Exhibit 10.1

 

Execution Copy

 

 

ASSET PURCHASE AGREEMENT

 

by and between

 

Catalytica Energy Systems, Inc.
as Seller

and

 

Eaton Corporation
as Buyer

 

 

 

 

Dated as of October 25, 2006

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Appendix

Appendix A

 

Definitions

 

Exhibits

Exhibit A

 

Financial Statements

Exhibit B

 

Form of Bill of Sale

Exhibit C

 

Form of Instrument of Assumption

Exhibit D

 

Form of Patent Assignment

Exhibit E

 

Transition Services Agreement

Exhibit F

 

Lease Assignments

 

Schedules

Schedule 1.1(a)

 

Sub-leases

Schedule 1.1(b)

 

Fixed Assets

Schedule 1.1(c)

 

Precious Metals

Schedule 1.1(e)

 

Assigned Contracts

Schedule 1.1(f)

 

Registered Acquired Intellectual Property

Schedule 1.2

 

Retained Assets

Schedule 3.2

 

Purchase Price Allocation

Schedule 5.3(a)

 

Conflicts

Schedule 5.3(b)

 

Consents

Schedule 5.4

 

Title; Location of Assets

Schedule 5.5

 

Financial Statement Exceptions

Schedule 5.6

 

Changes in Conditions

Schedule 5.7(a)

 

Material Contracts

Schedule 5.7(c)

 

Material Contract Exceptions

Schedule 5.8(a)

 

Registered Acquired Intellectual Property

Schedule 5.8(b)

 

Intellectual Property Exceptions

Schedule 5.8(d)

 

Due Dates for Registered Acquired Intellectual Property

Schedule 5.8(g)

 

Intellectual Property Contracts

Schedule 5.10

 

Compliance with Laws Exceptions/Permits

Schedule 5.12

 

Condition and Sufficiency Exceptions

Schedule 5.13

 

Prototype Purchasers

Schedule 5.14

 

Product Warranty Exceptions; Standard Terms and Conditions

Schedule 5.16

 

Employees

Schedule 5.17(a)

 

Employee Benefits

Schedule 5.17(f)

 

Benefits As a Result of Transaction

Schedule 5.18

 

Environmental Exceptions

Schedule 7.2(a)

 

Apportionable Expenses

Schedule 9.1

 

Transferred Employees

 

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Execution Copy

ASSET PURCHASE AGREEMENT

This Asset Purchase Agreement (this “Agreement”), dated as of October 25, 2006,
is made by and among CATALYTICA ENERGY SYSTEMS, INC., a Delaware corporation
(“Seller”), and EATON CORPORATION, an Ohio corporation (“Buyer”).  Capitalized
terms are used in this Agreement with the meanings assigned those terms in
Appendix A hereto.

Buyer desires to purchase from Seller, and Seller desires to sell to Buyer,
substantially all of the assets of the Business on the terms and conditions
contained in this Agreement.

Therefore, Seller and Buyer hereby agree as follows:

ARTICLE I

PURCHASE AND SALE OF ASSETS

1.1          Sale of Assets.  At the Closing and effective as of the Closing
Date, Seller shall sell, transfer and deliver to Buyer, and Buyer shall purchase
from Seller, free and clear of all Liens other than Permitted Liens, all of the
following assets, rights and properties of Seller (collectively, the “Acquired
Assets”):

(a)          Real Property Leases.  The Mountain View Lease and all of Seller’s
right, title and interest in and to any and all buildings, structures,
improvements and fixtures located on the real property subject to such lease,
and the sub-leases listed on Schedule 1.1(a) (together with the Mountain View
Lease, the “Real Property Leases”);

(b)          Fixed Assets.  All office, laboratory and test equipment,
machinery, product displays, tools, dies, furniture and other tangible personal
property used primarily in the Business (the “Fixed Assets”), including those
Fixed Assets listed on Schedule 1.1(b);

(c)          Supplies.  All supplies of raw materials, works-in-process,
finished goods, spare parts, supplies and storeroom contents owned or held by or
on behalf of Seller relating primarily to the Business, including those precious
metals listed on Schedule 1.1(c), as the same may be depleted or augmented prior
to the Closing Date in the Ordinary Course;

(d)          Prepaid Amounts.  All prepayments listed in Item 1 of Schedule 7.2,
prorated (if applicable) in accordance with Section 7.2;

(e)          Contracts.  All rights and incidents of interest of, and benefits
accruing to, Seller in and to the Contracts (to the extent related to the
Business) listed on Schedule 1.1(e) (the “Assigned Contracts”);

(f)           Acquired Intellectual Property.  All Intellectual Property owned
by Seller and used primarily in the Business (the “Acquired Intellectual
Property”), including the

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Registered Acquired Intellectual Property listed on Schedule 1.1(f), but
excluding the licensed software described on Schedule 1.2;

(g)          Permits.  To the extent transferable under applicable Law, all
franchises, registrations, certificates, variances, permits, licenses,
authorizations, approvals and similar rights obtained, issued or granted to
Seller by any Governmental Authority which are required to conduct the Business
in the manner conducted immediately prior to the Closing (the “Permits”);

(h)          Books and Records.  All books and records (or true and correct
copies thereof) to the extent related to the Business, including all
computerized books and records (but excluding any computers or computer
equipment in which such computerized books and records may reside except to the
extent provided for in Section 1.1(b)) and all Contracts, files, documents,
lists, plats, correspondence, architectural plans, drawings and specifications,
invoices, forms, correspondence, customer records, promotional and advertising
materials, test results and programs, technical data, operating records,
operating manuals, instructional documents, employee files for Transferred
Employees (to the extent permitted under applicable Law) and other printed or
written materials to the extent related to the Business; provided, however, that
none of the following shall constitute Acquired Assets:  (i) any records and
documents prepared in connection with the transactions contemplated hereby
(other than such records and documents to be delivered to Buyer pursuant to the
express terms of this Agreement or any of the Ancillary Agreements), (ii) any
records or documents that Seller is required by Law to retain in its possession
(but if legally permissible Seller shall provide Buyer with copies thereof),
(iii) any records and documents to the extent that such records and documents
are subject to the attorney-client privilege (except to the extent that such
records and documents relate to the Acquired Intellectual Property), (iv) any
financial records and documents which relate to the financial condition of
Seller and do not solely relate to the Business, and (v) any documents or
records relating to the minutes or proceedings of the board of directors of
Seller; provided, further, that Seller shall have the right to retain and use,
subject to the restrictions contained herein, copies of any such books and
records that are also used in or relate to any of Seller’s retained businesses.

(i)           Warranties.  All rights under or pursuant to all warranties and
guarantees, whether express or implied, made by suppliers, manufacturers,
contractors and other third parties with respect to any of the Acquired Assets;

(j)           Other Intangible Assets.  The Business as carried on and conducted
by Seller as a going concern, including any and all goodwill and similar
intangible assets associated therewith, including but not limited to (except as
otherwise set forth in this Agreement, including Sections 1.1(d) and 7.2), all
claims, actions, deposits, prepayments, refunds, causes of action, rights of
recovery, rights of set off, and rights of recoupment of any kind or nature
relating to the Acquired Assets; and

(k)          All Other Assets.  All other tangible assets of Seller related
primarily to the Business, including all customer lists, supplier lists,
catalogues, sales brochures and other marketing data.

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1.2          Retained Assets.  All assets, rights and properties other than the
Acquired Assets (collectively, the “Retained Assets”), including those Retained
Assets listed on Schedule 1.2, shall be retained by Seller, and Buyer will in no
way be construed to have purchased (or to be obligated to purchase) any interest
whatsoever in any Retained Assets.

1.3          Non-Assignable Assets; Beneficial Ownership.  Notwithstanding any
provision of this Agreement to the contrary, this Article I does not constitute
an agreement to assign or sell any Acquired Assets that are not capable of being
validly assigned or sold without the Consent of any third party (the
“Non-Assignable Assets”).  Subject to Section 7.1(b), to the extent that any
sale or assignment contemplated by this Agreement has not occurred as of the
Closing, Seller and Buyer shall thereafter cooperate for a period of 180 days
from the Closing Date to effect such sales or assignment.  Notwithstanding the
foregoing, neither Seller nor Buyer will be liable in any manner to any Person
who is not a party to this Agreement for any failure of any of the transfers
contemplated by this Agreement to be consummated on or after the Closing Date.

ARTICLE II

ASSUMPTION OF LIABILITIES

2.1          Assumed Liabilities.  At the Closing and effective as of the
Closing Date, Buyer shall assume and thereafter perform, pay and discharge in
accordance with their terms only the following Liabilities of Seller
(collectively, the “Assumed Liabilities”):

(a)          Assigned Contracts.  All Liabilities under the Real Property Leases
and Assigned Contracts to the extent that such Liabilities relate to the
Business and first arise on or after the Closing.

(b)          Employment Liabilities.  All Liabilities to be borne by Buyer
pursuant to Article IX.

(c)          Other Liabilities of the Business.  Liabilities under Article 25 of
the Mountain View Lease and all Liabilities arising on or after the Closing
relating to the Acquired Assets and operation of the Business by Buyer,
including the sale of products related to the Business.

(d)          All Liabilities to be borne by Buyer pursuant to Section 7.1(b).

(e)          The Buyer Environmental and Facilities Liabilities.

2.2          Retained Liabilities.  All Liabilities of Seller of any kind and
nature, whether related to the Business or not and whether known or unknown,
contingent or fixed, that are not Assumed Liabilities are “Retained
Liabilities”.  Seller shall retain all Retained Liabilities and Buyer shall have
no obligation whatsoever to perform, pay or discharge any Retained Liabilities.

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ARTICLE III

PURCHASE PRICE

3.1          Purchase Price.  In consideration for the transfer of the Acquired
Assets, at the Closing, Buyer shall (a) pay Seller an amount in cash equal to
$2,400,000; and (b) assume the Assumed Liabilities (such cash amount,
collectively with the value of the Assumed Liabilities, the “Purchase Price”). 
Such cash amount shall be paid by wire transfer of immediately available funds
to an account designated in writing for such purpose by Seller prior to the
Closing.

3.2          Purchase Price Allocation.  The Purchase Price plus the Assumed
Liabilities (collectively, the “Total Consideration”) will be allocated among
the Acquired Assets and the non-competition agreement contained in Section 7.4
as shown on Schedule 3.2.  The Total Consideration and such schedule shall be
adjusted to reflect any payments made after Closing pursuant to Article VIII. 
Unless otherwise required under applicable Law, each Party shall report the
purchase and sale of the Acquired Assets on all Tax Returns, including timely
filed Internal Revenue Service Forms 8594, in accordance with the allocation
shown on Schedule 3.2, as adjusted, and no Party will take any position (whether
in audits, Tax Returns or otherwise) that is inconsistent with such allocation.

ARTICLE IV

CLOSING AND DELIVERIES

4.1          Closing.  The closing of the transactions contemplated hereby (the
“Closing”) shall take place at 1111 Superior Avenue, Cleveland, Ohio, at 10:00
a.m. local time on the date hereof.  The time and date on which the Closing is
actually held is referred to herein as the “Closing Date.”  All proceedings
required to be taken and all documents required to be executed and delivered by
all Parties at the Closing will be deemed to have been taken and executed
simultaneously and no such proceedings will be deemed to have been taken nor
such documents executed or delivered until all have been taken, executed and
delivered.  Regardless of the time at which Closing occurs, Closing will be
deemed for all purposes to have occurred on the Closing Date at 12:01 a.m. local
time in Cleveland, Ohio.

4.2          Deliveries by Seller.  At the Closing, Seller shall deliver or
cause to be delivered (unless previously delivered) to Buyer the following
items:

(a)           the Bill of Sale, duly executed by Seller;

(b)           the Instrument of Assumption, duly executed by Seller;

(c)           the Lease Assignment, duly executed by Seller;

(d)           the Patent Assignment, duly executed by Seller;

(e)           the Transition Services Agreement, duly executed by Seller;

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(f)            a Consent and Estoppel Certificate, in form and substance
satisfactory to Buyer signed by Jack Dymond Associates related to the Mountain
View Lease;

(g)           UCC termination statements and any other documents necessary to
release any Liens other than Permitted Liens on the Acquired Assets; and

(H)           SUCH OTHER DOCUMENTS, INSTRUMENTS OF SALE, TRANSFER, CONVEYANCE OR
ASSIGNMENT AS ARE REQUIRED TO VEST TITLE IN AND TO THE ACQUIRED ASSETS IN BUYER.

4.3          Deliveries by Buyer.  At the Closing, Buyer shall deliver or cause
to be delivered (unless previously delivered) to Seller the following items:

(A)           THE CASH PORTION OF THE PURCHASE PRICE PURSUANT TO SECTION 3.1;

(B)           THE BILL OF SALE, DULY EXECUTED BY BUYER;

(C)           THE INSTRUMENT OF ASSUMPTION, DULY EXECUTED BY BUYER;

(D)           THE LEASE ASSIGNMENT, DULY EXECUTED BY BUYER;

(E)           THE TRANSITION SERVICES AGREEMENT, DULY EXECUTED BY BUYER; AND

(F)            SUCH OTHER DOCUMENTS AND INSTRUMENTS AS ARE REQUIRED TO EVIDENCE
THE ASSUMPTION OF THE ASSUMED LIABILITIES BY BUYER.

ARTICLE V

REPRESENTATIONS AND WARRANTIES OF SELLER

Seller hereby represents and warrants to Buyer, subject to such exceptions and
disclosures as set forth in the Disclosure Letter supplied by Seller to Buyer on
the date hereof  (the “Disclosure Letter”) (which exceptions and disclosures
will reference the appropriate section of this Article V to which they relate
and each of which exceptions and disclosures shall be deemed to be incorporated
by reference into such representations and warranties; provided, that any
information disclosed in the text of any section of the Disclosure Letter shall
be deemed disclosed and incorporated in any other section, subsection, clause or
paragraph hereof, as the case may be, where it is reasonably apparent from the
text of such disclosure that it is applicable to such other section, subsection,
clause or paragraph hereof, as the case may be), as follows:

5.1          ORGANIZATION AND STANDING.  SELLER IS A CORPORATION DULY
INCORPORATED, VALIDLY EXISTING AND IN GOOD STANDING UNDER THE LAWS OF THE STATE
OF ITS INCORPORATION.  SELLER IS DULY QUALIFIED TO DO BUSINESS AND IN GOOD
STANDING IN THE STATES OF THE UNITED STATES IN WHICH THE CHARACTER OF THE
PROPERTIES OWNED OR LEASED BY IT AND USED BY IT IN THE BUSINESS OR IN WHICH THE
CONDUCT OF THE BUSINESS REQUIRES IT TO BE SO QUALIFIED, EXCEPT FOR THOSE
JURISDICTIONS WHERE FAILURE TO BE SO QUALIFIED WOULD NOT, INDIVIDUALLY OR IN THE
AGGREGATE, CONSTITUTE OR REASONABLY BE LIKELY TO CONSTITUTE A SELLER MATERIAL
ADVERSE EFFECT.

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5.2          AUTHORITY, VALIDITY AND EFFECT.  SELLER HAS ALL REQUISITE CORPORATE
POWER AND AUTHORITY TO EXECUTE, DELIVER AND PERFORM ITS OBLIGATIONS UNDER THIS
AGREEMENT AND THE ANCILLARY AGREEMENTS TO WHICH IT IS A PARTY AND TO CONSUMMATE
THE TRANSACTIONS CONTEMPLATED HEREBY AND THEREBY.  THIS AGREEMENT AND EACH OF
THE ANCILLARY AGREEMENTS TO WHICH SELLER IS PARTY HAS BEEN DULY EXECUTED AND
DELIVERED BY SELLER.  THIS AGREEMENT AND EACH OF THE ANCILLARY AGREEMENTS TO
WHICH SELLER IS PARTY IS THE LEGAL, VALID AND BINDING OBLIGATION OF SELLER,
ENFORCEABLE AGAINST SELLER IN ACCORDANCE WITH ITS RESPECTIVE TERMS, EXCEPT AS
LIMITED BY (I) APPLICABLE BANKRUPTCY, REORGANIZATION, INSOLVENCY, MORATORIUM OR
OTHER SIMILAR LAWS AFFECTING THE ENFORCEMENT OF CREDITORS’ RIGHTS GENERALLY FROM
TIME TO TIME IN EFFECT, (II) THE AVAILABILITY OF EQUITABLE REMEDIES (REGARDLESS
OF WHETHER ENFORCEABILITY IS CONSIDERED IN A PROCEEDING AT LAW OR IN EQUITY) OR
(III) RULES CONCERNING SPECIFIC PERFORMANCE (THE “GENERAL ENFORCEABILITY
EXCEPTIONS”).

5.3          NO CONFLICT; REQUIRED FILINGS AND CONSENTS.

(A)           NEITHER THE EXECUTION AND DELIVERY OF THIS AGREEMENT OR ANY
ANCILLARY AGREEMENT BY SELLER, NOR THE CONSUMMATION BY SELLER OF THE
TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY, NOR COMPLIANCE BY SELLER WITH ANY
OF THE PROVISIONS HEREOF OR THEREOF, WILL (I) CONFLICT WITH OR RESULT IN A
BREACH OF ANY PROVISION OF SELLER’S CERTIFICATE OF INCORPORATION OR BY-LAWS;
(II) EXCEPT AS SET FORTH ON SCHEDULE 5.3(A) OF THE DISCLOSURE LETTER, CONFLICT
WITH, CONSTITUTE OR RESULT IN THE MATERIAL BREACH OF ANY TERM, CONDITION OR
PROVISION OF, OR CONSTITUTE A MATERIAL DEFAULT UNDER, RESULT IN OR GIVE RISE TO
ANY RIGHT OF TERMINATION, CANCELLATION OR ACCELERATION WITH RESPECT TO, OR
RESULT IN THE CREATION OR IMPOSITION OF ANY LIEN (OTHER THAN PERMITTED LIENS)
UPON ANY OF THE ACQUIRED ASSETS PURSUANT TO, OR REQUIRE ANY NOTICE UNDER, ANY
NOTE, BOND, MORTGAGE, INDENTURE, CONTRACT OR OTHER INSTRUMENT OR OBLIGATION TO
WHICH SELLER IS A PARTY OR BY WHICH THE BUSINESS IS SUBJECT; OR (III) ASSUMING
THE APPROVALS REFERRED TO IN SECTION 5.3(B) ARE OBTAINED, MATERIALLY VIOLATE ANY
ORDER OR LAW TO WHICH SELLER, THE BUSINESS OR THE ACQUIRED ASSETS ARE SUBJECT.

(B)           OTHER THAN AS SET FORTH ON SCHEDULE 5.3(B) OF THE DISCLOSURE
LETTER, NO NOTICE TO, FILING WITH, AUTHORIZATION OF, EXEMPTION BY OR CONSENT OF
ANY PERSON IS NECESSARY FOR THE CONSUMMATION BY SELLER OF THE TRANSACTIONS
CONTEMPLATED BY THIS AGREEMENT AND THE ANCILLARY AGREEMENTS.

5.4          TITLE.

(A)           SELLER HAS GOOD AND MARKETABLE TITLE TO OR A VALID LEASEHOLD
INTEREST IN EACH ACQUIRED ASSET, FREE AND CLEAR OF ALL LIENS OTHER THAN
PERMITTED LIENS.  EXCEPT AS SET FORTH ON SCHEDULE 5.4 OF THE DISCLOSURE LETTER,
NO PERSON OTHER THAN SELLER OWNS ANY INTEREST IN ANY OF THE ACQUIRED
INTELLECTUAL PROPERTY.  NONE OF SELLER’S AFFILIATES OR SUBSIDIARIES OPERATES THE
BUSINESS OR OWNS ANY ASSETS OR RIGHTS USED IN OR RELATED TO THE BUSINESS.  ALL
TANGIBLE ACQUIRED ASSETS ARE LOCATED AT THE PROPERTY TO BE LEASED BY BUYER UNDER
THE MOUNTAIN VIEW LEASE OR AT THE LOCATIONS SET FORTH ON SCHEDULE 5.4 OF THE
DISCLOSURE LETTER.  NONE OF THE ACQUIRED ASSETS ARE SUBJECT TO OR HELD UNDER ANY
SECURITY, CONDITIONAL SALES OR OTHER TITLE RETENTION CONTRACT.

(B)           NEITHER KAWASAKI HEAVY INDUSTRIES, LTD. NOR ANY OF ITS
SUBSIDIARIES OR AFFILIATES HAS ANY CLAIMS AGAINST SELLER OR ANY OF ITS
SUBSIDIARIES OR AFFILIATES IN CONNECTION WITH THE ACQUIRED ASSETS, THE BUSINESS,
THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY.

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5.5          FINANCIAL CONDITION.

