxx Companies'
or M-tron Companies' possession or under its control until such information is
at least ten years old except that if, prior to the expiration of such period,
any Xxxxx Company or M-tron Company wishes to destroy or dispose of any such
information that is at least three years old, prior to destroying or disposing
of any of such information, (a) Xxxxx or M-tron, on behalf of the Xxxxx Company
or the M-tron Company that is proposing to dispose of or destroy any such
information, shall provide no less than 45 days' prior written notice to the
other party, specifying the information proposed to be destroyed or disposed of,
and (b) if, prior to the scheduled date of such destruction or disposal, the
other party requests in writing that any of the information proposed to be
destroyed or disposed of be delivered to such other party, Xxxxx or M-tron, as
applicable, promptly shall arrange for the delivery of the requested information
to a location specified by, and at the expense of, the requesting party.
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4.5 CONFIDENTIALITY.
(a) Each party hereto shall keep, and shall cause its Representatives
to keep, the other party's Information strictly confidential and will disclose
such Information only to such of its Representatives who need to know such
Information and who agree to be bound by this Section 4.5 and not to disclose
such Information to any other Person. Without the prior written consent of the
other party, neither party nor any of their respective Representatives shall
disclose the other party's Information to any Person or entity except as may be
required by law or judicial process and in accordance with this Section 4.5.
Notwithstanding the foregoing, each party may disclosure such information as it
believes is necessary or appropriate to comply with any Federal or state
securities laws, but shall give the other party reasonable prior notice thereof.
(b) In the event that either party or any of its Representatives
receives a request or is required by law or judicial process to disclose to a
court or other tribunal all or any part of the other party's Information, the
receiving party or its Representatives shall promptly notify the other party of
the
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request in writing, and consult with and assist the other party in seeking a
protective order or request for other appropriate remedy. In the event that such
protective order or other remedy is not obtained or the other party waives
compliance with the terms hereof, such receiving party or its Representatives,
as the case may be, shall disclose only that portion of the Information or facts
which, in the written opinion of the receiving party's outside counsel, is
legally required to be disclosed, and will exercise its respective reasonable
best efforts to assure that confidential treatment will be accorded such
Information or facts by the Persons or entities receiving the same. The
providing party will be given an opportunity to review the Information or facts
prior to disclosure.
4.6 FURTHER ASSURANCES. Each of the parties hereto, at its own cost and
expense, promptly shall, or shall cause its Subsidiaries to, execute such
documents (the "TRANSACTION DOCUMENTS") and take such further actions as may be
reasonably required or desirable to carry out the provisions hereof and to
consummate the transactions contemplated hereby.
4.7 COOPERATION. The parties shall cooperate with each
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other in all reasonable respects to ensure that the transactions contemplated
herein are carried out in accordance with their terms.
4.8 NO REPRESENTATIONS AS TO M-TRON ASSETS. M-TRON AGREES THAT THE
TRANSFER BY XXXXX SYSTEMS (SD) TO M-TRON OF THE M-TRON ASSETS AND THE M-TRON
BUSINESSES IS ON AN "AS IS, WHERE IS" BASIS, AND NO REPRESENTATIONS OR
WARRANTIES ARE BEING MADE BY XXXXX WITH RESPECT THERETO.
4.9 M-TRON STOCK. If Xxxxx or a Xxxxx Subsidiary wants to make a
spin off or public offering of its M-tron stock, M-tron will use reasonable
efforts to register, with Xxxxx responsible for M-tron's out of pocket
expenses, all or a portion of such stock in a timely manner under (or
otherwise comply with) the Securities Act of 1933, as amended, and any
related state securities laws. In addition, M-tron will use reasonable
efforts to permit Xxxxx, without cost to Xxxxx, to piggy-back on any other
registration statements filed by M-tron (including for continuous offering),
provided, in M-tron's opinion, such piggy-back rights do not interfere with
the other offering.
