Exhibit 2
STOCK PURCHASE AGREEMENT
By and Among
Alpha Technologies Group, Inc.,
Uni-Star Industries, Inc.,
Tyco Electronics Corporation
and
Tyco Electronics UK Ltd.
July 28, 2000
ARTICLE 1. PURCHASE AND SALE OF SHARES.................................. 1
1.1 Purchase and Sale................................................ 1
ARTICLE 2. PURCHASE PRICE; INVENTORY; ADJUSTMENT........................ 2
2.1 Purchase Price................................................... 2
2.2 Payment of the Purchase Price.................................... 2
2.3 Determination of Inventory....................................... 2
2.4 Post-Closing Adjustment.......................................... 3
2.5 Transfer Taxes................................................... 4
ARTICLE 3. REPRESENTATIONS AND WARRANTIES............................... 4
3.1 Representations and Warranties of the Company and the Shareholder 4
3.1.1 Corporate Organization and Standing.............................. 5
3.1.2 Capitalization of the Company.................................... 5
3.1.3 Authorization.................................................... 6
3.1.4 No Conflict...................................................... 6
3.1.5 Financial Statements............................................. 6
3.1.6 Insurance........................................................ 7
3.1.7 Litigation....................................................... 7
3.1.8 Licenses and Permits; Compliance with Laws....................... 8
3.1.9 Tax Matters...................................................... 8
3.1.10 Brokers, Finders................................................. 11
3.1.11 Absence of Certain Changes....................................... 11
3.1.12 Real Properties.................................................. 13
3.1.13 Material Contracts............................................... 14
3.1.14 Intellectual Property Rights..................................... 14
3.1.15 Labor Matters.................................................... 15
3.1.16 No Consent....................................................... 16
3.1.17 Employee Benefit Plans; Employment Agreements.................... 16
3.1.18 Product Liability and Recalls.................................... 18
3.1.19 Books and Records................................................ 19
3.1.20 Personal Property................................................ 19
3.1.21 Environmental Matters............................................ 20
3.1.22 Customers and Suppliers.......................................... 21
3.1.23 Product Warranty................................................. 21
3.1.24 Certain Agreements............................................... 22
3.1.25 Inventory........................................................ 22
3.1.26 Notes and Accounts Receivable.................................... 22
3.1.27 Powers of Attorney............................................... 22
3.1.28 Bank Accounts; Safe Deposit Boxes................................ 23
3.1.29 Guaranties....................................................... 23
3.1.30 Certain Business Relationships with the Company or its 23
Subsidiaries.....................................................
3.1.31 Undisclosed Liabilities.......................................... 23
3.1.32 Restrictions on Business Activities.............................. 23
3.1.33 Subsidiaries..................................................... 24
3.1.34 Federal Tax Identification Number................................ 24
3.2 Representations and Warranties of The Shareholder................
3.2.1 Approvals, etc................................................... 24
3.2.2 Authorization.................................................... 24
3.2.3 No Conflict......................................................
3.2.4 Title to Shares.................................................. 24
3.3 Disclaimer of Other Representations and Warranties............... 25
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3.4 Definition of "Best Knowledge"................................... 25
ARTICLE 4. REPRESENTATIONS AND WARRANTIES OF THE PURCHASER.............. 25
4.1 Representations and Warranties................................... 25
4.1.1 Organization and Standing........................................ 25
4.1.2 Authorization.................................................... 25
4.1.3 Compliance....................................................... 26
4.1.4 Investment Only.................................................. 26
4.1.5 Litigation....................................................... 26
4.1.6 Brokers, Finders................................................. 26
4.1.7 Approvals, etc................................................... 27
4.1.8 Financial Condition.............................................. 27
ARTICLE 5. COVENANTS AND AGREEMENTS..................................... 27
5.1 Employees........................................................ 27
5.1.1 Employment Status................................................ 27
5.1.2 Employee Benefits; Crediting of Service..........................
5.1.3 Liability with Respect to Certain Benefit Obligations............ 28
5.1.4 Required Documentation........................................... 29
5.2 Performance of the Company's and its Subsidiaries' Obligations... 29
5.3 Reasonable Best Efforts to Close................................. 29
5.4 Disclosures...................................................... 30
5.5 Books, Records and Information................................... 30
5.6 Tax Matters...................................................... 31
5.7 Non-Competition Agreement........................................ 35
ARTICLE 6. CONDUCT OF BUSINESS PENDING CLOSING.......................... 35
6.1 Conduct of Business Pending Closing.............................. 35
6.1.1 Conduct of Business in Ordinary Course........................... 36
6.1.2 No Changes to Organization Documents............................. 36
6.1.3 Changes to Capital Stock......................................... 36
6.1.4 Dividends........................................................ 37
ARTICLE 7. CLOSING DATE, CONDITIONS AND TRANSACTIONS.................... 37
7.1 Closing Date and Place........................................... 37
7.2 Conditions Precedent to the Obligations of the Purchaser......... 38
7.2.1 No Injunctive Proceedings........................................ 38
7.2.2 Representations and Warranties................................... 38
7.2.3 Performance of Agreements; Instruments of Transfer............... 38
7.2.4 Compliance Certificate........................................... 38
7.2.5 Material Adverse Effect.......................................... 38
7.2.6 Opinion of Counsel............................................... 39
7.2.7 Consents, etc.................................................... 39
7.2.8 Due Diligence....................................................
7.3 Conditions Precedent to the Obligations of the Shareholder....... 39
7.3.1 No Injunctive Proceedings........................................ 39
7.3.2 Payment.......................................................... 40
7.3.3 Representations and Warranties................................... 40
7.3.4 Performance of Agreements; Instruments of Transfer............... 40
7.3.5 Compliance Certificate........................................... 40
7.3.6 Opinion of Counsel............................................... 40
7.3.7 Consents, etc.................................................... 40
7.4 Non-Compliance with and Termination of This Agreement............ 40
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ARTICLE 8. CLOSING DOCUMENTS............................................ 41
8.1 The Shareholder' Obligations..................................... 41
8.1.1 Resolutions...................................................... 41
8.1.2 Share Certificates............................................... 41
8.1.3 Books and Records................................................ 41
8.1.4 Resignations..................................................... 41
8.1.5 Compliance Certificate........................................... 41
8.1.6 Opinion of Counsel............................................... 41
8.1.7 Affidavits....................................................... 42
8.2 The Purchaser's Obligations...................................... 42
8.2.1 Payment.......................................................... 42
8.2.2 Compliance Certificate........................................... 42
8.2.3 Opinion of Counsel............................................... 42
8.3 Joint Obligations................................................
ARTICLE 9. INDEMNIFICATION.............................................. 42
9.1 Indemnification by the Shareholder............................... 42
9.2 Indemnification by the Purchaser................................. 42
9.3 Survival of Representations, Warranties and Covenants; 43
Threshold; Deductible............................................
9.4 Notice and Opportunity to Defend................................. 44
9.5 Reduction for Insurance.......................................... 45
9.6 Environmental Indemnification and Procedures..................... 45
9.7 Waivers by the Shareholder....................................... 46
ARTICLE 10. MISCELLANEOUS............................................... 47
10.1 Expenses......................................................... 47
10.2 Notices.......................................................... 48
10.3 Counterparts..................................................... 49
10.4 Entire Agreement................................................. 49
10.5 Headings......................................................... 49
10.6 Assignment; Amendment of Agreement............................... 49
10.7 Governing Law.................................................... 49
10.8 Failure to Close................................................. 50
10.9 Further Assurances............................................... 50
10.10 No Third Party Rights............................................ 50
10.11 Non-Waiver....................................................... 50
10.12 Severability..................................................... 51
10.13 Incorporation of Exhibits and Schedules.......................... 51
10.14 Waiver of Jury Trial............................................. 51
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STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT (this "Agreement"), dated as of the 28th
day of July, 2000, by and among Alpha Technologies Group, Inc. a Delaware
corporation (the "Shareholder"), Uni-Star Industries, Inc., a Delaware
corporation (the "Company"), Tyco Electronics Corporation, a Pennsylvania
corporation (the "U.S. Purchaser"), and Tyco Electronics UK Limited, a company
organized under the laws of England and Wales (the "U.K. Purchaser", and
together with the U.S. Purchaser, the "Purchasers").
W I T N E S S E T H; That
WHEREAS, the Shareholder owns all of the shares of the outstanding
capital stock of the Company (collectively, the " Uni-Star Shares"); and
WHEREAS, the Company owns all of the shares of the outstanding
capital stock of Microdot Connectors Europe Limited, a company organized under
the laws of England and Wales ("Microdot UK") (collectively, the "Microdot UK
Shares", and together with the Uni-Star Shares, the "Shares"); and
WHEREAS, the Shareholder desires to sell and transfer to the U.S.
Purchaser all of the Uni-Star Shares, and the U.S. Purchaser wishes to acquire
such Uni-Star Shares pursuant to and in accordance with the terms and conditions
of this Agreement; and
WHEREAS, the Company desires to sell and transfer to the U.K.
Purchaser all of the Microdot UK Shares, and the U.K. Purchaser wishes to
acquire such Microdot UK Shares pursuant to and in accordance with the terms
and conditions of this Agreement.
NOW, THEREFORE, in consideration of the premises and mutual covenants
and agreements herein set forth, the parties hereto hereby agree as follows:
ARTICLE 1. PURCHASE AND SALE OF SHARES.
1.1 PURCHASE AND SALE.
Subject to the terms and conditions of this Agreement, the U.S. Purchaser agrees
to purchase from the Shareholder, and the Shareholder on the Closing Date (as
defined in Section 7.1 hereof) agrees to sell, transfer and convey to the U.S.
Purchaser all of the Uni-Star Shares, and the U.K. Purchaser agrees to
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purchase from the Company, and the Company on the Closing Date agrees to sell,
transfer and convey to the U.K. Purchaser all of the Microdot UK Shares.
ARTICLE 2. PURCHASE PRICE; INVENTORY; ADJUSTMENT.
2.1 PURCHASE PRICE.
Subject to the adjustment provisions of Section 2.4 hereof, and upon the terms
and subject to the conditions contained in this Agreement, (i) the U.S.
Purchaser shall pay to the Shareholder the sum of Twelve Million Two Hundred
Forty Eight Thousand Dollars ($12,248,000), reduced by an amount equal to the
Company's indebtedness for borrowed money, other than up to $250,000 for
equipment loans and capital lease obligations, as of the Closing Date (the "U.S.
Purchase Price") in full consideration for the Uni-Star Shares, and (ii) the
U.K. Purchaser shall pay to the Company the sum of Fifty Two Thousand Dollars
($52,000), reduced by an amount equal to the Microdot UK's indebtedness for
borrowed money as of the Closing Date (the "U.K. Purchase Price", and together
with the U.S. Purchase Price, the "Purchase Price") in full consideration for
the Microdot UK Shares. The parties shall use their best efforts to jointly
develop an allocation of the Purchase.
2.2 PAYMENT OF THE PURCHASE PRICE.
At the Closing, (i) the U.K. Purchaser shall pay the U.K. Purchase Price to the
Company, which shall be immediately transferred to the Shareholder by the
Company by dividend or distribution, and (ii), immediately after the payment of
such dividend or distribution, the U.S. Purchaser shall pay the U.S. Purchase
Price to the Shareholder, in each case by wire transfer in immediately available
funds.
2.3 DETERMINATION OF INVENTORY.
The quantity and valuation of the inventory of the Company and Microdot UK (the
"Inventory") shall be determined as follows:
(a) The value of the Inventory as of the Closing Date shall be
determined from the books and records of the Company and Microdot UK, including
without limitation the results of a physical inventory of Microdot UK's
inventory as of June 30, 2000. A physical inventory of the Company's inventory
shall be taken within three business days after the Closing Date, and the books
and records of the Company and Microdot UK shall be adjusted for Inventory
quantities as of the Closing, and such Inventory shall be valued in accordance
with paragraph (b) of this Section 2.3. Such physical inventory of the
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Company's inventory shall be conducted by the Shareholder's representatives at
the Shareholder's expense jointly with the Purchaser's representatives at the
Purchaser's expense.
(b) The Inventory reflected on the Contract Net Asset Statement (as
defined in Section 2.4.1 hereof) and the Final Net Asset Statement (as defined
in Section 2.4.1 hereof) shall be determined in accordance with generally
accepted accounting principles consistently applied ("GAAP").
(c) Any disagreement regarding the quantity or value of the Inventory,
or both, shall be resolved in the manner and at the time described in Section
2.4.1 hereof.
2.4 POST-CLOSING ADJUSTMENT.
2.4.1 The Purchase Price will be adjusted downward dollar for dollar
following the Closing Date to the extent that the Net Assets (as hereinafter
defined) of the Company and Microdot UK as of the Closing Date (the "Final Net
Assets") shown upon the Final Net Asset Statement (as hereinafter defined) are
less than $3,986,000 (the "Contract Net Assets"), which represents the Net
Assets as of October 31, 1999. The manner in which the Contract Net Assets were
determined is shown on Schedule 2.4.1 attached hereto and made a part hereof
(the "Contract Net Asset Statement"). For purposes of this Agreement, the term
"Net Assets" shall mean the consolidated assets of the Company and Microdot UK,
exclusive of any intercompany obligations to or from the Shareholder, minus
cash, trade payables, accrued compensation and benefits, other accrued
liabilities, and equipment loans, capital leases and any other indebtedness for
borrowed money. The Final Net Asset Statement will be prepared by the
Shareholder from the books of account of the Company and Microdot UK as of the
Closing Date, in accordance with GAAP consistent with the past practice of the
Company. The Shareholder will furnish a statement showing the Final Net Assets
(the "Final Net Asset Statement") to the U.S. Purchaser not later than 60 days
after the Closing Date. The Purchasers will give representatives of the
Shareholder reasonable access to the premises of the Company and Microdot UK, to
their respective books and records and to the appropriate personnel of the
Purchasers for purposes of determining the Final Net Asset Statement. Unless
the U.S. Purchaser notifies the Shareholder in writing that it disagrees with
the Final Net Asset Statement within 30 days after receipt thereof, the Final
Net Asset Statement shall be conclusive and binding on the Purchasers and the
Shareholder. If the U.S. Purchaser notifies (a "Dispute Notification") the
Shareholder in writing of its disagreement with the Final Net Asset Statement
within such 30-day period, then the Purchasers and the Shareholder shall attempt
to resolve their differences with respect thereto within 30 days after the
Shareholder's receipt of the U.S. Purchaser's written notice of disagreement.