(A)           ATTACHED AS EXHIBIT A TO THE DISCLOSURE LETTER IS A SCHEDULE OF
THE ACQUIRED ASSETS AND ASSUMED LIABILITIES AS OF SEPTEMBER 30, 2006 (THE “ASSET
AND LIABILITY SCHEDULE”) AND THE STATEMENT OF INCOME FOR THE BUSINESS FOR THE
SEVEN MONTH PERIOD ENDED JULY 31, 2006 (THE “STATEMENT OF INCOME”) (COLLECTIVELY
THE “FINANCIAL STATEMENTS”).  EXCEPT AS SET FORTH IN SCHEDULE 5.5(A) OF THE
DISCLOSURE LETTER, THE FINANCIAL STATEMENTS ARE TRUE, CORRECT AND COMPLETE, THE
COMPONENTS OF THE FINANCIAL STATEMENTS AS PRESENTED WERE PREPARED IN ACCORDANCE
WITH ACCOUNTING PRINCIPLES GENERALLY ACCEPTED IN THE UNITED STATES OF AMERICA
(“GAAP”) AND PRESENT IN ALL MATERIAL RESPECTS THE RESULTS OF OPERATIONS OF THE
BUSINESS AS OF AND FOR THE PERIODS ENDING ON THEIR RESPECTIVE DATES EXCEPT THAT
(I) THE STATEMENT OF INCOME WILL NOT BE FULLY REPRESENTATIVE OF THE RESULTS OF
OPERATIONS OF THE BUSINESS AS CERTAIN EXPENSES, INCLUDING BUT NOT LIMITED TO,
ACCOUNTING, INFORMATION SYSTEMS, INVESTOR RELATIONS, HUMAN RESOURCES AND OTHER
CORPORATE SERVICES HAVE NOT BEEN INCLUDED IN THE STATEMENT OF INCOME, (II) THE
STATEMENT OF INCOME DOES NOT INCLUDE CERTAIN EXPENSES THAT WOULD LIKELY BE
INCURRED ON A STAND-ALONE OPERATION, (III) THE ASSET AND LIABILITY SCHEDULE
EXCLUDES ANY LIABILITY THAT MAY RESULT FROM THE DECOMMISSIONING OF THE MOUNTAIN
VIEW FACILITIES AS REQUIRED UNDER THE MOUNTAIN VIEW LEASE AND (IV) THE FINANCIAL
STATEMENTS DO NOT INCLUDE ANY OF THE FOOTNOTES REQUIRED BY GAAP FOR ANNUAL
FINANCIAL STATEMENTS.

(B)           ON THE CLOSING DATE, AFTER GIVING EFFECT TO THE CONSUMMATION OF
THIS AGREEMENT (I) THE FAIR MARKET VALUE OF THE ASSETS OF SELLER WILL AS OF SUCH
DATE EXCEED THE FAIR MARKET VALUE OF THE LIABILITIES OF SELLER, (II) SELLER WILL
NOT HAVE AN UNREASONABLY SMALL AMOUNT OF CAPITAL WITH WHICH TO CONDUCT ITS
RESPECTIVE BUSINESSES, AND (III) SELLER WILL BE ABLE TO PAY ITS RESPECTIVE DEBTS
AS THEY MATURE.

5.6          CHANGES IN CONDITION.

(A)           SINCE DECEMBER 31, 2005, AND EXCEPT AS SET FORTH ON SCHEDULE 5.6
OF THE DISCLOSURE LETTER, SELLER HAS OPERATED THE BUSINESS ONLY IN THE ORDINARY
COURSE AND, WITHOUT LIMITING THE GENERALITY OF THE FOREGOING, SINCE THAT DATE,
IN CONNECTION WITH THE BUSINESS:

(I)            SELLER HAS NOT SOLD, LEASED, TRANSFERRED OR ASSIGNED ANY OF THE
ACQUIRED INTELLECTUAL PROPERTY OR OTHER INTANGIBLE ASSETS RELATED TO THE
BUSINESS;

(II)           SELLER HAS NOT ENTERED INTO ANY CONTRACT WITH RESPECT TO THE
BUSINESS OUTSIDE THE ORDINARY COURSE;

(III)          NO PERSON (INCLUDING SELLER) HAS ACCELERATED, TERMINATED,
MODIFIED OR CANCELLED ANY CONTRACT WITH RESPECT TO THE BUSINESS AND WHICH SELLER
IS PARTY;

(IV)          SELLER HAS NOT INCURRED ANY INDEBTEDNESS (EXCEPT FOR INDEBTEDNESS
THAT HAS BEEN INDEFEASIBLY SATISFIED AS OF THE CLOSING) OR IMPOSED ANY LIEN
(OTHER THAN MECHANICS,’ WORKMEN’S, MATERIALMEN’S, LANDLORDS,’ CARRIERS’ OR OTHER
SIMILAR LIENS ARISING IN THE ORDINARY COURSE WITH RESPECT TO LIABILITIES THAT
ARE NOT YET DUE AND PAYABLE OR THAT ARE BEING CONTESTED IN GOOD FAITH) ON ANY
ACQUIRED ASSET;

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(V)           SELLER HAS NOT MADE OR COMMITTED TO MAKE ANY CAPITAL EXPENDITURES
THAT, INDIVIDUALLY OR IN THE AGGREGATE, EXCEED $25,000 WITH RESPECT TO THE
BUSINESS WHICH ARE INCLUDED IN THE ASSUMED LIABILITIES;

(VI)          SELLER HAS NOT DELAYED OR POSTPONED THE PAYMENT OF ACCOUNTS
PAYABLE OR OTHER LIABILITIES RELATED TO THE BUSINESS;

(VII)         SELLER HAS NOT INCURRED ANY MATERIAL DAMAGE TO, DESTRUCTION OR
LOSS OF ANY ACQUIRED ASSETS;

(VIII)        OTHER THAN NORMAL MERIT SALARY INCREASES CONSISTENT WITH THE PAST
PRACTICE OF THE BUSINESS, SELLER HAS NOT INCREASED THE SALARIES OR OTHER
COMPENSATION OF, GRANTED ANY RIGHTS TO SEVERANCE BENEFITS, STAY PAY, OR
TERMINATION PAY TO ANY BUSINESS EMPLOYEE OR MADE ANY ADVANCE OR LOAN TO, OR MADE
ANY CHANGES IN THE TERMS OF EMPLOYMENT OF ANY BUSINESS EMPLOYEES OR DISCUSSED
TERMINATION OF EMPLOYMENT WITH ANY BUSINESS EMPLOYEES; AND

(IX)           SELLER HAS NOT ENTERED INTO ANY CONTRACT WITH RESPECT TO OR
COMMITTED TO ENGAGE IN ANY OF THE FOREGOING WITH RESPECT TO THE BUSINESS WHICH
ARE INCLUDED IN THE ASSUMED LIABILITIES.

(B)           NO SELLER MATERIAL ADVERSE EFFECT HAS OCCURRED SINCE DECEMBER 31,
2005.

5.7          MATERIAL CONTRACTS.

(A)           SCHEDULE 5.7(A) OF THE DISCLOSURE LETTER IDENTIFIES THOSE
CONTRACTS (OR ANY GROUPS OF RELATED OR SIMILAR CONTRACTS) TO WHICH SELLER OR ANY
OF ITS AFFILIATES IS PARTY IN CONNECTION WITH OR RELATING TO THE BUSINESS OR THE
ACQUIRED ASSETS THAT:

(I)            REQUIRE PAYMENT BY ANY PARTY THERETO IN EXCESS OF $25,000 PER
YEAR;

(II)           IS NOT TERMINABLE ON LESS THAN THREE MONTHS’ NOTICE WITHOUT
PAYMENT BY, PENALTY OR OTHER ADVERSE CONSEQUENCE TO THE BUSINESS;

(III)          INVOLVE THE LEASE OR USE OF REAL PROPERTY;

(IV)          INVOLVE THE LEASE, PURCHASE OR SERVICE OF TANGIBLE PERSONAL
PROPERTY REQUIRING PAYMENTS IN EXCESS OF $25,000 PER YEAR;

(V)           RELATE TO CAPITAL EXPENDITURES TO BE MADE AFTER CLOSING IN AN
AMOUNT IN EXCESS OF $25,000;

(VI)          CREATE A PARTNERSHIP OR JOINT VENTURE;

(VII)         CREATE, INCUR OR GUARANTEE INDEBTEDNESS OR IMPOSE A LIEN ON ANY OF
THE ACQUIRED ASSETS;

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(VIII)        GRANT A LICENSE TO ACQUIRED INTELLECTUAL PROPERTY OR REQUIRE THE
PAYMENT OF ROYALTIES;

(IX)           IS A MANAGEMENT, CONSULTING, EMPLOYMENT, COMPENSATION,
TERMINATION, SEVERANCE OR SIMILAR CONTRACT INVOLVING PAYMENTS IN EXCESS OF
$25,000;

(X)            REQUIRE THE PAYMENT OF BONUSES OR SIMILAR INCENTIVES TO ANY
PERSON IN CONNECTION WITH THE BUSINESS OR THE TRANSACTION CONTEMPLATED HEREBY;

(XI)           APPOINT A PERSON AS A MANUFACTURER’S REPRESENTATIVE, DISTRIBUTOR
OR SALES AGENT;

(XII)          CREATE ANY LIABILITY FOR OR RELATED TO ASBESTOS, SILICA,
REFRACTORY CERAMIC FIBERS OR OTHER SUBSTANCE THAT COULD BE HARMFUL TO HUMAN
HEALTH;

(XIII)         CONCERN CONFIDENTIALITY OR NON-COMPETITION;

(XIV)        PROVIDE FOR INDEMNIFICATION BY OR OF SELLER;

(XV)         INVOLVE AN OPTION TO PURCHASE, A RIGHT OF FIRST REFUSAL OR OTHER
PREFERENTIAL RIGHT TO ACQUIRE ANY ACQUIRED ASSET;

(XVI)        GRANT A POWER OF ATTORNEY WITH RESPECT TO THE BUSINESS;

(XVII)       HAVE AS A PARTY AN EMPLOYEE, OFFICER, DIRECTOR OR AN AFFILIATE OF
SELLER (OTHER THAN SELLER) OR AN ENTITY IN WHICH ANY SUCH PERSON HAS AN INTEREST
OR A GOVERNMENTAL AUTHORITY; OR

(XVIII)      THE CONSEQUENCES OF A DEFAULT UNDER WHICH WOULD CONSTITUTE OR
REASONABLY BE EXPECTED TO CONSTITUTE A SELLER MATERIAL ADVERSE EFFECT.

(B)           PRIOR TO THE DATE HEREOF, SELLER HAS MADE AVAILABLE TO BUYER OR
ITS REPRESENTATIVES AN ACCURATE AND COMPLETE COPY OF EACH MATERIAL CONTRACT (OR
A WRITTEN DESCRIPTION OF THE MATERIAL TERMS OF ANY MATERIAL CONTRACT THAT IS NOT
WRITTEN).

(C)           EXCEPT AS SET FORTH ON SCHEDULE 5.7(C) OF THE DISCLOSURE LETTER,
EACH MATERIAL CONTRACT IS VALID, BINDING AND ENFORCEABLE IN ACCORDANCE WITH ITS
TERMS, EXCEPT AS LIMITED BY THE GENERAL ENFORCEABILITY EXCEPTIONS, AND IS IN
FULL FORCE AND EFFECT.  EXCEPT AS SET FORTH ON SCHEDULE 5.7(C) OF THE DISCLOSURE
LETTER, THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT AND THE ANCILLARY
AGREEMENTS WILL NOT GIVE RISE TO A MATERIAL BREACH OF, OR RIGHT OF ACCELERATION
OR TERMINATION UNDER, ANY MATERIAL CONTRACT.  EXCEPT AS SET FORTH ON
SCHEDULE 5.7(C) OF THE DISCLOSURE LETTER, THERE ARE NO EXISTING MATERIAL
DEFAULTS BY SELLER UNDER ANY OF THE MATERIAL CONTRACTS AND NO EVENT HAS OCCURRED
OR TO SELLER’S KNOWLEDGE IS LIKELY TO OCCUR THAT (WHETHER WITH OR WITHOUT
NOTICE, LAPSE OF TIME OR THE HAPPENING OR OCCURRENCE OF ANY OTHER EVENT) WOULD
CONSTITUTE A MATERIAL DEFAULT UNDER ANY MATERIAL CONTRACT BY SELLER.  EXCEPT AS
SET FORTH ON SCHEDULE 5.7(C) OF THE DISCLOSURE LETTER, TO SELLER’S KNOWLEDGE IN
EACH CASE, THERE ARE NO EXISTING MATERIAL DEFAULTS BY ANY PARTY (OTHER THAN
SELLER) TO A MATERIAL CONTRACT AND NO EVENT HAS OCCURRED OR IS LIKELY TO OCCUR
THAT (WHETHER WITH OR WITHOUT NOTICE, LAPSE OF TIME OR THE HAPPENING

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OR OCCURRENCE OF ANY OTHER EVENT) WOULD CONSTITUTE A MATERIAL DEFAULT UNDER ANY
MATERIAL CONTRACT BY ANY PARTY THERETO OTHER THAN SELLER.

(D)           SCHEDULE 5.7(A) OF THE DISCLOSURE LETTER LISTS ANY OUTSTANDING BID
OR PROPOSAL MADE BY OR TO SELLER, OR TO OR BY ANY CUSTOMER, SUPPLIER, VENDOR OR
SERVICE PROVIDER IN CONNECTION WITH THE BUSINESS THAT IF ACCEPTED WOULD
CONSTITUTE A CONTRACT OF A TYPE DESCRIBED IN SECTION 5.7(A).

5.8          INTELLECTUAL PROPERTY.

(A)           SCHEDULE 1.1(F) SETS FORTH, WITH THE TITLE (OR APPROPRIATE
DESCRIPTION), FILING DATE, ISSUE DATE, OWNERSHIP, REGISTRATION OR APPLICATION
INDICATED, AS APPLICABLE, A COMPLETE AND CORRECT LIST OF ALL REGISTERED ACQUIRED
INTELLECTUAL PROPERTY.

(B)           EXCEPT AS SET FORTH ON SCHEDULE 5.8(B) OF THE DISCLOSURE LETTER,
THERE ARE NO AND HAVE NEVER BEEN ANY ACTIONS INSTITUTED, COMMENCED, PENDING
AGAINST SELLER OR, TO SELLER’S KNOWLEDGE, AGAINST ANY OTHER PERSON OR, TO
SELLER’S KNOWLEDGE, THREATENED AGAINST SELLER OR ANY OTHER PERSON, THAT
(I) CHALLENGE THE RIGHTS OF SELLER REGARDING OWNERSHIP IN OR THE SCOPE OF ANY
ACQUIRED INTELLECTUAL PROPERTY OR IS OTHERWISE ADVERSE TO THE USE, REGISTRATION,
RIGHT TO USE, VALIDITY OR ENFORCEABILITY OF THE ACQUIRED INTELLECTUAL PROPERTY;
OR (II) ASSERT THAT THE OPERATION OF THE BUSINESS AS CONDUCTED BY SELLER IS OR
WAS INFRINGING OR OTHERWISE IN VIOLATION OF ANY INTELLECTUAL PROPERTY OF ANY
OTHER PERSON.  EXCEPT AS SET FORTH ON SCHEDULE 5.8(B), TO SELLER’S KNOWLEDGE, NO
PERSON IS INFRINGING UPON OR OTHERWISE IN VIOLATION OF THE ACQUIRED INTELLECTUAL
PROPERTY.  EXCEPT AS SET FORTH ON SCHEDULE 5.8(B), TO SELLER’S KNOWLEDGE, NONE
OF THE ACQUIRED INTELLECTUAL PROPERTY, NOR THE CONDUCT OF THE BUSINESS AS
PRESENTLY CONDUCTED OR ANY OF ITS CURRENT PRODUCTS OR PROCESSES, VIOLATES,
INFRINGES UPON OR MISAPPROPRIATES THE INTELLECTUAL PROPERTY RIGHTS OF ANY OTHER
PERSON.  EXCEPT AS SET FORTH ON SCHEDULE 5.8(B) OF THE DISCLOSURE LETTER, SELLER
HAS NOT RECEIVED ANY OPINION OF COUNSEL (OUTSIDE OR INSIDE) RELATING TO
INFRINGEMENT, INVALIDITY OR UNENFORCEABILITY OF ANY ACQUIRED INTELLECTUAL
PROPERTY AS IT RELATES TO THE BUSINESS.

(C)           ALL WORKS OF AUTHORSHIP AND ALL OTHER MATERIALS SUBJECT TO
COPYRIGHT PROTECTION THAT ARE INCLUDED IN THE ACQUIRED INTELLECTUAL PROPERTY,
INCLUDING THE COMPUTER SOFTWARE, DOCUMENTATION, SOFTWARE DESIGN, TECHNICAL AND
FUNCTIONAL SPECIFICATIONS, AND ALL OTHER MATERIALS SUBJECT TO COPYRIGHT
PROTECTION THAT ARE INCLUDED IN THE ACQUIRED INTELLECTUAL PROPERTY ARE ORIGINAL
AND WERE EITHER CREATED BY EMPLOYEES OF SELLER WITHIN THE SCOPE OF THEIR
EMPLOYMENT OR ARE OTHERWISE WORKS MADE FOR HIRE, OR ALL RIGHT, TITLE AND
INTEREST IN AND TO SUCH WORKS OF AUTHORSHIP HAVE BEEN LEGALLY AND FULLY ASSIGNED
AND TRANSFERRED TO SELLER AND ALL SUCH EMPLOYEES OR OTHER CREATORS OF SUCH WORKS
HAVE WAIVED THEIR MORAL RIGHTS THERETO IN FAVOR OF, AS APPLICABLE, SELLER.  ALL
RIGHTS IN ALL INVENTIONS AND DISCOVERIES (I) MADE, WRITTEN, DEVELOPED OR
CONCEIVED BY ANY EMPLOYEE OR INDEPENDENT CONTRACTOR OF SELLER, DURING THE COURSE
OF SUCH EMPLOYEE’S EMPLOYMENT (OR OTHER RETENTION) BY SELLER AND RELATING TO OR
INCLUDED IN THE ACQUIRED INTELLECTUAL PROPERTY, (II) MADE, WRITTEN, DEVELOPED OR
CONCEIVED WITH THE USE OR ASSISTANCE OF ANY OF ANY SELLER’S FACILITIES OR
RESOURCES, OR (III) THAT ARE THE SUBJECT OF ONE OR MORE CERTIFICATES OF PATENT
OR PATENT APPLICATIONS AND THAT RELATE TO OR ARE INCLUDED IN THE ACQUIRED
INTELLECTUAL PROPERTY, HAVE BEEN ASSIGNED IN WRITING TO SELLER.  ALL EMPLOYEES
AND INDEPENDENT CONTRACTORS OF SELLER AND ITS AFFILIATES HAVE SIGNED DOCUMENTS
CONFIRMING THAT EACH OF THEM (I) WILL PROTECT THE SECRECY AND CONFIDENTIALITY OF
ALL CONFIDENTIAL KNOW HOW AND/OR TRADE SECRETS, AND (II) WILL ASSIGN TO (OR WITH

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RESPECT TO MORAL RIGHTS, WILL WAIVE IN FAVOR OF) SELLER ALL INTELLECTUAL
PROPERTY RIGHTS RELATED TO THE BUSINESS AND MADE, WRITTEN, DEVELOPED OR
CONCEIVED BY THEM (A) DURING THE COURSE OF THEIR EMPLOYMENT (OR OTHER RETENTION)
BY SELLER OR ITS AFFILIATES AND/OR (B) WITH THE USE OR ASSISTANCE OF SELLER’S
FACILITIES OR RESOURCES, TO THE EXTENT THAT OWNERSHIP OF ANY SUCH ACQUIRED
INTELLECTUAL PROPERTY RIGHTS DOES NOT VEST IN SELLER BY OPERATION OF LAW, AND,
TO SELLER’S KNOWLEDGE, NO SUCH EMPLOYEE IS IN VIOLATION OR BREACH OF ANY TERM OF
ANY SUCH WRITTEN AGREEMENT THAT WOULD IMPAIR THE ACQUIRED INTELLECTUAL
PROPERTY.  FOR THE PURPOSES OF THIS SECTION 5.8(C), AFFILIATE SHALL BE DEEMED TO
EXCLUDE ANY DIRECTOR OR STOCKHOLDER OF SELLER, UNLESS SUCH DIRECTOR OR
STOCKHOLDER OWNS OR CONTROLS, DIRECTLY OR INDIRECTLY, MORE THAN 50% OF THE
OUTSTANDING VOTING SECURITIES OF  SELLER.

