Document:

exv10wt

 

Exhibit 10.T

STOCK PURCHASE AGREEMENT

Between

IAP WORLDWIDE SERVICES INC.

and

JOHNSON CONTROLS, INC.

Dated as of December 17, 2004

 

TABLE OF CONTENTS

	 	 	 	 	 
	ARTICLE I — PURCHASE AND SALE
	 	 	1	 
	 
	 	 	 	 
	Section 1.1 Purchase and Sale
	 	 	1	 
	Section 1.2 Purchase Price
	 	 	1	 
	Section 1.3 Closing Date
	 	 	4	 
	Section 1.4 Delivery and Payment
	 	 	4	 
	Section 1.5 Disclosure Letter
	 	 	5	 
	 
	 	 	 	 
	ARTICLE II — REPRESENTATIONS AND WARRANTIES OF SELLER
	 	 	5	 
	 
	 	 	 	 
	Section 2.1 Organization and Authority of Seller
	 	 	5	 
	Section 2.2 Organization, Authority, and Qualification of the Company
	 	 	5	 
	Section 2.3 Capitalization of the Company
	 	 	6	 
	Section 2.4 Subsidiaries of the Company
	 	 	7	 
	Section 2.5 Financial Statements
	 	 	7	 
	Section 2.6 Interim Financial Statements
	 	 	8	 
	Section 2.7 Absence of Undisclosed Liabilities
	 	 	8	 
	Section 2.8 Absence of Certain Changes or Events
	 	 	9	 
	Section 2.9 Title to Properties; Absence of Liens and Encumbrances, etc.
	 	 	10	 
	Section 2.10 Litigation
	 	 	11	 
	Section 2.11 Compliance with Law
	 	 	11	 
	Section 2.12 Contracts
	 	 	12	 
	Section 2.13 Brokers and Finders
	 	 	14	 
	Section 2.14 Insurance
	 	 	14	 
	Section 2.15 Tax Matters
	 	 	15	 
	Section 2.16 Collective Bargaining Agreements, Employment Agreements, and Benefit
Plans
	 	 	16	 
	Section 2.17 ERISA; Employee Benefits
	 	 	18	 
	Section 2.18 Intellectual Property
	 	 	21	 
	Section 2.19 Environmental Laws
	 	 	22	 
	Section 2.20 Government Contracts
	 	 	23	 
	Section 2.21 Foreign Corrupt Practices Act
	 	 	25	 
	Section 2.22 Affiliate Transactions
	 	 	25	 

 

	 	 	 	 	 
	Section 2.23 Books and Records
	 	 	26	 
	Section 2.24 Accounts Receivable
	 	 	26	 
	Section 2.25 Business Relationships with Customers and Suppliers
	 	 	27	 
	Section 2.26 Disclosure
	 	 	27	 
	Section 2.27 No Other Representation or Warranties
	 	 	27	 
	 
	 	 	 	 
	ARTICLE III — REPRESENTATIONS AND WARRANTIES OF BUYER
	 	 	28	 
	 
	 	 	 	 
	Section 3.1 Organization and Authority of Buyer
	 	 	28	 
	Section 3.2 Brokers and Finders
	 	 	28	 
	Section 3.3 Financial Capability
	 	 	29	 
	Section 3.4 Acquisition of Shares
	 	 	29	 
	Section 3.5 Foreign Ownership, etc.
	 	 	29	 
	 
	 	 	 	 
	ARTICLE IV — COVENANTS RELATING TO INCOME TAXES
	 	 	29	 
	 
	 	 	 	 
	Section 4.1 Code Section 338(h)(10) Election
	 	 	29	 
	Section 4.2 Indemnification of Taxes
	 	 	29	 
	Section 4.3 Refunds
	 	 	30	 
	Section 4.4 Other Taxes
	 	 	31	 
	Section 4.5 Tax Audits
	 	 	31	 
	Section 4.6 Allocation Agreement
	 	 	32	 
	Section 4.7 Disputes
	 	 	32	 
	 
	 	 	 	 
	ARTICLE V — CERTAIN COVENANTS AND AGREEMENTS OF SELLER AND BUYER
	 	 	33	 
	 
	 	 	 	 
	Section 5.1 Access and Information
	 	 	33	 
	Section 5.2 Registrations, Filings, and Consents
	 	 	33	 
	Section 5.3 Conduct of Business
	 	 	34	 
	Section 5.4 Security Clearance
	 	 	36	 
	Section 5.5 Books and Records; Access to Information
	 	 	36	 
	Section 5.6 Marks
	 	 	37	 
	Section 5.7 Retained Contracts
	 	 	37	 
	Section 5.8 Expenses
	 	 	38	 
	Section 5.9 Reasonable Efforts
	 	 	38	 
	Section 5.10 Filings
	 	 	38	 
	Section 5.11 Certain Notifications
	 	 	39	 

 

	 	 	 	 	 
	Section 5.12 Plant Closings
	 	 	39	 
	Section 5.13 Intercompany Account; Pre-Closing Debt; Cash
	 	 	39	 
	Section 5.14 Intercompany Agreements
	 	 	41	 
	Section 5.15 Certain Employees
	 	 	41	 
	Section 5.16 No Solicitations
	 	 	44	 
	Section 5.17 Financial Statements and Reports; Filings
	 	 	44	 
	Section 5.18 Certain Restrictions
	 	 	45	 
	 
	 	 	 	 
	ARTICLE VI — CONDITIONS TO THE PURCHASE AND SALE
	 	 	45	 
	 
	 	 	 	 
	Section 6.1
Conditions to the Purchase and Sale Relating to Buyer
	 	 	45	 
	Section 6.2 Conditions to the Purchase and Sale Relating to Seller
	 	 	47	 
	 
	 	 	 	 
	ARTICLE VII — AMENDMENT AND WAIVER
	 	 	47	 
	 
	 	 	 	 
	Section 7.1 Amendment and Modification
	 	 	47	 
	Section 7.2 Waiver
	 	 	48	 
	 
	 	 	 	 
	ARTICLE VIII — MISCELLANEOUS
	 	 	48	 
	 
	 	 	 	 
	Section 8.1 Right to Cancel
	 	 	48	 
	Section 8.2 Return of Information
	 	 	48	 
	Section 8.3 Survival; Indemnification
	 	 	48	 
	Section 8.4 Public Disclosure
	 	 	52	 
	Section 8.5 Assignment
	 	 	53	 
	Section 8.6 Non-Competition Agreement
	 	 	53	 
	Section 8.7 Entire Agreement
	 	 	54	 
	Section 8.8 Disclosure Letter
	 	 	54	 
	Section 8.9 Counterparts
	 	 	55	 
	Section 8.10 Section Headings
	 	 	55	 
	Section 8.11 Notices
	 	 	55	 
	Section 8.12 Governing Law
	 	 	56	 
	Section 8.13 Illegality
	 	 	56	 
	Section 8.14 Definitions
	 	 	56	 
	 
	 	 	 	 
	ARTICLE IX — POST-CLOSING COOPERATION
	 	 	58	 
	 
	 	 	 	 
	Section 9.1 Post-Closing Access, Information and Cooperation
	 	 	58	 
	Section 9.2 Post-Closing Cooperation Regarding Employee Benefit Plans
	 	 	58	 

 

 

	 	 	 	 	 
	Section 9.3 Intellectual Property License
	 	 	58	 
	Exhibits Redacted
	 	 	 	 

 

 

     STOCK PURCHASE AGREEMENT, dated as of December 17, 2004, (the
“Agreement”), between Johnson Controls Inc., a Wisconsin corporation
(“Seller”), and IAP Worldwide Services Inc., a Delaware corporation
(“Buyer,” and with Seller, the “Parties”).

W I T N E S S E T H:

     WHEREAS, Seller owns all of the issued and outstanding shares (the
“Shares”) of capital stock of Johnson Controls World Services, Inc., a
Florida corporation (the “Company”); and

     WHEREAS, prior to or concurrently with this transaction, Seller has
transferred ownership of the following subsidiaries of the Company to
Seller: Johnson Controls Building Automation Systems, LLC, a Delaware
limited liability company (“JCBAS”), and Johnson Controls Security Systems,
LLC, a Florida limited liability company (“JCSS”); and

     WHEREAS, Seller, through these transferred subsidiaries or other
entities, plans to continue doing business with the United States Government
in the areas of security services, operations and maintenance functions for
a portion of facilities, and providing services relating to building
controls, energy savings and other products or services provided by Seller’s
Controls business, which does not compete with the current business of the
Company; and

     WHEREAS, Seller desires to sell and transfer to Buyer, and Buyer
desires to purchase from Seller, all of the Shares as more specifically
provided herein;

     NOW, THEREFORE, in consideration of the mutual covenants and
undertakings contained herein, and subject to and on the terms and
conditions herein set forth, the parties hereto agree as follows:

ARTICLE I — PURCHASE AND SALE

Section 1.1 Purchase and Sale.

(a) Shares. Seller agrees to sell, assign, transfer, convey, and
deliver to Buyer, and Buyer agrees to purchase, accept, acquire, and
take assignment and delivery of, the Shares for the consideration
specified in Section 1.2 hereof.

Section 1.2 Purchase Price

(a) Purchase Price. Based upon the amount of Net Working Capital
equal to $50,000,000 (the “Base Net Working Capital Amount”), as
derived from the consolidated balance sheet of the Company and its
consolidated Subsidiaries dated September 30, 2004 and as set forth on
the reference date balance sheet attached hereto as Exhibit A and the
adjustments reflected thereon (the

1

 

“Reference Date Balance Sheet”), and the due diligence performed by
Buyer prior to the date of this Agreement, the purchase price (the
“Purchase Price”) to be paid for the Shares shall be the sum of (i)
$279.1 million, as adjusted pursuant to Section 1.2(b) below (the
“Preliminary Purchase Price”) and (ii) (A) plus the amount by which
the Final Net Working Capital Amount exceeds the Base Net Working
Capital Amount or (B) minus the amount by which the Base Net Working
Capital Amount exceeds the Final Net Working Capital Amount.

(b) Adjustment of Preliminary Purchase Price. Subsequent to the date
of this Agreement, Buyer shall perform additional due diligence
pursuant to the terms of that certain offer letter from an affiliate
of Buyer dated November 15, 2004 and executed by Seller and receive
the Disclosure Letter from Seller pursuant to Section 1.05. Based
upon any information obtained by Buyer during the course of Buyer’s
due diligence with respect to the Company, or any information
contained in the Disclosure Letter (or Buyer’s due diligence with
respect thereto), and any further negotiations between Buyer and
Seller, Buyer and Seller shall either (i) confirm that the Preliminary
Purchase Price shall remain $279.1 million or (ii) agree to a new
Preliminary Purchase Price, in either case, in writing within
twenty-two (22) business days after January 10, 2005. Buyer and
Seller acknowledge that any renegotiation of the Preliminary Purchase
Price is not limited to a downward adjustment for errors or other
numerically quantified items identified in Buyer’s due diligence
review, the Disclosure Letter, or Buyer’s due diligence with respect
thereto, but may take into account broader negative implications from
Buyer’s perspective flowing therefrom affecting Buyer’s valuation of
the Company. Buyer shall provide a notice to Seller with respect to
its proposed Preliminary Purchase Price pursuant to the foregoing
sentence within twenty (20) business days after January 10, 2005. If
the Buyer and Seller cannot reach an agreement with respect to either
subsection (i) or (ii) hereof, either party shall have the right to
cancel and terminate this Agreement pursuant to Section 8.1 hereof.

(c) “Net Working Capital”. For purposes hereof, the term “Net
Working Capital” shall mean the amount by which (a) the aggregate
amount of current assets of billed accounts receivable, unbilled
accounts receivable (excluding intercompany and related party
receivables), inventories, and other current assets reflected on the
Reference Date Balance Sheet (the “Current Assets”) exceeds (b) the
aggregate amount of current liabilities of accounts payable (excluding
intercompany and related party payables), accrued compensation and
benefits and other current liabilities reflected on the Reference Date
Balance Sheet (the “Current Liabilities”). The Reference Date Balance
Sheet and the Closing Date Balance Sheet shall (i) contain only the
foregoing line item categories and the trial balance accounts that
comprise each of such line item categories, (ii) be prepared from the
books and records of the Company and its consolidated Subsidiaries, on
a stand-alone basis, in accordance with GAAP and the same accounting
principles used in the preparation of the balance sheets included in
the Financial Statements, (iii) not reflect any purchase accounting

2

 

adjustments and (iv) not reflect any amounts relating to the Retained
Contracts (collectively the “Accounting Principles”).

(d) Closing Date Balance Sheet

     (i) Closing Date Balance Sheet. A balance sheet for the
Company and its consolidated Subsidiaries dated as of the Closing
Date (the “Closing Date Balance Sheet”) shall be prepared by Buyer
in accordance with the Accounting Principles. Seller shall be
given a copy of the Closing Date Balance Sheet no later than sixty
(60) days after the Closing Date.

     (ii) Purchase Price Report. Based upon the Closing Date
Balance Sheet, Buyer shall calculate the amount of Net Working
Capital as derived from the Closing Date Balance Sheet (the “Final
Net Working Capital Amount”). The calculation of the Final Net
Working Capital Amount shall be contained in a written report (the
“Purchase Price Report”). Buyer shall deliver the Purchase Price
Report to Seller together with the Closing Date Balance Sheet.

     (iii) Notice of Objection. For the purpose of determining
the Final Net Working Capital Amount, the Closing Date Balance
Sheet and the Purchase Price Report shall be binding on both
parties unless, within thirty (30) days of Seller’s receipt of the
proposed Purchase Price Report and the Closing Date Balance Sheet,
Buyer receives from Seller a statement listing all objections,
together with an explanation, with reasonable detail, of each and
the specific amount of adjustment to the Final Net Working Capital
Amount requested by Seller (a “Notice of Objection”).

     (iv) Final Net Working Capital Determination. The Parties
shall attempt to resolve their differences regarding the Final Net
Working Capital Amount as soon as possible after the Notice of
Objection has been received. If this is not possible within a
period of thirty (30) days of Buyer’s receipt of the Notice of
Objection, an independent accounting firm shall prepare a binding
Closing Date Balance Sheet, including a determination of the Final
Net Working Capital Amount. The independent accounting firm (the
“Designated Accountant”) shall be a “Big 4” accounting firm
selected by the mutual consent of Buyer and Seller at the request
of either of the Parties. The decision of the Designated
Accountant with respect to the Final Net Working Capital Amount
shall be final and binding on the Parties. However, its review
shall be limited to the points raised in the Notice of Objection
based on supporting documentation provided by Buyer and Seller.
The Designated Accountant may not amend the Closing Date Balance
Sheet and the Purchase Price Report to a greater extent than
provided for in the Notice of Objection. The costs of the
Designated Accountant shall be equally shared between the Parties.

3

 

     (v) Exchange of Information. For purposes of the review of
the Closing Date Balance Sheet and/or the Purchase Price Report,

the Parties shall have their auditors make their working papers
available to the other Party and, if requested, their respective
auditors and to the Designated Accountant and make available to
each other all other relevant books and records, data, and other
information relating to the Company.

(e) Payment of Purchase Price

     (i) On the Closing Date, the Buyer shall Pay to Seller the
Preliminary Purchase Price.

     (ii) If the Final Net Working Capital Amount (as determined
in accordance with Section 1.2(d) above) exceeds the Base Net
Working Capital Amount, Buyer shall, within three (3) business
days following the date of such determination, pay to Seller an
amount equal to such excess. If the Final Net Working Capital
Amount (as determined in accordance with Section 1.2(d) above) is
less than the Base Net Working Capital Amount, Seller shall,
within three (3) business days following the date of such
determination, pay to Buyer an amount equal to such difference.

     (iii) Payments pursuant to this Section 1.2 shall be made by
wire transfer of immediately available funds to the respective
bank accounts of the Parties as shall be directed by written
notice delivered by a Party to the other Party at least two (2)
business days prior to the date that any such payment is due
hereunder.

Section 1.3 Closing Date.

Delivery of the Shares and payment to Seller of the Preliminary Purchase
Price (the “Closing”) shall take place at the offices of Milbank, Tweed,
Hadley & McCloy LLP, at 1 Chase Manhattan Plaza, New York, NY, 10005, at
10:00 A.M. (local time) on the date that is within seven (7) business days
after the date all conditions in Article VI are either satisfied or waived
(other than those that must be satisfied or waived in writing at the
Closing), by Buyer in the case of Section 6.1 and the Seller in the case of
Section 6.2, and the expiration or termination of any applicable waiting
period under the Hart-Scott-Rodino Act (as defined below), or on such other
time, date or place as may be mutually agreed upon in writing by Buyer and
Seller (the “Closing Date”).

Section 1.4 Delivery and Payment.

On the Closing Date, Seller shall deliver to Buyer certificates representing
the Shares duly endorsed and in form for transfer to Buyer or accompanied by
stock powers endorsed in blank and, Buyer shall pay to Seller the
Preliminary Purchase Price in immediately available funds by federal funds
check or bank wire transfer to an account designated by Seller.

4

 

Section 1.5 Disclosure Letter.

The Seller will deliver to Buyer a Disclosure Letter (the “Disclosure
Letter”) within ten (10) business days after January 10, 2005 (the
“Disclosure Letter Delivery Date”).

ARTICLE II — REPRESENTATIONS AND WARRANTIES OF SELLER

Seller represents and warrants to Buyer as follows as of the Disclosure
Letter Delivery Date:

Section 2.1 Organization and Authority of Seller.

Seller is a corporation validly existing under the laws of the State of
Wisconsin, with corporate power to own its properties and conduct its
business as now conducted by it and to enter into, and to perform its
obligations under, this Agreement, including without limitation to own,
hold, sell and transfer (pursuant to this Agreement) the Shares. The
execution and delivery of this Agreement have been duly authorized by all
necessary corporate action of Seller, and this Agreement has been duly
executed and delivered by Seller and, assuming due authorization, execution
and delivery by Buyer and that Buyer has full power, authority and legal
right to enter into and perform its obligations hereunder, is a legal, valid
and binding agreement of Seller, enforceable against Seller in accordance
with its terms, subject to applicable bankruptcy, insolvency and similar
laws affecting creditors’ rights generally and subject, as to
enforceability, to general principles of equity (regardless of whether
enforcement is sought in a proceeding in equity or at law). Except as set
forth in Section 2.1 of the Disclosure Letter, the execution and delivery of
this Agreement and the consummation of the transactions contemplated herein
by Seller do not conflict with, or result in any violation or breach of, any
provision of the certificate of incorporation or by-laws of Seller, or any
material indenture, mortgage, deed of trust, lease or other agreement to
which Seller is a party or by which it or any of its property is bound, or
any judgment, decree or order, applicable to Seller, of any court or other
governmental authority. Except as set forth in Section 2.1 of the Disclosure
Letter and other than as required by the Hart-Scott-Rodino Antitrust
Improvements Act of 1976 (the “Hart-Scott-Rodino Act”), the applicable
reporting requirements under the Securities Exchange Act of 1934, as amended
(the “1934 Act”) and applicable Industrial-Security Regulations (as defined
in Section 5.4 hereof), no consent, approval, order or authorization of, or
registration, declaration or filing with, any federal, national, state or
local governmental or regulatory agency or authority is required to be made
or obtained by Seller or the Company in order to execute or deliver this
Agreement or to consummate the transactions contemplated hereby.

Section 2.2 Organization, Authority, and Qualification of the
Company.

The Company is a corporation validly existing and in good standing under the
laws of the State of Florida with corporate power to own, use and lease its
properties and to conduct its business as now conducted by it and is duly
qualified, licensed or admitted as a foreign corporation to do business and
is in good standing in each jurisdiction

5

 

specified in Section 2.2 of the Disclosure Letter, which are the only
jurisdictions in which the ownership, use or leasing of its properties, or
the conduct or nature of its business, makes such qualification, licensing
or admission necessary, except for those jurisdictions in which the adverse
effects of all such failures by the Company to be so qualified, licensed or
admitted and in good standing can in the aggregate be eliminated without
material cost or expense by the Company becoming qualified or admitted and
in good standing. Except as set forth in Section 2.2 of the Disclosure
Letter, the consummation of the transactions contemplated by this Agreement
do not (a) conflict with, or result in any violation or breach of, any
provision of the certificate of incorporation or by-laws of the Company or
any Subsidiary, (b) (i) conflict with or result in a violation or breach of,
(ii) constitute (with or without notice or lapse of time or both) a default
under, (iii) require the Company or any Subsidiary to obtain any consent,
approval or action of, make any filing with or give any notice to any person
as a result or under the terms of, (iv) result in or give to any person any
right of termination, cancellation, acceleration or modification in or with
respect to, (v) result in or give to any person any additional rights or
entitlement to increased, additional, accelerated or guaranteed payments
under, or (vi) result in the creation or imposition of any liens, charges,
pledges, security interests, or other encumbrances upon the Company or any
Subsidiary, or any of their respective assets and properties under, any
indenture, mortgage, deed of trust, lease or other agreement to which the
Company or any Subsidiary is a party or by which the Company or any
Subsidiary or any property of the Company or any Subsidiary is bound, or (c)
subject to obtaining the consents, approvals and actions specified in
Section 2.2 of the Disclosure Letter, conflict with or result in a violation
or breach of any term or provision of any judgment, decree or order,
applicable to the Company or the Subsidiaries, of any court or other
governmental authority.

Section 2.3 Capitalization of the Company.

(a) The authorized capital stock of the Company consists of 5,000
shares of common stock, par value $1.00 per share, of which 5,000
shares are currently outstanding. All of such outstanding shares were
duly authorized, validly issued and are fully paid and non-assessable.
The Shares are owned of record and beneficially by Seller and the
Shares are free and clear of any liens, charges, pledges, security
interests, or other encumbrances.

(b) Other than pursuant to this Agreement and as set forth in Section
2.3(b) of the Disclosure Letter, there are not authorized or
outstanding any subscriptions, options, conversion rights, warrants or
other agreements, securities or commitments obligating Seller, the
Company or the Subsidiaries to issue, deliver or sell, or cause to be
issued, delivered or sold, the Shares or any shares of the capital
stock, or any securities convertible into or exchangeable for shares
of capital stock, of the Company or its Subsidiaries or obligating
Seller, the Company or the Subsidiaries to grant, extend or enter into
any such agreement or commitment.

6

 

Section 2.4 Subsidiaries of the Company.

