<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
____________
FORM 8-K
CURRENT REPORT
____________
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report
(Date of earliest event reported): September 27, 1997
BEI Electronics, Inc.
------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 0-17885 71-0455756
- ----------------- ----------------------- -------------------
(State of (Commission File Number) (IRS Employer
Incorporation) Identification No.)
83 Hobart Street, Hackensack, New Jersey 07601
---------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
(201) 488-4960
----------------------------------------------------------
(Registrant's telephone number, including area code)
<PAGE>
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS.
On September 27, 1997, BEI Electronics, Inc. ("Electronics") distributed
all of the issued and outstanding shares of Common Stock, par value $0.001 per
share, of its wholly-owned subsidiary, BEI Technologies, Inc., a Delaware
corporation ("Technologies"). The distribution ("Distribution") was made in the
form of a dividend to holders of record of Electronics Common Stock at the close
of business on September 24, 1997. Electronics shareholders of record were
entitled to receive one share of Technologies Common Stock for each share of
Electronics Common Stock owned. Technologies now owns two former wholly-owned
subsidiaries of Electronics, BEI Sensors & Systems Company, Inc. and Defense
Systems Company, Inc. As a result of the Distribution, Electronics no longer
holds an interest in its former business as a manufacturer of electronic sensors
and motion control products. As a result of the Distribution, Technologies is
now an independent publicly-owned company.
Electronics retained its business as an emerging manufacturer of diagnostic
and therapeutic products focused on gynecology and women's health issues, which
it carries out through its majority-owned subsidiary, BEI Medical Systems
Company, Inc. ("Medical").
In connection with the Distribution, Electronics and Technologies entered
into a number of agreements including a Distribution Agreement, a Technology
Transfer and License Agreement, an Assumption of Liabilities and Indemnity
Agreement, a Trademark Assignment and Consent Agreement, a Corporate Services
Agreement, an Agreement Regarding Certain Representations and Covenants and a
Tax Allocation and Indemnity Agreement, copies of which are included as exhibits
hereto. Additional information concerning Technologies and the Distribution is
contained in Technologies' Registration Statement on Form 10, as amended (File
0-22799), filed under the Securities Exchange Act of 1934.
On September 27, 1997, Richard M. Brooks, George S. Brown, C. Joseph
Giroir, William G. Howard, Robert Mehrabian and Peter G. Paraskos resigned as
members of Electronics' Board of Directors. Each of them, other than Mr.
Paraskos, continues as a director of Technologies. On September 27, 1997, Ralph
M. Richart, a director of Medical, and Richard W. Turner, President and Chief
Executive Officer and a Director of Medical, became members of Electronics's
Board of Directors.
2
<PAGE>
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
(a) PRO FORMA FINANCIAL INFORMATION
PAGE NUMBER
5. Introduction to Pro Forma Condensed Consolidated Financial
Information
5. Pro Forma Condensed Consolidated Balance Sheet as of
June 28, 1997
6. Pro Forma Condensed Consolidated Statement of Operations
Nine Months ended June 28, 1997
7. Pro Forma Condensed Consolidated Statement of Operations
Year ended September 28, 1996
8. Notes to Pro Forma Condensed Consolidated Financial
Information
(b) EXHIBITS:
EXHIBIT NO.
2.1 Distribution Agreement between BEI Electronics, Inc. and BEI
Technologies, Inc. dated as of September 26, 1997
2.2 Corporate Services Agreement between BEI Technologies, Inc.
and BEI Electronics, Inc. dated as of September 26, 1997
2.3 Tax Allocation and Indemnity Agreement between BEI
Electronics, Inc. and BEI Technologies, Inc. dated as of
September 26, 1997
2.4 Assumption of Liabilities and Indemnity Agreement between
BEI Electronics, Inc. and BEI Technologies, Inc. dated as of
September 26, 1997
2.5 Technology Transfer and License Agreement by and between BEI
Electronics, Inc. and BEI Technologies, Inc. dated as of
September 26, 1997
3
<PAGE>
2.6 BEI Electronics, Inc. and BEI Technologies, Inc. dated as of
Trademark Assignment and Consent Agreement by and between
September 26, 1997
2.7 Agreement Regarding Certain Representations and Covenants by
and between BEI Electronics, Inc. and BEI Technologies, Inc.
dated as of September 26, 1997
4
<PAGE>
BEI ELECTRONICS, INC.
PRO FORMA FINANCIAL INFORMATION
The following unaudited pro forma condensed consolidated balance sheet of BEI
Electronics, Inc. ("Electronics") as of June 28, 1997 gives effect to the
distribution of all issued and outstanding shares of common stock of its wholly
owned subsidiary, BEI Technologies, Inc. ("Technologies"), to the common
stockholders of Electronics on September 27, 1997 ("the Distribution") and
related transactions as if the transactions had occurred as of June 28, 1997.
The unaudited pro forma condensed consolidated statements of operations for the
nine months ended June 28, 1997 and for the year ended September 28, 1996 give
effect to the Distribution and related transactions as if the transactions had
occurred at the beginning of the respective periods. The pro forma financial
information is not necessarily indicative of the financial position or results
of operations that would have occurred had the Distribution and related
transactions been consummated at the beginning of the periods presented, nor is
it necessarily indicative of future financial position or operating results.
PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
(UNAUDITED)
AS OF JUNE 28, 1997
(IN THOUSANDS)
<TABLE>
<CAPTION>
PRO FORMA PRO FORMA
HISTORICAL ADJUSTMENTS AS ADJUSTED
----------- ------------ -----------
<S> <C> <C> <C>
ASSETS
------
Current assets..................................... $ 55,672 ($49,018) (1)
9,000 (2)
(248) (3) $15,406
Equipment, furniture and fixtures, net............. 788 -- 788
Other assets....................................... 45,312 (37,650) (1) 7,662
-------- -------- -- -------
Total assets.................................. $101,772 ($77,916) $23,856
======== ======== =======
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
Current liabilities................................ $ 26,103 ($22,307) $ 3,796
Long-term debt, less current portion............... 62 -- 62
Other liabilities.................................. 18,802 (18,802) (1)
359 (3) 359
Minority interest in consolidated subsidiary....... 1,539 -- 1,539
STOCKHOLDERS' EQUITY
Common stock....................................... 10 (3) (1) 7
Additional paid-in capital......................... 35,928 (35,321) (1) --
(607) (3) --
Retained earnings.................................. 33,864 (15,771) (1) 18,093
Unearned restricted stock.......................... (1,286) 1,286 (1) --
Treasury stock..................................... (13,250) 13,250 (1) --
-------- -------- -- -------
Total stockholders' equity................... 55,266 (37,166) 18,100
-------- -------- -------
Total liabilities and stockholders' equity... $101,772 ($77,916) $23,856
======== ======== =======
</TABLE>
See accompanying notes.
5
<PAGE>
BEI ELECTRONICS, INC.
PRO FORMA CONDENSED
CONSOLIDATED STATEMENT OF OPERATIONS
(UNAUDITED)
FOR THE NINE MONTHS ENDED JUNE 28, 1997
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
PRO FORMA PRO FORMA
HISTORICAL ADJUSTMENTS AS ADJUSTED
----------- ------------ ------------
<S> <C> <C> <C>
Net Sales.............................................................. $ 7,606 $ -- $7,606
Cost of Sales.......................................................... 4,426 -- 4,426
------- ----- -------
3,180 -- 3,180
Selling, general and administrative expense............................ 6,012 357 (4) 6,369
Research, development and related expenses............................. 1,380 -- 1,380
------- ----- -------
7,392 357 7,749
------- ----- -------
Loss from operations................................................... (4,212) (357) (4,569)
Other income........................................................... 128 -- 128
Interest expense....................................................... (53) -- (53)
------- ----- -------
Loss before income taxes............................................... (4,137) (357) (4,494)
Income taxes (benefit)................................................. (1,422) (121) (4) (1,543)
------- ----- -------
Loss from continuing operations........................................ (2,715) ($236) ($2,951)
Income from discontinued operations, net of income taxes............... 3,183 ===== =======
-------
Net income............................................................. $ 468
=======
Earnings(loss) from continuing operations per common and common
equivalent share................................................... ($0.38) ($0.42)
Earnings from discontinued operations per common and common equivalent
share.............................................................. 0.45
-------
Earnings per common and common equivalent share........................ $ 0.07
=======
Shares used in per share computations.................................. 7,131 7,021
======= =======
</TABLE>
See accompanying notes.
6
<PAGE>
BEI ELECTRONICS PRO FORMA CONDENSED
CONSOLIDATED STATEMENT OF OPERATIONS
(UNAUDITED)
FOR THE YEAR ENDED SEPTEMBER 28, 1996
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
PRO FORMA PRO FORMA,
HISTORICAL ADJUSTMENTS AS ADJUSTED
----------- ------------ ------------
<S> <C> <C> <C>
Net Sales............................................................ $ 9,357 $ -- $ 9,357
Cost of Sales........................................................ 5,792 -- 5,792
------- ----- -------
3,565 -- 3,565
Selling, general and administrative expenses......................... 6,517 477 (4) 6,994
Research, development and related expenses........................... 1,328 -- 1,328
------- ----- -------
7,845 477 8,322
------- ----- -------
Loss from operations................................................. (4,280) (477) (4,757)
Other income......................................................... 324 -- 324
Interest expense..................................................... (110) -- (110)
------- ----- -------
Loss before income taxes............................................. (4,066) (477) (4,543)
Income taxes (benefit)............................................... (1,384) (162) (4) (1,546)
------- ----- -------
Loss from continuing operations...................................... (2,682) ($315) ($2,997)
Income from discontinued operations, net of income taxes............. 4,571 ===== ======
-------
Net income........................................................... $ 1,889
=======
Earnings (loss) from continuing operations per common and common
equivalent share.................................................... ($0.37) ($0.43)
=======
Earnings from discontinued operations per common and common
equivalent share.................................................... $ 0.64
-------
Earnings per common and common equivalent share...................... $ 0.27
=======
Shares used in per share computations................................ 7,108 6,926
======= =======
</TABLE>
See accompanying notes.
7
<PAGE>
BEI ELECTRONICS, INC.
NOTES TO PRO FORMA FINANCIAL INFORMATION
The unaudited pro forma condensed consolidated balance sheet as of June 28, 1997
and the unaudited pro forma condensed consolidated statements of operations for
the nine months ended June 28, 1997 and for the year ended September 28, 1996,
give effect to the following adjustments:
(1) Reflects the distribution of all of the issued and outstanding common stock
of Technologies to the common stockholders of Electronics.
(2) Reflects the receipt by Electronics of $9.0 million in cash as repayment of
a portion of amounts owed to Electronics by BEI Sensors & Systems Company,
Inc. (a wholly owned subsidiary of Technologies). Also gives effect to the
assumption by Technologies of net intercompany obligations payable by
Electronics to BEI Sensors & Systems, Inc. and Defense Systems Company,
Inc. (wholly owned subsidiaries of Technologies).
(3) Gives effect to the establishment of a valuation allowance for certain
deferred tax assets of Electronics. The valuation allowance was not
required prior to the Distribution because Technologies was included in a
consolidated group with Electronics for federal income tax purposes.
Taxable income of Technologies has been available to offset operating
losses and the reversal of timing differences related to the deferred tax
assets of Electronics. The charge related to the establishment of the
valuation allowance will be recorded by Electronics in the consolidated
statement of operations for the quarter ended September 28, 1997.
(4) Reflects estimated additional recurring general and administrative expenses
that would have been incurred had Electronics been a stand alone public
company, including fees for managerial services under the Corporate
Services Agreement with Technologies, and insurance, legal, accounting,
directors' fees and other costs of which a portion will no longer be
allocated to Technologies. Also, gives effect to the related pro forma
income tax benefit of such costs.
The pro forma condensed consolidated statements of operations include income tax
benefits from operating losses of Electronics. These tax benefits accrued to
Electronics as a result of the inclusion of taxable income from Technologies in
the companies' consolidated federal income tax returns. Operating losses
generated by Electronics in fiscal years 1998 and 1999 will also result in
federal income tax benefits as a result of loss carrybacks against consolidated
taxable income from fiscal years 1997 and 1996 (to the extent consolidated
taxable income from such years is not exceeded by losses in fiscal 1998 and
1999). For periods subsequent to fiscal 1999, the carryback of such losses will
not be available under the two year carryback limitation, and as a result, no
income tax benefit from any operating losses of Electronics would be recorded in
its consolidated statement of operations.
Historical earnings per common and common equivalent share is computed based on
the weighted average number of shares of common and common stock equivalents
(using the treasury stock method) outstanding during the period. Pro forma loss
from continuing operations per common share is based on the weighted average
number of shares of common stock outstanding; common stock equivalents are
excluded from the computation because their inclusion would be antidilutive.
8
<PAGE>
The pro forma effects of the Distribution and related transactions on the
consolidated financial statements of Electronics are based on management's
estimates, which are subject to revision when actual amounts are determined.
The actual effects of the transactions will be recorded in the consolidated
financial statements of Electronics which will be included in its Annual Report
on Form 10-K for the year ended September 28, 1997.
9
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
BEI ELECTRONICS, INC.
Dated: October 10, 1997 By: /s/ Thomas W. Fry
--------------------------------------
Thomas W. Fry
Vice President, Finance and Administration
Chief Financial Officer
10
<PAGE>
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
PAGE NUMBER
EXHIBIT IN SEQUENTIALLY
NUMBER DESCRIPTION NUMBERED VERSION
<S> <C>
2.1 Distribution Agreement between BEI Electronics, 12
Inc. and BEI Technologies, Inc. dated as of
September 26, 1997
2.2 Corporate Services Agreement between BEI 41
Electronics, Inc. and BEI Technologies, Inc. dated
as of September 26, 1997
2.3 Tax Allocation and Indemnity Agreement between 46
BEI Electronics, Inc. and BEI Technologies, Inc.
dated as of September 26, 1997
2.4 Assumption of Liabilities and Indemnity 59
Agreement between BEI Electronics, Inc. and BEI
Technologies, Inc. dated as of September 26, 1997
2.5 Technology Transfer and License Agreement by 72
and between BEI Electronics, Inc. and BEI
Technologies, Inc. dated as of September 26, 1997
2.6 Trademark Assignment and Consent Agreement by 84
and between BEI Electronics, Inc. and BEI
Technologies, Inc. dated as of September 26, 1997
2.7 Agreement Regarding Certain Representations and 98
Covenants by and between BEI Electronics, Inc.
and BEI Technologies, Inc. dated as of
September 26, 1997
</TABLE>
11
<PAGE>
EXHIBIT 2.1
DISTRIBUTION AGREEMENT
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
Article 1 Definitions................................................................. 1
1.1 General..................................................................... 1
1.2 References; Interpretation.................................................. 5
Article 2 Distribution And Other Transactions; Certain Covenants...................... 5
2.1 The Distribution And Other Transactions..................................... 5
(a) Certain Transactions................................................. 5
(b) Stock Dividend To BEI................................................ 5
(c) Charter; By-Laws..................................................... 5
(d) Directors............................................................ 5
(e) Certain Licenses And Permits......................................... 5
(f) Lease Amendments..................................................... 6
(g) Transfer Of Agreements............................................... 6
(h) Consents............................................................. 7
(i) Delivery Of Shares To Agent.......................................... 7
(j) Other Transactions................................................... 7
2.2 Financing................................................................... 7
2.3 Operations In Ordinary Course............................................... 7
2.4 Capital Structure........................................................... 8
2.5 Assumption And Satisfaction Of Liabilities.................................. 8
2.6 Resignations................................................................ 8
2.7 Further Assurances.......................................................... 8
2.8 No Representations Or Warranties............................................ 8
2.9 Elimination Of Guarantees................................................... 8
2.10 Witness Services............................................................ 9
2.11 Certain Postdistribution Transactions....................................... 9
2.12 Transfers Not Effected Prior To Effective Time; Transfers Deemed
Effective As Of Effective Time.............................................. 9
2.13 Ancillary Agreements........................................................ 10
Article 3 Access To Information....................................................... 10
3.1 Provision Of Corporate Records.............................................. 10
3.2 Access To Information....................................................... 10
3.3 Reimbursement; Other Matters................................................ 10
3.4 Confidentiality............................................................. 11
Article 4 Dispute Resolution.......................................................... 11
</TABLE>
i
<PAGE>
TABLE OF CONTENTS
(continued)
<TABLE>
<CAPTION>
PAGE
<S> <C>
Article 5 Insurance.............................................................. 13
5.1 Coverage............................................................... 13
5.2 Claims Following The Effective Time; Waiver............................ 13
5.3 Administration......................................................... 14
5.4 Insurance Proceeds..................................................... 14
5.5 Retrospectively Rated Policies......................................... 14
5.6 Agreement For Waiver Of Conflict And Shared Defense.................... 14
5.7 Cooperation............................................................ 14
5.8 Indemnity Agreement.................................................... 14
Article 6 Employee Obligations And Benefit Plans................................. 15
6.1 BEI Retirement Plan.................................................... 15
6.2 Supplemental Plan...................................................... 15
6.3 Stock Options And Restricted Stock..................................... 15
(a) Stock Options..................................................... 15
(b) Restricted Stock.................................................. 16
6.4 Other Benefits......................................................... 16
6.5 Severance Claims....................................................... 17
Article 7 Miscellaneous.......................................................... 17
7.1 Complete Agreement; Construction....................................... 17
7.2 Ancillary Agreements................................................... 17
7.3 Counterparts........................................................... 17
7.4 Survival Of Agreements................................................. 17
7.5 Expenses............................................................... 17
7.6 Notices................................................................ 18
7.7 Waivers................................................................ 18
7.8 Amendments............................................................. 18
7.9 Assignment............................................................. 18
7.10 Successors And Assigns................................................. 19
7.11 Termination............................................................ 19
7.12 Subsidiaries........................................................... 19
7.13 Third Party Beneficiaries.............................................. 19
7.14 Attorney Fees.......................................................... 19
7.15 Title And Headings..................................................... 19
</TABLE>
ii
<PAGE>
TABLE OF CONTENTS
(continued)
<TABLE>
<CAPTION>
PAGE
<S> <C>
7.16 Exhibits And Schedules.................................................... 19
7.17 Specific Performance...................................................... 19
7.18 Governing Law............................................................. 20
7.19 Consent To Jurisdiction................................................... 20
7.20 Severability.............................................................. 20
7.21 Force Majeure............................................................. 20
</TABLE>
iii
<PAGE>
DISTRIBUTION AGREEMENT
The following DISTRIBUTION AGREEMENT dated as of September 26, 1997, is
entered into by BEI ELECTRONICS, INC., a Delaware corporation ("BEI"), and BEI
TECHNOLOGIES, INC., a Delaware corporation ("Technologies").
The Board of Directors of BEI has determined to distribute to the holders
of shares of Common Stock, par value $0.001 per share, of BEI (the "BEI Common
Stock") shares of Common Stock, par value $0.001 per share, of Technologies (the
"Technologies Common Shares"). It is desirable to allocate and assign
responsibility for various matters affecting the activities of Technologies and
to set forth the principal corporate transactions required to effect such
distribution and other agreements that will govern certain other matters
following the distribution.
NOW, THEREFORE, in consideration of the mutual agreements, provisions and
covenants contained in this Agreement, the parties hereby agree as follows:
ARTICLE 1
DEFINITIONS
1.1 GENERAL. As used in this Agreement, the following terms shall have
the following meanings (such meanings to be equally applicable to both the
singular and plural forms of the terms defined):
"Action" shall mean any claim, action, suit, arbitration, inquiry,
proceeding or investigation by or before any court, any governmental or other
regulatory or administrative official, agency, body or commission or any
arbitration tribunal, including any claims or contract disputes concerning any
governmental contract.
"Affiliate" shall mean, when used with respect to a specified person,
another person that directly, or indirectly through one or more intermediaries,
controls or is controlled by or is under common control with the person
specified.
"Agent" shall mean ChaseMellon Shareholder Services, LLC, as transfer
agent for BEI and Technologies.
"Ancillary Agreements" shall mean all of the written agreements,
instruments, understandings, assignments or other arrangements (other than this
Agreement) entered into in connection with the transactions contemplated hereby,
including, without limitation, (i) the Tax Allocation and Indemnity Agreement,
(ii) the Technology Transfer and License Agreement, (iii) the Trademark
Assignment and Consent Agreement, (iv) the Assumption of Liabilities and
Indemnity Agreement, (v) the Tax Allocation and Indemnity Agreement, and (vi)
the Corporate Services Agreement.
1
<PAGE>
"BEI Business" shall mean the businesses of any division, Subsidiary
or investment of BEI (other than the Technologies Business) managed or operated
prior to the Effective Time by any such business entity.
"BEI Liabilities" shall mean collectively, (i) all the Liabilities of
BEI and its Subsidiaries under this Agreement and any of the Ancillary
Agreements and (ii) all the Liabilities of the parties hereto or their
respective Subsidiaries (whenever arising whether prior to, at or following the
Effective Time) arising out of or in connection with or otherwise relating to
the management or conduct before or after the Effective Time of the BEI
Business.
"BEI Restricted Stock Plan" shall mean the 1992 BEI Restricted Stock
Plan, as in effect at the Effective Time.
"BEI Retirement Plan" shall mean the BEI Retirement Savings Plan, as
in effect at the Effective Time.
"BEI Supplemental Plan" shall mean the BEI Deferred Compensation Plan,
as in effect on the Distribution Date.
"Claims Administration" shall mean (i) the processing of claims made
under Company Policies, including the reporting of claims and occurrences to the
appropriate insurance carriers and the collection of the proceeds of Company
Policies and (ii) in the case of the Technologies Business, the reporting to BEI
of any losses or claims which may cause the per-occurrence deductible or self-
insured retention or limits of any Company Policy to be exceeded.
"Code" shall mean the Internal Revenue Code of 1986, as amended, and
the Treasury regulations promulgated thereunder, including any successor
legislation.
"Commission" shall have the meaning set forth in Section 3.2(b).
"Company Policies" shall mean all Policies, current or past, under
which BEI or any subsidiary, affiliate or predecessor of BEI is a named insured.
"Conveyancing and Assumption Instruments" shall mean, collectively,
the various agreements, instruments and other documents to be entered into to
effect the transfer of assets and the assumption of Liabilities in the manner
contemplated by this Agreement.
"Corporate Services Agreement" shall mean the Corporate Services
Agreement dated as of the date hereof between BEI and Technologies.
"Credit Agreement" shall mean the line of credit agreement dated
September 27, 1997 with Canadian Imperial Bank of Commerce, the Assumption
Agreement dated as of September 15, 1997 related to the Series A and Series B
Senior Notes, the loan agreements related to the mortgage note dated
December 13, 1988, and any other related agreements or other financing
agreements which will be assumed by Technologies prior
2
<PAGE>
to the Distribution Date pursuant to Section 2.2 hereof and which are intended
to provide financing and working capital for Technologies after the
Distribution.
"Distribution" shall mean the distribution to holders of record of
shares of BEI Common Stock as of the Distribution Record Date of the
Technologies Common Shares owned by BEI on the basis of one Technologies Common
Share for every one share of BEI Common Stock. The Distribution shall be deemed
effective as of the Effective Time.
"Distribution Date" shall mean October 7, 1997, or such other date
as may hereafter be determined by BEI's Board of Directors as the date on or
after which certificates representing the Common Shares shall be distributed by
the Agent to holders of record of shares of BEI Common Stock on the Distribution
Record Date.
"Distribution Record Date" shall mean September 24, 1997, or such
other date as may hereafter be determined by BEI's Board of Directors as the
record date for the Distribution.