4.10 AUDITING PRACTICES. So long as Xxxxx is required to
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consolidate M-tron's results of operations and financial position, each party
agrees:
(a) not select a different independent accounting firm from
that used by Xxxxx without Xxxxx'x consent;
(b) use reasonable commercial efforts to enable our auditors to date
their opinion on our audited annual financial statements on the same date as
Xxxxx'x auditors date their opinion on Xxxxx'x financial statements;
(c) exchange all relevant information needed to prepare financial
statements;
(d) grant each other's internal auditors access to each other's
records; and
(e) notify each other of any change in accounting principles.
ARTICLE V
INDEMNIFICATION AND RELEASES
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5.1 MUTUAL RELEASE. Effective as of the Time of Separation and except
as otherwise specifically set forth in this Agreement, each of Xxxxx, on the one
hand, and M-tron, on the other hand, releases and forever discharges the other
and its affiliates, and its and their directors, officers, employees and agents
of and from all debts, demands, actions, causes of action, suits, accounts,
covenants, contracts, agreements, damages, and any and all claims, demands and
liabilities whatsoever of every name and nature, both in law and in equity,
against such other party or any of its assigns, which the releasing party has or
ever had, which arise out of or relate to events, circumstances or actions taken
by such other party prior to the Time of Separation; PROVIDED, HOWEVER, that the
foregoing general release shall not apply to this Agreement, or the transactions
contemplated hereby and shall not affect either party's right to enforce this
Agreement or any other agreement contemplated hereby in accordance with its
terms. Each party understands and agrees that, except as otherwise specifically
provided herein, neither the other party nor any of its Subsidiaries is, in this
Agreement or any other agreement or document, representing or warranting to such
party in any way as to the assets, business or Liabilities transferred or
assumed as contemplated hereby or thereby or as to
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any consents or approvals required in connection with the consummation of the
transactions contemplated by this Agreement.
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5.2 INDEMNIFICATION BY XXXXX. Xxxxx shall indemnify, defend and hold
harmless M-tron and any of its Subsidiaries, and each of their respective
directors, officers, employees, agents and Affiliates, and each of the heirs,
executors, successors and assigns of any of the foregoing (the "M-TRON
INDEMNITIES") from and against the Xxxxx Liabilities and any and all losses,
Liabilities and damages, including the costs and expenses of any and all
actions, threatened actions, demands, assessments, judgments, settlements and
compromises relating thereto and attorneys' fees and any and all expenses
whatsoever reasonably incurred in investigating, preparing or defending against
any such actions or threatened actions (collectively, "M-TRON INDEMNIFIABLE
LOSSES" and, individually, a "M-TRON INDEMNIFIABLE LOSS") of the M-tron
Indemnitees arising out of or due to the failure or alleged failure of Xxxxx or
any of its Subsidiaries to pay, perform or otherwise discharge in due course any
of the Xxxxx Liabilities.
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5.3 INDEMNIFICATION BY M-TRON. M-tron shall indemnify, defend and hold
harmless Xxxxx and each of its Subsidiaries, and each of their directors,
officers, employees, agents and Liabilities and each of the heirs, executors,
successors and assigns of any of the foregoing (the "XXXXX INDEMNITEES") from
and against the M-tron Liabilities and any and all losses, Liabilities and
damages, including the costs and expenses of any and all actions, threatened
actions, demands, assessments, judgments, settlements and compromises relating
thereto and attorneys' fees and any and all expenses whatsoever reasonably
incurred in investigating, preparing or defending against any such actions or
threatened actions (collectively, "XXXXX INDEMNIFIABLE LOSSES" and,
individually, a XXXXX INDEMNIFIABLE LOSS") of the Xxxxx Indemnitees arising out
of or due to the failure or alleged failure of M-tron or any of its Affiliates
to pay, perform or otherwise discharge in due course any of the M-tron
Liabilities. The "M-tron Indemnifiable Losses" and the Xxxxx Indemnifiable
Losses" are collectively referred to as the "INDEMNIFIABLE LOSSES."