(a) Section 2.4(a) of the Disclosure Letter lists the name of each
subsidiary of the Company in which the Company directly or indirectly
beneficially owns securities representing fifty percent (50%) or more
of the aggregate voting power (such subsidiaries being collectively
referred to herein as the “Subsidiaries”), together with the
jurisdiction of its organization, the percentage of shares of each
class of its capital stock (or other equity interest) owned by the
Company and all other record owners of such outstanding capital stock.
The shares of capital stock of each Subsidiary that are owned by the
Company are free and clear of all liens, charges, pledges, security
interests or other encumbrances, other than as set forth in Section
2.4(a) of the Disclosure Letter, and all such capital stock is duly
authorized, validly issued, fully paid and non-assessable. No
Subsidiary owns any capital stock (or other equity interest) in
another Subsidiary. Each Subsidiary is a limited liability company
validly existing and in good standing under the laws of its respective
jurisdiction of organization, has the power and authority to own, use
and lease its properties and to conduct its business as now conducted
by it, and is duly qualified, licensed or admitted as a foreign
company to do business and is in good standing in each jurisdiction
specified in Section 2.4(a) of the Disclosure Letter, which are the
only jurisdictions in which the ownership, use or leasing of its
properties, or the conduct or nature of its business, makes such
qualification, licensing or admission necessary, except for those
jurisdictions in which the adverse effects of all such failures by the
Company to be so qualified, licensed or admitted and in good standing
can in the aggregate be eliminated without material cost or expense by
the Subsidiary becoming qualified or admitted and in good standing.

(b) Section 2.4(b) of the Disclosure Letter lists the name of each
entity in which the Company directly or indirectly beneficially own
securities representing at least twenty percent (20%), but less than
fifty percent (50%), of the aggregate voting power (the “Investment
Entities”), together with the jurisdiction of its organization, the
percentage of shares of each class of its capital stock (or other
equity interests) so held and all of the other record owners of such
outstanding capital stock. No Investment Entity owns any capital
stock (or other equity interest) in another Investment Entity.

(c) Except as set forth in Section 2.4(c) of the Disclosure Letter,
any obligations to make any capital contributions to or any payments
in respect of the Subsidiaries and Investment Entities have been
satisfied in full.

Section 2.5 Financial Statements.

Exhibit B hereto contains the consolidated balance sheets of the Company and
its consolidated Subsidiaries as of September 30, 2003 and September 30,
2004 previously furnished to Buyer and the related consolidated statements
of income and retained earnings and cash flows for the years then ended,
together with the notes relating thereto (such financial statements,
including the notes relating thereto, being

7

 

hereinafter referred to as the “Financial Statements”). The Financial
Statements present fairly, in all material respects, in accordance with
generally accepted accounting principles in effect in the United States
(“GAAP”) applied on a consistent basis throughout the periods involved
(except as may be otherwise noted therein) the consolidated financial
position of the Company and its consolidated Subsidiaries, on a stand-alone
basis, as of the respective dates set forth therein and the consolidated
results of operations and cash flows of the Company and its consolidated
Subsidiaries for the respective fiscal periods set forth therein. The
Financial Statements were compiled from the books and records of the Company
regularly maintained by management and used to prepare the Financial
Statements in accordance with the principles stated therein. The Company
and the Subsidiaries have maintained their respective books and records in a
manner sufficient to permit the preparation of the Financial Statements in
accordance with GAAP applied on a consistent basis throughout the periods
involved (except as may be otherwise noted therein). The management of the
Company has established and maintained internal controls and procedures
designed to ensure that material information about the Company and its
business is made known to the officers of the Company on a timely basis and
such internal controls have been effective in all material respects. The
Final Net Working Capital Amount shall be sufficient for the Company and its
Subsidiaries to conduct their respective businesses, operations and
activities in the ordinary course and consistent with past practices.

Section 2.6 Interim Financial Statements.

Exhibit C hereto contains a consolidated balance sheet of the Company and
its consolidated Subsidiaries as of October 31, 2004 and the related
consolidated statement of income for the one (1) month period since
September 30, 2004 (such financial statements being hereinafter referred to
as the “Interim Financial Statements”). Except as may be otherwise noted
therein or in Section 2.6 of the Disclosure Letter and subject to year-end
adjustments, the Interim Financial Statements present fairly, in all
material respects, in accordance with GAAP applied on a consistent basis
throughout the periods involved (except for the absence of detailed notes),
the consolidated financial position of the Company and its consolidated
Subsidiaries, on a stand-alone basis, as of October 31, 2004, and the
consolidated results of their operations for the one (1) month period then
ended.

Section 2.7 Absence of Undisclosed Liabilities.

Except as provided for in the Financial Statements or as reflected in the
notes thereto, or as set forth in Section 2.7 of the Disclosure Letter, at
the last day of the respective periods covered by Financial Statements,
there were no liabilities or obligations, contingent or otherwise, of the
Company or the Subsidiaries that were not provided for in such financial
statements or reflected in the notes thereto. Except as otherwise disclosed
in the Financial Statements or Section 2.7 of the Disclosure Letter, since
the last day of the period covered by the Financial Statements, (a) neither
the Company nor any of the Subsidiaries has incurred any liabilities or
obligations, except (i) such as may have arisen in the ordinary course of
business or (ii) such as are the result of the

8

 

transactions contemplated by this Agreement, and (b) there has been no
Material Adverse Effect.

Section 2.8 Absence of Certain Changes or Events.

Except as otherwise disclosed in this Agreement or set forth in Section 2.8
of the Disclosure Letter, since September 30, 2004 (or since September 30,
2003 in the case of item (ix) below), the Company and the Subsidiaries have
conducted their business in the ordinary and usual course and there has not
been (i) any change or amendment to their articles of incorporation or
by-laws; (ii) any issuance or sale of any shares of their capital stock or
the issuance or sale of any securities convertible into, or options with
respect to, or warrants to purchase or rights to subscribe for, any shares
of their capital stock, or any agreements obligating any of them to do any
of the foregoing; (iii) any dividends declared, set aside, paid or made with
respect to the Shares; (iv) any damage, destruction or other casualty loss
(whether or not covered by insurance) materially and adversely affecting the
properties or business of the Company or of the Company and the Subsidiaries
considered as a whole; (v) any increase in the compensation payable or to
become payable by the Company or any of the Subsidiaries to any of their
officers or employees or any adoption, amendment or change to, or any
increase in, any employment, change-in-control, severance, bonus, insurance,
pension or other employee benefit plan, payment or arrangement for or with
any such officers or employees; (vi) any material labor dispute involving
the Company or any of the Subsidiaries, (vii) any transactions between the
Company or any of the Subsidiaries, on the one hand, and Seller or any
subsidiary, officer, director or affiliate of Seller (other than the Company
and its Subsidiaries) or any officer or director of the Company or any of
the Subsidiaries, on the other hand, other than employment arrangements
consistent with past practice and employment-related agreements set forth in
Section 2.8(vii) of the Disclosure Letter; (viii) (A) incurrences by the
Company or any Subsidiary of indebtedness in an aggregate principal amount
exceeding $100,000 (net of any amounts discharged during such period), or
(B) any voluntary purchase, cancellation, prepayment or complete or partial
discharge in advance of a scheduled payment date with respect to, or waiver
of any right of the Company or any Subsidiary under, any indebtedness of or
owing to the Company or any Subsidiary other than pursuant to Section 5.13
of this Agreement after the date of this Agreement but prior to the Closing;
(ix) any change in (A) any pricing, investment, accounting, financial
reporting, inventory, credit, allowance or Tax practice or policy of the
Company or any Subsidiary, or (B) any method of calculating any bad debt,
contingency or other reserve of the Company or any Subsidiary for
accounting, financial reporting or Tax purposes, or any change in the fiscal
year of the Company or any Subsidiary; (x) any write-off or write-down of
or any determination to write off or write down any of the assets and
properties of the Company or any Subsidiary in an aggregate amount exceeding
$25,000; (xi) any acquisition or disposition of, or incurrence of any liens,
charges, pledges, security interests, or other encumbrances on, any assets
and properties of the Company or any Subsidiary, other than in the ordinary
course of business consistent with past practice; (xii) any (A)
recapitalization, reorganization, liquidation or dissolution of the Company
or any Subsidiary or (B) merger or other business combination involving the
Company or any Subsidiary and any other person other than the dissolution or
transfer of certain

9

 

Subsidiaries as set forth on Section 2.4 of the Disclosure Letter; (xiii)
any entering into, amendment, modification, termination (partial or
complete) or granting of a waiver under or giving any consent with respect
to (A) any contract which is required (or had it been in effect on the date
hereof would have been required) to be disclosed pursuant to Sections 2.12
and 2.20 and or (B) any material license held by the Company or any
Subsidiary; (xiv) capital expenditures or commitments for additions to
property, plant or equipment of the Company and the Subsidiaries
constituting capital assets in an aggregate amount exceeding $25,000; (xv)
any commencement or termination by the Company or any Subsidiary of any line
of business; (xvi) any entering into of a contract to do or engage in any of
the foregoing after the date hereof; or (xvii) any other commitment or
transaction entered into by the Company or any of the Subsidiaries that is
material to the Company or to the Company and the Subsidiaries considered as
whole, other than in the ordinary course of business.

Section 2.9 Title to Properties; Absence of Liens and Encumbrances,
etc.

Each of the Company and the Subsidiaries has good title to all of its
properties and assets, real or personal, free and clear of any liens,
encumbrances and defects, except for (i) any liens, encumbrances or defects
disclosed in Section 2.9 of the Disclosure Letter (ii) any liens or
encumbrances for Taxes and assessments not yet past due or which are being
contested in good faith and for which appropriate reserves have been made;
and (iii) mechanic, materialmen, workmen, repairmen, warehousemen, carriers
and other similar liens and encumbrances. All real property owned by the
Company or the Subsidiaries and all leases, including leases of real
property, under which any of the Company or the Subsidiaries is the lessee
and that require a lease payment in excess of $25,000 annually (the
“Leases”) are listed in Section 2.9 of the Disclosure Letter. Except as set
forth in Section 2.9 of the Disclosure Letter, (x) each such Lease is a
legal, valid and binding agreement, enforceable in accordance with its
terms, of the Company or a Subsidiary and, to Seller’s Knowledge, of each
other person that is a party thereto, and (y) neither the Company nor any of
the Subsidiaries has received notice of any material default by the Company
or any such Subsidiary under any of the Leases and, neither the Company nor
any such Subsidiary is in default in any material respect under any of the
Leases. The buildings and other improvements, machinery, equipment and
other tangible assets used in the business or operation of the Company and
the Subsidiaries as currently conducted are owned, used or leased by the
Company or the Subsidiaries free from material defects (patent or latent),
have been maintained in accordance with normal industry practice and are in
good operating condition and repair. Except as disclosed in Section 2.9 of
the Disclosure Letter, there are no facilities or services which are used in
connection with any business or operations of the Company and its
Subsidiaries which are shared with Seller or any of its affiliates (other
than the Company and its Subsidiaries). As of the date hereof, the
properties and assets owned or leased by the Company and its Subsidiaries
are and, assuming no material changes, as of the Closing Date, such
properties and assets will be, sufficient to conduct the business or
operations of the Company and its Subsidiaries to the same extent as
heretofore conducted by them in the ordinary course of business as of the
Closing.

10

 

Section 2.10 Litigation.

Except as disclosed in Section 2.10 of the Disclosure Letter, there are no
actions, suits, proceedings or investigations pending or, to the Seller’s
Knowledge, threatened against the Company or any of the Subsidiaries at law,
in equity or otherwise, in, before or by, any court or governmental agency
or authority that, (i) has or could reasonably be expected to have a
Material Adverse Effect, (ii) could result in the issuance of a judgment,
order, injunction, decree, or stipulations restraining, enjoining or
otherwise prohibiting or making illegal the consummation of any of the
transactions contemplated by this Agreement or otherwise result in a
material diminution of the benefits contemplated by this Agreement to Buyer
or, (iii) if determined adversely to Seller, the Company or a Subsidiary,
could reasonably be expected to result in any injunction or other equitable
relief against the Company or any Subsidiary that would interfere in any
material respect with its business or operations. To Seller’s Knowledge,
there are no facts or circumstances that could reasonably be expected to
give rise to any material actions, suits, proceedings or investigations that
would be required to be disclosed pursuant to the immediately preceding
sentence. Except as disclosed in Section 2.10 of the Disclosure Letter,
there are no unsatisfied judgments or outstanding orders, injunctions,
decrees, stipulations or awards against the Company or any of the
Subsidiaries or against any of their properties or businesses that have or
could reasonably be expected to have a Material Adverse Effect.

For the purposes of this Agreement, (a) “Material Adverse Effect” means any
material adverse effect (i) on the business, assets and properties,
liabilities, results of operations, condition (financial or otherwise) or
prospects of the Company and the Subsidiaries taken as a whole, (ii) on the
ability of the Company or Seller to perform in any material respect their
respective obligations under or with respect to, or to consummate the
transactions contemplated by, this Agreement, or (iii) on the ability of the
Company to conduct its businesses and to own or lease its assets and
properties in substantially the same manner in which such businesses are
conducted and such assets and properties are owned or leased on the Closing
Date; and (b) “Seller’s Knowledge” shall mean the actual knowledge of Thomas
Andrews, Mark Chatelain, Dwight Clark, Mark Filteau, Edward Hamm, James
Kaylor, Bettie Kennedy, Carol S. King, Tom Lampley, Michael McCarty, Laura
Mitchell, Lisa Sheldon, Kevin Smith and David Toops, after each such person
has made appropriate and reasonable investigations and inquiries.

Section 2.11 Compliance with Law.

Except as set forth in Section 2.11 of the Disclosure Letter, (a) the
business of the Company and the Subsidiaries is not and at any time in the
last five (5) years has not been conducted in violation of any law,
ordinance or published regulation of any governmental entity, except for
possible violations that do not have and could not reasonably be expected to
have a Material Adverse Effect, and (b) all governmental approvals, permits
and licenses required by the Company and the Subsidiaries to conduct their
business as conducted by them at any time in the last five (5) years have
been obtained and are in full force and effect and are being complied with
in all material

11

 

respects, except for those the absence of which do not have and could not
reasonably be expected to have a Material Adverse Effect.

Section 2.12 Contracts.

(a) Section 2.12(a) of the Disclosure Letter (with paragraph
references corresponding to those set forth below) contains a true and
complete list of each of the following contracts in effect on the date
hereof (true and complete copies or, if none, reasonably complete and
accurate written descriptions of which, together with all amendments
and supplements thereto and all waivers of any terms thereof, have
been made available to Buyer prior to the execution of this
Agreement), to which the Company or any Subsidiary is a party or by
which any of its assets and properties is bound:

(i) (A) all contracts (excluding Employee Benefit Plans) providing
for a commitment of employment or consultation services for a
specified or unspecified term or otherwise relating to employment
or the termination of employment, together with the name, position
and rate of compensation of each person party to such a contract
and the expiration date of each such contract; and (B) any written
or unwritten representations, commitments, promises,
communications or courses of conduct (excluding Employee Benefit
Plans and any such contracts referred to in clause (A)), involving
in the case of either clause (A) or clause (B) an obligation of
the Company or any Subsidiary to make payments in any year to any
person exceeding $50,000 or any group of similarly situated
persons exceeding $100,000 in the aggregate;

(ii) all contracts with any person containing any provision or
covenant (A) purporting to prohibit or limit the ability of the
Company or any Subsidiary (or after giving effect to the
transactions contemplated hereby, Buyer and its affiliates) to
engage in any business activity or compete with any person or
prohibiting or limiting the ability of any person to compete with
the Company or any Subsidiary (except for any teaming agreement
entered into in the ordinary course of business for purposes of
submitting a joint bid with respect to any single proposed
contract or series of related contracts with a single customer
provided that such provision or covenant does not extend beyond
the term of the related customer contract or apply to any other
customer) or (B) that could result in a breach or default by the
Company based upon any action or inaction by Buyer or its
affiliates after the Closing;

(iii) any contract (or group of related contracts) for the lease
of personal property to or from any person providing for lease
payments in excess of $100,000 over the full term of the contract;

(iv) any contract (or group of related contracts) for the purchase
or sale of raw materials, commodities, supplies, products, or
other personal property,

12

 

or for the furnishing or receipt of services, the performance of
which involves consideration in excess of $100,000 over the full
term of the contract;

(v) any contract concerning a partnership or joint venture;

(vi) any contract (or group of related contracts) under which the
Company has incurred any indebtedness over $25,000 or under which
it has imposed a lien, charge, pledge, security interest, or other
encumbrance on any of its assets and properties, tangible or
intangible;

(vii) all contracts relating to a business combination involving
the Company or any Subsidiary or to which the Company or any
Subsidiary is a party;

(viii) any collective bargaining contracts;

(ix) all contracts that (A) limit or contain restrictions on the
ability of the Company or any Subsidiary to declare or pay
dividends on, to make any other distribution in respect of or to
issue or purchase, redeem or otherwise acquire its capital stock,
to incur indebtedness, to incur or suffer to exist any lien,
charge, pledge, security interest, or other encumbrance, to
purchase or sell any assets and properties or to change the lines
of business in which it participates or engages or to engage in
any business combination or (B) require the Company or any
Subsidiary to maintain specified financial ratios or levels of net
worth or other indicia of financial condition;

(x) all customer contracts that can reasonably be expected to
generate revenues for the Company or any Subsidiary in excess of
$100,000 over the full term of such contract (assuming the
exercise of all unexercised options to extend the term of such
contract);

(xi) all contracts, including, without limitation, any licenses or
royalty agreements, that require the Company or any Subsidiary to
make any payments based on its sales, earnings, net income,
earnings before interest, Taxes, depreciation and amortization, or
any other or similar measure of the Company’s or any Subsidiary’s
financial results;

(xii) any contract under which the consequences of a default or
termination could reasonably be expected to have a Material
Adverse Effect;

(xiii) any Government Contract; and

(xiv) any other contract (or group of related contracts) the
performance of which involves consideration in excess of $50,000
over the full term of the contract.

If between the date hereof and the Closing Date the Company enters
into a contract required to be listed in Section 2.12(a) of the
Disclosure Letter, the

13

 

Company shall deliver to Buyer at the Closing an amended Section
2.12(a) of the Disclosure Letter to include a true and complete
list of each such contract.

(b) In all material respects, each contract required to be listed in
Section 2.12(a) of the Disclosure Letter is in full force and effect
and constitutes a legal, valid and binding agreement, enforceable in
accordance with its terms, of the Company or any Subsidiary and, to
the Seller’s Knowledge, of each other party thereto, subject to
applicable bankruptcy, insolvency and similar laws affecting
creditors’ rights generally and subject, as to enforceability, to
general principles of equity (regardless of whether enforcement is
sought in a proceeding in equity or at law), nor, to Seller’s
Knowledge, any other party to such contract is, or has received notice
that it is, in violation or breach of or default under any such
contract (or with notice or lapse of time or both, would be in
violation or breach of or default under any such contract) in any
material respect.

(c) Neither the Company nor any Subsidiary has any outstanding powers
of attorney or comparable delegations of authority executed on behalf
of the Company or such Subsidiary.

Section 2.13 Brokers and Finders.

With the exception of Goldman Sachs & Co., Seller has not employed any
broker, finder, consultant, or intermediary in connection with the
transactions contemplated by this Agreement that would be entitled to a
broker’s, finder’s or similar fee or commission in connection therewith.
Seller shall be responsible to make payments, if any, to which Goldman Sachs
& Co. shall be entitled.

Section 2.14 Insurance.

Section 2.14 of the Disclosure Letter contains a true and complete list
(including the names of the insurers, the names of the persons to whom such
policies have been issued, the expiration dates thereof, the annual premiums
and payment terms thereof, whether it is a “claims made” or an “occurrence”
policy and a brief description of the interests insured thereby) of all
liability, property, workers’ compensation, life, directors’ and officers’
liability and other insurance policies currently in effect that insure the
Company or any Subsidiary or its business, operations, officers, directors
or employees (whether full time or contract), or affect or relate to the
ownership, use or operation of any of the assets and properties of the
Company or any Subsidiary and that (i) have been issued to the Company or
any Subsidiary or (ii) have been issued to any person (other than the
Company or any Subsidiary) for the benefit of the Company or any Subsidiary.
The insurance coverage provided by any of the policies described in clause
(i) above will not terminate or lapse, and no insurer will have the right to
terminate any such policy, by reason of the transactions contemplated by
this Agreement. With respect to each policy listed in Section 2.14 of the
Disclosure Letter (i) the policy is legal, valid, binding, enforceable and
in full force and effect, no premiums due thereunder have not been paid in
all material respects; (ii) neither the

14

 

Company or any Subsidiary nor, to Seller’s Knowledge, any other party to the
policy is in breach or default (including with respect to the payment of
premiums or the giving of notices), and no event has occurred to Seller’s
Knowledge which, with notice or the lapse of time, would constitute such a
breach or default, or permit termination, modification or acceleration,
under the policy; and (iii) neither the Company or any Subsidiary nor, to
Seller’s Knowledge, any other party to the policy has repudiated any
provision thereof. Except as set forth in Section 2.14 of the Disclosure
Letter, to Seller’s Knowledge such insurance policies are placed with
financially sound and reputable insurers and are in amounts and have
coverages that are reasonable and customary for persons engaged in
businesses and operations comparable to those of the Company or any
Subsidiary and having assets and properties comparable to those of the
Company or any Subsidiary.

Section 2.15 Tax Matters.

(a) All Tax Returns required to be filed by the Company and each of
its Subsidiaries or on their behalf have been duly filed and all such
Tax Returns are true, complete, and correct in all material respects.
All Taxes that are due or claimed to be due from the Company or any of
its Subsidiaries have been paid and adequate provision in accordance
with GAAP has been made for all accrued Taxes not yet due and payable.

(b) There are no current, pending or, to the Seller’s Knowledge,
threatened audits, assessments, or other examinations relating to
Taxes by any Taxing Authority or any judicial or administrative
proceedings relating to Taxes, no deficiencies for any Taxes have been
proposed, asserted or assessed against the Company or any Subsidiary,
and no requests for waivers of the time to assess any such Taxes are
pending or threatened.

(c) The Company and each of its Subsidiaries has complied in all
respects with all applicable laws, rules, and regulations relating to
the payment and withholding of Taxes (including withholding of Taxes
pursuant to Section 1441 and 1442 of the Code or similar provisions
under any state, local or foreign laws) and have, within the time and
the manner prescribed by law, withheld and paid over to the proper
governmental or regulatory authority all amounts required to be so
withheld and paid over under applicable laws.

