1
EXHIBIT 10.3
SEPARATION AND DISTRIBUTION AGREEMENT
THIS AGREEMENT is made and entered into this ____ day of ________, 1997, by
and between ODETICS, INC., a Delaware corporation ("Odetics"), and ATL
PRODUCTS, INC., a Delaware corporation ("ATL").
PRELIMINARY STATEMENT
Odetics is the sole stockholder of ATL.
Odetics, through ATL and ATL's wholly owned subsidiary, ATL Products
Limited, a United Kingdom private limited liability company, is engaged in the
manufacture and sale of automated tape libraries, and related services (the "ATL
Business").
Odetics' Board of Directors has determined that Odetics will cause ATL to
make an initial public offering of up to 1,897,500 shares of its Class A Common
Stock (the "IPO"), and subsequent to the IPO and subject to certain conditions,
distribute to Odetics' stockholders all of the outstanding stock of ATL owned
by Odetics through a spinoff (the "Distribution"). The IPO and the
Distribution are together referred to herein as the "Separation" and will
result in the total and complete separation of the Business and ATL from
Odetics at the time of the Distribution (the "Separation Date"); provided,
however, that Odetics may continue to provide services to ATL pursuant to
services agreements after the Separation Date.
The parties hereto have determined that it is necessary and desirable to set
forth in this Agreement and in a services agreement (the "Services Agreement"),
a Promissory Note and a Tax Allocation Agreement (the "Tax Allocation
Agreement") between ATL and Odetics (the Services Agreement and the Tax
Allocation Agreement are collectively referred to herein as the "Ancillary
Agreements"), the principal corporate transactions determined by Odetics and ATL
to be appropriate to effect the Separation and to set forth other agreements and
undertakings by and between Odetics and ATL that will govern certain other
matters between the date hereof and the Distribution and following the
Distribution.
1
2
Simultaneously with the execution of this Agreement, Odetics and ATL are
entering into the Ancillary Agreements.
NOW, THEREFORE, in consideration of the promises and the mutual
representations, warranties, covenants and agreements, and upon the terms and
subject to the conditions hereinafter set forth, the parties do hereby agree as
follows:
ARTICLE I.
THE TRANSFER
1.1 Transfer of Assets. On the terms and subject to the conditions set
forth in this Agreement, and the other agreements and instruments of conveyance
contemplated hereunder, simultaneously with the execution and delivery of this
Agreement, Odetics has heretofore transferred, assigned and conveyed to ATL all
of Odetics' right, title, and interest in and to all of the assets, tangible
and intangible, related to the Business (the "ATL Assets") for a purchase price
equal to the book value thereof, as calculated in accordance with generally
accepted accounting principles. The parties hereto believe that such purchase
price constitutes fair market value of the ATL Assets.
1.2 Payment of Purchase Price. The purchase price of the ATL Assets will
be included in the principal amount of a Promissory Note (the "Note") in
substantially the form attached hereto as Exhibit A, which will be completed at
the consummation of the IPO, and executed and delivered in connection therewith,
and such purchase price shall be payable in accordance with the terms of the
Note.
2
3
ARTICLE II.
REPRESENTATIONS AND WARRANTIES OF ODETICS
Odetics represents and warrants to ATL as follows:
2.1 Power and Authority; Effect of Agreement. Odetics is a corporation
duly organized, validly existing and in good standing under the laws of
Delaware, has requisite corporate power and authority to execute, deliver and
perform this Agreement and to consummate the transactions contemplated hereby.
The execution, delivery and performance by it of this Agreement and the
consummation by it of the transactions contemplated hereby have been duly
authorized by all necessary corporate action on the part of Odetics. This
Agreement has been duly and validly executed and delivered by Odetics and
constitutes its legal, valid and binding obligation enforceable against it in
accordance with its terms, except to the extent that such enforceability may be
limited by bankruptcy, insolvency, reorganization, moratorium or other similar
laws relating to creditors' rights generally. The execution, delivery and
performance by it of this Agreement and the consummation by Odetics of the
transactions contemplated by the Transfer does not, and will not, with or
without the giving of notice or the lapse of time, or both: (i) violate any
provision of law, rule or regulation to which it is subject; (ii) violate any
order, judgment or decree applicable to it; (iii) conflict with, or result in a
breach or default under, its Certificate of Incorporation or its Bylaws; or (iv)
conflict with, or result in a breach or default under, any contract to which it
is a party; except, in each case, for violations, conflicts, breaches or
defaults which in the aggregate would not materially hinder or impair the
consummation of the transactions contemplated hereby or have a material adverse
effect on the Business.
2.2 Stock of Transferred Subsidiaries. Odetics is the owner, beneficially
and of record of all of the issued and outstanding stock of the assets referred
to in Section 1.1 hereof, free and clear of all liens, encumbrances, security
agreements, options, claims, charges and restrictions.
2.3 Government Consents. No consent, approval or authorization of, or
exemption from, or filing with, any governmental or regulatory authority is
required in connection with the execution, delivery or performance by Odetics
of the terms of this Article II or the taking by it of any other action
required to effectuate the Transfer.
3
4
ARTICLE III.