5.4 INSURANCE PROCEEDS, TAX BENEFITS; MITIGATION. The
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amount which any party (an "INDEMNIFYING PARTY") is or may be required to pay
to any other Person (an "INDEMNITEE") pursuant to Sections 5.2 or 6.3 shall
be reduced (including retroactively) by (i) any insurance proceeds or other
amounts actually recovered by or on behalf of such Indemnitee in reduction of
the related Indemnifiable Loss and (ii) any Tax benefits realized or
realizable by such Indemnitee based on the present value thereof by reason of
such loss and shall be increased by any Tax liability incurred by such
Indemnitee based on such indemnity payment. If an Indemnitee shall have
received the payment required by this Agreement from an Indemnifying Party in
respect of an Indemnifiable Loss and shall subsequently actually receive
insurance proceeds, Tax benefits or other amounts in respect of such
Indemnifiable Loss as specified above, then such Indemnitee shall pay to such
Indemnifying Party a sum equal to the amount of such insurance proceeds, Tax
benefits or other amounts actually received. The Indemnitee shall take all
reasonable steps to mitigate all Losses, including availing itself of any
defenses, limitations, rights of contribution, claims against third parties
and other rights at law (it being understood that any out-of-pocket costs
paid to third parties in connection with such mitigation shall constitute
Losses), and shall provide such evidence and documentation of the nature and
extent of any Loss
5.5 PROCEDURE FOR INDEMNIFICATION.
as may be reasonably requested by the Indemnifying Party.
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(a) If an Indemnitee shall receive notice or otherwise learn of the
assertion by a person (including any governmental entity) who is not a party to
this Agreement of any claim or of the commencement by any such Person of any
action (a "THIRD-PARTY CLAIM") with respect to which an Indemnifying Party may
be obligated to provide indemnification pursuant to this Agreement, such
Idemnitee shall give such Indemnifying party written notice thereof promptly
after becoming aware of such Third-Party Claim; PROVIDED, HOWEVER, that the
failure of any Indemnitee to give notice as required by this Section 5.5 shall
not relieve the Indemnifying Party of its obligations under this Article V,
except to the extent that such Indemnifying Party is prejudiced by such failure
to give notice. Such notice shall describe the Third-Party Claim in reasonable
detail, and shall indicate the amount (estimated if necessary) of the
Indemnifiable Loss that has been or may be sustained by such Indemnitee.
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(b) An Indemnifying Party may elect to defend or to seek to settle or
compromise, at such Indemnifying Party's own expense and by such Indemnifying
Party's own counsel reasonably acceptable to the Indemnitee, any Third-Party
Claim, provided that the Indemnifying Party must confirm in writing that it
agrees that the Indemnitee is entitled to indemnification hereunder in respect
of such Third-Party Claim. Within 30 days of the receipt of notice from an
Indemnitee in accordance with Section 5.5(a) (or sooner, if the nature of such
Third-Party Claim so requires), the Indemnifying Party shall notify the
Indemnitee of its election whether to assume responsibility for such Third-Party
Claim (provided that if the Indemnifying Party does not so notify the Indemnitee
of its election within 30 days after receipt of such notice from the Indemnitee,
the Indemnifying Party shall be deemed to have elected not to assume
responsibility for such Third-Party Claim), and such Indemnitee shall cooperate
in the defense or settlement or compromise of such Third-Party Claim. After
notice from an Indemnifying Party to an Indemnitee of its election to assume
responsibility for a Third-Party Claim, such Indemnifying Party shall not be
liable to such Indemnitee under this Article V for any legal or other
expenses (except expenses approved in advance by the Indemnifying Party)
subsequently incurred by such Indemnitee in connection
31
with the defense thereof; PROVIDED, HOWEVER, that if the defendants in any
such claim include both the Indemnifying Party and one or more Indemnitees
and in such Indemnitees' reasonable judgment there exists a conflict of
interest between such Indemnitees and the Indemnifying Party such Indenmitees
shall have the right to employ separate counsel 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. If an Indemnifying Party elects not to