Any dispute set forth in the
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Dispute Notification not resolved by the Purchasers and the Shareholder within
such 30-day period will be resolved by an accounting firm mutually acceptable to
the parties or, in the absence of agreement, by an accounting firm of national
reputation selected by lot after eliminating the Shareholder's and the
Purchasers' principal outside accountants and one additional firm designated as
objectionable by the Shareholder and the U.S. Purchaser. The review of the Final
Net Asset Statement by the accounting so selected shall be limited to the issues
set forth in the Dispute Notice. The determination by the accounting firm so
selected of the Final Net Asset Statement and the Final Net Assets (with such
modifications therein, if any, as reflect such determination) shall be
conclusive and binding upon the parties. The fees and expenses of such
accounting firm in acting under this Section 2.4.1 shall be shared equally by
the U.S. Purchaser and the Shareholder.
2.4.2 If the Contract Net Assets are greater than the Final Net
Assets, then the Shareholder shall pay to the U.S. Purchaser an amount equal to
the difference. Payment shall be made by the Shareholder not more than five
business days following the determination of the Final Net Assets pursuant to
Section 2.4.1 hereof in the manner described in Section 2.2 hereof, and the
amount of such payment shall bear interest from the Closing Date to the date of
payment at the 3-month London Inter-bank Offered Rate as published in the Wall
Street Journal on the Closing Date ("LIBOR").
2.5 TRANSFER TAXES.
The Shareholder shall be responsible for all transfer and similar taxes assessed
or payable in connection with or as a result of the transfer of the Uni-Star
Shares from the Shareholder to the Purchaser, and the U.K. Purchaser shall be
responsible for all transfer and similar taxes assessed or payable in connection
with or as a result of the transfer of the Microdot UK Shares from the Company
to the U.K. Purchaser.
ARTICLE 3. REPRESENTATIONS AND WARRANTIES.
3.1 REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND THE Shareholder.
Each of the Company and the Shareholder jointly and severally represent and
warrant to the Purchaser as follows:
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3.1.1 Corporate Organization and Standing.
The Company has no subsidiaries other than Microdot UK. Each of the Company and
Microdot UK is a corporation duly organized, validly existing and in good
standing under the laws of the jurisdiction of its incorporation and has the
requisite corporate power and authority necessary to own or lease and operate
the properties and to carry on its business as presently conducted. The Company
has delivered to the Purchaser complete and correct copies of the Articles of
Incorporation and by-laws of the Company and the Memorandum of Association and
Articles of Association of Microdot UK. The Company and Microdot UK are duly
qualified, licensed or registered to do business in each of the jurisdictions
set forth in Schedule 3.1.1 hereto, which are the only jurisdictions in which
the nature of the business as now being conducted by it or the property owned or
leased by it makes such qualification, licensing or registration necessary
except where the failure to be so qualified would not have a Material Adverse
Effect. Except as set forth in Schedule 3.1.1 hereto, the Company does not
directly or indirectly own any equity or similar interest in, or any interest
convertible into or exchangeable or exercisable for any equity or similar
interest in, any corporation, partnership, joint venture or other business
association or entity. For purposes of this Agreement, "Material Adverse
Effect" means any change, effect or circumstance that, individually or when
taken together with all other changes, effects or circumstances that have
occurred prior to the date of determination of the occurrence of the Material
Adverse Effect, is or is reasonably likely to be materially adverse to the
business, assets (including intangible assets), financial condition, prospects
or results of operation of the Company and Microdot UK taken as a whole.
3.1.2 Capitalization of the Company.
The authorized capital stock of the Company consists of 1,000 shares of common
stock, $.01 par value, of which 100 shares have been duly authorized, validly
issued and are fully paid and non-assessable and owned by the Shareholder, free
and clear of all liens, encumbrances, restrictions and claims of any kind. The
authorized ordinary shares of Microdot UK consists of 1,000,000 ordinary shares,
1 English Pound par value, of which 231,000 ordinary shares have been duly
authorized, validly issued and are fully paid and non-assessable and owned by
the Company, free and clear of all liens, encumbrances, restrictions and claims
of any kind, other than those to be released at Closing. There are no
preemptive or similar rights on the part of any holder of any class of
securities of the Company, or obligating the Company to issue or sell any shares
of capital stock of, or other equity interests in, the Company. No options,
warrants, conversion or other rights, agreements or commitments of any kind
obligating the Company or Microdot UK,
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contingently or otherwise, to issue or sell any shares of its capital stock of
any class or any securities convertible into or exchangeable for any such
shares, are outstanding, and no authorization therefor has been given.
3.1.3 Authorization.
The Shareholder and the Company have all necessary corporate power and authority
to enter into this Agreement and to perform their respective obligations
hereunder and to consummate the transactions contemplated hereby. This
Agreement has been duly executed and delivered by the Shareholder and the
Company and is the valid and binding obligation of the Shareholder and the
Company enforceable against each of them in accordance with its terms, except as
enforcement may be limited by equitable principles limiting the right to obtain
specific performance or other equitable remedies, or by applicable bankruptcy or
insolvency laws and related decisions affecting creditors' rights generally.
3.1.4 No Conflict.
Except as set forth in Schedule 3.1.4 attached hereto and made a part hereof,
neither the execution and delivery of this Agreement nor the consummation of the
transactions contemplated hereby will (i) result in the acceleration of, or the
creation in any party of any right to accelerate, terminate, modify or cancel
any material indenture, contract, lease, sublease, loan agreement, note or other
obligation or liability to which the Shareholder, the Company or Microdot UK is
a party or by which it is bound or to which any of its assets is subject, (ii)
conflict with or result in a breach of or constitute a default under any
provision of the Articles of Incorporation or Bylaws (or other charter
documents) of the Shareholder, the Company or Microdot UK, or a default under or
violation of any material restriction, lien, encumbrance, indenture, contract,
lease, sublease, loan agreement, note or other obligation or liability to which
it is a party or by which it is bound or to which any of its assets is subject
or result in the creation of any lien or encumbrance upon any of said assets, or
(iii) violate or result in a breach of or constitute a default under any
judgment, order, decree, rule or regulation of any court or governmental agency
to which the Shareholder, the Company or Microdot UK is subject, and which, in
each of clauses (i), (ii) and (iii) above, would have a Material Adverse Effect.
3.1.5 Financial Statements.
(a) Except as set forth in Schedule 3.1.5, the balance sheet of the
Company on a consolidated basis from which the Contract Net Asset Statement was
derived was prepared in accordance
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with GAAP, and fairly presents the assets and liabilities (whether accrued,
contingent or otherwise) of the Company at October 31, 1999 and Microdot UK at
September 30, 1999. Except as set forth on such balance sheet or in, or
consistent with, Schedule 3.1.5 attached hereto and made a part hereof, as of
the date hereof and the Closing Date, the Company and Microdot UK have, and will
have, no material liabilities of any nature, whether absolute, accrued, asserted
or unasserted or contingent or whether due or to become due, required by GAAP to
be included on a balance sheet as of such date(s), except for those liabilities
incurred in the ordinary course of business since October 31, 1999 in the case
of the Company and September 30, 1999 in the case of Microdot UK.
(b) Except as set forth in Schedule 3.1.5 attached hereto and made a
part hereof, the unaudited consolidated income statements of the Company for the
12-month periods ended October 31, 1998 and 1999, and the unaudited consolidated
income statement for the six-month period ended April 30, 2000, copies of which
have been furnished to the Purchaser, were prepared in accordance with GAAP on a
consistent basis and fairly present the results of the consolidated operations
of the Company for such periods.
3.1.6 Insurance.
Schedule 3.1.6 attached hereto and made a part hereof sets forth a complete and
correct list and description of the policies of insurance in effect on the date
hereof covering the assets and operations of the Company and Microdot UK. Such
policies are carried by the Shareholder and will be terminated as of the Closing
with respect to the Company and Microdot UK. All such policies are with
reputable insurance carriers, provide coverage for the normal risks incident to
the business of the Company and Microdot UK and their respective properties and
assets. None of the Shareholder, the Company or Microdot UK has been denied
insurance or suffered the cancellation of any insurance with respect to the
Company or Microdot UK in the past five years.
3.1.7 Litigation.
Except as set forth in Schedule 3.1.7 attached hereto and made a part hereof,
there is no claim, action, suit, proceeding, or investigation pending or, to the
best knowledge of the Company or the Shareholder, threatened against the Company
or Microdot UK, or the directors, officers, agents or employees of the Company
or Microdot UK, or any properties, assets or rights of the Company or Microdot
UK, and there are no orders, writs, injunctions or decrees currently in force
against the Company or Microdot UK or the
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directors, officers, agents or employees of the Company or Microdot UK with
respect to the conduct of the Company's or Microdot UK's business.
3.1.8 Licenses and Permits; Compliance with Laws.
Except as set forth in Schedule 3.1.8 attached hereto and made a part hereof,
the Company and Microdot UK own, hold or possess in their own names, all
licenses, franchises, permits, approvals and other governmental authorizations
(federal, state and local) (collectively, "Licenses and Permits") necessary to
entitle them to use their respective corporate names, to own or lease, operate
and use their respective assets and properties and to carry on and conduct their
respective businesses and operations as presently conducted, except for such
Licenses and Permits the absence of which would not have a Material Adverse
Effect. The Company and Microdot UK are not in violation of or default under
any Licenses or Permits or any judgment, order, writ, injunction or decree of
any court or administrative agency issued against it or any law, ordinance, rule
or regulation applicable to it, which could reasonably be expected individually
or in the aggregate to have a Material Adverse Effect or which could reasonably
be expected to interfere materially with the consummation of the transactions
contemplated herein. Schedule 3.1.8 hereto sets forth a complete and correct
list of all Licenses and Permits related to the design, manufacture and
marketing of products by the Company or Microdot UK, all of which are in full
force and effect as of the date hereof.
3.1.9 Tax Matters.
(a) For purposes of this Agreement, (i) "Tax" means any of the Taxes,
and "Taxes" means (A) all net income, capital gains, gross income, gross
receipts, sales, use, ad valorem, franchise, capital, profits, license, and
other withholding, employment, social security, payroll, transfer, conveyance,
documentary, stamp, property, value added, customs duties, minimum taxes,
estimated and any other taxes, fees, charges, levies, excises, duties or
assessments of any kind whatsoever, together with additions to tax or additional
amounts, interest and penalties relating thereto that may be imposed by the
federal government or any state, local, or foreign government, and (B) any
liability of the Company or Microdot UK for the payment of any amount of any
type described in clause (A) as a result of the Company or Microdot UK being a
transferee or a member of an affiliated or combined group prior to the Closing,
(ii) "Tax Returns" means all returns, reports, statements, and forms required to
be filed in respect of any Tax, and (iii) "Code" means the Internal Revenue Code
of 1986, as amended, including the rules and regulations thereunder and any
substitute or successor provisions.
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(b) Except as set forth on Schedule 3.1.9(b) attached hereto and made
a part hereof:
(i) the Company and Microdot UK have: (A) timely filed all
federal, foreign, state, and local Tax Returns required to be filed by or
with respect to the Company and Microdot UK on or prior to the Closing Date
and all such Tax Returns are true, complete and correct in all material
respects; and (B) timely paid in full or accrued on the Final Net Asset
Statement all Taxes due, or for which assessments have been received, for
all periods ending on or prior to the Closing Date.
(ii) Neither the Company nor Microdot UK is a party to any
pending action or proceeding, nor, to the best knowledge of the Shareholder
or the Company, is any action or proceeding threatened, by any governmental
authority for the assessment or collection of any Taxes, and no claim for
the assessment or collection of any Taxes has been asserted or proposed to
be asserted against the Company or Microdot UK, which has not been settled
with all amounts due having been paid or is being contested in good faith.
Neither the Company nor Microdot is engaged in any material discussions
with any taxing authority which is reasonably likely to result in the
assessment of additional Taxes against the Company or Microdot UK or their
respective properties.
(iii) The federal income tax returns of the Company have not
been audited by the IRS for any taxable year of its existence. The statute
of limitations period for assessment of federal income taxes has expired
for all taxable years through the taxable year ending October 27, 1996.
(iv) There are no agreements, waivers, or other arrangements
providing for an extension of time with respect to the filing of any Tax
Returns or for the assessment of any Tax or deficiency against or relating
to the Company or Microdot UK. There are no outstanding powers of attorney
enabling any party to represent the Company or Microdot UK with respect to
Tax matters.
(v) The Company and Microdot UK have withheld prior to Closing,
proper and accurate amounts from employees of the Company and Microdot UK
in compliance in all material respects with all withholding and similar
provisions of any and all applicable federal, foreign, state, and local
laws, statutes, codes, ordinances, rules, and regulations. All such amounts
have been timely remitted to the proper governmental authority as
prescribed by law.
(vi) All other Taxes required to have been withheld or collected
by the Company or Microdot UK have been duly withheld and collected and
have been duly paid over to the proper governmental authority, or settled
or adequately reserved for on the Final Net Asset Statement, all as and to
the extent prescribed by law.
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(vii) All Taxes due from the Company or Microdot UK with respect
to Company or Microdot UK employee income tax withholding, social security
taxes, unemployment, and any similar Taxes for all periods ending on or
prior to the Closing Date have been either paid in full on or prior to the
Closing Date or accrued as a liability on the Final Net Asset Statement.
(viii) The reserves for Taxes on the Contract and Final Net
Asset Statements are sufficient for the payment of all unpaid Taxes
required to be accrued for through the dates of such Statements and for all
periods prior thereto, including, without limitation, all Taxes, if any,
which are not required to be paid until after such dates but which are
imposed in respect of any period or periods prior to the dates of such
Statements.
(ix) Neither the Company nor Microdot UK is a party to any
agreement, arrangement, or practice for the sharing of Taxes or is
obligated to indemnify any other party for Taxes.
(x) There are no liens for Taxes on any asset of the Company or
Microdot UK, other than for Taxes not yet due and payable.
(xi) Neither the Company, Microdot UK nor any of the Shareholder
is a party to any agreement, contract, arrangement, or plan that has
resulted or would result, separately or in the aggregate, in the payment of
any "excess parachute payments" within the meaning of Section 280G of the
Code.