REPRESENTATIONS AND WARRANTIES OF ATL
ATL represents and warrants to Odetics as follows:
3.1 ATL's Power and Authority. ATL is a corporation duly organized
validly existing and in good standing under the laws of Delaware, and has all
requisite corporate power and authority to carry on the Business as it is now
being conducted and as proposed to be conducted.
3.2 Due Authorization, Execution and Delivery; Effect of Agreement. ATL
has all requisite corporate power and authority to execute, deliver and perform
this Agreement and to consummate the transactions contemplated hereby. The
execution, delivery and performance by ATL this Agreement and the consummation
by ATL of the transactions contemplated hereby have been duly authorized by all
necessary corporate action on the part of ATL. This Agreement has been duly and
validly executed and delivered by ATL and constitutes the legal, valid and
binding obligation of ATL, enforceable against ATL in accordance with its terms,
except to the extent that such enforceability may be limited by bankruptcy,
insolvency, reorganization, moratorium or other similar laws relating to
creditors' rights generally. The execution, delivery and performance by ATL of
this Agreement and the consummation by ATL of the transactions contemplated by
the Transfer does not, and will not, with or without the giving of notice or the
lapse of time, or both: (i) violate any provision of law, rule or regulation to
which ATL is subject; (ii) violate any order, judgment or decree applicable to
ATL; (iii) conflict with, or result in a breach or default under, the
Certificate of Incorporation or Bylaws of ATL; or (iv) conflict with, or result
in a breach or default under, any contract to which it is a party; except, in
each case, for violations, conflicts, breaches or defaults which in the
aggregate would not materially hinder or impair the consummation of the
transactions contemplated hereby or have a material adverse effect on the
Business.
3.3 Consents. No consent, approval or authorization of, or exemption
from, or filing with, any governmental or regulatory authority or any other
third party is required in connection with the execution, delivery or
performance by ATL of this Agreement or the taking by of any other action
required to effectuate the Transfer.
4
5
ARTICLE IV.
COVENANTS OF ODETICS
4.1 Books and Records; Personnel. For a period of six years after the
Separation Date (or such longer period as maybe required by any law or
regulation, any governmental agency, any ongoing litigation or class of
connection with any administrative proceeding):
(a) Odetics shall not dispose of or destroy any of the business
records and files of the Business retained by it or any of its subsidiaries (the
"Retained Records"). If Odetics wishes to dispose of or destroy such records
and files after such six year period, it shall use reasonable efforts to first
give 30 days' prior written notice to ATL and ATL shall have the right, at its
option and expense, upon prior written notice to Odetics within such 30 day
period, to take possession of the Retained Records within 60 days after the date
of ATL's notice to Odetics.
(b) Odetics shall allow ATL and its representatives reasonable
access to all Retained Records during regular business hours and upon reasonable
notice. Odetics shall maintain the Retained Records in a manner and at locations
that reasonably facilitates retrieval and review by ATL. ATL shall have the
right, at its own expense, to make copies of any such records and files and
Odetics shall provide convenient duplication facilities for such purpose,
provided, however, that any such access or copying shall be had or done in such
manner so as not to unreasonably interfere with the normal conduct of Odetics'
business or operations; and
(c) Odetics shall make reasonably available to ATL, upon written
request and at ATL's expense: (i) personnel to assist in locating and obtaining
records and files maintained by it
5
6
(including those created after the date hereof, to the extent necessary and
appropriate in connection with pending and future claims against ATL relating
to the Business) and (ii) any of its personnel whose assistance or
participation (including as a witness during depositions or at trial) is
reasonably required by ATL in anticipation of, or preparation for or during,
existing or future litigation or other matters in which ATL or any of its
affiliates is involved and which is related to the Business.
4.2 Supply Agreements. For a period of three years from the consummation
of the IPO, Odetics shall not unilaterally terminate or assign its guarantee
obligation with respect to any supply agreement pursuant to which it has
guaranteed the performance by ATL of ATL's obligations, unless such suppliers
have consented to the termination or assignment of such guarantee.
4.3 Cooperation. Odetics agrees to cooperate with ATL, both before and
after the Separation Date, to enable both parties to implement the Separation,
including but not limited to performing the obligations undertaken by the
parties hereunder. Such cooperation will include but not be limited to
preparing and submitting required financial reports after the Separation Date,
which may relate to periods before or after the Separation Date, and executing
such documents and doing such other acts and things as may be necessary to
carry out the intent of this Agreement as it relates to the Separation.
ARTICLE V.
COVENANTS OF ATL
5.1 Cooperation. ATL agrees to cooperate with Odetics, both before and
after the Separation Date, to enable both parties to implement the Separation,
including but not limited to performing the obligations undertaken by the
parties hereunder. Such cooperation will include but not be limited to
preparing and submitting required financial reports after the Separation Date,
which may relate to periods before or after the Separation Date, and executing
such documents and doing such other acts and things as may be necessary to carry
out the intent of this Agreement as it relates to the Separation.