assume responsibility for a Third-Party Claim (which election may be made
only in the event of a good faith dispute that a claim was inappropriately
tendered under Section 5.2 or 5.3, as the case may be) such Indemnitee may
defend or (subject to the following sentence) seek to compromise or settle
such Third-Party Claim without prior written notice to the Indemnifying
Party, which shall have the option within fifteen days following the receipt
of such notice (i) to disapprove the settlement and assume all past and
future responsibility for the claim, including reimbursing the Indemnitee for
prior expenditures in connection with the claim, or (ii) to disapprove the
settlement and continue to refrain from participation in the defense of the
claim, in which event the Indemnifying Party shall have no further
right to contest the
32
amount or reasonableness of the settlement if the Indemnitee elects to
proceed therewith, or (iii) to approve the amount of the settlement,
reserving the Indemnifying Party's right to contest the Indemnitee's right to
indemnity, or (iv) to approve and agree to pay the settlement. In the vent
the Indemnifying Party makes no response to such written notice from the
Indemnitee, the Indemnifying Party shall be deemed to have elected option
(ii).
(c) If an Indemnifying Party chooses to defend or to seek to compromise
any Third-Party Claim, the Indemnitee shall make available to such Indemnifying
Party any personnel and any books, records or other documents within its control
or which it otherwise has the ability to make available that are necessary or
appropriate for such defense.
(d) Notwithstanding anything else in this Section 5.5 to the contrary,
an Indemnifying Party shall not settle or compromise any Third-Party Claim
unless (i) such settlement or compromise contemplates as an unconditional term
thereof the giving by such claimant or plaintiff to the Indemnitee of a written
release from all liability in respect of such Third-Party Claim and (ii) such
33
settlement does not provide for any non-monetary relief by Indemnitee unless
Indemnitee consents thereto. In the event the Indemnitee shall notify the
Indemnifying Party in writing that such Indemnitee declines to accept any such
settlement or compromise, such Indemnitee may continue to contest such Third-
Party Claim free of any participation by such Indemnifying Party, at such
Indemnitee's sole expense. In such event, the obligation of such Indemnifying
Party to such Indemnitee with respect to such Third-Party Claim shall be equal
to (i) the costs and expenses of such Indemnitee prior to the date such
Indemnifying Party notifies such Indemnitee of such offer of settlement or
compromise (to the extent such costs and expenses are otherwise indemnifiable
hereunder) plus (ii) the less of (A) the amount of any offer of settlement or
compromise which such Indemnitee declined to accept and (B) the actual
out-of-pocket amount such Indemnitee is obligated to pay subsequent to such
date as a result of such Indemnitee's continuing to pursue such Third-Party
Claim.
(e) Any claim on account of an Indemnifiable Loss which does not result
from a Third-Party Claim shall be asserted by written notice given by the
Indemnitee to the applicable Indemnifying Party. Such Indemnifying Party shall
have a period of 30 days
34
after the receipt of such notice within such 30-day period, such Indemnifying
Party shall be deemed to have refused to accept responsibility to make
payment. If such Indemnifying Party does not respond within such 30-day
period or rejects such claim in whole or in part, such Indemnitee shall be
free to pursue such remedies as may be available to such party under
applicable law or under this Agreement, the Merger Agreement or the
Indemnification Agreement.
(f) In addition to any adjustments required pursuant to Section 5.4, if
the amount of any Indemnifiable Loss shall, at any time subsequent to the
payment required by this Agreement, be reduced by recovery, settlement or
otherwise, the amount of such reduction, less any expenses incurred in
connection therewith, shall promptly be repaid by the Indemnitee to the
Indemnifying Party.
(g) In the event of payment by an Indemnifying Party to any Indemnitee
in connection with any Third-Party Claim, such Indemnifying Party shall be
subrogated to and shall stand in the place of such Indemnitee as to any events
or circumstances in respect of which such Indemnitee may have any right or claim
relating to such third-Party Claim against any claimant or
35
plaintiff asserting such Third-Party Claim. Such Indemnitee 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.