(xii) The Company is not, and has never been, a United States
real property holding company within the meaning of Section 897(c) of the
Code. (xiii) The Company is not subject to an agreement or consent under
Section 341(f) of the Code.
(xiv) The Company will not be required to include any adjustment
in taxable income for any period ending after the Closing under Section 481
of the Code (or under any similar provision of the Tax laws of any
jurisdiction) as a result of a change in the method of accounting for a
period ending on or before the Closing or pursuant to an agreement with a
Tax authority with regard to the Tax liability of the Company or Microdot
UK for any period ending on or before the Closing.
(xv) None of the Company's property is "tax exempt use property"
within the meaning of Section 168(h) of the Code.
(xvi) None of the assets owned by the Company is required to be
treated as owned by any other person for federal income tax purposes.
10
(xvii) Neither the Company nor Microdot UK is a party to any
joint venture, partnership or other arrangement or contract which could be
properly treated as a partnership for federal income tax purposes.
(xviii) Neither the Company nor Microdot UK has entered into any
sale-leaseback or any leveraged lease transaction that fails to satisfy the
requirements of Revenue Procedure 75-21 (or similar provisions of foreign
law).
(xix) Neither the Company nor Microdot UK is liable with respect
to any indebtedness the interest of which is not deductible for applicable
federal, foreign, state or local income tax purposes.
(xx) The Shareholder has filed a consolidated federal income tax
return with the Company for the taxable year immediately preceding the
current taxable year and that the Shareholder is eligible to make an
election under Section 338(h)(10) of the Code (and any comparable election
under state or local law) (a "Section 338(h)(10) Election") with respect to
the Company.
3.1.10 Brokers, Finders.
Except for JWGenesis Capital Markets, Inc., whose fees for their work in
connection with the sale of the Company to the Purchaser shall be paid by the
Shareholder, neither the Company nor the Shareholder has retained any broker or
finder in connection with the transactions contemplated herein or is obligated
or has agreed to pay any brokerage or finder's commission, fee or similar
compensation.
3.1.11 Absence of Certain Changes.
(a) Since April 30, 2000, except as set forth in Schedule 3.1.11
attached hereto and made a part hereof, each of the Company and Microdot UK has
conducted its business in the ordinary course and there has not occurred with
respect to any of the Company or Microdot UK:
(i) any Material Adverse Effect;
(ii) any payment, discharge or satisfaction of any liabilities
or obligations (whether accrued, absolute, contingent or otherwise) in
excess of $25,000, other than the payment, discharge or satisfaction, in
the ordinary course of business, of liabilities or obligations incurred in
the ordinary course of business;
11
(iii) except in the ordinary course of business, any assets
(whether real, personal or mixed, tangible or intangible) becoming subject
to any mortgage, pledge, lien, security interest, encumbrance, restriction
or charge of any kind;
(iv) any cancellation or waiver of any claims or rights of
value, or any sale, lease, transfer, assignment, distribution or other
disposition of any material assets, except for sales of finished goods
inventory in the ordinary course of business, or any disposal of any
material assets for any amount to affiliates;
(v) any disposal or lapse of any rights in, to or for the use of
any patent, trademark, trade name or copyright, or any disclosure to any
person not an employee, or other disposition of, any customer lists;
(vi) any increase in the base compensation or other payment to
any director, officer or employee, whether now or hereafter payable or
granted (other than increases in base compensation in the ordinary course
consistent in timing and amount with past practices), or entry into or
variation of the terms of any employment or incentive agreement with any
such person;
(vii) any capital expenditure or commitment for additions to
property, plant or equipment, or lease agreement, which exceeds $25,000 and
which, if purchased, would be reflected in the property, plant or equipment
accounts;
(viii) any change in any method of accounting or keeping its
books of account or accounting practices;
(ix) any damage, destruction or loss of any asset, whether or
not covered by insurance, which exceeds $25,000;
(x) except liabilities incurred in the ordinary course of
business, any obligation or liability, including, without limitation, any
liability for nonperformance or termination of any contract;
(xi) any sale or other disposition of any of the assets of the
Company other than sales and dispositions in the ordinary course of
business; or
(xii) any elimination of any reserves established on the
Company's books or any changing of the method of accrual unless there is
any change of significant facts or circumstances pertaining to any reserves
which would justify their elimination.
12
(b) Since April 30, 2000, except as set forth in Schedule 3.1.11 hereto,
the Company and Microdot UK has not:
(i) authorized for issuance, issued, delivered or sold any equity
securities of the Company or Microdot UK, or altered the terms of any
outstanding securities issued by it or in any way increased its indebtedness for
borrowed money; or
(ii) declared, paid or set aside for payment any dividend or other
distribution (whether in cash, stock or property or otherwise) in respect of any
Shares, including, without limitation, any dividend distribution or any similar
distribution, or redeemed, purchased or otherwise acquired any Shares, any
securities convertible into or exchangeable for any Shares, or any options,
warrants or other rights to purchase or subscribe to any of the foregoing (and
no dividends are or will be owed to any holder of Shares), except for any
dividend or distribution payable in cash which will not cause the Final Net
Assets to be less than the Contract Net Assets.
3.1.12 Real Properties.
Neither the Company nor Microdot UK owns any real property. Schedule 3.1.12
attached hereto and made a part hereof sets forth a complete and correct list of
all leases pursuant to which the Company or Microdot UK leases real property as
lessee hereto (the "Real Property Leases"). The Company and Microdot UK has or
will have at the Closing valid leasehold interests in all real properties
covered by the Real Properties Leases, in each case free and clear of all
mortgages, liens, charges, encumbrances, easements, security interests or title
imperfections other than (i) those listed in Schedule 3.1.12 hereto, (ii) liens
for current taxes, assessments or governmental charges not yet due and
delinquent, and (iii) those which do not, individually or in the aggregate,
materially interfere with the use of the real properties or materially detract
from their value. The Company and Microdot UK enjoy peaceful and undisturbed
possession under all Real Property Leases. The lease of real property by the
Company or Microdot UK or the use thereof, as presently used by the Company and
Microdot UK, does not violate any local zoning or similar land use laws or
governmental regulations which if violated would have a Material Adverse Effect.
Neither the Company nor Microdot UK is in violation of or in noncompliance with
any covenant, condition, restriction, order or easement affecting the real
property leased by the Company or Microdot UK where such violation or
noncompliance would have a Material Adverse Effect. There is no condemnation
pending or, to the best knowledge of the Shareholder or the Company, threatened
affecting the real property leased by the
13
Company or Microdot UK. The Shareholder has delivered to the Purchasers prior to
the date hereof complete and correct copies of the Real Property Leases listed
in Schedule 3.1.12 hereto.
3.1.13 Material Contracts.
Schedule 3.1.13 attached hereto and made a part hereof sets forth a complete and
correct list of all of the Material Contracts (as hereinafter defined) to which
the Company or Microdot UK is a party or to which any of the Shareholder is a
party and that relate to the business of the Company or Microdot UK as of the
date hereof. As used in this Agreement, "Material Contracts" means (a) all
leases or other agreements under which the Company or Microdot UK is lessee of,
or holds or operates, any machinery, equipment, vehicle or other tangible
personal property owned by a third party and used in the business of the Company
or Microdot UK and which entails annual payments, in the case of any such lease
or agreement, in excess of $10,000; (b) all contracts and agreements to which
the Company or Microdot UK is a party and which are (i) outstanding contracts
with its officers, employees, agents, consultants, advisors, salesmen, sales
representatives, distributors, sales agents or dealers of the Company or
Microdot UK, other than contracts which by their terms are cancelable by the
Company, Microdot UK, or the Shareholder with notice of not more than 30 days
and without cancellation penalties or severance payments, in the case of any
such contract, in excess of $10,000, and (ii) collective bargaining agreements
of the Company or Microdot UK which relate to the business of the Company or
Microdot UK; (c) all mortgages, indentures, security agreements, pledges, notes,
loan agreements or guarantees relating to the Company or Microdot UK in excess
of $10,000; (d) all customer contracts relating to the business of the Company
or Microdot UK which are expected to result in a material loss to the Company or
Microdot UK; (e) all material uncompleted customer contracts relating to the
business of the Company or Microdot UK and not priced in a manner consistent
with the Company's or Microdot UK' past practice; and (f) all outstanding
contracts with customers or vendors expected to result in payment to or by the
Company or Microdot UK in excess of $50,000. Each of the Company and Microdot
UK has furnished or will furnish to the Purchaser true and correct copies of all
Material Contracts prior to the Closing.
3.1.14 Intellectual Property Rights.
Except as set forth in Schedule 3.1.14 attached hereto and made a part hereof,
the Company and Microdot UK solely owns or has the exclusive right to use, free
and clear of any lien or other encumbrance or restriction, all patents,
trademarks (whether registered or unregistered), service marks, trade names,
service
14
names, brand names, logos and copyrights (collectively, "Intellectual Property
Rights") owned or used by the Company and Microdot UK in the conduct of their
respective businesses. Schedule 3.1.14 hereto sets forth a complete and correct
list of all such Intellectual Property Rights and their respective legal status
(including whether such rights are the subject of a license). Except as set
forth in Schedule 3.1.14 hereto, there is no claim or demand of any person
pertaining to, or any proceeding pending or, to the best knowledge of the
Shareholder or the Company, threatened, which challenges the exclusive rights of
the Company or Microdot UK in respect of (i) the Intellectual Property Rights or
(ii) the rights of the Company or Microdot UK in respect of any material trade
secret owned or used by the Company or Microdot UK in the conduct of the
Company's or Microdot UK' businesses. None of the Intellectual Property Rights
is subject to any outstanding order, ruling, decree, judgment or stipulation by
or with any court, arbitrator or administrative agency. To the best knowledge of
the Shareholder and the Company, none of the products manufactured, distributed
and sold by the Company and Microdot UK infringe any Intellectual Property
Rights held, owned or used by any third party and, to the best knowledge of the
Shareholder or the Company, none of the Intellectual Property Rights held, owned
or used by the Company or Microdot UK are being infringed upon by others or used
by others, whether or not such use constitutes infringement, or has been the
subject of dispute, whether or not resulting in litigation, except for orders,
rulings, decrees, judgments, stipulations alleged infringements or disputes set
forth in Schedule 3.1.14 hereto.
3.1.15 Labor Matters.
(a) There are no (i) labor strikes, disputes, slowdowns,
representation campaigns or work stoppages with respect to employees of the
Company or Microdot UK pending or, to the best knowledge of the Company and the
Shareholder, threatened against or affecting the Company or Microdot UK, (ii)
grievance or arbitration proceedings arising out of collective bargaining
agreements to which the Company or Microdot UK is a party (other than informal
grievances), (iii) unfair labor practice complaints pending or, to the best
knowledge of the Company and the Shareholder, threatened against the Company or
Microdot UK, or (iv) collective bargaining agreements or other labor union
contracts applicable to persons employed by the Company or Microdot UK and to
the best knowledge of the Company or the Shareholder, there are no activities or
proceedings of any labor union to organize any such employees.
(b) Each of the Company and Microdot UK is in material compliance with
all applicable laws respecting employment and employment practices, terms and
conditions of employment and
15
wages and hours the noncompliance with which is reasonably likely to have an
Material Adverse Effect, and is not engaged in any unfair labor practice.
3.1.16 No Consent.
Except as set forth in Schedule 3.1.16 attached hereto and made a part hereof,
no consent, approval, authorization order, filing, registration or qualification
of or with any court, governmental authority or third person is required to be
made or obtained by the Company, Microdot UK, or the Shareholder in connection
with the execution and delivery of this Agreement by the Company, Microdot UK,
or the Shareholder or the consummation by the Company, Microdot UK, or the
Shareholder of the transactions contemplated hereby.
3.1.17 Employee Benefit Plans; Employment Agreements.
(a) Schedule 3.1.17 attached hereto and made a part hereof sets forth
a complete and correct list of all employee contracts, arrangements and
"employee welfare benefit" or "employee pension benefit" plans sponsored,
maintained or contributed to by the Company or Microdot UK, as such terms are
defined in Sections 3(1) and 3(2), respectively, of the Employee Retirement
Income Security Act of 1974, as amended ("ERISA") (collectively, the "Plans"),
which Schedule includes, without limitation, all collective bargaining,
employment, compensation, pension, retirement, separation, vacation, sickness,
insurance, welfare, workers' compensation, profit sharing and bonus plans and
agreements, under which the Company or Microdot UK, with respect to any
employee, former employee director or beneficiary of the Company or Microdot UK,
have any obligation. The Company has furnished to the Purchaser true and
correct copies of instruments evidencing all such contracts and arrangements and
the Plans, all as amended to date. Neither the Company nor Microdot UK has ever
maintained or sponsored, or has ever had any obligation to contribute to, any
defined benefit pension plan.
(b) None of the Plans is a multi-employer plan within the meaning of
Section 3(37) of ERISA, and the Company, Microdot UK, and the Shareholder have
not maintained or sponsored, have not been required to contribute to, have not
terminated or withdrawn from (either completely or partially), and no withdrawal
liability (as defined in Section 4201, 4063 or 4064 of ERISA) has been incurred
by the Company or Microdot UK with respect to, any defined benefit plan or
multi-employer plan, whether or not maintained by the Company.
(c) The Plans have been administered in material compliance with their
terms and with all filings, reporting, disclosure, and other requirements of
ERISA and the Internal Revenue Code of
16
1986, as amended (the "Code"). Each Plan (together with its related funding
instrument) which is an employee pension benefit plan is qualified under Section
401 of the Code and the regulations issued thereunder, and each such Plan and
its related funding instrument have been the subject of a favorable
determination letter issued by the Internal Revenue Service holding that such
Plan and funding instrument are so qualified. A copy of all determination
letters, which have been issued by the Internal Revenue Service with respect to
each Plan which is an employee pension benefit plan, has been provided to the
Purchaser by the Shareholder. No event or omission has occurred which would
cause any Plan to lose its qualification or otherwise fail to satisfy the
relevant requirements to provide tax-favored benefits under the applicable Code
Section (including without limitation Code Sections 105, 125, 401(a) and
501(c)(9)).
(d) None of the Plans which is an employee welfare benefit plan
provides benefits to retirees or other former employees of the Company,
regardless of whether such benefits are vested and neither the Company nor the
Shareholder have terminated any employee welfare benefit plan providing benefits
to retirees.