(D)           (I) SELLER HAS TIMELY MADE ALL FILINGS WITH AND PAYMENTS TO
GOVERNMENTAL AUTHORITIES THAT ARE REQUIRED IN ORDER TO MAINTAIN IN SUBSISTENCE
OR PROTECT ITS OWNERSHIP RIGHTS IN EACH ITEM OF REGISTERED ACQUIRED INTELLECTUAL
PROPERTY; (II) ALL REGISTRATIONS WITH AND APPLICATIONS TO ANY GOVERNMENTAL
AUTHORITY IN RESPECT OF THE REGISTERED ACQUIRED INTELLECTUAL PROPERTY ARE IN
FULL FORCE AND EFFECT AND, TO SELLER’S KNOWLEDGE, ALL REGISTERED ACQUIRED
INTELLECTUAL PROPERTY IS VALID, SUBSISTING AND ENFORCEABLE; (III) EXCEPT AS SET
FORTH ON SCHEDULE 5.8(D) OF THE DISCLOSURE LETTER, NO DUE DATES FOR FILINGS OR
PAYMENTS CONCERNING ANY REGISTERED ACQUIRED INTELLECTUAL PROPERTY (INCLUDING,
WITHOUT LIMITATION, OFFICE ACTION RESPONSES, AFFIDAVITS OF USE, AFFIDAVITS OF
CONTINUING USE, RENEWALS, REQUESTS FOR EXTENSION OF TIME, MAINTENANCE FEES,
APPLICATION FEES AND FOREIGN CONVENTION PRIORITY FILINGS) FALL DUE WITHIN FOUR
MONTHS AFTER THE CLOSING; (IV) NO REGISTERED ACQUIRED INTELLECTUAL PROPERTY HAS
BEEN ABANDONED, CANCELED OR ADJUDICATED INVALID, OR IS SUBJECT TO ANY
OUTSTANDING ORDER, JUDGMENT OR DECREE RESTRICTING THE ABILITY OF SELLER TO USE
OR ENFORCE SUCH REGISTERED ACQUIRED INTELLECTUAL PROPERTY, OR IS THE SUBJECT OF
ANY SUIT, ACTION, REISSUE, REEXAMINATION, PUBLIC PROTEST, INTERFERENCE,
ARBITRATION, MEDIATION, OPPOSITION, CANCELLATION OR OTHER PROCEEDING; AND (V) TO
SELLER’S KNOWLEDGE, SELLER IS IN COMPLIANCE WITH ALL GOVERNMENT REGULATIONS
REGARDING THE MANUFACTURE, ADVERTISING, SALE, IMPORT, AND EXPORT OF ANY ACQUIRED
INTELLECTUAL PROPERTY AND ANY PRODUCT OF SELLER THAT INCORPORATES OR IS MADE
USING ANY ACQUIRED INTELLECTUAL PROPERTY.

(E)           SELLER HAS TAKEN ALL REASONABLE PRECAUTIONS TO PROTECT AND
PRESERVE THE SECRECY, CONFIDENTIALITY AND VALUE OF ALL MATERIAL CONFIDENTIAL
ACQUIRED INTELLECTUAL PROPERTY, INCLUDING ALL MATERIAL KNOW HOW AND/OR TRADE
SECRETS INCLUDED IN THE ACQUIRED INTELLECTUAL PROPERTY (OTHER THAN ACQUIRED
INTELLECTUAL PROPERTY THAT IS THE SUBJECT OF A PUBLISHED PATENT OR PUBLISHED
PATENT APPLICATION).

(F)            UPON THE CLOSING, BUYER SHALL HAVE THE RIGHTS THAT SELLER HAD
IMMEDIATELY PRIOR TO CLOSING TO:  (I) SUE FOR (AND OTHERWISE ASSERT CLAIMS FOR)
AND RECOVER DAMAGES AND OBTAIN ANY AND ALL OTHER REMEDIES AVAILABLE AT LAW OR IN
EQUITY FOR ANY PAST, PRESENT OR FUTURE INFRINGEMENT, MISAPPROPRIATION OR OTHER
VIOLATION OF ANY OF THE ACQUIRED INTELLECTUAL PROPERTY (AND TO SETTLE ALL SUCH
SUITS, ACTIONS AND PROCEEDINGS); (II) SEEK PROTECTION THEREFOR (INCLUDING THE
RIGHT TO SEEK AND OBTAIN COPYRIGHT, TRADEMARK AND SERVICE MARK REGISTRATIONS AND
CERTIFICATES OF PATENT IN THE UNITED STATES AND ALL OTHER COUNTRIES AND
GOVERNMENTAL DIVISIONS); AND (III) TO CLAIM ALL RIGHTS AND PRIORITY THEREUNDER.

(G)           (I) THERE ARE NO RESTRICTIONS ON THE DIRECT OR INDIRECT TRANSFER
OF ANY LICENSE OR OTHER CONTRACT OR AGREEMENT PURSUANT TO WHICH SELLER HAS BEEN
GRANTED ANY RIGHT TO USE ANY

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INTELLECTUAL PROPERTY OF A THIRD PARTY THAT IS MATERIAL TO THE BUSINESS
(“INTELLECTUAL PROPERTY CONTRACT”); (II) THERE EXISTS NO EVENT, CONDITION OR
OCCURRENCE WHICH, WITH OR WITHOUT THE GIVING OF NOTICE OR LAPSE OF TIME, OR
BOTH, WOULD CONSTITUTE A MATERIAL BREACH OR DEFAULT BY SELLER UNDER ANY
INTELLECTUAL PROPERTY CONTRACT, AND SELLER HAS NOT RECEIVED NOTICE OF ANY SUCH
EVENT, CONDITION OR OCCURRENCE; (III) NO PARTY HAS GIVEN SELLER NOTICE OF ANY
BREACH OF ANY INTELLECTUAL PROPERTY CONTRACT OR OF ITS INTENTION TO CANCEL,
TERMINATE OR FAIL TO RENEW ANY INTELLECTUAL PROPERTY CONTRACT; (IV) TO SELLER’S
KNOWLEDGE, EACH PERSON WHO IS A PARTY TO ANY INTELLECTUAL PROPERTY CONTRACT HAD
AND HAS ALL RIGHTS, POWER AND AUTHORITY NECESSARY TO ENTER INTO, BE BOUND BY AND
FULLY PERFORM SUCH LICENSE, CONTRACT OR AGREEMENT; (V) SELLER HAS TIMELY MADE
ALL ROYALTY PAYMENTS AND OTHER PAYMENTS REQUIRED TO BE MADE UNDER EACH
INTELLECTUAL PROPERTY CONTRACT AND NO SUCH PAYMENTS WILL BE DUE AND OWING AS OF
THE CLOSING DATE EXCEPT IN THE ORDINARY COURSE AS SET FORTH IN ANY OF THE
INTELLECTUAL PROPERTY CONTRACTS; AND (VI) NO SUIT IS PENDING AGAINST SELLER OR,
TO SELLER’S KNOWLEDGE, AGAINST ANY OTHER PERSON, NOR, TO SELLER’S KNOWLEDGE, HAS
ANY CLAIM BEEN THREATENED OR ASSERTED (IN WRITING OR OTHERWISE) AGAINST SELLER
OR ANY OTHER PERSON CONCERNING ANY INTELLECTUAL PROPERTY OWNED BY ANY THIRD
PARTY, WHICH INTELLECTUAL PROPERTY IS A SUBJECT OF AN INTELLECTUAL PROPERTY
CONTRACT OR IS OTHERWISE MATERIAL TO THE BUSINESS, TO THE EXTENT SUCH SUIT OR
CLAIM COULD REASONABLY BE EXPECTED TO ADVERSELY AFFECT THE RIGHTS OF SELLER IN
SUCH INTELLECTUAL PROPERTY, INCLUDING ANY SUIT CONCERNING A CLAIM OR POSITION
THAT SUCH INTELLECTUAL PROPERTY HAS BEEN VIOLATED OR IS INVALID, UNENFORCEABLE,
UNPATENTABLE, UNREGISTERABLE, CANCELABLE, NOT OWNED OR NOT OWNED EXCLUSIVELY BY
THE PARTY THAT HAS PURPORTED TO HAVE GRANTED RIGHTS TO SELLER IN CONNECTION WITH
SUCH ACQUIRED INTELLECTUAL PROPERTY.

5.9          LITIGATION.  THERE IS NO ACTION WITH RESPECT TO THE BUSINESS
PENDING, OR TO SELLER’S KNOWLEDGE, THREATENED AGAINST SELLER OR ANY AFFILIATE OF
SELLER THAT WOULD RESTRICT THE CONSUMMATION OF THE TRANSACTIONS UNDER THIS
AGREEMENT OR THE ANCILLARY AGREEMENTS.  NEITHER THE ACQUIRED ASSETS NOR THE
BUSINESS IS SUBJECT TO ANY ACTION OR ORDER.

5.10        COMPLIANCE WITH LAWS.  EXCEPT (A) AS SET FORTH ON SCHEDULE 5.10 OF
THE DISCLOSURE LETTER, AND (B) AS WOULD NOT REASONABLY BE EXPECTED TO MATERIALLY
OR ADVERSELY AFFECT THE BUSINESS OR THE ACQUIRED ASSETS, SELLER (I) IS IN
COMPLIANCE WITH AND, SINCE JANUARY 1, 2003, HAS BEEN IN COMPLIANCE WITH ALL
LAWS, PERMITS AND ORDERS APPLICABLE TO THE BUSINESS IN ALL MATERIAL RESPECTS,
AND (II) SINCE JANUARY 1, 2003, HAS NOT RECEIVED ANY WRITTEN NOTIFICATION FROM
ANY GOVERNMENTAL AUTHORITY ASSERTING THAT SELLER IS NOT IN COMPLIANCE WITH ANY
LAW, PERMIT OR ORDER APPLICABLE TO THE BUSINESS OR THE ACQUIRED ASSETS. 
SCHEDULE 5.10 OF THE DISCLOSURE LETTER CONTAINS A COMPLETE AND ACCURATE LIST OF
ALL PERMITS HELD OR REQUIRED TO BE HELD BY SELLER IN CONNECTION WITH THE
BUSINESS, AND ALL SUCH PERMITS ARE IN FULL FORCE AND EFFECT.

5.11        NO GIFTS OR SIMILAR BENEFITS.  NEITHER SELLER NOR ANY OF ITS
DIRECTORS, OFFICERS, OR TO SELLER’S KNOWLEDGE, ITS AGENTS, EMPLOYEES OR PERSONS
ACTING ON THEIR BEHALF HAS, IN CONNECTION WITH THE BUSINESS, DIRECTLY OR
INDIRECTLY, GIVEN OR AGREED TO GIVE ANYTHING OF VALUE OR PROVIDE ANY BENEFIT TO
ANY FOREIGN OR DOMESTIC GOVERNMENTAL OFFICIAL, FOREIGN OR DOMESTIC POLITICAL
PARTY OR OFFICIAL THEREOF, SUPPLIER, CUSTOMER OR OTHER PERSON WHO WAS, IS OR MAY
BE IN A POSITION TO HELP OR HINDER THE BUSINESS OR ASSIST IN CONNECTION WITH ANY
ACTUAL OR PROPOSED TRANSACTION UNDER CIRCUMSTANCES THAT INVOLVE A VIOLATION OF
ANY APPLICABLE LAW, INCLUDING, WITHOUT LIMITATION, THE FOREIGN CORRUPT PRACTICES
ACT.

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5.12        CONDITION AND SUFFICIENCY.  THE ACQUIRED ASSETS ARE IN GOOD
CONDITION AND REPAIR (SUBJECT TO NORMAL WEAR AND TEAR CONSISTENT WITH THE AGE OF
THE ASSETS AND PROPERTIES) AND CONSTITUTE ALL OF SELLER’S ASSETS AND OTHER
RIGHTS NECESSARY TO CONDUCT THE BUSINESS AS CURRENTLY CONDUCTED BY SELLER AND AS
CONDUCTED BY SELLER DURING THE PERIODS REPRESENTED BY THE FINANCIAL STATEMENTS.

5.13        PURCHASERS OF PROTOTYPES.  SCHEDULE 5.13 OF THE DISCLOSURE LETTER
SETS FORTH A COMPLETE AND ACCURATE LIST OF ALL PERSONS WHO HAVE PURCHASED
PROTOTYPES FROM SELLER RELATED TO THE BUSINESS (THE “PROTOTYPE PURCHASERS”). 
EXCEPT AS SET FORTH ON SCHEDULE 5.13 OF THE DISCLOSURE LETTER, SELLER IS NOT
INVOLVED IN ANY CLAIM, DISPUTE OR CONTROVERSY WITH ANY PROTOTYPE PURCHASER. 
EXCEPT AS SET FORTH ON SCHEDULE 5.13 OF THE DISCLOSURE LETTER, THE BUSINESS HAS
NOT SOLD ANY PRODUCTS.

5.14        PRODUCT WARRANTY.  EACH PRODUCT OF THE BUSINESS SOLD OR DELIVERED TO
A THIRD PARTY BY SELLER HAS BEEN SOLD OR DELIVERED, AS APPLICABLE, IN CONFORMITY
WITH ALL APPLICABLE MATERIAL CONTRACTUAL COMMITMENTS (INCLUDING ANY APPLICABLE
WARRANTIES), AND EXCEPT AS SET FORTH ON SCHEDULE 5.14 OF THE DISCLOSURE LETTER,
SELLER HAS NO MATERIAL LIABILITY IN CONNECTION WITH THE BUSINESS FOR REPLACEMENT
OR REPAIR THEREOF OR OTHER DAMAGES IN CONNECTION THEREWITH.  EXCEPT AS SET FORTH
ON SCHEDULE 5.14 OF THE DISCLOSURE LETTER, NO PRODUCT OF THE BUSINESS SOLD OR
DELIVERED TO A THIRD PARTY BY SELLER IS SUBJECT TO ANY GUARANTY, WARRANTY OR
OTHER INDEMNITY BEYOND THE APPLICABLE SELLER’S STANDARD TERMS AND CONDITIONS OF
SALE, COPIES OF WHICH ARE SET FORTH ON SCHEDULE 5.14 OF THE DISCLOSURE LETTER.

5.15        LABOR MATTERS.  SELLER IS NOT PARTY TO OR BOUND BY ANY UNION
CONTRACT OR COLLECTIVE BARGAINING AGREEMENT, AND SELLER HAS NOT AGREED TO
RECOGNIZE ANY UNION OR OTHER COLLECTIVE UNIT.  NO UNION OR COLLECTIVE BARGAINING
UNIT HAS BEEN CERTIFIED AS REPRESENTING SELLER’S EMPLOYEES AND NO ORGANIZATIONAL
ATTEMPT HAS BEEN MADE OR THREATENED BY OR ON BEHALF OF ANY LABOR UNION OR
COLLECTIVE BARGAINING UNIT WITH RESPECT TO SELLER’S EMPLOYEES.  SELLER HAS NOT
EXPERIENCED ANY LABOR STRIKE, DISPUTE, SLOWDOWN OR STOPPAGE OR ANY OTHER
MATERIAL LABOR DIFFICULTY DURING THE PAST FIVE YEARS.  SELLER HAS COMPLIED IN
ALL MATERIAL RESPECTS WITH ALL APPLICABLE LAWS RELATING TO THE EMPLOYMENT OF
LABOR.

5.16        EMPLOYEES.  SCHEDULE 5.16 OF THE DISCLOSURE LETTER SETS FORTH A
COMPLETE AND ACCURATE LIST OF ALL EMPLOYEES OR INDEPENDENT CONTRACTORS ENGAGED
PRIMARILY IN THE BUSINESS ON BEHALF OF SELLER AND, FOR EACH SUCH PERSON, HIS OR
HER POSITION, CURRENT BASE SALARY AND MOST RECENT ANNUAL BONUS, AND THE DATE ON
WHICH HE OR SHE BECAME EMPLOYED OR ENGAGED AS A CONSULTANT (OR HAS BEEN DEEMED
BY SELLER TO HAVE BECOME EMPLOYED OR ENGAGED) BY SELLER.  SCHEDULE 5.16 OF THE
DISCLOSURE LETTER ALSO LISTS ANY EMPLOYEE OF SELLER WHO IS NOT AT WORK AS OF THE
CLOSING DATE DUE TO LEAVE OF ABSENCE, DISABILITY OR WORKERS’ COMPENSATION LEAVE
OR MILITARY LEAVE AND SPECIFIES FOR EACH SUCH EMPLOYEE THE CATEGORY OF LEAVE AND
THE DATE ON WHICH SUCH LEAVE COMMENCED.  SELLER DOES NOT EMPLOY ANY PERSON WHO
CANNOT BE DISMISSED IMMEDIATELY AND WITHOUT NOTICE TO THE EMPLOYEE OR LIABILITY
TO SUCH PERSON (OTHER THAN FOR BENEFITS REQUIRED BY APPLICABLE LAW, SALARY OR
WAGES FOR TIME WORKED, AND BENEFITS DISCLOSED ON SCHEDULE 5.17(A) OF THE
DISCLOSURE LETTER).

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5.17        EMPLOYEE BENEFIT PLANS.

(A)           SCHEDULE 5.17(A) OF THE DISCLOSURE LETTER SETS FORTH A COMPLETE
AND ACCURATE LIST OF THE BENEFITS SELLER PROVIDES TO OR FOR THE PERSONS LISTED
ON SCHEDULE 5.16 OF THE DISCLOSURE LETTER.  EACH “EMPLOYEE BENEFIT PLAN,” AS
DEFINED IN SECTION 3(3) OF ERISA, MAINTAINED, CONTRIBUTED TO OR REQUIRED TO BE
CONTRIBUTED TO BY SELLER OR ANY OF ITS ERISA AFFILIATES FOR THE BENEFIT OF
CURRENT, FORMER OR RETIRED EMPLOYEES (THE “SELLER ERISA PLANS”) AND EACH OTHER
PLAN, CONTRACT, PROGRAM OR ARRANGEMENT MAINTAINED, CONTRIBUTED TO OR REQUIRED TO
BE CONTRIBUTED TO BY SELLER OR ANY OF ITS ERISA AFFILIATES FOR THE BENEFIT OF
CURRENT, FORMER OR RETIRED EMPLOYEES (THE “SELLER BENEFIT ARRANGEMENTS”)
COMPLIES IN ALL MATERIAL RESPECTS WITH ITS TERMS AND ALL APPLICABLE LAWS,
INCLUDING ERISA AND THE CODE, AND NO “REPORTABLE EVENT” OR “PROHIBITED
TRANSACTION” (AS SUCH TERMS ARE DEFINED IN ERISA) OR TERMINATION HAS OCCURRED
WITH RESPECT TO ANY SELLER ERISA PLAN UNDER CIRCUMSTANCES THAT PRESENT A RISK OF
ANY MATERIAL LIABILITY TO SELLER.  COPIES OR DESCRIPTIONS OF EACH SELLER ERISA
PLAN AND SELLER BENEFIT ARRANGEMENT IN WHICH CURRENT EMPLOYEES OF THE BUSINESS
PARTICIPATE HAVE BEEN PROVIDED TO BUYER PRIOR TO THE DATE HEREOF.  EXCEPT AS SET
FORTH ON SCHEDULE 5.17(A) OF THE DISCLOSURE LETTER, NEITHER SELLER NOR ANY OF
ITS ERISA AFFILIATES HAS ANY OBLIGATION TO PROVIDE MEDICAL OR LIFE INSURANCE
COVERAGE TO ANY TRANSFERRED EMPLOYEE UNDER THE SELLER ERISA PLANS, THE SELLER
BENEFIT ARRANGEMENTS OR ANY OTHER PLAN OR CONTRACT, EXCEPT AS REQUIRED BY
APPLICABLE LAWS.

(B)           NO SELLER ERISA PLAN OR ANY OTHER PLAN SPONSORED OR CONTRIBUTED TO
BY SELLER OR ANY OF ITS ERISA AFFILIATES HAS INCURRED ANY “ACCUMULATED FUNDING
DEFICIENCY” AS SUCH TERM IS DEFINED IN SECTION 302 OF ERISA AND SECTION 412 OF
THE CODE (WHETHER OR NOT WAIVED).

(C)           NEITHER SELLER NOR ANY OF ITS ERISA AFFILIATES HAS CONTRIBUTED TO
OR COMPLETELY OR PARTIALLY WITHDRAWN FROM A “MULTIEMPLOYER PLAN” (AS SUCH TERM
IS DEFINED IN SECTION (3)(37) OF ERISA) WITHIN THE LAST SIX YEARS.

(D)           NEITHER SELLER NOR ANY OF ITS AFFILIATES HAS AT ANY TIME PROVIDED
OR MAINTAINED ANY PLAN, PROGRAM OR ARRANGEMENT PROVIDING POST-RETIREMENT MEDICAL
OR OTHER POST-RETIREMENT BENEFITS FOR OR ON BEHALF OF THE EMPLOYEES OF THE
BUSINESS (OTHER THAN AS REQUIRED BY APPLICABLE LAWS) AND THERE HAS BEEN NO
COMMUNICATION TO EMPLOYEES THAT COULD REASONABLY BE INTERPRETED TO PROMISE OR
GUARANTEE SUCH POST RETIREMENT BENEFITS.

(E)           NEITHER SELLER NOR ANY OF ITS ERISA AFFILIATES HAS EVER MAINTAINED
OR CONTRIBUTED TO A DEFINED BENEFIT PENSION PLAN (AS DEFINED IN SECTION 3(2) OF
ERISA) SUBJECT TO TITLE IV OF ERISA.

(F)            NO PERSON LISTED ON SCHEDULE 5.16 OF THE DISCLOSURE LETTER WILL
BECOME ENTITLED TO ANY RETIREMENT, SEVERANCE OR ANY OTHER INCREASED OR
ACCELERATED COMPENSATION OR BENEFIT SOLELY AS A RESULT OF THE TRANSACTIONS
CONTEMPLATED HEREBY.