5.6 REMEDIES CUMULATIVE. The remedies provided in this Article V shall
be cumulative and shall not preclude assertion by any Indemnitee of any other
rights or the seeking of any and all other remedies against any Indemnifying
Party.
5.7 SURVIVAL OF INDEMNITIES. The obligations of each of M- tron and
Xxxxx under this Article V shall survive the sale or other transfer by it of any
assets or businesses or the assignment by it of any Liabilities, with respect to
any Indemnifiable Loss of the other related to such assets, businesses or
Liabilities.
36
5.8 TAX MATTERS. Notwithstanding anything to the contrary in this
Article V, any claim for indemnification with respect to any Liabilities which
are Tax liabilities of Xxxxx and M-tron shall be governed by the terms and
provisions of Article II hereof.
37
ARTICLE VI
EMPLOYEE BENEFIT PLAN
6.1 EMPLOYEE BENEFITS PLANS.
(a) 401(K) PLAN. The Xxxxx Corporation 401(k) Plan (the "401(k) Plan")
shall remain the plan and obligation of Xxxxx after the Separation. After the
Separation, M-tron shall be a participating employer in the 401(k) Plan, and
M-tron employees shall remain participants in the 401(k) Plan until such time as
M-tron determines otherwise. If and when M-tron wants to remove its employees
from the 401(k) Plan, the parties will cooperate to accomplish that.
ARTICLE VII
PROVISION OF MANAGEMENT ADVISORY SERVICES TO M-TRON
7.1 PROVISIONS OF SERVICES. Xxxxx shall continue to provide
management advisory and oversight services (the
38
"Services") to M-tron, which may include strategic, merger and acquisition
and financial advice. Such Services are intended to be generally comparable
in type and quantity to that which Xxxxx provided to M-tron prior to the Time
of the Separation. Such services will terminate at such time as Xxxxx ceases
to own a majority of the voting power of M-tron.
7.2 PAYMENT. All out-of-pocket expenses related specifically to the
provision of services to M-tron, including without limitation outside counsel,
auditors, and tax advisors expenses, shall be charged to and paid promptly by
M-tron. In addition, M-tron shall pay to Xxxxx $100,000 per year which shall be
increased (i) beginning in 2001 by increases in the consumer price index over
the previous year, and (ii) as agreed between the parties, if the quantity of
Services provided shall be materially greater than contemplated herein.
7.3 (a) DISCLAIMER OF WARRANTIES. XXXXX DISCLAIMS ALL WARRANTIES,
EXPRESS OR IMPLIED, INCLUDING, BUT NOT LIMITED TO, THE IMPLIED WARRANTIES OF
MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE, WITH RESPECT TO THE
SERVICES. XXXXX MAKES NO REPRESENTATIONS OR WARRANTIES AS TO THE QUALITY,
SUITABILITY OR ADEQUACY OF THE SERVICES FOR ANY PURPOSE OR USE.
39
(b) LIMITATIONS OF LIABILITY/INDEMNIFICATION OF M-TRON. Xxxxx
shall have no liability to M-tron with respect to its furnishing any of the
Services hereunder except for liabilities arising out of willful misconduct
occurring after the Time of the Separation. Xxxxx will indemnify, defend and
hold harmless Xxxxx'x Indemnities in respect of all liabilities related to,
arising from, asserted against or associated with such willful misconduct.
Such indemnification obligation shall be a liability of Xxxxx and the
provisions of Article V with respect to indemnification shall govern with
respect thereto. In no event shall Xxxxx have any liability for any
incidental, indirect, special or consequential damages, whether or not caused
by or resulting from negligence or breach of obligations hereunder and
whether or not endorsed of the possibility of the existence of such damages.