"Effective Time" shall mean midnight on September 27, 1997, or such
other date as may hereafter be determined by BEI's Board of Directors as the
date on which the Distribution shall be deemed effective.
"Indemnity Agreement" shall mean the Assumption of Liabilities and
Indemnity Agreement dated as of the date hereof between BEI and Technologies.
"Information Statement" shall mean the Information Statement sent to
the holders of shares of BEI Common Stock in connection with the Distribution,
including any amendment or supplement thereto.
"Insurance Proceeds" shall mean those monies (i) received by an
insured from an insurance carrier or (ii) paid by an insurance carrier on behalf
of an insured, in either case net of any applicable premium adjustment,
retrospectively-rated premium, deductible, retention, or cost of reserve paid or
held by or for the benefit of such insured.
"Insured Claims" shall mean those Liabilities that, individually or in
the aggregate, are covered within the terms and conditions of any Company
Policy, whether or not subject to deductibles, uncollectability or
retrospectively-rated premium adjustments, but only to the extent that such
Liabilities are within applicable Company Policy limits, including aggregates.
"Liabilities" shall mean any and all debts, liabilities and
obligations, absolute or contingent, matured or unmatured, liquidated or
unliquidated, accrued or unaccrued, known or unknown, whenever arising,
including, without limitation, those debts, liabilities and obligations arising
under any law, rule, regulation, Action, threatened Action, order or consent
decree of any court, any governmental or other regulatory or administrative
agency or commission or any award of any arbitration tribunal, and those arising
under any contract, guarantee, commitment or undertaking.
3
<PAGE>
"Person" shall mean any natural person, corporation, limited liability
company, business trust, joint venture, association, company, partnership or
government, or any agency or political subdivision thereof.
"Policies" shall mean insurance policies and insurance contracts of
any kind (other than life and benefits policies or contracts), including,
without limitation, primary, excess and umbrella policies, commercial general
liability policies, fiduciary liability, environmental impairment, director and
officer, health, automobile, aircraft, property and, casualty, workers'
compensation and employee dishonesty insurance policies, bonds and self-
insurance and captive insurance company arrangements, together with the rights,
benefits and privileges thereunder.
"Subsidiary" shall mean any corporation, partnership or other entity
of which another entity (i) owns, directly or indirectly, ownership interests
sufficient to elect a majority of the Board of Directors (or persons performing
similar functions) (irrespective of whether at the time any other class or
classes of ownership interests of such corporation, partnership or other entity
shall or might have such voting power upon the occurrence of any contingency) or
(ii) is a general partner or an entity performing similar functions (e.g., a
trustee).
"Tax" shall mean all Federal, state, local and foreign taxes and
assessments, including all interest, penalties and additions imposed with
respect to such amounts.
"Tax Agreement" shall mean the Tax Allocation and Indemnity Agreement
dated as of the date hereof between BEI and Technologies.
"Technologies Assets" shall mean, collectively, all the rights and
assets of BEI and its Subsidiaries relating to the Technologies Business,
including, without limitation, all the outstanding capital stock or other
interests of Subsidiaries of BEI conducting Technologies Business and the
technology, patents, trademarks and other intellectual property described in the
Technology Transfer and License Agreement.
"Technologies Business" shall mean the businesses heretofore conducted
by BEI, including but not limited to the sensors and defense businesses, other
than those medical device businesses conducted by BEI Medical Systems Company,
Inc. ("BEI Medical") prior to the Effective Time, and business activities
acquired, developed or established by or for Technologies or any of its
Subsidiaries after the Effective Time.
"Technologies Equity Plan" shall mean Technologies' 1997 Equity
Incentive Plan, as in effect at the Effective Time.
"Technologies Liabilities" shall mean, collectively, (i) all the
Liabilities of Technologies and its Subsidiaries under this Agreement and any of
the Ancillary Agreements and (ii) all the Liabilities of the parties hereto or
their respective Subsidiaries (whenever arising whether prior to, at or
following the Effective Time) arising out of or in connection with or otherwise
relating to the management or conduct before or after the Effective Time of the
Technologies Business.
4
<PAGE>
"Technology Transfer and License Agreement" shall mean the Technology
Transfer and License Agreement dated as of the date hereof between BEI and
Technologies.
"Trademark Assignment and Consent Agreement" shall mean the Trademark
Assignment and Consent Agreement dated as of the date hereof between BEI and
Technologies.
1.2 REFERENCES; INTERPRETATION. References to an "Exhibit" or to a
"Schedule" are, unless otherwise specified, to one of the Exhibits or Schedules
attached to this Agreement, and references to a "Section" are, unless otherwise
specified, to one of the Sections of this Agreement.
ARTICLE 2
DISTRIBUTION AND OTHER TRANSACTIONS; CERTAIN COVENANTS
2.1 THE DISTRIBUTION AND OTHER TRANSACTIONS.
(a) CERTAIN TRANSACTIONS. At or prior to the Effective Time:
(i) BEI shall contribute to Technologies the business entities
that are to comprise the Technologies Business (to the extent they are not owned
by Technologies or any of its Subsidiaries).
(ii) BEI shall transfer to Technologies effective as of the
Effective Time all of BEI's and its Subsidiaries' right, title and interest in
the Technologies Assets.
(iii) BEI shall transfer to Technologies and its Subsidiaries, all
other assets that relate to the BEI executive office and human resources
functions.
(b) STOCK DIVIDEND TO BEI. At or prior to the Effective Time,
Technologies shall issue to BEI as a stock dividend the number of Technologies
Common Shares required to effect the Distribution less the number of
Technologies Common Shares already owned by BEI.
(c) CHARTER; BY-LAWS. Technologies' Certificate of Incorporation was
filed with the Delaware Secretary of State on June 30, 1997, and the Board of
Directors of Technologies adopted the Bylaws of Technologies at a meeting held
on June 30, 1997.
(d) DIRECTORS. At or prior to the Effective Time, BEI, as the sole
shareholder of Technologies, shall have taken all necessary action to elect, or
cause to be elected, to the Board of Directors of Technologies the individuals
identified in the Information Statement as directors of Technologies, such
elections to be effective on or prior to the Effective Time, with the specific
date to be set by BEI in its discretion.
(e) CERTAIN LICENSES AND PERMITS. At or prior to the Effective Time
or as soon as reasonably practicable thereafter, all transferrable licenses,
permits and authorizations issued by governmental or regulatory entities which
relate to the Technologies Business but
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which are held in the name of BEI or any of its Subsidiaries (other than any
Subsidiary of Technologies), or any of their respective employees, officers,
directors, stockholders, agents, or otherwise, on behalf of Technologies (or its
Subsidiaries) shall be duly and validly transferred by BEI to Technologies (or
its Subsidiaries).
(f) LEASE AMENDMENTS. At or prior to the Effective Time, or as soon
as reasonably practicable thereafter, amendments shall be executed to each of
the leases to which BEI is a party and which provide for the lease of real or
personal property representing Technologies Assets or relating to the
Technologies Business which amendments will provide for the substitution of
Technologies for BEI as lessee or lessor, as the case may be, and excuse BEI
from any future liabilities or responsibilities with respect thereto.
(g) TRANSFER OF AGREEMENTS.
(i) BEI hereby agrees that at or prior to the Effective Time or as
soon as reasonably practicable thereafter, subject to the limitations set forth
in this Section 2.1(g) and the terms of the Ancillary Agreements, it will, and
it will cause its Subsidiaries (other than Technologies or any of its
Subsidiaries) to, assign, transfer and convey to Technologies all of BEI's or
such Subsidiaries' respective right, title and interest in and to any and all
agreements that, in BEI's sole judgment, relate exclusively to the Technologies
Business.
(ii) Subject to the provisions of this Section 2.1(g) and the terms
of the Ancillary Agreements, any agreement to which either or both of the
parties hereto or any of their Subsidiaries is a party that inures, in BEI's
sole judgment, to the benefit of both the BEI Business and the Technologies
Business shall be assigned in part, on or prior to the Effective Time or as soon
as reasonably practicable thereafter, so that each party shall be entitled to
the rights and benefits inuring to its business under such agreement.
(iii) The assignee of any agreement assigned, in whole or in part,
hereunder (an "Assignee"), shall assume and agree to pay, perform, and fully
discharge all obligations of BEI under such agreement or, in the case of a
partial assignment under paragraph (g) (ii), Technologies's related portion of
such obligations as determined in accordance with the terms of the relevant
agreement, where determinable on the face thereof, and otherwise as determined
in accordance with the practice of the parties prior to the Distribution.
(iv) Notwithstanding anything in this Agreement to the contrary,
this Agreement shall not constitute an agreement to assign any agreement, in
whole or in part, or any rights thereunder if the agreement to assign or attempt
to assign, without the consent of a third party, would constitute a breach
thereof or in any way adversely affect the rights of the Assignee thereof. Until
such consent is obtained, or if an attempted assignment thereof would be
ineffective or would adversely affect the rights of any party hereto so that the
Assignee would not, in fact, receive all such rights, the parties will cooperate
with each other in any arrangement designed to provide for the Assignee the
benefits of, and to permit the Assignee to assume liabilities under, any such
agreement.
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(h) CONSENTS. The parties hereto shall use commercially reasonable
efforts to obtain required consents to assignment of agreements hereunder.
(i) DELIVERY OF SHARES TO AGENT. At or prior to the Effective Time,
BEI shall deliver to the Agent the share certificate or certificates
representing the Technologies Common Shares issued to BEI by Technologies,
pursuant to Section 2.1(b) and shall instruct the Agent to distribute, on or as
soon as practicable following the Distribution Date, such Common Shares to
holders of record of shares of BEI Common Stock on the Distribution Record Date
as further contemplated by, and subject to the conditions contained in, the
Information Statement and this Agreement. Technologies shall provide all share
certificates that the Agent shall require in order to effect the Distribution.
(j) OTHER TRANSACTIONS. At or prior to the Effective Time, BEI and
Technologies shall have consummated those other transactions in connection with
the Distribution that are contemplated by the Information Statement and not
specifically referred to in subparagraphs (a)-(i) above.
2.2 FINANCING.
(a) Each of the parties hereto shall take all actions necessary to
cause Technologies immediately prior to the Effective Time: (i) to assume BEI's
rights and obligations under the Credit Agreements, provided that BEI shall have
no obligation to guarantee or otherwise provide credit support or enhancement
for the obligations of Technologies under such Credit Agreements; and (ii) to
assume BEI's intercompany payable to Defense Systems Company, Inc. ("Defense").
(b) Each of the parties hereto shall take all actions necessary such
that immediately prior to the Effective Time, BEI Sensors and Systems Company,
Inc. ("Sensors") shall pay BEI up to $9.0 million in partial satisfaction of the
intercompany obligation owed by Sensors to BEI. Immediately following such
payment, BEI shall contribute the balance of its intercompany receivable from
Sensors to Technologies.
(c) Prior to the Effective Time, each of the parties shall take all
actions necessary to cause Electronics to exchange its intercompany receivable
from BEI Medical Systems Company, Inc. ("Medical") for common stock of Medical
valued at $37.00 per share of common stock.
(d) Prior to the Effective Time, each of the parties hereto shall take
all actions necessary to cause Technologies to tender to Defense the
intercompany receivable from Sensors (contributed to Technologies pursuant to
the second sentence of Section 2.2(b) hereof) in partial satisfaction of the
intercompany payable to Defense (assumed by Technologies pursuant to clause (ii)
of Section 2.2(a) hereof).
2.3 OPERATIONS IN ORDINARY COURSE. Each of BEI and Technologies agrees
that, except as otherwise provided in any Ancillary Agreement or this Agreement
or as otherwise mutually agreed between BEI and Technologies, during the period
from the date of this Agreement through the Effective Time, it will, and will
cause their respective Subsidiaries during such period to, conduct its and their
respective businesses in a manner substantially consistent with current and past
operating practices and in the ordinary course, including, without limitation,
with respect to the payment and administration of accounts payable and the
administration of accounts receivable, the purchase of capital assets and
equipment and the management of inventories.
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2.4 CAPITAL STRUCTURE. Each of BEI and Technologies agrees to use
commercially reasonable efforts to achieve both an allocation of consolidated
indebtedness of BEI and a capital structure of Technologies which substantially
reflects the capital structure after the Distribution of Technologies set forth
in the Information Statement under the heading "Capitalization."
2.5 ASSUMPTION AND SATISFACTION OF LIABILITIES. Except as otherwise
specifically set forth in any Ancillary Agreement, from and after the Effective
Time, (i) BEI shall, and shall cause its Subsidiaries to, assume, pay, perform
and discharge all BEI Liabilities, and (ii) Technologies shall, and shall cause
its Subsidiaries to, assume, pay, perform and discharge all Technologies
Liabilities.
2.6 RESIGNATIONS. BEI shall cause all its directors, officers and
employees, other than those continuing in their present roles, as described in
the Information Statement, to resign, effective as of the Effective Date, from
all positions as directors, officers and employees of BEI or as officers or
directors of BEI Medical or its subsidiaries.
2.7 FURTHER ASSURANCES. In case at any time after the Effective Time any
further action is reasonably necessary or desirable to carry out the purposes of
this Agreement and the Ancillary Agreements, the proper officers of each party
to this Agreement shall take all such necessary action. Without limiting the
foregoing, BEI and Technologies shall use commercially reasonable efforts to
obtain all consents and approvals, to enter into all amendatory agreements and
to make all filings and applications that may be required for the consummation
of the transactions contemplated by this Agreement and the Ancillary Agreements,
including, without limitation, all applicable governmental and regulatory
filings and novations.
2.8 NO REPRESENTATIONS OR WARRANTIES. Each of the parties hereto
understands and agrees that, except as otherwise expressly provided, no party
hereto is, in this Agreement or in any other agreement or document contemplated
by this Agreement or otherwise, making any representation or warranty
whatsoever, including, without limitation, as to title, value or legal
sufficiency. It is also agreed and understood that all assets either
transferred to or retained by the parties, as the case may be, shall be "as is,
where is" and that (subject to Section 2.7) the party to which such assets are
to be transferred hereunder shall bear the economic and legal risk that any
conveyances of such assets shall prove to be insufficient or that such party's
or any of the Subsidiaries' title to any such assets shall be other than good
and marketable and free from encumbrances. Similarly, each party hereto
understands and agrees that no party hereto is, in this Agreement or in any
other agreement or document contemplated by this Agreement or otherwise,
representing or warranting in any way that the obtaining of any consents or
approvals, the execution and delivery of any amendatory agreements and the
making of any filings or applications contemplated by this Agreement will
satisfy the provisions of any or all applicable agreements or the requirements
of any or all applicable laws or judgments, it being agreed and understood that
the party to which any assets are transferred shall bear the economic and legal
risk that any necessary consents or approvals are not obtained or that any
requirements of laws or judgments are not complied with.
2.9 ELIMINATION OF GUARANTEES. Except as otherwise specified in any
Ancillary Agreement, BEI and Technologies shall use commercially reasonable
efforts to have, on or prior
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to the Effective Time, or as soon as reasonably practicable thereafter, BEI and
any of its Subsidiaries removed as guarantor of or obligor for any Technologies
Liability or Liabilities. To the extent that BEI or any of its Subsidiaries
cannot be removed as guarantor of or obligor for any such Technologies Liability
or Liabilities, Technologies agrees that until such Technologies Liability or
Liabilities shall have been discharged in full, Technologies will take no
action, and will not permit any of its Subsidiaries to take any action, which
will have the effect of increasing the contingent liability or exposure of BEI
or any of its Subsidiaries with respect to such Technologies Liability or
Liabilities.
2.10 WITNESS SERVICES. At all times from and after the Effective Time,
each of BEI and Technologies shall use commercially reasonable efforts to make
available to each other, upon reasonable written request, its and its
Subsidiaries' officers, directors, employees and agents as witnesses to the
extent that (i) such persons may reasonably be required in connection with the
prosecution or defense of any Action in which the requesting party may from time
to time be involved and (ii) there is no conflict in the Action between the
requesting party and itself. A party providing witness services to the other
party under this Section shall be entitled to receive from the recipient of such
services, upon the presentation of invoices therefor, payments for such amounts
relating to supplies, disbursements and other out-of-pocket expenses and direct
and indirect costs of employees who are witnesses as may be reasonably incurred
in providing such witness services.
2.11 CERTAIN POSTDISTRIBUTION TRANSACTIONS. Each of BEI and Technologies
agrees that (i) it shall comply with and otherwise not take action inconsistent
with each representation and statement made, or to be made, to Davis, Polk &
Wardwell in connection with such firm's rendering an opinion to BEI and
Technologies as to certain tax aspects of the Distribution and (ii) until two
years after the Distribution Date, it will maintain its status as a company
engaged in the active conduct of a trade or business, as defined in Section
355(b) of the Code.
2.12 TRANSFERS NOT EFFECTED PRIOR TO EFFECTIVE TIME; TRANSFERS DEEMED
EFFECTIVE AS OF EFFECTIVE TIME. To the extent that any transfers contemplated
by this Article II shall not have been consummated at or prior to the Effective
Time, the parties shall cooperate to effect such transfers as promptly following
the Effective Time as shall be practicable. Nothing herein shall be deemed to
require the transfer of any assets or the assumption of any Liabilities which by
their terms or operation of law cannot be transferred; provided, however, that
the parties hereto and their respective Subsidiaries shall cooperate to seek to
obtain any necessary consents or approvals for the transfer of all assets and
Liabilities contemplated to be transferred pursuant to this Article II. In the
event that any such transfer of assets or Liabilities has not been consummated,
from and after the Effective Time, the party retaining such asset or Liability
shall hold such asset in trust for the use and benefit of the party entitled
thereto (at the expense of the party entitled thereto) or retain such Liability
for the account of the party by whom such Liability is to be assumed pursuant
hereto, as the case may be, and take such other action as may be reasonably
requested by the party to whom such asset is to be transferred, or by whom such
Liability is to be assumed, as the case may be, in order to place such party,
insofar as is reasonably possible, in the same position as would have existed
had such asset or Liability been transferred as contemplated hereby. As and
when any such asset or Liability becomes transferable, such transfer shall be
effected forthwith. The parties agree that, as of the Effective
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Time, each party hereto shall be deemed to have acquired complete and sole
beneficial ownership over all of the assets, together with all rights, powers
and privileges incident thereto, and shall be deemed to have assumed in
accordance with the terms of this Agreement all of the Liabilities, and all
duties, obligations and responsibilities incident thereto, which such party is
entitled to acquire or required to assume pursuant to the terms of this
Agreement.
2.13 ANCILLARY AGREEMENTS. At or prior to the Effective Time, each of BEI
and Technologies shall enter into, and/or (where applicable) shall cause their
respective Subsidiaries to enter into, the Ancillary Agreements and any other
agreements in respect of the Distribution reasonably necessary or appropriate in
connection with the transactions contemplated hereby and thereby.
ARTICLE 3
ACCESS TO INFORMATION
3.1 PROVISION OF CORPORATE RECORDS. After the Effective Time, upon the
prior written request by one party for specific and identified agreements,
documents, books, records or files including, without limitation, computer
files, microfiche, tape recordings and photographs (collectively, "Records"),
relating to or affecting the requesting party, the other party shall arrange, as
soon as reasonably practicable following the receipt of such request, for the
provision of appropriate copies of such Records (or the originals thereof if the
party making the request has a reasonable need for such originals) in the
possession of such other party or any of its Subsidiaries, but only to the
extent such items are not already in the possession of the requesting party.
3.2 ACCESS TO INFORMATION.
(a) From and after the Effective Time, BEI and Technologies shall
afford to the other and its authorized accountants, counsel and other designated
representatives (including governmental representatives and auditors in
connection with governmental claims or audits) reasonable access during normal
business hours, subject to appropriate restrictions for classified, privileged
or confidential information, to the personnel, properties, books and records of
such party and its Subsidiaries insofar as such access is reasonably required by
the other party.
(b) For a period of five years following the Effective Time, each of
BEI and Technologies shall provide to the other, promptly following such time at
which such documents shall be filed with the Securities and Exchange Commission
(the "Commission"), all documents that shall be filed by it and by any of its
respective Subsidiaries with the Commission pursuant to the periodic and interim
reporting requirements of the Securities Exchange Act of 1934, and the rules and
regulations of the Commission promulgated thereunder.
3.3 REIMBURSEMENT; OTHER MATTERS.
(a) Except to the extent otherwise contemplated by any Ancillary
Agreement, a party providing Records or access to information to the other party
under this Article III shall
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be entitled to receive from the recipient, upon the presentation of invoices
therefor, payments for such amounts relating to supplies, disbursements and
other out-of-pocket expenses as are reasonably incurred in providing such
Records or access to information.
(b) The parties hereto shall comply with those document retention
policies set forth in Schedule 3.3(b) hereto or established and agreed to in
writing by their respective authorized officers on or prior to the Effective
Time in respect of Records and related matters.
3.4 CONFIDENTIALITY. Each of BEI and its Subsidiaries and Technologies
and its Subsidiaries shall not use or permit the use of (without the prior
written consent of the other) and shall hold, and shall cause its consultants
and advisors to hold, in strict confidence, all information concerning the other
parties in its possession, its custody or under its control (except to the
extent that (A) such information has been in the public domain or becomes part
of the public domain through no fault of such party, (B) such information has
been later lawfully acquired by such party, without an obligation of confidence,
from a third party who is legally free to disclose such information, (C) this
Agreement or any other Ancillary Agreement or any other agreement entered into
pursuant hereto permits such use or disclosure of such information or (D) such
information is independently developed by such party without reference to such
information) to the extent such information (x) relates to the period up to the
Effective Time, (y) relates to any Ancillary Agreement or (z) is obtained in the
course of performing services for the other party pursuant to any Ancillary
Agreement, and each party shall not (without the prior written consent of the
other) otherwise release or disclose such information to any other person,
except such party's auditors and attorneys, unless compelled to disclose such
information by judicial or administrative process or unless such disclosure is
required by law and such party has used commercially reasonable efforts to
consult with the other affected party or parties prior to such disclosure. To
the extent that a party hereto is compelled by judicial or administrative
process to disclose such information under circumstances in which any
evidentiary privilege would be available, such party agrees to assert such
privilege in good faith prior to making such disclosure. Each of the parties
hereto agrees to consult with each relevant other party in connection with any
such judicial or administrative process, including, without limitation, in
determining whether any privilege is available, and further agrees to allow each
such relevant party and its counsel to participate in any hearing or other
proceeding (including, without limitation, any appeal of an initial order to
disclose) in respect of such disclosure and assertion of privilege.
ARTICLE 4
DISPUTE RESOLUTION
In the event of a controversy, dispute or claim arising out of, in
connection with, or in relation to the interpretation, performance,
nonperformance, validity or breach of this Agreement or any of the Ancillary
Agreements or otherwise arising out of, or in any way related to this Agreement
or any of the Ancillary Agreements, including, without limitation, any claim
based on contract, tort, statute or constitution (collectively, "Agreement
Disputes"), the Presidents (or their designees) of the respective parties shall
negotiate in good faith for a reasonable period of time to settle such Agreement
Dispute.