5.18        ENVIRONMENTAL MATTERS.  EXCEPT AS SET FORTH ON SCHEDULE 5.18 OF THE
DISCLOSURE LETTER:

(A)           THE BUSINESS HAS BEEN CONDUCTED IN COMPLIANCE WITH ALL APPLICABLE
ENVIRONMENTAL LAWS SO AS TO PREVENT ANY HAZARDOUS MATERIALS FROM BEING RELEASED
INTO THE SOIL AND GROUNDWATER OF THE MOUNTAIN VIEW FACILITIES AND, SO AS TO
PREVENT ANY HAZARDOUS MATERIALS

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FROM BEING RELEASED INTO THE SOIL AND GROUNDWATER, THE BUSINESS POSSESSES AND
HAS BEEN IN COMPLIANCE WITH  ALL PERMITS AND OTHER GOVERNMENTAL AUTHORIZATIONS
REQUIRED UNDER APPLICABLE ENVIRONMENTAL LAWS, EXCEPT WHERE NON-COMPLIANCE OR THE
ABSENCE OF A PERMIT COULD NOT REASONABLY BE EXPECTED TO HAVE A MATERIAL ADVERSE
EFFECT ON THE BUSINESS AFTER THE CLOSING.

(B)           THERE IS NO PENDING, OR TO SELLER’S KNOWLEDGE THREATENED,
INVESTIGATION, CLAIM OR ADMINISTRATIVE PROCEEDING AGAINST SELLER UNDER ANY
ENVIRONMENTAL LAW WITH RESPECT TO THE BUSINESS, AND SELLER HAS NOT RECEIVED ANY
NOTICE ALLEGING THAT THE CONDUCT OF THE BUSINESS IS IN VIOLATION OF APPLICABLE
ENVIRONMENTAL LAW.

(C)           THERE HAVE BEEN NO UNPERMITTED RELEASES OF HAZARDOUS MATERIALS TO
THE SOIL OR GROUNDWATER OF THE MOUNTAIN VIEW FACILITIES (I) BY SELLER OR ITS
RELATED PERSONS, OR (II) TO SELLER’S KNOWLEDGE, ANY OTHER PERSON, OR (III)
OTHERWISE IN THE COURSE OF THE CONDUCT OF THE BUSINESS, WHICH ARE REASONABLY
LIKELY TO GIVE RISE TO AN OBLIGATION BY BUYER TO TAKE ANY RESPONSE,
INVESTIGATION, REMOVAL, OR OTHER ACTION WITH RESPECT TO THE SOIL OR GROUNDWATER
OF THE MOUNTAIN VIEW FACILITIES UNDER ANY ENVIRONMENTAL LAW OR THE MOUNTAIN VIEW
LEASE.

(D)           THERE IS NO ASBESTOS, SILICA, REFRACTORY CERAMIC FIBERS OR OTHER
SUBSTANCE THAT IS IN A CONDITION OR CONCENTRATION HARMFUL TO HUMAN HEALTH
PRESENT IN THE FACILITY SUBJECT TO THE MOUNTAIN VIEW LEASE OR USED IN THE
BUSINESS, OTHER THAN HAZARDOUS MATERIAL USED IN THE CONDUCT OF THE BUSINESS IN
THE ORDINARY COURSE AND STORED, USED, AND DISPOSED OF IN ALL MATERIAL RESPECTS
IN ACCORDANCE WITH APPLICABLE ENVIRONMENTAL LAW.

Notwithstanding the foregoing, Seller makes no representation or warranty
whatsoever pursuant to this Section 5.18, regarding (i) any matter that is
within the Buyer Environmental and Facility Liabilities, or (ii) except to the
extent of the Seller Environmental Liabilities, any Hazardous Material which has
or hereafter migrates onto the Mountain View Facilities from any other property.

5.19        TAXES.  TO THE EXTENT FAILURE TO DO SO WOULD ADVERSELY IMPACT THE
ACQUIRED ASSETS OR BUYER’S OWNERSHIP OF THE ACQUIRED ASSETS OR THE OPERATION OF
THE BUSINESS, SELLER HAS FILED ALL TAX RETURNS REQUIRED TO BE FILED BY IT WITH
RESPECT TO THE BUSINESS, AND HAS PAID (OR MADE ADEQUATE PROVISION IN ITS
FINANCIAL STATEMENTS FOR THE PAYMENT OF) ALL TAXES SHOWN ON SUCH RETURNS TO BE
OWED BY IT, AND NO CLAIMS FOR ADDITIONAL TAXES WITH RESPECT TO THE ACQUIRED
ASSETS OR THE BUSINESS FOR ANY PRIOR FISCAL YEARS ARE PENDING.  SELLER IS NOT A
PARTY TO ANY PENDING ACTION, NOR TO SELLER’S KNOWLEDGE IS ANY ACTION THREATENED,
BY ANY GOVERNMENTAL AUTHORITY FOR THE ASSESSMENT OR COLLECTION OF TAXES WITH
RESPECT TO THE BUSINESS.  SELLER IS NOT A FOREIGN PERSON PURSUANT TO
SECTION 1445(B)(2) OF THE CODE.  NONE OF THE ASSUMED LIABILITIES IS AN
OBLIGATION TO MAKE A PAYMENT OR IS AN AGREEMENT THAT UNDER CERTAIN CIRCUMSTANCES
COULD REQUIRE A PAYMENT THAT WOULD NOT BE DEDUCTIBLE UNDER SECTION 280G OF THE
CODE.  SELLER HAS DULY AND TIMELY WITHHELD FROM SALARIES, WAGES AND OTHER
COMPENSATION PAID TO EMPLOYEES ENGAGED PRIMARILY IN THE BUSINESS AND PAID OVER
TO THE APPROPRIATE TAX AUTHORITIES ALL AMOUNTS REQUIRED TO BE SO WITHHELD AND
PAID OVER FOR THE PERTINENT PERIODS UNDER ALL APPLICABLE LAWS AND HAS COLLECTED
ALL MATERIAL SALES AND USE TAXES REQUIRED TO BE COLLECTED IN RESPECT OF THE
BUSINESS, AND HAS REMITTED SUCH AMOUNTS TO THE APPROPRIATE GOVERNMENTAL
AUTHORITIES, OR HAS BEEN FURNISHED PROPERLY COMPLETED EXEMPTION CERTIFICATES AND
HAS MAINTAINED ALL SUCH RECORDS AND SUPPORTING DOCUMENTS IN THE MANNER REQUIRED
BY ALL APPLICABLE SALES AND USE TAX LAWS.

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5.20        NO BROKERS.  EXCEPT FOR THE FEES AND EXPENSES PAYABLE TO W.Y.
CAMPBELL & COMPANY, WHICH ARE RETAINED LIABILITIES, NO BROKER, FINDER OR SIMILAR
AGENT HAS BEEN EMPLOYED BY OR ON BEHALF OF SELLER IN CONNECTION WITH THE
TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT OR ANY OF THE ANCILLARY AGREEMENTS,
AND SELLER HAS NO LIABILITY TO PAY ANY BROKERAGE COMMISSION, FINDER’S FEE OR ANY
SIMILAR COMPENSATION IN CONNECTION WITH THIS AGREEMENT OR THE ANCILLARY
AGREEMENTS OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY.

ARTICLE VI

REPRESENTATIONS AND WARRANTIES OF BUYER

Buyer represents and warrants to Seller as follows:

6.1          ORGANIZATION AND STANDING.  BUYER IS A CORPORATION DULY
INCORPORATED, VALIDLY EXISTING AND IN GOOD STANDING UNDER THE LAWS OF THE STATE
OF ITS INCORPORATION.  BUYER IS DULY QUALIFIED TO DO BUSINESS AND IN GOOD
STANDING IN THE STATES OF THE UNITED STATES IN WHICH THE CHARACTER OF THE
PROPERTIES OWNED OR LEASED BY IT OR IN WHICH THE CONDUCT OF ITS BUSINESS
REQUIRES IT TO BE SO QUALIFIED.

6.2          AUTHORITY, VALIDITY AND EFFECT.  BUYER HAS ALL REQUISITE CORPORATE
POWER AND AUTHORITY TO EXECUTE, DELIVER AND PERFORM ITS OBLIGATIONS UNDER THIS
AGREEMENT AND THE ANCILLARY AGREEMENTS TO WHICH IT IS A PARTY AND TO CONSUMMATE
THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY.  THIS AGREEMENT AND EACH OF THE
ANCILLARY AGREEMENTS TO WHICH BUYER IS A PARTY HAS BEEN DULY EXECUTED AND
DELIVERED BY BUYER.  THIS AGREEMENT AND EACH OF THE ANCILLARY AGREEMENTS TO
WHICH BUYER IS A PARTY IS THE LEGAL, VALID AND BINDING OBLIGATION OF BUYER,
ENFORCEABLE AGAINST BUYER IN ACCORDANCE WITH ITS TERMS, EXCEPT AS LIMITED BY THE
GENERAL ENFORCEABILITY EXCEPTIONS.

6.3          NO CONFLICT; REQUIRED FILINGS AND CONSENTS.

(A)           NEITHER THE EXECUTION AND DELIVERY OF THIS AGREEMENT OR ANY
ANCILLARY AGREEMENT BY BUYER, NOR THE CONSUMMATION BY BUYER OF THE TRANSACTIONS
CONTEMPLATED HEREBY OR THEREBY, NOR COMPLIANCE BY BUYER WITH ANY OF THE
PROVISIONS HEREOF OR THEREOF, WILL (I) CONFLICT WITH OR RESULT IN A BREACH OF
ANY PROVISION OF BUYER’S CERTIFICATE OF INCORPORATION OR BY-LAWS; (II)  CONFLICT
WITH, CONSTITUTE OR RESULT IN THE BREACH OF ANY TERM, CONDITION OR PROVISION OF,
OR CONSTITUTE A DEFAULT UNDER, RESULT IN OR GIVE RISE TO ANY RIGHT OF
TERMINATION, CANCELLATION OR ACCELERATION WITH RESPECT TO, OR RESULT IN THE
CREATION OR IMPOSITION OF ANY LIEN UPON ANY MATERIAL ASSETS OF BUYER PURSUANT
TO, OR REQUIRE ANY NOTICE UNDER, ANY NOTE, BOND, MORTGAGE, INDENTURE, CONTRACT
OR OTHER INSTRUMENT OR OBLIGATION TO WHICH BUYER IS A PARTY OR BY WHICH IT OR
ANY OF ITS MATERIAL ASSETS IS SUBJECT; OR (III) VIOLATE ANY ORDER OR LAW TO
WHICH BUYER IS SUBJECT.

(B)           NO NOTICE TO, FILING WITH, AUTHORIZATION OF, EXEMPTION BY OR
CONSENT OF ANY PERSON IS NECESSARY FOR THE CONSUMMATION BY BUYER OF THE
TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT.

6.4          LITIGATION.  THERE ARE AND HAVE BEEN NO ACTIONS INSTITUTED,
COMMENCED, PENDING OR THREATENED AGAINST BUYER THAT WOULD RESTRICT THE
CONSUMMATION OF THE TRANSACTIONS UNDER THIS AGREEMENT OR THE ANCILLARY
AGREEMENTS.

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6.5          NO BROKERS.  NO BROKER, FINDER OR SIMILAR AGENT HAS BEEN EMPLOYED
BY OR ON BEHALF OF BUYER IN CONNECTION WITH THE TRANSACTIONS CONTEMPLATED BY
THIS AGREEMENT OR ANY OF THE ANCILLARY AGREEMENTS AND BUYER HAS NO LIABILITY TO
PAY ANY BROKERAGE COMMISSION, FINDER’S FEE OR ANY SIMILAR COMPENSATION IN
CONNECTION WITH THIS AGREEMENT OR THE ANCILLARY AGREEMENTS OR THE TRANSACTIONS
CONTEMPLATED HEREBY OR THEREBY.

ARTICLE VII

COVENANTS

7.1          FURTHER ASSURANCES; SUBSEQUENT TRANSFERS.

(A)           SELLER AND BUYER SHALL EXECUTE AND DELIVER SUCH FURTHER
INSTRUMENTS OF CONVEYANCE, TRANSFER AND ASSIGNMENT AND SHALL TAKE SUCH OTHER
ACTIONS AS A PARTY MAY REASONABLY REQUEST OF THE OTHER IN ORDER TO EFFECTUATE
THE PURPOSES OF THIS AGREEMENT AND THE ANCILLARY AGREEMENTS AND TO CARRY OUT THE
TERMS HEREOF AND THEREOF.  AFTER THE CLOSING, IF FOR ANY REASON SELLER DOES NOT
OR IS UNABLE TO EXECUTE SUCH FURTHER DOCUMENTS AS ARE NECESSARY OR REQUIRED TO
BE EXECUTED BY SELLER HEREUNDER WITHIN TEN (10) BUSINESS DAYS OF BUYER’S WRITTEN
REQUEST, SELLER HEREBY IRREVOCABLY APPOINTS BUYER AS ITS ATTORNEY IN FACT (WHICH
APPOINTMENT IS COUPLED WITH AN INTEREST) TO EXECUTE AND DELIVER SUCH
ASSIGNMENTS, APPLICATIONS OR OTHER INSTRUMENTS AS SHALL BE NECESSARY TO
EFFECTUATE THE PURPOSES OF THIS AGREEMENT AND THE ANCILLARY AGREEMENTS AND TO
PROTECT AND VEST TITLE IN AND TO THE ACQUIRED ASSETS.  NOTWITHSTANDING ANYTHING
TO THE CONTRARY IN THIS AGREEMENT, THE POWER OF ATTORNEY GRANTED BY THE
PRECEDING SENTENCE SHALL TERMINATE NO LATER THAN THE FIFTH-YEAR ANNIVERSARY OF
THE CLOSING DATE.

(B)           BEGINNING ON THE DATE HEREOF  AND ENDING 180 DAYS FOLLOWING THE
CLOSING DATE, EACH PARTY, AT ITS OWN EXPENSE, SHALL USE COMMERCIALLY REASONABLE
EFFORTS TO OBTAIN ANY CONSENT REQUIRED TO ASSIGN THE NON-ASSIGNABLE ASSETS TO
BUYER; PROVIDED THAT NEITHER SELLER NOR BUYER WILL BE OBLIGATED TO PAY ANY
CONSIDERATION (EXCEPT FOR DE MINIMIS FILING FEES OR OTHER ADMINISTRATIVE
CHARGES) TO ANY THIRD PARTY FROM WHOM SUCH CONSENTS ARE SOUGHT.  IF AND TO THE
EXTENT THAT THE PARTIES ARE UNABLE TO OBTAIN ANY SUCH REQUIRED CONSENT THROUGH
THE USE OF COMMERCIALLY REASONABLE METHODS, UNLESS PROHIBITED BY APPLICABLE LAW
OR THE TERMS HEREOF, (I) SELLER SHALL CONTINUE TO BE BOUND BY THE TERMS OF SUCH
NON-ASSIGNABLE ASSETS; AND (II) BUYER SHALL PAY, PERFORM AND DISCHARGE FULLY ALL
THE OBLIGATIONS OF SELLER THEREUNDER FROM AND AFTER THE CLOSING DATE, INCLUDING
THE PAYMENT, DISCHARGE AND SATISFACTION OF ANY RELATED LIABILITIES THAT, BUT FOR
THE LACK OF SUCH CONSENT, WOULD BE ASSUMED LIABILITIES.  SELLER SHALL, WITHOUT
FURTHER CONSIDERATION THEREFOR, PAY, ASSIGN AND REMIT TO BUYER PROMPTLY ALL
MONIES, RIGHTS AND OTHER CONSIDERATIONS RECEIVED IN RESPECT OF SUCH PERFORMANCE
BY BUYER.  SELLER SHALL EXERCISE OR EXPLOIT ITS RIGHTS AND OPTIONS UNDER ALL
SUCH NON-ASSIGNABLE ASSETS ONLY AS REASONABLY DIRECTED BY BUYER AND AT BUYER’S
EXPENSE.  IF AND WHEN ANY SUCH CONSENT IS OBTAINED OR SUCH NON-ASSIGNABLE ASSET
OTHERWISE BECOMES ASSIGNABLE OR ABLE TO BE NOVATED, SELLER SHALL PROMPTLY ASSIGN
ITS RIGHTS AND OBLIGATIONS THEREUNDER TO BUYER, WITHOUT PAYMENT OF FURTHER
CONSIDERATION THEREFOR, AND BUYER SHALL, WITHOUT THE PAYMENT OF ANY FURTHER
CONSIDERATION THEREFOR, ASSUME ALL SUCH RIGHTS AND OBLIGATIONS, IN WHICH CASE
SUCH NON-ASSIGNABLE ASSET SHALL THEREAFTER CONSTITUTE AN ACQUIRED ASSET (AND
LIABILITIES THEREUNDER SHALL CONSTITUTE ASSUMED LIABILITIES) FOR ALL PURPOSES
UNDER THIS AGREEMENT.  SELLER SHALL NOT REQUEST ANY RELEASE OF ITS OBLIGATIONS
FOR ANY ASSUMED LIABILITIES

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FROM ANY PERSON WITHOUT BUYER’S PRIOR WRITTEN CONSENT, WHICH CONSENT WILL NOT BE
UNREASONABLY WITHHELD, CONDITIONED OR DELAYED.

7.2          PRORATIONS; POST-CLOSING RECEIPTS.

(A)           ON AND AFTER THE CLOSING DATE, THE PARTIES WILL COOPERATE TO
PRORATE THE RECEIPTS AND EXPENSES SET FORTH ON SCHEDULE 7.2(A) AND ANY OTHER
MUTUALLY AGREED UPON OPERATING EXPENSES (COLLECTIVELY, “APPORTIONABLE
EXPENSES”).  THE APPORTIONABLE EXPENSES SHALL BE APPORTIONED ON A PER DIEM BASIS
IN ACCORDANCE WITH THE PRINCIPLE THAT APPORTIONABLE EXPENSES RELATED TO OR
ARISING FROM TIME PERIODS ON OR PRIOR TO THE CLOSING DATE WILL BE BORNE BY
SELLER AND APPORTIONABLE EXPENSES RELATED TO OR ARISING FROM TIME PERIODS AFTER
THE CLOSING DATE WILL BE BORNE BY BUYER.  THE AMOUNT OF APPORTIONABLE EXPENSES
THAT CAN BE DETERMINED ON THE CLOSING DATE WILL BE FIXED AND THE RESPECTIVE
OBLIGATIONS OF THE PARTIES DETERMINED ACCORDINGLY ON THE CLOSING DATE.  IF ANY
APPORTIONABLE EXPENSES CANNOT BE PRORATED OR DETERMINED AS OF THE CLOSING DATE
THEN IT SHALL BE SEPARATELY PRORATED, DETERMINED AND PAID BY THE RESPONSIBLE
PARTY AS SOON AS PRACTICABLE FOLLOWING THE CLOSING DATE.  IF ANY OF THE
FOREGOING PRORATION AMOUNTS CANNOT BE DETERMINED AS OF THE CLOSING DATE DUE TO
FINAL BILLS THEREFOR NOT BEING ISSUED AS OF THE CLOSING DATE, THE PARTIES WILL
PRORATE SUCH ITEMS AS AND WHEN THE ACTUAL BILLS THEREFOR ARE ISSUED TO THE
APPROPRIATE PARTY.  THE PARTY OWING AMOUNTS TO THE OTHER BY MEANS OF SUCH
PRORATIONS SHALL PAY THE SAME WITHIN THIRTY DAYS FOLLOWING SUCH PRORATION.

(B)           IF, FOLLOWING THE CLOSING DATE, A PARTY RECEIVES ANY PROPERTY OR
PAYMENT BELONGING TO THE OTHER PARTY, SUCH PARTY WILL IMMEDIATELY FORWARD SUCH
PROPERTY OR PAYMENT TO THE APPROPRIATE PARTY IN THE FORM SUCH PAYMENT OR
PROPERTY WAS RECEIVED.  TO THE EXTENT BUYER RECEIVES ANY MAIL OR PACKAGES
ADDRESSED TO SELLER AND DELIVERED TO BUYER PRIOR TO DECEMBER 31, 2006, THAT
BUYER HAS REASONABLY DETERMINED (FOLLOWING INSPECTION OR OTHERWISE) DO NOT
PRIMARILY RELATE TO THE BUSINESS, BUYER SHALL PROMPTLY DELIVER SUCH MAIL OR
PACKAGES TO SELLER.

7.3          TRANSFER TAXES.  SELLER AND BUYER SHALL EQUALLY BEAR ALL STATE AND
LOCAL SALES, TRANSFER OR SIMILAR TAXES AND ALL RECORDING COSTS AND FEES, HOWEVER
STYLED OR DESIGNATED, THAT ARE REQUIRED TO BE PAID IN CONNECTION WITH THE
TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT, REGARDLESS OF THE PARTY UPON WHICH
SUCH AMOUNTS WOULD HAVE BEEN IMPOSED ABSENT THIS PROVISION.  THE PARTIES SHALL
COOPERATE WITH EACH OTHER TO THE EXTENT REASONABLY REQUESTED AND LEGALLY
PERMITTED TO MINIMIZE ANY SUCH TAXES.  THE PARTY REQUIRED BY LAW TO FILE SUCH
TAX RETURNS SHALL PREPARE AND FILE ALL NECESSARY TAX RETURNS AND OTHER
DOCUMENTATION WITH RESPECT TO ALL SUCH TAXES, COSTS AND FEES WITHIN THE TIME
PERIOD PRESCRIBED BY LAW, AND THE OTHER PARTY SHALL PROMPTLY REIMBURSE SUCH
PARTY FOR 50% OF THE AMOUNT OF SUCH TAXES, COSTS AND FEES UPON RECEIPT OF NOTICE
THAT SUCH TAXES, COSTS AND FEES HAVE BEEN PAID.