(d) Neither the Company nor any of its Subsidiaries has any liability
for the Taxes of any person other than the Company or any such
Subsidiaries, as a transferee, successor or otherwise (including,
without limitation any liability under Treasury Regulations section
1.1502-6 or any similar provision of state, local or foreign law).

(e) Except as set forth in Section 2.15(e) of the Disclosure Letter,
neither the Company nor any of its Subsidiaries has been a member of a
group which files a consolidated federal income tax return other than
a group in which Seller is the parent.

15

 

(f) Except as set forth in Section 2.15(f) of the Disclosure Letter,
neither the Company nor any of its Subsidiaries is a party to or bound
by any obligation under any Tax sharing, Tax allocation, Tax indemnity
or similar agreement and no power of attorney has been granted by or
with respect to the Company or any of its Subsidiaries with respect to
any matter relating to Taxes.

(g) As of the effective time of any Section 338(h)(10) Election, each
of the Company and its Subsidiaries is a member of a “selling
consolidated group” (within the meaning of Section 338(h)(10)(B) of
the Code) of which Seller is the common parent (and Company and its
Subsidiaries are a “consolidated target” within the meaning of Treas.
Reg. § 1.338(h)(10)-1(b)(1) of the consolidated group of which Seller
is the common parent).

(h) Neither the Company nor any of its Subsidiaries has been a
“distributing corporation” or a “controlled corporation” in connection
with a distribution intended or purported to be governed by Section
355 of the Code.

(i) The Company and each of its Subsidiaries have complied in all
respects with all applicable laws relating to intercompany
transactions and transfer pricing.

(j) Neither the Company nor any of its Subsidiaries (nor any
predecessor thereof) is a party to a plan or agreement that could give
rise to (i) remuneration the deduction for which could be disallowed
under Section 162(m) of the Code or (ii) any “excess parachute
payment” within the meaning of Code section 280G (or a corresponding
provision of state, local or foreign law).

(k) Neither the Company nor any of its Subsidiaries is required to
include in income any adjustment pursuant to Section 481(a) of the
Code by reason of any voluntary change in accounting method (nor has
any governmental or regulatory authority proposed any such adjustment
or change of accounting method).

For purposes of this Agreement, (i) the term “Tax Returns” shall mean any
report, return, declaration, claim for refund, information report or return
or statement required to be supplied to a governmental or regulatory
authority in connection with Taxes, including any schedule or attachment
thereto or amendment thereof, (ii) the term “Tax” or “Taxes” shall mean
without limitation, any and all present or future taxes, levies, imposts,
duties, deductions, charges or withholdings together with any related
liabilities, penalties, fines, additions to tax or interest, imposed by any
Taxing Authority and (iii) the term “Taxing Authority” shall mean any
governmental or regulatory authority exercising any authority to impose,
regulate, levy, assess or administer the imposition of any Tax.

Section 2.16 Collective Bargaining Agreements, Employment Agreements,

and Benefit Plans.

(a) Except as set forth in Section 2.16(a) of the Disclosure Letter,
neither the Company nor any of the Subsidiaries has in effect or has
any liability with respect

16

 

to any labor agreements, collective bargaining agreement, employment
agreement or any incentive compensation, deferred compensation, profit
sharing, stock option, stock bonus, stock purchase, change in control,
retention, savings, retirement, pension or other employee benefit or
compensation plan or arrangement, with or for the benefit of any
current or former officer, employee or director. Seller has
heretofore made available to Buyer true and correct copies of each
document listed Section 2.16(a) of the Disclosure Letter, together
with all amendments, modifications or supplements thereto as agreed
upon by the Company or any of its Subsidiaries and any authorized
representative of any labor organization representing their employees.

(b) Except as set forth in Section 2.16(b) of the Disclosure Letter,
neither the Company nor any Subsidiary has in effect or has any
liability with respect to any collective bargaining agreement or
employment agreement with or for the benefit of any officer, employee
or director providing for an increase or acceleration of wages or
benefits to such current or former officer, employee or director as a
result of a change of control of the Company.

(c) Section 2.16(c) of the Disclosure Letter contains a list of the
name of each officer and employee of the Company and the Subsidiaries
having an annual base salary or wages of at least $100,000 at the date
hereof, together with each such person’s position or function, annual
base salary or wages and any incentive or bonus arrangement with
respect to such person in effect on such date. Since June 2004,
except for Laura Mitchell, no officer, employee or consultant employed
or retained by the Company or the Subsidiaries on or after such date
has resigned or severed a relationship with the Company or any
Subsidiaries and been employed or engaged by, or except as set forth
on Exhibit D hereto received offers of employment or engagement that
are open and outstanding from Seller or any of its affiliates other
than the Company or its Subsidiaries. Seller has not received any
information that would lead it to reasonably believe that a material
number of such persons will likely cease to be employees, or will
likely refuse offers of employment from Buyer, because of the
consummation of the transactions contemplated by this Agreement.

(d) Section 2.16(d) of the Disclosure Letter sets forth all labor
organizations or groups representing the employees of the Company or
any of the Subsidiaries, together with the approximate number of such
employees represented by each such labor organization or group.
Except as set forth in Section 2.16(d) of the Disclosure Letter, in
the last twenty-four (24) months, no labor organization or group of
Company or Subsidiary employees has made, nor is there pending, any
demand for recognition or certification, and as of the date of this
Agreement there are no representation proceedings pending before the
National Labor Relations Board or threatened to be filed, and there
are no pending organizing activities involving any labor organization
or group of Company or Subsidiary employees.

(e) Except as set forth in Section 2.16(e) of the Disclosure Letter,
in the last twenty-four (24) months, there have been no strikes, work
stoppages,

17

 

slowdowns, lockouts or similar labor actions or disputes pending or
threatened. Except as set forth in Section 2.16(e) of the Disclosure
Letter, and as of the date of this Agreement, there are no unfair
labor practice or sex, age, race or other discrimination claims,
charges or complaints, arbitrations or material grievances, charges or
complaints, or other claims, charges or complaints against the Company
or any Subsidiary pending or, to the Seller’s Knowledge, threatened to
be filed with any public or governmental authority, arbitral forum, or
court relating to any of the Company’s or any Subsidiary’s employees.

(f) Except as set forth in Section 2.16(f) of the Disclosure Letter,
in the last twenty-four (24) months, the Company and the Subsidiaries
have complied in all material respects with all applicable laws
relating to the employment of labor, including, without limitation
those relating to wages, hours and collective bargaining. Except as
set forth in Section 2.16(f) of the Disclosure Letter, there are no
actions, proceedings, complaints or charges of any kind pending or, to
Seller’s Knowledge, threatened to be filed by any employee or group of
employees of the Company or any Subsidiary against the Company or any
Subsidiaries arising out of his, her or their employment or the
termination of such employment, except to the extent that the same
could not, individually or in the aggregate, have a Material Adverse
Effect.

Section 2.17 ERISA; Employee Benefits.

(a) All material plans, funds, programs, contracts, or arrangements
(regardless of whether they are funded or unfunded, oral or written)
that are being maintained by or contributed to by the Company or any
of the Subsidiaries for, or that cover or provide benefit to, any
employees or former employees of the Company or any of the
Subsidiaries, or with respect to which the Company or any of its
Subsidiaries has any direct or indirect or actual or contingent
liability for the purpose of providing health and accident coverage
(including any self-insured arrangement), workers’ compensation,
disability benefits, life insurance, supplemental unemployment
benefits, vacation benefits, pension or other retirement benefits,
profit-sharing, deferred compensation, bonuses, stock options, stock
purchase opportunities, stock appreciation, severance benefits, change
in control benefits, retention benefits, or any other fringe benefit,
including, but not limited to, any “employee benefit plan” within the
meaning of Section 3(3) of the Employee Retirement Income Security Act
of 1974, as amended (“ERISA”) (hereinafter collectively referred to as
the “Employee Benefit Plans” or “Plan”) are listed in Section 2.17 of
the Disclosure Letter. Plans specifically maintained in order to
comply with federal or state government contract regulations are
included within the definition of Employee Benefit Plan.

(b) Section 2.17(b) applies with respect to each Employee Benefit
Plan other than any such Plan that is jointly administered pursuant to
the Labor Management Relations Act, 1947, U.S.C. § 141 et seg.
(the “Taft-Hartley Act”). Each such Employee Benefit Plan is a binding
legal obligation of the Company or Subsidiary maintaining the Plan.
Each such Employee Benefit Plan has been

18

 

administered to date in material compliance with its terms and with
the requirements of ERISA, the Internal Revenue Code of 1986, as
amended (the “Code”), and other applicable laws, and all material
reporting and disclosure requirements of Title I of ERISA and the Code
have been met with respect to each such Employee Benefit Plan. Each
such Employee Benefit Plan intended to qualify under Section 401(a) of
the Code is so qualified. With respect to each such Employee Benefit
Plan true and complete copies of (A) each plan document (and if
applicable, related trust agreements) and all amendments thereto, (B)
the most recent Internal Revenue Service determination letter (if
applicable), (C) the two most recent actuarial valuation report (if
applicable), (D) the last two Forms 5500 and Schedules A and B thereto
(if applicable), (E) the current summary plan description (if
applicable), and (F) the two most recent annual and periodic
accounting of related plan assets (if applicable) have been made
available for inspection by Buyer and are correct in all material
respects.

(c) Except as set forth in Section 2.17(c) of the Disclosure Letter,
no Employee Benefit Plan constitutes an “employee pension benefit
plan” as defined in Section 3(2) of ERISA (a “Pension Plan”) that is
subject to the funding standards of Section 412 of the Code or Title
IV of ERISA and neither the Company, any Subsidiary nor any person or
entity required within the last six years to be treated as a single
employer with the Company or any Subsidiary under Section 414 of the
Code has or has had any direct or indirect or actual or contingent
liability with respect to any such Pension Plan within the last six
years. Except as set forth in Section 2.17(c) of the Disclosure
Letter, the fair market value of the assets set aside to fund each
Pension Plan, other than any such Plan that is jointly administered
pursuant to the Taft-Hartley Act, is not less than the greater of (i)
the present value of the projected benefit obligations under such
Pension Plan as of Closing (determined in accordance with the
principles set forth in FAS 87) or (ii) the present value of the
benefits accrued as of the Closing under such Pension Plan calculated
on a termination basis using the assumptions and methodologies that
would be used to terminate such Pension Plan under Section 4041 of
ERISA (regardless of whether such Pension Plan is subject to ERISA).
No Pension Plan maintained by the Company, a Subsidiary or an entity
required to be treated with the Company or a Subsidiary as a single
employer under Section 414 of the Code (an “ERISA Affiliate”) has, nor
has the Company or any of the Subsidiaries received notice that any
Pension Plan that constitutes a “multiemployer plan” as defined in
Section 3(37) of ERISA (a “Multiemployer Plan”), has an accumulated or
waived funding deficiency within the meaning of Section 412 of the
Code. With respect to any “employee benefit plan” as defined in
Section 3(3) of ERISA, there is no outstanding liability arising
under Title IV of ERISA or the Code, with respect to which the Company
or any Subsidiary could have any direct indirect or actual or
contingent liability and the consummation of the transactions
contemplated by this Agreement (including the related restructuring
transactions involving JCSS, JCBS and Johnson Controls Major Systems,
LLC, (“JCMS”)) will not give rise to any such liability. No Employee
Benefit Plan constitutes a Multiemployer Plan except for plans
specifically identified as such in Section 2.17(c) of the Disclosure
Letter. Except as set forth

19

 

in Section 2.17(c) of the Disclosure Letter, no Employee Benefit Plan
is maintained in connection with any trust described in Section
501(c)(9) of the Code. No material liability of the Company or any
Subsidiary exists as a result of a “prohibited transaction”, as
defined in Section 4975 of the Code or Section 406 of ERISA, with
respect to any Employee Benefit Plan. Except as set forth in Section
2.17(c) of the Disclosure Letter, no Pension Plan covered by Title IV
of ERISA (including, but not limited to plans maintained by Seller
and/or any of its subsidiaries or affiliates) has terminated, and
neither the Company nor any of its Subsidiaries has made a complete or
partial withdrawal from a Multiemployer Plan, as a result of which the
Company or any Subsidiary may be liable under Title IV of ERISA.
Except as set forth in Section 2.17(c) of the Disclosure Letter, there
have been no “reportable events” (as defined by Section 4043 of ERISA)
with respect to any Employee Benefit Plan that have not been waived
and the consummation of the transaction, contemplated by this
Agreement, cannot reasonably be expected to result in such reportable
events. Neither the Company, its Subsidiaries nor any ERISA Affiliate
has incurred any material liability under Section 4980B of the Code
for failure to satisfy the continuation coverage requirements of group
health plans. With respect to any Employee Benefit Plan other than a
Plan that is jointly administered pursuant to the Taft Hartley Act, no
civil or criminal action is pending or, to Seller’s Knowledge,
threatened against any such Employee Benefit Plan or any fiduciary of
any such Employee Benefit Plan. No civil or criminal action is pending
against the Company or any Subsidiary in connection with an Employee
Benefit Plan, nor is Seller, the Company, or any Subsidiary in
possession of any information that any of them reasonably believes may
form the basis for such a claim.

(d) There is no contract, agreement, plan, or arrangement covering
any employee or former employee of the Company or any of its
Subsidiaries that, individually or collectively, could give rise to
the payment of any amount that would not be deductible pursuant to the
terms of Section 162(a)(1) or 280G of the Code. No payments or
benefits under any Employee Benefit Plan or employment, change in
control or severance plan, program, agreement or arrangement,
including, without limitation, any parachute payment plan or
agreement, will be established or become accelerated, vested, funded
or payable by reason of any transaction contemplated under this
Agreement (or by reason of any transaction contemplated under this
Agreement in combination with any other event, such as the termination
of employment, occurring after the consummation of the transactions
contemplated by this Agreement).

(e) Except as disclosed in Section 2.17(e) of the Disclosure Letter,
no employee or former employee of the Company or any of its
Subsidiaries is covered under any “welfare plan” within the meaning of
Section 3(1) of ERISA (a “Welfare Plan”) maintained or contributed to,
by the Company or any of the Subsidiaries that is intended to provide
post-employment or post-retirement benefits to such employees,
including, but not limited to, retiree health or life insurance
benefits.

20

 

(f) Except as set forth in Section 2.17(f) of the Disclosure Letter,
all Employee Benefit Plans and policies that are maintained by the
Company or any of the Subsidiaries covering Foreign Employees (as
hereinafter defined) comply in all material respects with all
applicable laws. For the purposes of this Section 2.17, the term
“Foreign Employees” shall mean employees who are non-resident aliens
and perform services outside the United States.

(g) Except as specifically set forth in Section 2.17(c) of the
Disclosure Letter with respect to Employee Benefit Plans made
available pursuant to collective bargaining agreements or required to
be provided pursuant to a Government Contract, neither the Company,
any of its Subsidiaries nor any other person or entity has taken any
action or made any statements (in writing or orally) to waive or
impair the right to unilaterally terminate or amend the Employee
Benefit Plans other than such Plans that are jointly administered
pursuant to the Taft-Hartley Act. There has been no amendment to,
written interpretation or announcement (whether or not written) by the
Company or the Subsidiaries relating to, or changes in employee
participation or coverages under, any Employee Benefit Plan that would
materially increase the expense of maintaining such Employee Benefit
Plan above the level of the expense incurred in respect thereof for
the calendar year ending 2003, excluding (i) an increase due to
changes in federal or state law, (ii) an increase that is fully
reimbursable under contract with customers or (iii) an increase that
is provided in a collective bargaining agreement.

(h) Section 2.17(h) of the Disclosure Letter sets forth a list of all
Multiemployer Pension Plans to which the Company or any its
Subsidiaries has contributed in the last six years.

(i) The vesting schedule applicable to Company Employees under the
Johnson Control Pension Plan is five-year “cliff” vesting.

Section 2.18 Intellectual Property.

Except as set forth in Section 2.18 of the Disclosure Letter and Section
5.6, (a) each of the Company and its Subsidiaries has all right, title and
interest in, free and clear of all liens, or is licensed or otherwise has a
valid and binding right under contract to use, all patents, trademarks,
trade names, service marks, service names, processes, know-how, Software or
other intellectual property and copyrights (the “Intellectual Property”)
material to (i) the conduct of the business and operations of the Company
and the Subsidiaries or (ii) the Company’s or any Subsidiary’s ability to
perform any contract required to be disclosed in Section 2.12 of the
Disclosure Letter and (b) neither the Company nor any of the Subsidiaries
has infringed upon or violated any Intellectual Property rights of third
parties in any respect, and the Company and the Subsidiaries have never
received any notice from any other person challenging the right of the
Company or any of the Subsidiaries to use any Intellectual Property owned or
used by or licensed to the Company or any of the Subsidiaries, which
challenge has or could reasonably be expected to have a Material Adverse
Effect. Section 2.18 of the Disclosure Letter lists all patents,
trademarks, trade names, service marks, service

21

 

names, Software and copyrights that is used by or is necessary to (i) the
conduct of the business and operations of the Company and the Subsidiaries
or (ii) the Company’s or any Subsidiary’s ability to perform any contract
required to be disclosed in Section 2.12 of the Disclosure Letter.

Section 2.19 Environmental Laws.

(a) Except as set forth in Section 2.19(a) of the Disclosure Letter,
the Company and the Subsidiaries have at all times complied and are
currently in compliance in all material respects with all applicable
Environmental Laws (as defined below) and neither the Company nor any
Subsidiary has intentionally or willfully violated any Environmental
Laws.

(b) Except as set forth in Section 2.19(b) of the Disclosure Letter,
the Company and the Subsidiaries have all government approvals and
permits required under Environmental Laws and necessary for their
operations and the occupancy of their facilities. The Company and the
Subsidiaries have at all times in the past complied and are currently
in compliance with all such government approvals and permits in all
material respects. Each such government approval and permit is in
full force and effect.

(c) Except as set forth in Section 2.19(c) of the Disclosure Letter,
no citation or other notice has been issued and to Seller’s Knowledge
no investigation or review is ongoing, pending or threatened by any
federal, state or local governmental entity with respect to (i) any
alleged material violation of or any material liability or obligation
under any Environmental Laws by the Company, any Subsidiary, or any of
their respective predecessors or affiliates occurring prior to the
Closing; or (ii) any alleged failure by the Company, any Subsidiary,
or any of their respective predecessors or affiliates, prior to the
Closing, to possess any material permit, certificate, license,
registration, approval or other authorization required by any
Environmental Laws for the past or current activities conducted by the
Company, any Subsidiary, or any of their respective predecessors or
affiliates.

(d) Except as set forth in Section 2.19(d) of the Disclosure Letter,
there are no past, present or pending citations or other notices (i)
identifying the Company, any Subsidiary, or any of their respective
predecessors or affiliates as a “potentially responsible party” at any
facility or site requiring environmental clean-up or any waste
disposal site; or (ii) alleging liability or obligations of the
Company, any Subsidiary, or any of their respective predecessors or
affiliates under any Environmental Laws, government approval or
permit.

(e) Except as set forth in Section 2.19(e) of the Disclosure Letter,
there are no facts, circumstances, conditions or occurrences
concerning the Company, any Subsidiary, or any of their respective
predecessors or affiliates that could reasonably be expected to give
rise to any material violation, liability, or obligation under
Environmental Laws with respect to any on-site or off-site

22

 

hazardous material contamination or the ownership or operation of any
property or facility.

(f) Except as set forth in Section 2.19(f) of the Disclosure Letter,
neither the Company, any Subsidiary, nor any of their respective
predecessors or affiliates has retained, assumed or otherwise become
subject to any liability or obligation of any other person or entity
under Environmental Laws.

(g) Except as set forth in Section 2.19(g) of the Disclosure Letter,
the Company’s or any of its Subsidiaries’ current real properties do
not include Polychlorinated Biphenyls (PCBs), underground storage
tanks, asbestos-containing materials, impoundments or waste disposal
areas.

(h) Neither this Agreement nor the consummation of the transaction
that is the subject of this Agreement will result in any obligations
for site investigation or cleanup or notification to or consent of
government agencies or third parties pursuant to the New Jersey
Industrial Site Recovery Act (ISRA) (N.J.A.C. 7:26B ) or any other
Environmental Laws.

(i) The Seller has provided to Buyer copies of all environmental
reports and other material environmental documents concerning the
facilities and operations owned or used by the Company or its
Subsidiaries within the past five (5) years.

(j) For purposes hereof, “Environmental Laws” shall mean any federal,
state, or local statute, ordinance or published rule or regulation or
common law relating to pollution, protection, or cleanup of the
environment or health and safety matters.

Section 2.20 Government Contracts.

(a) A true and correct list of each Government Contract which is in
effect as of the date of this Agreement and which has been completed
within the last five (5) years and each Government Bid to which the
Company or any Subsidiary is a party, is set forth in Section 2.20(a)
of the Disclosure Letter. If between the date of this Agreement and
the Closing Date the Company enters into a Government Contract or a
Government Bid, Seller shall deliver to Buyer at the Closing an
amended Section 2.20(a) of the Disclosure Letter to include a true and
correct list of each such Government Contract and Government Bid. For
the purpose hereof, (i) the term “Government Bid” means any offer to
sell or provide goods or services made by the Company prior to the
Closing Date which, if accepted, would result in a Government Contract
and for which an award has not been issued prior to the Closing Date
and (ii) the term “Government Contract” means any prime contract,
subcontract, teaming agreement or arrangement, joint venture, basic
ordering agreement, pricing agreement, letter contract, grant,
cooperative agreement or other similar arrangement of any kind which
was performed or is being performed, in whole or in part, between the
Company and either (A) any governmental or regulatory authority, (B)
any prime contractor of a governmental or regulatory authority in its
capacity as a prime contractor, or (C)

23

 

any subcontractor at any tier with respect to a contract with a
governmental or regulatory authority if such subcontractor is acting
in its capacity as a subcontractor; provided, however,
that a task purchase or delivery order under a Government Contract
shall not constitute a separate Government Contract, for purposes of
this definition, but shall be part of the Government Contract to which
it relates.