(e) Each Plan required to be listed on Schedule 3.1.17 may be amended,
terminated or otherwise modified by the Shareholder to the greatest extent
permitted by applicable law, including the elimination of any and all future
benefit accruals and no employee communications or provision of any Plan
document has failed to effectively reserve the right of the Company or an
Affiliate to so amend, terminate or otherwise modify such Plan. An entity is an
"Affiliate" of the Company if it would have ever been considered a single
employer with the Company under ERISA Section 4001(b) or part of the same
"controlled group" as the Company for purposes of ERISA Section 302(d)(8)(C).
(f) With respect to each Plan, neither the Company, Microdot UK, nor
any of their respective employees or directors, nor any plan fiduciary of any of
the Plans, has engaged in any transaction in violation of Section 406(a) or (b)
of ERISA or any "prohibited transaction" (as defined in Section 4975(c)(1) of
the Code) for which no exemption exists under Section 4975(d) of the Code, and
no "reportable event" (as defined in Section 4043 of ERISA and the regulations
promulgated thereunder), other than such as may arise out of the consummation of
the transactions contemplated by this Agreement, has occurred in connection with
any Plan.
(g) Other than routine claims for benefits made in the ordinary course
of business, there are no pending claims, investigations or causes of action
("Claims") and to the best knowledge of the Shareholder and the Company, no such
Claims are threatened against any Plan or fiduciary of any such
17
Plan by any participant, beneficiary or governmental agency with respect to the
qualification or administration of any such Plan and there is no basis to
anticipate that any such claims will be made. Each plan ever maintained by the
Company or an Affiliate has complied in all material respects with the
applicable notification and other applicable requirements of the Consolidated
Omnibus Budget Reconciliation Act of 1985, Health Insurance Portability and
Accountability Act of 1996, the Newborns' and Mothers' Health Protection Act of
1996, the Mental Health Parity Act of 1996, and the Women's Health and Cancer
Rights Act of 1998.
(h) The Company and Microdot UK shall either contribute or accrue on
their respective books the amount of any employer matching contributions or
discretionary contributions (in an amount determined in accordance with the
Company's, Microdot UK's, and the Shareholder's past practices) to any defined
contribution plan maintained or sponsored by the Company or Microdot UK, or in
which the Company or Microdot UK has any obligation to contribute and which is
in the ordinary course of business would be contributed for or attributable to
the period prior to the Closing Date.
(i) None of the assets any Plan are invested in property constituting
employer real property or an employer security (within the meaning of Section
407(d) of ERISA), other than voluntary investments in the Shareholder's common
stock by participants in the Shareholder's 401(k) plan, as permitted by the
terms of such plan.
(j) Neither the execution and delivery of this Agreement nor the sale
of the Shares or any of the transactions contemplated herein will terminate or
modify, or give a third person a right to terminate or modify, the provisions or
terms of any Plan (including employment agreements) and will not constitute a
stated triggered event under any Plan (including employment agreements) that
will result in any payment (including parachute payments, severance payments or
any similar payments) becoming due to any employees of the Company or any of its
Subsidiaries.
3.1.18 Product Liability and Recalls.
(a) There is no claim, action, suit, inquiry, proceeding or
investigation in any case by or before any court or governmental body pending
or, to the best knowledge of the Shareholder or the Company, threatened, against
or involving the Company or Microdot UK relating to any product alleged to have
been designed, manufactured or sold by the Company or Microdot UK and alleged to
have been defective or improperly designed or manufactured.
18
(b) Except as set forth in Schedule 3.1.18 hereto, there is no
pending, or to the best knowledge of the Company or the Shareholder, threatened
recall or investigation of any product sold by the Company or Microdot UK.
3.1.19 Books and Records.
The accounting records of the Company and Microdot UK are complete and correct
in all material respects and have been maintained in accordance with sound
business practices.
3.1.20 Personal Property.
Schedule 3.1.20 attached hereto and made a part hereof sets forth a complete and
correct list of all personal property owned by the Company and Microdot UK and
sets forth any lease pursuant to which the Company or Microdot UK lease personal
property as lessee or lessor (the "Personal Property Leases"). Except as set
forth in Schedule 3.1.20 hereto, each of the Company and Microdot UK has or will
have at the Closing (a) good and valid title to all of the personal property
listed in Schedule 3.1.20 hereto as owned by it, including, without limitation,
the personal property acquired after the date of this Agreement (except for
inventories and other assets sold or otherwise disposed of in accordance with
the provisions of this Agreement), and (b) valid leasehold interests in all
personal property listed in Schedule 3.1.20 hereto as leased by it, in each case
free and clear of all mortgages, liens, charges, encumbrances, easements,
security interests or title imperfections other than (i) those listed in
Schedule 3.1.20 hereto, (ii) mechanics, materialmen, suppliers, vendors or
similar liens arising in the ordinary course securing amounts which are not
delinquent, (iii) liens for current taxes, assessments or governmental charges
not yet due and delinquent, or (iv) those which do not, individually or in the
aggregate materially interfere with the use of the personal property or
materially detract from its value. The Company and Microdot UK enjoy peaceful
and undisturbed possession under all Personal Property Leases. The personal
property set forth in Schedule 3.1.20 hereto constitutes all personal property
used in the operation of the Company's and Microdot UK' businesses as presently
conducted. Except as set forth on Schedule 3.1.20 hereto, the personal property
is maintained in good operating condition, reasonable wear and tear excepted,
for the purposes for which it is currently being used. The Shareholder shall
deliver to the Purchaser prior to the Closing complete and correct copies of the
Personal Property Leases.
19
3.1.21 Environmental Matters.
(a) For purposes of this Agreement, the capitalized terms defined
below shall have the meanings ascribed to them below.
(i) "Environmental Law(s)" means all federal, state or local law
(including common law), statute, ordinance, rule, regulation, code, or
other requirement relating to the environment, natural resources, or public
or employee health and safety and includes, but is not limited to the
Comprehensive Environmental Response Compensation and Liability Act
("CERCLA"), 42 U.S.C. (S) 9601 et seq., the Hazardous Materials
Transportation Act, 49 U.S.C. (S) 1801 et seq., the Resource Conservation
and Recovery Act ("RCRA"), 42 U.S.C. (S) 6901 et seq., the Clean Water Act,
33 U.S.C. Section (S) 1251 et seq., the Clean Air Act, 42 U.S.C. (S) 7401
et seq., the Toxic Substance Control Act, 15 U.S.C. (S) 2601 et seq., the
Oil Pollution Act of 1990, 33 U.S.C. (S) 2701 et seq., and the Occupational
Safety and Health Act, 29 U.S.C. (S) 651 et seq., as such laws have been
amended or supplemented, and the regulations promulgated pursuant thereto,
and all analogous state or local statutes and any applicable transfer
statutes
(ii) "Environmental Permits" means all approvals,
authorizations, consents, permits, licenses, registrations and certificates
required by any applicable Environmental Law.
(iii) "Hazardous Substance(s)" means, without limitation, any
flammable explosives, radioactive materials, urea formaldehyde foam
insulation, polychlorinated biphenyls, petroleum and petroleum products
(including but not limited to waste petroleum and petroleum products),
methane, hazardous materials, hazardous wastes, pollutants, contaminants
and hazardous or toxic substances, as defined in or regulated under any
applicable Environmental Law.
(iv) "Release" means any past or present spilling, leaking,
pumping, pouring, emitting, emptying, discharging, injecting, escaping,
leaching, dumping or disposing of a Hazardous Substance into the
environment.
(b) Except as disclosed in Schedule 3.1.21 attached hereto and made a
part hereof, the Company and Microdot UK has obtained all Environmental Permits
that are required for the lawful operation of its business. The Company and
Microdot UK (i) are in compliance in all material respects with all terms and
conditions of their Environmental Permits and with any applicable Environmental
Law, and (ii) have not received written notice of any material violation by or
material claim against the Company or Microdot UK under any Environmental Law.
20
(c) Except as disclosed in Schedule 3.1.21 hereof, there have been no
Releases, or threatened Releases, of any Hazardous Substances into, on or under
any of the properties owned or operated (or formerly owned or operated) by the
Company or Microdot UK, in violation of any applicable Environmental Law.
(d) Except as disclosed in Schedule 3.1.21 hereof, neither the Company
nor Microdot UK has been identified as a potentially responsible party at any
federal or state National Priority List ("Superfund") site.
3.1.22 Customers and Suppliers.
Schedule 3.1.22 attached hereto and made a part hereof contains a list setting
forth the 10 largest customers of the Company, by dollar amount, over the eight
fiscal months ended July 2, 2000, and the 10 largest suppliers of the Company,
by dollar amount, over the eight fiscal months ended July 2, 2000. All purchase
and sale orders and other commitments for purchases and sales made by the
Company and Microdot UK have been made in the ordinary course of business in
accordance with past practices, and no payments have been made to any supplier
or customers or any of their respective representatives other than payments to
such suppliers or the payment of the invoiced price of supplies purchased or
goods sold in the ordinary course of business. The Company and Microdot UK does
not have any obligation to accept returns of products in excess of the reserve
for returns set forth in the Contract Net Asset Statement.
3.1.23 Product Warranty.
Each product manufactured, sold, leased, or delivered by the Company and
Microdot UK has been in conformity with all applicable material contractual
commitments and all express and implied warranties, and the Company and Microdot
UK do not have any material liability (and there is no basis for any present or
future action, suit, proceeding, hearing, investigation, charge, complaint,
claim, or demand against any of them giving rise to any liability) for
replacement or repair thereof or other damages in connection therewith (not
covered by insurance), subject only to the reserves set forth on the Contract
Net Asset Statement. No product manufactured, sold, or delivered by the Company
or Microdot UK is subject to any guaranty, warranty, or other indemnity beyond
the applicable standard terms and condition of sale. Schedule 3.1.23 attached
hereto and made a part hereof includes copies of the standard terms and
conditions of sale for the Company and Microdot UK (containing applicable
guaranty, warranty and indemnity provisions).
21
3.1.24 Certain Agreements.
Except as listed on Schedule 3.1.24 attached hereto and made a part hereof, all
Material Contracts, Real Property Leases, Personal Property Leases and all other
contracts and agreements of the Company and Microdot UK, including, without
limitation, open sales orders and unfilled purchase orders (collectively, the
"Commitments") are fully transferable without the consent of any third party and
the Shareholder and the Company have no knowledge of any material default or
claimed or purported or alleged material default or state of facts which, with
notice or lapse of time or both, would constitute a material default on the part
of any party in the performance of any obligation to be performed or paid by any
party under the Commitments, and have not received or given notice of any
default or claimed or purported or alleged default or state of facts which, with
notice or lapse of time or both, would constitute a default on the part of any
party in the performance or payment under the Commitments.
3.1.25 Inventory.
The Inventory reflected in the most recent financial statements is carried at an
amount not in excess of the lower of cost or net realizable value. The
Inventory is merchantable and fit for the purpose for which it was procured or
manufactured, and none of which is slow-moving, obsolete, damaged, or defective,
or not usable or saleable in the ordinary course of business of the Company and
Microdot UK as heretofore conducted, subject to inventory valuation reserves.
3.1.26 Notes and Accounts Receivable.
All notes and accounts receivable of the Company and Microdot UK are reflected
properly on their respective books and records, are valid and existing
receivables which arose in the ordinary course of business and are subject to no
refunds or other adjustments and to no defenses, rights of setoff, assignments,
restrictions, encumbrances, conditions enforceable by third parties, or
counterclaims, are current and collectible in accordance with their terms at
their recorded amounts, subject to the reserves set forth in the Contract Net
Asset Statement as adjusted for the passage of time through the Closing Date in
accordance with the past custom and practice of the Company.
3.1.27 Powers of Attorney.
There are no powers of attorney executed on behalf of the Company or Microdot
UK.
22
3.1.28 Bank Accounts; Safe Deposit Boxes.
Schedule 3.1.28 attached hereto and made a part hereof sets forth a complete and
correct list of each account with any bank, trust company, securities broker or
other financial institution with which the Company or Microdot UK has any
account and all safe deposit boxes maintained by the Company or Microdot UK, the
identifying numbers or symbols thereof, and the name of each person authorized
to draw thereon or to have access thereto.
3.1.29 Guaranties.
Except as set forth in Schedule 3.1.29 attached hereto and made a part hereof,
the Company and Microdot UK is not a guarantor for any liability or obligation
(including indebtedness) of any third party.
3.1.30 Certain Business Relationships with the Company or its
Subsidiaries.
Except as set forth in Schedule 3.1.30 attached hereto and made a part hereof,
none of the Shareholder has been involved in any business arrangement or
relationship with the Company or Microdot UK within the past 12 months, and none
of the Shareholder owns any asset, tangible or intangible, which is used in the
business of any of the Company or Microdot UK.
3.1.31 Undisclosed Liabilities.
The Company and Microdot UK have no liabilities, whether accrued, absolute,
contingent or otherwise, which are material to the Company or Microdot UK taken
as a whole, except (i) to the extent reflected or reserved for on the October
31, 1999 balance Sheet which were required to be reserved for or reflected
thereon in accordance with GAAP, (ii) liabilities incurred in the normal and
ordinary course of business of the Company since October 31, 1999, (iii)
liabilities disclosed in Schedule 3.1.31 attached hereto and made a part hereof
and in the other Schedules attached hereto, or (iv) liabilities disclosed in
this Agreement.
3.1.32 Restrictions on Business Activities.
Except for this Agreement or as set forth in Schedule 3.1.32 attached hereto and
made a part hereof, to the best knowledge of the Company and the Shareholder,
there is no agreement, judgment, injunction, order or decree binding upon the
Company or Microdot UK which has or could reasonably be expected to have the
effect of prohibiting or impairing any business practice of the Company or
Microdot UK, acquisition of property by the Company or Microdot UK, or the
conduct of business by the Company or Microdot UK as currently conducted or as
proposed to be conducted by the Company or Microdot UK.
23
3.1.33 Subsidiaries.
Microdot UK is the only subsidiary of the Company. All of the issued and
outstanding shares of capital stock of Microdot UK have been duly authorized and
are validly issued, fully paid, and non-assessable. The Company holds of record
and owns beneficially all of the outstanding shares of Microdot UK, free and
clear of liens, encumbrances, restrictions and claims of any kind. There are no
outstanding or authorized options, rights, warrants, purchase rights, conversion
rights, exchange rights, or other contracts or commitments of any character that
could require any of the Company or Microdot UK to issue, sell, transfer, or
otherwise dispose of any capital stock of Microdot UK or that could require
Microdot UK to issue, sell, or otherwise cause to become outstanding any of its
own capital stock. There are no outstanding stock appreciation, phantom stock,
profit participation, or similar rights with respect to Microdot UK. There are
no voting trusts, proxies, or other agreements or understandings with respect to
the voting of any capital stock of Microdot UK. Neither the Company nor
Microdot UK controls directly or indirectly or has any direct or indirect equity
participation in any corporation, partnership, trust or other business
association which is not a subsidiary.