7.4          CONFIDENTIALITY, NON-COMPETITION AND NON-SOLICITATION.

(A)           NECESSITY.  SELLER ACKNOWLEDGES AND AGREES ON BEHALF OF ITSELF AND
ITS AFFILIATES AS FOLLOWS:

(I)            THE COVENANTS IN THIS SECTION 7.4, INCLUDING THE SCOPE OF THE
COVENANTS AS TO TIME, GEOGRAPHY AND ACTIVITY, ARE REASONABLE AND NECESSARY TO
PROTECT AND

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PRESERVE BUYER’S AND ITS AFFILIATES’ LEGITIMATE BUSINESS INTERESTS WITH RESPECT
TO THE BUSINESS BEING ACQUIRED AND ARE NOT BROADER THAN NECESSARY TO PROTECT
SUCH INTERESTS;

(II)           BUYER AND/OR ITS AFFILIATES WOULD BE IRREPARABLY DAMAGED IF
SELLER OR ITS AFFILIATES WERE TO BREACH THEIR OBLIGATIONS UNDER THIS
SECTION 7.4; AND

(III)          BUYER HAS BEEN MATERIALLY INDUCED BY SELLER TO ENTER INTO THIS
AGREEMENT, AND BUYER WOULD NOT HAVE TAKEN SUCH ACTION, IF SELLER HAD NOT
COVENANTED AS PROVIDED IN THIS SECTION 7.4.

(B)           CONFIDENTIALITY.  SELLER WILL MAINTAIN IN CONFIDENCE AND SAFEGUARD
ALL BUSINESS AND CUSTOMER INFORMATION PRIMARILY RELATED TO THE BUSINESS, AND ALL
TECHNICAL INFORMATION RELATED TO THE BUSINESS, THAT WAS MAINTAINED AS A TRADE
SECRET BY SELLER AS OF THE DATE OF THIS AGREEMENT (COLLECTIVELY, THE
“CONFIDENTIAL INFORMATION”).  SELLER  SHALL NOT DISCLOSE ANY SUCH CONFIDENTIAL
INFORMATION TO ANY THIRD PARTY AND SHALL NOT USE SUCH CONFIDENTIAL INFORMATION
EXCEPT (A) IN THE PERFORMANCE OF ITS OBLIGATIONS UNDER THIS AGREEMENT, (B) TO
CONDUCT ITS SCR BUSINESS, SUBJECT TO THE LIMITATIONS OF THE LICENSE GRANTED BY
SECTION 7.6(B), AND (C) TO KAWASAKI IN THE COURSE OF COMPLYING WITH ITS
OBLIGATIONS UNDER THE KAWASAKI LICENSE AGREEMENT TO THE EXTENT NOT ASSUMED BY
BUYER HEREUNDER OR TO DEFEND ANY CLAIM RELATED TO THE KAWASAKI LICENSE AGREEMENT
(PROVIDED THAT KAWASAKI IS UNDER A WRITTEN OBLIGATION OF CONFIDENTIALITY WITH
RESPECT TO SUCH INFORMATION IN A FORM REASONABLY ACCEPTABLE TO BUYER). 
CONFIDENTIAL INFORMATION SHALL NOT INCLUDE ANY INFORMATION THAT: (I) IS, OR
BECOMES, GENERALLY AVAILABLE TO THE PUBLIC EXCEPT TO THE EXTENT THAT SUCH
CONFIDENTIAL INFORMATION BECOMES AVAILABLE TO THE PUBLIC AS A RESULT OF A BREACH
OF SELLER’S OBLIGATION HEREUNDER, (II) IS RECEIVED BY SELLER FROM A THIRD PARTY
WITHOUT AN ACCOMPANYING DUTY OF CONFIDENTIALITY, (III) IS REQUIRED BY LAW TO BE
DISCLOSED BY SELLER, PROVIDED THAT SELLER SHALL GIVE BUYER SUFFICIENT WRITTEN
NOTICE THAT IT IS REQUIRED BY LAW TO MAKE SUCH A DISCLOSURE SO THAT PRIOR TO ANY
SUCH DISCLOSURE, BUYER MAY SEEK APPROPRIATE PROTECTIVE ORDERS;  AND PROVIDED
FURTHER THAT, IN ANY SUCH CASE, SELLER ONLY SHALL BE PERMITTED TO DISCLOSE SUCH
PORTION OF THE INFORMATION THAT SELLER IS ADVISED BY COUNSEL THAT IT IS REQUIRED
TO DISCLOSE BY LAW, (IV) IS DISCLOSED BY SELLER TO COMPLY WITH A VALID
ADMINISTRATIVE OR CONGRESSIONAL SUBPOENA OR PURSUANT TO AN ORDER OF A COURT OF
COMPETENT JURISDICTION, OR (V) HAS BEEN APPROVED FOR USE OR DISCLOSURE BY BUYER
IN WRITING IN ADVANCE OF ANY SUCH USE OR DISCLOSURE, WHICH APPROVAL SHALL NOT BE
COMMERCIALLY UNREASONABLY WITHHELD, CONDITIONED OR DELAYED.

(C)           COVENANT.  FOR A PERIOD OF FIVE YEARS FROM AND AFTER THE CLOSING
DATE, SELLER WILL NOT, AND WILL CAUSE ITS CURRENT AND FUTURE AFFILIATES NOT TO,
DIRECTLY OR INDIRECTLY, WHETHER BY ITSELF OR THROUGH AN AGENT, EMPLOYEE OR
OTHERWISE, OR IN ASSOCIATION WITH ANY PERSON OR ENTITY, OWN, SHARE IN THE
EARNINGS OF, INVEST IN THE STOCK, BONDS OR OTHER SECURITIES OF, MANAGE, OPERATE,
FINANCE (WHETHER AS A LENDER, INVESTOR OR OTHERWISE), CONTROL, PARTICIPATE IN
THE OWNERSHIP, MANAGEMENT, OPERATION, OR CONTROL OF, LEND MONEY TO, OR TAKE PART
IN, ANY OTHER PERSON OR ENTITY THAT IS ENGAGED IN THE MANUFACTURING, SELLING OR
DISTRIBUTION OF ANY PRODUCTS OR PROVIDING ANY SERVICES THAT COMPETE, IN WHOLE OR
IN PART, WITH THE BUSINESS OR IN THE DEVELOPMENT OF ANY SUCH PRODUCTS, OR BE
ENGAGED OR EMPLOYED BY ANY SUCH PERSON OR ENTITY IN RESPECT OF SUCH COMPETING
PRODUCT OR SERVICE, OR CONSULT, ADVISE OR RENDER SERVICES TO, ANY SUCH PERSON OR
ENTITY REGARDING ANY SUCH COMPETING PRODUCT OR SERVICE (A “COMPETING ACTIVITY”)
ANYWHERE IN THE WORLD.

 

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(D)           EXCEPTION.  SELLER WILL NOT BE IN VIOLATION OF SECTION 7.4(C)
SOLELY BY REASON OF INVESTING IN STOCK, BONDS OR OTHER SECURITIES OF ANY PERSON
OR ENTITY ENGAGED IN A COMPETING ACTIVITY (BUT WITHOUT OTHERWISE PARTICIPATING
IN SUCH COMPETING ACTIVITY), IF:  (I) SUCH STOCK, BONDS OR OTHER SECURITIES ARE
LISTED ON ANY NATIONAL SECURITIES EXCHANGE OR HAVE BEEN REGISTERED UNDER SECTION
12(G) OF THE SECURITIES EXCHANGE ACT OF 1934 OR ANY SUCCESSOR LAW; AND (II) SUCH
INVESTMENT DOES NOT EXCEED, IN THE CASE OF ANY CLASS OF THE CAPITAL STOCK OF ANY
ONE ISSUER, 10% OF THE ISSUED AND OUTSTANDING SHARES OR SUCH CAPITAL STOCK, OR,
IN THE CASE OF BONDS OR OTHER SECURITIES, 10% OF THE AGGREGATE PRINCIPAL AMOUNT
THEREOF ISSUED AND OUTSTANDING.

(E)           NON-SOLICITATION.  FOR A PERIOD OF FIVE YEARS AFTER THE CLOSING
DATE, SELLER WILL NOT, AND WILL CAUSE ITS CURRENT OR FUTURE AFFILIATES NOT TO,
DIRECTLY OR INDIRECTLY CAUSE OR INDUCE, OR ATTEMPT TO CAUSE OR INDUCE, ANY
THEN-EXISTING CUSTOMER, SUPPLIER, LICENSEE, LICENSOR, OR FRANCHISEE OR OTHER
BUSINESS RELATION OF THE BUSINESS, TO CEASE DOING BUSINESS WITH BUYER OR ITS
AFFILIATES IN RESPECT OF THE BUSINESS, OR TO DEAL WITH ANY COMPETITOR OF THE
BUSINESS, OR MATERIALLY INTERFERE WITH THE RELATIONSHIP BETWEEN BUYER AND ITS
AFFILIATES AND THEIR CUSTOMERS, SUPPLIERS, LICENSEES, LICENSORS, FRANCHISEES OR
OTHER BUSINESS RELATIONS IN RESPECT OF THE BUSINESS.  DURING SUCH FIVE-YEAR
PERIOD, SELLER WILL NOT, AND WILL CAUSE ITS CURRENT OR FUTURE AFFILIATES NOT TO,
DIRECTLY OR INDIRECTLY HIRE, RETAIN, OR ATTEMPT TO HIRE OR RETAIN ANY EMPLOYEE
OF BUYER OR ITS AFFILIATES, ENGAGED IN THE BUSINESS; PROVIDED, HOWEVER, THAT
NOTHING IN THIS SECTION 7.4(E) SHALL PROHIBIT THE PLACEMENT OF BONA FIDE PUBLIC
ADVERTISEMENTS FOR EMPLOYMENT BY SELLER THAT ARE NOT SPECIFICALLY TARGETED AT
SUCH EMPLOYEES (FOR THE AVOIDANCE OF DOUBT, THE FOREGOING PROVISO SHALL NOT
AFFECT SELLER’S COVENANT PURSUANT TO THIS SECTION 7.4(E) NOT TO, DIRECTLY OR
INDIRECTLY HIRE, RETAIN, OR ATTEMPT TO HIRE OR RETAIN ANY EMPLOYEE OF BUYER OR
ITS AFFILIATES ENGAGED IN THE BUSINESS, DURING SUCH FIVE-YEAR PERIOD).

(F)            ACQUISITION EXCEPTION.  NOTWITHSTANDING ANYTHING ELSE TO THE
CONTRARY IN THIS AGREEMENT, THE RESTRICTIONS OF THIS SECTION 7.4 SHALL NOT APPLY
TO (I) ANY PERSON THAT ACQUIRES SELLER BY MERGER, CONSOLIDATION, SALE OF ALL OR
SUBSTANTIALLY ALL OF ITS ASSETS, PURCHASE OR OTHER ACQUISITION OF A MAJORITY OF
SELLER’S OUTSTANDING VOTING SECURITIES OR OTHERWISE, WHICH PERSON WAS NOT AN
AFFILIATE OF SELLER PRIOR TO SUCH ACQUISITION, OR (II) ANY PERSON THAT ACQUIRES
ANY OF SELLER’S ASSETS, WHETHER BY PURCHASE OR BY SALE IN CONNECTION WITH ANY
REORGANIZATION OR LIQUIDATION OF SELLER, WHICH PERSON WAS NOT AN AFFILIATE OF
SELLER PRIOR TO SUCH ACQUISITION.

(G)           MODIFICATION OF COVENANT.  IF A FINAL JUDGMENT OF A COURT OR
TRIBUNAL OF COMPETENT JURISDICTION DETERMINES THAT ANY TERM OR PROVISION
CONTAINED IN SECTIONS 7.4(C) OR 7.5(E) IS INVALID OR UNENFORCEABLE, THEN THE
COURT OR TRIBUNAL WILL HAVE THE POWER TO REDUCE THE SCOPE, DURATION, OR
GEOGRAPHIC AREA OF THE TERM OR PROVISION, TO DELETE SPECIFIC WORDS OR PHRASES,
OR TO REPLACE ANY INVALID OR UNENFORCEABLE TERM OR PROVISION WITH A TERM OR
PROVISION THAT IS VALID AND ENFORCEABLE AND THAT COMES CLOSEST TO EXPRESSING THE
INTENTION OF THE INVALID OR UNENFORCEABLE TERM OR PROVISION, AND THIS AGREEMENT
WILL BE ENFORCEABLE AS SO MODIFIED AFTER THE EXPIRATION OF THE TIME WITHIN WHICH
THE JUDGMENT MAY BE APPEALED.

(H)           AFFILIATE.  FOR PURPOSES OF THIS SECTION 7.4,  AFFILIATE SHALL BE
DEEMED TO EXCLUDE ANY DIRECTOR OR STOCKHOLDER OF SELLER, UNLESS SUCH DIRECTOR OR
STOCKHOLDER OWNS OR CONTROLS, DIRECTLY OR INDIRECTLY, MORE THAN 50% OF THE
OUTSTANDING VOTING SECURITIES OF SELLER.

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7.5          ACCESS TO BOOKS AND RECORDS.  FOR A PERIOD OF THREE YEARS FROM THE
CLOSING DATE, OR FOR SUCH LONGER PERIOD AS IS REQUIRED BY APPLICABLE LAWS, BUYER
WILL PERMIT SELLER OR ITS AUTHORIZED REPRESENTATIVES REASONABLE ACCESS, AT
SELLER’S EXPENSE, TO ANY BOOKS AND RECORDS RELATING TO THE TRANSFERRED BUSINESS
AND THE ACQUIRED ASSETS TO THE EXTENT REASONABLY REQUIRED BY SELLER TO PERMIT
IT: TO DETERMINE ITS COMPLIANCE WITH APPLICABLE LAWS AND TAX AND FINANCIAL
REPORTING REQUIREMENTS, TO COMPLY WITH ITS OBLIGATIONS UNDER THIS AGREEMENT OR
TO DISCHARGE ITS OBLIGATIONS WITH RESPECT TO RETAINED LIABILITIES.  FOR A PERIOD
OF THREE YEARS FROM THE CLOSING DATE, OR FOR SUCH LONGER PERIOD AS IS REQUIRED
BY APPLICABLE LAWS, SELLER WILL PERMIT BUYER OR ITS AUTHORIZED REPRESENTATIVES
REASONABLE ACCESS, AT BUYER’S EXPENSE, TO INFORMATION RELATING TO THE
TRANSFERRED BUSINESS TO THE EXTENT REASONABLY REQUIRED BY BUYER TO PERMIT IT: TO
DETERMINE ITS COMPLIANCE WITH APPLICABLE LAWS AND TAX AND FINANCIAL REPORTING
REQUIREMENTS, AND TO COMPLY WITH ITS OBLIGATIONS UNDER THIS AGREEMENT OR TO
DISCHARGE ITS OBLIGATIONS WITH RESPECT TO THE ASSUMED LIABILITIES. 
NOTWITHSTANDING ANYTHING TO THE CONTRARY IN THIS SECTION 7.5, IN THE EVENT THAT
THE PROVISION OF INFORMATION PURSUANT TO THIS SECTION 7.5 COULD BE COMMERCIALLY
DETRIMENTAL, VIOLATE ANY LAW OR AGREEMENT, OR WAIVE ANY ATTORNEY-CLIENT, OR
OTHER SIMILAR PRIVILEGE, THE PARTIES SHALL TAKE ALL COMMERCIALLY REASONABLE
MEASURES TO PERMIT THE COMPLIANCE WITH SUCH OBLIGATIONS IN A MANNER THAT AVOIDS
ANY SUCH HARM OR CONSEQUENCE.

7.6          CERTAIN IP MATTERS.

(A)           SELLER HEREBY GRANTS TO BUYER AND ITS AFFILIATES A NON-EXCLUSIVE,
IRREVOCABLE, FULLY PAID UP, WORLDWIDE, ROYALTY-FREE LICENSE TO USE ANY
INTELLECTUAL PROPERTY OWNED BY SELLER THAT IS USED BY SELLER OR ITS AFFILIATES
IN THE CONDUCT OR OPERATION OF THE BUSINESS BUT IS NOT ACQUIRED INTELLECTUAL
PROPERTY SOLELY IN THE CONDUCT OR OPERATION OF THE BUSINESS, WHICH LICENSE SHALL
BE EFFECTIVE AS OF CLOSING.

(B)           BUYER HEREBY GRANTS TO SELLER AND ITS AFFILIATES A NON-EXCLUSIVE,
IRREVOCABLE, FULLY PAID UP, WORLDWIDE, ROYALTY-FREE LICENSE TO USE THE ACQUIRED
INTELLECTUAL PROPERTY (OTHER THAN THE REGISTERED ACQUIRED INTELLECTUAL PROPERTY
AND ANY DOCUMENTS RELATED TO THE ACQUIRED INTELLECTUAL PROPERTY) SOLELY IN THE
CONDUCT OR OPERATION OF THE SCR BUSINESS, WHICH LICENSE SHALL BE EFFECTIVE AS OF
CLOSING.

7.7          ENVIRONMENTAL COVENANTS.

(A)           WITHIN THE TIME ALLOWED BY APPLICABLE ENVIRONMENTAL LAWS, OR IF
SHORTER,  THE MOUNTAIN VIEW LEASE, SELLER SHALL PERFORM ALL RESPONSE ACTIONS
REQUIRED TO DISCHARGE THE SELLER ENVIRONMENTAL LIABILITIES IN ACCORDANCE WITH
APPLICABLE ENVIRONMENTAL LAWS AND THE MOUNTAIN VIEW LEASE.  WITHIN THE TIME
ALLOWED BY APPLICABLE LAWS, OR IF SHORTER, THE MOUNTAIN VIEW LEASE, BUYER SHALL
PERFORM ALL REMOVALS, RESPONSE ACTIONS, AND OTHER ACTIVITIES REQUIRED TO
DISCHARGE THE BUYER ENVIRONMENTAL AND FACILITIES LIABILITIES IN ACCORDANCE WITH
APPLICABLE LAWS AND THE MOUNTAIN VIEW LEASE.  NOTWITHSTANDING ANYTHING TO THE
CONTRARY IN THIS SECTION 7.7 BUYER AND SELLER SHALL COOPERATE TO DISCHARGE IN
ACCORDANCE WITH APPLICABLE ENVIRONMENTAL LAWS ANY REMOVAL, RESPONSE ACTIONS AND
SIMILAR ACTIVITIES REQUIRED TO ADDRESS MATTERS THAT ARE BOTH SELLER
ENVIRONMENTAL LIABILITIES AND BUYER ENVIRONMENTAL AND FACILITIES LIABILITIES,
SUBJECT TO BUYER’S AND SELLER’S RESPECTIVE RIGHTS TO INDEMNIFICATION UNDER
SECTION 8.2(A)(VI) AND SECTION 8.2(B)(IV).

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(B)           BUYER, AT NO MATERIAL COST TO BUYER, WILL REASONABLY COOPERATE,
AND SHALL NOT UNREASONABLY INTERFERE WITH, SELLER’S EFFORTS TO DISCHARGE SELLER
ENVIRONMENTAL LIABILITIES, INCLUDING WITHOUT LIMITATION ANY RESPONSE ACTIONS
UNDERTAKEN OR CAUSED BY SELLER IN ORDER TO DISCHARGE THE SELLER ENVIRONMENTAL
LIABILITIES.  SUCH COOPERATION SHALL INCLUDE, WITHOUT LIMITATION, REASONABLE
COOPERATION TO MAKE THE MOUNTAIN VIEW FACILITIES AND THE ASSETS THEREIN
AVAILABLE TO SELLER AS NEEDED TO UNDERTAKE RESPONSE ACTIONS, ACCESS TO
APPLICABLE BOOKS AND RECORDS IN ACCORDANCE WITH SECTION 7.5 AND THE ASSIGNMENT
TO SELLER BY BUYER OF ANY RIGHTS BUYER MAY HAVE AGAINST ANY THIRD PARTIES (OTHER
THAN BUYER AND ITS SUBSIDIARIES) WHICH WOULD REDUCE OR MITIGATE THE SELLER
ENVIRONMENTAL LIABILITIES; PROVIDED, HOWEVER, THAT SELLER SHALL USE COMMERCIALLY
REASONABLE EFFORTS TO REDUCE ANY INTERFERENCE WITH THE USE OF THE MOUNTAIN VIEW
FACILITIES BY BUYER OR ITS SUCCESSORS, SUBTENANTS, AND ASSIGNS.

(C)           EACH PARTY’S OBLIGATION TO UNDERTAKE ANY RESPONSE ACTION SHALL BE
LIMITED TO THE RESPONSE ACTIONS REQUIRED BY APPLICABLE LAW OR THE REAL PROPERTY
LEASES AND SHALL BE SUBJECT TO REASONABLE CHALLENGE (AT NO COST OR ADDITIONAL
LIABILITY TO THE PARTY INDEMNIFIED FROM SUCH OBLIGATION UNDER THIS AGREEMENT).