5.2 Books and Records; Personnel. For a period of six years after the
Separation Date (or such longer period as may be required by any law or
regulation, any governmental agency, any ongoing litigation or class of
litigation, or in connection with any administrative proceeding):
(a) ATL shall not dispose of or destroy the business records and files
of the Business that are transferred to it or any of its subsidiaries in
carrying out the transactions
6
7
contemplated hereby (the "Transferred Records"). If ATL wishes to dispose of
or destroy such records and files after that time, it shall use reasonable
efforts to first give 30 days' prior written notice to Odetics and Odetics
shall have the right, at its option and expense, upon prior written notice to
ATL within such 30 day period, to take possession of the Transferred Records
within 60 days after the date of Odetics' notice to ATL;
(b) ATL shall allow Odetics and its representatives reasonable access
to all Transferred Records during regular business hours and upon reasonable
notice. ATL shall maintain the Transferred Records in a manner and at locations
that reasonably facilitates retrieval and review by Odetics. Odetics shall have
the right, at its own expense, to make copies of any such records and files and
ATL shall provide convenient duplication facilities for such purposes provided,
however, that any such access or copying shall be had or done in such a manner
so as not to unreasonably interfere with the normal conduct of ATL's business or
operations; and
(c) ATL shall make reasonably available to Odetics upon written
request and at Odetics' expense: (1) ATL's personnel to assist in locating and
obtaining records and files maintained by it (including those created after the
date hereof, to the extent necessary and appropriate in connection with pending
and future claims against Odetics relating to the Business), and (ii) any of
its personnel whose assistance or participation (including as a witness during
depositions or at trial) is reasonably required by Odetics in anticipation of,
or preparation for or during, existing or future litigation or other matters in
which Odetics or any of its affiliates is involved.
ARTICLE VI.
THE IPO AND ACTIONS PENDING THE IPO
6.1 Transactions Prior to the IPO.
(a) Subject to the conditions specified in Section 6.3 hereof, Odetics
and ATL shall use their reasonable best efforts to consummate the IPO. Such
actions shall include, but shall not necessarily be limited to, those specified
in this Section 6.1.
7
8
(b) ATL shall file the IPO Registration Statement, and such amendments
or supplements thereto, as may be necessary in order to cause the same to become
and remain effective as required by law or by the Underwriters, including, but
not limited to, filing such amendments to ATL's Registration Statement on Form
S-1 as may be required by the Underwriting Agreement, the Commission or federal,
state or foreign securities laws. Odetics and ATL shall also cooperate in
preparing, filing with the Securities and Exchange Commission (the "Commission")
and causing to become effective a registration statement registering the ATL
Common Stock under the Exchange Act, and any registration statements or
amendments thereof which are required to reflect the establishment of, or
amendments to, any employee benefit and other plans necessary or appropriate in
connection with the IPO, the Separation, the Distribution or the other
transactions contemplated by this Agreement and the Ancillary Agreements.
(c) ATL and Odetics shall enter into the Underwriting Agreement, in
form and substance reasonably satisfactory to ATL and Odetics, and shall
comply with their respective obligations thereunder.
(d) Odetics and ATL shall consult with each other and the Underwriters
regarding the timing, pricing and other material matters with respect to the
IPO.
(e) ATL shall use its reasonable best efforts to take all such action
as may be necessary or appropriate under state securities laws of the United
States (and any comparable laws under any foreign jurisdictions) in connection
with the IPO.
(f) ATL shall prepare, file and use reasonable best efforts to seek to
make effective, an application for listing of the Class A Common Stock of ATL
(the "ATL Common Stock") issued in the IPO on the Nasdaq National Market,
subject to official notice of issuance.
(g) ATL and Odetics shall participate in the preparation of materials
and presentations as the Underwriters shall deem necessary or desirable.
8
9
(h) ATL shall pay all third party costs, fees and expenses relating to
the IPO, all of the reimbursable expenses of the Underwriters pursuant to the
Underwriting Agreement, all of the costs of producing, printing, mailing and
otherwise distributing the Prospectus, as well as the Underwriters' discount as
provided in the Underwriting Agreement.
6.2 Proceeds of the IPO. The IPO will be a primary offering of ATL Common
Stock and the net proceeds of the IPO will be retained by ATL, subject to its
obligation to pay certain amounts to Odetics pursuant to the Note.
6.3 Conditions Precedent to Consummation of the IPO. As soon as
practicable after the date of this Agreement, the parties hereto shall use
their reasonable best efforts to satisfy the following conditions to the
consummation of the IPO. The obligations of the parties to consummate the IPO
shall be conditioned on the satisfaction, or waiver by Odetics, of the
following conditions:
(a) The IPO Registration Statement shall have been declared effective
by the Commission, and there shall be no stop-order in effect with respect
thereto.
(b) The actions and filings with regard to state securities laws of
the United States (and any comparable laws under any foreign jurisdictions)
described in Section 6.1 shall have been taken and, where applicable, have
become effective or been accepted.
(c) The ATL Common Stock to be issued in the IPO shall have been
accepted for listing on the Nasdaq National Market, on official notice of
issuance.
(d) ATL shall have entered into the Underwriting Agreement and all
conditions to the obligations of ATL and the Underwriters shall have been
satisfied or waived.