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If after such reasonable period such Presidents (or their designees) are
unable to settle such Agreement Dispute (and in any event after 60 days have
elapsed from the time the parties began such negotiations), such Agreement
Dispute shall be determined, at the request of either party, by arbitration
before a single arbitrator conducted in San Francisco, California, before and in
accordance with the then-existing Rules of Practice and Procedure of the San
Francisco office of JAMS/Endispute, Inc. ("JAMS") (the "Rules"), and any
judgment or award rendered by the arbitrator shall be final, binding and
nonappealable (except upon grounds specified in 9 U.S.C. section 10 or
California Code of Civil Procedure section 1285 et seq. as in effect on the date
hereof), and judgment may be entered by any state or Federal court having
jurisdiction thereof in accordance with Section 7.19 hereof. Each party shall
have the right to conduct the following discovery: one-time service of up to 25
document requests upon the other party, with receipt of all responsive documents
within 30 days; exchange of witness lists identifying any witnesses the party
intends to call at the arbitration hearing and any other persons with material
information about the dispute, including a brief description of each identified
person's knowledge; the taking of depositions of any fact (non-expert)
witnesses, however, the total time for all of each party's depositions of fact
witnesses shall not exceed ten eight-hour days, including breaks; and the
designation of up to three expert witnesses per party, with the right to depose
the opposing party's experts, however the total time for all of each party's
depositions of expert witnesses shall not exceed two eight-hour days, including
breaks. Any controversy concerning whether an Agreement Dispute is an
arbitrable Agreement Dispute, whether arbitration has been waived, whether an
assignee of this Agreement is bound to arbitrate, or as to the interpretation of
enforceability of this Article 4 shall be determined by the arbitrator. The
arbitrator shall be a retired or former judge of any Federal or California trial
or appellate court or such other qualified person as the parties may agree to
designate, provided such individual has had substantial professional experience
with regard to settling commercial disputes. The arbitration hearing shall
commence no later than six months following the service of the Demand for
Arbitration. The arbitrator shall make detailed findings of fact and law in
writing in support of his or her decision and shall serve his or her award and
findings of fact within 15 days following the later of the conclusion of the
arbitration hearing or submission of the final briefs. The arbitrator shall be
entitled, if appropriate, to award any remedy in such proceedings, including,
without limitation, monetary damages, specific performance and all other forms
of legal and equitable relief; provided, however, the arbitrator shall not be
entitled to award punitive damages and shall not reform, modify or materially
change this Agreement or any of the Ancillary Agreements. In his or her award
the arbitrator shall allocate, in his or her discretion, among the parties to
the arbitration all costs of the arbitration, including, without limitation, the
fees and expenses of the arbitrator and reasonable attorneys' fees, costs and
expert witness expenses of the parties. The parties hereto agree to comply with
any award made in any such arbitration proceedings that has become final in
accordance with the Rules and agree to the entry of a judgment in any
jurisdiction upon any award rendered in such proceedings becoming final under
the Rules.
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ARTICLE 5
INSURANCE
5.1 COVERAGE. As of the Effective Time, coverage of Technologies and its
Subsidiaries shall cease under current Company Policies, except as provided in
this Article 5. From and after the Effective Time, Technologies and its
Subsidiaries will be responsible for obtaining and maintaining insurance
coverages for their own account, and, with respect to policies of commercial
general liability insurance, shall name BEI as an additional insured with
respect to liabilities assumed by BEI under the Indemnity Agreement. To the
extent that liabilities arising from the activities of Technologies prior to the
Effective Time are covered by Company Policies, and result in the assertion of
claims against BEI after the Effective Time, it is the intention of the parties
that, without increasing or expanding the risks assumed by the insurer,
Technologies will have the benefit of such insurance coverage after the
Effective Time. No assignment pursuant to Section 5.2 is intended to increase
the liability of any insurer under a Company Policy. If and when such
assignment occurs, it is BEI's intention to assign only such coverage as would
have been available to BEI in respect of the Technologies Business if the
Distribution had not occurred.
5.2 CLAIMS FOLLOWING THE EFFECTIVE TIME; WAIVER.
(a) If, subsequent to the Effective Time, any person shall assert a
claim or institute a suit, action or proceeding against Technologies or any of
its Subsidiaries (including, without limitation, where Technologies or its
Subsidiaries are joint defendants with other persons) with respect to any
injury, loss, liability, damage or expense incurred or claimed to have been
incurred prior to the Effective Time in the course of or in connection with the
conduct of the Technologies Business and which injury, loss, liability, damage
or expense may constitute an insured or insurable occurrence under one or more
Company Policies, BEI shall, at the time such claim is asserted, be deemed,
without need of further documentation, to assign to Technologies or any of its
Subsidiaries an interest in the relevant Company Policies (unless such
assignment would render BEI's coverage for such occurrence thereunder void),
subject to any limitations or obligations of Technologies contemplated by this
Article 5, if necessary, and then only to the extent necessary, to convey to
Technologies or any of its Subsidiaries rights of indemnity and the right to be
defended by or at the expense of the insurer, with respect to any such claim,
suit, action, proceeding, injury, loss, liability, damage or expense provided,
however, that, with respect to Company Policies for which Technologies has
payment obligations pursuant to Section 5.5 or otherwise, Technologies and its
Subsidiaries shall only have the rights set forth under this Section 5.2(a) with
respect to such Company Policies if such payment obligations have been satisfied
by Technologies.
(b) Notwithstanding any contrary provision contained herein, BEI shall
at all times retain the Company Policies, together with the rights, benefits and
privileges thereunder, including without limitation the right to invade or
exhaust any Company Policy by submission of claims, settlement or otherwise;
provided, that the retention of the Company Policies by BEI is not intended to
limit, inhibit or preclude any right granted pursuant to Section 5.2(a), and
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provided further that Section 5.2(a) is not intended to limit, inhibit or
preclude any rights, benefits or privileges BEI may have under Company Policies.
5.3 ADMINISTRATION. From the Effective Time until one full policy year
after the end of the policy year in which the Effective Time occurs (the
"Insurance Transition Period"), Technologies shall be responsible for Claims
Administration with respect to BEI Liabilities and Technologies Liabilities.
BEI hereby appoints Technologies as its agent and attorney in fact to assert
claims against insurance carriers and to otherwise perform Claims Administration
with respect to BEI Liabilities during the Insurance Transition Period.
Technologies shall be responsible for Claims Administration with respect to
Technologies Liabilities with respect to which BEI is engaged in coverage
litigation as of the Effective Time.
5.4 INSURANCE PROCEEDS. Proceeds received with respect to claims made
under Company Policies shall be paid to BEI with respect to BEI Liabilities and
to Technologies with respect to Technologies Liabilities.
5.5 RETROSPECTIVELY RATED POLICIES. From and after the Effective Time,
any additional premiums payable or rebates of premiums previously paid in
respect of any retrospectively rated Company Policy shall be paid or collected
by BEI. BEI shall be reimbursed by Technologies, or shall distribute to
Technologies, amounts equal to the portion of any such additional premium or
rebate, as applicable, which relates to the Technologies Business. BEI shall
notify Technologies when it becomes aware of a proposed adjustment.
5.6 AGREEMENT FOR WAIVER OF CONFLICT AND SHARED DEFENSE. In the event
that Insured Claims of more than one of the parties hereto exist relating to the
same occurrence, the parties shall jointly defend and waive any conflict of
interest necessary to the conduct of the joint defense. Nothing in this Section
5.6 shall be construed to limit or otherwise alter in any way the obligations of
the parties to this Agreement, including those created by this Agreement, by
operation of law or otherwise.
5.7 COOPERATION. The parties hereto agree to use commercially reasonable
efforts to cooperate with respect to the various insurance matters contemplated
by this Agreement.
5.8 INDEMNITY AGREEMENT. The parties hereto agree that the amount which
any indemnifying party is or may be required to pay to an indemnified party
pursuant to the Indemnity Agreement shall be reduced (including, without
limitation, retroactively) by any proceeds of insurance policies or other
amounts actually recovered by or on behalf of such indemnified party in
reduction of the related Liability (as defined in the Indemnity Agreement). If
an indemnified party shall have received the payment (an "Indemnity Payment")
required by the Indemnity Agreement from an indemnifying party in respect of any
Liability (as defined in the Indemnity Agreement) and shall subsequently
actually receive proceeds of insurance policies or other amounts in respect of
such Liability, then such indemnified party shall repay to such indemnifying
party a sum equal to the amount actually received (up to but not in excess of
the amount of any Indemnity Payment made thereunder). An insurer who would
otherwise be obligated to pay any claim shall not, solely by virtue of the
indemnification provisions contained in the Indemnity Agreement, be relieved of
its responsibility with respect thereto, or have any
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subrogation rights with respect thereto, it being expressly understood and
agreed that no insurer or any other third party shall be entitled to a benefit
they would not otherwise be entitled to receive in the absence of the
indemnification provisions contained in the Indemnity Agreement by virtue
thereof.
ARTICLE 6
EMPLOYEE OBLIGATIONS AND BENEFIT PLANS
6.1 BEI RETIREMENT PLAN. From the Effective Time, and through December
31, 1997, Technologies employees will continue to participate in the BEI
Retirement Plan. Effective January 1, 1998, Technologies will establish a
qualified retirement plan with a salary deferral (401(k)) feature ("Technologies
401(k) Plan") for its and its Subsidiaries' employees. Prior service with BEI
or any of its Subsidiaries shall be recognized under the Technologies 401(k)
Plan for the purpose of meeting all vesting, eligibility and other service-
related requirements thereunder. Effective January 1, 1998, Technologies' and
its Subsidiaries' employees will no longer participate in the BEI Retirement
Plan but will become participants in the Technologies 401(k) Plan in accordance
with the terms of the Technologies 401(k) Plan. Effective as of, or as soon as
administratively feasible following, January 1, 1998, the account balances of
the Technologies and its Subsidiaries' employees held in the BEI Retirement Plan
will be transferred to the Technologies 401(k) Plan in a trustee-to-trustee
transfer (the "Transferred Assets"). Technologies hereby agrees to assume, and
shall indemnify and hold harmless BEI from and against, any and all claims
brought against BEI or any of its Subsidiaries under the Technologies 401(k)
Plan or with respect to the Transferred Assets.
6.2 SUPPLEMENTAL PLAN. Effective as of the Effective Time, Technologies
shall adopt a plan substantially similar to the BEI Supplemental Plan (the
"Technologies Supplemental Plan"). Prior service with BEI or any of its
Subsidiaries shall be recognized under the Technologies Supplemental Plan for
the purpose of meeting all vesting, eligibility and other service-related
requirements thereunder. As of, or as soon as administratively feasible
following, the Effective Time, assets, benefits and liabilities accrued under
the BEI Supplemental Plan, with respect to participants in the BEI Supplemental
Plan who become employees of Technologies or who become or remain employees of
any Subsidiary of Technologies, shall be transferred to, and thereafter
administered under, the terms of the Technologies Supplemental Plan.
Technologies hereby agrees to assume, and shall indemnify and hold harmless BEI
from and against, any and all claims brought against BEI or any of its
Subsidiaries under the Technologies Supplemental Plan or with respect to the
assets, benefits or liabilities transferred from the BEI Supplemental Plan to
the Technologies Supplemental Plan.
6.3 STOCK OPTIONS AND RESTRICTED STOCK.
(a) STOCK OPTIONS. BEI and Technologies shall cause vested and
unvested incentive stock options and nonstatutory stock options to purchase BEI
Common Stock outstanding at the Effective Time to be converted to vested and
unvested incentive stock options and nonstatutory stock options, as appropriate,
to purchase Technologies Common Stock issued
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under the Technologies Equity Plan. The conversion will be accomplished
according to the following rules:
(i) the excess of the aggregate fair market value of the shares of
Technologies Common Stock subject to the option after the conversion over the
aggregate option price of such shares shall be essentially equal to, and in any
event no more than, the excess of the aggregate fair market value of the shares
of BEI Common Stock subject to the option before such conversion over the
aggregate option price of such shares;
(ii) on a share by share comparison, the ratio of the option price
to the fair market value of the shares of Technologies Common Stock subject to
the option immediately after the conversion may not be more favorable to the
optionee than the ratio of the option price to the fair market value of the
shares of BEI Common Stock subject to the option immediately before the
conversion; and
(iii) the new option does not give the option holder additional
benefits that such holder did not have under the old option.
For purposes of the calculation identified above, the fair market value of
Technologies Common Stock after the conversion shall be calculated in accordance
with accepted practices for such determinations, as determined by the management
of Technologies in consultation with its professional advisers.
(b) RESTRICTED STOCK. BEI and Technologies shall cause each holder as
of the Distribution Record Date of shares of BEI Common Stock issued pursuant to
the BEI Restricted Stock Plan ("BEI Restricted Stock") to receive as a result of
the Distribution vested and unvested shares of Technologies Common Stock equal
to the number of vested and unvested shares of BEI Restricted Stock held by such
holder on the Distribution Record Date. Vesting of the unvested shares of
Technologies Common Stock so issued shall be in accordance with the vesting
requirements of the BEI Restricted Stock Plan; provided, however, that
employment by Technologies or Electronics or any of either company's respective
Subsidiaries shall be deemed to be employment by BEI or any of its Subsidiaries
for purposes of satisfying the vesting requirements of the BEI Restricted Stock
Plan. For the purpose of vesting unvested shares of BEI Restricted Stock under
the vesting requirements of the BEI Restricted Stock Plan, employment by
Technologies or any of its Subsidiaries shall be deemed to be employment by BEI
or any of its Subsidiaries.
6.4 OTHER BENEFITS. From the Effective Time, and through December 31,
1997, Technologies employees and employees of its Subsidiaries will continue to
participate in the health, disability and other welfare benefit plans (other
than plans described in Section 6.5) sponsored by BEI. Effective January 1,
1998, Technologies will adopt welfare benefit plans and programs (the
"Technologies Benefit Plans") affording benefits similar to those provided under
BEI's welfare benefit plans. Effective January 1, 1998, Technologies employees
and employees of its Subsidiaries will no longer participate in the BEI welfare
benefit plans and programs but will become participants in the Technologies
Benefit Plans in accordance with the terms of the Technologies Benefit Plans.
BEI will not be responsible for and will incur no liability with
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respect to the Technologies Benefit Plans. The BEI group medical plan or plans
shall provide required group health continuation coverage under the Consolidated
Omnibus Budget Reconciliation Act of 1984 ("COBRA") for qualifying events that
occur prior to January 1, 1998. Technologies, with respect to its and its
Subsidiaries' employees, shall provide COBRA coverage for qualifying events that
occur on or after January 1, 1998. Technologies hereby agrees to assume, and
shall indemnify and hold harmless BEI from and against, all claims brought
against BEI or any of its Subsidiaries under the Technologies Benefit Plans,
including, without limitation, any claims under COBRA for qualifying events of
Technologies' and its Subsidiaries' employees and dependents that occur on or
after January 1, 1998.
6.5 SEVERANCE CLAIMS. Technologies shall assume, and shall indemnify and
hold BEI harmless against, all claims and liabilities for severance, change-in-
control or termination benefits arising out of or resulting from the transfer of
employment of any employee of BEI or any of its Subsidiaries to Technologies or
any of its Subsidiaries at the Effective Time.
ARTICLE 7
MISCELLANEOUS
7.1 COMPLETE AGREEMENT; CONSTRUCTION. This Agreement, including the
Exhibits and Schedules, and the Ancillary Agreements shall constitute the entire
agreement between the parties with respect to the subject matter hereof and
shall supersede all previous negotiations, commitments and writings with respect
to such subject matter. In the event of any inconsistency between this
Agreement and any Schedule hereto, the Schedule shall prevail. Notwithstanding
any other provisions in this Agreement to the contrary, in the event and to the
extent that there shall be a conflict between the provisions of this Agreement
and the provisions of any Ancillary Agreement, such Ancillary Agreement shall
control.
7.2 ANCILLARY AGREEMENTS. This Agreement is not intended to address, and
should not be interpreted to address, the matters specifically and expressly
covered by the Ancillary Agreements.
7.3 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, all of which shall be considered one and the same agreement, and
shall become effective when one or more such counterparts have been signed by
each of the parties and delivered to the other parties.
7.4 SURVIVAL OF AGREEMENTS. Except as otherwise contemplated by this
Agreement, all covenants and agreements of the parties contained in this
Agreement shall survive the Effective Time.
7.5 EXPENSES. Except as otherwise set forth in this Agreement or any
Ancillary Agreement, all costs and expenses incurred on or prior to the
Effective Time (whether or not paid on or prior to the Effective Time) in
connection with the preparation, execution, delivery and implementation of this
Agreement and any Ancillary Agreement, the Information Statement and the
Distribution and the consummation of the transactions contemplated thereby shall
be
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charged to and paid by BEI Electronics, Inc. and allocated to the parties on an
equitable basis. Except as otherwise set forth in this Agreement or any
Ancillary Agreement, each party shall bear its own costs and expenses incurred
after the Effective Time.
7.6 NOTICES. All notices and other communications hereunder shall be in
writing and hand delivered or mailed by registered or certified mail (return
receipt requested) or sent by any means of electronic message transmission with
delivery confirmed (by voice or otherwise) to the parties at the following
addresses (or at such other addresses for a party as shall be specified by like
notice) and will be deemed given on the date on which such notice is received:
To BEI ELECTRONICS, INC.:
Prior to the Effective Time:
One Post Street, Suite 2500
San Francisco, CA 94104
Attn: President
After the Effective Time:
83 Hobart Street
Hackensack, NJ 07601
Attn: President
with a copy to:
One Post Street, Suite 2500
San Francisco, CA 94104
Attn: Chairman
To BEI TECHNOLOGIES, INC.:
One Post Street, Suite 2500
San Francisco, CA 94104
Attn: President
7.7 WAIVERS. The failure of either party to require strict performance by
the other party of any provision in this Agreement will not waive or diminish
that party's right to demand strict performance thereafter of that or any other
provision hereof.
7.8 AMENDMENTS. Subject to the terms of Section 7.11 hereof, this
Agreement may not be modified or amended except by an agreement in writing
signed by the parties.
7.9 ASSIGNMENT. This Agreement shall be assignable in whole in connection
with a merger or consolidation or the sale of all or substantially all the
assets of a party hereto so long as the resulting, surviving or transferee
entity assumes all the obligations of the relevant party
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hereto by operation of law or pursuant to an agreement in form and substance
reasonably satisfactory to the other party to this Agreement. Otherwise this
Agreement shall not be assignable, in whole or in part, directly or indirectly,
by any party hereto without the prior written consent of the others and any
attempt to assign any rights or obligations arising under this Agreement without
such consent shall be void.
7.10 SUCCESSORS AND ASSIGNS. The provisions of this Agreement shall be
binding upon, inure to the benefit of and be enforceable by the parties and
their respective successors and permitted assigns.
7.11 TERMINATION. This Agreement may be terminated and the Distribution
may be amended, modified or abandoned at any time prior to the Effective Time by
and in the sole discretion of BEI without the approval of Technologies or the
shareholders of BEI. In the event of such termination, no party shall have any
liability of any kind to any other party or any other person. After the
Effective Time, this Agreement may not be terminated except by an agreement in
writing signed by the parties.
7.12 SUBSIDIARIES. Each of the parties hereto shall cause to be performed,
and hereby guarantees the performance of, all actions, agreements and
obligations set forth herein to be performed by any Subsidiary of such party at
the time such performance is anticipated to occur in order to facilitate the
Distribution.
7.13 THIRD PARTY BENEFICIARIES. This Agreement is solely for the benefit
of the parties hereto and their respective Subsidiaries and Affiliates and
should not be deemed to confer upon third parties any remedy, claim, liability,
reimbursement, claim of action or other right in excess of those existing
without reference to this Agreement.
7.14 ATTORNEY FEES. Except as contemplated by the third to the last
sentence of Article 4 hereof, a party in breach of this Agreement shall, on
demand, indemnify and hold harmless the other party hereto for and against all
out-of-pocket expenses, including, without limitation, legal fees, incurred by
such other party by reason of the enforcement and protection of its rights under
this Agreement. The payment of such expenses is in addition to any other relief
to which such other party may be entitled hereunder or otherwise.
7.15 TITLE AND HEADINGS. Titles and headings to sections herein are
inserted for the convenience of reference only and are not intended to be a part
of or to affect the meaning or interpretation of this Agreement.
7.16 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.
7.17 SPECIFIC PERFORMANCE. Each of the parties hereto acknowledges that
there is no adequate remedy at law for failure by such party to comply with the
provisions of this Agreement and that such failure would cause immediate harm
that would not be adequately compensable in damages, and therefore agree that
its agreements contained herein may be
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specifically enforced without the requirement of posting a bond or other
security, in addition to all other remedies available to the other party hereto
under this Agreement.
7.18 GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF CALIFORNIA AS SUCH LAWS ARE APPLIED TO
AGREEMENTS BETWEEN CALIFORNIA RESIDENTS ENTERED INTO AND PERFORMED ENTIRELY IN
CALIFORNIA.
7.19 CONSENT TO JURISDICTION. This Section 7.19 shall not limit the
provisions of Article 4 hereof. Each of the parties irrevocably submits to the
exclusive personal jurisdiction and venue of (a) the Superior Court for the City
and County of San Francisco, California and (b) the United States District Court
for the Northern District of California, for the purposes of any suit, action or
other proceeding arising out of this Agreement or any transaction contemplated
hereby. Each of the parties agrees to commence any action, suit or proceeding
relating hereto either in the United States District Court for the Northern
District of California located in San Francisco, California or if such suit,
action or other proceeding may not be brought in such court for jurisdictional
reasons, in the Superior Court for the City and County of San Francisco,
California. Each of the parties further agrees that service of any process,
summons, notice or document by U.S. registered mail to such party's address set
forth above shall be effective service of process for any action, suit or
proceeding in California with respect to any matters to which it has submitted
to jurisdiction in this Section 7.19. Each of the parties irrevocably and
unconditionally waives any objection to the laying of venue of any action, suit
or proceeding arising out of this Agreement or the transactions contemplated
hereby in (i) the Superior Court for the City and County of San Francisco,
California, or (ii) the United States District Court for the Northern District
of California located in San Francisco, California, and hereby further
irrevocably and unconditionally waives and agrees not to plead or claim in any
such court that any such action, suit or proceeding brought in any such court
has been brought in an inconvenient forum.
7.20 SEVERABILITY. In the event any one or more of the provisions
contained in this Agreement should be held invalid, illegal or unenforceable in
any respect, the validity, legality and enforceability of the remaining
provisions contained herein and therein shall not in any way be affected or
impaired thereby. The parties shall endeavor in good-faith negotiations to
replace the invalid, illegal or unenforceable provisions with valid provisions,
the economic effect of which comes as close as possible to that of the invalid,
illegal or unenforceable provisions.
7.21 FORCE MAJEURE.
7.21.1 ACTS CONSTITUTING FORCE MAJEURE. Neither party shall be
liable to the other for a delay in its performance of this Agreement arising
from causes beyond its reasonable control. Without limiting the generality of
the foregoing, such events include any act of God; accident; explosion; fire;
earthquake; flood; strikes; labor disputes; riots; sabotage; embargo; equipment
failure; federal, state, or local legal restriction or limitation. Neither
party shall be required to resolve labor disputes, but shall use commercially
reasonable efforts to seek alternative sources to the extent practicable.
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7.21.2 NOTICE REQUIREMENT. When circumstances occur that delay the
performance of either party under this Agreement, whether or not such
circumstances are excused pursuant to Section 7.21.1 above, such party shall,
when it first becomes aware of such circumstances, promptly notify the other
party, by facsimile or by telephone confirmed in writing within two (2) business
days in the case of oral notice. Within ten (10) business days of the date when
either party first becomes aware of the event which it contends is responsible
for the delay, it shall supply to the other party in writing the reason(s) for
and anticipated duration of such delay, the measures taken and to be taken to
prevent or minimize the delay, and the timetable for the implementation of such
measures.
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IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed as of the day and year first above written.
