EXHIBIT 2.1
DISTRIBUTION AGREEMENT
TABLE OF CONTENTS
PAGE
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
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TABLE OF CONTENTS
(continued)
PAGE
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
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TABLE OF CONTENTS
(continued)
PAGE
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
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DISTRIBUTION AGREEMENT
The following DISTRIBUTION AGREEMENT dated as of September [ ], 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.
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"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
_______________, 1997 with Canadian Imperial Bank of Commerce, the Senior Note
Agreements dated _______________, 199_ related to the Series A and Series B
Senior Notes, the loan agreements related to the mortgage note dated
_______________, 199_, and any other related agreements or other financing
agreements which will be assumed by Technologies prior
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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 ___, 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 ___, 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 ___, 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.
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"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.
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"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
5
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.
(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 $[________] 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 $[__________] per share of common stock.
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
8
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 ▇▇▇▇▇, ▇▇▇▇ &
▇▇▇▇▇▇▇▇ 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
9
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
10
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.
11
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
13
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
14
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
15
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
16
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
17
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:
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: President
After the Effective Time:
▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: President
with a copy to:
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: Chairman
To BEI TECHNOLOGIES, INC.:
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
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
18
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
19
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.
20
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.
21
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:
--------------------------------
Name:
------------------------------
Title:
-----------------------------
BEI TECHNOLOGIES, INC.,
By:
-------------------------------
Name:
------------------------------
Title:
-----------------------------
22
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.
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.
The retention period depends upon the subject matter of the email, as
covered elsewhere in this policy.
3.