(e) Odetics shall be satisfied in its sole discretion that it will
own at least 80.0% of the outstanding ATL voting stock following the IPO, and
all other conditions to permit the Distribution to qualify as a tax free
distribution to Odetics'
9
10
stockholders shall, to the extent applicable as of the time of the IPO, be
satisfied and there shall be no event or condition that is likely to cause any
of such conditions not to be satisfied as of the time of the Distribution or
thereafter.
(f) No order, injunction or decree issued by any court or agency of
competent jurisdiction or other legal restraint or prohibition preventing the
consummation of the Separation or the IPO or any of the other transactions
contemplated by this Agreement or any Ancillary Agreement shall be in effect.
(g) Such other actions as the parties hereto may, based upon the
advice of counsel, reasonably request to be taken prior to the Separation and
the IPO in order to assure the successful completion of the Separation and the
IPO and the other transactions contemplated by this Agreement shall have been
taken.
(h) This Agreement shall not have been terminated.
(i) A pricing committee of Odetics directors designated by the Board
of Directors of Odetics shall have determined that the terms of the IPO are
acceptable to Odetics.
ARTICLE VII.
THE DISTRIBUTION
7.1 The Distribution.
(a) Subject to the conditions specified in Section 7.3 hereof, on or
prior to the Distribution Date, Odetics will deliver to First National Bank of
Boston (the "Agent") for the benefit of holders of record of Odetics' Common
Stock on the record date established by the Board of Directors of Odetics, a
single stock certificate, endorsed by Odetics in blank, representing all of the
outstanding shares of ATL Common Stock then owned by Odetics, and shall cause
the transfer agent for the shares of Odetics Common Stock to instruct the Agent
to distribute on the Distribution Date the appropriate number of such shares of
ATL Common Stock to each such holder or designated transferee or transferees of
such holder.
10
11
(b) Subject to Section 7.4, each holder of Odetics Common Stock on the
Record Date (or such holder's designated transferee or transferees) will be
entitled to receive in the Distribution a number of shares of ATL Common Stock
equal to the number of shares of Odetics Common Stock held by such holder on
the Record Date multiplied by a fraction the numerator of which is the number
of shares of ATL Common Stock beneficially owned by Odetics on the Record Date
and the denominator of which is the number of shares of Odetics Common Stock
outstanding on the Record Date.
(c) ATL and Odetics, as the case may be, will provide to the Agent all
share certificates and any information required in order to complete the
Distribution on the basis specified above.
7.2 Actions Prior to the Distribution.
(a) Odetics and ATL shall prepare and mail, prior to the Distribution
Date, to the holders of Odetics Common Stock, such information concerning ATL,
its business, operations and management, the Distribution and such other
matters as Odetics and ATL shall reasonably determine and as may be required by
law. Odetics and ATL will prepare, and ATL will, to the extent required under
applicable law, file with the Commission any such documentation and any
requisite no action letters which Odetics determines are necessary or desirable
to effectuate the Distribution and Odetics and ATL shall each use its reasonable
best efforts to obtain all necessary approvals from the Commission with respect
thereto as soon as practicable.
(b) Odetics and ATL shall take all such action as may be necessary or
appropriate under the state securities laws of the United States (and any
comparable laws under any foreign jurisdiction) in connection with the
Distribution.
(c) Odetics and ATL shall take all reasonable steps necessary and
appropriate to cause the conditions set forth in Section 7.3(d) (subject to
Sections 7.3(d)) to be satisfied and to effect the Distribution on the
Distribution Date.
(d) ATL shall prepare and file, and shall use its reasonable best
efforts to have approved, an application for the listing of the ATL Common
Stock to be distributed in the Distribution on the Nasdaq National Market,
subject to official notice of distribution.
11
12
7.3 Conditions to Distribution. The Odetics Board currently intends to
effect the Distribution by December 31, 1997. Subject to any restrictions
contained in the Underwriting Agreement, the Odetics Board shall have the sole
discretion to determine the date of consummation of the Distribution at any
time after the Closing Date and on or prior to December 31, 1997. Odetics shall
be obligated to consummate the Distribution no later than December 31, 1997,
subject to the satisfaction, or waiver by the Odetics Board in its sole
discretion, of the conditions set forth below. In the event that any such
condition shall not have been satisfied or waived on or before December 31,
1997, Odetics shall consummate the Distribution as promptly as practicable
following the satisfaction or waiver of all such conditions.
(a) a private letter ruling from the Internal Revenue Service shall
have been obtained, and shall continue in effect, to the effect that, among
other things, the Distribution will qualify as a tax free distribution for
federal income tax purposes under Section 355 of the Code and will not result in
the recognition of any gain to Odetics or Odetics' stockholders, and such ruling
shall be in form and substance satisfactory to Odetics in its sole discretion;
(b) any material governmental approvals and consents necessary to
consummate the Distribution shall have been obtained and be in full force and
effect;
(c) no order, injunction or decree issued by any court or agency of
competent jurisdiction or other legal restraint or prohibition preventing the
consummation of the Distribution shall be in effect and no other event outside
the control of Odetics shall have occurred or failed to occur that prevents the
consummation of the Distribution; and
(d) no other events or developments shall have occurred subsequent to
the date hereof that, in the judgment of the Board of Directors of Odetics,
would result in the Distribution having a material adverse effect on Odetics
or on the stockholders of Odetics.