BEI ELECTRONICS, INC.,
By: /s/ Charles Crocker
--------------------------------
Name: Charles Crocker
------------------------------
Title: President
-----------------------------
BEI TECHNOLOGIES, INC.,
By: /s/ Charles Crocker
-------------------------------
Name: Charles Crocker
------------------------------
Title: President
-----------------------------
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SCHEDULE 3.3(b)
DOCUMENT RETENTION POLICY
I. GENERAL GUIDELINES AFFECTING DOCUMENT RETENTION
Generally, the document retention policy is shaped by the following
requirements and issues:
A. LEGAL REQUIREMENTS. The comprehensive document retention policy must
conform to legal requirements that affect the businesses.
B. INDUSTRY PRACTICE. Standards and customs in the industries in which
the companies do business will often determine record retention policies. These
standards and customs, coupled with accrued experience within the companies,
often provide a basis for decisions made concerning the relative utility of
competing policies.
C. INDIVIDUAL REQUIREMENTS. Need for access and retrieval of documents
also determines the parameters of the document retention policy.
II. PARTICULAR CATEGORIES OF DOCUMENTS AND THEIR RETENTION
Several categories of documents that bear special consideration are
identified below. While minimum retention periods are suggested, the retention
of the documents identified below and of documents not included in the
identified categories should be determined primarily by the application of the
general guidelines affecting document retention identified above, as well as any
other pertinent factors known to the respective company.
A. TAX RECORDS. Tax records include, but may not be limited to,
documents concerning payroll, expenses, proof of deductions, business costs,
accounting procedures, and other documents concerning the Companies revenues.
Tax records should be retained for at least six years from the date of filing
the applicable return.
B. EMPLOYMENT RECORDS/PERSONNEL RECORDS. State and federal statutes
require the companies to keep certain recruitment, employment and personnel
information. The companies should also keep personnel files that reflect
performance reviews and any complaints brought against the Company or individual
employees under applicable state and federal statutes. The companies should
also keep all final memoranda and correspondence reflecting performance reviews
and actions taken by or against personnel in the employee's personnel file.
Employment Records/Personnel Records should be retained for six years.
C. BOARD MATERIALS. Meeting minutes should be retained in perpetuity in
the companies' respective minute books. A clean copy of all Board materials
should be kept for no less than three years by each company.
1.
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D. PRESS RELEASES/PUBLIC FILINGS. The companies should retain permanent
copies of all press releases and publicly filed documents under the theory that
each company should have its own copy to test the accuracy of any document a
member of the public can theoretically produce against that company.
With regard to Registration Statement materials or any periodic
reports filed with the SEC or any government agency, a copy of the materials
actually filed or publicly disseminated should be kept in a permanent file by
the company.
E. LEGAL FILES. Counsel should be consulted to determine the retention
period of particular documents.
F. MARKETING AND SALES DOCUMENTS. Each company should keep final copies
of marketing and sales documents for the same period of time it keeps other
corporate files --generally three years.
An exception to the three year policy may be sales invoices,
contracts, leases, licenses and other legal documentation. These documents
should be kept for at least three (3) years beyond the life of the agreement.
G. DEVELOPMENT/INTELLECTUAL PROPERTY AND TRADE SECRETS. Development
documents are often subject to intellectual property protection in their final
form (e.g., patents and copyrights). The documents detailing the development
process are often also of value to a company and are protected as a trade secret
where the company:
(a) derives independent economic value from the secrecy of the
information; and
(b) the company has taken affirmative steps to keep the information
confidential.
Each company should keep all documents designated as containing trade
secret information for at least the life of the trade secret.
H. CONTRACTS. Final, execution copies of all contracts entered into by a
company should be kept by that company. Each company should retain copies of
the final contracts for at least three (3) years beyond the life of the
agreement, and longer in the case of publicly filed contracts.
I. ELECTRONIC MAIL. Email that needs to be saved should be either:
(a) printed in hard copy and kept in the appropriate file; or
(b) downloaded to a computer file and kept electronically or on disk
as a separate file.
2.
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The retention period depends upon the subject matter of the email, as
covered elsewhere in this policy.
3.
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EXHIBIT 2.2
CORPORATE SERVICES AGREEMENT
CORPORATE SERVICES AGREEMENT ("AGREEMENT") dated as of September 26, 1997
between BEI Technologies, Inc., a Delaware corporation ("Technologies") and BEI
Electronics, Inc., a Delaware corporation ("Electronics" or
"Electronics/Medical").
R E C I T A L S:
WHEREAS, Electronics desires to obtain certain services, facilities,
supplies and equipment from Technologies and Technologies desires to provide
same to Electronics/Medical, on the terms set forth herein.
NOW, THEREFORE, in consideration of the mutual covenants expressed herein,
the parties agree as follows:
1. SUBLEASE OF FACILITIES.
The parties do not presently share any facilities and no sublease of
facilities by either party to the other is presently foreseen. However, the
parties may by mutual consent, not to be unreasonably withheld, subsequently
cooperate to accommodate the office or factory space needs of the other on arms
length terms.
2. GENERAL & ADMINISTRATIVE.
Commencing on the date of separation, Technologies will perform
certain specialized administrative services for Electronics/Medical as more
particularly detailed below. These services will be performed by Technologies'
Human Resources and Corporate Accounting and Administrative specialists and will
continue for a transition period the duration of which is noted below.
a. HUMAN RESOURCES. An experienced senior manager will provide
consultation, training and oversight of Electronics' regulatory affairs. These
affairs consist of such areas as: employment, termination, layoffs, discipline,
worker's compensation, etc. This assistance will continue for no more than five
quarters.
b. EMPLOYEE BENEFITS. Technologies' senior staff will oversee, on
behalf of Electronics, the continuation, administration, and orderly handoff of
all employee fringe benefit programs, payroll systems, and IRS qualified and
non-qualified retirement plans. These programs include life, medical, dental
and disability income benefits; the ADP payroll systems, a 401(k) retirement
savings plan and a deferred compensation plan.
These services will continue for one full policy year (in the case of
the fringe benefit plans) or one full plan year (in the case of the 401(k) plan)
beyond the year in which separation occurs.
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c. GENERAL LIABILITY AND DIRECTORS AND OFFICERS (D&O) INSURANCE.
Technologies' cognizant manager will oversee on behalf of Electronics the
continuation and orderly handoff of responsibility for maintaining these
categories of insurance. The service provided will include risk assessment,
assurance of policy coverage and liaison with the company's broker(s) and
carrier(s). Premiums due from each Company shall be invoiced separately by the
insurance provider. This service will continue for one full calendar year
beyond the end of the year in which separation occurs.
d. AUDIT AND TAX PREPARATION. Technologies' corporate accounting
staff will supervise and coordinate necessary financial audits and tax
preparation activities with Ernst & Young LLP and the orderly handoff of these
activities to the audit and federal and state tax service provider(s) ultimately
selected by Electronics/Medical. This liaison and oversight will continue
through the completion of the fiscal year end audits and tax returns for the
fiscal year following the year in which the separation occurs.
e. SEC COMPLIANCE REPORTING. Technologies' corporate staff
responsible for 10-K, 10-Q and proxy reporting will assist Electronics by
preparing applicable SEC and Nasdaq - mandated reports for filing by
Electronics. This service will continue for no more than five fiscal quarters
following the date of separation unless otherwise agreed pursuant to future
negotiations.
3. FEES & PAYMENTS
a. Electronics shall pay fees to Technologies for the above
described managerial services. The amount to be paid shall be negotiated on an
arms length basis within 60 days following the date hereof. In addition,
Electronics will pay such additional costs and expenses as have typically been
separately invoiced in the past for professional services such as audit and tax
preparation support, employee benefit record keeping and financial advisory
services, legal advice, and insurance policy premiums.
b. Fees for Technologies' services shall be payable monthly, pro
rated for fractional periods and invoiced in advance before the 10th of each
month. Electronics agrees to pay Technologies' invoices net within 30 days.
Additional costs and expenses incurred for professional services shall be
invoiced directly to Electronics. Where practical considerations dictate that
Technologies should pay for the professional services directly, or on behalf of
Electronics, Electronics agrees to reimburse Technologies immediately following
receipt of Technologies' invoice which details the charges.
c. It is the intent of the parties that the fees shall bear a
reasonable relationship to actual costs. The need for continued service (if
any) and the fees (if any) therefore shall be reviewed after four quarters and
adjusted subject to arms length negotiation confirmed in writing.
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4. TERMINATION.
Either party may, in its discretion, terminate this Agreement in the
event that the other party breaches any material obligation hereunder, which
breach continues for a period of sixty (60) days after written notice thereof is
delivered by the non-breaching party. Electronics may terminate this Agreement
at will, sixty (60) days after written notice of such intent to terminate has
been given to Technologies. In the event of termination, the fees due
Technologies shall accrue through the date of termination.
5. NOTICES.
All notices, requests and other communications to Technologies or
Electronics/Medical hereunder shall be in writing (including telecopy or similar
electronic transmissions), shall refer specifically to this Agreement and shall
be personally delivered or sent by telecopy or other electronic facsimile
transmission or by registered mail or certified mail, return receipt requested,
postage prepaid, in each case to the respective address specified below (or such
other address as may be specified in writing to the other party hereto):
BEI Technologies, Inc.
One Post Street, Suite 2500
San Francisco, CA 94104
Attn: President
BEI Electronics, Inc.
83 Hobart Street
Hackensack, NJ 07601
Attn: President
Any notice or communication given in conformity with this Section
shall be deemed to be effective when received by the addressee, if delivered by
hand, and three days after mailing, if mailed.
6. SUCCESSORS.
The terms and provisions of this Agreement shall inure to the benefit
of, and be binding upon Technologies, Electronics, and their respective
successors and assigns; provided, however, that neither Technologies nor
Electronics may assign or otherwise transfer any of its rights and interests,
nor delegate any of its respective obligations, hereunder, including, without
limitation, pursuant to a merger or consolidation, without the prior written
consent of the other party hereto.
7. GOVERNING LAW.
This Agreement shall be governed by and construed in accordance with
the laws of the State of California, as applied to contracts entered into and
performed entirely within California.
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8. SEVERABILITY.
If any provision hereof should be held invalid, illegal or unenforceable in
any respect in any jurisdiction, then, to the fullest extent permitted by law,
(a) all other provisions hereof shall remain in full force and effect in such
jurisdiction and shall be liberally construed in order to carry out the
intentions of the parties hereto as nearly as may be possible and (b) such
invalidity, illegality or unenforceability shall not affect the validity,
legality or enforceability of such provision in any other jurisdiction.
9. FORCE MAJEURE.
a. ACTS CONSTITUTING FORCE MAJEURE. Neither party shall be liable
to the other arising out of a delay in its performance of this Agreement arising
from causes beyond its reasonable control. Without limiting the generality of
the foregoing, such events include any act of God; accident; explosion; fire;
earthquake; flood; strikes; labor disputes; riots; sabotage; embargo; equipment
failure; federal, state, or local legal restriction or limitation. Neither
party shall be required to resolve labor disputes, but shall use commercially
reasonable efforts to seek alternative sources to the extent practicable.
b. NOTICE REQUIREMENT. When circumstances occur that delay the
performance of either party under this Agreement, whether or not such
circumstances are excused pursuant to Section 7.1 above, such party shall, when
it first becomes aware of such circumstances, promptly notify the other party,
by facsimile or by telephone confirmed in writing within two (2) business days
in the case of oral notice. Within ten (10) business days of the date when
either party first becomes aware of the event which it contends is responsible
for the delay, it shall supply to the other party in writing the reason(s) for
and anticipated duration of such delay, the measures taken and to be taken to
prevent or minimize the delay, and the timetable for the implementation of such
measures.
10. HEADINGS.
Headings used herein are for convenience only and shall not in any way
affect the construction of, or be taken into consideration in interpreting this
Agreement.
11. ENTIRE AGREEMENT; AMENDMENT.
This Agreement constitutes the entire agreement between the parties
hereto regarding the subject matter hereof and may not be changed or cancelled
except in writing signed by all parties hereto.
12. EXECUTION IN COUNTERPARTS.
This Agreement may be executed in any number of counterparts, each of
which counterparts, when so executed and delivered, shall be deemed to be an
original, and all of which counterparts, taken together, shall constitute one
and the same instrument.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed under seal and delivered as of the date first above written. This
Agreement may only be amended or modified by a written agreement executed by
both parties.
BEI Technologies, Inc.
by: /s/ Charles Crooker
-----------------------------
President
____________________________
Title: President
BEI Electronics, Inc.
by: /s/ Charles Crocker
----------------------------
President
____________________________
Title: President
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EXHIBIT 2.3
TAX ALLOCATION AND INDEMNITY AGREEMENT
This Tax Allocation and Indemnity Agreement is entered into this 26th day
of September, 1997, by and between BEI Electronics, Inc., a Delaware corporation
("ELECTRONICS"), and BEI Technologies, Inc., a Delaware corporation
("TECHNOLOGIES").
RECITALS
1. ELECTRONICS is the common parent of the ELECTRONICS Affiliated Group,
and ELECTRONICS and various of its direct and indirect subsidiaries are members
of the ELECTRONICS Unitary Group (as those terms are defined below);
2. On September 26, 1997, ELECTRONICS contributed the stock of BEI Sensors
and Systems Company to TECHNOLOGIES in exchange for all of TECHNOLOGIES capital
stock and TECHNOLOGIES thereby became a member of the ELECTRONICS Affiliated
Group and ELECTRONICS Unitary Group;
3. ELECTRONICS intends to distribute its TECHNOLOGIES stock to its
shareholders in a transaction under Section 355 of the Code, at which time
TECHNOLOGIES would no longer be a member of the ELECTRONICS Affiliated Group and
the ELECTRONICS Unitary Group; and
4. ELECTRONICS, on behalf of itself and the members of the ELECTRONICS
Subgroup, and TECHNOLOGIES, on behalf of itself and the members of the
TECHNOLOGIES Subgroup (as those terms are defined below), intend in this
Agreement to provide for the allocation among themselves of Tax liabilities
arising from tax returns filed after, and Final Determinations made after,
September 27, 1997, for the period that TECHNOLOGIES and the other members of
the TECHNOLOGIES Subgroup are members of the ELECTRONICS Affiliated Group and
the ELECTRONICS Unitary Group; reimbursement for payment of Tax liabilities and
use of Tax benefits arising during that period for tax returns filed after
September 27, 1997; indemnification and procedures for audits and contests with
respect to subsequent adjustments of such Tax liabilities for Final
Determinations made after September 27, 1997; and cooperation in filing of
returns and other matters relating to Taxes;
NOW, THEREFORE, the parties agree as follows:
ARTICLE I
DEFINITIONS
For the purpose of this Agreement the following terms shall have the
following meanings:
1.1 "Affiliated Period" means the period during which TECHNOLOGIES or any
other member of the TECHNOLOGIES Subgroup is a member of the ELECTRONICS
Affiliated Group and/or the ELECTRONICS Unitary Group.
<PAGE>
1.2 "Agreement" means this Tax Allocation and Indemnity Agreement, as
amended from time to time.
1.3 "Code" means the Internal Revenue Code of 1986, as amended, or any
similar or successor statute.
1.4 "Combined Return" means any state, local or, if applicable, foreign
income, franchise or similar tax return which has been or will be filed by any
ELECTRONICS Subgroup member or TECHNOLOGIES Subgroup member on a basis which
reports Taxes for two or more members of such subgroup using combined
consolidated or unitary business tax reporting principles.
1.5 "Consolidated Return" means a consolidated U.S. federal income tax
return filed by or on behalf of an affiliated group of corporations within the
meaning of Section 1504 of the Code.
1.6 "Distribution" means a distribution by ELECTRONICS of its capital
stock of TECHNOLOGIES to the shareholders of ELECTRONICS.
1.7 "Final Determination" means, with respect to any liability for Taxes
for any period, (a) a final, unappealable decision by a court of competent
jurisdiction, (b) the expiration of applicable statutes of limitations on
assessment of Taxes or filing of claims for refund, (c) the execution of a
closing agreement under Section 7121 of the Code or the acceptance by the IRS of
an offer in compromise pursuant to Section 7122 of the Code (or similar
agreements with tax authorities entered into under applicable state, local or
foreign tax law), (d) a binding agreement without reservation on IRS Form 870-AD
or a comparable agreement form under the laws of any other taxing jurisdiction
or (e) any other final, irrevocable and unappealable determination of Taxes for
such period.
1.8 "IRS" means the United States Internal Revenue Service or any
successor thereto.
1.9 "ELECTRONICS Affiliated Group" means the affiliated group of
corporations (within the meaning of Section 1504 of the Code) of which
ELECTRONICS is the common parent.
1.10 "ELECTRONICS Subgroup" means ELECTRONICS and all other corporations
included in the ELECTRONICS Affiliated Group and/or the ELECTRONICS Unitary
Group other than TECHNOLOGIES and other corporations included in the
TECHNOLOGIES Subgroup.
1.11 "ELECTRONICS Unitary Group" means any group of corporations including
ELECTRONICS filing or required to file any Combined Return.
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1.12 "Tax" or "Taxes" means any or all taxes, however denominated,
including any interest, penalties or other additions to tax that may become
payable in respect thereof, imposed by any federal, territorial, state, local or
foreign government or any agency or political subdivision of any such
government, which taxes shall include, without limiting the generality of the
foregoing, all income or profits taxes (including but not limited to, federal,
state and foreign income taxes), payroll and employee withholding taxes,
unemployment insurance contributions, social security taxes, sales and use
taxes, ad valorem taxes, excise taxes, franchise taxes, gross receipts taxes,
business license taxes, occupation taxes, real and personal property taxes,
stamp taxes, environmental taxes, transfer taxes, and other governmental charges
or obligations of the same or of a similar nature to any of the foregoing, which
are required to be paid, withheld or collected.
1.13 "TECHNOLOGIES Subgroup" means TECHNOLOGIES and all of its direct and
indirect subsidiaries, whether currently or hereafter existing, which would be
included in an affiliated group of corporations (within the meaning of Section
1504(a) of the Code) and/or combined, consolidated or unitary state or other tax
filing groups of corporations of which TECHNOLOGIES would be the ultimate parent
corporation if TECHNOLOGIES were not a member of the ELECTRONICS Affiliated
Group or ELECTRONICS Unitary Group, respectively.
ARTICLE II
FILING OF RETURNS
2.1 Consolidated Returns and Combined Returns.
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(a) ELECTRONICS shall have exclusive authority and responsibility to
prepare and file Consolidated Returns and Combined Returns on behalf of the
ELECTRONICS Affiliated Group and ELECTRONICS Unitary Group, respectively (as
well as any other documents, statements or elections required to be filed or
included with such Consolidated Returns or Combined Returns), for all taxable
years (or portions thereof) included in the Affiliated Period. ELECTRONICS
shall have sole authority and discretion to determine (i) the manner in which
such Consolidated Returns and Combined Returns (and related documents) shall be
prepared and filed, including without limitation the manner in which any item of
income, gain, loss, deduction or credit included in such returns shall be
reported and the corporations appropriately included in the ELECTRONICS Unitary
Group filing a Combined Return, (ii) whether any extensions of time to file a
Consolidated Return or Combined Return shall be requested, and (iii) the
elections that will be made in such returns on behalf of the ELECTRONICS
Affiliated Group, the ELECTRONICS Unitary Group or any members thereof
(including members of the TECHNOLOGIES Subgroup).
(b) TECHNOLOGIES and each member of the TECHNOLOGIES Subgroup hereby
irrevocably appoint ELECTRONICS as their agent and attorney-in-fact to take such
actions (including the execution of documents on behalf of TECHNOLOGIES or any
other member of the TECHNOLOGIES Subgroup) as may be appropriate to effectuate
the filing of
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such Consolidated Returns and Combined Returns. TECHNOLOGIES and each
TECHNOLOGIES Subgroup member agree to file such consents, elections and other
documents, provide information as requested by ELECTRONICS and otherwise
cooperate with ELECTRONICS as necessary to carry out the purpose of this
section. The TECHNOLOGIES Subgroup shall be allocated and TECHNOLOGIES shall pay
to ELECTRONICS an appropriate share of ELECTRONICS' costs (as reasonably
determined by ELECTRONICS) of preparing and filing returns under this Section
2.1.
(c) ELECTRONICS shall be liable, and shall indemnify TECHNOLOGIES and
each other member of the TECHNOLOGIES Subgroup, for any penalties or other
damages attributable to the failure of ELECTRONICS to make timely filings of
Consolidated Returns or Combined Returns for the Affiliated Period or full and
timely payment of all amounts shown to be due thereon, provided that
TECHNOLOGIES and the TECHNOLOGIES Subgroup members have complied with their
obligations to make Tax payments to, provide information to, and otherwise
cooperate on a timely basis with ELECTRONICS as provided under the provisions of
this Agreement. In the event ELECTRONICS pays penalties or other damages as a
result of TECHNOLOGIES' failure to provide information to, or otherwise
cooperate on a timely basis with ELECTRONICS as provided under the provisions of
this Agreement, TECHNOLOGIES shall indemnify ELECTRONICS and each other member
of the ELECTRONICS Subgroup for such penalties or other damages.
2.2 Other Returns.
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(a) Except as otherwise provided herein or as the parties hereto may
otherwise agree, TECHNOLOGIES shall have exclusive authority and responsibility
to prepare and file all tax returns by or on behalf of it and any member of the
TECHNOLOGIES Subgroup, other than Consolidated Returns and Combined Returns
subject to the provisions of Section 2.1. ELECTRONICS shall provide (and shall
cause each ELECTRONICS Subgroup member and their representatives to provide)
reasonable access to books, records, returns and other information to the extent
necessary to permit TECHNOLOGIES timely to prepare and file such tax returns and
shall otherwise cooperate as reasonably requested by TECHNOLOGIES in connection
with the preparation and filing of such returns.
(b) TECHNOLOGIES shall be liable, and shall indemnify ELECTRONICS and
each other member of the ELECTRONICS Subgroup, for any penalties or other
damages attributable to the failure of TECHNOLOGIES to make timely filings of
tax returns for which it is responsible under this Section 2.2(b) or full and
timely payment of amounts shown to be due thereon, provided that ELECTRONICS and
the ELECTRONICS Subgroup members have complied with their obligations to provide
information and otherwise cooperate as provided hereunder.
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ARTICLE III
ALLOCATION OF LIABILITIES FOR TAXES
3.1 Federal Income Taxes.
--------------------
(a) For each taxable year (or portion thereof) in which TECHNOLOGIES
and any other members of the TECHNOLOGIES Subgroup are included in the
ELECTRONICS Affiliated Group, the TECHNOLOGIES Subgroup shall be allocated and
TECHNOLOGIES shall pay to ELECTRONICS the TECHNOLOGIES Subgroup's federal income
Tax liability, if any (including any alternative minimum tax or environment tax,
as determined under this Section 3.1). Such federal Tax liability shall equal
the hypothetical separate return tax liability of such subgroup for such taxable
year, as determined in accordance with the provisions of Treasury Regulations
Section 1.1552-1(a)(2)(ii) (treating references to a "member" therein as
references to the TECHNOLOGIES Subgroup, and including the adjustments under
clauses (a) - (h) thereof) as if the TECHNOLOGIES Subgroup had filed a separate
consolidated federal income tax return for such taxable year. If the
TECHNOLOGIES Subgroup's federal Tax liability as so determined is zero, then
ELECTRONICS shall pay to TECHNOLOGIES the excess, if any, of the ELECTRONICS
Subgroup's federal income Tax liability, determined as if the ELECTRONICS
Subgroup had filed a separate consolidated federal income tax return for such
taxable year under the same principles as set forth in the preceding sentence,
over the actual federal income Tax liability of the ELECTRONICS Affiliated
Group.