ARTICLE VIII

INDEMNIFICATION

8.1          SURVIVAL PERIODS.

(A)           THE REPRESENTATIONS AND WARRANTIES OF SELLER SET FORTH IN THIS
AGREEMENT OR IN ANY CERTIFICATE OR INSTRUMENT DELIVERED PURSUANT HERETO (AND
SELLER’S LIABILITY FOR BREACH OF ANY SUCH REPRESENTATIONS AND WARRANTIES) SHALL
SURVIVE UNTIL THE DATE THAT IS TWO YEARS AFTER THE CLOSING DATE, EXCEPT THAT THE
REPRESENTATIONS AND WARRANTIES OF SELLER (AND SELLER’S LIABILITY FOR BREACH OF
ANY SUCH REPRESENTATIONS AND WARRANTIES) SET FORTH IN SECTION 5.1 (ORGANIZATION
AND STANDING), SECTION 5.2 (AUTHORITY, VALIDITY AND EFFECT), SECTION 5.4
(TITLE), SECTION 5.17 (EMPLOYEE BENEFIT PLANS), SECTION 5.19 (TAXES) AND
SECTION 5.20 (NO BROKERS) SHALL SURVIVE UNTIL THE DATE THAT IS TWO MONTHS AFTER
THE EXPIRATION OF THE APPLICABLE PERIODS UNDER THE LAWS PRESCRIBING APPLICABLE
STATUES OF LIMITATION WITH RESPECT TO THE SUBJECT MATTER OF SUCH REPRESENTATIONS
AND WARRANTIES.

(B)           THE REPRESENTATIONS AND WARRANTIES OF BUYER SET FORTH IN THIS
AGREEMENT OR IN ANY CERTIFICATE OR INSTRUMENT DELIVERED PURSUANT HERETO (AND
BUYER’S LIABILITY FOR BREACH OF ANY SUCH REPRESENTATIONS AND WARRANTIES) SHALL
SURVIVE UNTIL THE DATE THAT IS TWO YEARS AFTER THE CLOSING DATE, EXCEPT THAT THE
REPRESENTATIONS AND WARRANTIES OF BUYER (AND BUYER’S LIABILITY FOR BREACH OF ANY
SUCH REPRESENTATIONS AND WARRANTIES) SET FORTH IN SECTION 6.1 (ORGANIZATION AND
STANDING), SECTION 6.2 (AUTHORITY, VALIDITY AND EFFECT) AND SECTION 6.5 (NO
BROKERS) SHALL SURVIVE UNTIL THE DATE THAT IS TWO MONTHS AFTER THE EXPIRATION OF
THE APPLICABLE PERIODS UNDER THE LAWS PRESCRIBING APPLICABLE STATUES OF
LIMITATION WITH RESPECT TO THE SUBJECT MATTER OF SUCH REPRESENTATIONS AND
WARRANTIES.

(C)           EXCEPT AS OTHERWISE EXPRESSLY SET FORTH HEREIN, EACH COVENANT MADE
BY A PARTY UNDER THIS AGREEMENT SHALL SURVIVE THE CLOSING IN ACCORDANCE WITH ITS
TERMS.

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(D)           NOTIFICATION OF CLAIMS.  IF A PARTY OR ANY OF ITS RELATED PERSONS
(THE “INDEMNIFIED PARTY”) INTENDS TO SEEK INDEMNIFICATION PURSUANT TO THIS
ARTICLE VIII, SUCH INDEMNIFIED PARTY SHALL PROMPTLY NOTIFY THE PARTY FROM WHOM
SUCH INDEMNIFICATION IS SOUGHT (AN “INDEMNIFYING PARTY”) IN WRITING (THE
“DISPUTE NOTICE”) DESCRIBING SUCH CLAIM IN REASONABLE DETAIL, INCLUDING THE
ESTIMATED AMOUNT OF SUCH CLAIM; PROVIDED THAT THE FAILURE TO PROVIDE SUCH NOTICE
WILL NOT AFFECT THE OBLIGATIONS OF THE INDEMNIFYING PARTY EXCEPT TO THE EXTENT
IT IS ACTUALLY PREJUDICED THEREBY.  THE INDEMNIFYING PARTY SHALL HAVE A PERIOD
OF 30 DAYS WITHIN WHICH TO OBJECT TO THE INDEMNIFIED PARTY’S DISPUTE NOTICE.  IF
THE INDEMNIFYING PARTY DOES NOT RESPOND WITHIN SUCH 30-DAY PERIOD, SUCH PARTY
SHALL BE DEEMED TO HAVE ACCEPTED RESPONSIBILITY TO MAKE PAYMENT AND SHALL HAVE
NO FURTHER RIGHT TO CONTEST THE VALIDITY OF SUCH CLAIM.

8.2          INDEMNIFICATION.

(A)           SUBJECT TO THE OTHER PROVISIONS OF THIS ARTICLE VIII, SELLER SHALL
INDEMNIFY AND HOLD BUYER AND ITS RELATED PERSONS HARMLESS FROM AND AGAINST ANY
COSTS OR EXPENSES (INCLUDING REASONABLE ATTORNEYS’ FEES), JUDGMENTS, FINES,
LIABILITIES, LOSSES, CLAIMS AND DAMAGES (COLLECTIVELY, “DAMAGES”) RESULTING
FROM:

(I)            ANY BREACH OF ANY REPRESENTATION OR WARRANTY MADE BY SELLER IN
THIS AGREEMENT OR ANY OF THE ANCILLARY AGREEMENTS;

(II)           ANY FAILURE BY SELLER TO PERFORM OR BREACH OF ANY COVENANT MADE
BY IT IN THIS AGREEMENT OR ANY OF THE ANCILLARY AGREEMENTS;

(III)          SELLER’S FAILURE TO PAY, PERFORM OR DISCHARGE IN ACCORDANCE WITH
ITS TERMS ANY RETAINED LIABILITY;

(IV)          THE FAILURE OF SELLER TO COMPLY WITH APPLICABLE LAWS RELATING TO
BULK TRANSFERS;

(V)           ANY TAXES (OTHER THAN TAXES REQUIRED TO BE REIMBURSED BY BUYER
PURSUANT TO SECTION 7.3) OR INDEBTEDNESS OF SELLER OR ITS AFFILIATES; OR

(VI)          SELLER ENVIRONMENTAL LIABILITIES.

(B)           SUBJECT TO THE OTHER PROVISIONS OF THIS ARTICLE VIII, BUYER SHALL
INDEMNIFY AND HOLD SELLER AND ITS RELATED PERSONS HARMLESS FROM AND AGAINST ALL
DAMAGES RESULTING FROM:

(I)            ANY BREACH OF ANY REPRESENTATION OR WARRANTY MADE BY BUYER IN
THIS AGREEMENT OR ANY OF THE ANCILLARY AGREEMENTS;

(II)           ANY FAILURE BY BUYER TO PERFORM OR BREACH OF ANY COVENANT MADE BY
IT IN THIS AGREEMENT OR ANY OF THE ANCILLARY AGREEMENTS;

(III)          BUYER’S FAILURE TO PAY, PERFORM OR DISCHARGE IN ACCORDANCE WITH
ITS TERMS ANY ASSUMED LIABILITY; OR

(IV)          BUYER ENVIRONMENTAL AND FACILITIES LIABILITIES.

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(C)           FOR PURPOSES OF SECTION 8.2(A)(I), DAMAGES SHALL BE COMPUTED
WITHOUT TAKING INTO ACCOUNT ANY MATERIALITY OR SELLER MATERIAL ADVERSE EFFECT
QUALIFIER CONTAINED IN THE REPRESENTATION OR WARRANTY AT ISSUE.

8.3          THIRD PARTY CLAIMS.  IF AN INDEMNIFICATION CLAIM INVOLVES A CLAIM
BY A THIRD PARTY AGAINST THE INDEMNIFIED PARTY (A “THIRD PARTY CLAIM”), THE
INDEMNIFYING PARTY WILL HAVE THIRTY DAYS AFTER RECEIPT OF THE DISPUTE NOTICE TO
ELECT TO UNDERTAKE, CONDUCT AND CONTROL, THROUGH COUNSEL OF ITS OWN CHOOSING AND
AT ITS OWN EXPENSE, THE SETTLEMENT OR DEFENSE OF THE THIRD PARTY CLAIM; PROVIDED
THAT THE INDEMNIFIED PARTY MAY PARTICIPATE IN SUCH SETTLEMENT OR DEFENSE THROUGH
COUNSEL CHOSEN AND PAID FOR BY THE INDEMNIFIED PARTY.  IF THE INDEMNIFYING PARTY
DOES NOT NOTIFY THE INDEMNIFIED PARTY WITHIN THIRTY DAYS AFTER THE RECEIPT OF
THE DISPUTE NOTICE THAT IT ELECTS TO UNDERTAKE THE DEFENSE THEREOF, THE
INDEMNIFIED PARTY WILL HAVE THE RIGHT TO CONTEST, SETTLE OR COMPROMISE SUCH
CLAIM BUT SHALL NOT THEREBY WAIVE ANY RIGHT TO INDEMNITY THEREFOR PURSUANT TO
THIS AGREEMENT.  AS LONG AS THE INDEMNIFYING PARTY IS CONTESTING A THIRD PARTY
CLAIM IN GOOD FAITH, THE INDEMNIFIED PARTY SHALL NOT PAY OR SETTLE ANY SUCH
CLAIM.  NOTWITHSTANDING THE FOREGOING, THE INDEMNIFIED PARTY MAY SETTLE A THIRD
PARTY CLAIM IF THE SETTLEMENT INCLUDES, AS AN UNCONDITIONAL TERM THEREOF, A
WRITTEN RELEASE OF THE INDEMNIFYING PARTY FROM ALL LIABILITY AND OBLIGATION IN
RESPECT OF SUCH THIRD PARTY CLAIM; PROVIDED THAT IN SUCH EVENT THE INDEMNIFIED
PARTY WAIVES ANY RIGHT TO INDEMNITY BY THE INDEMNIFYING PARTY THEREFOR.  THE
INDEMNIFIED PARTY SHALL COOPERATE FULLY IN ALL ASPECTS OF ANY INVESTIGATION,
DEFENSE, PRETRIAL ACTIVITIES, TRIAL, COMPROMISE, SETTLEMENT OR DISCHARGE OF ANY
THIRD PARTY CLAIM, INCLUDING BY PROVIDING THE INDEMNIFYING PARTY WITH REASONABLE
ACCESS TO EMPLOYEES AND OFFICERS (INCLUDING AS WITNESSES) AND OTHER INFORMATION.

8.4          THRESHOLD.  NOTWITHSTANDING ANY PROVISION OF THIS AGREEMENT TO THE
CONTRARY, SELLER WILL NOT BE OBLIGATED TO INDEMNIFY BUYER FOR ANY DAMAGES UNDER
SECTION 8.2(A)(I) UNLESS AND UNTIL THE AMOUNT OF ALL DAMAGES EXCEEDS $50,000
(THE “THRESHOLD”), PROVIDED, THAT IF BUYER’S DAMAGES EXCEED SUCH THRESHOLD, THEN
BUYER SHALL BE ENTITLED TO INDEMNIFICATION AS SET FORTH IN THIS ARTICLE VIII FOR
THE FULL AMOUNT OF ALL SUCH DAMAGES.  NOTWITHSTANDING ANY PROVISION OF THIS
AGREEMENT TO THE CONTRARY, SELLER SHALL NOT BE LIABLE TO INDEMNIFY, REIMBURSE,
OR OTHERWISE HOLD HARMLESS BUYER OR ITS RELATED PERSONS FOR ANY DAMAGES,
LIABILITIES, OR OTHER AMOUNTS UNDER SECTION 8.2(A)(I) OR
SECTION 8.2(A)(II) (OTHER THAN THE COVENANTS SET FORTH IN SECTION 7.4 (C) AND
(E) OF THIS AGREEMENT, WHICH SHALL NOT BE SUBJECT TO THE CAP (AS DEFINED
BELOW)), INDIVIDUALLY OR IN THE AGGREGATE, IN EXCESS OF $2,400,000 (THE “CAP”).

8.5          SPECIFIC PERFORMANCE.  IF EITHER PARTY BREACHES ANY OF ITS
COVENANTS, DUTIES OR OBLIGATIONS SET FORTH IN THIS AGREEMENT, THE OTHER PARTY
WOULD ENCOUNTER EXTREME DIFFICULTY IN ATTEMPTING TO PROVE THE ACTUAL AMOUNT OF
DAMAGES SUFFERED BY THEM AS A RESULT OF SUCH BREACH AND WOULD NOT BE REASONABLY
OR ADEQUATELY COMPENSATED IN DAMAGES IN ANY ACTION AT LAW.  IN ADDITION TO ANY
OTHER REMEDY A PARTY MAY HAVE AT LAW, IN EQUITY, BY STATUTE OR OTHERWISE, IF THE
OTHER PARTY BREACHES THIS AGREEMENT, THEN THE FIRST PARTY WILL BE ENTITLED TO
SEEK AND RECEIVE TEMPORARY, PRELIMINARY AND PERMANENT INJUNCTIVE AND OTHER
EQUITABLE RELIEF FROM ANY GOVERNMENTAL BODY OF COMPETENT JURISDICTION TO ENFORCE
ANY OF ITS RIGHTS UNDER THIS AGREEMENT OR OTHERWISE TO PREVENT VIOLATION OF THIS
AGREEMENT.  NO REMEDY CONFERRED BY ANY OF THE SPECIFIC PROVISIONS OF THIS
AGREEMENT IS INTENDED TO BE EXCLUSIVE OF ANY OTHER REMEDY THAT IS OTHERWISE
AVAILABLE AT LAW, IN EQUITY, BY STATUTE OR OTHERWISE.  SUBJECT TO THE LAST
SENTENCE OF SECTION 8.7 REGARDING THE PAYMENT OF EXPENSES OF ARBITRATION, IN ANY
ACTION, SUIT OR OTHER PROCEEDING

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INSTITUTED, CONCERNING OR ARISING OUT OF THIS AGREEMENT, THE PREVAILING PARTY
WILL RECOVER ALL OF SUCH PARTY’S COSTS AND REASONABLE ATTORNEYS’ FEES.

8.6          EXCLUSIVE REMEDY.  EXCEPT WITH RESPECT TO CLAIMS BASED ON FRAUD OR
WILLFUL BREACH AND FOR EQUITABLE REMEDIES AS PROVIDED FOR IN SECTION 8.5, THE
INDEMNIFICATION PROVISIONS OF THIS ARTICLE VIII ARE THE EXCLUSIVE REMEDY
FOLLOWING THE CLOSING (I) FOR ANY BREACHES OR ALLEGED BREACHES OF ANY
REPRESENTATION, WARRANTY OR OTHER PROVISION OF THIS AGREEMENT OR THE
TRANSACTIONS CONTEMPLATED HEREBY AND (II) FOR ANY HAZARDOUS MATERIAL PRESENT ON,
IN, OR ABOUT THE MOUNTAIN VIEW FACILITIES (INCLUDING, WITHOUT LIMITATION THE
SOIL, GROUNDWATER, BUILDING MATERIALS, FIXTURES AND EQUIPMENT THEREOF) OR
OTHERWISE WITH RESPECT TO THE COMPLIANCE OF THE BUSINESS OR THE MOUNTAIN VIEW
FACILITIES WITH ANY ENVIRONMENTAL LAW AND, WITHOUT LIMITATION OF THE FOREGOING,
EACH PARTY HEREBY WAIVES ANY AND ALL RIGHTS THAT ARE OR MAY OTHERWISE BE
AVAILABLE TO IT AT LAW OR EQUITY IN RESPECT OF THIS AGREEMENT, ANY HAZARDOUS
MATERIAL PRESENT ON, IN, OR ABOUT THE MOUNTAIN VIEW FACILITIES (INCLUDING,
WITHOUT LIMITATION THE SOIL, GROUNDWATER, BUILDING MATERIALS, FIXTURES AND
EQUIPMENT THEREOF) OR OTHERWISE WITH RESPECT TO THE COMPLIANCE OF THE BUSINESS
OR THE MOUNTAIN VIEW FACILITIES WITH ANY ENVIRONMENTAL LAW, AND THE TRANSACTIONS
CONTEMPLATED HEREBY.  NONE OF THE PARTIES, NOR ANY OF THEIR RELATED PERSONS, MAY
BRING ANY ACTION OR PROCEEDING, AT LAW, EQUITY OR OTHERWISE, AGAINST THE OTHER
PARTY OR ITS RELATED PERSONS, IN RESPECT OF ANY BREACHES OR ALLEGED BREACHES OF
ANY REPRESENTATION, WARRANTY OR OTHER PROVISION OF THIS AGREEMENT OR ANY
HAZARDOUS MATERIAL PRESENT ON, IN, OR ABOUT THE MOUNTAIN VIEW FACILITIES
(INCLUDING, WITHOUT LIMITATION THE SOIL, GROUNDWATER, BUILDING MATERIALS,
FIXTURES AND EQUIPMENT THEREOF) OR OTHERWISE WITH RESPECT TO THE COMPLIANCE OF
THE BUSINESS OR THE MOUNTAIN VIEW FACILITIES WITH ANY ENVIRONMENTAL LAW, EXCEPT
PURSUANT TO THE EXPRESS PROVISIONS OF THIS ARTICLE VIII.  EACH PARTY HEREBY
ACKNOWLEDGES THAT THE OTHER PARTY HAS MADE NO REPRESENTATIONS AND WARRANTIES,
EXPRESS OR IMPLIED, WITH RESPECT TO THIS AGREEMENT OR THE MATTERS CONTEMPLATED
HEREBY, EXCEPT AS EXPLICITLY SET FORTH IN THIS AGREEMENT AND THE ANCILLARY
AGREEMENTS.  THE PARTIES FURTHER AGREE THAT THE FOREGOING WAIVERS SHOULD NOT BE
DIMINISHED BY THE OPERATION OF ANY LAW TO THE EFFECT THAT WAIVERS OF UNKNOWN
CLAIMS ARE NOT ENFORCEABLE AND, ACCORDINGLY, THE PARTIES, AFTER CONSULTATION
WITH COUNSEL, EACH WAIVES THE BENEFITS OF ALL SUCH LAWS, INCLUDING WITHOUT
LIMITATION, SECTION 1542 OF THE CALIFORNIA CIVIL CODE.

8.7          ARBITRATION OF DISPUTES.  NOTWITHSTANDING ANYTHING TO THE CONTRARY
CONTAINED IN THIS AGREEMENT, ANY CLAIMS, DISPUTES OR CONTROVERSIES ARISING OUT
OF OR RELATING TO ARTICLE VIII, INCLUDING ANY DISPUTE CONCERNING THE
ARBITRABILITY OR THE SCOPE OF THIS ARBITRATION CLAUSE, SHALL BE EXCLUSIVELY
SETTLED BY BINDING ARBITRATION PURSUANT TO THE COMMERCIAL RULES OF THE AMERICAN
ARBITRATION ASSOCIATION (“AAA”) (IT BEING EXPRESSLY UNDERSTOOD AND AGREED THAT
ANY SUCH CLAIMS, DISPUTES AND REMEDIES SHALL BE SUBJECT TO THE PROVISIONS OF
ARTICLE VIII).  ARBITRATION MAY BE COMMENCED BY ANY PARTY HERETO IN CLEVELAND,
OHIO BY GIVING WRITTEN NOTICE TO AAA IN SUCH PLACE, AND TO EACH OTHER PARTY,
THAT SUCH CLAIM OR DISPUTE HAS BEEN REFERRED TO ARBITRATION UNDER THIS SECTION
8.7.  THE ARBITRATION PROCEEDINGS SHALL BE CONDUCTED, USING DELAWARE LAW, AND
APPLICABLE FEDERAL LAW, BEFORE A SINGLE NEUTRAL ARBITRATOR (OR, IN THE CASE OF A
CLAIM EXCEEDING $1,000,000, BEFORE A PANEL OF THREE (3) NEUTRAL ARBITRATORS,
WITH EACH PARTY SELECTING ONE ARBITRATOR AND THE TWO SELECTED BY THE PARTIES
SELECTING THE THIRD), EACH OF WHOM SHALL HAVE EXPERIENCE WITH MERGERS AND
ACQUISITIONS.  ANY AWARD RENDERED BY THE ARBITRATOR(S) SHALL BE CONCLUSIVE,
FINAL AND BINDING UPON THE PARTIES HERETO, AND NONAPPEALABLE TO ANY COURT OR
FORUM; PROVIDED, HOWEVER, THAT ANY SUCH AWARD SHALL BE ACCOMPANIED BY A CONCISE
WRITTEN OPINION GIVING THE REASONS FOR THE AWARD.  JUDGMENT UPON SUCH AWARD MAY
BE ENTERED IN ANY COURT OF COMPETENT JURISDICTION.  EACH

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PARTY SHALL PAY ITS OWN EXPENSES OF ARBITRATION, EXCEPT THAT THE COSTS AND
EXPENSES OF THE ARBITRATORS AND THE ARBITRATION PROCEEDING SHALL BE PAID BASED
ON THE RESOLUTION OF THE DISPUTED ITEMS AND THE RELATIVE DEGREE OF SUCCESS OF
EACH PARTY AS DETERMINED BY THE
ARBITRATOR(S).