12
13
The foregoing conditions are for the sole benefit of Odetics and shall not give
rise to or create any duty on the part of Odetics or the Odetics Board of
Directors to waive or not waive any such condition.
7.4 Fractional Shares. As soon as practicable after the Distribution
Date, Odetics shall direct the Agent to determine the number of whole shares
and fractional shares of ATL Common Stock allocable to each holder of record or
beneficial owner of Odetics Common Stock as of the Record Date, to aggregate
all such fractional shares and sell the whole shares obtained thereby at the
direction of Odetics either to Odetics, in open market transactions or
otherwise, in each case at then prevailing trading prices, and to cause to be
distributed to each such holder or for the benefit of each such beneficial
owner, in lieu of any fractional share, such holder's or owner's ratable share
of the proceeds of such sale, after making appropriate deductions of any amount
required to be withheld for federal income tax purposes and after deducting an
amount equal to all brokerage charges, commissions and transfer taxes
attributed to such sale. Odetics and the Agent shall use their reasonable best
efforts to aggregate the shares of Odetics Common Stock that may be held by any
beneficial owner thereof through more than one account in determining the
fractional share allocable to such beneficial owner.
7.5 The ATL Board of Directors. Odetics and ATL shall each take all
actions which may be required to elect or otherwise appoint as directors of
ATL, on or prior to the Distribution Date, persons to be designated by a
nominating committee of ATL's Board of Directors as additional or substitute
members of the Board of Directors of ATL on the Distribution Date.
13
14
ARTICLE VIII.
MUTUAL RELEASES; INDEMNIFICATION
8.1 Release of Pre-closing Claims.
(a) Except as provided in Section 8.1(c), effective as of the date of
consummation of the IPO (the "Closing Date"), ATL does hereby, for itself and
each of its affiliates, successors and assigns, and all persons who at any time
prior to the Closing Date have been stockholders, directors, officers, agents or
employees of ATL (in each case, in their respective capacities as such), remise,
release and forever discharge each of Odetics and its affiliates, successors and
assigns, and all persons who at any time prior to the Closing Date have been
stockholders, directors, officers, agents or employees of Odetics (in each case,
in their respective capacities as such), and their respective heirs, executors,
administrators, successors and assigns, from any and all losses, claims,
actions, damages, expenses or liabilities whatsoever, (collectively, the
"Liabilities"), whether at law or in equity (including any right of
contribution), whether arising under any contract or agreement, by operation of
law or otherwise, existing or arising from any acts or events occurring or
failing to occur or alleged to have occurred or to have failed to occur or any
conditions existing or alleged to have existed on or before the Closing Date.
(b) Except as provided in Section 8.1(c), effective as of the
Closing Date, Odetics does hereby, for itself and its affiliates, successors and
assigns, and all persons who at any time prior to the Closing Date have been
stockholders, directors, officers, agents or employees of Odetics (in each case,
in their respective capacities as such), remise, release and forever discharge
ATL, and its affiliates, successors and assigns, and all persons who at any time
prior to the Closing Date have been stockholders, directors, officers, agents or
employees of ATL (in each case, in their respective capacities as such), and
their respective heirs, executors, administrators, successors and assigns, from
any and all Liabilities whatsoever, whether at law or in equity (including any
right of contribution), whether arising under any contract or agreement, by
operation of law or otherwise, existing or arising from any acts or events
occurring or failing to occur or alleged to have occurred or to have failed to
occur or any conditions existing or alleged to have existed on or before the
Closing Date, including in connection with the transactions and all other
activities to implement any of the Separation, the IPO and the Distribution.
14
15
(c) Nothing contained in Section 8.1(a) or (b) shall impair any right of
any person to enforce this Agreement, any Ancillary Agreement or any
agreements, arrangements, commitments or understandings that are specified
herein or in the Schedules and Exhibits hereto not to terminate as of the
Closing Date, in each case in accordance with its terms. Nothing contained in
Section 8.1(a) or (b) shall release any person from:
(i) any liability provided in or resulting from any agreement
between Odetics and ATL that is specified herein or the Schedules and Exhibits
hereto as not to terminate as of the Closing Date, or any other liability
specified as not to terminate as of the Closing Date;
(ii) any liability, contingent or otherwise, assumed, transferred,
assigned or allocated to such person;
(iii) any liability that the parties may have with respect to
indemnification or contribution pursuant to this Agreement for claims brought
against the parties by third Persons, which liability shall be governed by this
Article VIII and, if applicable, the appropriate provisions of the Ancillary
Agreements.
(d) ATL shall not make, any claim or demand, or commence any action
asserting any claim or demand, including any claim of contribution or any
indemnification, against Odetics, or any other person released pursuant to
Section 8.1(a), with respect to any liabilities released pursuant to Section
8.1(a). Odetics shall not make any claim or demand, or commence any action
asserting any claim or demand, including any claim of contribution or any
indemnification, against ATL or any other person released pursuant to Section
8.1(b), with respect to any labilities released pursuant to Section 8.1(b).