(b) For purposes of determining allocation of Tax liabilities and
payment obligations under this Section 3.1, (i) any Taxes attributable to the
transfer by ELECTRONICS to TECHNOLOGIES of the stock of BEI Sensors and Systems
Company in connection with the formation and initial capitalization of
TECHNOLOGIES shall be allocated to the ELECTRONICS Subgroup, (ii) any Taxes
attributable to the Distribution being treated as a taxable event to ELECTRONICS
shall be allocated to the party breaching the "Agreement Regarding Certain
Representations and Covenants", provided if neither party has breached such
agreement, or both parties have breached such agreement, then the Taxes shall be
allocated based on a ratio equal to the market capitalization of the ELECTRONICS
Subgroup to the TECHNOLOGIES Subgroup on the date of the distribution, (iii) any
Taxes attributable to the restoration of an excess loss account or intercompany
gain in connection with the Distribution or other event causing termination of
membership by TECHNOLOGIES and other members of the TECHNOLOGIES Subgroup in the
ELECTRONICS Affiliated Group shall be allocated to whichever subgroup includes
the corporation required to restore such item under applicable Treasury
Regulations pursuant to Section 1502 of the Code, (iv) the benefit of the
graduated Tax rates provided under Section 11 of the Code and any alternative
minimum tax exemption amount under Section 55 of the Code shall be allocated to
the TECHNOLOGIES Subgroup in proportion to the ratio of the TECHNOLOGIES
Subgroup's federal Tax liability to the total federal Tax liability of the
ELECTRONICS Affiliated Group (computed without regard to such benefit), and (v)
ELECTRONICS shall otherwise have discretion to allocate items between the
TECHNOLOGIES Subgroup and the ELECTRONICS Subgroup not otherwise specifically
addressed hereunder in any reasonable manner that it deems appropriate in light
of the provisions and purposes of this Agreement.
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<PAGE>
(c) The TECHNOLOGIES Subgroup's federal Tax liability for the taxable
year during or with which the Affiliated Period ends shall be determined in
accordance with the provisions of Treasury Regulations Section 1.1502-76(b) by
closing the books of TECHNOLOGIES and the TECHNOLOGIES Subgroup members as of
the end of the last day of the Affiliated Period and taking into account only
items accruing during the portion of the taxable year ending on such date in
computing such liability. Items shall not be pro-rated in accordance with
clauses (ii) or (iii) of Section 1.1502-76(b)(2) of the treasury regulations
except to the extent ELECTRONICS in its discretion determines that it is
impracticable to allocate particular items in accordance with the preceding
sentence.
(d) The parties acknowledge that the allocation of federal Tax
liability provided for by this Section 3.1 is for purposes of determining the
parties' actual payment obligations to each other with respect to Taxes of the
ELECTRONICS Affiliated Group for the Affiliated Period and not for purposes of
computing earnings and profits pursuant to Section 1552 of the Code, and
recognize that such allocation may differ from the allocation provided by
Section 1552 for earnings and profits purposes.
3.2 State Income and Franchise Taxes.
--------------------------------
(a) For each taxable year (or portion thereof) for which TECHNOLOGIES
and/or any other members of the TECHNOLOGIES Subgroup are included in any
combined Return filed by the ELECTRONICS Unitary Group, the TECHNOLOGIES
Subgroup shall be allocated and TECHNOLOGIES shall pay to ELECTRONICS the state
income Tax liability of TECHNOLOGIES and/or such other TECHNOLOGIES Subgroup
members that are so included, as determined under this Section 3.2. Such state
income Tax liability shall equal the hypothetical state income tax liability of
the TECHNOLOGIES Subgroup members so included, computed as if they filed a
Combined Return (or if only one such member is so included, a separate state
income or franchise tax return) including only such included member(s). To the
extent that the same or analogous federal consolidated reporting principles as
are referred to in Section 3.1 apply for purposes of filing such Combined
Returns, then such principles as are referred to in Section 3.1 apply for
purposes of determining the TECHNOLOGIES Subgroup's state Tax liability in
respect of any Combined Return of the ELECTRONICS Unitary Group. If the state
income Tax liability of the TECHNOLOGIES Subgroup as so determined is zero, then
ELECTRONICS shall pay to TECHNOLOGIES the excess, if any, of the ELECTRONICS
Subgroup's state income Tax liability, determined as if the ELECTRONICS Subgroup
had filed a separate Combined Return not including any TECHNOLOGIES Subgroup
members, over the actual state income Tax liability of the ELECTRONICS Unitary
Group. ELECTRONICS shall have the discretion to make determinations of each
subgroup's liability for Taxes under this Section 3.2(a) in any manner that is
reasonable in light of the applicable state and local Tax reporting principles
and the purposes of this Agreement.
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<PAGE>
(b) TECHNOLOGIES shall be responsible for payment of any state Taxes
due from it or any members of the TECHNOLOGIES Subgroup, and ELECTRONICS shall
be responsible for payment of any state Taxes due from ELECTRONICS or any
members of the ELECTRONICS Subgroup, in connection with state income or
franchise tax returns that are not Combined Returns.
3.3 Other Taxes. Any taxes other than Taxes allocated under Sections 3.1
-----------
and 3.2 shall be the responsibility of the party incurring such Tax under
applicable law. Notwithstanding the foregoing, in the event that the applicable
law of any foreign taxing jurisdiction provides for filing of Combined Returns
including one or more members of each of the TECHNOLOGIES Subgroup and the
ELECTRONICS Subgroup, then principles similar to those set forth above in
Section 3.2(a) shall be applied for purposes of determining an appropriate
allocation of Taxes required to be reported with such Combined Returns.
ARTICLE IV
PAYMENT AND INDEMNIFICATION
4.1 Estimated Tax Payments. ELECTRONICS shall have the right to assess
----------------------
TECHNOLOGIES for the TECHNOLOGIES Subgroup's share of any estimated Tax payment
liability incurred by the ELECTRONICS Affiliated Group or the ELECTRONICS
Unitary Group for any taxable year (or portion thereof) included in the
Affiliated Period, as determined by ELECTRONICS in its reasonable discretion
applying the principles of Sections 3.1 and 3.2. For this purpose, TECHNOLOGIES'
share of each such estimated Tax payment liability shall not exceed the
ELECTRONICS Affiliated Group's or ELECTRONICS Unitary Group's actual estimated
Tax payment liability for the relevant period and ELECTRONICS shall have no
obligation to make any payment to TECHNOLOGIES. ELECTRONICS shall provide
TECHNOLOGIES with notice of its estimated Tax payment obligation hereunder at
least five days prior to the due date thereof as specified in such notice,
together with a summary of the basis for the calculation of such obligation, and
TECHNOLOGIES shall pay the amount owed no later than such due date. Any payments
made by TECHNOLOGIES under this Section 4.1 shall be credited against the final
Tax payment obligations due for the entire taxable year (or portion thereof)
under Section 4.2.
4.2 Final Tax Payments. As soon as practicable after the end of each
------------------
taxable year (or portion thereof) included in the Affiliated Period, but in no
event later than 30 days prior to the due date (including extensions) for filing
the applicable Consolidated Return or Combined Return therefor, ELECTRONICS
shall prepare and submit to TECHNOLOGIES a statement setting forth the final
amount determined by ELECTRONICS to be due from TECHNOLOGIES or ELECTRONICS, as
the case may be, in accordance with the provisions of Sections 3.1 and 3.2,
taking into account any amounts credited to TECHNOLOGIES under Section 4.1.
Such statement shall include sufficient supporting information to show the basis
for the amount determined. Unless TECHNOLOGIES objects to the amount
determined, such amount shall be paid no later than five days thereafter. In
the event of a dispute, such dispute shall be resolved by the independent
accounting firm then employed by ELECTRONICS.
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<PAGE>
4.3 Indemnification. Provided that TECHNOLOGIES has made the payments to
---------------
ELECTRONICS required under this Agreement, ELECTRONICS shall be responsible for,
shall protect, indemnify and hold harmless TECHNOLOGIES and each TECHNOLOGIES
Subgroup member from, and shall be entitled to any refunds of (i) any Taxes
imposed on the ELECTRONICS Affiliated Group or the ELECTRONICS Unitary Group (or
any member thereof), including without limitation any obligation to contribute
to the payment of any such Taxes (other than as provided in this Agreement) and
any liability arising from the several liability for Taxes of an affiliated
group under Treasury Regulations Section 1.1502-6 or any analogous provisions of
other applicable law, and (ii) any other Taxes imposed on any member of the
ELECTRONICS Subgroup. Except as provided in the preceding sentence,
TECHNOLOGIES shall be responsible for, shall protect, indemnify and hold
harmless ELECTRONICS and each ELECTRONICS Subgroup member from, and shall be
entitled to any refunds of, Taxes imposed on the TECHNOLOGIES Subgroup or any
member thereof.
ARTICLE V
SUBSEQUENT ADJUSTMENTS
5.1 Subsequent Adjustments. In the event that a Final Determination
----------------------
adjusts any items of income, gain, loss, deduction or credit of the ELECTRONICS
Affiliated Group, the ELECTRONICS Unitary Group or any member thereof for any
taxable year (or portion thereof) included in the Affiliated Period, then the
payment obligations under Article III of this Agreement shall be redetermined in
the following manner: (a) any adjustments related to tax returns filed on or
before September 27, 1997 shall be the responsibility of, or enjoyed by,
TECHNOLOGIES, except to the extent ELECTRONICS' aggregate cumulative liability
under such adjustments exceeds $200,000. In the event ELECTRONICS aggregate
cumulative liability exceeds $200,000, then the payment obligations under
Article III of this Agreement shall be redetermined to reflect such adjustments
and ELECTRONICS shall pay TECHNOLOGIES or TECHNOLOGIES shall pay ELECTRONICS, as
the case may be, the difference between the amounts owed under such section as
so adjusted and the amounts owed as originally determined, together with an
appropriate share of any interest actually due or received in respect of such
adjustment; (b) any adjustments, however, that are a liability attributable to
the carryback of an ELECTRONICS loss or credit shall be allocable to ELECTRONICS
to the extent thereof. Any payment required pursuant to this Article V shall be
made promptly after the occurrence of such Final Determination.
ARTICLE VI
CONTROVERSIES
6.1 Taxes of ELECTRONICS Affiliated Group or Unitary Group. ELECTRONICS
------------------------------------------------------
shall have exclusive authority to represent TECHNOLOGIES and each TECHNOLOGIES
Subgroup member in any audit, examination or other controversy before the IRS or
any other governmental authority or court regarding the Taxes of the ELECTRONICS
Affiliated Group or ELECTRONICS Unitary Group for all taxable years or portions
thereof included in the Affiliated Period. Such authority shall include, but
not be limited to, (a) the exclusive control of any response to any examination
by the IRS or any other taxing authority, and (b) the exclusive
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<PAGE>
control of any contest of any issue through a Final Determination, including,
but not limited to whether and in what forum to conduct such contest, the choice
of counsel, and whether and on what basis to settle. ELECTRONICS shall timely
notify TECHNOLOGIES of any controversy relating to Tax items of TECHNOLOGIES or
any other member of the TECHNOLOGIES Subgroup and promptly provide TECHNOLOGIES
with copies of all correspondence relating to such controversy. Subject to
ELECTRONICS' exclusive authority over Tax controversies as provided for herein,
TECHNOLOGIES shall have the right to consult with ELECTRONICS and participate in
the conduct of such controversies to the extent the controversy relates to items
of the TECHNOLOGIES Subgroup.
6.2 Other Taxes. Except as the parties may otherwise agree, each of
-----------
ELECTRONICS and TECHNOLOGIES shall have exclusive authority to represent itself
and its respective subgroup members in any controversies relating to Taxes of
its respective subgroup (or any members thereof), other than Taxes referred to
in Section 6.1.
6.3 Cooperation. ELECTRONICS and TECHNOLOGIES shall cooperate with each
-----------
other, and shall cause their respective subgroup members and representatives
also to cooperate, in the conduct of any controversy relating to Taxes. Such
cooperation shall include, without limitation, (a) execution of powers of
attorney or other documents necessary to enable the party having authority to
control a contest to take all actions desired by such party with respect
thereto, including making elections, filing claims for refund, and receiving
funds, and (b) making available to the other party, during normal business hours
and on reasonable terms, all books, records (including, but not limited to,
workpapers and schedules), information and employees reasonably requested in
connection with such controversy. In the event of any dispute between the
parties, the parties will adhere to Article 4 "Dispute Resolution" of the
"Distribution" agreement.
6.4 Records. ELECTRONICS and TECHNOLOGIES agree that all records,
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including but not limited to, tax returns, supporting schedules, workpapers,
correspondence and other documents within their possession or the possession of
the members of their respective subgroups and relating to Taxes arising during
the Affiliated Period, shall be retained for as long as such records may be
material to the determination of liabilities or refunds of such Taxes and shall
be made reasonably available to the other party upon request during normal
business hours for inspection and copying. Prior to destroying any such
records, the party in possession thereof shall notify the other of such intent
and shall offer to deliver such records to the other.
ARTICLE VII
CARRYBACKS
7.1 Carrybacks. Unless ELECTRONICS in its sole and absolute discretion
----------
consents thereto, or unless specifically required by law, neither TECHNOLOGIES
nor any member of the TECHNOLOGIES Subgroup shall carry back any losses or
credits arising after the Affiliated Period to a taxable year occurring during
the Affiliated Period, and TECHNOLOGIES and each member of the TECHNOLOGIES
Subgroup shall make any elections and take all such action necessary to avoid
any such carryback. Even if a carryback is required by law, ELECTRONICS
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<PAGE>
shall make no payment to TECHNOLOGIES and TECHNOLOGIES shall be entitled to no
refund to the extent that the use of such carryback prevented ELECTRONICS or any
member of the ELECTRONICS Subgroup from using a credit or loss which it would
otherwise use in the year or years to which the TECHNOLOGIES credit or loss is
carried back. In the event that a carryback is not required by law, and
ELECTRONICS, in its sole and absolute discretion, consents to such a carryback,
then ELECTRONICS sole obligation shall be to make reasonable efforts to prepare
and file an amended return based on information supplied to ELECTRONICS by
TECHNOLOGIES and, in the event of the collection of any refund as a result
thereof, to pay to TECHNOLOGIES the amount thereof (including interest received
thereon) attributable to the carryback of such losses and credits. As a
condition precedent to any such action by ELECTRONICS, TECHNOLOGIES shall agree
to indemnify and hold ELECTRONICS harmless with respect to all costs and
expenses incurred in connection therewith and the full amount of any increase in
the ELECTRONICS Affiliated Group Taxes, including interest and penalties,
arising as a result of such amended return.
ARTICLE VIII
MISCELLANEOUS
8.1 Counterparts; Entire Agreement; Corporate Power.
-----------------------------------------------
(a) This Agreement may be executed in one or more counterparts, all of
which shall be considered one and the same agreement, and shall become effective
when one or more counterparts have been signed by each of the parties and
delivered to the other party.
(b) This Agreement contains the entire agreement between the parties
with respect to the subject matter hereof and thereto, supersede all previous
agreements, negotiations, discussions, writings, understandings, commitments and
conversations with respect to such subject matter, and there are no agreements
or understandings between the parties other than those set forth or referred to
herein or therein.
(c) ELECTRONICS represents on behalf of itself and each other member
of the ELECTRONICS Group and TECHNOLOGIES represents on behalf of itself and
each other member of the TECHNOLOGIES Group as follows:
(i) each such person has the requisite corporate or other power
and authority and has taken all corporate or other action necessary in order to
execute and deliver this Agreement to which it is a party and, subject to
receipt of approval of the stockholders of ELECTRONICS of the Distribution, to
consummate the transactions contemplated hereby and thereby; and
(ii) this Agreement to which it is a party has been duly executed
and delivered by it and constitutes a valid and binding agreement of it,
enforceable in accordance with the terms thereof.
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8.2 Governing Law. This Agreement shall be governed by and construed and
-------------
interpreted in accordance with the laws of the State of California, irrespective
of the choice of laws principles of the State of California, as to all matters,
including matters of validity, construction, effect, enforceability, performance
and remedies.
8.3 Assignability. This Agreement shall be binding upon and inure to the
-------------
benefit of the parties hereto and thereto, respectively, and their respective
successors and assigns; provided, however, that no party hereto or thereto may
assign its respective rights or delegate its respective obligations under this
Agreement without the express prior written consent of the other parties hereto
or thereto.
8.4 Third Party Beneficiaries. Except for the indemnification rights
-------------------------
under this Agreement of any ELECTRONICS indemnitee or TECHNOLOGIES indemnitee in
their respective capacities as such, (a) the provisions of this Agreement are
solely for the benefit of the parties hereto or thereto and are not intended to
confer upon any person except the parties any rights or remedies hereunder, and
(b) there are no third party beneficiaries of this Agreement and this Agreement
shall not provide any third person with any remedy, claim, liability,
reimbursement, claim of action or other right in excess of those existing
without reference to this Agreement. No party hereto shall have any right,
remedy or claim with respect to any provision of this Agreement to the extent
such provision relates solely to the other party hereto.
8.5 Notices. All notices or other communications under this Agreement
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shall be in writing and shall be deemed to be duly given when (a) delivered in
person or (b) deposited in the United States mail or private express mail,
postage prepaid, addressed as follows:
If to ELECTRONICS, to :
If to TECHNOLOGIES, to:
Any party may, by notice to the other party, change the address to which
such notices are to be given.
8.6 Severability. If any provision of this Agreement or the application
------------
thereof to any person or circumstance is determined by a court of competent
jurisdiction to be invalid, void or unenforceable, the remaining provisions
hereof or thereof, or the application of such provision to persons or
circumstances or in jurisdictions 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 or thereby, as the case
may be, is not affected in any manner adverse to any
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<PAGE>
party. Upon such determination, the parties shall negotiate in good faith in an
effort to agree upon such a suitable and equitable provision to effect the
original intent of the parties.
8.7 Force Majeure. No party shall be deemed in default of this Agreement
-------------
to the extent that any delay or failure in the performance of its obligations
under this Agreement results from any cause beyond its reasonable control and
without its fault or negligence, such as acts of God, acts of civil or military
authority, embargoes, epidemics, war, riots, insurrections, fires, explosions,
earthquakes, floods, unusually severe weather conditions, labor problems or
unavailability of materials, or, in the case of computer systems, any failure in
electrical or air conditioning equipment. In the event of any such excused
delay, the time for performance shall be extended for a period equal to the time
lost by reason of the delay.
8.8 Publicity. Prior to the Distribution, each of TECHNOLOGIES and
---------
ELECTRONICS shall consult with the other prior to issuing any press releases or
otherwise making public statements with respect to the Distribution or any of
the other transactions contemplated by this Agreement and prior to making any
filings with any governmental authority with respect thereto.
8.9 Expenses. Except as expressly set forth in this Agreement, whether or
--------
not the Distribution is consummated, all third party fees, costs and expenses
paid or incurred in connection with the Distribution will be allocated to the
parties on an equitable basis.
8.10 Headings. The Article, Section and Paragraph headings contained in
--------
this Agreement are for reference purposes only and shall not affect in any way
the meaning or interpretation of this Agreement.
8.11 Waivers of Default. Waiver by any party of any default by the other
------------------
party of any provision of this Agreement shall not be deemed a waiver by the
waiving party of any subsequent or other default, nor shall it prejudice the
rights of the other party.
8.12 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 who is or is to be thereby aggrieved shall have the right
to specific performance and injunctive or other equitable relief of its rights
under this Agreement, in addition to any and all other rights and remedies at
law or in equity, 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. Any requirements for the securing or posting of any bond
with such remedy are waived.
8.13 Amendments. No provisions of this Agreement shall be deemed waived,
----------
amended, supplemented or modified by any party, unless such waiver, amendment,
supplement or modification is in writing and signed by the authorized
representative of the party against whom it is sought to enforce such waiver,
amendment, supplement or modification.
-12-
<PAGE>
8.14 Words in the singular shall be held to include the plural and vice
versa and words of one gender shall be held to include the other genders as the
context requires. The terms "hereof," "herein," and "herewith" and words of
similar import shall, unless otherwise stated, be construed to refer to this
Agreement as a whole and not to any particular provision of this Agreement.
Article and Section references are to the Sections to this Agreement unless
otherwise specified. The word "including" and words of similar import when used
in this Agreement shall mean "including, without limitation," unless the context
otherwise requires or unless otherwise specified. The word "or" shall not be
exclusive.
IN WITNESS WHEREOF, the parties hereto have caused this Tax Allocation and
Indemnity Agreement to be executed by their duly authorized representatives.
ELECTRONICS
By: /s/ Charles Crocker
------------------------------------
Name: Charles Crocker
----------------------------------
Title: President
---------------------------------
TECHNOLOGIES
By: /s/ Charles Crocker
------------------------------------
Name: Charles Crocker
----------------------------------
Title: President
---------------------------------
13
<PAGE>
EXHIBIT 2.4
ASSUMPTION OF LIABILITIES
AND
INDEMNITY AGREEMENT
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAG
<S> <C> <C>
I. Technologies Assumption And Indemnity.................. 1
II. Electronics Assumption And Indemnity................... 3
III. Insurance Matters...................................... 3
IV. Procedures For Indemnification......................... 4
A. Third Party Claims..................................... 4
B. Indemnification Payments............................... 5
C. Other Adjustments...................................... 5
V. Consolidation, Merger, Transfer, Or Lease.............. 6
VI. Notices................................................ 6
VII. Dispute Resolution..................................... 7
VIII. Consent To Jurisdiction................................ 7
IX. Survival............................................... 8
X. General................................................ 8
A. Complete Agreement; Construction....................... 8
B. Amendments............................................. 8
C. Waiver................................................. 8
D. Severability........................................... 8
E. Governing Law.......................................... 8
F. Successors And Assigns................................. 9
G. Attorney Fees.......................................... 9
H. Title And Headings..................................... 9
I. Exhibits............................................... 9
J. Force Majeure.......................................... 9
</TABLE>
<PAGE>
This ASSUMPTION OF LIABILITIES AND INDEMNITY AGREEMENT (this "Agreement")
is entered into as of the 26th of September, 1997 by and between BEI
TECHNOLOGIES, INC., a Delaware corporation, having its executive offices at One
Post Street, Suite 2500, San Francisco, California 94104 ("Technologies"), and
BEI ELECTRONICS, INC., a Delaware corporation, having its executive offices at
83 Hobart Street, Hackensack, New Jersey, 07601 ("Electronics") (Technologies
and Electronics each being referred to as a "Party" and collectively as the
"Parties").
RECITALS:
WHEREAS, Electronics and Technologies have entered into that certain
Distribution Agreement dated as of the date hereof concerning the spinoff of
Technologies from Electronics (the "Distribution Agreement"); and
WHEREAS, Electronics and Technologies desire to allocate certain
liabilities and obligations associated with their respective businesses;
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants hereinafter set forth, the Parties hereby agree as follows:
I. TECHNOLOGIES ASSUMPTION AND INDEMNITY.
Technologies shall solely assume, and shall indemnify and hold harmless
Electronics from and against:
A. All claims, damages, losses, liabilities, fines, penalties, costs and
expenses (including reasonable attorneys' fees and disbursements) (collectively,
"Liabilities") arising out of, associated with, or resulting from the
activities, business, operations, assets, properties, conduct or status of
Technologies on or after the Effective Time (as such date is defined in the
Distribution Agreement).
B. All Liabilities associated with the matters, current sites and
businesses described in Exhibit I, including, without limitation, those
Liabilities in connection with the removal, remediation or control of
environmental conditions at or associated with any of the sites identified
therein.
C. All Liabilities arising out of, associated with, or resulting from the
activities, business, operations, assets, properties, conduct or status of BEI
Sensors & Systems Company, Inc., Defense Systems Company, Inc., BEI Export
Sales, Inc., BEI Properties, Inc., SiTek, Inc., a BEI Company, and BEI
International, Inc. (including those companies' respective
<PAGE>
subsidiaries) prior to the Effective Time (as such term is defined in the
Distribution Agreement).