(b) Except as set forth in Section 2.20(b) of the Disclosure Letter,
(i) the Company and the Subsidiaries have fully complied with all
material terms and conditions of each Government Contract and
Government Bid to which it is a party; (ii) the Company and the
Subsidiaries have complied with all material requirements of any law
pertaining to such Government Contract or Government Bid including
with respect to bidding for or obtaining such Government Contract or
Government Bid; (iii) all representations and certifications made by
the Company and the Subsidiaries with respect to such Government
Contract or Government Bid were accurate, current and complete in all
material respects as of their effective date, and the Company and the
Subsidiaries have complied with all such representations and
certifications in all material respects; (iv) the Company and the
Subsidiaries are not, and have not been, in violation, or currently
alleged to be in violation, in any material respect, of the False
Statements Act, as amended, the False Claims Act, as amended, or any
other federal requirement relating to the communication of false
statements or submission of false claims to the United States
Government; and (v) no termination or default notice, cure notice or
show cause notice has been issued to the Company or any Subsidiary and
remains unresolved, and to Seller’s Knowledge, there has been no plan
or proposal of any entity to issue any such notice. For purposes
hereof, the term “United States Government” includes all departments
and agencies of any branch of the United States Government, all
independent establishments within the United States Government, and
United States Government corporations.

(c) (i) None of the Company’s or any Subsidiary’s employees (whether
full time or contract), consultants or agents is (or during the last
five years has been) under administrative, civil or criminal
indictment or, to Seller’s Knowledge, investigation by any
governmental or regulatory authority with respect to the conduct of
the business of the Company or any Subsidiary; (ii) to Seller’s
Knowledge, there is no pending audit or investigation of the Company
or any Subsidiary or any of its officers, employees (whether full time
or contract) or representatives, nor within the last five years has
there been any audit or investigation of the Company or any Subsidiary
or any of their respective officers, employees (whether full time or
contract) or representatives resulting in a material adverse finding
with respect to any material alleged irregularity, misstatement or
omission arising under or relating to any Government Contract or
Government Bid; and (iii) during the last five years, the Company and
the Subsidiaries have not made any voluntary disclosure in writing to
any governmental or regulatory authority with respect to any material
alleged irregularity, misstatement or omission arising under or
relating to a Government

24

 

Contract or Government Bid that has led to any of the consequences set
forth in clause (i) or (ii) of this Section 2.20(c) or any other
material damage, penalty assessment, recoupment of payment or
disallowance of cost.

(d) There are (i) no outstanding claims against the Company or any
Subsidiary, either by any governmental or regulatory authority or by
any prime contractor, subcontractor, vendor or other third party
arising under or relating to any Government Contract or Government
Bid, and (ii), no outstanding disputes (x) between the Company or any
Subsidiary, on the one hand, and any governmental or regulatory
authority, on the other hand, under the Contract Disputes Act or any
other federal statute or (y) between the Company or any Subsidiary, on
the one hand, and any prime contractor, subcontractor or vendor, on
the other hand, arising under or relating to any Government Contract
or Government Bid.

(e) Set forth in Section 2.20(e) of the Disclosure Letter is a list of
all Government Contracts that have been audited within the last three
years.

Section 2.21 Foreign Corrupt Practices Act.

Neither the Company nor any Subsidiary, nor any director, officer, agent,
employee (whether full time or contract) or other person acting on behalf of
the Company or any Subsidiary has, in the course of its actions for, or on
behalf of, the Company or any Subsidiary (i) used any corporate funds for
any unlawful contribution, gift, entertainment or other unlawful expenses
relating to political activity; (ii) made any direct or indirect unlawful
payment to any foreign or domestic government official or employee (whether
full time or contract) from corporate funds; (iii) violated or is in
violation of any provision of the U.S. Foreign Corrupt Practices Act of
1977, as amended, or (iv) made any unlawful bribe, rebate, payoff, influence
payment, kickback or other unlawful payment to any foreign or domestic
government official or employee (whether full time or contract).

Section 2.22 Affiliate Transactions.

Except as disclosed in Section 2.22(a) of the Disclosure Letter, (i) there
are no intercompany liabilities between the Company or any Subsidiary, on
the one hand, and Seller, any officer, director or affiliate (other than the
Company or any Subsidiary) of Seller, on the other, (ii) neither Seller nor
any such officer, director or affiliate provides or causes to be provided
any assets, services (including without limitation guarantees of any
obligations of the Company or any of its Subsidiaries) or facilities to the
Company or any Subsidiary and (iii) neither the Company nor any Subsidiary
provides or causes to be provided any assets, services (including without
limitation guarantees of any obligations of the Company or any of its
Subsidiaries) or facilities to Seller or any such officer, director or
affiliate. Except as disclosed in Section 2.22(b) of the Disclosure Letter,
each of the liabilities and transactions listed in Section 2.22(a) of the
Disclosure Letter was incurred or engaged in, as the case may be, on an
arm’s-length basis. Except as disclosed in Section 2.22(c) of the
Disclosure Letter, since September 30, 2003, all settlements of intercompany
liabilities between the Company or any

25

 

Subsidiary, on the one hand, and Seller or any such officer, director
or affiliate, on the other, have been made, and all allocations of
intercompany expenses have been applied, in the ordinary course of business
consistent with past practice.

Section 2.23 Books and Records.

The minute books and other similar records of the Company and the
Subsidiaries as made available to Buyer prior to the execution of this
Agreement contain a true and complete record, in all material respects, of
all action taken at all meetings and by all written consents in lieu of
meetings of the stockholders, the boards of directors and committees of the
boards of directors of the Company and the Subsidiaries since the Company
has been owned by Seller. To Seller’s Knowledge the minute books and other
similar records of the Company and the Subsidiaries as made available to
Buyer prior to the execution of this Agreement contain a true and complete
record, in all material respects, of all action taken at all meetings and by
all written consents in lieu of meetings of the stockholders, the boards of
directors and committees of the boards of directors of the Company and the
Subsidiaries prior to the date the Company has been owned by Seller. The
stock transfer ledgers and other similar records of the Company and the
Subsidiaries as made available to Buyer prior to the execution of this
Agreement accurately reflect all record transfers prior to the execution of
this Agreement in the capital stock of the Company and the Subsidiaries.
Except as set forth in Section 2.23 of the Disclosure Letter, neither the
Company nor any Subsidiary has any of its books and records recorded,
stored, maintained, operated or otherwise wholly or partly dependent upon or
held by any means (including any electronic, mechanical or photographic
process, whether computerized or not) which (including all means of access
thereto and therefrom) are not under the exclusive ownership and direct
control of the Company or a Subsidiary.

Section 2.24 Accounts Receivable. 

Except as set forth in Section 2.24 of the Disclosure Letter, the accounts
and notes receivable of the Company and the Subsidiaries reflected on the
balance sheet included in the Financial Statements, and all accounts and
notes receivable arising subsequent to September 30, 2004, (i) arose from
bona fide sales transactions in the ordinary course of business and are
payable on ordinary trade terms, (ii) are legal, valid and binding
obligations of the respective debtors enforceable in accordance with their
terms, (iii) are not subject to any valid set-off or counterclaim, (iv) do
not represent obligations for goods sold on consignment, on approval or on a
sale-or-return basis or subject to any other repurchase or return
arrangement, (v) are collectible in the ordinary course of business
consistent with past practice in the aggregate recorded amounts thereof, net
of any applicable reserve reflected in the balance sheet included in the
Interim Financial Statements, and (vi) are not the subject of any actions,
suits proceedings or investigations brought by or on behalf of the Company
or any Subsidiary. Section 2.24 of the Disclosure Letter sets forth a
description of any security arrangements and collateral securing the
repayment or other satisfaction of receivables of the Company and the
Subsidiaries. All steps necessary to render all such security arrangements
legal, valid, binding and enforceable, and to give and maintain for the
Company or a

26

 

Subsidiary, as the case may be, a perfected security interest in the related
collateral, have been taken.

Section 2.25 Business Relationships with Customers and Suppliers.

Section 2.25(a) of the Disclosure Letter lists the ten (10) largest
customers of the Company and the Subsidiaries, on the basis of revenues for
goods sold or services provided for the most recently-completed fiscal year.
Section 2.25(b) of the Disclosure Letter lists the twenty (20) largest
suppliers of the Company and the Subsidiaries, on the basis of cost of goods
or services purchased for the most recently-completed fiscal year. Section
2.25(c) of the Disclosure Letter lists the forty (40) largest contracts of
the Company and the Subsidiaries, on the basis of revenues for goods sold or
services provided for the most recently-completed fiscal year (including,
with respect to each such contract, the associated revenues and gross
margins for such fiscal year and projected associated revenues and gross
margins for the next fiscal year (which projections were prepared in good
faith on the basis of reasonable assumptions and represent Seller’s
reasonable assessment of the matters represented thereby), Except as
disclosed in Section 2.25(d) of the Disclosure Letter, no such customer or
supplier has ceased or materially reduced its purchases from, use of the
services of, or sales or provision of services to the Company and the
Subsidiaries since September 30, 2003, or to Seller’s Knowledge, has
threatened to cease or materially reduce such purchases, use, sales or
provision of services after the date hereof. Except as disclosed in Section
2.25(e) of the Disclosure Letter, to the Seller’s Knowledge, no such
customer or supplier is threatened with bankruptcy or insolvency.

Section 2.26 Disclosure.

All material facts relating to the business or condition of the Company and
the Subsidiaries have been disclosed to Buyer in or in connection with this
Agreement. No representation or warranty contained in this Agreement, and
no statement contained in Section 2.26 of the Disclosure Letter or in any
certificate, list or other writing furnished to Buyer pursuant to any
provision of this Agreement, contains any untrue statement of a material
fact or omits to state a material fact necessary in order to make the
statements herein or therein, in the light of the circumstances under which
they were made, not misleading.

Section 2.27 No Other Representation or Warranties.

EXCEPT FOR THE REPRESENTATIONS AND WARRANTIES CONTAINED IN THIS AGREEMENT,
NEITHER SELLER NOR THE COMPANY NOR ANY OTHER PERSON ACTING FOR EITHER OF
THEM MAKES ANY OTHER REPRESENTATION OR WARRANTY, EXPRESS OR IMPLIED, AND
SELLER AND THE COMPANY HEREBY DISCLAIM ANY SUCH REPRESENTATION OR WARRANTY,
WHETHER BY SELLER OR THE COMPANY OR ANY OF THEIR RESPECTIVE OFFICERS,
DIRECTORS, EMPLOYEES, AGENTS OR REPRESENTATIVES OR ANY OTHER PERSON, WITH
RESPECT TO THE EXECUTION, DELIVERY OR PERFORMANCE BY SELLER OF THIS
AGREEMENT OR WITH RESPECT TO THE TRANSACTIONS

27

 

CONTEMPLATED HEREBY, NOTWITHSTANDING THE DELIVERY OR DISCLOSURE TO BUYER OR
ANY OF ITS OFFICERS, DIRECTORS, EMPLOYEES, AGENTS OR REPRESENTATIVES OR ANY
OTHER PERSON OF ANY DOCUMENTATION OR OTHER INFORMATION BY SELLER OR THE
COMPANY OR ANY OF THEIR RESPECTIVE OFFICERS, DIRECTORS, EMPLOYEES, AGENTS OR
REPRESENTATIVES OR ANY OTHER PERSON WITH RESPECT TO ANY ONE OR MORE OF THE
FOREGOING.

ARTICLE III — REPRESENTATIONS AND WARRANTIES OF BUYER

Buyer represents and warrants to Seller as follows:

Section 3.1 Organization and Authority of Buyer.

Buyer is a corporation validly existing and in good standing under the laws
of the State of Delaware with the corporate power to own its properties and
conduct its business as now conducted by it and to enter into, and perform
its obligations under, this Agreement. The execution and delivery of this
Agreement have been duly authorized by all necessary corporate action of
Buyer, and this Agreement has been duly executed and delivered by Buyer and,
assuming due authorization, execution and delivery by Seller and that Seller
has full power, authority and legal right to enter into and perform its
obligations hereunder, is a legal, valid and binding agreement of Buyer,
enforceable against Buyer in accordance with its terms, subject to
applicable bankruptcy, insolvency and similar laws affecting creditors’
rights generally and subject, as to enforceability, to general principles of
equity (regardless of whether enforcement is sought in a proceeding in
equity or at law). The execution and delivery of this Agreement and the
consummation of the transactions contemplated herein by Buyer do not
conflict with, or result in any violation of, any provision of the
certificate of incorporation or by-laws of Buyer, or any indenture,
mortgage, deed of trust, lease or other agreement to which Buyer is a party
or by which it or any of its property is bound, or any judgment, decree or
order, applicable to Buyer, of any court or other governmental authority.
Other than as required by the Hart-Scott-Rodino Act, the 1934 Act and the
Industrial Security Regulations, no consent, approval, order or
authorization of, or registration, declaration or filing with, any federal,
state or local governmental or regulatory agency or authority is required to
be made or obtained by Buyer in order to execute or deliver this Agreement
or to consummate the transactions contemplated hereby.

Section 3.2 Brokers and Finders.

Buyer has not employed any broker, finder, consultant, or intermediary in
connection with the transactions contemplated by this Agreement that would
be entitled to a broker’s, finder’s or similar fee or commission in
connection therewith. Buyer shall be responsible to make payments, if any,
to which its investment banker shall be entitled. Buyer agrees to bear all
of the costs it incurs in connection with the transactions contemplated by
this Agreement unless otherwise expressly provided herein.

28

 

Section 3.3 Financial Capability.

Buyer has sufficient funds on hand at this time and sufficient borrowing
capacity with responsible financial institutions to purchase the Shares on
the terms and conditions contained in this Agreement and will have such
funds on the Closing Date.

Section 3.4 Acquisition of Shares.

The Shares are being acquired by Buyer for its own account and not with view
to or in connection with any disposition thereof in violation of the
Securities Act of 1933, as amended, or the rules and regulations thereunder,
or any applicable state securities or “blue sky” laws.

Section 3.5 Foreign Ownership, etc.

Buyer is not, and on the Closing Date will not be, owned or controlled by,
or under the influence of, any foreign entity within the meaning of, or as
contemplated by, the Industrial Security Regulations.

ARTICLE IV — COVENANTS RELATING TO INCOME TAXES

Section 4.1 Code Section 338(h)(10) Election.

At Buyer’s sole request which shall be provided not less than fifteen (15)
days prior to the Closing, Seller and Buyer will join in making a timely
election under Section 338(h)(10) of the Code and any corresponding
elections under state, local or foreign tax law (collectively the
“Section 338(h)(10) Election”) with respect to the purchase and sale
of the stock of the Company and its Subsidiaries. Buyer shall pay one half
of any incremental taxes that the Seller is obligated to satisfy as a result
of the Section 338(h)(10) Election in excess of taxes that would be due
without such Section 338(h)(10) Election, provided, however,
that in no event shall Buyer be responsible for any such incremental taxes
in excess of $1,250,000.

Section 4.2 Indemnification of Taxes.

(a) Notwithstanding anything to the contrary provided in Section
8.3(e), Seller shall be responsible for and pay, reimburse, indemnify
and hold harmless each of Buyer, the Company and each Subsidiary for,
from and against any and all liabilities for and resulting from Taxes
(and payments in respect of Taxes) that are imposed on, allocated or
attributable to, or incurred or payable by Buyer, the Company or any
Subsidiary for any taxable period (or any Straddle Period) of the
Company or any of its Subsidiaries that ends on or before the Closing
Date, including without limitation any such Taxes (or payments in
respect of Taxes) (A) arising under Treasury Regulation Section
1.1502-6 or any similar provision of U.S. state or local law or
foreign law, or (B) arising under principles of transferee

29

 

or successor liability, by contract or otherwise. In addition,
without duplication of the amounts for which Seller is required to
indemnify pursuant to the preceding sentence, the Seller shall be
responsible for and pay, reimburse, indemnify and hold harmless each
of Buyer, the Company and each Subsidiary for, from and against any
Taxes resulting from a breach by Seller or the Company of any
representation contained in Section 2.15 hereto.

(b) In the case of any Taxes that are imposed on a periodic basis and
are payable for a Straddle Period, the portion of such Tax related to
the portion of such Straddle Period ending on the Closing Date shall
(x) in the case of any property Taxes, ad valorem Taxes or other
similar periodic Taxes, be deemed to be the amount of such Tax for the
entire taxable period multiplied by a fraction the numerator of which
is the number of days in the portion of the taxable period ending on
the Closing Date and the denominator of which is the number of days in
the entire taxable period, and (y) in the case of any Tax not
described in clause (x), be deemed to be equal to the amount which
would be payable if the relevant Straddle Period ended on the Closing
Date.

(c) If any claim or demand for Taxes in respect of which indemnity may
be sought pursuant to this Section 4.2 is asserted in writing against
the Company or any Subsidiary, Buyer shall notify Seller of such claim
or demand within 15 days upon the receipt thereof and shall give
Seller such information with respect thereto as Seller may reasonably
request. The failure of Buyer to notify Seller within 15 days shall
not relieve Seller of its obligations under this Agreement; provided,
however, any additional Taxes, interest, penalties or other costs
resulting from Buyer’s failure to provide such notice within 15 days
shall be borne by Buyer. Seller may discharge, at any time, its
indemnification obligation under this Section 4.2 by paying to Buyer
(or at the Buyer’s options, the Company or any Subsidiary) the amount
payable pursuant to this Section 4.2 calculated on the date of such
payment. Seller may, at its own expense and subject to Section 4.5,
participate in the defense of any such action or proceeding (including
any Tax audit).

(d) Any payment due pursuant to this Section 4.2 shall be made
not later than thirty (30) days after receipt by Seller of written
notice from Buyer, the Company or any Subsidiary stating the amount
due under this Section 4.2. Any payment required to be made under
this Section 4.2 that is not made when due shall bear interest at the
rate per annum determined, from time to time, under the provision, of
Section 6621(a)(2) of the Code for each day until paid.

Section 4.3 Refunds.

Any refunds of Taxes (together with any interest with respect thereto) paid
to or in respect of the Company or any Subsidiary and that (i) relate to Tax
periods or portions thereof ending on or before the Closing Date shall be
for the account of Seller, other than any refunds or credits reflected as an
asset in the determination of Net Working Capital and taken into account in
computing any adjustment to Purchase Price pursuant

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to Section 1.2 and (ii) relate to Tax periods or portions thereof beginning
on the day after the Closing Date shall be for the account of Buyer. Buyer
or Seller, as the case may be, shall pay over to Seller or Buyer, as the
case may be, any such refund or the amount of any such credit (in each case,
together with any interest with respect thereto) within fifteen (15) days
after receipt thereof; provided, however, that Buyer and Seller shall not be
required to pay any amount to the other party to the extent of any amounts
for which Buyer or Seller has claimed indemnification pursuant to Section
4.2 hereof and for which the other party has not yet indemnified the party
making such indemnification claim; further provided, however, that any
amounts in excess of such unpaid but claimed indemnification amount shall be
due and payable. Any refunds or credits of Taxes (together with any
interest with respect thereto) of the Company or any Subsidiary for any
period beginning before but ending after the Closing Date shall be equitably
apportioned between Seller and Buyer. Buyer shall, if Seller so requests
and at Seller’s expense, prepare, execute and file any claims for refunds or
credits, or cause the Company or any Subsidiary to prepare, execute and file
any claims for refunds or credits, to which Seller is entitled under this
Section 4.3 so long as such actions do not have an adverse effect on Buyer,
the Company or any Subsidiary. Seller shall reimburse, indemnify and hold
harmless each of the Buyer, the Company and each Subsidiary for, from and
against any and all liabilities for or with respect to Taxes arising with
respect to any refunds or credits. Buyer shall not prepare, execute and
file any claims for refunds or credits, or cause the Company or any
Subsidiary to prepare, execute and file any claims for refunds or credits,
to which Buyer is entitled under this Section 4.3 so long as such actions
would have an adverse effect on Seller. Buyer shall reimburse, indemnify
and hold harmless Seller for, from and against any and all liabilities for
or with respect to Taxes arising with respect to any refunds or credits.

Section 4.4 Other Taxes.

Any real property transfer or gains Tax, sales Tax, use Tax, stamp Tax,
stock transfer Tax, or other similar Tax imposed on the Company or any of
its Subsidiaries arising out of or in connection with the transactions
contemplated by this Agreement shall be split equally by Buyer and Seller.

Section 4.5 Tax Audits.

(a) Seller shall have the sole right (but not the obligation) to
represent the interests of the Company and its Subsidiaries in any
audit or administrative or court proceeding (a “Tax Proceeding”)
relating to Taxes for taxable periods of the Company and its
Subsidiaries which end on or before the Closing Date and to employ
counsel of its choice at its expense, provided that Buyer shall have
the right to jointly represent the interests of the Company and its
Subsidiaries with Seller in any such Tax Proceeding to the extent that
Seller’s indemnification obligations under this Agreement have
terminated. Buyer agrees that it will cooperate fully, and shall
cause the Company and its Subsidiaries to cooperate fully, with Seller
and its counsel in the defense against or compromise of any claim in
any said proceeding.

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(b) Seller has the right, but not the obligation, to jointly represent
the interests of the Company and its Subsidiaries with Buyer in any
Tax Proceeding relating to Taxes for any Straddle Period of the
Company and its Subsidiaries. Any disputes regarding the conduct or
resolution of any such audit or proceeding shall be resolved pursuant
to Section 4.6.

(c) Buyer shall have the sole right to represent the interests of the
Company and its Subsidiaries in all Tax Proceedings other than Tax
Proceedings described in clauses (a) and (b) of this Section 4.5.

For purposes of this Agreement, the term “Straddle Period” shall mean a
taxable period which includes the Closing Date but does not end on that day.

Section 4.6 Allocation Agreement.

In connection with the Section 338(h)(10) Election, the Buyer shall prepare
and the Buyer and the Seller shall mutually agree upon the fair market
values of the assets deemed purchased for purposes of the computation of the
Aggregate Deemed Sale Price (as defined under applicable Treasury
Regulations) of the Company’s assets and the allocation of such Aggregate
Deemed Sale Price among such assets (the “Allocation Agreement”) in
accordance with Section 338 of the Code. Such Allocation Agreement shall
reflect the value assigned to assets of the Company. The Buyer and the
Seller agree that they shall use their reasonable best efforts to finalize
the Allocation Agreement no later than sixty (60) days before the last date
on which the Section 338(h)(10) Election may be filed. If, sixty (60) days
before the last date on which the Section 338(h)(10) Election may be filed,
the Buyer and the Seller have not finalized the Allocation Agreement as
described above, any disputed aspects of the Allocation Agreement or such
revision shall be resolved by the Accounting Referee twenty (20) days before
the last date on which the Section 338(h)(10) Election may be filed. The
costs, expenses and fees of the Accounting Referee shall be borne equally by
the Buyer and the Seller. The Buyer and the Seller agree to act in
accordance with the allocations contained in the Allocation Agreement in any
relevant Tax Returns or similar filings.