(e) It is the intent of each of Odetics and ATL by virtue of the
provisions of this Section 8.1 to provide for a full and complete release and
discharge of all liabilities existing or arising from all acts and events
occurring or failing to occur or alleged to have occurred or to have failed to
occur and all conditions existing or alleged to have existed on or before the
Closing Date, between or among ATL and its affiliates on the one hand, and
Odetics and its affiliates on the other hand (including
15
16
any contractual agreements or arrangements existing or alleged to exist between
or among any such persons on or before the Closing Date), except as expressly
set forth in Section 8.1(c). At any time, at the request of any other party,
each party shall execute and deliver releases reflecting the provisions hereof.
8.2 Indemnification by ATL. Except as provided in Section 8.4, ATL shall
indemnify, defend and hold harmless Odetics, and each of its directors,
officers and employees, and each of the heirs, executors, successors and
assigns of any of the foregoing (collectively, the "Odetics Indemnitees"), from
and against any and all Liabilities of the Odetics Indemnitees relating to,
arising out of or resulting from any of the following items (collectively, the
"ATL Liabilities"):
(a) the operation of the ATL Business, as conducted at any time prior
to, on or after the Closing Date (including any Liability relating to, arising
out of or from any act or failure to act by any director, officer, employee,
agent or representative of ATL, whether or not such act or failure to act is or
was within such person's authority); provided however, that ATL shall not be
responsible for and shall not indemnify, defend or hold harmless Odetics for
any tax liability resulting from the reorganization of ATL's international
operations occurring prior to the Closing Date;
(b) the ownership, leasing or use of any assets of ATL, including,
without limitation, the ATL Assets, any personal property, real property and
leasehold interests of ATL;
(c) the failure of ATL or any other person to pay, perform or
otherwise promptly discharge any liabilities of ATL or any material contract or
agreement of ATL in accordance with their respective terms, whether prior to or
after the Closing Date or the date hereof;
(d) any breach by ATL or its affiliates of this Agreement or any of
the Ancillary Agreements; or
(e) any untrue statement or alleged untrue statement of a material
fact or omission or alleged omission to state a material fact required to be
stated therein or necessary to make the statements therein not misleading, with
respect to all information contained in any IPO Registration Statement or
Prospectus made by ATL or any of its directors, officers, employees, agents or
representatives.
8.3 Indemnification by Odetics. Odetics shall indemnify, defend and hold
harmless ATL, and each of its directors, officers and employees, and each of
the heirs, executors, successors and assigns of any of the foregoing
(collectively, the "ATL Indemnitees"), from and against any and all Liabilities
of the ATL Indemnitees relating to, arising out of or resulting from any of the
following items:
(a) the operation of the business of Odetics (other than the ATL
Business), as conducted at any time prior to, on or after the Closing Date
(including any Liability relating to, arising out of or from any act or failure
to act by any director, officer, employee, agent or representative of Odetics,
whether or not such act or failure to act is or was within such person's
authority);
16
17
(b) the ownership, leasing or use of any assets of Odetics,
including, without limitation, any personal property, real property and
leasehold interests of Odetics;
(c) the failure of Odetics or any other person to pay, perform or
otherwise promptly discharge any liabilities of Odetics (other than the ATL
Liabilities) or any material contract or agreement of Odetics in accordance
with their respective terms, whether prior to or after the Closing Date or the
date hereof;
(d) any breach by Odetics or its affiliates (other than ATL) of this
Agreement or any of the Ancillary Agreements; or
(e) any untrue statement or alleged untrue statement of a material
fact or omission or alleged omission to state a material fact required to be
stated therein or necessary to make the statements therein not misleading, with
respect to all information contained in any IPO Registration Statement or
Prospectus made by Odetics or any of its directors, officers, employees, agents
or representatives.
8.4 Indemnification Obligations Net of Insurance Proceeds and Other
Amounts.
(a) The parties intend that any liability subject to indemnification
or reimbursement pursuant to this Article VIII will be net of insurance proceeds
that actually reduce the amount of the liability. Accordingly, the amount
which any party (an "Indemnifying Party") is required to pay to any person
entitled to indemnification hereunder (an "Indemnitee") will be reduced by any
insurance proceeds theretofore actually recovered by or on behalf of the
Indemnitee in reduction of the related liability. If an Indemnitee receives a
payment (an "Indemnity Payment") required by this Agreement from an
Indemnifying Party in respect of any liability and subsequently receives
insurance proceeds, then the Indemnitee will pay to the Indemnifying Party an
amount equal to the excess of the Indemnity Payment received over the amount of
the Indemnity Payment that would have been due if the insurance proceeds
recovery had been received, realized or recovered before the Indemnity Payment
was made.
(b) 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 such insurer or other
third party would not be entitled to receive in the absence of the
indemnification provisions by virtue of the indemnification provisions hereof.