3.1.34 Federal Tax Identification Number.
The Company's Federal Tax Identification Number is 00-000-0000.
3.1.35 Approvals, etc.
--------------
All consents, approvals, authorizations and orders (corporate, governmental or
otherwise) necessary for the due authorization, execution and delivery by the
Shareholder and the Company of this Agreement and the valid sale and delivery of
the Shares have been obtained or will be obtained prior to the Closing Date.
3.1.36 Title to Shares.
Except as set forth in Schedule 3.1.36 attached hereto and made a part hereof,
the Shareholder is the record and beneficial owner of and has good and valid
title to the Uni-Star Shares, free and clear of any liens, pledges, charges,
security interests, encumbrances, title retention agreements, adverse claims or
options, and upon the delivery of and payment for the Uni-Star Shares at the
Closing as provided for herein, the U.S. Purchaser will acquire good and valid
title thereto, free and clear of any liens, pledges, charges, security
interests, encumbrances, title retention agreements, adverse claims or options.
Except as set forth in Schedule 3.1.36 attached hereto and made a part hereof,
the Company is the record and beneficial owner of and has good and valid title
to the Microdot UK Shares, free and clear of any liens, pledges, charges,
24
security interests, encumbrances, title retention agreements, adverse claims or
options, and upon the delivery of and payment for the Microdot UK Shares at the
Closing as provided for herein, the U.K. Purchaser will acquire good and valid
title thereto, free and clear of any liens, pledges, charges, security
interests, encumbrances, title retention agreements, adverse claims or options.
3.2 DISCLAIMER OF OTHER REPRESENTATIONS AND WARRANTIES.
Except as expressly set forth in Sections 3.1 and 3.2 hereof, the Shareholder
and the Company disclaim all other representations and warranties, whether
expressed or implied.
3.3 DEFINITION OF "BEST KNOWLEDGE".
For purposes of this Agreement, the term "to the best knowledge of the
Shareholder and the Company" or other term of similar import means that the
officers of the Company and the Shareholder, as the case may be, have no actual
knowledge that the representation or warranty is untrue in any material respect.
ARTICLE 4. REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS.
4.1 REPRESENTATIONS AND WARRANTIES.
The Purchasers represents and warrants to the Shareholder and the Company as
follows:
4.1.1 Organization and Standing.
The U.S. Purchaser is a corporation duly incorporated, organized, and validly
existing under the laws of the Commonwealth of Pennsylvania and has all
requisite corporate power and authority to execute and deliver this Agreement
and to consummate the transactions contemplated hereby and perform its
obligations hereunder. The U.K. Purchaser is a company duly incorporated,
organized, and validly existing under the laws of England and Wales and has all
requisite corporate power and authority to execute and deliver this Agreement
and to consummate the transactions contemplated hereby and perform its
obligations hereunder.
4.1.2 Authorization.
All corporate and other proceedings required to be taken on the part of the
Purchasers, including, without limitation, all action required to be taken by
the directors or shareholders of the Purchasers to authorize the Purchasers to
enter into and carry out this Agreement and to purchase the Shares hereunder,
have been, or prior to the Closing will be, duly and properly taken. This
Agreement has been duly executed and delivered by the Purchasers and is the
valid and binding obligation of the Purchasers enforceable against them in
25
accordance with its terms, except as enforcement may be limited by equitable
principles limiting the right to obtain specific performance or other equitable
remedies, or by applicable bankruptcy or insolvency laws and related decisions
affecting creditors' rights generally.
4.1.3 Compliance.
The execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby, upon satisfaction of the conditions set forth
in Article 7 hereof, will not:
a) result in the breach of any of the terms or conditions of, or
constitute a default under or violate, as the case may be, the certificate of
incorporation or by-laws of either of the Purchasers, or any agreement, lease,
mortgage, note, bond, indenture, license or other document or undertaking, oral
or written, to which either of the Purchasers or any of their subsidiaries or
affiliates is bound, or by which any of its or their properties or assets may be
affected; or
(b) violate any rule, regulation, writ, injunction, order or decree of
any court, administrative agency or governmental body.
4.1.4 Investment Only.
The Purchasers are purchasing the Shares solely for their own account for
investment purposes only and not with a view to the distribution or resale
thereof. The Purchasers will not sell or transfer any of the Shares (or any
securities issued in substitution, reclassification or recapitalization) in
violation of applicable federal or state securities laws.
4.1.5 Litigation.
There are no actions, suits, proceedings or investigations pending, or to the
Purchasers' best knowledge, threatened which question the validity of this
Agreement or of any action taken or to be taken in connection herewith or the
consummation of the transactions contemplated herein.
4.1.6 Brokers, Finders.
Neither of the Purchasers has not retained any broker or finder in connection
with the transactions contemplated herein and is not obligated and has not
agreed to pay any brokerage or finder's commission, fee or similar compensation.
26
4.1.7 Approvals, etc.
All consents, approvals, authorizations and orders (corporate, governmental or
otherwise) necessary for the due authorization, execution and delivery by the
Purchasers of this Agreement and the consummation of the transactions
contemplated hereby have been obtained or will be obtained prior to the Closing
Date.
4.1.8 Financial Condition.
Each of the Purchasers has the financial capabilities to fully meet and perform
all of its obligations under this Agreement.
4.1.9 Knowledge of Breaches of Agreement.
As of the date hereof, neither of the Purchasers has any knowledge that any of
the representations and warranties of the Shareholder and the Company contained
in Article 3 of this Agreement are untrue in any material respect, or that
either of the Shareholder or the Company is in material breach of any of its
obligations hereunder.
ARTICLE 5. COVENANTS AND AGREEMENTS.
5.1 Employees.
5.1.1 Employment Status.
The Shareholder, the Company and the Purchasers agree that the sale of the
Shares shall cause no change in the status of the employment of Employees of the
Company and Microdot UK as the same existed immediately prior to the Closing
Date, except for those individuals who are officers of the Shareholder, whose
status with the Company and Microdot UK will terminate as of the Closing. For
purposes of this Agreement, "Employees" shall include all employees of the
Company and Microdot UK, both salaried and hourly, who are active employees of
the Company or Microdot UK on the Closing Date.
5.1.2 Welfare Plans for Employees.
The U.S. Purchaser and the U.K. Purchaser shall extend coverage under their
welfare benefit plans to the Employees of the Company and Microdot UK,
respectively, without any waiting periods, without any evidence of insurability
and without application of any pre-existing condition limitations, except to the
extent any such Employees remain subject thereto under the Company's or Microdot
UK's comparable
27
welfare plan immediately prior to the Closing Date. The Purchasers and their
welfare plans shall count health care plan expenses and other claims incurred by
Employees (and their dependents) during the calendar year in which the Closing
Date occurs and on or prior to the Closing Date for purposes of plan year
deductibles, out-of-pocket maximums, benefit maximums and all other similar
limitations to the same extent as applicable under the Company's or Microdot
UK's plans as in effect immediately prior to the Closing Date. The Shareholder
and the Company agree to cooperate with the Purchasers in the transmission of
such relevant data to the Purchasers and their claims administrators.
5.1.3 401(k) Plan.
On or prior to the Closing Date, the Shareholder shall cause all matching
contributions made by the Company or the Shareholder with respect to the
Employees of the Company pursuant to the Code Section 401(a) and 401(k) plan
established by the Shareholder (the "Shareholder's 401(k) Plan") to become
vested as of the Closing. The U.S. Purchaser shall establish or designate, or
shall cause to be established or designated, a defined contribution Code Section
401(a) and 401(k) plan (the "U.S. Purchaser's 401(k) Plan") that will provide
benefits to Employees of the Company beginning as of the Closing Date, to the
extent the Employee has met the eligibility requirements of the U.S. Purchaser's
plan. The U.S. Purchaser's 401(k) Plan shall accept rollovers from the
Shareholder's 401(k) Plan (including rollovers of any outstanding participant
loans on a basis on which the substantive terms of such loans will not change)
for all Employees of the Company who elect to make rollover contributions to the
U.S. Purchaser's 401(k) Plan. No provision of this Agreement shall constitute a
limitation on the right of the U.S. Purchaser to amend, modify or terminate
after the Closing Date the U.S. Purchaser's 401(k) Plan.
5.1.4 Liability with Respect to Certain Benefit Obligations.
Except for the liabilities, responsibilities, and obligations set forth in the
Company's or Microdot UK' pension plans (identified by an asterisk in Schedule
3.1.17 attached hereto and made a part hereof), which plans shall on the Closing
Date continue to be the responsibility of the Company and Microdot UK, the
Shareholder shall assume all liabilities, responsibilities and obligations under
the Plans with respect to any amounts payable or benefits to be provided to any
Employee or former Employee or any beneficiary thereof for payments, services,
benefits, materials or supplies incurred, provided or received thereunder by any
Employee or former Employee or beneficiary thereof prior to the Closing Date,
except for those amounts reflected on the Final Net Asset Statement. In
addition, and without in any way limiting the Shareholder's
28
obligations hereunder, the Shareholder shall be responsible for all costs
arising from or related to the vesting or acceleration of benefits under the
Shareholder's 401(k) Plan. The Purchasers shall assume liability for, or cause
the Company and Microdot UK to assume liability for or remain liable for,
employee benefits in respect of Employees and their beneficiaries, which
benefits relate to services rendered after the Closing Date. Anything herein to
the contrary notwithstanding, the Purchasers may, but need not, in its sole
discretion, assume on or after the Closing Date some or all of the liabilities,
responsibilities or obligations under one or more of the Plans.
5.1.5 Required Documentation.
In connection with the implementation of this Section 5.1, the Shareholder and
the Purchasers shall cooperate, and the Shareholder or the Purchasers, as the
case may be, shall cause the Company and Microdot UK to cooperate, in the
preparation and filing of all documentation required to be filed with any
applicable governmental agency or authority.
5.2 PERFORMANCE OF THE COMPANY'S AND MICRODOT UK'S OBLIGATIONS.
The Purchasers agree to cause the Company and Microdot UK to perform and fulfill
all obligations and commitments of the Company existing as of the Closing Date
or thereafter incurred, all in accordance with this Agreement.
5.3 REASONABLE BEST EFFORTS TO CLOSE.
During the period commencing on the date of the execution of this Agreement and
continuing until the Closing Date, the Purchasers and the Shareholder shall use
their reasonable best efforts to comply promptly with all requests or
requirements which applicable federal or state law or governmental officials may
impose on them with respect to the transactions which are the subject of this
Agreement, and to consummate such transactions as promptly as practicable. The
reasonable best efforts of the Purchasers and the Shareholder shall include,
without limitation, good faith response, in cooperation with each other, to all
requests for information, documentary or otherwise, by any governmental agency.
5.4 DISCLOSURES.
Except as required by law or occurring after the Closing, neither the
Shareholder nor the Purchaser, without the prior written consent of the other,
will make any press release or any similar public announcement concerning the
transactions contemplated hereby. Except as required by law or occurring
29
after the Closing, no written or oral announcement or private disclosure with
respect to the transactions contemplated hereby will be made to any person
unrelated to the Shareholder or the Purchaser unless jointly approved by the
holders of a majority of the Shares and the Purchaser. If disclosure is required
by law, the disclosing party shall consult in advance with the other party and
attempt in good faith to reflect such other party's concerns in the required
disclosure. Notwithstanding the foregoing, the parties anticipate that the
Shareholder will make a public announcement concerning the transaction
contemplated by this Agreement promptly after the execution and delivery of this
Agreement, which announcement shall be subject to the approval of the U.S.
Purchaser (which shall not be unreasonably denied or delayed).
5.5 BOOKS, RECORDS AND INFORMATION.
5.5.1 The Purchasers agree that all documents delivered to either
of the Purchasers by the Shareholder or the Company pursuant to this Agreement
and all documents of the Company and Microdot UK shall after the Closing be open
for inspection by representatives of the Shareholder after prior written notice
at any time during regular business hours for reasonable and necessary purposes
until such time as documents are destroyed or possession thereof is given to the
other party as provided for in Section 5.5.2 hereof and that the Shareholder may
during such period at their expense make such copies thereof as they may
reasonably request. The Shareholder agree that all documents that are retained
by the Shareholder after the Closing Date and that are related to the Company or
Microdot UK shall be open for inspection by representatives of the Purchasers at
any time during regular business hours until such time as documents are
destroyed or possession thereof is given up to the other party as provided for
in Section 5.5.2 hereof and that the Purchasers may during such period at its
expense make such copies thereof as it may reasonably request.
5.5.2 Without limiting the generality of Section 5.5.1 hereof, for
a period ending on the sixth anniversary of the Closing Date, neither of the
Purchasers nor the Shareholder shall destroy or give up possession of any item
referred to in Section 5.5.1 hereof without first offering to the other, or in
the case of the Company or Microdot UK, to the Shareholder, the opportunity, at
such other's expense (but without any other payment), to obtain the same.
Thereafter each party shall be free to dispose of them as it deems fit.
5.5.3 The Purchasers shall use reasonable efforts to afford the
Shareholder access to employees who were previously employees of the
Shareholder, or the Company or Microdot UK and remain in the employ of the
Company or Microdot UK, or the Purchasers or their affiliates, as the
30
Shareholder shall reasonably request for their proper corporate purposes,
including, without limitation, the defense of legal proceedings or tax audits.
Such access may include interviews or attendance at depositions or legal
proceedings. All out-of-pocket expenses reasonably incurred by the Purchasers
in connection with this Section 5.5.3 shall be paid or promptly reimbursed by
the Shareholder; such reimbursement shall include the cost on a pro rata basis
of the salary or wages and benefits of the employee involved, if any, to the
extent the time involved is in excess of five business days per year.