Section 4.7 Disputes.

In the event that Seller or Buyer disputes the application or interpretation
of any provision of Sections 2.15, 4.1, 4.2, 4.3, 4.4, 4.5 or 4.6 hereof, or
the amount or calculation of Taxes, if any, owed by such party thereunder,
such party shall deliver to the other a statement setting forth, in
reasonable detail, the nature of and/or the dollar amount of any
disagreement so asserted. The parties shall attempt in good faith to
resolve such dispute within twenty (20) days following the commencement of
such dispute. If the parties are unable to resolve such dispute within such
twenty (20) day period, the dispute shall be resolved by an accounting
referee to be mutually appointed by the Parties (the “Accounting Referee”).
The Accounting Referee shall determine, only with respect to the specific
disagreements submitted in writing by Seller and Buyer, the manner in which
such item or items in dispute should be resolved; provided,

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however, that the dollar amount of any such item or items shall be
determined within the range of dollar amounts proposed by Seller, on the one
hand, and Buyer, on the other hand. The Accounting Referee shall be directed
to make such determination promptly, but in no event later than thirty (30)
days after acceptance of its appointment. Any finding by the Accounting
Referee shall be a reasoned award stating the findings of fact and
conclusions of law (if any) on which it is based, shall be final and binding
upon the parties and shall be the sole and exclusive remedy between the
parties regarding the disputed items so presented. The fees and expenses of
the Accounting Referee shall be borne exclusively by the party whose
estimate of the Tax owed is furthest from the amount owed as determined by
the Accounting Referee. The parties shall otherwise bear their own expenses
incurred in any dispute resolution pursuant to this Section 4.7.

ARTICLE V — CERTAIN COVENANTS AND AGREEMENTS OF 

SELLER AND BUYER

Section 5.1 Access and Information.

Subject to Section 5.4 hereof, Seller shall permit Buyer and its
representatives after the date of execution of this Agreement to have
access, during regular business hours and upon reasonable advance notice, to
the properties, books and records and management employees of the Company
and the Subsidiaries and to accompany representatives of Seller or the
Company on visits to customers of the Company reasonably requested by Buyer
(provided that such visits do not interfere with or disrupt or adversely
affect the business of the Company), and shall furnish, or cause to be
furnished, to Buyer any financial and operating data and other information
with respect to the business and properties of the Company and the
Subsidiaries as Buyer shall from time to time reasonably request. After the
date of this Agreement and prior to the Closing, Seller shall keep Buyer
informed from time to time concerning any material changes that may occur
affecting the business of the Company and its Subsidiaries. Any such
information provided or obtained pursuant to this Section 5.1 shall be held
in the strictest confidence in accordance with, and pursuant to, the letter
agreement between Buyer and Goldman Sachs & Co. on behalf of Seller and the
Company (the “Confidentiality Agreement”) and, in the event the transactions
contemplated by this Agreement are not consummated, shall be returned or
destroyed in accordance with, and pursuant to, the Confidentiality Agreement
and Section 8.2 hereof.

Section 5.2 Registrations, Filings, and Consents.

Subject to the terms and conditions herein provided (and without limitation
of the provisions of Section 5.9 or 5.10 hereof), Seller and Buyer will
cooperate and use their respective commercially reasonable best efforts to
make all registrations, filings and applications, to give all notices and to
obtain all governmental or other consents, transfers, approvals, orders,
qualifications and waivers necessary or desirable for the consummation of
the transactions contemplated hereby.

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Section 5.3 Conduct of Business.

From the date hereof, and except as otherwise contemplated by this Agreement
or disclosed in Section 5.3 of the Disclosure Letter or consented to or
approved by Buyer, Seller covenants and agrees that:

(a) the Company and the Subsidiaries shall operate their businesses
only in the ordinary course and use their reasonable efforts to
preserve their properties, business and relationships with suppliers
and customers, and that each officer and employee of the Company and
the Subsidiaries shall devote 100% of their time to the business of
the Company and the Subsidiaries; provided, however, Mark Filteau and
Dave Mercier are currently providing services to Seller and will
devote less than 100% of their time to the business of the Company and
the Subsidiaries; provided, further, that Seller shall make each of
them available at Buyer’s request in connection with Buyer’s due
diligence of the Company and the transactions contemplated hereby.

(b) neither the Company nor any of the Subsidiaries shall (i) change
or amend its articles of incorporation or by-laws, (ii) issue or sell
any shares of its capital stock, or issue or sell any securities
convertible into, or options with respect to, or warrants to purchase
or rights to subscribe to, any shares of its capital stock or enter
into any agreement obligating it to do any of the foregoing;

(c) the Company shall not, directly or indirectly, redeem, purchase or
otherwise acquire any of the Shares;

(d) neither the Company nor any of the Subsidiaries shall, other than
in the ordinary course of business,

(i) acquire or dispose of any other substantial fixed assets or
acquire or dispose of any other substantial assets,

(ii) encumber any of its properties other than by virtue of liens
referred to in Section 2.9 hereof, incur a material amount of
additional indebtedness, or

(iii) enter into any contract, agreement, commitment or
arrangement with respect to any of the foregoing, other than
renewals or extensions of existing contracts or contracts for
which the Company or any of its Subsidiaries have previously
submitted bids; or

(e) it will not encumber the Shares and neither the Company nor any
of the Subsidiaries will encumber shares of any of its Subsidiaries
(other than as described in Section 5.3 of the Disclosure Letter);

(f) except to the extent required by applicable law, (i) the Company
and the Subsidiaries shall cause the books and records to be
maintained in the usual, regular and ordinary manner, (ii) not permit
any change in (A) any pricing,

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investment, accounting, financial reporting, inventory, credit,
allowance or Tax practice or policy of the Company or any Subsidiary,
or (B) any method of calculating any bad debt, contingency or other
reserve of the Company or any Subsidiary for accounting, financial
reporting or Tax purposes and (iii) not permit any change in the
fiscal year of the Company or any Subsidiary.

(g) (i) use, and will cause the Company and the Subsidiaries to use,
commercially reasonable efforts to maintain in full force and effect
until the Closing substantially the same levels of coverage as the
insurance afforded under the contracts listed in Section 2.12(a) of
the Disclosure Letter, (ii) to the extent requested by Buyer prior to
the Closing Date, use all commercially reasonable efforts to cause
such insurance coverage held by any person (other than the Company or
any Subsidiary) for the benefit of the Company or any Subsidiary to
continue to be provided at the expense of the Company and the
Subsidiaries for at least one hundred and twenty (120) days after the
Closing on substantially the same terms and conditions as provided on
the date of this Agreement and (iii) cause any and all benefits under
such contracts paid or payable (whether before or after the date of
this Agreement) with respect to the business, operations, employees or
assets and properties of the Company and the Subsidiaries to be paid
to the Company and the Subsidiaries.

(h) cause the Company and the Subsidiaries to comply, in all material
respects, with all laws and orders applicable to the business and
operations of the Company and the Subsidiaries, and promptly following
receipt thereof to give Buyer copies of any written notice received
from any governmental or regulatory authority or other person alleging
any violation of any such law or order.

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Section 5.4 Security Clearance.

Buyer hereby acknowledges and agrees that the nature of the business of the
Company and its Subsidiaries requires compliance with the Department of
Defense Industrial Security Regulation and Industrial Security Manual for
Safeguarding Classified Information (Department of Defense Regulation
5220.22-M) and the Department of Energy security regulations, including
without limitation the foreign ownership, control or influence regulations
under 48 CFR 904.70, et seg. (hereinafter collectively referred to
as the “Industrial Security Regulations”), which, inter alia,
obligate the Company and certain of its Subsidiaries to obtain facility
security clearances, limit the degree of foreign ownership or control of, or
foreign influence over, the Company and its Subsidiaries, require
recertification by the Company regarding the degree of foreign ownership,
influence and control to which the Company is subject that results from a
change in ownership of the Company, require that certain officers and
management personnel and members of the Board of Directors of the Company
and certain of its Subsidiaries obtain personal security clearances and
Department of Energy “Q” clearances (“Q clearances”) and may require that
Buyer and the officers and directors of Buyer (that are not officers of the
Company or its Subsidiaries) obtain personal security clearances and Q
clearances. As a result, neither Seller nor the Company or any of its
Subsidiaries will provide any information about, or access to, the Company
or its Subsidiaries except in accordance with, and as permitted by, the
Industrial Security Regulations and after delivery by Buyer to Seller and
the Company of evidence satisfactory to Seller and the Company of Buyer’s
compliance with, and as to the permissibility of providing such access or
information under, the Industrial Security Regulations. Buyer further
acknowledges and agrees that consummation of the transactions contemplated
hereby will require approval of Buyer under, and compliance by Buyer with,
the Industrial Security Regulations, including without limitation the
provisions relating to foreign ownership, influence and control, facility
clearances, personal security clearances and Q clearances. As a result,
prior to Closing Buyer and Seller hereby agree to do all things necessary to
comply with and to cause the officers and directors of Buyer and any persons
who shall become officers and directors and management personnel of the
Company and its Subsidiaries to comply with, and obtain all required
approvals under, the Industrial Security Regulations.

Section 5.5 Books and Records; Access to Information.

On the Closing Date, Seller will deliver or make available to Buyer all of
the books and records of the Company and the Subsidiaries and all
information, data and systems related to their business or operations, and
if at any time after the Closing Seller discovers in its possession or under
its control any other such information, data and systems or books and
records, it will forthwith deliver such information, data and systems or
books and records to Buyer. Prior to the Closing, Seller will cause the
Company to possess all documentation (whether in written or electronic
format) with respect to any Intellectual Property disclosed in Section
2.18(i) and (ii), which documentation shall be accurate in all material
respects and reasonably sufficient in detail and content to identify and
explain such Intellectual Property and to facilitate its full and proper use
without reliance on the special knowledge or memory of any person.

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Seller will cause its officers, employees, agents, and representatives to
cooperate with Purchaser following the Closing to provide for an orderly
transfer of the information, data and systems to the Company and the
Subsidiaries and to minimize the disruption to the business and operations
of the Company and the Subsidiaries resulting from the transactions
contemplated by this Agreement. Each Party agrees for a period of six (6)
years after the Closing Date, (i) to retain after the Closing Date all
books, records and other documents pertaining to the Company and the
Subsidiaries in existence on the Closing Date and not to destroy any such
books, records and other documents unless the one Party shall first offer in
writing to surrender such books, records and other documents to the other
Party and such other Party shall not agree in writing to take possession
thereof during the ten (10) day period after such offer is made and (ii) to
make the same available after the Closing Date for inspection and copying by
the other Party or its agents at such other Party’s expense and to make
available appropriate personnel with respect thereto, upon reasonable
request and upon reasonable notice. Notwithstanding the foregoing,
following the Closing, all information, data or systems relating to the
Company or any of its Subsidiaries shall be the property of the Company or
any such Subsidiary and Seller shall not use or retain any such information,
data or systems for any purpose.

Section 5.6 Marks.

Buyer hereby acknowledges and agrees that Seller or one or more of its
subsidiaries is the sole owner of certain trademarks, service marks, trade
names and registrations so identified in Section 5.6 of the Disclosure
Letter (the “Seller Marks”). Buyer shall promptly change any corporate names
of the Company or its Subsidiaries, which shall contain the name “JC”,
“JCI”, or “Johnson Controls” to another name, and Buyer shall within a
reasonable period of time change the signs, documents, and other material of
the Company and its Subsidiaries, which contain the names “JC”, “JCI”, or
“Johnson Controls”. Furthermore, Seller shall promptly change any corporate
names of Seller or its subsidiaries, which shall contain the name “World
Services” to another name and Seller shall within a reasonable period of
time change the signs, documents, and other material of Seller and its
subsidiaries, which contain the name “World Services.” Following the
Closing, Seller shall cease using the name “World Services”.

Section 5.7 Retained Contracts.

Seller shall, or shall cause the Company or a Subsidiary, as the case may
be, to cause the contracts specified in Exhibit E hereto (the “Retained
Contracts”) to which the Company or any Subsidiary is a party as of the date
of this Agreement, to be terminated or canceled or transferred or assigned
to Seller or any of its affiliates (other than the Company or any
Subsidiary) prior to the Closing Date so that the Company and any Subsidiary
shall have no obligations thereunder from and after the Closing Date. Buyer
shall not assume by virtue of this Agreement or the transactions
contemplated hereby, and shall have no liability for and Seller shall
indemnify the Company or Buyer for, any Damages relating to the Retained
Contracts or their cancellation, termination, transfer or assignment.

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Section 5.8 Expenses.

Whether or not the transactions contemplated by this Agreement are
consummated and except as otherwise set forth herein, all costs and expenses
incurred in connection with this Agreement and the transactions contemplated
hereby (including fees and disbursements of financial advisors, accountants
and attorneys) shall be paid (i) by Seller, if such costs or expenses are
incurred by Seller or the Company, and (ii) by Buyer, if such costs or
expenses are incurred by Buyer.

Section 5.9 Reasonable Efforts.

Subject to the terms and conditions herein provided, each of Buyer and
Seller agrees to use reasonable efforts to take, or cause to be taken, all
action and to do, or cause to be done, all things necessary, proper or
advisable under applicable laws and regulations, to consummate and make
effective the transactions contemplated by this Agreement. Buyer and Seller
will, and will cause the Company and its Subsidiaries to, use all reasonable
efforts to obtain consents of all third parties and governmental or
regulatory authorities necessary or advisable to consummate and make
effective the transactions contemplated by this Agreement. Notwithstanding
anything to the contrary provided in this Section 5.9, Buyer shall not be
required to take any action or do, or cause to be done, anything that would
result in a material diminution of the benefits contemplated by this
Agreement to Buyer. In case at any time after the Closing Date any further
action is necessary or desirable to carry out the purposes of this
Agreement, the proper officers or directors of Buyer or the Company and its
Subsidiaries, as the case may be, shall take all such necessary action.
From and after the Closing Date, Buyer shall, and shall cause the Company
and the Subsidiaries to, cooperate fully with Seller, its affiliates,
agents, employees and insurers (by way of example and not of limitation, by
providing reasonable access to information, records and employees of the
Company and its Subsidiaries, by providing that agents and employees of the
Company and its Subsidiaries be made available for appearance at any legal
proceeding and by giving prompt notice of any claim) in connection with any
demands, claims, actions, cause of actions made or threatened arising from,
or relating to, any events occurring prior to the Closing, including,
without limitation, any action or occurrence alleged to be covered by
insurance maintained by Seller or its affiliates on behalf of the Company
and its Subsidiaries.

Section 5.10 Filings.

Buyer shall, and Seller shall cause the Company to, as soon as practicable,
file Notification and Report Forms under the Hart-Scott-Rodino Act with the
Federal Trade Commission and the Antitrust Division of the Department of
Justice with respect to this Agreement and the transactions contemplated
hereby and shall use their commercially reasonable best efforts to respond
as promptly as practicable to all inquiries received from the Federal Trade
Commission or the Antitrust Division for additional information or
documentation. Buyer shall, and Seller shall cause the Company and its
Subsidiaries to, promptly take all such action as may be necessary under the
United States federal and state and other laws applicable to or necessary
for, and will file and, if appropriate, use

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their reasonable efforts to have declared effective or approved all
documents and notifications with all governmental or regulatory authorities
that they deem necessary or appropriate for the consummation of the
transactions contemplated hereby, and Buyer shall, and Seller shall (subject
to Section 5.4 hereof) cause the Company and its Subsidiaries to, give the
other information requested by such other Party pertaining to it and its
subsidiaries and affiliates which is reasonably necessary to enable such
other Party to take such actions and file in a timely manner all reports and
documents required to be so filed by or under applicable United States
federal and state and other laws.

Section 5.11 Certain Notifications.

After the date of this Agreement and prior to the Closing, each Party shall
notify the other of them in writing (where appropriate, through updates to
Section 5.11 of the Disclosure Letter) of, and contemporaneously shall
provide the other Party with true and complete copies of any and all
information or documents relating to, and will use all commercially
reasonable efforts (taking into account the business of the Company and the
Subsidiaries) to cure before the Closing, any event, transaction or
circumstance, as soon as practicable after it becomes known to such Party,
occurring after the date of this Agreement that causes or will cause any
covenant or agreement of such Party under this Agreement to be breached or
that renders or will render untrue any representation or warranty of such
Party contained in this Agreement as if the same were made on or as of the
date of such event, transaction or circumstance; provided,
however, that no notice given pursuant to this Section 5.11 shall
have any effect on the representations, warranties, covenants or agreements
contained in this Agreement for purposes of determining satisfaction of any
condition contained herein or shall in any way limit the other Party’s right
to seek indemnity under this Agreement.

Section 5.12 Plant Closings.

Buyer hereby agrees that for a period of sixty days following the Closing
Date, Buyer shall not and shall cause the Company and its Subsidiaries not
to undertake a “plant closing” or a “mass layoff” (as such terms are defined
in the Worker Adjustment and Retraining Notification Act (“WARN”)) or
undertake any other actions requiring notification pursuant to WARN to union
representatives and affected employees of the Company or its Subsidiaries or
units of local governments where the Company or its Subsidiaries, as the
case may be, maintain employment sites unless Buyer provides the notices
required by WARN. Buyer further agrees and acknowledges that on and after
the Closing Date the Company and Buyer shall be solely responsible for
compliance with any federal or state laws and regulations relating to plant
closings or a mass layoff of personnel in respect of employment sites of the
Company and the Subsidiaries, and, in particular, compliance with the notice
and other provisions of WARN.

Section 5.13 Intercompany Account; Pre-Closing Debt.

(a) Immediately prior to the Closing, Seller (whether on its behalf or
on behalf of its subsidiaries) shall pay or cause to be paid to the
Company or any Subsidiary

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any amounts reflected in the intercompany receivable/payable,
intercompany loan or intercompany interest, in each case, as reflected
in the Financial Statements (the “Intercompany Account”) that
represent amounts payable by Seller (whether on its behalf or on
behalf of its subsidiaries other than the Company and its
Subsidiaries) to the Company and its Subsidiaries. Immediately prior
to the Closing, the Company (whether on its behalf or on behalf of its
Subsidiaries) shall pay or cause to be paid to Seller or any of its
subsidiaries any amounts reflected in the Intercompany Account that
represent amounts payable by the Company (whether on its behalf or on
behalf of its Subsidiaries) to Seller and its subsidiaries. Prior to
the Closing, Seller will terminate and will cause any such officer,
director or affiliate of Seller (other than the Company or any of its
Subsidiaries) to terminate each contract with the Company or any
Subsidiary. Prior to the Closing, neither the Company nor any
Subsidiary will enter into any contract or amend or modify any
existing contract, and will not engage in any transaction outside the
ordinary course of business consistent with past practice or not on an
arm’s-length basis (other than pursuant to Government Contracts or
Government Bids disclosed pursuant to Section 2.20 of the Disclosure
Letter), with Seller or any such officer, director or affiliate.

(b) Prior to the Closing Date, Seller shall repay or otherwise
terminate, cancel, transfer or assign, on behalf of the Company or any
Subsidiary, any indebtedness of the Company or any Subsidiary (other
than Current Liabilities), including without limitation any
obligations (i) for borrowed money, (ii) evidenced by notes, bonds,
debentures or similar instruments, (iii) for the deferred purchase
price of goods or services (other than trade payables or accruals
incurred in the ordinary course of business), (iv) under capital
leases, (v) in the nature of guarantees of the obligations described
in clauses (i) through (iv) and (vi) the indebtedness and obligations
set forth in Section 5.13(b) of the Disclosure Letter (collectively,
the “Retained Debt”), so that the Company and any Subsidiary shall
have no obligations thereunder from and after the Closing Date.

(c) Buyer shall not assume by virtue of this Agreement or the
transactions contemplated hereby, and shall have no liability for, and
Seller shall indemnify the Company or Buyer for any Damages relating
to the Intercompany Account, any contracts terminated pursuant to
Section 5.13(a) or the Retained Debt.

(d) Seller shall indemnify Buyer for any net amounts that the Company
has not collected with respect to the receivable described in Exhibit
F prior to the second anniversary of the Closing Date. Buyer shall
cause the Company to use commercially reasonable efforts to collect
such receivable in a manner consistent with how the Company seeks to
collect its receivables in the ordinary course of business, and to
reduce the receivable to the extent the Company can otherwise sell the
underlying asset related to such receivable. In the event that Seller
is required to indemnify Buyer pursuant to this Section 5.13(d), Buyer
shall cause the Company to assign all of its right, title and interest
to such receivable to the Seller.

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Section 5.14 Intercompany Agreements.

All agreements between the Company or any of its Subsidiaries on the one
hand, and Seller or any of its subsidiaries (other than the Company and its
Subsidiaries), on the other hand, other than those set forth in a notice
delivered by Buyer to Seller prior to the Closing (the “Intercompany
Agreements”), shall be cancelled on and as of the Closing and shall be of no
force and effect thereafter. Without limitation of the foregoing, the
parties hereto agree and acknowledge that any insurance or reinsurance
provided or maintained prior to the Closing by Seller or any subsidiaries of
Seller (other than the Company and its Subsidiaries) in the name of, on
behalf of or for the benefit of the Company and its Subsidiaries will be
cancelled on and as of the Closing and will be of no force and effect
thereafter.

Section 5.15 Certain Employees.

(a) Buyer hereby agrees with Seller to cause the Company to employ at
the Closing, each of the individuals who is employed by the Company or
its Subsidiaries at the time of the Closing (each a “Company
Employee”) on comparable terms and conditions as employees of the
Company performing comparable services for the Company and its
Subsidiaries prior to the Closing provided, however, that no guarantee
of employment, compensation or benefits to any third party is intended
to be conveyed by this Section 5.15. Nothing herein shall be deemed
to restrict or limit the Company and its Subsidiaries from terminating
the employment of, or modifying the terms and conditions of the
employment of, any employee of the Company or any Subsidiary after the
Closing.