17
18
8.5 Procedures for Indemnification of Third Party Claims.
(a) If an Indemnitee shall receive notice or otherwise learn of the
assertion by any person other than the parties hereto of a claim (a "Third Party
Claim") with respect to which an Indemnifying Party may be obligated to provide
indemnification to such Indemnitee pursuant to Section 8.2 or 8.3, or any other
Section of this Agreement or any Ancillary Agreement, such Indemnitee shall give
such Indemnifying Party written notice thereof within 20 days after becoming
aware of such Third Party Claim. Any such notice shall describe the Third Party
Claim in reasonable detail. Notwithstanding the foregoing, the failure of any
Indemnitee or other Person to give notice as provided in this Section 8.5(a)
shall not relieve the related Indemnifying Party of its obligations under this
Article VIII, except to the extent that such Indemnifying Party is actually
prejudiced by such failure to give notice.
(b) An Indemnifying Party may elect to defend (and, unless the
Indemnifying Party has specified any reservations or exceptions, to seek to
settle or compromise), at such Indemnifying Party's own expense and by such
Indemnifying Party's own counsel, any Third Party Claim. Within 30 days after
the receipt of notice from an Indemnitee in accordance with Section 8.5(a), the
Indemnifying Party shall notify the Indemnitee of its election whether the
Indemnifying Party will assume responsibility for defending such Third Party
Claim, which election shall specify any reservations or exceptions. After
notice from an Indemnifying Party to an Indemnitee of its election to assume
the defense of a Third Party Claim, such Indemnitee shall have the right to
employ separate counsel and to participate in (but not control) the defense,
compromise, or settlement thereof, but the fees and expenses of such counsel
shall be the expense of such Indemnitee except as set forth in the next
sentence. In the event that the Indemnifying Party has elected to assume the
defense of the Third Party Claim but has specified, and continues to assert,
any reservations or exceptions in such notice, then, in any such case, the
reasonable fees and expenses of one separate counsel for all Indemnitees shall
be borne by the Indemnifying Party.
(c) If an Indemnifying Party elects not to assume responsibility for
defending a Third Party Claim, or fails to notify an Indemnitee of its election
as provided in Section 8.5(b), such Indemnitee may defend such Third Party
Claim at the cost and expense of the Indemnifying Party.
18
19
(d) Unless the Indemnifying Party has failed to assume the defense
of the Third Party Claim in accordance with the terms of this Agreement, no
Indemnitee may settle or compromise any Third Party Claim without the consent
of the Indemnifying Party.
(e) No Indemnifying Party shall consent to entry of any judgment or
enter into any settlement of the Third Party Claim without the consent of the
Indemnitee if the effect thereof is to permit any injunction, declaratory
judgment, other order or other nonmonetary relief to be entered, directly or
indirectly, against any Indemnitee.
(f) The provisions of this Section 8.5 shall not apply to Taxes (which
are covered by the Tax Allocation Agreement).
19
20
ARTICLE IX.
INTERIM OPERATIONS AND CERTAIN OTHER MATTERS
9.1 Insurance Matters.
(a) ATL agrees that it will reimburse Odetics for its proportionate
share of premiums paid or accrued, from the date hereof until the Distribution
Date, in respect of Insurance Policies under which ATL will continue to have
coverage following the date hereof. Odetics and ATL agree to cooperate in good
faith to provide for an orderly transition of insurance coverage from the date
hereof through the Distribution Date and for the treatment of any Insurance
Policies that will remain in effect following the Closing Date on a mutually
agreeable basis. In no event shall Odetics, or any Odetics Indemnitee have any
liability or obligation whatsoever to ATL in the event that any Insurance Policy
or other contract or policy of insurance shall be terminated or otherwise cease
to be in effect for any reason, shall be unavailable or inadequate to cover any
liability of ATL for any reason whatsoever or shall not be renewed or extended
beyond the current expiration date.
(b)(i) Except as otherwise provided in any Ancillary Agreement, the
parties intend by this Agreement that ATL and its affiliates be
successor-in-interest to all rights that any may have as of the Closing Date as
a subsidiary or affiliate of Odetics prior to the Closing Date under any policy
of insurance issued to Odetics by any insurance carrier or under any agreements
related to such policies executed and delivered prior to the Closing Date,
including any rights ATL and its affiliates may have, as an insured or
additional named insured, subsidiary or affiliate to avail itself of any such
policy of insurance or any such agreements related to such policies as in
effect prior to the Closing Date. At the request of ATL, Odetics shall take
all reasonable steps, including the execution and delivery of any instruments,
to effect the foregoing; provided however that Odetics shall not be required to
pay any amounts, waive any rights or incur any liabilities in connection
therewith.
20
21
(ii) Except as otherwise contemplated by any Ancillary Agreement,
after the Closing Date, neither of Odetics or ATL shall, without the consent of
the other, provide any such insurance carrier with a release, or amend, modify
or waive any rights under any such policy or agreement, if such release,
amendment, modification or waiver would adversely affect any rights or potential
rights of the other hereunder; provided, however, that the foregoing shall not
(A) preclude either from presenting any claim or from exhausting any policy
limit, (B) require either to pay any premium or other amount or to incur any
liability, or (C) require either to renew, extend or continue any policy in
force. Each of ATL and Odetics will share such information as is reasonably
necessary in order to permit the other to manage and conduct its insurance
matters in an orderly fashion.
(c) This Agreement shall not be considered as an attempted assignment
of any policy of insurance or as a contract of insurance and shall not be
construed to waive any right or remedy of either Odetics or ATL in respect of
any insurance policy or any other contract or policy of insurance.