(c) LIMITATION OF LIABILITY; INDEMNIFICATION OF XXXXX. M-tron shall
indemnify and hold harmless Xxxxx Indemnities in respect of all liabilities
related to, arising from, asserted against or associated with Xxxxx'x furnishing
or failing to furnish the Services provided for in this Agreement, other than
liabilities arising out of the willful misconduct of Xxxxx
40
following the Date of the Separation. Such indemnification obligation shall
be a liability of M-tron, and the provisions of Article V with respect to
indemnification shall govern with respect thereto. IN NO EVENT SHALL XXXXX
HAVE ANY LIABILITY FOR ANY INCIDENTAL, INDIRECT, SPECIAL OR CONSEQUENTIAL
DAMAGES, WHETHER OR NOT CAUSED BY OR RESULTING FROM NEGLIGENCE OR BREACH OF
OBLIGATIONS HEREUNDER AND WHETHER OR NOT INFORMED OF THE POSSIBILITY OF THE
EXISTENCE OF SUCH DAMAGES AND ITS MAXIMUM LIABILITY SHALL BE LIMITED TO
MANAGEMENT FEES RECEIVED AFTER THE TIME OF SEPARATION.
(d) SUBROGATION OF RIGHTS VIS-A-VIS THIRD PARTY CONTRACTORS.
In the event any liability arises from the performance of Services hereunder by
a third party contractor, M-tron shall be subrogated to such rights, if any, as
Xxxxx may have against such third party contractor with respect to the Services
provided by such third party contractor to or on behalf of M-tron.
(e) LAWS AND GOVERNMENTAL REGULATIONS. M-TRON SHALL BE
RESPONSIBLE FOR (I) COMPLIANCE WITH ALL LAWS AND GOVERNMENTAL REGULATIONS
EFFECTING ITS BUSINESS AND (II) ANY USE M-TRON MAY MAKE OF THE SERVICES TO
ASSIST IT IN COMPLYING WITH SUCH LAWS AND
41
GOVERNMENTAL REGULATIONS.
(f) RELATIONSHIP OF PARTIES. Nothing in this Agreement shall be deemed
or construed by the parties or any third party as creating the relationship of
principal and agent, partnership or joint venture between the parties, it being
understood and agreed that no provision contained herein, and no actions of the
parties, shall be deemed to crate any relationship between the parties other
than the relationship of independent contractor nor be deemed to vest any
rights, interest or claims in any third parties.
ARTICLE VIII
MISCELLANEOUS AND GENERAL
8.1 NO-ARMS LENGTH. EACH OF THE PARTIES HERETO RECOGNIZES AND AGREES
THAT THIS AGREEMENT AND CERTAIN DECISIONS AND/OR ACTIONS WHICH MAY BE MADE OR
TAKEN PURSUANT TO OR IN CONNECTION WITH THIS AGREEMENT AND/OR OTHER AGREEMENTS,
ARRANGEMENTS OR RELATIONS HAVE NOT BEEN OR MAY NOT IN THE FUTURE BE THE RESULT
OF ARMS-LENGTH NEGOTIATIONS, AND AS A RESULT MAY BE MORE OR LESS FAVORABLE TO
ONE PARTY OR THE OTHER THAN MIGHT OTHERWISE RESULT.
42
8.2 MODIFICATION OR AMENDMENT. The parties hereto may modify or amend
this Agreement by written agreement executed ad delivered by authorized officers
of the respective parties.
8.3 COUNTERPARTS. For the convenience of the parties hereto, this
Agreement may be executed in separate counterparts, each such counterpart
being deemed to be an original instrument, and which counterparts shall
together constitute the same agreement.
8.4 GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the laws of the State of New York,
without reference to its conflicts of law principles.