ARTICLE IX

EMPLOYEE BENEFIT MATTERS

9.1          EMPLOYMENT.  BUYER SHALL MAKE OFFERS OF EMPLOYMENT AS OF THE DAY
AFTER THE CLOSING TO THOSE EMPLOYEES OF SELLER LISTED ON SCHEDULE 9.1 WHO ARE
ACTIVELY AT WORK IMMEDIATELY PRIOR TO THE CLOSING DATE (THOSE EMPLOYEES WHO
ACCEPT EMPLOYMENT WITH BUYER AS OF THE DAY AFTER CLOSING ARE COLLECTIVELY
REFERRED TO HEREIN AS THE “TRANSFERRED EMPLOYEES”).  BUYER FURTHER AGREES TO
EXTEND OFFERS OF EMPLOYMENT TO ANY EMPLOYEE OF SELLER WHO IS NOT ACTIVELY AT
WORK ON THE CLOSING DATE DUE TO LEAVE OF ABSENCE, DISABILITY OR WORKERS’
COMPENSATION LEAVE OR MILITARY LEAVE (COLLECTIVELY, THE “INACTIVE EMPLOYEES”),
PROVIDED THAT, EXCEPT AS TO INACTIVE EMPLOYEES ON MILITARY LEAVE, SUCH INACTIVE
EMPLOYEE WILL BE AVAILABLE FOR, AND ACCEPT SUCH OFFER OF, EMPLOYMENT WITHIN THE
SIX-MONTH PERIOD FOLLOWING THE CLOSING. TO THE EXTENT PERMITTED UNDER APPLICABLE
LAW, THE ACQUIRED ASSETS WILL INCLUDE SELLER’ EMPLOYEE FILES OF EACH TRANSFERRED
EMPLOYEE.

9.2          COMPENSATION AND EMPLOYEE BENEFITS.

(A)           IN GENERAL.  FOR A PERIOD OF SIX MONTHS AFTER THE CLOSING DATE,
BUYER SHALL PROVIDE EACH TRANSFERRED EMPLOYEE WITH NO LESS THAN THE CURRENT BASE
SALARY SET FORTH FOR SUCH EMPLOYEE ON SCHEDULE 5.16 AND SUCH OTHER EMPLOYEE
BENEFITS THAT BUYER PROVIDES TO ITS SIMILARLY SITUATED EMPLOYEES.  SELLER SHALL
PAY EACH TRANSFERRED EMPLOYEE HIS SALARY OR WAGES EARNED THROUGH THE CLOSING
DATE AND ALL OTHER OBLIGATIONS TO SUCH EMPLOYEES THAT ARE NOT ASSUMED
LIABILITIES, AND ALL SUCH LIABILITIES ARE RETAINED LIABILITIES.  SUBJECT TO THE
FOREGOING AND THE OTHER PROVISIONS OF THIS ARTICLE IX, BUYER SHALL HAVE THE
RIGHT TO DETERMINE THE COMPENSATION AND EMPLOYEE BENEFITS OF THE TRANSFERRED
EMPLOYEES.

(B)           ACCRUED VACATION AND HOLIDAY PAY.  DURING THE YEAR IN WHICH
CLOSING OCCURS, BUYER SHALL PROVIDE EACH TRANSFERRED EMPLOYEE WITH AT LEAST THE
NUMBER OF PAID VACATION DAYS AND HOLIDAYS TO WHICH HE WOULD HAVE BEEN ENTITLED
UNDER SELLER’S PRACTICES DURING SUCH YEAR (EXCEPT TO THE EXTENT USED BY THE
TRANSFERRED EMPLOYEE DURING SUCH YEAR PRIOR TO CLOSING).

(C)           SERVICE CREDIT.  FOR PURPOSES OF ANY EMPLOYEE BENEFIT PLAN,
PROGRAM OR ARRANGEMENT ESTABLISHED FOR OR MADE AVAILABLE TO THE TRANSFERRED
EMPLOYEES BY BUYER (THE “BUYER PLANS”), BUYER SHALL CREDIT EACH TRANSFERRED
EMPLOYEE WITH SERVICE FOR ALL PERIODS OF SERVICE PRIOR TO THE CLOSING DATE
RECOGNIZED BY SELLER OR ANY OF ITS AFFILIATES.  SUCH SERVICE WILL BE CREDITED
FOR PURPOSES OF DETERMINING ELIGIBILITY AND VESTING UNDER ALL BUYER PLANS AND
FOR BENEFIT LEVELS AS APPLICABLE IN THE BUYER WELFARE PLANS (I.E., VACATION,
DISABILITY, SEVERANCE AND SIMILAR BENEFITS).

(D)           WELFARE BENEFIT PLANS.  COVERAGE FOR ALL TRANSFERRED EMPLOYEES AND
THEIR ELIGIBLE DEPENDENTS UNDER THE SELLER ERISA PLANS AND THE SELLER BENEFIT
ARRANGEMENTS THAT ARE WELFARE BENEFIT PLANS WITHIN THE MEANING OF SECTION 3(1)
OF ERISA (THE “SELLER WELFARE PLANS”)

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WILL TERMINATE EFFECTIVE AS OF THE CLOSING DATE (THE “FINAL COVERAGE DATE”). 
ALL CLAIMS FOR EXPENSES INCURRED PRIOR TO THE CLOSING DATE BY TRANSFERRED
EMPLOYEES AND THEIR ELIGIBLE DEPENDENTS UNDER THE SELLER WELFARE PLANS AND
WORKERS’ COMPENSATION BENEFITS OF EMPLOYEES OF SELLER FOR EVENTS OCCURRING PRIOR
TO THE CLOSING DATE ARE RETAINED LIABILITIES.  THE BUYER PLANS THAT ARE WELFARE
BENEFIT PLANS WITHIN THE MEANING OF SECTION 3(1) OF ERISA (THE “BUYER WELFARE
PLANS”) SHALL PROVIDE COVERAGE AND BENEFITS TO TRANSFERRED EMPLOYEES (AND THEIR
ELIGIBLE DEPENDENTS) BEGINNING ON THE DAY AFTER THE FINAL COVERAGE DATE OR, IN
THE CASE OF INACTIVE EMPLOYEES, UPON THEIR EMPLOYMENT BY BUYER PURSUANT TO
SECTION 9.1.  BUYER SHALL BE RESPONSIBLE FOR ALL CLAIMS UNDER BUYER WELFARE
PLANS FOR EXPENSES INCURRED BY THE TRANSFERRED EMPLOYEES AFTER THE CLOSING DATE,
OR IN THE CASE OF INACTIVE EMPLOYEES, THEIR EMPLOYMENT BY BUYER.  FOR PURPOSES
OF THIS SECTION 9.2(D), A CLAIM SHALL BE DEEMED INCURRED WHEN (I) THE MEDICAL OR
DENTAL SERVICE RELATING TO THE EXPENSE IS PROVIDED, REGARDLESS OF WHEN THE
INCIDENT GIVING RISE TO THE MEDICAL OR DENTAL EXPENSE OCCURS PROVIDED THAT
CLAIMS RELATING TO A HOSPITAL CONFINEMENT THAT COMMENCES ON OR PRIOR TO THE
CLOSING DATE BUT CONTINUES THEREAFTER SHALL BE TREATED AS INCURRED ON OR PRIOR
TO THE CLOSING DATE; OR (II) IN THE EVENT OF A LIFE, TRAVEL AND ACCIDENT OR
ACCIDENTAL DEATH OR DISMEMBERMENT INSURANCE, DISABILITY OR WORKERS’ COMPENSATION
CLAIM, WHEN THE DEATH, ACCIDENT OR INJURY, AS APPLICABLE, OCCURS.  BUYER SHALL
CAUSE DEDUCTIBLES AND OUT-OF-POCKET PAYMENTS EXPENDED BY EACH TRANSFERRED
EMPLOYEE FOR COVERAGE UNDER THE SELLER WELFARE PLANS IN THE PLAN YEAR IN WHICH
THE CLOSING OCCURS TO BE COUNTED TOWARD THE DEDUCTIBLES AND OUT-OF-POCKET
MAXIMUMS APPLICABLE TO EACH TRANSFERRED EMPLOYEE UNDER THE BUYER WELFARE PLANS. 
IN ADDITION, NO PRE-EXISTING CONDITION, LIMITATION, EXCLUSION OR WAITING PERIOD
APPLICABLE WITH RESPECT TO ANY BUYER WELFARE PLAN WILL APPLY TO ANY TRANSFERRED
EMPLOYEE.

9.3          COBRA.  BUYER SHALL HAVE SOLE RESPONSIBILITY FOR “CONTINUATION
COVERAGE” BENEFITS PROVIDED AFTER THE CLOSING DATE UNDER BUYER’S GROUP HEALTH
PLANS TO ALL TRANSFERRED EMPLOYEES, AND “QUALIFIED BENEFICIARIES” OF TRANSFERRED
EMPLOYEES, FOR WHOM A “QUALIFYING EVENT” OCCURS AFTER THE CLOSING DATE.  SELLER
SHALL HAVE THE SOLE RESPONSIBILITY FOR “CONTINUATION COVERAGE” BENEFITS PROVIDED
UNDER SELLER’S GROUP HEALTH PLANS TO ALL TRANSFERRED EMPLOYEES, AND ALL
“QUALIFIED BENEFICIARIES” OF SUCH TRANSFERRED EMPLOYEES, FOR WHOM A “QUALIFYING
EVENT” HAS OCCURRED ON OR PRIOR TO THE CLOSING DATE, OR FOR ANY SELLER EMPLOYEE
OR “QUALIFIED BENEFICIARY” WHO IS NOT A TRANSFERRED EMPLOYEE OR A “QUALIFIED
BENEFICIARY” OF A TRANSFERRED EMPLOYEE, REGARDLESS OF WHEN SUCH “QUALIFYING
EVENT” OCCURS, AND THE OBLIGATIONS OF SELLER UNDER THIS SENTENCE ARE RETAINED
LIABILITIES.  THE TERMS “CONTINUATION COVERAGE,” “QUALIFIED BENEFICIARIES” AND
“QUALIFYING EVENT” SHALL HAVE THE MEANING ASCRIBED TO THEM UNDER SECTION 4980B
OF THE CODE AND SECTIONS 601-608 OF ERISA.

9.4          FURTHER ASSURANCES.  SELLER SHALL PROVIDE ANY TRANSITION SERVICES
NECESSARY TO TRANSFER THE EMPLOYMENT OF THE TRANSFERRED EMPLOYEES AND TO
COOPERATE WITH BUYER IN ORDER TO EFFECT A SMOOTH TRANSITION FOR ALL TRANSFERRED
EMPLOYEES.

ARTICLE X

MISCELLANEOUS

10.1        EXPENSES.  ALL COSTS AND EXPENSES (INCLUDING ALL LEGAL, ACCOUNTING,
BROKER, FINDER OR INVESTMENT BANKER FEES) INCURRED IN CONNECTION WITH THIS
AGREEMENT AND THE TRANSACTIONS

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CONTEMPLATED HEREBY ARE TO BE PAID BY THE PARTY INCURRING SUCH EXPENSES, EXCEPT
TO THE EXTENT OTHERWISE PROVIDED HEREIN.

10.2        SUCCESSORS AND ASSIGNS.  THIS AGREEMENT SHALL BE BINDING UPON AND
INURE TO THE BENEFIT OF THE PARTIES AND THEIR RESPECTIVE SUCCESSORS AND
PERMITTED ASSIGNS, BUT NO PARTY MAY ASSIGN EITHER THIS AGREEMENT OR ANY OF ITS
RIGHTS, INTERESTS OR OBLIGATIONS HEREUNDER WITHOUT THE PRIOR WRITTEN APPROVAL OF
THE OTHER PARTY, WHICH CONSENT WILL NOT BE UNREASONABLY WITHHELD, CONDITIONED OR
DELAYED; PROVIDED, THAT A CHANGE OF CONTROL OF SELLER SHALL NOT BE DEEMED TO BE
AN ASSIGNMENT UNDER THIS SECTION 10.2.  NOTWITHSTANDING THE FOREGOING, BUYER
MAY, WITHOUT THE CONSENT OF SELLER, ASSIGN THIS AGREEMENT OR ALL OR ANY PORTION
OF ITS RIGHTS, INTERESTS OR OBLIGATIONS HEREUNDER TO ANY OF BUYER’S AFFILIATES
PROVIDED BUYER SHALL REMAIN FULLY LIABLE FOR THE FULFILLMENT OF ALL SUCH
OBLIGATIONS.  FOR PURPOSES OF THIS AGREEMENT, A “CHANGE OF CONTROL OF SELLER”
MEANS (I) THE ACQUISITION OF SELLER BY ANOTHER ENTITY BY MEANS OF ANY
TRANSACTION OR SERIES OF RELATED TRANSACTIONS TO WHICH SELLER IS PARTY,
INCLUDING, WITHOUT LIMITATION, ANY STOCK ACQUISITION, REORGANIZATION, MERGER OR
CONSOLIDATION, (II) THE SALE OF ALL OR SUBSTANTIALLY ALL OF THE ASSETS OF
SELLER, PROVIDED THE PURCHASER OF SUCH ASSETS ASSUMES THE LIABILITIES OF SELLER
HEREUNDER AND THAT SELLER PROVIDES WRITTEN NOTICE TO BUYER OF SUCH SALE AND
ASSUMPTION, OR (III) ANY LIQUIDATION, DISSOLUTION OR WINDING UP OF SELLER,
WHETHER VOLUNTARY OR INVOLUNTARY.

10.3        THIRD PARTY BENEFICIARIES.  THIS AGREEMENT DOES NOT BENEFIT OR
CREATE ANY LEGAL OR EQUITABLE RIGHT, REMEDY OR CLAIM IN OR ON BEHALF OF ANY
PERSON OTHER THAN THE PARTIES.  THIS AGREEMENT AND ALL OF ITS TERMS AND
CONDITIONS ARE FOR THE SOLE AND EXCLUSIVE BENEFIT OF THE PARTIES AND THEIR
SUCCESSORS AND PERMITTED ASSIGNS.

10.4        NOTICES.  ANY NOTICE OR OTHER COMMUNICATION PROVIDED FOR HEREIN OR
GIVEN HEREUNDER TO A PARTY HERETO WILL BE SUFFICIENT IF IN WRITING, AND
DELIVERED IN PERSON, SENT BY FACSIMILE TRANSMISSION (ELECTRONICALLY CONFIRMED), 
MAILED BY FIRST CLASS REGISTERED OR CERTIFIED MAIL, POSTAGE PREPAID, OR SENT BY
FEDERAL EXPRESS OR OTHER OVERNIGHT COURIER OF NATIONAL REPUTATION, ADDRESSED AS
FOLLOWS:

If to Seller:

Catalytica Energy Systems, Inc.

301 West Warner Road, Suite 132

Tempe, AZ  85284

Attn:       Robert W. Zack, President, CEO and CFO

                Richard Weinroth, Secretary and Corporate Counsel

With a copy to

Wilson Sonsini Goodrich & Rosati

Professional Corporation

650 Page Mill Road

Palo Alto, California 94304-1050

Attn:  Donna M. Petkanics

Fax:  650.493.6811

 

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If to Buyer:

Eaton Corporation

1111 Superior Avenue

Cleveland, Ohio  44114

Attn:       Office of the Secretary

Fax:         (216) 479-7103

 

or to such other address with respect to a Party as such Party notifies the
other in writing as provided above.  Any such notice or other communication
shall be deemed to have been given and received on the day on which it was
personally delivered or transmitted by facsimile, receipt of complete
transmission confirmed (or, if such day is not a Business Day, on the next
following Business Day) or, if mailed, by registered or certified mail, on the
third Business Day following the date of mailing or, if couriered overnight, on
the next following Business Day; provided, however, that if at the time of
mailing or within three Business Days thereafter, there is or occurs a labor
dispute or other event that might reasonably be expected to disrupt the delivery
of documents by mail, any notice or other communication hereunder shall be
delivered or transmitted by means of overnight courier as set forth above.

10.5        COMPLETE AGREEMENT.  THIS AGREEMENT (ALONG WITH THE SCHEDULES,
DISCLOSURE LETTER, EXHIBITS AND APPENDICES HERETO) CONTAINS THE COMPLETE AND
EXCLUSIVE STATEMENT OF THE TERMS OF THE AGREEMENTS BETWEEN THE PARTIES WITH
RESPECT TO THE TRANSACTIONS CONTEMPLATED HEREBY AND SUPERSEDES ALL OTHER PRIOR
AGREEMENTS AND UNDERSTANDINGS BETWEEN THE PARTIES WITH RESPECT THERETO,
INCLUDING THE EXCLUSIVITY AGREEMENT, AS EXTENDED; PROVIDED THAT THIS AGREEMENT
SHALL NOT TERMINATE BUYER’S RIGHT TO OBTAIN EVIDENCE SUPPORTING THE PAYMENTS
MADE UNDER THE EXCLUSIVITY AGREEMENT, AS EXTENDED, AS CONTEMPLATED THEREBY AND
TO SEEK ADJUSTMENT TO THE EXTENT PERMITTED THEREUNDER OR EXTINGUISH BUYER’S
OBLIGATION TO MAKE PAYMENT FOR THE PERIOD FROM OCTOBER 1, 2006 THROUGH OCTOBER
15, 2006.

10.6        CONSTRUCTION.  EACH PROVISION OF THIS AGREEMENT HAS BEEN SUBJECT TO
MUTUAL CONSULTATION, NEGOTIATION AND AGREEMENT OF THE PARTIES AND THEREFORE IS
TO BE CONSTRUED AS IF THE PARTIES DRAFTED IT JOINTLY.  THE WORD “INCLUDING”
MEANS INCLUDING WITHOUT LIMITATION.  ALL REFERENCES TO THE MASCULINE HEREIN
SHALL INCLUDE THE FEMININE AND NEUTER, ALL REFERENCES TO THE NEUTER HEREIN SHALL
INCLUDE THE MASCULINE AND FEMININE, ALL REFERENCES TO THE PLURAL SHALL INCLUDE
THE SINGULAR AND ALL REFERENCES TO THE SINGULAR SHALL INCLUDE THE PLURAL.

10.7        HEADINGS; REFERENCES.  THE HEADINGS CONTAINED IN THIS AGREEMENT ARE
FOR CONVENIENCE OF REFERENCE ONLY AND DO NOT AFFECT THE INTERPRETATION OR
CONSTRUCTION HEREOF.  WHEN A REFERENCE IS MADE IN THIS AGREEMENT TO A SECTION OR
AN ARTICLE, SUCH REFERENCE IS TO A SECTION OR ARTICLE OF THIS AGREEMENT UNLESS
OTHERWISE INDICATED.

10.8        AMENDMENT; WAIVER.  THIS AGREEMENT MAY BE AMENDED OR MODIFIED ONLY
IN A WRITING REFERENCING THIS AGREEMENT AND DULY EXECUTED BY THE PARTIES.  THE
PROVISIONS OF THIS AGREEMENT MAY BE WAIVED ONLY IN A WRITING REFERENCING THIS
AGREEMENT SIGNED BY THE PARTY FROM WHOM THE WAIVER IS SOUGHT, AND A PARTY MAY
ENFORCE ANY PROVISION OF THIS AGREEMENT EVEN IF IT HAS PREVIOUSLY GRANTED A
WAIVER OR FAILED TO ENFORCE THAT OR ANY OTHER PROVISION OF THIS AGREEMENT.

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10.9        GOVERNING LAW.  THIS AGREEMENT IS TO BE GOVERNED BY, AND CONSTRUED
AND ENFORCED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF DELAWARE, WITHOUT
GIVING EFFECT TO ANY CHOICE OR CONFLICT OF LAW PROVISION OR RULE (WHETHER OF THE
STATE OF DELAWARE OR ANY OTHER JURISDICTION) THAT WOULD CAUSE THE APPLICATION OF
THE LAWS OF ANY OTHER JURISDICTION.

10.10      SUBMISSION TO JURISDICTION.  EACH PARTY HEREBY SUBMITS TO THE
EXCLUSIVE JURISDICTION OF ANY STATE OR FEDERAL COURT SITTING IN CUYAHOGA COUNTY
IN THE CITY OF CLEVELAND, OHIO, WITH RESPECT TO ANY ACTION ARISING OUT OF OR
RELATING TO THIS AGREEMENT AND AGREES THAT ALL CLAIMS IN RESPECT OF SUCH ACTION
MAY BE HEARD AND DETERMINED IN ANY SUCH COURT.  EACH PARTY WAIVES ANY DEFENSE OF
INCONVENIENT FORUM TO THE MAINTENANCE OF ANY ACTION SO BROUGHT.  ANY PARTY MAY
MAKE SERVICE ON THE OTHER PARTY BY SENDING OR DELIVERING A COPY OF THE PROCESS
TO THE PARTY TO BE SERVED AT THE ADDRESS AND IN THE MANNER PROVIDED FOR THE
GIVING OF NOTICES IN SECTION 10.4.