D. All Liabilities arising out of, associated with, or resulting from the
activities, business, operations, assets, properties, conduct or status of the
discontinued businesses and former sites related to BEI Sensors & Systems
Company, Inc., Defense Systems Company, Inc., BEI Export Sales, Inc., BEI
Properties, Inc., SiTek, Inc., a BEI Company, and BEI International, Inc.
(including those companies' respective subsidiaries) identified in Exhibit II,
including, without limitation, Liabilities in connection with the removal,
remediation or control of environmental conditions at any of the sites
identified thereby.
E. All claims and Liabilities for employee benefits for which
Technologies is responsible pursuant to Article 6 of the Distribution Agreement.
F. Notwithstanding the foregoing, matters involving the assumption of
liability and indemnification for taxes shall be governed by the terms of the
Tax Allocation and Indemnity Agreement and the Agreement Regarding Certain
Representations and Covenants, each dated as of the date hereof and each between
Technologies and Electronics (the "Tax Agreements").
G. Notwithstanding the foregoing, Technologies shall indemnify BEI for
all Liabilities to the extent they result from Technologies' gross negligence in
the provision of services under the Corporate Services Agreement dated as of the
date hereof between Technologies and Electronics, other than matters concerning
compliance with reporting to the Securities and Exchange Commission (the "SEC")
and the Nasdaq Stock Market (the "Nasdaq") which have been dealt with separately
in this Agreement.
H. Notwithstanding the foregoing, Technologies agrees to indemnify and
hold harmless Electronics, each of its directors, each of its officers who signs
a filing made with the SEC or the Nasdaq and each person, if any, who controls
Electronics within the meaning of the Securities Act of 1933, as amended (the
"Securities Act"), or the Exchange Act of 1934, as amended (the "Exchange Act"),
against any Liabilities to which Electronics, or any director, officer, or
controlling person of Electronics may become subject under the Securities Act or
the Exchange Act, insofar as such Liabilities arise out of or are based upon
errors or omissions made by Technologies in connection with the filing of
periodic reports with the SEC and the Nasdaq which are attributable to
negligence by Technologies in determining the necessity, form or timing of such
filing. Technologies shall not be responsible for and shall not be required to
indemnify Electronics, its directors, officers or controlling persons, for any
Liabilities resulting directly or indirectly from any untrue or allegedly untrue
statement of a material fact in any such filing or the omission or alleged
omission to state a material fact in any such filing if such untrue or allegedly
untrue statement was provided by Electronics to Technologies, or if such omitted
or allegedly omitted fact was not provided to Technologies in written form, in
connection with the preparation of the filing. Furthermore, Technologies shall
not indemnify Electronics for Liabilities incurred due to a late filing if the
information required to make the filing was not provided to Technologies in a
reasonably timely fashion after Technologies advised Electronics of the need to
make such filing.
<PAGE>
II. ELECTRONICS ASSUMPTION AND INDEMNITY.
Electronics shall solely assume, and shall indemnify and hold harmless
Technologies from and against:
A. All Liabilities arising out of, associated with, or resulting from the
activities, business, operations, assets, properties, conduct or status of
Electronics on or after the Effective Time.
B. All Liabilities arising out of, associated with, or resulting from the
activities, business, operations, assets, properties, conduct or status of
Electronics prior to the Effective Time, except for those described in Article I
above.
C. All claims and Liabilities for employee benefits for which Electronics
is responsible pursuant to Article 6 of the Distribution Agreement.
D. Notwithstanding the foregoing, matters involving the assumption of
liability and indemnification for taxes shall be governed by the terms of the
Tax Agreements.
III. INSURANCE MATTERS.
The amount which any indemnifying Party is or may be required to pay to any
indemnified Party hereunder shall be reduced (including, without limitation,
retroactively) by any proceeds of insurance policies or other amounts actually
recovered by or on behalf of such indemnified Party in reduction of the related
Liability. If an indemnified Party shall have received the payment (an
"Indemnity Payment") required by this Agreement from an indemnifying Party in
respect of any Liability and shall subsequently actually receive proceeds of
insurance policies or other amounts in respect of such Liability, then such
indemnified Party shall pay to such indemnifying Party a sum equal to the amount
actually received (up to but not in excess of the amount of any Indemnity
Payment made hereunder). An insurer who would otherwise be obligated to pay any
claim shall not be relieved of the responsibility with respect thereto, or,
solely by virtue of the indemnification provisions hereof, have any subrogation
rights with respect thereto, it being expressly understood and agreed that no
insurer or any other third party shall be entitled to a benefit they would not
otherwise be entitled to receive in the absence of the indemnification
provisions hereof by virtue of the indemnification provisions hereof.
IV. PROCEDURES FOR INDEMNIFICATION.
A. THIRD PARTY CLAIMS. If a claim or demand is made against an
indemnified Party by any person who is not a party to this Agreement (a "Third
Party Claim") as to which such indemnified Party is entitled to indemnification
pursuant to this Agreement, such indemnified Party shall notify the indemnifying
Party in writing, and in reasonable detail, of the Third Party Claim promptly
(and in any event within ten business days) after receipt by such indemnified
Party of written notice of the Third Party Claim; provided, however, that
failure to give such notification shall not affect the indemnification provided
hereunder except to the extent the
<PAGE>
indemnifying Party shall have been actually prejudiced as a result of such
failure (except that the indemnifying Party shall not be liable for any expenses
incurred during the period in which the indemnified Party failed to give such
notice). Thereafter, the indemnified Party shall deliver to the indemnifying
Party, promptly (and in any event within ten business days) after the
indemnified Party's receipt thereof, copies of all notices and documents
(including court papers) received by the indemnified Party relating to the Third
Party Claim.
If a Third Party Claim is made against an indemnified Party, the
indemnifying Party shall be entitled to participate in the defense thereof and,
if it so chooses and acknowledges in writing its obligation to indemnify the
indemnified Party therefor, to assume the defense thereof with counsel selected
by the indemnifying Party; provided, however, that such counsel is not
reasonably objected to by the indemnified Party. Should the indemnifying Party
so elect to assume the defense of a Third Party Claim, the indemnifying Party
shall not be liable to the indemnified Party for legal or other expenses
subsequently incurred by the indemnified Party in connection with the defense
thereof, unless in connection with the defense of such Third Party Claim there
is in the opinion of counsel for the indemnified Party a material conflict of
interest on any material issue between the position of the indemnified Party and
the position of the indemnifying Party. If the indemnifying Party assumes such
defense, the indemnified Party shall have the right to participate in the
defense thereof and to employ counsel, at its own expense, separate from the
counsel employed by the indemnifying Party, it being understood that the
indemnifying Party shall control such defense. The indemnifying Party shall be
liable for the fees and expenses of counsel employed by the indemnified Party
for any period during which the indemnifying Party has failed to assume the
defense thereof (other than during the period prior to the time the indemnified
Party shall have given notice of the Third Party Claim as provided above). If
the indemnifying Party so elects to assume the defense of any Third Party Claim,
the indemnified Party shall cooperate with the indemnifying Party in the defense
or prosecution thereof.
If the indemnifying Party acknowledges in writing its obligation to
indemnify the indemnified Party for a Third Party Claim, then in no event will
the indemnified Party admit any liability with respect to, or settle, compromise
or discharge, any Third Party Claim without the indemnifying Party's prior
written consent; provided, however, that the indemnified Party shall have the
right to settle, compromise or discharge such Third Party Claim without the
consent of the indemnifying Party if the indemnified Party releases the
indemnifying Party from its indemnification obligation hereunder with respect to
such Third Party Claim and such settlement, compromise or discharge would not
otherwise materially adversely affect the indemnifying Party. If the
indemnifying Party acknowledges in writing its obligation to indemnify the
indemnified Party for a Third Party Claim, the indemnified Party will agree to
any settlement, compromise or discharge of a Third Party Claim that the
indemnifying Party may recommend and that by its terms obligates the
indemnifying Party to pay the full amount of the liability in connection with
such Third Party Claim and releases the indemnified Party completely in
connection with such Third Party Claim and that would not otherwise materially
adversely affect the indemnified Party; provided, however, that the indemnified
Party may refuse to agree to any such settlement, compromise or discharge if the
indemnified Party agrees that the indemnifying Party's indemnification
obligation with respect to such Third Party Claim shall
<PAGE>
not exceed the amount that would be required to be paid by or on behalf of the
indemnifying Party in connection with such settlement, compromise or discharge.
Notwithstanding the foregoing, the indemnifying Party shall not be entitled
to assume the defense of any Third Party Claim (and shall be liable for the fees
and expenses of counsel incurred by the indemnified Party in defending such
Third Party Claim) if the Third Party Claim seeks an order, injunction or other
equitable relief or relief for other than money damages against the indemnified
Party which the indemnified Party reasonably determines, after conferring with
its counsel, cannot be separated from any related claim for money damages. If
such equitable relief or other relief portion of the Third Party Claim can be so
separated from that for money damages, the indemnifying Party shall be entitled
to assume the defense of the portion relating to money damages.
B. INDEMNIFICATION PAYMENTS. Indemnification required by this Agreement,
shall be made by periodic payments of the amount thereof during the course of
the investigation or defense, as and when bills are received or loss, liability,
claim, damages or expense is incurred.
C. OTHER ADJUSTMENTS.
(1) The amount of any indemnification obligation with respect to any
Third Party Claim ("Indemnity Obligation") shall be (x) increased to take into
account any net tax cost actually incurred by the indemnified Party arising from
any payments received from the indemnifying Party (grossed up for such increase)
and (y) reduced to take into account any net tax benefit actually realized by
the indemnified Party arising from the incurrence or payment of any such
Indemnity Obligation. In computing the amount of such tax cost or tax benefit,
the indemnified Party shall be deemed to recognize all other items of income,
gain, loss, deduction or credit before recognizing any item arising from the
receipt of any payment with respect to an Indemnity Obligation or the incurrence
or payment of any Indemnity Obligation.
(2) In addition to any adjustments required pursuant to Article III
hereof or clause (1) of this paragraph C., if the amount of any Indemnity
Obligation 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 indemnified Party to the indemnifying Party up to the aggregate
amount of any payments received from such indemnifying Party pursuant to this
Agreement in respect of such Indemnity Obligation.
V. CONSOLIDATION, MERGER, TRANSFER, OR LEASE.
Neither Party shall consolidate with or merge into any other person, or
convey, transfer or lease its properties and assets substantially as an entirety
to any other person, and neither Party shall permit any person to consolidate
with or merge into it or convey, transfer or lease its properties and assets
substantially as an entirety to said Party unless:
<PAGE>
A. In any case in which either Party shall consolidate with or merge into
another person or convey, transfer or lease its properties and assets
substantially as an entirety to any person, the person formed by such
consolidation or into which said Party is merged or the person which acquires by
conveyance or transfer, or which leases the properties and assets of said Party
substantially as an entirety shall (i) be a corporation, (ii) be organized and
validly existing under the laws of the United States of America, any State
thereof or the District of Columbia and (iii) expressly assume, by an instrument
reasonably satisfactory to the other Party, each and every obligation of said
Party to be performed or observed hereunder;
B. After giving effect to such transaction, the person formed by such
consolidation or into which a Party is merged or the person which acquires by
conveyance, transfer or lease the properties and assets of a Party substantially
as an entirety must have consolidated stockholders' equity, as determined in
accordance with generally accepted accounting principles, at least equal to the
consolidated stockholders' equity of said Party immediately prior to the
consummation of such transaction; and
C. Said Party shall have delivered to the other Party a Certificate
executed by its Chief Executive Officer and Chief Financial Officer stating that
such consolidation, merger, conveyance, transfer or lease complies with this
Article V and with the terms of that certain Agreement Regarding Certain
Representations and Covenants, dated as of the date hereof and between
Technologies and Electronics, and that all conditions precedent herein relating
to such transaction have been complied with.
VI. NOTICES.
All notices and other communications hereunder shall be in writing and hand
delivered or mailed by registered or certified mail (return receipt requested)
or sent by any means of electronic message transmission with delivery confirmed
(by voice or otherwise) to the Parties at the following addresses (or at such
other addresses for a Party as shall be specified by like notice) and will be
deemed given on the date on which such notice is received:
To ELECTRONICS:
83 Hobart Street
Hackensack, New Jersey 07601
Attn: President
with a copy to:
One Post Street
Suite 2500
San Francisco, CA 94104
Attn: Chairman
To TECHNOLOGIES:
<PAGE>
One Post Street
Suite 2500
San Francisco, CA 94104
Attn: President
VII. DISPUTE RESOLUTION.
In the event of a controversy, dispute or claim arising out of, in
connection with, or in relation to the interpretation, performance,
nonperformance, validity or breach of this Agreement or otherwise arising out
of, or in any way related to this Agreement, including, without limitation, any
claim based on contract, tort, statute or constitution (collectively, "Agreement
Disputes"), such matters shall be resolved in accordance with the provisions of
Article 4 of the Distribution Agreement.
VIII. CONSENT TO JURISDICTION.
This Article VIII shall not limit the provisions of Article VII hereof.
Each of the Parties irrevocably submits to the exclusive personal jurisdiction
and venue of (a) the Superior Court of the City and County of San Francisco,
California, and (b) the United States District Court for the Northern District
of California for the purposes of any suit, action or other proceeding arising
out of this Agreement or any transaction contemplated hereby. Each of the
Parties agrees to commence any action, suit or proceeding relating hereto either
in the United States District Court for the Northern District of California
located in San Francisco, California, or if such suit, action or other
proceeding may not be brought in such court for jurisdictional reasons, in the
Superior Court of the City and County of San Francisco, California. Each of the
Parties further agrees that service of any process, summons, notice or document
by U.S. registered mail to such Party's address set forth above shall be
effective service of process for any action, suit or proceeding in California
with respect to any matters to which it has submitted to jurisdiction in this
Article VIII. Each of the Parties irrevocably and unconditionally waives any
objection to the laying of venue of any action, suit or proceeding arising out
of this Agreement or the transactions contemplated hereby in (i) the Superior
Court of the City and County of San Francisco, California, or (ii) the United
States District Court for the Northern District of California located in San
Francisco, California, and hereby further irrevocably and unconditionally waives
and agrees not to plead or claim in any such court that any such action, suit or
proceeding brought in any such court has been brought in an inconvenient forum.
IX. SURVIVAL.
All the indemnity obligations under this Agreement shall survive
indefinitely.
X. GENERAL.
A. COMPLETE AGREEMENT; CONSTRUCTION. This Agreement, including the
Exhibits, shall constitute the entire agreement between the Parties with respect
to the subject matter hereof and shall supersede all previous negotiations,
commitments and writings with respect to such
<PAGE>
subject matter. In the event of any inconsistency between this Agreement and
any Schedule hereto, the Schedule shall prevail.
B. AMENDMENTS. This Agreement may not be modified or amended except by
an agreement in writing signed by the Parties.
C. WAIVER. The failure of either Party to require strict performance by
the other Party of any provision in this Agreement will not waive or diminish
that Party's right to demand strict performance thereafter of that or any other
provision hereof.
D. SEVERABILITY. In the event any one or more of the provisions
contained in this Agreement should be held invalid, illegal or unenforceable in
any respect, the validity, legality and enforceability of the remaining
provisions contained herein shall not in any way be affected or impaired
thereby. The Parties shall endeavor in good faith negotiations to replace the
invalid, illegal or unenforceable provisions with valid provisions, the economic
effect of which comes as close as possible to that of the invalid, illegal or
unenforceable provisions.
E. GOVERNING LAW. This Agreement shall be governed and construed in
accordance with the laws of the State of California, as such laws are applied to
agreements between California residents entered into and to be performed
entirely in California.
F. SUCCESSORS AND ASSIGNS. The provisions of this Agreement shall be
binding upon, inure to the benefit of and be enforceable by the Parties and
their respective successors and permitted assigns.
G. ATTORNEY FEES. A Party in breach of this Agreement shall, on demand,
indemnify and hold harmless the other Parties hereto for and against all out-of-
pocket expenses, including, without limitation, legal fees, incurred by such
other Party by reason of the enforcement and protection of its rights under this
Agreement. The payment of such expenses is in addition to any other relief to
which such other Party may be entitled hereunder or otherwise.
H. TITLE AND HEADINGS. Titles and headings to sections herein are
inserted for the convenience of reference only and are not intended to be a part
of or to affect the meaning or interpretation of this Agreement.
I. EXHIBITS. The Exhibits 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.
J. FORCE MAJEURE.
(1) ACTS CONSTITUTING FORCE MAJEURE. Neither Party shall be liable to
the other for a delay in its performance of this Agreement arising from causes
beyond its reasonable control. Without limiting the generality of the
foregoing, such events include any act of God; accident; explosion; fire;
earthquake; flood; strikes; labor disputes; riots; sabotage; embargo; equipment
failure; federal, state, or local legal restriction or limitation. Neither
Party shall be
<PAGE>
required to resolve labor disputes, but shall use commercially reasonable
efforts to seek alternative sources to the extent practicable.
(2) NOTICE REQUIREMENT. When circumstances occur that delay the
performance of either Party under this Agreement, whether or not such
circumstances are excused pursuant to Section J(1) above, such Party shall, when
it first becomes aware of such circumstances, promptly notify the other Party,
by facsimile or by telephone confirmed in writing within two (2) business days
in the case of oral notice. Within ten (10) business days of the date when
either Party first becomes aware of the event which it contends is responsible
for the delay, it shall supply to the other Party in writing the reason(s) for
and anticipated duration of such delay, the measures taken and to be taken to
prevent or minimize the delay, and the timetable for the implementation of such
measures.
IN WITNESS WHEREOF, this Agreement has been executed by the duly authorized
representatives of Electronics and Technologies as of the date first above
written.
BEI TECHNOLOGIES, INC. BEI ELECTRONICS, INC.
By: /s/ Charles Crocker By: /s/ Charles Crocker
------------------------- ----------------------------
Name: Charles Crocker Name: Charles Crocker
----------------------- --------------------------
Title: President Title: President
---------------------- -------------------------
<PAGE>
EXHIBIT I
A. GENERAL LITIGATION AND CLAIMS.
None identified.
B. CURRENT SITES AND BUSINESSES.
1. San Francisco, California. (Corporate Headquarters.)
2. Maumelle, Arkansas. (Manufacturing, engineering, administrative and
research and development facility for sensors business.)
3. Tustin, California. (Manufacturing, engineering and administrative
facility for sensors business.)
4. Goleta, California. (Manufacturing, engineering and administrative
facility for sensors business.)
5. Campbell, California. (Manufacturing, administrative and research and
development facility for silicon microelectromechanical structures
business.)
6. San Marcos, California. (Manufacturing, engineering and
administrative facility for motors business.)
7. Sylmar, California. (Manufacturing, engineering, research and
development, and administrative facility for sensors business.)
8. Concord, California. (Manufacturing, engineering, research and
administrative facility for sensors business.)
<PAGE>
EXHIBIT II
Identified Discontinued Businesses And Former Plant Sites
1. Euless, Texas. (Manufacturing, engineering, warehouse and
administrative facility for defense business.)
2. East Camden, Arkansas. (Warehousing facility for defense business.)
Any sites or businesses discovered by Technologies or Electronics after the
Effective Time that are related solely to the businesses comprising Technologies
on the Effective Time.
<PAGE>
EXHIBIT 2.5
TECHNOLOGY TRANSFER AND LICENSE AGREEMENT
BY AND BETWEEN
BEI ELECTRONICS, INC.
AND
BEI TECHNOLOGIES, INC.
<PAGE>
BEI
TECHNOLOGY TRANSFER AND LICENSE AGREEMENT
THIS AGREEMENT is made and entered into as of this 26th day of September,
1997 by and between BEI ELECTRONICS, INC., with its principal executive offices
at 83 Hobart Street, Hackensack, New Jersey, 07601, (hereinafter referred to as
"Electronics") and BEI TECHNOLOGIES, INC., with its principal executive offices
at One Post Street, Suite 2500, San Francisco, California 94104 (hereinafter
referred to as "Technologies") (hereinafter collectively the "Parties" and each
individually a "Party").
RECITALS
WHEREAS, Electronics and Technologies are contemplating entering into
a Distribution Agreement concerning the spin-off of Technologies from
Electronics (the "Distribution Agreement");
WHEREAS, prior to entering into the Distribution Agreement,
Electronics possesses certain Intellectual Property and Technology used
exclusively or primarily in the Technologies business;
WHEREAS, Technologies desires to own or have the right to use such
certain Intellectual Property and Technology used in its business;
WHEREAS, to allow each of Electronics and Technologies (and their
respective stockholders) to obtain the full value of its respective rights under
the Distribution Agreement, Technologies and Electronics desire to enter into
and execute this Agreement concerning the assignment and licensing of certain
Intellectual Property and Technology;
NOW, THEREFORE, in consideration of the above, and the mutual promises
set forth below, Electronics and Technologies agree as follows:
1. DEFINITIONS.
Whenever used in this Agreement, the following terms shall have the
following meanings, on the understanding that words in the singular include the
plural and vice-versa. Headings and subheadings are used for convenience only
and are not intended as limitations in the Agreement or for use in interpreting
the Agreement.
"Agreement" shall mean this agreement as amended and/or supplemented from
time to time, including all the Exhibits attached hereto.
"Confidential Information" shall mean any and all information disclosed to
the receiving Party by the disclosing Party pursuant to this Agreement, in any
form such as, but not limited
1.
<PAGE>
to, visual, oral, written, graphic, electronic or model form, including but not
limited to know-how and trade secrets, whether patented or not and whether in
the laboratory, pilot plant or commercial plant stage (including drawings,
operating conditions, specifications and safety instructions) owned or
controlled by a Party.
"Effective Date" shall mean the Effective Time specified in the
Distribution Agreement.
"Electronics Businesses" shall mean the businesses of BEI Medical Systems
Company, Inc. (hereinafter "Medical Systems"), as they were carried out on or
before the Effective Date.
"Electronics Intellectual Property" shall mean the Intellectual Property,
not including trademarks or tradedress, owned or licensed in by Medical Systems
on or before the Effective Date.
"Electronics Products" shall mean those products that were made by Medical
Systems on or before the Effective Date and products acquired, developed or
established by or for Electronics or any of its Subsidiaries after the Effective
Date.
"Electronics Technology" shall mean all the Technology, that was used by or
derived from efforts by or on behalf of Medical Systems on or before the
Effective Date.
"Intellectual Property" shall mean all classes or types of patents, utility
models, design patents, copyrights, mask works and applications for the
aforementioned, in all countries of the world, owned by a Party and in existence
on or before the Effective Date.
"Medical Device" shall mean a product that is primarily intended for use in
the field of woman's health care and has virtually no other independent
application.
"Person" shall mean any natural person, corporation, limited liability
company, business trust, joint venture, association, company, partnership or
government, or any agency or political sub-division thereof.
"Products" shall mean the Electronics Products and the Technologies
Products.
"Subsidiary" shall mean any corporation, partnership or other entity of
which another entity (i) owns, directly or indirectly, ownership interests
sufficient to elect a majority of the Board of Directors (or persons performing
similar functions) (irrespective of whether at the time any other class or
classes of ownership interests of such corporation, partnership or other entity
shall or might have such voting power upon the occurrence of any contingency) or
(ii) is a general partner or an entity performing similar functions (e.g., a
trustee).
"Technologies Businesses" shall mean the businesses of Electronics other
than the Electronics Businesses, as they were carried out on or before the
Effective Date.
2.