8.5 NOTICES. Any notice, request, instruction or other document to be
given hereunder by any party to the other shall be in writing and shall be
deemed to have been duly given (i) on the date of delivery if delivered by
facsimile (upon confirmation of receipt) or personally, (ii) on the first
business day following the date of dispatch if delivered by Federal Express or
other next-day courier service, or (iii) on the third business day
43
following the date of mailing if delivered by registered or certified mail,
return receipt requested, postage prepaid. All notices hereunder shall be
delivered as set forth below, or pursuant to such other instructions as may
be designated in writing by the party to receive such notice:
If to Xxxxx:
Xxxxx Corporation
000 Xxxxxxxx Xxxxx Xxxxxx
Xxx, XX 00000
Attn: Chief Financial Officer
Telecopy: (000) 000-0000
Telephone: (000) 000-0000
If to M-tron to:
M-tron Industries, Inc.
000 Xxxxxxx Xxxxxx
XX Xxx 000
Xxxxxxx, XX 00000
Attn: President
Telecopy: (000) 000-0000
Telephone: (000) 000-0000
8.6 CAPTIONS. All Article, Section and paragraph captions herein are
for convenience of reference only, do not constitute part of this Agreement and
shall not be deemed to limit or otherwise affect any of the provisions hereof.
8.7 NO THIRD PARTY BENEFICIARY. This Agreement is for the
44
purpose of defining the respective rights and obligations of the parties
hereto and is not for the benefit of any employee, creditor or other third
party, except as may be expressly set forth herein.
8.8 SUCCESSORS AND ASSIGNS. No party to this Agreement shall convey,
assign or otherwise transfer any of its rights or obligations under this
Agreement without the express written consent of the other party hereto in its
sole and absolute discretion. Any such conveyance, assignment or transfer
without the express written consent of the other party shall be void AB INITIO.
No assignment of this Agreement or any rights hereunder shall relieve the
assigning party of its obligations hereunder. Any successor by merger to a party
to this Agreement shall be substituted for such party as a party to this
Agreement, and all obligations, duties and liabilities of the substituted party
under this Agreement shall continue in full force and effect as obligations,
duties and liabilities of the substituting party, enforceable against the
substituting party as a principal, as though no substitution had been made.
8.9 CERTAIN OBLIGATIONS. Whenever this Agreement requires
45
any of the Subsidiaries of any party to take any action, this Agreement will
be deemed to include an undertaking on the part of such party to cause such
Subsidiary to take such action.
8.10 SPECIFIC PERFORMANCE. In the event of any actual or threatened
default in, or breach of, any of the terms, conditions and provisions of this
Agreement, the party or parties who are or are to be thereby aggrieved shall
have the right of specific performance and injunctive relief giving effect to
its or their rights under this Agreement, in addition to any and all other
rights and remedies at law as provided Section 8.12 hereof, and all such rights
and remedies shall be cumulative. The parties agree that the remedies at law for
any breach or threatened breach, including monetary damages, are inadequate
compensation for any loss and that any defense in any action for specific
performance that a remedy at law would be adequate is waived.
8.11 SEVERABILITY. If any provision of this Agreement or the
application thereof to any Person or circumstance is determined to be invalid,
void or unenforceable, the remaining provisions hereof, or the application of
such provision to Persons or circumstances other than those remaining provisions
46
hereof, or the application of such provision to Persons or circumstances other
than those as to which it has been held invalid or unenforceable, shall remain
in full force and effect and shall in no way be affected, impaired or
invalidated thereby, so long as the economic or legal substance of
the transactions contemplated hereby is not affected in any manner adverse to
any party. Upon any such determination, the parties shall negotiate in good
faith in an effort to agree upon a suitable and equitable substitute provision
to effect the original intent of the parties.
8.12 ARBITRATION. Any dispute with respect to this Agreement shall be
arbitrated in New York City or Westchester County, NY in accordance with the
rules of the American Arbitration Association.
IN WITNESS WHEREOF, this Agreement has been duly executed and
delivered by the duly authorized officers of the parties hereto as of the date
first above written.
XXXXX CORPORATION
By:
--------------------------
Name:
Title:
M-TRON INDUSTRIES, INC.
By:
----------------------
Name:
Title:
47