5.6 TAX MATTERS.
5.6.1 Except to the extent Taxes are reserved for on the Final Net
Asset Statement, the Shareholder shall indemnify and hold harmless each of the
Purchasers, the Company and Microdot UK (i) for any and all Taxes of the Company
and Microdot UK with respect to all taxable periods of the Company and Microdot
UK ending on or prior to the Closing Date, (ii) all Taxes allocated to the
Shareholder pursuant to Section 5.6.2 hereof, and (iii) any losses, damages,
assessments, settlements, judgments or reasonable costs and expenses, arising
out of or incident to the imposition, assessment or assertion of any such Taxes
described in clauses (i) and (ii) above, including those incurred in connection
with the assertion or defense of any claim or assessment for such Taxes
(collectively, "Other Amounts").
5.6.2 If, with respect to any Tax, the taxable period of the Company
or Microdot UK does not terminate on the Closing Date, the Tax (whether based on
income, capital, ownership of property or otherwise) attributable to the taxable
period of the Company and Microdot UK that includes the Closing Date shall be
allocated to (i) the Shareholder for the period up to and including the Closing
Date; and (ii) the applicable Purchaser for the period subsequent to the Closing
Date. The Purchasers shall be further liable for all Taxes reserved for on the
Final Net Asset Statement. The Purchasers shall indemnify and hold harmless the
Shareholder and its affiliates with respect to all Taxes allocated to either of
the Purchasers pursuant to this Section 5.6.2 and all Other Amounts related
thereto. Any indemnification hereunder shall be subject to the procedures set
forth in Section 9.4 hereof. For purposes of this section, Taxes for the period
up to and including the Closing Date shall be determined on the basis of a
closing of the books as of the Closing Date, except that any Tax imposed
annually based on ownership of assets on a particular date, or any similar tax,
shall be prorated to the period prior to and including the Closing Date and the
period thereafter.
5.6.3 The Shareholder shall prepare or cause to be prepared in a
manner consistent with past practice, and timely file or cause to be timely
filed, all Tax Returns of the Company and Microdot UK with
31
respect to periods ending on or before or including the Closing Date. In the
case of Tax Returns of the Company or Microdot UK for periods beginning on or
before and ending after the Closing Date, or any other Tax Returns which are
required to be signed after the Closing Date by an officer of the Company or
Microdot UK or which are required to be signed by either of the Purchasers, such
Tax Returns shall be provided to the applicable Purchaser , at least twenty (20)
days before such Tax Returns are required to be filed, together with all
workpapers utilized in allocating Taxes reported thereon between the period up
to and including the Closing Date and period subsequent to the Closing Date.
5.6.4 Whenever any taxing authority sends a notice of an audit, initiates
an examination of the Company or Microdot UK, or otherwise asserts a claim,
makes an assessment, or disputes the amounts of Taxes for which the Shareholder
is or may be liable under this Agreement, the Purchasers shall promptly inform
the Shareholder. The failure of the Purchaser to notify the Shareholder
promptly shall not relieve the Shareholder of any obligations under this
Agreement except to the extent such failure materially prejudices the
Shareholder's ability to defend the claim. The Shareholder shall have the
exclusive right to control, at its cost, any resulting proceedings. The
Purchasers shall have the right to participate at their own expense in the
proceedings. The Shareholder may settle any such claim, assessment, or dispute
to the extent such proceedings or determinations affect the amount of Taxes for
which the Shareholder is liable under this Agreement, only with the prior
consent of the applicable Purchaser, which consent shall not be unreasonably
withheld. Whenever any taxing authority sends a notice of an audit, initiates
an examination of the Company or Microdot UK, or otherwise asserts a claim,
makes an assessment or disputes the amount of Taxes for which either of the
Purchasers is or may be liable under this Agreement, the Shareholder shall
promptly inform the applicable Purchaser. The Purchasers shall have the
exclusive right to control, at their cost, any resulting proceedings and to
determine whether and when to settle any such claim, assessment, or dispute,
except to the extent such proceedings or determinations affect the amount of
Taxes for which the Shareholder is liable under this Agreement.
5.6.5 The Purchasers and the Shareholder shall provide each other
with such assistance as may reasonably be requested by either of them in
connection with the preparation of any Tax Return, any audit or other
examination by any taxing authority, or any judicial or administrative
proceedings relating to liability for Taxes, and each will retain and provide
the other with any records or information which may be relevant to such Return,
audit, or examination, proceedings or determination. Such assistance shall
include making employees available on a mutually convenient basis to provide
additional information and
32
explanation of any material provided hereunder and shall include providing
copies of any relevant Tax Return and supporting work schedules. The party
requesting assistance hereunder shall reimburse the other for reasonable expense
incurred in providing such assistance. Without limiting in any way the foregoing
provisions of this Section 5.6.5, the Purchasers agree that they will retain,
until the appropriate statutes of limitation (including any extensions) expire,
copies of all Tax Returns, work schedules and other records or information which
it possesses and which may be relevant to such Returns of the Company and
Microdot UK for all taxable periods ending on or prior to the Closing Date, and
that such records shall be maintained until the expiration of the applicable
statute of limitations, including any extensions thereof. The Purchasers will
not destroy or otherwise dispose of such records without first providing the
Shareholder a reasonable opportunity to review and copy such records.
5.6.6 Any and all Tax sharing agreements or practices among or
between the Company and Microdot UK on the one hand and the Shareholder or any
of its affiliates on the other hand shall be terminated as of the Closing Date
and no payments relating thereto shall be made subsequent to the Closing Date.
5.6.7 All powers of attorney authorizing any party to represent the
Company or Microdot UK with respect to Taxes shall be terminated on or before
the Closing Date.
5.6.8 At the Closing, the Shareholder shall furnish the U.S.
Purchaser with an affidavit from the Shareholder, as described in Section
1445(b)(2) of the Code, signed under penalty of perjury, containing the
Shareholder's United States taxpayer identification number, address, and a
statement that the Shareholder is not a foreign person.
5.6.9 Except as otherwise expressly permitted by the terms of this
Agreement, neither the Company nor Microdot UK shall, without the prior written
consent of the applicable Purchaser, make any election regarding Taxes that
applies to or affect periods after the Closing Date, execute any waiver of
restrictions on assessment or collection of any Tax, or settle or compromise any
claim regarding any Tax liability that applies to or affect periods after the
Closing Date.
5.6.10 The Company and the Shareholder shall join with the Purchasers in
making a Section 338(h)(10) Election and any corresponding elections under
state, local and foreign tax law with respect to the purchase and sale of the
stock of the Company (and, if requested by Purchasers, the Shareholder shall
cooperate with the Purchasers' Section 338(g) Election with respect to Microdot
UK). The Purchasers and the Shareholder shall cooperate fully with each other
in making such Section 338(h)(10) Election (and, if
33
requested by Purchasers, such Section 338(g) Election with respect to Microdot
UK). In particular, and not by way of limitation, the Purchasers and the
Shareholder shall jointly execute necessary copies of Internal Revenue Service
Form 8023 (or any successor or corresponding form or report) and all attachments
required to be filed therewith pursuant to applicable regulations with respect
to the purchase and sale of the stock of the Company (and, if requested by
Purchasers, shall execute any forms that may be necessary in connection with a
Section 338(g) Election with respect to Microdot UK). The Shareholder also shall
pay any Tax imposed on the Company attributable to the making of the Section
338(h)(10) Election with respect to the purchase and sale of the stock of the
Company, including, but not limited to, (a) any Tax imposed under Treas. Reg.
(S) 1.338(h)(10)-1T(d)(2), Treas. Reg. (S) 1.1502-6, or (b) any state or local
Tax imposed on the Company as a result of the Section 338(h)(10) Election. The
Purchasers shall have an option to make an actual or deemed election under
either Section 338(g) of the Code for Microdot UK under federal, state, local or
foreign laws (a "Microdot Election"), provided that within 60 days after the
Closing, the Purchasers shall have notified the Shareholder that the Purchasers
have a reasonable likelihood of exercising their option to make a Microdot
Election. If the Purchasers deliver such a notice to the Shareholder, the
Purchasers and the Shareholder shall cooperate with each other to determine the
amount of Additional Tax (as defined below), if any, that would be payable by
the Shareholder as a result of the Purchasers making a Microdot Election, and in
any event, the Shareholder shall deliver to the Purchasers, within 60 days after
its receipt of such notice from the Purchasers, the Shareholder's determination
of the amount of such Additional Tax, if any. The Purchaser shall not exercise
its option to make a Microdot Election until the earlier of (i) its receipt of
the Shareholder's determination of the amount of such Additional Tax, if any,
payable as a result of a Microdot Election and (ii) 60 days after delivery by
the Purchasers of notice to the Shareholder that the Purchasers have a
reasonable likelihood of exercising their option to make a Microdot Election. If
the Purchasers thereafter exercise their option to make a Microdot Election, the
Purchasers shall indemnify the Shareholder for any Additional Taxes that are
attributable to such Microdot Election, provided that the Purchasers shall not
be obligated to indemnify the Shareholder for any Additional Taxes (x) in the
event the Shareholder does not provide the Purchasers with its determination of
Additional Taxes within such 60-day period, or (y), in the event the Shareholder
does provide such notice to the Purchasers, in excess of the amount set forth as
such Additional Taxes in the Shareholder's notice to the Purchasers. For
purposes hereof, "Additional Taxes" shall mean (i) the amount by which the Taxes
of the Company and Microdot UK are increased for periods ending on or prior to
the
34
Closing Date as a result of the Purchasers' Microdot Election and (ii) the
amount by which the Taxes of the Shareholder (and its affiliates) are increased
for any period as a result of the Purchasers' Microdot Election. The Purchasers
shall make any such indemnification payment to the Shareholder on the date that
any such Taxes are required to be paid by the Shareholder.
5.6.11 The Purchasers shall promptly pay to the Shareholder an amount
equal to any refund of Taxes (together with any interest or other amounts
refunded in respect thereof) that is received by, or that is applied for the
benefit or at the direction of, the Purchaser, the Company or Microdot UK, and
that is for, or allocable to, a period with respect to which the Shareholder is
responsible for Taxes hereunder, whether such Taxes were paid by the Shareholder
or were reserved for on the Final Net Asset Statement.
5.7 NON-COMPETITION AGREEMENT.
The Shareholder shall enter into a Non-Competition Agreement with the U.S.
Purchaser in the form attached hereto and made a part hereof as Schedule 5.7.
5.8 SUBSTITUTION OF GUARANTY.
The U.S. Purchaser shall use all commercially reasonable efforts to obtain the
substitution of the Shareholder by the U.S. Purchaser as the guarantor of the
Company's obligations under the Company's equipment loan with CIT, and shall
indemnify the Shareholder from any liability if the Company does not perform its
obligations with respect to such loan after the Closing.
ARTICLE 6. CONDUCT OF BUSINESS PENDING CLOSING.
6.1 CONDUCT OF BUSINESS PENDING CLOSING.
The Shareholder and the Company agree that, pending the Closing:
6.1.1 Conduct of Business in Ordinary Course.
The Shareholder shall cause the Company to conduct its business in a manner
consistent with the past practices of the Company and Microdot UK, and the
Shareholder shall cause the Company and Microdot UK not to engage in any
transactions out of the ordinary course of business. Furthermore, except as may
otherwise be required under, or contemplated by, this Agreement, the Shareholder
shall cause the Company and Microdot UK not to do any of the following without
the prior consent of the Purchaser:
35
(i) incur or permit to be incurred any obligation or other
liabilities (exclusive of health and property insurance premiums) in excess
of $25,000 except for inventory purchases in the normal and ordinary course
of business consistent with past practice;
(ii) voluntarily permit to be incurred any lien or encumbrance
on any of the assets of the Company or Microdot UK;
(iii) increase the compensation payable or to become payable to
any of the employees of the Company or Microdot UK, except for increases in
the ordinary course and consistent with past practice, or otherwise enter
into or alter any employment, consulting, or service agreement, in each
case that is not terminable on 30 days notice or less;
(iv) commence, enter into, or alter any profit sharing, deferred
compensation, bonus, stock option, stock purchase, pension, retirement, or
incentive plan or any fringe benefit plan for employees of the Company or
Microdot UK;
(v) sever or terminate any employees of the Company or Microdot
UK except for cause in the ordinary course of business;
(vi) make or commit to any capital expenditure in excess of
$25,000 or make or commit to such expenditures which would, in the
aggregate, exceed $50,000; or
(vii) make any Tax election, execute any waiver of restrictions
on assessment or collection of any Tax, or settle or compromise any Tax
liability.
6.1.2 No Changes to Organization Documents.
No change will be made to the organization documents of the Company or Microdot
UK.
6.1.3 Changes to Capital Stock.
No issuance, sale, pledge, disposition or encumbrance of, or authorization of
the issuance, sale, pledge, disposition or encumbrance of, any shares of capital
stock of any class, or any options, warrants, convertible securities or other
rights of any kind to acquire any shares of capital stock of, or any other
ownership interest in the Company or Microdot UK will be made.
6.1.4 Dividends.
No dividends or other distributions or payments will be declared, set aside,
made or paid in respect of the capital stock of the Company or Microdot UK,
except for any dividend or distribution payable in cash
36
which will not cause the Final Net Assets to be less than the Contract Net
Assets, or as contemplated by Section 2.2 hereof.
ARTICLE 7. CLOSING DATE, CONDITIONS AND TRANSACTIONS.
7.1 CLOSING DATE AND PLACE.
The consummation of the sale and purchase of the Shares contemplated by this
Agreement (the "Closing") will take place at the offices of the U.S. Purchaser
at 000 Xxxxxxxxxxxx Xxxxx, Xxxxx Xxxx, Xxxxxxxxxx, at 10:00 A.M. West Coast time
on July 28, 2000 or at such other date and time as may be mutually agreeable to
the parties hereto (the "Closing Date"). The parties agree that the Closing can
be accomplished by facsimile and overnight deliveries of documents.
At the Closing, (i) the Company will deliver to the U.K. Purchaser
certificates representing all of the Microdot UK Shares duly endorsed for
transfer or accompanied by duly executed stock powers, in either case executed
in favor of the U.K. Purchaser or its nominee as the U.K. Purchaser may have
directed prior to the Closing, (ii) the Company will pay a dividend or make a
distribution to the Shareholder in an amount equal to the U.K. Purchase Price,
and (iii) the Shareholder will deliver to the U.S. Purchaser certificates
representing all of the Uni-Star Shares duly endorsed for transfer or
accompanied by duly executed stock powers, in either case executed in favor of
the U.S. Purchaser or its nominee as the U.S. Purchaser may have directed prior
to the Closing. At the Closing, the U.K. Purchaser will deliver the U.K.