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"Technologies Intellectual Property" shall mean the Intellectual Property,
not including trademarks or tradedress, owned or licensed in by Electronics, its
Subsidiaries and their constituent companies and predecessor companies prior to
the Effective Date, other than Electronics Intellectual Property.
"Technologies Products" shall mean all products of Electronics other than
Electronics Products that were made by Subsidiaries of Electronics or their
constituent companies and their predecessor companies on or before the Effective
Date and all products acquired, developed or established by or for Technologies
or any of its Subsidiaries after the Effective Date.
"Technologies Technology" shall mean all the Technology, other than
Electronics Technology, that was used by or derived from efforts by or on behalf
of Electronics or its constituent companies and their predecessors on or before
the Effective Date.
"Technology" shall mean the body of knowledge owned by a Party or a
Subsidiary of a Party and in existence as of the Effective Date, including: (i)
information such as technical, engineering, maintenance, environmental and
safety information with respect to the design, equipment selection,
construction, installation, staffing and operation of facilities and equipment
for the design and manufacture of Products; (ii) formulae, process drawings and
descriptions, know-how, and technological and processing information, for the
design and manufacture of Products; and (iii) specifications and properties of
the Products.
"Term" shall mean the period of time during which this Agreement is in full
force and effect pursuant to Section 5.
2. ASSIGNMENT OF INTELLECTUAL PROPERTY.
2.1 ASSIGNMENT. At or prior to the Effective Time, Electronics
irrevocably agrees to assign and transfer to Technologies all of its right,
title and interest, together with all rights of priority, in and to the
Technologies Intellectual Property, the Technologies Technology and the
Technologies Products that are or will be owned by Electronics or any of its
Subsidiaries at the time of the assignment and transfer. Electronics will
retain all right, title and interest in and to the Electronics Intellectual
Property, the Electronics Technology and the Electronics Products.
2.2 DISCLAIMER. EXCEPT AS EXPRESSLY STATED IN SECTION 3.10, ELECTRONICS
MAKES NO REPRESENTATION OR WARRANTY, EXPRESS OR IMPLIED, WITH RESPECT TO THE
INTELLECTUAL PROPERTY OR TECHNOLOGY ASSIGNED HEREBY, INCLUDING WITHOUT
LIMITATION AS TO THEIR VALIDITY, ENFORCEABILITY OR FITNESS FOR ANY PARTICULAR
USE OR PURPOSE. NEITHER PARTY SHALL BE LIABLE TO THE OTHER FOR INDIRECT,
SPECIAL OR CONSEQUENTIAL DAMAGES ARISING OUT OF ANY USE OF CONFIDENTIAL
INFORMATION OR INTELLECTUAL PROPERTY RIGHTS OBTAINED BY IT FROM THE OTHER PARTY
HEREUNDER.
3.
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3. LICENSES.
3.1 LIMITED LICENSE. Technologies and its Subsidiaries hereby grant
to Electronics an irrevocable, royalty free, worldwide, nonexclusive license,
with the right to sublicense, to use the Technologies Intellectual Property and
the Technologies Technology, that have been used by or on behalf of Electronics
in the Electronics Businesses on or before the Effective Date, solely for
designing, making, having made, using, offering for sale, selling and importing
Electronics Products that qualify as Medical Devices hereunder.
3.2 SUBLICENSE TERMS. Any sublicense granted pursuant to this Section 3
shall be consistent with and subject to the terms and conditions of this
Agreement.
3.3 LIMITATIONS. Notwithstanding any other provision of this Agreement,
no Party or its Subsidiaries shall be obligated to: (i) grant any license, or
make any disclosure, to the other Party with respect to Intellectual Property,
owned or controlled by such Party or its Subsidiaries, if to do so would violate
an agreement with an unrelated third party in effect on the Effective Date, or
(ii) grant any license, or make any disclosure, to the other Party with respect
to Intellectual Property owned or controlled by such Party or its Subsidiaries
if to do so would be in violation of law. If the violation can be avoided by a
more limited license, then the Parties, for themselves and on behalf of their
respective Subsidiaries, agree to grant same to the extent commercially
reasonable. Notwithstanding any other provision of this Agreement, following
the Effective Date, neither Party nor any of their respective Subsidiaries shall
be obligated to make any further disclosure to the other Party with respect to
any Technology or Intellectual Property licensed hereunder.
3.4 WARRANTY. Each Party warrants that (a) except as expressly set forth
in this Agreement, neither such Party nor any of its Subsidiaries has granted
nor will grant any licenses that conflict with the rights and licenses set forth
in this Agreement, and (b) such Party and its respective Subsidiaries have the
right to grant the rights and licenses granted by such Party or its respective
Subsidiaries in or pursuant to this Agreement. NO OTHER WARRANTY OF ANY KIND,
WHETHER EXPRESS OR IMPLIED, IS GIVEN BY ONE PARTY TO THE OTHER PARTY AND IN
PARTICULAR THE PARTIES DISCLAIM ANY WARRANTY THAT THEIR RESPECTIVE INTELLECTUAL
PROPERTY AND RIGHTS WITH RESPECT THERETO ARE VALID OR ENFORCEABLE OR USEFUL FOR
ANY PURPOSE.
3.5 EXPRESS LICENSES ONLY. Except for licenses expressly granted pursuant
to this Section 3, no other licenses are intended to be or are granted hereby,
and nothing in this Agreement shall be construed as, or result in, conveying by
implication, waiver or estoppel any right or license to either Party, any
Subsidiary or to any third party.
4.
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4. CONFIDENTIALITY.
4.1 CONFIDENTIALITY OBLIGATION. Each of the Parties agrees to keep
confidential and neither disclose to others nor use except as permitted herein
any Confidential Information received from the other Party or its Subsidiaries
pursuant to this Agreement.
4.2 LIMITS ON DISCLOSURE. The receiving Party shall treat such
Confidential Information in the same manner and with the same degree of care as
it uses with respect to its own Confidential Information of like nature and
shall disclose Confidential Information of the other Party only to its employees
or consultants who have a need to know it, provided that such employees and
consultants are bound to respect all confidentiality obligations provided for in
this Agreement.
4.3 EXCEPTIONS. The obligations set forth in Sections 4.1 and 4.2 shall
not apply with respect to any Confidential Information that:
4.3.1 PUBLIC KNOWLEDGE. Is generally available to the public or
subsequently becomes generally available to the public through no breach by the
receiving Party of confidentiality obligations under this Agreement or prior
agreements between the Parties concerning the Confidential Information; or
4.3.2 RECEIVED FROM THIRD PARTY. Is received without a
confidentiality obligation from a third party who is legally free to disclose
such Confidential Information and who did not receive such Confidential
Information in confidence from the disclosing Party; or
4.3.3 APPROVED FOR DISCLOSURE. Is approved in writing for release by
the disclosing Party or its Subsidiaries; or
4.3.4 SUCCESSOR IN INTEREST. Is disclosed to any permitted assignee
of this Agreement, provided that such assignee agrees in writing to be bound by
the provisions of this Agreement; or
4.3.5 INDEPENDENTLY DEVELOPED. Is independently developed by the
receiving Party without reference to the Confidential Information received from
the disclosing Party or its Subsidiaries.
4.4 PERMITTED DISCLOSURES. The provisions of Sections 4.1 and 4.2
notwithstanding, in exercising the rights granted under this Agreement, any
Party may disclose Confidential Information to others for purpose of
sublicensing, provided that any sublicenses pursuant to which any Confidential
Information is disclosed shall have first entered into a written confidentiality
and non-use obligation at least as stringent as that imposed on the Parties
pursuant to this Agreement.
4.5 SUBPOENA OR DEMAND. The provisions of Sections 4.1 and 4.2
notwithstanding, a Party may disclose Confidential Information if compelled to
do so pursuant to a subpoena or
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similar demand for production of documents in connection with any suit or
arbitration proceeding, any administrative procedure or before a governmental or
administrative agency or instrumentality thereof or any legislative hearing or
other similar proceeding, provided that (a) the receiving Party shall promptly
notify the disclosing Party or its appropriate Subsidiary of the subpoena or
demand, (b) the receiving Party shall assert in good faith prior to making such
disclosure any available evidentiary privilege, and (c) the receiving Party
shall use its best efforts to maintain the confidential nature of the
Confidential Information by protective order or other means.
4.6 PROTECTION OF RIGHTS. The provisions of Sections 4.1 and 4.2
notwithstanding, any Party hereto may disclose Confidential Information to
others as may be necessary in a bona fide attempt to protect or enforce its
rights and privileges under this Agreement.
5. DURATION AND TERMINATION.
5.1 TERM OF AGREEMENT. This Agreement shall become effective on the
Effective Date, and shall continue in full force for ten years from the
Effective Date, at which time it shall terminate unless renewed by written
agreement of the Parties. After expiration of the Agreement pursuant to this
Section 5.1, the rights and obligations set forth in Sections 2, 3, 4, and 9
shall survive.
5.2 TERMINATION FOR MATERIAL BREACH. If either Party or a Subsidiary of
either Party commits a material breach with respect to any of such entity's
obligations hereunder, the other Party may give written notice to the allegedly
breaching Party or Subsidiary, specifying the alleged material breach and an
intention to terminate this Agreement and all extant licenses. The Party or
Subsidiary, charged with the alleged material breach shall have sixty (60) days
from the date of receipt of such written notice to cure the alleged material
breach. If the alleged material breach is not cured within said sixty (60)-day
period, the other Party may terminate this Agreement and any license still in
force that was granted to the breaching Party by sending a written notice of
termination to the Party who breached or whose Subsidiary breached and in this
event, neither Party waives any legal rights to recover damages resulting from
the termination of this Agreement.
5.3 INSOLVENCY. In the event that either Party shall: (i) become
insolvent or go into liquidation or receivership or be admitted to the benefits
of any procedure for the settlement or postponement of debts or be the subject
of bankruptcy proceedings filed against it, which proceedings are not terminated
within ninety (90) days of filing; or (ii) become party to dissolution
proceedings; then this Agreement and any and all obligations assumed hereby
(except as otherwise expressly provided for herein) may be terminated by the
other Party, if permitted by law, by giving written notice of such termination
on a date specified therein. [Expand]
6. RIGHTS UPON TERMINATION OTHER THAN UNDER SECTION 6.1.
6.1 TERMINATION OF LICENSES. Notwithstanding the foregoing, the licenses
granted under Section 3 to the Party committing a material breach as
contemplated by Section 5.2 may
6.
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be canceled immediately by the Party terminating this Agreement and such
breaching Party shall promptly forward to the other Party all copies of
Confidential Information, blue prints, drawings and data which it may have in
written or graphic or machine readable form and which have been proposed or
reproduced by it from the Confidential Information received from the other
Party. The termination of this Agreement pursuant to Section 5.2 shall not
affect the rights and licenses previously granted to the non-breaching Party,
which shall continue in full force and effect.
6.2 OBLIGATIONS SURVIVING TERMINATION. Upon termination pursuant to
Sections 5.2 or 5.3, the obligations of each Party to the other shall cease
except, subject to Section 6.1, the obligations set forth in Sections 3, 4 and 9
shall continue in full force and effect until completely discharged.
7. FORCE MAJEURE.
7.1 ACTS CONSTITUTING FORCE MAJEURE. Neither Party shall be liable to the
other arising out of a delay in its performance of this Agreement arising from
causes beyond its reasonable control. Without limiting the generality of the
foregoing, such events include any act of God; accident; explosion; fire;
earthquake; flood; strikes; labor disputes; riots; sabotage; embargo; equipment
failure; federal, state, or local legal restriction or limitation. Neither
Party shall be required to resolve labor disputes, but shall use commercially
reasonable efforts to seek alternative sources to the extent practicable.
7.2 NOTICE REQUIREMENT. When circumstances occur that delay the
performance of either Party under this Agreement, whether or not such
circumstances are excused pursuant to Section 7.1 above, such Party shall, when
it first becomes aware of such circumstances, promptly notify the other Party,
by facsimile or by telephone confirmed in writing within two (2) business days
in the case of oral notice. Within ten (10) business days of the date when
either Party first becomes aware of the event which it contends is responsible
for the delay, it shall supply to the other Party in writing the reason(s) for
and anticipated duration of such delay, the measures taken and to be taken to
prevent or minimize the delay, and the timetable for the implementation of such
measures.
8. GUARANTEES, LIABILITIES AND INDEMNITIES.
8.1 LAWFUL POSSESSION. Each Party represents that to the best of its
knowledge and belief, it will be in the lawful possession of any Confidential
Information when disclosed by it pursuant to this Agreement and that the
disclosure of said Confidential Information shall not in any way violate any
agreement to hold such Confidential Information in confidence.
9. EXPORT CONTROL.
Each Party, for itself and on behalf of its Subsidiaries, agrees not to
export or reexport, or cause to be exported or reexported, any Confidential
Information furnished hereunder by the other Party or any of such other Party's
Subsidiaries or any Products designed or manufactured using any such
Confidential Information to any country to which, under the laws of the country
7.
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of origin of the Confidential Information, it is or may be prohibited from
exporting such Confidential Information or the direct product thereof.
10. ASSIGNMENT.
10.1 LIMITATIONS ON ASSIGNMENT. This Agreement shall not be assigned by
either Party to a third party without the prior written consent of the other
Party, which consent shall not be unreasonably withheld, except to: a Subsidiary
of a Party, or a successor to the business of such Party to which this Agreement
relates, or a successor to all or substantially all of the assets of such Party,
provided that the successor agrees in writing to accept the rights and to be
bound by the obligations of the assigning Party, any other assignment being
void.
10.2 VIOLATION. Any assignment in violation of this Section 10 shall be
void and any attempt to assign or actual assignment in derogation of this
prohibition shall be a material breach of this Agreement.
11. MISCELLANEOUS.
11.1 COMPLETE AGREEMENT. This Agreement and the Distribution Agreement
shall constitute the entire agreement between the parties with respect to the
subject matter hereof and shall supersede all previous negotiations, commitments
and writings with respect to such subject matter.
11.2 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, all of which shall be considered one and the same agreement, and
shall become effective when one or more such counterparts have been signed by
each of the parties and delivered to the other parties.
11.3 NOTICES. All notices and other communications hereunder shall be in
writing and hand delivered or mailed by registered or certified mail (return
receipt requested) or sent by any means of electronic message transmission with
delivery confirmed (by voice or otherwise) to the parties at the following
addresses (or at such other addresses for a Party as shall be specified by like
notice) and will be deemed given on the date on which such notice is received:
To BEI ELECTRONICS, INC.:
83 Hobart Street
Hackensack, NJ 07601
Attn: President
with a copy to:
One Post Street, Suite 2500
San Francisco, CA 94104
Attn: Chairman
8.
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To BEI TECHNOLOGIES, INC.:
One Post Street, Suite 2500
San Francisco, CA 94104
Attn: President
11.4 WAIVERS. The failure of either Party to require strict performance by
the other Party of any provision in this Agreement will not waive or diminish
that Party's right to demand strict performance thereafter of that or any other
provision hereof.
11.5 AMENDMENTS. Subject to the terms of Sections 5 and 6 hereof, this
Agreement may not be modified or amended except by an agreement in writing
signed by the Parties.
11.6 SUBSIDIARIES. Each of the parties hereto shall cause to be performed,
and hereby guarantees the performance of, all actions, agreements and
obligations set forth herein to be performed by any Subsidiary of such Party at
the time such performance is anticipated to occur in order to carry out the
intent of this Agreement.
11.7 THIRD PARTY BENEFICIARIES. This Agreement is solely for the benefit
of the Parties hereto and their respective Subsidiaries and should not be deemed
to confer upon third parties any remedy, claim, liability, reimbursement, claim
of action or other right in excess of those existing without reference to this
Agreement.
11.8 ATTORNEY FEES. Except as contemplated by the third to the last
sentence of Section 12.2 hereof, a Party in breach of this Agreement shall, on
demand, indemnify and hold harmless the other Party hereto for and against all
out-of-pocket expenses, including, without limitation, legal fees, that are
finally awarded to and incurred by such other Party by reason of the enforcement
and protection of its rights under this Agreement. The payment of such expenses
is in addition to any other relief to which such other Party may be entitled
hereunder or otherwise.
11.9 TITLE AND HEADINGS. Titles and headings to sections herein are
inserted for the convenience of reference only and are not intended to be a part
of or to affect the meaning or interpretation of this Agreement.
11.10 SPECIFIC PERFORMANCE. Each of the Parties hereto acknowledges that
there is no adequate remedy at law for failure by such Party to comply with the
provisions of this Agreement and that such failure would cause immediate harm
that would not be adequately compensable in damages, and therefore agree that
its agreements contained herein may be specifically enforced without the
requirement of posting a bond or other security, in addition to all other
remedies available to the other Party under this Agreement.
11.11 GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF CALIFORNIA AS SUCH LAWS ARE APPLIED TO
AGREEMENTS BETWEEN CALIFORNIA RESIDENTS ENTERED INTO AND PERFORMED ENTIRELY IN
CALIFORNIA.
9.
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11.12 SEVERABILITY. In the event any one or more of the provisions
contained in this Agreement should be held invalid, illegal or unenforceable in
any respect, the validity, legality and enforceability of the remaining
provisions contained herein and therein shall not in any way be affected or
impaired thereby. The Parties shall endeavor in good-faith negotiations to
replace the invalid, illegal or unenforceable provisions with valid provisions,
the economic effect of which comes as close as possible to that of the invalid,
illegal or unenforceable provisions.
12. DISPUTE RESOLUTION.
12.1 ALTERNATIVE DISPUTE RESOLUTION. In the event of a controversy,
dispute or claim (other than controversies, disputes or claims related to
infringement, validity or enforceability of Intellectual Property) arising out
of, in connection with, or in relation to the interpretation, performance,
nonperformance, validity or breach of this Agreement or otherwise arising out
of, or in any way related to this Agreement, including, without limitation, any
claim based on contract, tort, statute or constitution (collectively, "Agreement
Disputes"), such matters shall be resolved in accordance with the provisions of
Article 4 of the Distribution Agreement between the Parties dated as of the
Effective Date.
12.2 CONSENT TO JURISDICTION. This Section 12.2 shall not limit the
provisions of Sections 12.1 hereof. Each Party irrevocably submits to the
exclusive personal jurisdiction and venue of (a) the Superior Court for the City
and County of San Francisco, California and (b) the United States District Court
for the Northern District of California for the purposes of any suit, action or
other proceeding arising out of this Agreement or any transaction contemplated
hereby. Each Party agrees to commence any action, suit or proceeding relating
hereto either to the United States District Court for the Northern District of
California located in San Francisco, California or if such suit, action or other
proceeding may not be brought in such court for jurisdictional reasons, in the
Superior Court for the City and County of San Francisco, California. Each Party
further agrees that service of any process, summons, notice or document by U.S.
registered mail to such Party's address set forth above shall be effective
service of process for any action, suit or proceeding in California with respect
to any matters to which it has submitted to jurisdiction in this Section 12.2.
Each Party irrevocably and unconditionally waives any objection to the laying of
venue of any action, suit or proceeding arising out of this Agreement or the
transactions contemplated hereby in (i) the Superior Court for the city and
County of San Francisco, California, or (ii) the United States District Court
for the Northern District of California located in San Francisco, California,
and hereby further irrevocably and unconditionally waives and agrees not to
plead or claim in any such court that any such action, suit or proceeding
brought in any such court has been brought in an inconvenient forum.
12.3 CONTINUING OBLIGATIONS. It is expressly agreed that the failure of
the Parties to resolve a dispute on any issue to be resolved hereunder shall not
relieve either Party from any obligation set forth in this Agreement. In
addition, notwithstanding the pendency of any such dispute, neither Party will
be excused of its obligations hereunder to cooperate with the other to
effectuate the purposes of this Agreement.
10.
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IN WITNESS WHEREOF the Parties hereto have caused this Agreement to be
executed in duplicate as of the date first written above.
BEI ELECTRONICS, INC. BEI TECHNOLOGIES, INC.
By: /s/ Charles Croker By: /s/ Charles Crocker
------------------------ ------------------------
Name: Charles Crocker Name: Charles Crocker
---------------------- ----------------------
Title: President Title: President
--------------------- ---------------------
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EXHIBIT 2.6
TRADEMARK ASSIGNMENT AND CONSENT AGREEMENT
THIS TRADEMARK ASSIGNMENT AND CONSENT AGREEMENT (the "Agreement") is
executed as of September 26, 1997 ("Effective Date") by and between BEI
ELECTRONICS, INC. ("Electronics") a Delaware corporation having its principal
place of business at One Post Street, San Francisco, CA 94104, and BEI
TECHNOLOGIES, INC. ("Technologies"), a Delaware corporation having its principal
place of business at One Post Street, San Francisco, CA 94104.
RECITALS
Electronics and its wholly-owned subsidiary, BEI Sensors & Systems Company,
Inc. have adopted, are using or intend to use certain trade names and trademarks
in connection with sensors, engineered subsystems and associated components used
for the control of precision machinery and equipment, and Electronics and its
majority-owned subsidiary, BEI Medical Systems Company, Inc., have adopted, are
using or intend to use certain trade names and trade marks in connection with
medical equipment instruments and supplies, some of which, in each case, contain
or comprise the term BEI alone or in combination with other words or designs.
Technologies has been created to independently assume and through
subsidiaries to conduct the portion of Electronics' business related to sensors,
engineered subsystems and associated components used for the control of
precision machinery and equipment.
Electronics desires to grant, and Technologies desires to acquire, rights
in certain of Electronics' trade names and trademarks, some of which contain or
comprise the term BEI alone or in combination with other words or designs.
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Electronics and Technologies further desire to delineate their respective
trademark rights on a worldwide basis.
AGREEMENT
NOW, THEREFORE, in consideration of the mutual covenants and agreements set
forth below, the parties hereby agree as follows.
1. ASSIGNMENT OF MARKS.
Electronics hereby assigns to Technologies all right, title, and
interest which it may have in and to the marks set forth in Schedule A (the
"Marks"), together with the goodwill of the business symbolized by the Marks.
Electronics will, at Technologies' expense, execute such further instruments and
take such further actions as may be necessary or appropriate to further effect,
evidence and record such assignments as necessary with governmental agencies.
2. DISCLAIMER OF WARRANTY.
All Marks assigned pursuant to this Agreement are assigned "as-is"
with respect to any trademark, service mark, trade name, or other designation
subject to this Agreement. Electronics makes no representation or warranty, and
disclaims all representations and warranties as to: (1) the validity of any
trademark or service mark registration; (2) its right to use any trademark,
service mark, trade name or other designation; (3) the registrability of any
term, designation, or other symbol as a trademark or service mark; (4) non-
infringement; or (5) any other right or interest pertaining to any trademark,
service mark, trade name, or other designation.
3. CONSENT TO OTHER PARTY'S USE OF BEI MARKS AND NAMES.
3.1 Technologies may use or register, or attempt to register any
trademark, service mark, trade name, or other designation containing or
comprising the term BEI, or any
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transliteration or translation thereof, throughout the world in connection with
(1) electronic devices and equipment used in non-medical applications and (2)
services related to the sale or use of those goods (the "Technologies
Business").
3.2 Electronics may use, register, or attempt to register any
trademark, service mark, trade name, or other designation containing or
comprising the term BEI, or any transliteration or translation thereof,
throughout the world in connection with (1) medical equipment, instruments and
other goods specifically used for medical care and (2) services related to the
sale or use of those goods (the "Electronics Medical Business").
3.3 Technologies will not use, register or attempt to register
anywhere in the world:
The BEI Triangular logo shown in Schedule B or any mark, logo or
designation confusingly similar thereto, provided that it may use the BEI
Rectangular logo shown in Schedule C without restriction;
Any trademark, service mark, trade name or other designation
containing or comprising the term BEI in combination with the word "Medical" or
other term connoting the medical or health care fields or any transliteration or
translation thereof; or
Any trademark, service mark, trade name or other designation
containing or comprising the term BEI, or any transliteration or translation
thereof, in connection with the Electronics Medical Business.