(b) Except as may be required by law and except as otherwise set forth
in Section 5.15 of the Disclosure Letter, from and after the date
hereof, Seller will refrain, and will cause the Company and the
Subsidiaries to refrain, from directly or indirectly:

(i) making any representation or promise, oral or written, to
any officer, employee or consultant of the Company or any
Subsidiary concerning the future of any Employee Benefit Plan,
except for statements as to the rights or accrued benefits of
any officer, employee or consultant under the terms of any
Employee Benefit Plan;

(ii) making any increase in the salary, wages or other
compensation of any officer, employee or consultant of the
Company or any Subsidiary whose annual salary is or, after
giving effect to such change, would be $75,000;

(iii) adopting, entering into or becoming bound by any Employee
Benefit Plan, employment-related contract or collective
bargaining agreement, or amending, modifying or terminating
(partially or completely) any Employee

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Benefit Plan, employment-related contract or collective
bargaining agreement, except to the extent required by
applicable law and, in the event compliance with legal
requirements presents options, only to the extent that the
option which the Company or Subsidiary reasonably believes to be
the least costly is chosen; or

(iv) establishing or modifying any (i) targets, goals, pools or
similar provisions in respect of any fiscal year under any
Employee Benefit Plan, employment-related contract or other
employee compensation arrangement or (ii) salary ranges,
increase guidelines or similar provisions in respect of any
Employee Benefit Plan, employment-related contract or other
employee compensation arrangement.

(c) Seller will cause the Company and the Subsidiaries to administer
each Employee Benefit Plan, or cause the same to be so administered,
in all material respects in accordance with the applicable provisions
of the Code, ERISA and all other applicable laws. Seller will
promptly notify Buyer in writing of each receipt by Seller, the
Company or any Subsidiary (and furnish Buyer with copies) of any
notice of investigation or administrative proceeding by the Internal
Revenue Service, Department of Labor, Pension Benefit Guaranty
Corporation or other person involving any Employee Benefit Plan.

(d) As soon as reasonably practicable after the Closing Date, Seller
shall amend, or cause to be amended, the Johnson Controls, Inc.
Pension Plan (the “Johnson Controls Pension Plan”) so that, effective
as of the Closing Date, each Company Employee participating in such
Johnson Controls Pension Plan with at least four (4) but less than
five (5) years of service shall be credited with one (1) additional
year of service for vesting purposes; provided, however, that the
employees listed on Part I of Exhibit G who agree to continue
employment with the Company after the Closing shall be vested as
provided therein. Prior to the Closing, the Company and its
affiliates shall transfer to the Seller, and Seller shall accept the
transfer of, the sponsorship of, and liability and responsibility for,
the Johnson Controls World Services, Inc. Retirement Plan for
Employees of TGS Technologies, Inc. and its related trust
(collectively, the “Transferred Plan”). From and after the Closing,
Seller shall be the sponsor and administrator of the Transferred Plan
and shall indemnify and hold the Company and its affiliates harmless
against any cost, liability or expense related to the Transferred
Plan, whether arising before or after the Closing.

(e) Notwithstanding anything to the contrary contained herein, Seller
and its affiliates shall assume and be responsible for providing
post-retirement welfare benefits in accordance with this Section
5.15(e) to the following individuals who agree to continue employment
with the Company after the Closing: (i) any former employee of the
Company or its affiliates who is eligible for any such benefits as a
result of such former employee’s service with the Seller, the Company
or any of their affiliates, (ii) any Company Employee participating
in, or eligible to participate in, any plan program or arrangement of
the Seller, the

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Company or any of their affiliates that provides post-retirement
welfare benefits to eligible participants and (iii) any Company
Employee listed in Part II of Exhibit G hereto. Notwithstanding
anything to the contrary contained in any plan, program or arrangement
of the Seller or its affiliates, each individual described in the
preceding sentence shall be deemed as of the Closing to be fully
vested in the right to receive the post-retirement welfare benefits
described in this Section 5.15(e), it being understood that the
commencement date of such benefits for each of the individuals
described in clauses (ii) or (iii) above, shall be the date such
individual terminates employment with the Company and its affiliates.
Seller and its affiliates shall be required to provide the
post-retirement welfare benefits to the individuals described in this
Section 5.15(e) for the longer of (A) the period that the Seller and
its affiliates provide post-retirement welfare benefits to any former
employee of Seller or its affiliates or (B) the period that such
individuals have a contractual right to such benefits as a consequence
of their employment by the Seller, the Company or any of their
affiliates. Seller and its affiliates shall be required to (x)
provide to the individuals described in this Section 5.15(e)
post-retirement welfare benefits that are not less favorable than
those provided to similarly situated former employees of the Seller or
any of its affiliates and (y) to provide such benefits on terms and
conditions that are not less favorable than those made available to
similarly situated former employees of the Seller or any of its
affiliates. Effective as of the Closing Date, the Company shall
transfer to the Seller any trust maintained by the Company or its
affiliates to fund post-retirement welfare benefits and the Seller and
its affiliates shall indemnify and hold the Company and its affiliates
harmless for any claim, cost or expense incurred by the Company or its
affiliates after the Closing Date related to the transactions
described in this Section 5.15(e), including, without limitation, the
Seller’s assumption of liabilities hereunder or the transfer of any
trust to the Seller.

(f) Seller shall indemnify and hold Buyer, the Company and any of
their respective Subsidiaries harmless against any cost, liability or
expense to the extent related to a complete or partial withdrawal
(within the contemplation of Title IV of ERISA) from any Multiemployer
Plan on or before the second anniversary of the Closing Date arising
from (i) a termination of a Government Contract by the Company’s
client thereunder, unless such termination is as a result of the
Company’s “default” under such Government Contract or is consented to
by the Company, (ii) the expiration of a Government Contract in
accordance with its terms, (iii) the non-renewal of, or non-exercise
of an option on, a Government Contract by the Company’s client
thereunder unless the Company is unable or unwilling to continue
performing such Government Contract or (iv) the renewal of a
Government Contract on terms that are not at least substantially the
same as the terms of such Government Contract in effect as of the date
hereof. For the avoidance of doubt, Seller shall be required to
indemnify and hold Buyer, the Company and any of their respective
Subsidiaries harmless from any cost, liability or expense described in
the preceding sentence regardless of when such cost, liability or
expense is assessed or incurred.

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(g) Prior to the Closing, Seller, the Company or its Subsidiaries
shall have paid to the Company Employees any accrued bonus or
incentive compensation amounts related to the 2004 fiscal year
included on the Reference Date Balance Sheet.

(h) Immediately following the Closing, Seller shall pay to the
employee listed on Part III of Exhibit G on an amount equal to the
amount set forth next to such employee’s name on Part III of Exhibit G
if such employee shall have accepted an offer letter to continue
employment with the Company after the Closing.

Section 5.16 No Solicitations.

Seller will not take, nor will it permit the Company, the Subsidiaries or
any affiliate of Seller (or authorize or permit any investment banker,
financial advisor, attorney, accountant or other person retained by or
acting for or on behalf of Seller, the Company, the Subsidiaries or any such
affiliate) to take, directly or indirectly, any action to solicit,
encourage, receive, negotiate, assist or otherwise facilitate (including by
furnishing confidential information with respect to the Company or any
Subsidiary or permitting access to the assets and properties and books and
records of the Company or any Subsidiary) any offer or inquiry from any
person concerning an Acquisition Proposal. For purposes hereof,
“Acquisition Proposal” means any proposal for a merger or other business
combination to which the Company or any Subsidiary is a party or the direct
or indirect acquisition of any equity interest in, or a substantial portion
of the assets of, the Company or any Subsidiary, other than the transaction
contemplated by this Agreement.

Section 5.17 Financial Statements and Reports; Filings.

(a) As promptly as practicable and in any event no later than ten (10)
days after the end of each calendar month ending after the date hereof
and before the Closing Date, Seller will prepare and deliver to Buyer
true and complete copies of the unaudited balance sheet of the Company
as of the end of each calendar month, and the related unaudited
statements of operations and shareholders’ equity of the Company for
each one month period ended on each such date.

(b) As promptly as practicable, Seller will deliver to Buyer true and
complete copies of such other financial statements, reports and
analyses as may be prepared or received by Seller, the Company or any
Subsidiary relating to the business or operations of the Company or
any Subsidiary or as Buyer may otherwise reasonably request.

(c) As promptly as practicable, Seller will deliver copies of all
license applications and other filings made by the Company or any
Subsidiary after the date hereof and before the Closing Date with any
governmental or regulatory authority (other than routine, recurring
filings made in the ordinary course of business consistent with past
practice).

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Section 5.18 Certain Restrictions.

Except with the prior written consent of Buyer, Seller will cause the
Company and the Subsidiaries to refrain from:

(a) (i) entering into, amending, modifying, terminating (partially or
completely), granting any waiver under or giving any consent with
respect to (A) any contract that would, if in existence on the date of
this Agreement, be required to be disclosed in Section 2.12(a) of the
Disclosure Letter or (B) any material license or (ii) granting any
irrevocable powers of attorney;

(c) violating, breaching or defaulting under in any material respect,
or taking or failing to take any action that (with or without notice
or lapse of time or both) would constitute a material violation or
breach of, or default under, any term or provision of any license held
or used by the Company or any Subsidiary or any contract to which the
Company or any Subsidiary is a party or by which any of their
respective assets and properties is bound;

(d) voluntarily purchasing, canceling, prepaying or otherwise
providing for a complete or partial discharge in advance of a
scheduled payment date with respect to, or waiving any right of the
Company or any Subsidiary under, any indebtedness of or owing to the
Company or any Subsidiary other than with respect to the Seller
pursuant to the terms of this Agreement;

(e) making capital expenditures or commitments for additions to
property, plant or equipment constituting capital assets in an
aggregate amount exceeding $250,000;

(f) making any change in the lines of business in which they
participate or are engaged;

(g) writing off or writing down any of their assets and properties
outside the ordinary course of business consistent with past practice;
or

(h) entering into any contract to do or engage in any of the
foregoing.

ARTICLE VI — CONDITIONS TO THE PURCHASE AND SALE

Section 6.1 Conditions to the Purchase and Sale Relating to Buyer.

The obligation of Buyer to consummate the purchase of the Shares at the
Closing as contemplated by this Agreement shall be subject to the
satisfaction of or waiver by Buyer on or prior to the Closing Date of each
of the following conditions:

(a) each of the representations and warranties of Seller contained in
this Agreement shall be true in all material respects as of the
Closing Date, except

45

 

that representations and warranties qualified by the terms “material”,
“materially” “Material Adverse Effect” or other similar qualifiers
shall be true in all respects; each of the covenants and agreements of
Seller to be performed on or prior to the Closing Date shall have been
performed in all material respects; and Buyer shall have received at
the Closing certificates to that effect dated as of the Closing Date
and executed on behalf of Seller by any Vice President of Seller.

(b) there shall not have been issued and be in effect any order,
decree or judgment of or in any court or tribunal of competent
jurisdiction that makes the consummation of the purchase and sale of
the Shares illegal or which could reasonably be expected to otherwise
result in a material diminution of the benefits of the transactions
contemplated by this Agreement to Buyer.

(c) Buyer shall have received written opinions from the General
Counsel of Seller, dated the Closing Date and substantially in the
form of Exhibit H hereto.

(d) all consents, approvals or orders of any governmental or
regulatory authority (including, without limitation, any Department of
Defense or Department of Energy approvals) the granting of which is
required for the consummation of the transactions contemplated hereby
shall have been obtained and all waiting periods specified under
applicable law the expiration of which is necessary for such
consummation shall have passed.

(e) no action, suit, proceeding or investigation shall have been
instituted by any or threatened by any governmental or regulatory
authority, before a court or governmental or regulatory authority, to
restrain or prevent the consummation of the transactions contemplated
by this Agreement or, except as set forth in Section 6.1(e) of the
Disclosure Letter, which seeks other material relief from the Company
with respect to any of such transactions or which otherwise has or
could reasonably be expected to have a Material Adverse Effect.

(f) no change, event, occurrence (or development or threat with
respect to a prospective change, event or occurrence) shall have
occurred which, individually or in the aggregate, has resulted or
could reasonably be expected to result in a Material Adverse Effect.

(g) Seller shall not have commenced a voluntary case under any
Federal or state bankruptcy or insolvency law, Seller shall not have
made a general assignment for the benefit of creditors, and a decree
or order for relief shall not have been entered by a court having
jurisdiction in the premises in respect of Seller in an involuntary
case under any Federal or state bankruptcy or insolvency law and
continued unstayed and in effect for a period of at least 20 days.

(h) Seller shall have delivered to Buyer a certificate dated as of
the Closing Date and executed on behalf of Seller by any Vice
President of Seller, substantially in the form of Exhibit I hereto,
stating that the Seller is not a “foreign” person within the meaning
of Section 1445 of the Code, which certificate shall set forth all

46

 

information required by, and shall otherwise be executed in accordance
with, Treasury Regulation Section 1.1445-2(b)(2).

Section 6.2 Conditions to the Purchase and Sale Relating to Seller.

The obligations of Seller to consummate the sale of the Shares at the
Closing as contemplated by this Agreement shall be subject to the
satisfaction of or waiver by Seller on or prior to the Closing Date of each
of the following conditions:

(a) each of the representations and warranties of Buyer contained in
this Agreement shall be true in all material respects as of the
Closing Date, except that representations and warranties qualified by
the terms “material”, “materially”, “Material Adverse Effect” or other
similar qualifiers shall be true in all respects; each of the
covenants and agreements of Buyer to be performed on or prior to the
Closing Date shall have been performed in all material respects; and
Seller shall have received at the Closing certificates to that effect
dated as of the Closing Date and executed on behalf of Buyer by any
Vice President of Buyer.

(b) there shall not have been issued and be in effect any order,
decree or judgment of or in any court or tribunal of competent
jurisdiction which makes the consummation of the purchase and sale of
the Shares illegal.

(c) all consents, approvals or orders of any governmental or
regulatory authority (including, without limitation, any Department of
Defense or Department of Energy approvals) the granting of which is
required for the consummation of the transactions contemplated hereby
shall have been obtained and all waiting periods specified under
applicable law the expiration of which is necessary for such
consummation shall have passed.

(d) Buyer shall not have commenced a voluntary case under any Federal
or state bankruptcy or insolvency law, Buyer shall not have made a
general assignment for the benefit of creditors, and a decree or order
for relief shall not have been entered by a court having jurisdiction
in the premises in respect of Buyer in an involuntary case under any
Federal or state bankruptcy or insolvency law and continued unstayed
and in effect for a period of at least 20 days.

ARTICLE VII — AMENDMENT AND WAIVER

Section 7.1 Amendment and Modification.

This Agreement and any of the terms contained herein may only be amended or
modified by Seller and Buyer in writing.

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Section 7.2 Waiver.

At any time prior to the Closing either Seller or Buyer may (i) extend the
time for the performance of any of the obligations or other acts of the
other party hereto, (ii) waive any inaccuracies in the representations and
warranties of the other party contained herein or in any document delivered
pursuant hereto, or (iii) waive compliance with any of the agreements or
conditions of the other party contained herein. Any agreement on the part of
a party to any such extension or waiver shall be valid if set forth in an
instrument in writing by the party granting the extension or waiver.

ARTICLE VIII — MISCELLANEOUS

Section 8.1 Right to Cancel.

If either (i) the Parties have not agreed in writing to either clause (i) or
(ii) of Section 1.2(b) within twenty-two (22) business days after January
10, 2005 or (ii) the sale and purchase of the Shares pursuant to this
Agreement shall not have been consummated prior to February 28, 2005, Seller
or Buyer shall have the right to cancel and terminate this Agreement at any
time thereafter by giving at least three (3) days’ advance notice of such
cancellation and termination to the other party, whereupon Seller shall be
relieved of its obligations to sell the Shares and Buyer shall be relieved
of its obligation to purchase the Shares. Nothing contained in this Section
8.1 shall be construed as a release or waiver by either party of any of its
rights against the other party arising out of any breach of this Agreement
by the other party.

Section 8.2 Return of Information.

If for any reason whatsoever the sale and purchase of the Shares pursuant to
this Agreement is not consummated, Buyer shall, in addition to any
obligations with respect to the Evaluation Material (as defined in the
Confidentiality Agreement), upon request from Seller promptly return to
Seller or the Company all books, records and documents (including all
copies, if any, thereof) furnished by Seller, the Company, the Subsidiaries,
Goldman Sachs & Co., or any of their respective agents, employees, or
representatives, and any documents or working papers based thereon or
prepared in respect thereof, and shall not use or disclose the information
contained in such books, records, documents or working papers for any
purpose or make such information available to any other entity or person.

Section 8.3 Survival; Indemnification.

(a) The representations, warranties, covenants and agreements made by
each Party to the other Party in or pursuant to this Agreement shall
survive the occurrence of the Closing for the periods specified in
Sections 8.3(b), (c) and (d) below; provided, however,
that any representation, warranty, covenant or agreement that would
otherwise terminate in accordance with Sections 8.3 (b), (c) and (d)
below will continue to survive if a notice of a Buyer Claim, Seller
Claim

48

 

or Third Party Claim is timely delivered under this Section 8.3 on or
prior to such termination date thereof, until the related claim for
indemnification has been satisfied or otherwise resolved as provided
in this Section 8.3.

(b) Subject to the terms and conditions set forth in this Section
8.3, the representations and warranties made by Seller and contained
in Article II of this Agreement shall survive the Closing (i) with
respect to the representations and warranties contained in Sections
2.1, 2.2, 2.3, 2.4 and 2.13, indefinitely, (ii) with respect to the
representations and warranties contained in Sections 2.15, 2.16, 2.17
and 2.19, until sixty (60) days following the expiration of the
applicable statute of limitations (including all periods of extension,
whether automatic or permissive) and (iii) with respect to all other
representations and warranties contained in this Agreement, until the
second year anniversary of the Closing, but shall not survive, and
shall cease to be of any further force or effect, thereafter.

(c) Subject to the terms and conditions of this Section 8.3, the
representations and warranties made by Buyer and contained in Article
III of this Agreement shall survive the Closing with respect to the
representations and warranties contained in Sections 3.1 and 3.2,
indefinitely, and with respect to all other representations and
warranties contained in this Agreement, until the second year
anniversary of the Closing, but shall not survive, and shall cease to
be of any further force or effect, thereafter.

(d) Notwithstanding anything to the contrary set forth herein, the
covenants and agreements shall survive the Closing (i) with respect to
covenants or agreements contained in this Agreement to be performed on
or prior to the Closing, until the second year anniversary of the
Closing , (ii) with respect to each other covenant or agreement
contained in this Agreement, until sixty (60) days following the last
date on which such covenant or agreement is to be performed or, if no
such date is specified, indefinitely.

(e) After the Closing, Seller agrees to indemnify and hold harmless
Buyer and the Company, to the extent permitted by applicable law, from
and against all demands, claims, actions or causes of action,
assessments, losses, damages and liabilities (collectively “Damages”),
asserted against or actually incurred by Buyer or the Company as a
result of any (x) inaccuracy as of the Closing Date of any
representation or warranty of Seller contained in or made pursuant to
Article II of this Agreement (determined in all cases as if the terms
“material”, “materially”, “Material Adverse Effect” or other similar
qualifiers were not included therein) or any Damages directly arising
from the business of the Company occurring prior to the Closing or (y)
nonfulfillment of or failure to perform any covenant or agreement on
the part of Seller contained herein, but shall expressly exclude
consequential damages, damages based upon a theory of lost profits,
damages based upon a theory of a multiple of earnings or any similar
indirect damages (“Buyer Claims”); provided, however,
that Seller’s obligation to indemnify Buyer for any Damages pursuant
to this Section 8.3(e) shall be effective and Seller shall be liable
only to the extent that (i) such Damages are in

49

 

excess of any net amounts recoverable by the Company or the
Subsidiaries using their commercially reasonable efforts pursuant to
any contract, including, but not limited to Government Contracts, to
which the Company or Subsidiary is a party, (ii) such Damages exceed
the amount reserved against for such category of Damages in the
Financial Statements or Interim Financial Statements and (iii) written
notice of a Buyer Claim in respect of such Damages, specifying in
detail the basis therefor and referring to this Section 8.3(e), has
been received by Seller on or prior to the date specified by Section
8.3(b), and provided, further, however, that
the provisions for indemnity contained in clause (x) of this Section
8.3(e) shall be effective only to the extent the aggregate amount of
all such Damages for which Seller is liable under clause (x) of this
Section 8.3(e) exceeds $2,000,000 (the “Threshold Amount”), in which
event, Seller shall be liable under clause (x) of this Section 8.3(e)
only for the amount of Damages that is in excess of the Threshold
Amount. Notwithstanding anything to the contrary contained herein, in
no event shall the aggregate indemnity obligation of Seller pursuant
to clause (x) of this Section 8.3(e) be in excess of the amount of
$30,000,000 (the “Cap”). Notwithstanding the foregoing, (A) the Cap
shall be increased on a dollar-for-dollar basis, not to exceed
$10,000,000, for every dollar of Damages arising out of or relating to
any inaccuracy of the representations and warranties contained in
Sections 2.16, 2.17 and 2.19, and (B) neither the Threshold Amount nor
the Cap shall apply to any fraud or willful misconduct on the part of
Seller. Buyer and Seller agree that Buyer’s and the Company’s sole
remedy for claims for any breach by Seller of this Agreement, other
than equitable remedies for the nonfulfillment of or failure to
perform the obligations in Section 8.6, shall be limited to Seller’s
indemnity obligations pursuant to this Section 8.3(e).

(f) Notwithstanding any provision of the Agreement to the contrary,
Seller agrees to indemnify and hold harmless Buyer from and against
all Damages, including without limitation, any Tax, employee benefits
and environmental liabilities) arising from or related to JCBAS and
JCSS (or their business or operations or as a result of their transfer
to Seller, as applicable).

(g) After the Closing, Buyer agrees to indemnify and hold harmless
Seller, to the extent permitted by applicable law, from and against
all Damages asserted against or incurred by Seller as a result of any
inaccuracy as of the Closing Date of any representation or warranty of
Buyer contained in or made pursuant to Article III of this Agreement
or nonfulfillment of or failure to perform any covenant or agreement
on the part of Buyer contained herein (“Seller Claims”);
provided, however, that Buyer’s obligation to
indemnify Seller for any Damages pursuant to this Section 8.3(g) shall
be effective and Buyer shall be liable only to the extent that (i)
written notice of a Seller Claim in respect of such Damages,
specifying in detail the basis therefor and referring to this Section
8.3(g), has been received by Buyer on or prior to the date specified
by Section 8.3(b), and (ii) the aggregate amount of all such Damages
for which Buyer is liable under this indemnity exceeds the Threshold
Amount, in which case, Buyer shall be liable only for the amount of
Damages that is in excess of the Threshold Amount. Notwithstanding
anything to the contrary contained herein, in no event shall the
aggregate

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indemnity obligation of Buyer be in excess of the amount of the Cap.
Buyer and Seller agree that Seller’s sole remedy for claims for any
breach by Buyer of this Agreement shall be limited to Buyer’s
indemnity obligations pursuant to this Section 8.3(g).