Purchase Price to the Company as provided in Section 2.1 hereof and the U.S.
Purchaser will deliver (i) $500,000 to Congress Financial Corporation (New
England) ("Congress Financial") in accordance with the written payoff letter
from Congress Financial delivered by the Shareholder to the U.S. Purchaser and
(ii) the balance of U.S. Purchase Price (i.e., the U.S. Purchase Price minus the
$500,000 delivered to Congress Financial) to the Shareholder as provided in
Section 2.1 hereof. The U.S. Purchaser and the U.K. Purchaser shall be jointly
and severally liable for each other's obligations hereunder.
7.2 CONDITIONS PRECEDENT TO THE OBLIGATIONS OF THE PURCHASER.
The obligations of the Purchasers under this Agreement are subject to the
fulfillment prior to or at the Closing of each of the following conditions, any
one or more of which may be waived by the Purchasers:
37
7.2.1 No Injunctive Proceedings.
No preliminary or permanent injunction or other order (including a temporary
restraining order) of any state or federal court or other governmental agency
which prevents the consummation of the transactions which are the subject of
this Agreement or prohibits either of the Purchasers' ownership of the Shares
shall have been issued and remain in effect (provided that the Purchasers have
acted in accordance with the requirements of Section 5.3 hereof).
7.2.2 Representations and Warranties.
All representations and warranties of the Company and/or the Shareholder
contained in this Agreement shall be true and correct in all material respects
as of the Closing Date, except (i) as otherwise contemplated by this Agreement,
and (ii) that no representation or warranty of the Company and/or the
Shareholder shall be deemed to be untrue or incorrect by reason of any
transaction that conforms to the requirements of Article 6 hereof.
7.2.3 Performance of Agreements; Instruments of Transfer.
The Company and the Shareholder shall have fully performed in all material
respects all obligations, agreements, conditions and commitments required to be
fulfilled by the Company and the Shareholder pursuant to the terms hereof on or
prior to the Closing Date and the Shareholder and the Company shall have
tendered to the Purchasers the Shares and other documents, instruments and
certificates required by Article 8 hereof.
7.2.4 Compliance Certificate.
The Company and the Shareholder shall have delivered to the Purchasers their
certificates, dated the Closing Date, executed on their behalf by their
respective duly authorized representatives, as to the fulfillment of the
conditions set forth in Sections 7.2.2 and 7.2.3 hereof.
7.2.5 Material Adverse Effect.
There shall not have been any Material Adverse Effect from the date hereof to
the Closing Date in the financial condition or operations of the Company.
38
7.2.6 Opinion of Counsel.
The Purchasers shall have received the opinion of Xxxxxxx Xxxxxxx & Xxxxx LLP,
counsel for the Company and the Shareholder, in the form set forth in Schedule
7.2.6 attached hereto and made a part hereof.
7.2.7 Consents, etc.
All authorizations, consents or approvals of any and all governmental regulatory
authorities necessary in connection with the consummation of the Closing shall
have been obtained and be in full force and effect.
7.2.8 Release of Liens.
The U.S. Purchaser shall have received a letter agreement executed by Congress
Financial and each of the Shareholder's affiliates that is a borrower under the
credit facility provided to the Shareholder and such affiliates by Congress
Financial, confirming that upon receipt of the $500,000 wire transfer described
in Section 7.1 hereof all liens and security interests on the property of the
Company in favor of Congress Financial shall terminate.
7.2.9 Affidavit.
The Shareholder shall have delivered to the U.S. Purchaser the duly executed
affidavit set forth in Section 5.6.8 hereof.
7.3 CONDITIONS PRECEDENT TO THE OBLIGATIONS OF THE SHAREHOLDER AND THE
COMPANY.
The obligations of the Shareholder and/or the Company under this Agreement are
subject to the fulfillment prior to the Closing of each of the following
conditions, any one or more of which may be waived by the Shareholder and the
Company:
7.3.1 No Injunctive Proceedings.
No preliminary or permanent injunction or other order (including a temporary
restraining order) of any state or federal court or other governmental agency
which prevents the consummation of the transactions which are the subject of
this Agreement or prohibits the Purchasers' ownership of the Shares shall have
been issued and remain in effect (provided that the Shareholder and the Company
have acted in accordance with the requirements of Section 5.3 hereof).
39
7.3.2 Payment.
The Purchasers shall have delivered to the Shareholder and the Company the
payments provided for in Section 2.1 hereof and all other payments required to
be made by the Purchasers on the Closing Date pursuant to the terms hereof.
7.3.3 Representations and Warranties.
All representations and warranties of the Purchasers contained in this Agreement
shall be true and correct in all material respects as of the Closing Date.
7.3.4 Performance of Agreements; Instruments of Transfer.
The Purchasers shall have fully performed in all material respects all
obligations, agreements, conditions and commitments required to be fulfilled by
the Purchasers on or prior to the Closing Date and shall have tendered to the
Shareholder the documents, instruments and certificates required by Article 8
hereof.
7.3.5 Compliance Certificate.
The Purchasers shall have delivered to the Shareholder its certificate, dated
the Closing Date, executed on their behalf by their respective duly authorized
representatives, as to the fulfillment of the conditions set forth in Sections
7.3.3 and 7.3.4 hereof.
7.3.6 Opinion of Counsel.
The Shareholder shall have received the opinion of Xxxxxxx X. Xxxxxxx, Associate
General Counsel of the U.S. Purchaser, in the form set forth in Schedule 7.3.6
attached hereto and made a part hereof.
7.3.7 Consents, etc.
All authorizations, consents or approvals of any and all governmental regulatory
authorities necessary in connection with the consummation of the Closing shall
have been obtained and be in full force and effect.
7.4 NON-COMPLIANCE WITH AND TERMINATION OF THIS AGREEMENT.
(a) Each of the parties hereto agrees to use its reasonable efforts to
bring about the satisfaction of the conditions required to be performed by it
hereunder prior to and at the Closing, including, without limitation, compliance
with the requirements of Section 5.3 hereof.
(b) This Agreement may be terminated at any time prior to the Closing
without any liability of any party to any other party:
40
(i) by the mutual agreement of the Shareholder, the Company, and the
Purchasers provided, such termination is set forth in writing executed by both
parties;
(ii) by the Purchasers, if any of the conditions specified in Section
7.2 hereof shall not have been met by August 31, 2000 and shall not have been
waived in writing by the Purchasers; or
(iii) by the Shareholder and the Company, if any of the conditions
set forth in Section 7.3 hereof shall not have been met by August 31, 2000 and
shall not have been waived in writing by the Shareholder.
ARTICLE 8. CLOSING DOCUMENTS.
8.1 THE SHAREHOLDER' OBLIGATIONS.
At the Closing, the Shareholder shall deliver to the Purchasers the following:
8.1.1 Resolutions.
Copies of resolutions of the Company and the Shareholder certified by the
Secretary or Assistant Secretary of the Company or the Shareholder, as the case
may be, authorizing the execution, delivery and performance of this Agreement
and the transactions contemplated hereby.
8.1.2 Share Certificates.
Certificates representing the Shares, duly endorsed in blank or accompanied by
an appropriate stock power.
8.1.3 Books and Records.
The Company's and Microdot UK' corporate minute books, seals and stock ledger
books.
8.1.4 Resignations.
Resignations of those officers and directors of the Company who are not
employees of the Company or Microdot UK.
8.1.5 Compliance Certificate.
The certificate required by Section 7.2.4 hereof.
8.1.6 Opinion of Counsel.
The opinion of counsel for the Shareholder required by Section 7.2.6 hereof.
41
8.1.7 Affidavits.
The affidavits set forth in Section 5.6.8 hereof.
8.2 THE PURCHASERS' OBLIGATIONS.
At the Closing, the Purchasers shall deliver to the Company and the Shareholder
the following:
8.2.1 Payment.
Funds in the amounts and payable as set forth in Section 2.1 hereof and all
other payments required to be made by the Purchasers on or prior to the Closing
Date pursuant to the provisions of this Agreement.
8.2.2 Compliance Certificate.
The certificate required by Section 7.3.5 hereof.
8.2.3 Opinion of Counsel.
The opinion of counsel for the Purchaser required by Section 7.3.6 hereof.
ARTICLE 9. INDEMNIFICATION.
9.1 INDEMNIFICATION BY THE SHAREHOLDER.
Subject to the limits set forth in this Article 9, the Shareholder agrees to
indemnify, defend and hold the Purchasers and their respective affiliates,
officers, directors, employees, agents, successors and assigns (the Purchasers
and such persons are collectively hereinafter referred to as the "Purchasers'
Indemnified Persons"), harmless from and against any and all loss, liability,
damage or deficiency (including interest, penalties, costs of preparation and
investigation, and reasonable attorneys' fees) (collectively, "Losses") that the
Purchasers' Indemnified Persons may suffer, sustain, incur or become subject to
arising out of or due to: (a) any breach of any representation or warranty of
the Company and/or the Shareholder in this Agreement, any schedule or exhibit
hereto, or any certificate or other document delivered pursuant hereto; or (b)
the breach of any covenant, undertaking, agreement or other obligation of the
Company and/or the Shareholder under this Agreement, any schedule or exhibit
hereto, or any certificate or other document delivered pursuant hereto not
otherwise waived by the Purchaser.
9.2 INDEMNIFICATION BY THE PURCHASERS.
Subject to the limits set forth in this Article 9, the Purchasers agrees to
jointly and severally indemnify, defend and hold the Shareholder and its
successors and assigns (the Shareholder and such persons are
42
hereinafter collectively referred to as the "Shareholder's Indemnified
Persons"), harmless from and against any and all Losses that the Shareholder'
Indemnified Persons may suffer, sustain, incur or become subject to arising out
of or due to: (a) any breach of any representation or warranty of the Purchasers
in this Agreement, any schedule or exhibit hereto, or any certificate or other
document delivered pursuant hereto; or (b) the breach of any covenant,
undertaking, agreement or other obligation of the Purchasers under this
Agreement, any schedule or exhibit hereto, or any certificate or other document
delivered pursuant hereto not otherwise waived by the Shareholder.
9.3 SURVIVAL OF REPRESENTATIONS, AND WARRANTIES; DEDUCTIBLE.
The several representations and warranties of the parties contained in this
Agreement or in any document delivered pursuant hereto and the parties' right to
indemnity in accordance with this Article 9 shall survive the Closing Date and
shall remain in full force and effect thereafter until December 31, 2001, and
shall be effective with respect to any breach thereof, notice of which shall
have been duly given within such period in accordance with Section 9.4 hereof,
after which period they shall terminate and be of no further force or effect.
Notwithstanding the foregoing, the Purchaser may give notice of, and make a
claim relating to, and shall be indemnified in connection with (i) the breach of
the representations and warranties contained in Section 3.1.9 hereof and the
covenants contained in Section 5.6 hereof, at any time prior to 60 days after
the expiration of the appropriate statute of limitations or any extensions
thereof with respect to all taxable periods of the Company ending on or prior to
the Closing Date or referred to in Section 5.6.2 hereof, (ii) any breach of the
representations and warranties contained in Section 3.1.21 hereof for a period
of ten years after the Closing Date after which ten-year period it shall
terminate and be of no further force or effect, and (iii) the Shares and the
ownership thereof, at any time. Except as provided in Section 9.6, anything to
the contrary contained herein notwithstanding, neither party shall be entitled
to any recovery from the other party with respect to any inaccuracy or breach of
such warranties or representations unless and until the amount of such Losses
suffered, sustained or incurred by the asserting party, or to which such party
becomes subject, by reason of such inaccuracy or breach, shall exceed $100,000
calculated on a cumulative basis and not a per item basis (the "Basket Amount"),
and then only with respect to the excess over the Basket Amount, but in no event
shall the Shareholder or the Purchaser be liable to the other, in each case, in
an aggregate amount in excess of $8,000,000 (the "Cap"). The Basket Amount
shall not be applicable to claims arising under Sections 3.1.9, 3.1.36 or 5.6
hereof or to any covenants contained in this Agreement, and the Cap shall not be
applicable to claims arising under Sections 3.1.9, 3.1.21, 3.1.36 or 5.6
43
hereof or to any covenants contained in this Agreement. Notwithstanding anything
to the contrary contained in this Section 9.3 to the contrary, the covenants of
the parties contained in this Agreement shall survive according to their
respective terms.
9.4 NOTICE AND OPPORTUNITY TO DEFEND.
If there occurs an event which either party asserts is an indemnifiable event
pursuant to Sections 5.6, 9.1 or 9.2 hereof, the party seeking indemnification
(the "Indemnitee") shall notify the party obligated to provide indemnification
(the "Indemnitor") promptly. If such event involves (a) any claim, or (b) the
commencement of any action or proceeding by a third person, the Indemnitee shall
give the Indemnitor written notice of such claim or the commencement of such
action or proceeding. Delay or failure to so notify the Indemnitor shall only
relieve the Indemnitor of its obligations to the extent, if at all, that it is
prejudiced by reasons of such delay or failure. The Indemnitor shall have a
period of 30 days within which to respond thereto. If the Indemnitor accepts
responsibility, then the Indemnitor shall be obligated to compromise or defend,
at its own expense and by counsel chosen by the Indemnitor and reasonably
satisfactory to the Indemnitee, such matter, and the Indemnitor shall provide
the Indemnitee with such assurances as may be reasonably required by the
Indemnitee to assure that the Indemnitor will assume and be responsible for the
entire liability at issue, subject to the limitations set forth in Section 9.5
hereof. If the Indemnitor does not respond within such 30-day period or rejects
responsibility for such matter in whole or in part, the Indemnitee shall be free
to pursue, without prejudice to any of its rights hereunder, such remedies as
may be available to the Indemnitee under applicable law. The Indemnitee agrees
to cooperate fully with the Indemnitor and its counsel in the defense against
any such asserted liability. In any event, the Indemnitee shall have the right
to participate at its own expense in the defense of such asserted liability.