3.4 Electronics will not use, register or attempt to register:
The BEI Rectangular logo shown in Schedule C or any mark, logo or
designation confusingly similar thereto, provided that it may use the BEI
triangular logo shown in Schedule B without restriction;
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Any trademark, service mark, trade name or other designation
containing or comprising the term BEI in combination with the word
"Technologies" or "Technology" or any transliteration or translation thereof;
provided that Electronics may use the words "technology" or "technologies" in
their ordinary descriptive sense in identifying its goods, services or business;
or
Any trademark, service mark, trade name or other designation
containing or comprising the term BEI, or any transliteration or translation
thereof, in connection with the Technologies Business.
3.5 Technologies will not challenge Electronics' use of, registration
of, or attempt to register, any trademark, service mark, trade name, or other
designation comprising or containing the term BEI or any transliteration or
translation thereof in connection with the Electronics Medical Business, unless
such use, registration, or attempt to register violates the terms of paragraph
3.4 herein.
3.6 Electronics will not challenge Technologies' use of, registration
of, or attempt to register, any trademark, service mark, trade name, or other
designation comprising or containing the term BEI or any transliteration or
translation thereof in connection with the Technologies Business, unless such
use, registration, or attempt to register violates the terms of paragraph 3.3
herein.
3.7 Neither party may use any trade name comprising the term BEI or
any transliteration or translation thereof solely in combination with any
geographic term to identify its business, goods, or services where doing so
would be likely to cause confusion with the other party.
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3.8 The parties will cooperate with each other as needed in providing
evidence of the consents given herein or otherwise in effecting trademark,
service mark, or business name registration or for other purposes for which such
evidence may be needed consistent with the terms of this Agreement.
3.9 The parties believe that there is not likely to be confusion as
to their respective products or businesses if each party complies with the
foregoing terms governing use or registration of marks and names. In the event
such confusion occurs, the parties will cooperate as necessary and use all
commercially reasonable efforts to promptly resolve any such confusion and, if
appropriate, to direct third parties to the correct party. The parties agree to
use all commercially reasonable efforts to correct mistakes appearing in the
communications media regarding their respective corporate or trade names,
trademarks, or service marks and to respond to oral inquiries regarding the
parties' corporate or trade names, trademarks, or service marks by stating, to
the extent necessary to correct mistakes or respond to an inquiry, accurate
information about the parties' respective businesses or products.
4. TERM AND TERMINATION.
4.1 This Agreement shall be effective on the Effective Date. The
consent provisions as set forth in Section 3 shall continue in perpetuity unless
terminated in accordance with the provisions of this Agreement.
4.2 If either party discontinues all use of the mark BEI in the
ordinary course of trade everywhere in the world, including all use by
subsidiaries, affiliates, or licensees for the benefit of that party, for a
period of three consecutive years, the limitations on the other party's use of
the mark BEI in Paragraph 3.3 or Paragraph 3.4 of this Agreement, as the case
may be, shall terminate.
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5. GOVERNING LAW.
This Agreement shall be governed by and construed in accordance with
the trademark laws of the United States as they apply to trademark matters and
in accordance with the laws of the State of California as applied to contracts
entered into between California residents and to be performed entirely within
the State of California.
6. BREACH AND OPPORTUNITY TO CURE.
6.1 In the event that either party breaches any of its obligations
under this Agreement, the party claiming breach shall give notice in writing to
the other party. If the breach is curable, the party claimed to have breached
the Agreement shall have 45 days to cure the breach before the party claiming
the breach may bring legal action. Any statute of limitation governing such
claim shall be tolled pending the cure period. Notwithstanding the foregoing,
where a party reasonably believes that a breach of an obligation under this
Agreement may result in immediate, irreparable harm, the party shall be entitled
to seek injunctive relief first.
7. ATTORNEYS' FEES AND COSTS.
In the event either party hereto shall bring any action to enforce any
rights hereunder, the prevailing party in such action shall be entitled, in
addition to any other relief awarded by the court, to recover its reasonable
attorneys' fees and litigation expenses.
8. DISPUTE RESOLUTION.
8.1 ALTERNATIVE DISPUTE RESOLUTION. In the event of a controversy,
dispute or claim (other than controversies, disputes or claims related to
infringement, validity or enforceability of the Marks) arising out of, in
connection with, or in relation to the interpretation, performance,
nonperformance, validity or breach of this Agreement or otherwise arising out
of, or in any way related to this Agreement, including, without limitation, any
claim
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based on contract, tort, statute or constitution (collectively, "Agreement
Disputes"), such matters shall be resolved in accordance with the provisions of
Article 4 of the Distribution Agreement between the parties dated as of the
Effective Date.
8.2 CONSENT TO JURISDICTION. This Section 8.2 shall not limit the
provisions of Sections 8.1 hereof. Each party irrevocably submits to the
exclusive personal jurisdiction and venue of (a) the Superior Court for the City
and County of San Francisco, California and (b) the United States District Court
for the Northern District of California for the purposes of any suit, action or
other proceeding arising out of this Agreement or any transaction contemplated
hereby. Each party agrees to commence any action, suit or proceeding relating
hereto either in the United States District Court for the Northern District of
California located in San Francisco, California or if such suit, action or other
proceeding may not be brought in such court for jurisdictional reasons, in the
Superior Court for the City and County of San Francisco, California. Each party
further agrees that service of any process, summons, notice or document by U.S.
registered mail to such Party's address set forth above shall be effective
service of process for any action, suit or proceeding in California with respect
to any matters to which it has submitted to jurisdiction in this Section 8.2.
Each party irrevocably and unconditionally waives any objection to the laying of
venue of any action, suit or proceeding arising out of this Agreement or the
transactions contemplated hereby in (i) the Superior Court for the City and
County of San Francisco, California, or (ii) the United States District Court
for the Northern District of California located in San Francisco, California,
and hereby further irrevocably and unconditionally waives and agrees not to
plead or claim in any such court that any such action, suit or proceeding
brought in any such court has been brought in an inconvenient forum.
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9. NOTICES.
All notices and other communications hereunder shall be in writing and
hand delivered or mailed by registered or certified mail (return receipt
requested) or sent by any means of electronic message transmission with delivery
confirmed (by voice or otherwise) to the parties at the following addresses (or
at such other addresses for a party as shall be specified by like notice) and
will be deemed given on the date on which such notice is received:
To BEI ELECTRONICS, INC.:
Prior to the Effective Time:
One Post Street, Suite 2500
San Francisco, CA 94104
Attn: President
After the Effective Time:
83 Hobart Street
Hackensack, NJ 07601
Attn: President
With a copy to:
One Post Street, Suite 2500
San Francisco, CA 94104
Attn: Chairman
To BEI TECHNOLOGIES, INC.:
One Post Street, Suite 2500
San Francisco, CA 94104
Attn: President
10. ENTIRE AGREEMENT.
This Agreement constitutes the complete, final and exclusive agreement
between the parties with respect to the subject matter hereof and shall
supersede any and all prior oral
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or written representations, conditions, warranties, understandings, proposals or
agreements between the parties regarding the subject matter hereof.
11. AMENDMENT AND WAIVER.
No provision of this Agreement may be amended or waived except by a
writing signed by both parties.
12. SEVERABILITY.
In the event any one or more of the provisions contained in this
Agreement should be held invalid, illegal or unenforceable in any respect, the
validity, legality and enforceability of the remaining provisions contained
herein and therein shall not in any way be affected or impaired thereby. The
parties shall endeavor in good-faith negotiations to replace the invalid,
illegal or unenforceable provisions with valid provisions, the economic effect
of which comes as close as possible to that of the invalid, illegal or
unenforceable provisions.
13. ASSIGNMENT.
13.1 LIMITATIONS ON ASSIGNMENT. This Agreement shall not be assigned
by either party to a third party without the prior written consent of the other
party, which consent shall not be unreasonably withheld, except to: a Subsidiary
of a party, or a successor to the business of such party to which this Agreement
relates, or a successor to all or substantially all of the assets of such party,
provided that the successor agrees in writing to accept the rights and to be
bound by the obligations of the assigning party, any other assignment being
void.
13.2 VIOLATION. Any assignment in violation of this Section 13 shall
be void and any attempt to assign or actual assignment in derogation of this
prohibition shall be a material breach of this Agreement.
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14. THIRD PARTY BENEFICIARIES.
This Agreement is solely for the benefit of the parties hereto and
their respective Subsidiaries and should not be deemed to confer upon third
parties any remedy, claim, liability, reimbursement, claim of action or other
right in excess of those existing without reference to this Agreement.
15. FORCE MAJEURE.
15.1 ACTS CONSTITUTING FORCE MAJEURE. Neither party shall be liable to
the other for a delay in its performance of this Agreement arising from causes
beyond its reasonable control. Without limiting the generality of the foregoing,
such events include any act of God; accident; explosion; fire; earthquake;
flood; strikes; labor disputes; riots; sabotage; embargo; equipment failure;
federal, state, or local legal restriction or limitation. Neither party shall be
required to resolve labor disputes, but shall use commercially reasonable
efforts to seek alternative sources to the extent practicable.
15.2 NOTICE REQUIREMENT. When circumstances occur that delay the
performance of either party under this Agreement, whether or not such
circumstances are excused pursuant to Section 15.1 above, such party shall, when
it first becomes aware of such circumstances, promptly notify the other party,
by facsimile or by telephone confirmed in writing within two (2) business days
in the case of oral notice. Within ten (10) business days of the date when
either party first becomes aware of the event which it contends is responsible
for the delay, it shall supply to the other party in writing the reason(s) for
and anticipated duration of such delay, the measures taken and to be taken to
prevent or minimize the delay, and the timetable for the implementation of such
measures.
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<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first above written.
BEI TECHNOLOGIES, INC. BEI ELECTRONICS, INC.
a Delaware corporation a Delaware corporation
By: /s/ Charles Crocker By: /s/ Charles Crocker
--------------------- --------------------
Its: President Its: President
-------------------- -------------------
Address: One Post Street, Suite 2500 Address: One Post Street, Suite 2500
San Francisco, CA 94104 San Francisco, CA 94104
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SCHEDULE A
ELECTRONICS' COMMON-LAW, PENDING OR REGISTERED TRADEMARKS
TO BE ASSIGNED
<TABLE>
<CAPTION>
MARK APPLICATION/REGISTRATION NO. COUNTRY
<S> <C> <C>
BEI 1,109,920 United States
BEI and CODE DISK DESIGN 1,097,296 United States
BEI and ROCKET DESIGN 1,107,102 United States
BEI THE ENCODER COMPANY 1,223,228 United States
COMTRAC United States
DIGILINE 925,506 United States
DIGISEC 757,742 United States
EDCLIFF 705,558 United States
EXPRESS ENCODER United States
GYROCHIP 1,787,945 United States
HORIZON 75/267,840 United States
INSTAMOUNT United States
MICRO-LOC 1,142,345 United States
MICROSERIES United States
MODEL H2O 75/087,544 United States
MODEL H25 75/087,396 United States
MOTIONPAK 1,898,649 United States
OPTICAL RESOLVER 1,128,865 United States
SLIDELINE 951,891 United States
ULTRA-LOC 1,102,029 United States
WAVELABS 917,159 United States
BEI TMA290,044 Canada
BEI and DESIGN 94520745 France
BEI and DESIGN 1238124 France
BEI and DESIGN 1062171 Germany
BEI and DESIGN 2077915 Germany
BEI and DESIGN 420908 Italy
BEI and DESIGN 2042047 Japan
BEI and DESIGN 1202771 United Kingdom
</TABLE>
12
<PAGE>
SCHEDULE B
BEI TRIANGULAR LOGO
[THE LETTERS "BEI" ON A DARK BACKGROUND
WITH A TRIANGULAR BORDER]
13
<PAGE>
SCHEDULE C
BEI RECTANGULAR LOGO
[THE LETTERS "BEI" ON A DARK BACKGROUND
WITH A LOZENGE-SHAPED BORDER]
14
<PAGE>
EXHIBIT 2.7
AGREEMENT REGARDING CERTAIN
REPRESENTATIONS AND COVENANTS
This Agreement Regarding Certain Representations and Covenants (the
"Agreement") is entered into the 26th day of September, 1997, by and between BEI
ELECTRONICS, Inc., a Delaware corporation ("ELECTRONICS"), and BEI Technologies,
Inc., a Delaware corporation ("TECHNOLOGIES") on behalf of themselves and all
members of the ELECTRONICS Subgroup and the TECHNOLOGIES Subgroup. It is
executed contemporaneously with the Tax Allocation and Indemnity Agreement (the
"Tax Allocation Agreement") between the same parties. All terms used herein
shall have the same meaning as in the Tax Allocation Agreement.
ARTICLE I
DEFINITIONS
To the extent not defined in the Tax Allocation Agreement, the terms used herein
are defined as follows:
"DISTRIBUTION DATE" shall mean the date on which the Distribution
shall be effected.
"PRE-DISTRIBUTION PERIOD" shall mean any Taxable period ending on or
before the close of business on the Distribution Date; provided that if a
--------
Taxable period ending after the Distribution Date contains any days which fall
prior to or on the Distribution Date, any portion of such Taxable period up to
or including the Distribution Date shall also be included in the Pre-
Distribution Period.
"RETURN" shall mean any Tax return, statement, report or form
(including estimated Tax returns and reports, extension requests and forms, and
information returns and reports) required to be filed with any taxing authority.
"TAX ASSET" shall mean any net operating loss, net capital loss,
investment Tax credit, foreign Tax credit, target jobs Tax credit, low income
housing credit, research and experimentation credit, charitable deduction or any
other credit or Tax attribute, including additions to basis of property, which
could reduce any Tax, including, without limitation, deductions, credits, or
alternative minimum net operating loss carryforwards related to alternative
minimum Taxes.
ARTICLE II
REPRESENTATIONS
<PAGE>
2.1 TECHNOLOGIES SUBGROUP REPRESENTATIONS. TECHNOLOGIES represents
on behalf of itself and each member of the TECHNOLOGIES Subgroup that, as of the
date hereof, and covenants that, on the Distribution Date, there is no plan or
intention (A) to liquidate TECHNOLOGIES or to merge or consolidate TECHNOLOGIES
with any other person subsequent to the Distribution, (B) to sell or otherwise
dispose of any asset of the TECHNOLOGIES Subgroup subsequent to the
Distribution, except in the ordinary course of business and except with respect
to the liquidation of Defense Systems Company, Inc. ("Defense") (C) to take any
action inconsistent with the information furnished to Davis Polk & Wardwell in
connection with its tax opinion with respect to the Distribution, (D) to issue
stock of TECHNOLOGIES, other than pursuant to the Distribution, representing
more than 20 percent of the total combined voting power or more than 20 percent
of the total value of all classes of TECHNOLOGIES stock.
2.2 ELECTRONICS SUBGROUP REPRESENTATIONS. ELECTRONICS represents on
behalf of itself and each member of the ELECTRONICS Subgroup that, as of the
date hereof, and covenants that, on the Distribution Date, there is no plan or
intention (A) to liquidate ELECTRONICS or to merge or consolidate ELECTRONICS
with any other person subsequent to the Distribution, except with respect to the
possible merger of BEI Medical Systems Company, Inc. ("Medical") with and into
ELECTRONICS immediately after the Distribution, (B) to sell or otherwise dispose
of any asset of the ELECTRONICS Subgroup subsequent to the Distribution, except
in the ordinary course of business, (C) to take any action inconsistent with the
information furnished to Davis Polk & Wardwell in connection with its tax
opinion with respect to the Distribution, (D) to issue stock of ELECTRONICS
representing 50 percent or more of the vote or value of all classes of
ELECTRONICS stock including, for this purpose, stock issued in connection with
the possible merger with Medical.
2.3 TECHNOLOGIES SUBGROUP AND ELECTRONICS SUBGROUP REPRESENTATIONS.
TECHNOLOGIES represents on behalf of itself and each member of the TECHNOLOGIES
Subgroup and ELECTRONICS represents on behalf of itself and each member of the
ELECTRONICS Subgroup that, as of the date hereof, and covenants that, on the
Distribution Date, none of them is or will be aware of any plan or intention by
the current shareholders of ELECTRONICS to sell, exchange, transfer by gift, or
otherwise dispose of any of their stock in, or securities of, ELECTRONICS or
TECHNOLOGIES subsequent to the Distribution.
ARTICLE III
COVENANTS
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<PAGE>
3.1 TECHNOLOGIES SUBGROUP COVENANTS. TECHNOLOGIES covenants on
behalf of itself and each member of the TECHNOLOGIES Subgroup that (i) during
the two-year period following the Distribution Date, TECHNOLOGIES will not
liquidate, merge or consolidate with any other person, or sell, exchange,
distribute or otherwise dispose of its assets or those of the TECHNOLOGIES
Subgroup, except in the ordinary course of business and except with respect to
the liquidation of Defense, (ii) following the Distribution, TECHNOLOGIES will,
for a minimum of two years, continue the active conduct of the historic business
conducted by TECHNOLOGIES throughout the five year period prior to the
Distribution as required by Section 355 of the Code, (iii) during the two-year
period following the Distribution Date, TECHNOLOGIES will not issue stock
representing more than 20 percent of the total combined voting power or more
than 20 percent of the total value of all classes of TECHNOLOGIES stock, (iv) no
member of the TECHNOLOGIES Subgroup will take any action inconsistent with the
information furnished to Davis Polk & Wardwell in connection with its tax
opinion with respect to the Distribution, and (v) during the period beginning on
the Distribution Date and ending upon the expiration of the statute of
limitations period applicable to the Taxable year in which the Distribution
occurs (after giving effect to any extension, mitigation or waiver thereof), no
member of the TECHNOLOGIES Subgroup will make or change any accounting method,
amend any Tax Return or take any Tax position on any Tax Return, change the
manner in which it conducts business, take any other action, omit to take any
action or enter into any transaction that results in any increased Tax liability
with respect to a Pre-Distribution Period, or reduction of any Tax Asset that
was created in a Pre-Distribution Period, of the ELECTRONICS group or any member
thereof without first obtaining the written consent of an authorized
representative of ELECTRONICS; PROVIDED, HOWEVER, that if a change in law
(including the enactment of any statute or the issuance of any proposed,
temporary or final regulations, or administrative pronouncement or judicial
decision) would have a material adverse effect on the aggregate Tax liability of
the TECHNOLOGIES Subgroup then, notwithstanding anything to the contrary in this
clause (iii), TECHNOLOGIES shall be entitled to take such minimum action as is
necessary to eliminate or mitigate the effect of the change in law.
TECHNOLOGIES agrees to notify ELECTRONICS of any action taken under the proviso
contained in the preceding sentence.
3.2 ELECTRONICS SUBGROUP COVENANTS. ELECTRONICS covenants on behalf
of itself and each member of the ELECTRONICS Subgroup that (i) during the two-
year period following the Distribution Date, no member of the ELECTRONICS
Subgroup will liquidate, merge or consolidate with any other person, or sell,
exchange, distribute or otherwise dispose of its assets, except in the ordinary
course of business and except with respect to the possible merger of Medical
with and into ELECTRONICS, (ii) following the Distribution, the
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ELECTRONICS Subgroup will, for a minimum of two years, continue the active
conduct of the historic business conducted by Medical throughout the five year
period prior to the Distribution as required by Section 355 of the Code, (iii)
during the two-year period beginning on the Distribution Date, ELECTRONICS will
not issue stock representing 50 percent or more of the vote or value of all
classes of ELECTRONICS stock including, for this purpose, stock issued in
connection with the possible merger with Medical, (iv) no member of the
ELECTRONICS Subgroup will take any action inconsistent with the information
furnished to Davis Polk & Wardwell in connection with its tax opinion with
respect to the Distribution, and (v) during the period beginning on the
Distribution Date and ending upon the expiration of the statute of limitations
period applicable to the Taxable year in which the Distribution occurs (after
giving effect to any extension, mitigation or waiver thereof), no member of the
ELECTRONICS Subgroup will make or change any accounting method, amend any Tax
Return or take any Tax position on any Tax Return, change the manner in which it
conducts its business, take any other action, omit to take any action or enter
into any transaction that results in any increased Tax liability with respect to
a Pre-Distribution Period or reduction of any Tax Asset which was created in a
Pre-Distribution Period of the TECHNOLOGIES Subgroup without first obtaining the
written consent of an authorized representative of TECHNOLOGIES; PROVIDED,
HOWEVER, that if a change in law (including the enactment of any statute or the
issuance of any proposed, temporary or final regulations, or administrative
pronouncement or judicial decision) would have a material adverse effect on the
aggregate Tax liability of the ELECTRONICS Subgroup, then, notwithstanding
anything to the contrary in this clause (v), ELECTRONICS shall be entitled to
take such minimum action as is necessary to eliminate or mitigate the effect of
the change in law. ELECTRONICS agrees to notify TECHNOLOGIES of any action taken
under the proviso contained in the preceding sentence.
3.3 TECHNOLOGIES SUBGROUP AND ELECTRONICS SUBGROUP COVENANT. The
parties hereto agree to act in good faith in complying with the terms of this
Agreement.
3.4 EXCEPTIONS. Notwithstanding the foregoing, a member of the
TECHNOLOGIES Subgroup may take actions inconsistent with the covenants contained
in Section 3.1(i) through (v) above, and a member of the ELECTRONICS Subgroup
may take actions inconsistent with the covenants contained in Section 3.2(i)
through (v) above, if:
(i) TECHNOLOGIES or ELECTRONICS, as the case may be, obtains a ruling
from the Internal Revenue Service to the effect that such actions will not
result in the Distribution being taxable to ELECTRONICS or its shareholders; or
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(ii) TECHNOLOGIES or ELECTRONICS, as the case may be, obtains an opinion
of counsel nationally recognized as an expert in federal income tax matters
and acceptable to the other party to the same effect as in Section 3.4(i).
ARTICLE IV
INDEMNIFICATION
4.1 TECHNOLOGIES INDEMNIFICATION OF ELECTRONICS. TECHNOLOGIES
shall indemnify and hold ELECTRONICS harmless for the breach of any
representation or covenant made by a member of the TECHNOLOGIES Subgroup in
this Agreement.
4.2 ELECTRONICS INDEMNIFICATION OF TECHNOLOGIES. ELECTRONICS shall
indemnify and hold TECHNOLOGIES harmless for the breach of any
representation or covenant made by a member of the ELECTRONICS Subgroup in
this Agreement.
4.3 DAMAGES. The damages payable upon a breach of a representation
or covenant contained herein shall be agreed upon by the parties in good
faith or, if they cannot agree, shall be resolved in accordance with the
provisions of Article IV of the Distribution Agreement entered into by the
parties contemporaneously herewith.
ARTICLE V
MISCELLANEOUS
5.1 MISCELLANEOUS. All Miscellaneous provisions set forth in
Article VIII of the Tax Allocation Agreement are hereby incorporated by
reference. These incorporated provisions will carry full force and effect
with respect to this Agreement.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed by their duly authorized representatives.
ELECTRONICS ON BEHALF OF ITSELF AND EACH MEMBER OF
THE ELECTRONICS SUBGROUP
By: /s/ Charles Crocker
----------------------------
Name: Charles Crocker
--------------------------
Title: President
--------------------------
TECHNOLOGIES ON BEHALF OF ITSELF AND EACH MEMBER OF
THE TECHNOLOGIES SUBGROUP
By: /s/ Charles Crocker
----------------------------
Name: Charles Crocker
--------------------------
Title: President
--------------------------
6