10.11      SEVERABILITY.  ANY TERM OR PROVISION OF THIS AGREEMENT THAT IS
INVALID OR UNENFORCEABLE IN ANY JURISDICTION WILL, AS TO THAT JURISDICTION, BE
INEFFECTIVE TO THE EXTENT OF SUCH INVALIDITY OR UNENFORCEABILITY WITHOUT
RENDERING INVALID OR UNENFORCEABLE THE REMAINING TERMS AND PROVISIONS OF THIS
AGREEMENT OR AFFECTING THE VALIDITY OR ENFORCEABILITY OF ANY OF THE TERMS OR
PROVISIONS OF THIS AGREEMENT IN ANY OTHER JURISDICTION.  IF ANY PROVISION OF
THIS AGREEMENT IS SO BROAD AS TO BE UNENFORCEABLE, THE PROVISION IS TO BE
INTERPRETED TO BE ONLY SO BROAD AS IS ENFORCEABLE.

10.12      BULK TRANSFERS.  BUYER WAIVES COMPLIANCE WITH THE PROVISIONS OF ALL
APPLICABLE LAWS RELATING TO BULK TRANSFERS IN CONNECTION WITH THE TRANSFER OF
THE ACQUIRED ASSETS.

10.13      COUNTERPARTS.  THIS AGREEMENT MAY BE EXECUTED IN ANY NUMBER OF
COUNTERPARTS, EACH OF WHICH WILL BE DEEMED AN ORIGINAL AND ALL OF WHICH TOGETHER
WILL CONSTITUTE ONE AND THE SAME INSTRUMENT.  A SIGNATURE TO THIS AGREEMENT
DELIVERED BY FACSIMILE OR PORTABLE DOCUMENT FORMAT (PDF) WILL BE SUFFICIENT FOR
ALL PURPOSES BETWEEN THE PARTIES.

(Signatures are on the following page.)

 

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                IN WITNESS WHEREOF, Seller and Buyer have caused this Agreement
to be executed by its duly authorized officer or representative as of the date
set forth in the preamble hereto.

 

SELLER:

 

CATALYTICA ENERGY SYSTEMS, INC.

 

 

 

 

By:

/s/ ROBERT W. ZACK

 

Name:

Robert W. Zack

 

Title:

CEO

 

 

 

 

 

 

BUYER:

 

EATON CORPORATION

 

 

 

 

By:

/s/ DAVID S. BARRIE  

 

Name:

David S. Barrie 

 

Title:

Authorized Representative

 

 

 

 

And by:

/s/ MARTIN V. RARICK

 

Name:

Martin V. Rarick

 

Title:

Authorized Representative

 

 

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APPENDIX A

DEFINITIONS

“AAA” has the meaning set forth in Section 8.7.

“Acquired Assets” has the meaning set forth in Section 1.1.

“Acquired Intellectual Property” has the meaning set forth in Section 1.1(f).

“Action” means any civil, criminal or administrative action, cause of action,
lawsuit, arbitration, investigation, proceeding, hearing, charge, complaint,
citation, notice, request, demand, assessment, audit, or other legal,
administrative or arbitral proceeding or investigation, regardless of whether a
proceeding or lawsuit has been initiated.

“Affiliate” means with respect to any Person, any Person that directly or
indirectly controls, is controlled by or is under common control with such
Person.

“Agreement” has the meaning set forth in the preamble to this Agreement.

“Ancillary Agreements” means the Bill of Sale, the Instrument of Assumption, the
Lease Assignments, the Patent Assignment, and each other document and instrument
required to be delivered in connection with the transactions contemplated by
this Agreement.

“Apportionable Expenses” has the meaning set forth in Section 7.2(a).

“Asset and Liability Schedule” has the meaning set forth in Schedule 5.5(a).

“Assigned Contracts” has the meaning set forth in Section 1.1(e).

“Assumed Liabilities” has the meaning set forth in Section 2.1.

“Bill of Sale” means the bill of sale substantially in the form attached to the
Agreement as Exhibit B.

“Business” means Seller’s business of developing diesel fuel processing
technologies, including its Pre-Combustion Catalyst (“PCC”), Xonon Fuel
Combustor (“XFC”), Continuous Xonon Fuel Processor (“C-XFP”) and Xonon Fuel
Processor (“XFP”) and XEC90 programs.  In no event shall Business be deemed to
include the SCR Business.

“Business Day” means any day other than a Saturday, Sunday or a day on which
banks in Ohio or California are authorized or obligated by Law to close.

“Buyer” has the meaning set forth in the preamble to this Agreement.

“Buyer Environmental and Facilities Liabilities” means:

(A)          all obligations to surrender the Mountain View Facilities to the
master lessor in accordance with the terms of the Real Property Leases,
including without limitation the

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removal of all alterations and improvements that are required to be removed from
the Mountain View Facilities under the terms of the Real Property Leases and the
repair of all damage caused by such removal, to the extent required by the Real
Property Leases, including the disposal of any asbestos-containing building
materials or any lab furnishings, fixtures, hoods, or other building equipment
that has become coated with Hazardous Materials that have not yet migrated to
the soil or groundwater of the premises; and

(B)           the closure in accordance with applicable Laws of the Hazardous
Materials activities currently being conducted by the Business at the Mountain
View Facilities upon termination of such activities at such facilities; and

(C)           any Response Actions required by applicable Environmental Laws for
any Hazardous Materials (i) released to the environment of any of the Mountain
View Facilities during the period commencing on the Closing Date and ending on
the date such facilities are surrendered to the master lessor under the Real
Property Leases, or (ii) generated by the Business and transferred to any third
party for disposal after the Closing Date; and

(D)          any claims brought by any Governmental Authority or third party to
the extent arising as a consequence of any Hazardous Material Releases described
in subpart (C), above or any lack of performance of the obligations described in
subparts (A) and (B) above; and

(E)           any adverse health effect resulting from the exposure after the
Closing Date of any Person to a Hazardous Material stored, used, generated, or
disposed of in the conduct of the Business after the Closing Date; provided,
however, that if a particular exposure occurs both before and after the Closing
Date, the Buyer Environmental and Facilities Liabilities for such adverse health
effect shall be a proportion of the total Liability for such health effect based
on the relative duration and extent of the exposure after the Closing Date, as
compared to the total duration and extent of the exposure.

“Buyer Plans” has the meaning set forth in Section 9.2(c).

“Buyer Welfare Plans” has the meaning set forth in Section 9.2(d).

“Cap” has the meaning set forth in Section 8.4.

“Change of Control of Seller” has the meaning set forth in Section 10.2.

“Closing” has the meaning set forth in Section 4.1.

“Closing Date” has the meaning set forth in Section 4.1.

“Code” means the Internal Revenue Code of 1986, as amended, and the rules and
regulations promulgated thereunder.

“Competing Activity” has the meaning set forth in Section 7.4(c).

“Consent” means any consent, approval, authorization, qualification, waiver or
notification of a Governmental Authority or any other Person.

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“Contracts” means any written or oral contract, binding agreement, license,
binding commitment, undertaking or arrangement, including purchase orders and
sales orders.

“Damages” has the meaning set forth in Section 8.2(a).

“Disclosure Letter” has the meaning set forth in the preamble to Article V.

“Dispute Notice” has the meaning set forth in Section 8.1(d).

“Environmental Laws” means all laws, ordinances, regulations, rules, order,
permits, approvals, decisions or decrees, and any common law rules, orders,
permits, approvals, decisions or decrees, and any common or civil law (whether
currently in existence or hereafter enacted) concerning the subject of the
introduction, emission, discharge or release of pollutants or contaminants into
the air, soil, or surface or ground water; the transportation, handling, use,
storage, treatment or disposal of hazardous waste materials; or the remediation
or investigation of contamination of air, soil, or surface or ground water by
pollutants, contaminants or hazardous waste materials; or exposure to hazardous
substance hazardous waste, or toxic substances; including but not limited to the
Comprehensive Environmental Response, Compensation and Liability Act (CERCLA),
the Resource Conservation Recovery Act, 42 U.S.C. §6901 et seq. (RCRA), the
Clean Water Act, 33 U.S.C. §1251 et seq. (CWA), the Safe Drinking Water Act,
42 U.S.C. §300f et seq. (SWDA), the Clean Air Act, 42 U.S.C. §7401 et. seq.
(CAA), the Toxic Substances Control Act, 15 U.S.C §2601 et seq. (TSCA), and the
Emergency Planning and Right-to-Know Act of 1986, 42 U.S.C. §11001 et seq.
(EPCRA), and similar federal, state, provincial, territorial, local, municipal
and foreign laws; and any laws, ordinances, regulations, rules, orders, permits,
approvals, decisions or decrees, and any common law concerning worker health or
safety, including, but not limited to, the provisions of the Occupational Health
and Safety Act (OSHA) relating to hazardous materials, and similar state,
provincial, territorial, local, municipal and foreign laws.

“ERISA” means the Employee Retirement Income Security Act of 1974, as amended,
and the rules and regulations promulgated thereunder.

“ERISA Affiliate” shall mean any entity which is a member of a “controlled group
of corporations” with or under “common control” with Seller as defined in
Section 414(b) or (c) of the Code.

“Exclusivity Agreement” means the Exclusivity and Expense Reimbursement
Agreement dated June 30, 2006 between Seller and Buyer.

“Final Coverage Date” has the meaning set forth in Section 9.2(d).

“Financial Statements” has the meaning set forth in Section 5.5.

“Fixed Assets” has the meaning set forth in Section 1.1(b).

“GAAP” means United States generally accepted accounting principles.

“General Enforceability Exceptions” has the meaning set forth in Section 5.2.

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“Governmental Authority” means any government or political subdivision, whether
federal, state, local or foreign, or any agency or instrumentality of any such
government or political subdivision, or any federal, state, local or foreign
court or arbitrator.

“Hazardous Materials” shall include (a) any element, compound or chemical that
is defined, listed or otherwise classified as a contaminant, pollutant, toxic
pollutant, toxic or hazardous substance, extremely hazardous substance or
chemical, hazardous waste, medical waste, biohazardous or infectious waste,
special waste, or solid waste under Environmental Laws; (b) petroleum,
petroleum-based or petroleum-derived products; (c) polychlorinated biphenyls;
(d) any substance exhibiting a hazardous waste characteristic including but not
limited to corrosivity, ignitibility, toxicity or reactivity as well as any
radioactive or explosive materials; (e) friable asbestos, and (f) mercury in all
cases as defined or referenced in, or regulated under, any Environmental Laws.

“Indebtedness” means for any Person (without duplication):  (i) all indebtedness
for borrowed money, whether current, short-term, or long-term, secured or
unsecured (excluding trade accounts payable); (ii) all indebtedness for the
deferred purchase price for purchases of property outside the Ordinary Course
that is not evidenced by trade accounts payables; (iii) any payment of
obligations in respect of letters of credit (other than stand-by letters of
credit in support of Ordinary Course trade payables); (iv) any Liability with
respect to interest rate swaps, collars, caps and similar hedging obligations;
(v) any lease obligations under leases that are required to be accounted for as
capital leases under GAAP; (vi) any indebtedness referred to in clauses
(i) through (v) above that is directly or indirectly guaranteed by such Person.

“Indemnifying Party” and “Indemnified Party” have the meanings set forth in
Section 8.1(d).

“Instrument of Assumption” means the instrument of assignment and assumption in
substantially the form attached to the Agreement as Exhibit C.

“Intellectual Property” means (i) all names and marks, including trademarks,
service marks, trade names, corporate names, trade dress, slogans, logos and
domain names, and registrations and applications for registration thereof
including, all registered and unregistered trademarks, trade names, service
marks and applications therefor and all goodwill associated therewith; (ii) all
patents, patent applications and inventions, including any provisional, utility,
continuation, continuation-in-part or divisional applications filed in the
United States or any other jurisdiction, and all reissues thereof and all
reexamination certificates issuing therefrom; (iii) all ownership rights to any
copyrightable works or works in progress, including all related copyright
registrations; (iv) all know-how or other trade secrets, whether or not reduced
to practice, including inventions, discoveries, ideas, processes, formulae,
designs, drawings, models, industrial designs, know-how, confidential
information, or proprietary information, whether patentable or not; all computer
and electronic data processing programs and software programs and related
documentation; existing research projects; products, processes and computer
software presently under development; all product, process and software concepts
owned; and all proprietary information, processes, formulae and algorithms used
in the ownership, marketing, development, maintenance, support and delivery of
such products, processes and software; (v) other intellectual property rights,
including the right to secure

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copyright, trademark, patent or other forms of protection therein, the right to
continue the prosecution of any applications of such intellectual property, the
right to secure renewals, reissues, extensions and the right to recover for
infringement thereof and the right to sue for and recover damages, assert,
settle and/or release any claims or demands and obtain all other remedies and
relief at law or equity for any past, present or future infringement or
misappropriation of any of the foregoing intellectual property; (vi) all
licenses, options to license, agreements, contracts and other contractual rights
concerning any such intellectual property; and (vii) goodwill associated with
the foregoing or any Person holding any of the foregoing.

“Intellectual Property Contract” has the meaning set forth in Section 5.8(g).

“Kawasaki License Agreement” means that certain License Agreement, dated as of
September 29, 2006 between Seller and Kawasaki Heavy Industries, Ltd., a
Japanese corporation.

“Law” means any law, statute, code, ordinance, rule, regulation, or other
legally enforceable requirement of any Governmental Authority.

“Lease Assignment” means the assignments of the Real Property Leases
substantially in the form attached to the Agreement as Exhibit F.

“Liabilities” means any and all debts, liabilities and obligations, whether or
not accrued, contingent, known or unknown, or reflected on a balance sheet,
including those arising under any Law, Action or Order and those arising under
any Contract.

“Lien” means any mortgage, lien, pledge, adverse claim, interest, charge or
other similar encumbrance.

“Material Contract” means those Contracts identified on Schedule 5.7(a).

“Mountain View Facilities” means all of the real property currently leased and
subleased by Seller pursuant to the terms of the Real Property Leases and all of
the improvements, fixtures, equipment and other tangible property located
therein.

“Mountain View Lease” means the Lease Agreement dated January 1, 1993 between
Jack Dymond Associates and Catalytica, Inc. as assigned by Catalytica, Inc.
pursuant to Assignment of Lease effective September 15, 2000 and as assigned to
Seller pursuant to Assignment of Lease effective December 15, 2000, such Lease
Agreement has been as amended by the First Addendum to Lease dated October 23,
1997, the Second Addendum to Lease dated June 29, 1998, the Third Amendment and
Extension to Lease dated April 7, 2003, the Fourth Amendment to Lease dated
November 25, 2003, the Fifth Amendment to Lease dated June 30, 2004, the Sixth
Amendment and Extension to Lease dated June 27, 2005, regarding the real
property located at 430 Ferguson Drive, Mountain View, California.

“Non-Assignable Assets” has the meaning set forth in Section 1.3.

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“Order” means any order, judgment, ruling, injunction, award, decree or writ of
any Governmental Authority.

“Ordinary Course” means the ordinary course of business of the Business,
consistent with Seller’s past custom and practice.

“Party” or “Parties” means Seller, on the one hand, and Buyer, on the other
hand.

“Patent Assignment” means the patent assignment substantially in the form
attached to the Agreement as Exhibit D.

“Permits” has the meaning set forth in Section 1.1(g).

“Permitted Liens” means (i) Liens arising under Laws affecting the use of real
property, including zoning Laws, building Laws and similar restrictions that are
not violated by the current use or occupancy of such real property or the
operation of the Business as currently conducted thereon; (ii) the rights of the
landlord and subtenants under the Real Property Leases and the Liens included in
the Assumed Liabilities; (iii) Liens for Taxes, assessments or governmental or
other similar charges or levies that are not yet due and payable or that,
although due and payable, are being contested in good faith; (iv) mechanics,’
workmen’s, materialmen’s, landlords,’ carriers’ or other similar Liens arising
in the Ordinary Course with respect to Liabilities that are not yet due and
payable or that are being contested in good faith; and (v) Liens disclosed on
Schedule 5.4.

“Person” means any individual, sole proprietorship, partnership, corporation,
limited liability company, joint venture, unincorporated society or association,
trust or other entity or Governmental Authority.

“Prototype Purchasers” has the meaning set forth in Section 5.13.

“Purchase Price” has the meaning set forth in Section 3.1.

“Real Property Leases” has the meaning set forth in Section 1.1(a).

“Registered Acquired Intellectual Property” means all Acquired Intellectual
Property issued or registered by the U.S. Patent and Trademark Office, the U.S.
Copyright Office or the corresponding Governmental Authority in any other
country, and applications for any of the foregoing filed with any such
Governmental Authority.

“Release” means any release, spill, emission, discharge, leaking, pumping,
injection, deposit, disposal, dispersal, leaching or migration into the indoor
or outdoor environment (including, without limitation, ambient air, surface
water, groundwater and surface or subsurface strata) or into or out of any
property in violation of any Environmental Law, including the movement of
Hazardous Materials Released through or in the air, surface water, groundwater
or property.

“Related Persons” means, as to any Person, its officers, directors, employees,
Affiliates, advisors, agents or other representatives.

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“Retained Assets” has the meaning set forth in Section 1.2.

“Retained Liabilities” has the meaning set forth in Section 2.2.

“Schedules” means the schedules to this Agreement.

“SCR Business” means Seller’s business of cleaning, regenerating, rejuvenating
or manufacturing Selective Catalyst Reduction (“SCR”) catalyst or managing SCR
catalyst or any business relating to SCR catalyst.

“Seller” has the meaning set forth in the preamble to this Agreement.

“Seller Benefit Arrangements” has the meaning set forth in Section 5.17(a).

“Seller Environmental Liabilities” means, whether or not disclosed on Schedule
5.18:

(A)          any cleanup, removal, response, investigation, monitoring, and
remediation (“Response Actions”) required by applicable Environmental Laws or
the Mountain View Lease for (i) any Hazardous Materials present at the Closing
in the soil or groundwater of the Mountain View Facilities as a consequence of
any Release into the soil or groundwater of the Mountain View Facilities during
the period commencing on the commencement date of the Real Property Leases with
respect to each such facility and ending on the earlier of the date such
facility was surrendered to the master lessor under the Real Property Leases or
the Closing Date pursuant to this Agreement, or (ii) generated by the Business
and transferred to any third party for disposal by Seller or its subsidiaries
prior to the Closing Date; and

(B)           any claims brought by any Governmental Authority or third party to
the extent arising as a consequence of any Hazardous Material Releases described
in subpart (A), above; and

(C)           any adverse health effect resulting from the exposure prior to the
Closing Date of any Person to a Hazardous Material stored, used, generated, or
disposed of in the conduct of the Business prior to the Closing Date; provided,
however, that if a particular exposure occurs both before and after the Closing
Date, the Seller Environmental Liabilities for such adverse health effect shall
be a proportion of the total Liability for said health effect, based on the
relative duration and extent of the exposure prior to the Closing Date as
compared to the total duration and extent of the exposure.

Notwithstanding the foregoing, in no event shall Seller Environmental
Liabilities include any Hazardous Material which has or hereafter migrates onto
the Mountain View Facilities from any other property.

“Seller ERISA Plans” has the meaning set forth in Section 5.17(a).

“Seller’s Knowledge” means the actual knowledge of Seller’s executive officers
and senior management of the Business (including Ralph Dalla Betta and David
Yee) and such knowledge as would be reasonably expected to be known by such
individuals in the ordinary and usual course of the performance of their
professional responsibilities to Seller.

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“Seller Material Adverse Effect” means a material adverse effect on the
business, assets, Liabilities or financial condition of the Business taken as a
whole; provided, however, that none of the following shall be deemed, either
alone or in combination, to constitute a Seller Material Adverse Effect: any
change, event, state of facts, or effect resulting from or arising out of
(a) the announcement of this Agreement or the pendency of the transactions
contemplated hereby, including actions taken in connection with the separation
of the Business in furtherance of the transactions contemplated hereby, (b) the
performance by a Party of its obligations under this Agreement or as required by
applicable Laws or accounting requirements, (c) general economic conditions in
any country where the Business is conducted that do not disproportionately and
adversely affect the Business in any material respect, (d) general conditions in
any industry in which the Business is conducted that do not disproportionately
and adversely affect the Business in any material respect, or (e) any natural
disaster or any acts of terrorism, sabotage, military action or war (whether or
not declared) or any escalation or worsening thereof.

“Seller Welfare Plans” has the meaning set forth in Section 9.2(d).

“Statement of Income” has the meaning set forth in Schedule 5.5(a).

“Tax” means any and all domestic or foreign federal, state or local income,
franchise, business, occupation, sales/use, manufacturer’s excise, payroll,
withholding, Federal Insurance Contributions Act and employment and unemployment
taxes, personal and real property taxes and all other taxes or charges
(including all interest, penalties and additions to tax) measured, assessed,
levied, imposed or collected by any Governmental Authority, including any such
taxes or other charges the payment of which has been deferred.

“Tax Returns” means all Tax returns (including information returns) and reports
that are or were required to be filed by, or with respect to, a Person or its
income, properties or operations.

“Third Party Claim” has the meaning set forth in Section 8.3.

“Threshold” has the meaning set forth in Section 8.4.

“Total Consideration” has the meaning set forth in Section 3.2.

“Transferred Employees” has the meaning set forth in Section 9.1.

“Transition Services Agreement” means the Transition Services Agreement between
Buyer and Seller in substantially the form attached to the Agreement as Exhibit
E.

 

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