(h) The obligations and liabilities of Seller and Buyer with respect
to Buyer Claims or Seller Claims resulting from claims made by third
parties (“Third Party Claims”) shall be subject to the following terms
and conditions:

     (i) The indemnified party will give the indemnifying party
prompt notice of any such Third Party Claim, and, upon written
acknowledgement of its obligation to provide indemnity hereunder,
the indemnifying party shall have the right to undertake the
defense thereof by representatives chosen by it;
provided, however, that failure of an indemnified
party to give timely notice hereunder shall not affect rights to
indemnification hereunder, except and only to the extent that the
indemnifying party demonstrates actual material damage caused by
such failure;

     (ii) If the indemnifying party, within a reasonable time
(but in no event later than thirty (30) days) after notice of any
such Third Party Claim, fails to defend the indemnified party
against which such Third Party Claim has been asserted or fails
to reasonably pursue such defense by appropriate actions or
proceedings promptly taken or instituted and diligently pursued,
the indemnified party shall (upon further notice to the
indemnifying party) have the right to undertake the defense,
compromise or settlement of such Third Party Claim on behalf of
and for the account and risk of the indemnifying party;

     (iii) In the event the indemnifying party elects to assume
control of the defense and investigation of such Third-Party
Claim in accordance with this Section 8.3(h), the indemnified
party may, at its own cost and expense, participate in the
investigation, trial and defense of such Third-Party Claim;
provided, however, that, if the named persons to
a lawsuit or other legal action include both the indemnifying
party and the indemnified party and the indemnified party has
been advised in writing by counsel that there may be one or more
legal defenses available to such indemnified party that are
different from or additional to those available to indemnifying
party, the indemnified party shall be entitled, at the
indemnifying party’s cost, risk and expense, to separate counsel
of its own choosing;

     (iv) Anything in this Section 8.3(h) to the contrary
notwithstanding, (A) if there is a reasonable probability that a
Third Party Claim may materially and adversely affect the
indemnified party, the indemnified party shall have the right, at
its own cost and expense, to defend, compromise or settle such
Third Party Claim; provided, however, that if
such Third Party Claim is settled without the indemnifying
party’s consent to the entry of any judgment which does not
include as an unconditional term thereof the

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giving by the claimant or the plaintiff to the indemnified party
a release from all liability with respect to such Third Party
Claim, the indemnified party shall be deemed to have waived all
rights hereunder against the indemnifying party for money damages
arising out of such Third Party Claim, (B) the indemnifying party
shall not, without the written consent of the indemnified party,
settle or compromise any Third Party Claim or consent to the
entry of any judgment which does not include as an unconditional
term thereof the giving by the claimant or the plaintiff to the
indemnified party a release from all liability with respect to
such Third Party Claim, and (C) Seller and Buyer agree to
cooperate with each other, in all reasonable respects, with
respect to the defense, settlement or compromise of any Third
Party Claims; and

     (v) After the date of this Agreement and prior to the
Closing, Seller shall have the right at any time or from time to
time to supplement or amend the Disclosure Letter with respect to
any matter required to be set forth or described in the
Disclosure Letter. For purposes of the rights and obligations of
the parties hereunder, upon the occurrence of the Closing, any
such supplemental or amended disclosure shall be deemed to have
been disclosed as of the date of this Agreement for purposes of
satisfying a condition to Closing but not for purposes of
avoiding indemnification obligations due to the breach of a
representation or warranty made by Seller. Notwithstanding the
previous sentence, the delivery of any such supplement or
amendment by Seller shall not absolve Seller from liability for
indemnity or the failure to satisfy a condition to Closing due to
the breach of any representation or warranty which was untrue
when made.

Section 8.4 Public Disclosure.

Each of the parties to this Agreement hereby agrees with the other party
hereto that, (i) except as may be required to comply with applicable law, no
press release or similar public announcement or communication will be made
or caused to be made concerning the execution or performance of this
Agreement unless specifically approved in advance and in writing by all
parties hereto, and (ii) no press release shall be issued by the Seller
announcing the execution of this Agreement. Each of Seller and Buyer agree
that any public announcement required by applicable law shall only be made
after reasonable notice to the other party and (in the case of notice by
Buyer) the Company. Notwithstanding the foregoing, any public announcement
or other disclosure relating to the termination of this Agreement pursuant
to Section 8.1 will include the statement “[t]he parties have mutually
agreed to terminate the agreement in accordance with its terms,” and will
not include any statement inconsistent with the foregoing. Each party
agrees that it will not at any time publish or communicate to any person or
entity any disparaging statement concerning the other party or such other
party’s parents, subsidiaries and affiliates, and their respective partners,
directors, officers, shareholders, employees, agents, attorneys, successors
and assigns.

52

 

Section 8.5 Assignment.

Except as provided in the following sentence, this Agreement may not be
assigned. Buyer may assign its rights under this Agreement in whole or in
part to (i) an affiliate of Buyer that will take title to the Shares and
will assume all obligations of Buyer hereunder or (ii) any financial
institution providing purchase money or other financing to Buyer from time
to time as collateral security for such financing; provided,
however, that in such event, Buyer will remain fully liable for the
fulfillment of all such obligations. This Agreement shall be binding upon
and inure to the benefit of successors of the parties hereto.

Section 8.6 Non-Competition Agreement.

(a) Seller, in order to induce Buyer to enter into this Agreement,
and in consideration for $5 million of the Purchase Price to be paid
to it by Buyer at Closing, expressly covenants and agrees, to the
extent permitted by applicable law, that for a period beginning on the
date hereof and ending four years after the Closing Date, Seller will
not, and will not permit any of its affiliates to, directly or
indirectly: (i) engage or participate at any U.S. Government site,
whether located in the U.S. or otherwise, in any business with the
U.S. Government of the type conducted by the Company or the
Subsidiaries on the Closing Date that provides facilities management
services for the entire facility, contingency support services or
technical temporary employee placement services (provided, however,
this limitation does not include providing activities such as: (x)
security services, operations and maintenance functions for a portion
of the facility or services relating to building controls, energy
savings or other products or services provided by Seller’s Controls
Division or (y) related to the Joint Military Services (Army/Air
Force/Navy/Marine Corps) program known throughout the government
services industry as “Project Guardian” or otherwise referred to as
“Force Ten”, “Force Eleven”, “Force Twelve”, “Force Thirteen” and
“Force Fourteen” to be issued by various federal agencies as such
projects exist under the U.S. Government or as it may be changed in
the future), (ii) except for Laura Mitchell, employ, engage, seek to
employ or engage or directly solicit or encourage any employee,
officer or consultant employed or retained by the Company on the
Closing Date or since June, 2004 in connection with the operations of
the Company (provided, however, this limitation does not include
general public solicitations through the posting of job opportunities
or otherwise and an individual’s response thereto given that Seller
routinely makes such general public solicitations) or (iii) cause or
attempt to cause (A) any client, customer or supplier of the Company
or any Subsidiary to terminate or materially reduce its business with
the Company and the Subsidiaries or (B) any officer, employee or
consultant of the Company or Subsidiary to resign or sever the
relationship with the Company or a Subsidiary. Notwithstanding the
foregoing, the parties acknowledge that Seller has entered into
written agreements with the individuals or entities set forth on
Exhibit D hereto providing for special compensation arrangements and
contingent offers of employment for such individuals or entities.
Notwithstanding anything to the contrary set forth

53

 

herein, Seller may after such date that is twenty-two (22)
business days after January 10, 2005 employ any individual or entity
set forth on Exhibit D hereto who has not accepted an offer letter to
continue employment with the Company after the Closing. The parties
acknowledge the unique value of such key employees to the Company,
both with respect to their contributions to the successful performance
of existing contracts and their ability to facilitate the procurement
of new contracts through their knowledge of customer needs and bidding
procedures, their credibility with customers and their credentials as
evidence of the ability of the Company to successfully perform the
contracts obtained; and, Seller expressly covenants and agrees, to the
extent permitted by applicable law, that the remedy at law for any
breach of this Section 8.6 will be inadequate and that, in addition to
any other remedies Buyer may have, Buyer shall be entitled to
temporary and permanent injunctive relief without the necessity of
proving actual damage. To the extent that any part of this provision
may be invalid, illegal or unenforceable for any reason, it is
intended that, to the extent permitted by applicable law, such part
shall be enforceable to the extent that a court of competent
jurisdiction shall determine that such part if more limited in scope
would have been enforceable and such part shall be deemed to have been
so written and the remaining parts shall as written be effective and
enforceable in all events.

(b) Notwithstanding anything contained in paragraph (a) of this
Section 8.6 to the contrary, after the Closing, Seller may conduct,
directly or through its subsidiaries, any business conducted by them
(exclusive of the Company and its Readiness Management Support, LLC
Subsidiary) on the Closing Date.

Section 8.7 Entire Agreement.

This Agreement, together with the Confidentiality Agreement (which shall
remain in full force and effect), the Disclosure Letter, and all exhibits
hereto, (a) constitutes the entire agreement and supersedes all prior
agreements and understandings, both written and oral, between the parties
with respect to the subject matter hereof and (b) is not intended to confer
upon any other persons any rights or remedies hereunder.

Section 8.8 Disclosure Letter.

The inclusion of any matter in the Disclosure Letter shall (i) not be deemed
to constitute an admission by Seller or Buyer or otherwise imply that any
such matter is material for the purposes of this Agreement and (ii) be
deemed to relate to the particular sections of this Agreement to which such
matter is specifically referenced or cross-referenced; provided that no
specific cross-reference is necessary to the extent that it is apparent from
such disclosure that it would qualify or apply to any other section.

54

 

Section 8.9 Counterparts.

This Agreement may be executed in one or more counterparts, each of which
shall be deemed to be an original, but all of which shall be considered one
and the same instrument.

Section 8.10 Section Headings.

The section and paragraph headings contained in this Agreement are for
reference purposes only and shall not in any way affect the meaning or
interpretation of this Agreement.

Section 8.11 Notices.

All notices hereunder shall be deemed given by a party hereto if in writing
and delivered personally, by telex, telegram, or facsimile transmission, or
by registered or certified mail (return receipt requested) or nationally
recognized private courier to the other party at the following address for
such party (or at such other address as shall be specified by like notice):

(a) if to Seller, to:

Johnson Controls, Inc.

5757 N. Green Bay

Milwaukee, Wisconsin 53209

Attention: General Counsel

With a copy to:

Johnson Controls, Inc.

5757 N. Green Bay

Milwaukee, Wisconsin 53209

Attention: Vice President - Corporate Development

(b) if to Buyer, to:

IAP Worldwide Services Inc.

413 Western Lane

Irmo, SC 29063

Facsimile No.: (803) 798-1635

Attn: David Myers

With a copy to (which shall not constitute notice):

Milbank, Tweed, Hadley & McCloy LLP

One Chase Manhattan Plaza

New York, New York 10005

55

 

Facsimile No.: (212) 822-5735

Attn: Roland Hlawaty, Esq.

Any notice given by mail or telegram or facsimile transmission shall be
effective when received. Any notice given by telex shall be effective when
the appropriate telex answerback is received.

Section 8.12 Governing Law.

THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE
LAWS OF THE STATE OF NEW YORK, APPLICABLE TO A CONTRACT EXECUTED AND
PERFORMED IN SUCH STATE, WITHOUT GIVING EFFECT TO THE CONFLICTS OF LAWS
PRINCIPLES THEREOF.

Section 8.13 Illegality.

In case any provision in this agreement shall be invalid, illegal, or
unenforceable, to the extent permitted by applicable law, the validity,
legality, and enforceability of the remaining provisions shall not in any
way be affected or impaired thereby.

Section 8.14 Definitions.

The following terms shall have the respective meanings specified in the
indicated Sections of this Agreement:

	 	 	 
	Term	 	Agreement Section
	Accounting Principles
	 	1.2(c)
	Accounting Referee
	 	4.7
	Acquisition Proposal
	 	5.16
	Agreement
	 	Recitals
	Allocation Agreement
	 	4.6
	Base Net Working Capital Amount
	 	1.2(a)
	Buyer
	 	Recitals
	Buyer Claims
	 	8.3(e)
	Cap
	 	8.3(e)
	Closing
	 	1.3
	Closing Date
	 	1.3
	Closing Date Balance Sheet
	 	1.2(d)
	Code
	 	2.17(b)
	Company
	 	Recitals
	Company Employee
	 	5.15(a)
	Confidentiality Agreement
	 	5.1
	Current Assets
	 	1.2(c)
	Current Liabilities
	 	1.2(c)
	Damages
	 	8.3(e)
	Designated Accountant
	 	1.2(d)

56

 

	 	 	 
	Term	 	Agreement Section
	Disclosure Letter
	 	1.5
	Disclosure Letter Delivery Date
	 	1.5
	Employee Benefit Plans
	 	2.17(a)
	Environmental Laws
	 	2.19(j)
	ERISA
	 	2.17(a)
	ERISA Affiliate
	 	2.17(c)
	Final Net Working Capital Amount
	 	1.2(d)
	Financial Statements
	 	2.5
	Foreign Employees
	 	2.17(g)
	GAAP
	 	2.5
	Government Bid
	 	2.20(a)
	Government Contract
	 	2.20(a)
	Hart-Scott-Rodino Act
	 	2.1
	Industrial Security Regulations
	 	5.4
	Intellectual Property
	 	2.18
	Intercompany Agreements
	 	5.14
	Intercompany Account
	 	5.13
	Interim Financial Statements
	 	2.6
	Investment Entities
	 	2.4(b)
	JCBAS
	 	Recitals
	JCMS
	 	2.17(c)
	JCSS
	 	Recitals
	Johnson Controls Pension Plan
	 	5.15(d)
	Leases
	 	2.9
	Material Adverse Effect
	 	2.10
	Multiemployer Plan
	 	2.17(c)
	Net Working Capital
	 	1.2(c)
	Notice of Objection
	 	1.2(d)
	1934 Act
	 	2.1
	Parties
	 	Recitals
	Pension Plan
	 	2.17(c)
	Plan
	 	2.17(a)
	Preliminary Purchase Price
	 	1.2(a)
	Purchase Price
	 	1.2(a)
	Purchase Price Report
	 	1.2(d)
	Q Clearances
	 	5.4
	Reference Date Balance Sheet
	 	1.2(a)
	Retained Contracts
	 	5.7
	Retained Debt
	 	5.13(b)
	Seller
	 	Recitals
	Seller Claims
	 	8.3(g)
	Seller Marks
	 	5.6
	Seller Proprietary Software
	 	9.3(b)
	Seller’s Knowledge
	 	2.10
	Shares
	 	Recitals
	Software
	 	9.3(a)
	Straddle Period
	 	4.5

57

 

	 	 	 
	Term	 	Agreement Section
	Subsidiaries
	 	2.4(a)
	Taft-Hartley Act
	 	2.17(b)
	Tax
	 	2.15
	Tax Proceeding
	 	4.5
	Tax Returns
	 	2.15
	Taxing Authority
	 	2.15
	Third Party Claims
	 	8.3(h)
	Third Party Software
	 	9.3(e)
	Threshold Amount
	 	8.3(e)
	Transferred Plan
	 	5.15(d)
	WARN
	 	5.12
	Welfare Plan
	 	2.17(e)

ARTICLE IX — POST-CLOSING COOPERATION

Section 9.1 Post-Closing Access, Information and Cooperation.

The parties contemplate that there may be a continuing need for access to
information, data, systems or personnel, post-Closing, to allow both parties
to complete all necessary transactions, reorganizations, reporting
requirements, filings, audits or any other post-Closing matters, including
without limitation with respect to any financial audit of the Company to be
conducted by its independent auditing firm. The parties will cooperate with
each other and provide reasonable access to information, data, systems and
personnel in their respective control, post-Closing. In addition, to the
extent requested by Buyer, the Parties shall negotiate in good faith and
execute one or more transition services agreements prior to the Closing
covering such services as may be necessary post-Closing in order to permit
the Company to operate on a stand alone basis, including without limitation
facilities, benefit plans, payroll, information systems, shared or common
software licenses, operations and accounting, with reasonable compensation
arrangements for such services.

Section 9.2 Post-Closing Cooperation Regarding Employee Benefit
Plans.

In the event Seller is unable to reasonably create employee benefit plans
for employees of JCSS, JCBAS and JCMS, by the Closing Date, such employees
may continue to participate in Employee Benefit Plans until January 1, 2005.
Buyer and Seller shall negotiate in good faith and execute any agreements
necessary to provide for such participation after the Closing Date and the
reimbursement of Buyer by Seller for any costs related thereto. Seller
shall fully indemnify Buyer, the Company and its Subsidiaries with respect
thereto.

Section 9.3 Intellectual Property License. 

(a) For the purpose of this Section 9.3, the term “Software” shall
mean the source code and object code versions of any applications,
programs, operating

58

 

system software, computer software languages, utilities, other
computer programs and related documentation, in whatever form or
media, including the tangible media upon which such applications
programs, operating system software, computer software languages,
utilities, other computer programs and related documentation are
recorded or printed, together with all corrections, improvements,
updates, releases or revisions thereof.

(b) Seller hereby grants to the Company and its Subsidiaries a
perpetual, exclusive (subject to the exception set forth below),
worldwide, irrevocable, transferable, royalty-free license to use,
copy, maintain, modify, enhance, perform, display, distribute and
create derivative works of, and to sublicense any and all of the
foregoing rights to third parties, all Software owned, acquired or
developed by Seller or its subsidiaries and used in connection with
the business or operation of the Company and the Subsidiaries as
conducted prior to Closing, including, without limitation, the
interfaces, customizations and configuration of the off-the-shelf
third party software commonly referred to by Seller as the “Business
Operating System”, and excluding Seller’s Metasys® building automation
software (collectively, the “Seller Proprietary Software”).
Notwithstanding the foregoing, Seller retains the right to use, copy,
maintain, modify, enhance, perform, display, distribute and create
derivative works of, the Seller Proprietary Software for its own
internal business purposes and to sublicense such rights to its
subsidiaries for their own internal business purposes, provided, that
neither Seller nor its subsidiaries may license or sublicense the
Seller Proprietary Software to a third party. Neither the Company nor
any of its Subsidiaries shall transfer or sublicense any Seller
Proprietary Software to a non-affiliate of any of them, provided that
the foregoing restrictions shall not be applicable to (i) any
sublicense in connection with a joint venture or teaming arrangement
in the ordinary course of business of the Company or its Subsidiaries
and (ii) any sale, transfer or other disposition of all or a material
portion of the assets or the business of the Company and its
Subsidiaries by way of merger consolidation, equity or asset sale or
otherwise.

(c) Any modifications or enhancements to the Seller Proprietary
Software created by or on behalf of the Company or one of its
Subsidiaries after the Closing Date shall be owned by the Company.

(d) Seller hereby grants to the Company and its Subsidiaries a
perpetual, non-exclusive, worldwide, irrevocable, transferable,
royalty-free license to use, copy, maintain, modify, enhance, perform,
display, distribute and create derivative works of, and to sublicense
any and all such rights to third parties, Seller’s Metasys® building
automation software (including all corrections, improvements, updates,
releases or revisions thereof provided by Seller for sale to the
public) solely for continued use at any existing Company customer site
as of the date hereof. Seller hereby grants to the Company and its
Subsidiaries for a period of two years following the Closing, a
non-exclusive, worldwide, irrevocable, transferable, license, to use,
copy, maintain, modify, enhance, perform, display, distribute and
create derivative works of, and to sublicense any and all such

59

 

rights to third parties, Seller’s Metasys® building automation
software (including all corrections, improvements, updates, releases
or revisions thereof provided by Seller for sale to the public) for
use at any new Company customer site, on Seller’s branch transfer
pricing terms that are at least as favorable as those applicable to
any of Seller’s subsidiaries.

(e) For a mutually agreed transition period following Closing (of not
less than twelve (12) months), Seller will provide a sublicense to the
Company and its Subsidiaries to use any Software licensed or leased or
otherwise obtained by Seller from a third party that is used in
connection with the business or operations of the Company and the
Subsidiaries as conducted prior to Closing (“Third Party Software”),
including, without limitation, all Third Party Software necessary to
operate the Business Operating System. Following this mutually agreed
transition period, Buyer shall be responsible for purchasing or
licensing any Third Party Software necessary for the conduct of the
business.

60

 

     IN WITNESS WHEREOF, this Agreement has been signed on behalf of each of
the parties hereto as of the date first above written.

	 	 	 	 	 
	JOHNSON CONTROLS, INC.

	 	 	 	IAP WORLDWIDE SERVICES INC.
	 
	 	 	 	 
	/s/ John P. Kennedy

	 	 	 	/s/ David Myers
	 

	 	 	 	 
	John P. Kennedy

	 	 	 	David Myers
	President, Controls Group

	 	 	 	Chairman

61

 

AMENDMENT NO. 1 TO STOCK PURCHASE AGREEMENT

This Amendment No. 1 (the “Amendment”) to that certain Stock Purchase Agreement by and between
Johnson Controls, Inc. (“Seller”) and IAP Worldwide Services Inc. (“Buyer,” and with Seller, the
“Parties”), dated December 17, 2004 (the “Agreement”) is executed this 11th day of
February, 2005 and amends the Agreement as provided for below pursuant to Section 7.1 of the
Agreement. Except as expressly modified herein, the Agreement shall remain in full force and
effect as originally executed.

	1.  	Definition of “Preliminary Purchase Price”. Section 1.2(a) of the Agreement is
amended to define “Preliminary Purchase Price” as $ 260.1 million ($260,100,000).
	 
	2.  	Definition of “Base Net Working Capital Amount”. Section 1.2(a) of the Agreement is
amended to define “Base Net Working Capital Amount” as $64 million ($64,000,000). The amount
set forth opposite “Plus Adjustment Agreed Upon By the Parties**” on Exhibit A of the
Agreement shall be $17,405, which amount, for the avoidance of doubt, shall refer to an actual
amount equal to $17,405,000.
	 
	3.  	Indemnification; Section 8.3(e)(x). Section 8.3(e) (x) of the Agreement is amended
to include indemnity for Damages arising out of or relating to items 1, 2, 3 and 6 set forth
on Exhibit A to this Amendment, subject to the limitations in Section 8.3(e), provided that
Damages related to item 3 are also subject to the additional Cap specified in part (A) of the
second to last sentence of Section 8.3(e).
	 
	4.  	Indemnification; Section 8.3(f). Section 8.3(f) of the Agreement is amended to
include indemnification for Damages arising out of or relating to items 4 and 5 set forth on
Exhibit A to this Amendment.
	 