Any compromise of such asserted liability by the Indemnitor shall require the
prior written consent of the Indemnitee and until such consent is obtained the
Indemnitor shall continue the defense of such asserted liability. If, however,
the Indemnitee refuses its consent to a bona fide offer of settlement which the
Indemnitor wishes to accept, the Indemnitee may continue to pursue such matter,
free of any participation by the Indemnitor, at the sole expense of the
Indemnitee. In such event, the obligation of the Indemnitor to the Indemnitee
shall be equal to the lesser of (i) the amount of the offer of settlement which
the Indemnitee refused to accept, and (ii) the actual out-of-pocket amount the
Indemnitee is obligated to pay as a result of the Indemnitee's continuing to
pursue such matter. The Indemnitor shall be entitled to recover from the
44
Indemnitee any additional expenses incurred by the Indemnitor as a result of the
decision of the Indemnitee to pursue such matter.
9.5 REDUCTION FOR INSURANCE.
The amount which an Indemnitor is required to pay to, for, or on behalf of and
Indemnitee pursuant to this Article 9 shall be reduced (including, without
limitation, retroactively) by any insurance proceeds actually recovered by or on
behalf of the Indemnitee in reduction of the related indemnifiable loss (the
"Indemnifiable Loss"). Amounts required to be paid, as so reduced, are
hereinafter sometimes called an "Indemnity Payment". If an Indemnitee shall
have received, or if an Indemnitor shall have paid on its behalf, an Indemnity
Payment in respect of an Indemnifiable Loss and shall subsequently receive,
directly or indirectly, insurance proceeds in respect of such Indemnifiable
Loss, then such Indemnitee shall promptly pay to the Indemnitor the amount of
such insurance proceeds, or, if less, the amount of the Indemnity Payment. The
parties hereto agree that the foregoing shall not affect the subrogation rights
of any insurance companies making payments hereunder.
9.6 ENVIRONMENTAL INDEMNIFICATION AND PROCEDURES.
(a) The Shareholder shall indemnify, defend and hold harmless, subject
to the Basket Amount but not subject to the Cap, the Purchasers from and against
any and all Losses incurred or suffered by either of the Purchasers to the
extent that the Losses arise by reason of, or result from (i) the failure of any
representation or warranty of the Company or the Shareholder contained in
Section 3.1.21 to have been true in all material respects when made and as of
the Closing Date, (ii) the presence in violation of applicable law of any and
all environmental conditions, environmental liabilities or Hazardous Substances
at, in, by, from, or related to the Company's or Microdot UK' facilities that
arose, commenced, occurred or existed prior to the Closing Date, or (iii) the
unlawful Release, recycling, reclamation, incineration, or the arrangement of
transportation by the Company or Microdot UK in the operation of their
respective businesses of any Hazardous Substances that occur on or before the
Closing Date.
(b) The parties agree that in the event a claim for indemnification is
made pursuant to subparagraph (a) above, then, in lieu of the procedures set
forth in Section 9.4, the following procedures shall apply:
In seeking indemnification for a claim under this Section 9.6
("Environmental Claim"), the applicable Purchaser shall promptly notify the
Shareholder of the assertion of any
45
Environmental Claim in respect of which indemnity may be sought hereunder and
will give the Shareholder such information with respect thereto as the
Shareholder may reasonably request, but failure to give such notice shall not
relieve the Shareholder of any liability hereunder, except to the extent that
the Shareholder is prejudiced by such failure to give notice. The Shareholder
shall have the right, but not the obligation, exercisable by written notice to
the Purchasers within thirty (30) days of receipt of notice from such Purchaser
of the Environmental Claim in respect of which indemnity may be sought
hereunder, to assume the defense of the Environmental Claim; provided, however,
that if any action is required prior to the expiration of the Shareholder's 30-
day response period in order to preserve the rights of the applicable Purchaser,
such Purchaser shall so notify the Shareholder, and such Purchaser may assume
the defense of the Environmental Claim until the Shareholder responds, subject
to the right of the Shareholder to control such action as provided below unless
the Shareholder provides written notice that it will timely perform such
required action. In such event, the Shareholder shall have full control over any
actions, including, without limitation, any remedial action, negotiation or
litigation and settlement thereof, in connection with any such Environmental
Claim, provided that:
(i) if a remedial action or other action proposed to be taken by the
Shareholder in settlement of the Environmental Claim would materially and
adversely affect the applicable Purchaser's operation of its business, including
any material impairment in its relationships with customers, suppliers, the
government, or the general public, such action shall not be taken without such
Purchaser's prior written consent (which consent shall not be unreasonably
withheld); provided, however, such Purchaser's consent is not required if the
Shareholder agrees to compensate such Purchaser for any Losses resulting from
the remedial action's effect on such Purchaser's operation of its business;
(ii) the Shareholder shall not compromise or settle any Environmental
Claim unless such compromise or settlement provides only for the payment of
money and provides a complete release of the Purchasers from the party asserting
the claim and from the Shareholder; and
(iii) the Purchasers may participate in (but not control) the
settlement or defense of an Environmental Claim through counsel chosen by the
Purchasers, provided that the fees and expenses of such counsel shall be borne
by the Purchasers.
(c) Notwithstanding anything in this Agreement to the contrary, the
Shareholder shall indemnify, defend and hold harmless the Purchasers from and
against any and all Losses incurred or suffered by either of the Purchasers to
the extent that the Losses (i) arise by reason of, or result from any
46
matters disclosed on Schedule 3.1.7 or Schedule 3.1.21 attached hereto and (ii)
are in excess of any amounts reserved therefor in the Final Net Asset Statement.
The Shareholder's indemnity pursuant to this Section 9.6(c) shall not be subject
to either the Basket Amount or the Cap.
9.7 WAIVERS BY THE SHAREHOLDER.
(a) The Shareholder hereby irrevocably waives, to the fullest extent
permitted by law, any right including, without limitation, any right of
contribution, exoneration, indemnification, reimbursement, subrogation,
suretyship or any similar right, that the Shareholder may now have or hereafter
acquire against the Company or of any of its Shareholder, affiliates, directors,
officers, employees, agents, successors and assigns (each, a "Company Person")
that arises from the payment in any respect of any claim for indemnification
under this Article 9, and the Shareholder further irrevocably waives any
objection, defense, claim, demand or cause of action which the Shareholder ever
had, now has or which the Shareholder may hereafter acquire by reason of,
arising out of, or in respect of any payment in respect of any claim for
indemnification under this Article 9. The Shareholder expressly agrees and
covenants, to the fullest extent permitted by law, not to bring, commence,
institute, maintain, prosecute or aid or assist in any action or proceeding at
law or in equity or otherwise, or any counterclaim, third party claim, or cross-
claim against the Company or any Company Person by reason of, arising out of, or
in respect of any payment in respect of any claim for indemnification under this
Article 9.
(b) The Shareholder hereby acknowledges that it makes the waivers and
agreements set forth in Subsection (a) above and in Section 10.14 (Waiver of
Jury Trial) of this Agreement knowingly and voluntarily, without duress and only
after consideration of the ramifications of these waivers with the attorneys for
the Shareholder, and that these waivers constitute a material inducement for the
Purchaser to enter into and consummate the transactions contemplated by this
Agreement.
ARTICLE 10. MISCELLANEOUS.
10.1 EXPENSES.
Except as otherwise set forth in this Agreement, each of the parties hereto
shall pay its own expenses and costs incurred or to be incurred by it in
negotiating, closing and carrying out this Agreement.
47
10.2 NOTICES.
All notices, requests, demands and other communications given hereunder
(collectively, "Notices") shall be in writing and delivered personally or by
overnight courier to the parties at the following addresses or sent by
telecopier, with confirmation received, to the telecopy number specified below:
10.2.1 If to the Shareholder or the Company at:
Alpha Technologies Group, Inc.
00000 Xxx Xxxxxxxx Xxxxxxxxx, Xxxxx 000
Xxx Xxxxxxx, XX 00000
Attention: Xxxxxxxx Xxxxxx
Telecopier No.: (000) 000-0000
with a copy to:
Xxxxxx X. Xxxxxx, Esq.
Xxxxxxx Xxxxxx & Xxxxx LLP
000 Xxxxxxx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, XX 00000
Telecopier No.: (000) 000-0000
10.2.2 If to the U.S. Purchaser at:
0000 Xxxxxxx Xxxx Xxxx
Xxxxxxxxxx, XX 00000-0000
Telecopier No.: 000-000-0000
Attention: General Counsel
with a copy to:
Tyco International (US) Inc.
Xxx Xxxx Xxxx
Xxxxxx, XX 00000
Telecopier No.: (000) 000-0000
Attention: General Counsel
10.2.3 If to the U.K. Purchaser at:
Tyco Holdings (UK) Limited
Tower 42
The International Financial Centre, 27th Floor
00 Xxx Xxxxx Xxxxxx
Xxxxxx XX0X 0XX
Telecopier No.: 00-000-000-0000
Attention: General Counsel
10.2.4 All Notices shall be deemed delivered when actually received
if delivered personally or by overnight courier, sent by telecopier (promptly
confirmed in writing), addressed in
48
accordance with Sections 10.2.1, 10.2.2, or 10.2.3 hereof, as the case may be.
Each of the parties shall hereafter notify the other in accordance with this
Section 10.2 of any change of address or telecopy number to which notice is
required to be mailed.
10.3 COUNTERPARTS.
This Agreement may be executed simultaneously in one or more counterparts, and
by different parties hereto in separate counterparts, each of which when
executed shall be deemed an original, but all of which taken together shall
constitute one and the same instrument.
10.4 ENTIRE AGREEMENT.
This Agreement constitutes the entire agreement and supersedes all prior
agreements and understandings among the parties hereto with respect to the
subject matter hereof.
10.5 HEADINGS.
The headings contained in this Agreement and in the Schedules and Exhibits
hereto are for reference purposes only and shall not affect in any way the
meaning or interpretation of this Agreement.
10.6 ASSIGNMENT; AMENDMENT OF AGREEMENT.
This Agreement shall be binding upon the respective successors and assigns of
the parties hereto. This Agreement may not be assigned by any party hereto
without the prior written consent of all other parties hereto. This Agreement
may be amended only by written agreement of the parties hereto, duly executed
and delivered by an authorized representative of each of the parties hereto.
Notwithstanding the forgoing, the Purchasers shall have the absolute right to
assign this Agreement, in whole or in part, to an affiliate, provided the
Purchasers shall remain jointly and severally liable for all of their respective
obligations hereunder.
10.7 GOVERNING LAW.
This Agreement shall be governed by and construed and enforced in accordance
with the internal laws of the State of New York applicable to contracts made in
that State, without giving effect to the conflicts of laws principles thereof.
49
10.8 FAILURE TO CLOSE.
If for any reason this Agreement is terminated prior to the Closing, the
Purchasers shall return to the Shareholder all documents and other information,
including all originals and all copies thereof, theretofore delivered to the
Purchasers by the Shareholder or the Company. The Purchasers shall not retain
copies of any such documents or other information, and shall not thereafter for
a period of five years disclose to any person for any purpose or use any
information conveyed to the Purchasers in connection with the transactions
contemplated by this Agreement, except for such information which was: (a)
possessed by either of the Purchasers prior to the disclosure thereof by the
Shareholder or the Company; (b) disclosed to either of the Purchasers by an
independent third party without a violation of any obligation of confidentiality
on the part of such third party to the Shareholder or the Company; or (c)
ascertainable from public or published information or trade sources.
10.9 FURTHER ASSURANCES.
Each party agrees that it will execute and deliver, or cause to be executed and
delivered, on or after the date of this Agreement, all such other instruments
and will take all reasonable actions as may be necessary to transfer and convey
the Shares to the Purchaser, on the terms herein contained, to consummate the
transactions contemplated hereby, and to effectuate the provisions and purposes
hereof.
10.10 NO THIRD PARTY RIGHTS.
This Agreement is not intended and shall not be construed to create any rights
in any parties other than the Company, the Shareholder and the Purchaser and no
person shall assert any rights as third party beneficiary hereunder.
10.11 NON-WAIVER.
The failure in any one or more instances of a party hereto to insist upon
performance of any of the terms, covenants or conditions of this Agreement, to
exercise any right or privilege in this Agreement conferred, or the waiver by
said party of any breach of any of the terms, covenants or conditions of this
Agreement shall not be construed as a subsequent waiver of any such terms,
covenants, conditions, rights or privileges, but the same shall continue and
remain in full force and effect as if no such forbearance or waiver had
occurred.
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10.12 SEVERABILITY.
If any term or other provision of this Agreement is invalid, illegal or
incapable of being enforced by any rule of law, or public policy, all other
conditions and provisions of this Agreement shall nevertheless remain in full
force and effect so long as the economic or legal substance of the transactions
contemplated hereby is not affected in any manner adverse to any party. Upon
such determination that any term or other provision is invalid, illegal or
incapable of being enforced, the parties hereto shall negotiate in good faith to
modify this Agreement so as to affect the original intent of the parties as
closely as possible in an acceptable manner to the end that transactions
contemplated hereby are fulfilled to the extent possible.
10.13 INCORPORATION OF EXHIBITS AND SCHEDULES.
The Exhibits and Schedules hereto are incorporated into this Agreement and shall
be deemed a part hereof as if set forth herein in full. References herein to
"this Agreement" and the words "herein," "hereof" and words of similar import
refer to this Agreement (including its Exhibits and Schedules) as an entirety.
In the event of any conflict between the provisions of this Agreement and any
such Exhibit or Schedule, the provisions of this Agreement shall control.
Notwithstanding anything to the contrary contained in this Agreement or in any
of the Schedules, any information disclosed in one Schedule shall be deemed to
be disclosed in all Schedules.
10.14 WAIVER OF JURY TRIAL.
EACH OF THE COMPANY, THE PURCHASERS AND THE SHAREHOLDER HEREBY IRREVOCABLY
WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ALL RIGHTS TO TRIAL BY JURY IN
ANY ACTION, PROCEEDING, OR COUNTERCLAIM (WHETHER BASED UPON CONTRACT, TORT OR
OTHERWISE) ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY OF THE
TRANSACTIONS CONTEMPLATED HEREBY.
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IN WITNESS WHEREOF, the Company, the Purchasers and the Shareholder
have duly executed and delivered this Agreement as of the day and year first
above written.
SHAREHOLDER: ALPHA TECHNOLOGIES GROUP, INC.
By:
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Name:
Title:
COMPANY: UNI-STAR INDUSTRIES, INC.
By:
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Name:
Title:
U.S. PURCHASER: TYCO ELECTRONICS CORPORATION
By:
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Name:
Title:
U.K. PURCHASER: TYCO ELECTRONICS UK LIMITED
By:
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Name:
Title:
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