(d) ATL does hereby, for itself and its affiliates, agree that
Odetics or any Odetics Indemnitee shall have any liability whatsoever as a
result of the insurance policies and practices of Odetics and its affiliates as
in effect at any time prior to the Closing Date, including as a result of the
level or scope of any such insurance, the creditworthiness of any insurance
carrier, the terms and conditions of any policy, the adequacy or timeliness of
any notice to any insurance carrier with respect to any claim or potential claim
or otherwise.
ARTICLE X.
MISCELLANEOUS
10.1 Counterparts; Entire Agreement; Corporate Power.
(a) This Agreement and each Ancillary 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.
21
22
(b) This Agreement, and the Ancillary Agreements and the Exhibits,
Schedules and Appendices hereto and thereto contain the entire agreement
between the parties with respect to the subject matter hereof, 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.
10.2 Governing Law. This Agreement and, unless expressly provided therein,
each Ancillary Agreement, shall be governed by and construed and interpreted in
accordance with the laws of the State of California without regard to principles
of conflicts of law.
10.3 Assignability.
(a) Except as set forth in any Ancillary Agreement, this Agreement and
each Ancillary 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
or any Ancillary Agreement without the express prior written consent of the
other parties hereto or thereto.
10.4 Third Party Beneficiaries. Except for the indemnification rights under
this Agreement of any Odetics Indemnitee or ATL Indemnitee in their respective
capacities as such, (a) the provisions of this Agreement and each Ancillary
Agreement are solely for the benefit of the parties 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 or any Ancillary
Agreement and neither this Agreement nor any Ancillary Agreement shall 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 or any Ancillary Agreement. No party hereto shall have any right,
remedy or claim with respect to any provision of this Agreement or any
Ancillary Agreement to the extent such
22
23
provision relates solely to the other two parties hereto or the members of such
other two parties' respective Groups. No party shall be required to deliver any
notice under this Agreement or under any Ancillary Agreement to any other party
with respect to any matter in which such other party has no right, remedy or
claim.
10.5 Notices. All notices or other communications under this Agreement or
any Ancillary Agreement 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 Odetics, to: Odetics, Inc.
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attn: ▇▇▇▇ ▇▇▇▇▇▇▇
If to ATL, to: ATL Products, Inc.
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇ ▇. ▇▇▇▇, Ph.D.
Any party may, by notice to the other party, change the address to which such
notices are to be given.
10.6 Severability. If any provision of this Agreement or any Ancillary
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 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.
10.7 Force Majeure. No party shall be deemed in default of this Agreement
or any Ancillary Agreement to the extent that any delay or failure in the
performance of its obligations under this Agreement or any Ancillary Agreement
results from any cause beyond
23
24
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 parts, 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.
10.8 Publicity. Prior to the Distribution, each of ATL and Odetics shall
consult with the other prior to issuing any press releases or otherwise making
public statements with respect to the IPO, the Distribution or any of the other
transactions contemplated hereby and prior to making any filings with any
governmental authority with respect thereto.
10.9 Headings. The article, section and paragraph headings contained in
this Agreement and in the Ancillary Agreements are for reference purposes only
and shall not affect in any way the meaning or interpretation of this Agreement
or any Ancillary Agreement.
10.10 Survival of Covenants and Representations and Warranties. Except as
expressly set forth in any Ancillary Agreement, the covenants, representations
and warranties contained in this Agreement and each Ancillary Agreement, and
liability for the breach of any obligations contained herein, shall survive each
of the Separation, the IPO and the Distribution and shall remain in full force
and effect regardless of whether Odetics shall consummate, delay, modify or
abandon the Distribution.
10.11 Waivers of Default. Waiver by any party of any default by the
other party of any provision of this Agreement or any Ancillary 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.
10.12 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 or any Ancillary Agreement, the party or parties who are or are to be
thereby
24
25
aggrieved shall have the right to specific performance and injunctive or other
equitable relief of its rights under this Agreement or such Ancillary
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.
10.13 Amendments.
(a) No provisions of this Agreement or any Ancillary 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. Without limiting the
foregoing, the parties agree that any waiver, amendment, supplement or
modification of this Agreement or any Ancillary Agreement that solely relates
to and affects only two of the three parties hereto shall not require the
consent of the third party hereto.
(b) Without limiting the foregoing, the parties anticipate that,
prior to the Closing Date, some or all of the Schedules to this Agreement may
be amended or supplemented and, in such event, such amended or supplemented
Schedules shall be attached hereto in lieu of the original Schedules.
25
26
IN WITNESS WHEREOF, the parties have caused this Separation
and Distribution Agreement to be executed by their duly authorized
representatives.
ODETICS, INC.
a Delaware corporation
By:
--------------------------------------
▇▇▇▇ ▇▇▇▇▇▇▇, Chief Executive Officer
ATL PRODUCTS, INC.
a Delaware corporation
By:
--------------------------------------
▇▇▇▇▇ ▇. ▇▇▇▇, Chief Executive Officer
26
27
EXHIBIT A
Description of Services Calculation of Fees
----------------------- -------------------