	5.  	Closing Date. Section 1.3 of the Agreement is amended to set the Closing Date as
March 15, 2005. Section 8.1 of the Agreement is amended to replace “February 28, 2005” in the
first sentence with “March 31, 2005”.
	 
	6.  	Capitalized Terms; References. Any capitalized terms not defined in this Amendment
shall have the meaning set forth in the Agreement. Each reference to “hereof”, “hereunder”,
“herein” and “hereby” and each other similar reference and each reference to the “Agreement”
and “this Agreement” and each other reference contained in the Agreement shall, after this
Amendment becomes effective, refer to the Agreement as amended hereby
	 
	7.  	Counterparts. This Amendment may be executed in one or more counterparts,
each of which shall be deemed to be an original, but all of which shall be considered one
and the same instrument.

A-1

 

	8.  	Governing Law. THIS AMENDMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, APPLICABLE TO A CONTRACT EXECUTED AND
PERFORMED IN SUCH STATE, WITHOUT GIVING EFFECT TO THE CONFLICTS OF LAWS PRINCIPLES THEREOF

     IN WITNESS WHEREOF, this Amendment has been signed on behalf of each of the parties hereto as
of the date first above written.

	 	 	 	 	 
	JOHNSON CONTROLS, INC.

	 	 	 	IAP WORLDWIDE SERVICES INC.
	 
	 	 	 	 
	/s/ Jerome D. Okarma

	 	 	 	/s/ David Myers
	 

	 	 	 	 
	Jerome D. Okarma

	 	 	 	David Myers
	Vice President, Secretary and

	 	 	 	Chairman
	General Counsel
	 	 	 	 

A-2

 

Exhibit A to

Amendment No. 1 to

Stock Purchase Agreement

Dated December 17, 2004

1. RMS AFCAP

The matters set forth on Schedule 2.7, Item 3 of the Disclosure Letter, Schedule 2.20(b) of the
Disclosure Letter, Schedule 2.20(d)(ii)(x), Item 3 of the Disclosure Letter and Schedule
2.24(vi), Item 1 of the Disclosure Letter as described below:

AFCAP issued task order 5076 to Readiness Management Support, LLC (“RMS”) to build an
expeditionary village at Al Udeid AB, Qatar in late 2002. RMS directly contracted for power
production and subcontracted to Fluor for self-performing the site preparation and erection of
modular housing. Fluor’s modular housing supplier, International Building Systems (“IBS”),
delivered units that did not meet several material and assembly specifications that were
included in the final purchase order. There were disagreements between the customer in the
field and the Air Force staff in the United States over the required speed of production and
degree of permanence of the units. Fluor terminated IBS and initiated legal action to recover
the cost of bringing the units up to specifications and completing the on-site construction.
During this process, the Air Force contracting officer was routinely advised of status. In
November, 2003, the contracting officer issued a termination for convenience letter for task
order 5076. RMS and Fluor jointly prepared and submitted a settlement proposal to the Air
Force, a response to which is expected by March, 2005. The maximum exposure in settling this
issue for RMS is approximately $26 million. RMS has not paid Fluor for the cost overruns and
has not recognized cost/revenue on these costs.

2. Audits of RMS 

Damages arising from any audit (including those conducted by the DCAA) of RMS with respect to
the periods prior to the Closing Date.

3. Los Alamos DOE Fuel Consumption Dispute

The matters set forth on Schedule 2.10(a) to the Disclosure Letter and Schedule 2.19(c), Item 2
of the Disclosure Letter as described below:

As part of its duties at LANL, the Company oversaw the operation of a back-up steam plant in
area TA-21. The tank held diesel fuel to supply the boilers when they were needed. However, the
facility was seldom operated. The duties of the Company’s personnel included monitoring the
contents of the above-ground storage tank. In 2002 it was discovered that fuel was missing from
the tank. Indications are that the fuel leaked from a portion of the 80-foot underground line
running from the tank to the

A-3

 

boilers. A part of the line had been replaced in the mid 1990s because it was corroded, but the
remaining part of the line, which had neither wrapping nor cathodic protection, was not
replaced because of LANL budgetary constraints. The Company was previously charged
approximately $300,000 for the investigation and assessment of this matter. No remediation has
been undertaken and no further demands have been made on the Company relating to this matter.
However, the contract is not yet closed out and this issue could come up again as part of the
closeout.

4. Transferred Entities

The matters set forth on Schedule 2.8(vii), Items 2-4 of the Disclosure Letter and Schedule
5.3, Items 4-6 of the Disclosure Letter as described below and any matters relating to the
following entities (or their business or operations) or as a result of their transfer to
Seller:

(a) On or about December 31, 2004, the Company transferred to Seller all remaining assets of
American Power Technologies, Inc. (“APT”), acquired by the Company and merged into the Company
in 2000. This operation was part of the commercial facilities management business and was
transferred to the Seller in 2002. However, the prior asset transfer in 2002 had not
transferred APT’s interest as an insured under various insurance policies to the Seller. The
Seller was served in December, 2004 with a lawsuit against APT and the Company. As part of
this clean up asset transfer, the Seller agreed to defend and indemnify the Company against any
claims arising out of the APT assets or operations.

(b) On or about December 31, 2004, the Company transferred it’s 20% interest in CFI Solutions,
Inc. to the Seller as a housekeeping item. This ownership interest is in a discontinued
operation related to the commercial facility management business, was not reflected in the
Company’s financials and is not part of this transaction.

(c) On or about December 31, 2004, the Company transferred it’s 20% interest in Computerized
Facility Integration, LLC to the Seller as a housekeeping item. This ownership interest is in
a discontinued operation related to the commercial facility management business, was not
reflected in the Company’s financials and is not part of this transaction.

5. Subrogation Claim related to the World Trade Center Collapse

The matters set forth on Schedule 2.10(d) of the Disclosure Letter as described below:

Several insurers who paid property damage claims to Con Edison for damage resulting from
collapse of World Trade Center 7 have brought a subrogation action. American Power
Technologies, Inc. is a named party. JCWS acquired APT in 2000 and APT was merged into JCWS
that same year. JCWS was served with a complaint on or about December 6, 2004 in a lawsuit
that was apparently filed September 10, 2004. American Power Technologies, Inc. is one of over
forty defendants. This action

A-4

 

seeks to recover an unspecified sum for property damage resulting from the destruction of a
substation and related electrical equipment owned by Consolidated Edison of New York. The
substation was located under WTC 7, which caught fire and collapsed into the substation several
hours after the twin towers fell. It is alleged, in very general terms, that APT was one of the
“Construction Defendants” who were involved in the design, construction, installation,
maintenance etc. of the various building systems of WTC 7. More specifically, it is alleged
that both the City of New York and Citigroup had contracted with various “construction
defendants” to design and install back-up power generating systems within WTC 7, including
large diesel fuel storage tanks. APT’s specific involvement is not alleged, but this type of
construction was their line of business. It is alleged that the entire back up power system was
improperly designed, installed, etc. allowing the tanks to catch fire, resulting in damage to
WTC 7’s support structure, leading to the collapse of the building and the damage to the Con Ed
substation. JCWS, Inc. (the old IFM business in Alpharetta), acquired the stock of APT in a
Stock Purchase Agreement in 2000. APT was merged into JCWS, effective 12/31/00 and articles of
merger were filed in New York and 18 other states where JCWS was licensed to do business.

6. Afghan Plane Crash

The crash of the Kam-Air 737-200 airliner in Afghanistan on or about February 3, 2005.

A-5exv10wu

 

Exhibit 10.U

SHARE PURCHASE AGREEMENT

DATED JANUARY 10, 2005

BETWEEN

VALEO

AS BUYER

AND

JOHNSON CONTROLS

AUTOMOTIVE ELECTRONICS

AS SELLER

 

 

TABLE OF CONTENTS

	 	 	 	 	 	 	 
	1.
	 	DEFINITIONS AND INTERPRETATION	 	 	2	 
	 
	 	 	 	 	 	 
	2.
	 	SALE AND PURCHASE OF THE TRANSFER SHARES	 	 	7	 
	 
	 	 	 	 	 	 
	3.
	 	PURCHASE PRICE	 	 	7	 
	 
	 	 	 	 	 	 
	4.
	 	CONDITIONS PRECEDENT TO CLOSING	 	 	10	 
	 
	 	 	 	 	 	 
	5.
	 	PRECOMPLETION COVENANTS	 	 	11	 
	 
	 	 	 	 	 	 
	6.
	 	CLOSING	 	 	17	 
	 
	 	 	 	 	 	 
	7.
	 	REPRESENTATIONS AND WARRANTIES OF SELLER	 	 	18	 
	 
	 	 	 	 	 	 
	8.
	 	REPRESENTATIONS AND WARRANTIES OF BUYER	 	 	25	 
	 
	 	 	 	 	 	 
	9.
	 	CLAIMS FOR LOSSES BY BUYER	 	 	26	 
	 
	 	 	 	 	 	 
	10
	 	OTHER COVENANTS	 	 	31	 
	 
	 	 	 	 	 	 
	11
	 	CONFIDENTIALITY	 	 	35	 
	 
	 	 	 	 	 	 
	12
	 	ANNOUNCEMENTS	 	 	36	 
	 
	 	 	 	 	 	 
	13
	 	MISCELLANEOUS	 	 	36	 
	 
	 	 	 	 	 	 
	14
	 	GOVERNING LAW AND DISPUTE RESOLUTION	 	 	38	 
	 
	 	 	 	 	 	 
	15
	 	LIST OF ANNEXES	 	 	38	 

i 

 

SHARE PURCHASE AGREEMENT

This share purchase agreement (the “Agreement”) is made in Paris on this 10th day of
January 2005, in two original copies, by and between:

VALEO, a French société anonyme with an issued share capital of EUR 251,127,072, registered with
the Trade and Commercial Register of Paris under number 552 030 667, whose registered office is at
43 rue Bayen, 75017 Paris, represented by ______, duly authorized for the
purposes of this Agreement (“Valeo”);

ON THE ONE HAND

AND

JOHNSON CONTROLS AUTOMOTIVE ELECTRONICS, a French société par actions simplifiée with a share
capital of EUR 150,772,500, registered with the Trade and Commercial Register of Pontoise under
number 403 860 968, having its registered office at 18 chaussée Jules-César, 95520 Osny, France,
and represented by ______, duly authorized for the
purposes of this Agreement (“Seller”);

ON THE OTHER HAND

WHEREAS:

	A.  	Seller is, among other things, engaged through its Engine Electronics Division in the design,
development, marketing, manufacturing, and sale of engine management systems, automotive
engine electronic units and electronic engine components in France and abroad (collectively
the “Business”).
	 
	B.  	The Business comprises assets and liabilities that are currently part of Seller.
	 
	C.  	Seller has created, as sole shareholder, a new company, Engel Equipement, a French société
par actions simplifiée with a share capital of EUR 37,000, registered at the Trade and
Commercial Register of Paris under number 479 162 695 and represented by Ms Antje Merlin in
her capacity as President (the “Company”).
	 
	   	Before or on the Closing Date and in accordance with the terms and conditions set forth in
this Agreement, Seller shall contribute to the Company, as a contribution in kind (apport
partiel d’actif placé sous le régime des scissions) (the “Contribution in Kind”) the
Business, with a view to make the Business a stand alone operation.
	 
	   	The date on which the Contribution in Kind shall become effective is hereinafter referred
to as the “Contribution Date”.
	 
	D.  	Seller also contemplates to enter into a subcontracting arrangement in connection with
certain interior electronic manufacturing activities currently operated in its Premises in
Sainte-Florine and Sablé, while retaining the ownership of the corresponding production lines
and intellectual property rights. Terms and conditions of such arrangement are set forth in a
separate agreement (the “Entrustment Agreement”).

1

 

	E.  	On the Closing Date, Seller shall hold 100% of the shares of the Company, including both the shares issued upon the incorporation of the Company and those issued as a consequence of the
Contribution in Kind (together, the “Transfer Shares”).
	 
	F.  	On or prior to the date hereof, the worker’s committees (comités d’entreprise) of Seller have
given their opinion on the Transaction.
	 
	G.  	Seller desires to sell, transfer and assign to Valeo, and Valeo desires to purchase and
assume from Seller, the Transfer Shares in accordance with the terms and conditions set forth
herein.

IT IS AGREED AS FOLLOWS:

	1.  	DEFINITIONS AND INTERPRETATION

	 	1.1  	Definitions

	   	In this Agreement (including in the recitals and Annexes thereto), unless the context
otherwise requires or unless otherwise specified hereinafter, the following words shall
have the following meaning:
	 
	   	“Accounting Rules” means (i) the accounting practices and principles consistently used by
Seller for the preparation of its financial statements provided that if such practices and
principles are not in accordance with French GAAP, French GAAP shall be applicable and
(ii) the other practices and principles set forth in Annex 1(i);
	 
	   	“Accounts” means the pro-forma financial statements of the Business, consisting of a
balance sheet of the Business as at the Accounts Date and an EBITA statement for the
Business for the period running from October 1st, 2003 through the Accounts
Date, all prepared in accordance with the Accounting Rules and the Carve-Out Principles,
and attached as Annex 1(ii);
	 
	   	“Accounts Date” means September 30, 2004;
	 
	   	“Accounts Date Liabilities” means EUR 6.2 million (six point two million Euros);
	 
	   	“Amount of Claims” is defined in Article 9.2.3;
	 
	   	“Affiliate” means, in relation to any person other than an individual, any person which
Controls, is Controlled by, or is under common Control with, such person;
	 
	   	“Base Purchase Price” has the meaning ascribed to it in Article 3.1;
	 
	   	“Brazilian Affiliate” has the meaning ascribed to it in Article 10.1.2;
	 
	   	“Business” has the meaning ascribed to it in paragraph A of the recitals hereto;
	 
	   	“Business at Closing” has the meaning ascribed to it in Article 10.1.2;
	 
	   	“Business Day” means any day other than a Saturday, a Sunday or a legal holiday in France
(within the meaning of Article L. 222-1 of the French Labor Code);
	 
	   	“Business Employees” means the persons employed within the scope of the Business as
salariés, a list of which at the date hereof is attached as Annex 1(iii);
	 
	   	“Buyer” means Valeo or the Affiliate which it may designate in accordance with Article
13.2;

2

 

	   	“Carve-Out Costs” means the costs relating to the carving out of the Business as
identified by the Parties, an estimate of such costs being given and the corresponding
works being described in Annex 1(iv);
	 
	   	“Carve-Out Principles” means the practices and principles set forth in Annex 1(v)
and used by Seller to prepare the Accounts so as to give a true and fair picture of the
Business as if it were a stand-alone operation;
	 
	   	“Claim Notice” is defined in Article 9.4.1;
	 
	   	“Closing” means the transfer to Buyer by Seller of the ownership of the Transfer Shares;
	 
	   	“Closing Date” is defined in Article 6.1;
	 
	   	“Closing Date Balance Sheet” is defined in Article 3.3.1;
	 
	   	“Closing Liabilities” means with respect to the Company as at the Closing Date the sum of
(A) all liabilities other than (i) Excluded Provisions, (ii) items falling within the
definition of Closing Working Capital, (iii) items forming part of shareholders equity
(e.g. capital, reserves, current and retained earnings) and (iv) fixed assets suppliers
payables and (B) all items of financial debt. For the avoidance of doubt, Closing
Liabilities shall include, without limitation, the sum of all provisions other than the
Excluded Provisions and in particular provisions for IDR liabilities médailles du travail
or other pension or retirement liabilities and any provision related to products
manufactured or sold in connection with the Business (such provisions being determined in
accordance with Accounting Rules), the amount of all loans granted by Governmental
Authorities, any amount related to outstanding finance leases and the profit sharing
reserve. All such items shall be extracted from the Closing Date Balance Sheet. For the
avoidance of doubt, an example of calculation of the Closing Liabilities is attached as
Annex 1(vi)-Column (A);
	 
	   	“Closing Working Capital” means with respect to the Company as at Closing Date the sum of
(A) the difference between the total current assets and the total current liabilities as
commonly accepted by GAAP and (B) cash and cash equivalent, if any. Total current assets
include raw materials, merchandises, work-in-progress and finished goods inventories, net
receivables, prepayment and other current assets. Total current liabilities include trade
payables, current social and tax liabilities, fixed assets payables net of advances on
fixed assets supplier payables and all other current liabilities. For the avoidance of
doubt, (i) Excluded Provisions, (ii) amounts to be paid by the Company to Seller under the
Contribution Agreement as reimbursement for the amount of taxe professionnelle pertaining
to the Business after Closing to be reimbursed by the Company to Seller in accordance with
article 17.4 of the Contribution Agreement, and (iii) items falling within the definition
of Closing Liabilities shall not be considered as current liabilities for the purpose of
this definition. Such total current assets and current liabilities shall be extracted from
the Closing Date Balance Sheet. For the avoidance of doubt, an example of calculation of
the Closing Working Capital is attached as Annex 1(vi)-Column (B);
	 
	   	“Company Securities” means any rights or securities giving their holder a right to
subscribe for, convert, exchange or otherwise acquire shares in the issued share capital
of the Company or giving access to any such share(s) or portion of the share capital or
the voting rights of the Company;

3

 

	   	“Company” has the meaning ascribed to it in paragraph C of the recitals hereto;
	 
	   	“Contract(s)” is defined in Article 5.3.2(i)(a);
	 
	   	“Contributed Assets and Liabilities” is defined in Article 5.3.2(i);
	 
	   	“Contributed Intellectual Property” has the meaning ascribed to it in Article 5.3.2(i)(c);
	 
	   	“Contribution Agreement” has the meaning ascribed to it in Article 5.3.1;
	 
	   	“Contribution Date” has the meaning ascribed to it in paragraph C of the recitals hereto;
	 
	   	“Contribution in Kind” has the meaning ascribed to it in paragraph C of the recitals
hereto;
	 
	   	“Control” has the meaning set forth in article L. 233-3 of the French Commercial Code;
	 
	   	“Encumbrance” means, in respect of any given asset, any encumbrance or security interest
including but not limited to any charge, mortgage, pledge, security, lien, option right,
right of first refusal;
	 
	   	“Entrustment Agreement” shall have the meaning ascribed to in paragraph D of the recitals
hereto;
	 
	   	“Environmental Law” means Law relating to pollution, the protection of the environment, or
the use, storage or disposal of hazardous substances, waste, contaminant, pollutant or
toxic substance;
	 
	   	“Excluded Provisions” mean

	 	(a)  	any provision or debt recorded by the Company relating to any subsidy
granted by any Governmental Authority (other than loans granted by Governmental
Authorities), notwithstanding the fact that the relevant Governmental Authorities or
third parties would not have given their consent to the transfer of such subsidy as
at Closing Date;
	 
	 	(b)  	any provision or debt recorded by the Company relating to costs in
connection with the carving-out of the Business (including Carve-Out Costs);
	 
	 	(c)  	any provision or debt recorded by the Company relating to environmental
costs (including Specific Environmental Compliance Costs);
	 
	 	(d)  	any provision or debt recorded by the Company relating to transfer costs
linked to the removal from the Pontoise site of administrative and R&D business
employees upon expiration of the Transition Services Agreement;
	 
	 	(e)  	any provision or debt recorded by the Company relating to the transfer of
activities between the Sainte-Florine and the Sablé manufacturing sites; and
	 
	 	(f)  	any provision or debt recorded by the Company relating to a potential risk
of requalification of temporary workers;

	   	“Final Closing Liabilities” has the meaning ascribed to it in Article 3.3.5;
	 
	   	“Final Closing Working Capital” has the meaning ascribed to it in Article 3.3.5;

4

 

	   	“Governmental Authority” means the government of any nation, state, city, locality or
other political subdivision thereof, any entity exercising executive, legislative,
judicial, regulatory or administrative functions;
	 
	   	“Governmental Permits” means all permits and licenses, certificates of inspection,
approvals or other authorizations necessary for the operation of the Business or the
Premises as currently operated under applicable Law;
	 
	   	“Independent Expert” means (i) de Ricol, Lasteyrie & Associés or, in the event Ricol,
Lasteyrie & Associés is unable to act for any reason, (ii) any other accounting firm of
international reputation jointly appointed by Buyer and Seller, or failing Buyer and
Seller to agree on the name of such other accounting firm within a fifteen-day period
starting on the date on which Ricol, Lasteyrie & Associés has made known that it could not
act as independent expert and (iii) any accountant appointed by the President of the
Commercial Court of Paris acting en référé at the request of any of the Parties hereto;
	 
	   	“Intellectual Property Rights” means all industrial and intellectual property rights,
including registered trade marks, service marks, patents, utility models, registered
designs, applications for, and the right to apply for any such rights, inventions, trade
and business names, copyrights, computer software, domain names and databases, which may
subsist in any part of the world together with all renewals and extensions;
	 
	   	“Key Employees” means those persons whose names appear in Annex 1(vii);
	 
	   	“Law” means any applicable mandatory laws, regulations, statutes, rules or orders of any
Governmental Authority;
	 
	   	“Losses” means any liabilities, obligations, damages, losses, deficiencies, costs,
penalties, interest and expenses including without limitation the reasonable fees and
expenses of legal counsel;
	 
	   	“Material Contracts” means those of the Contracts listed in Annex 1(viii);
	 
	   	“Material Contracts Consents” means the written consent of each counter-party to the
Material Contracts listed in Annex 1(viii) Part 2 to the transfer of such Material
Contract from Seller to the Company and to the transfer of the Transfer Shares to Buyer;
	 
	   	“Notice of Objection” has the meaning ascribed to it in Article 3.3.2;
	 
	   	“Normative Working Capital” means EUR 42.6 million (forty two point six million Euros);
	 
	   	“Party” means Buyer or Seller (together, the “Parties”);
	 
	   	“Premises” shall mean the premises in which the Business is operated, as described in
Annex 1(ix);
	 
	   	“Proposed Closing Liabilities” has the meaning ascribed to it in Article 3.3.1;
	 
	   	“Proposed Working Capital” has the meaning ascribed to it in Article 3.3.1;
	 
	   	“Proprietary Information” means all information (whether or not protectable by patent,
copyright, mask works or trade secret rights) not generally known to the public (except
for patents), including, but not limited to, works or authorship, inventions, discoveries,
patentable subject matter, patents, patent applications, industrial models, industrial
designs, trade secrets, trade secret rights, software,

5

 

	   	works, copyrightable subject matters, copyright rights and registrations, dies, molds,
tools and tooling, mask works, know-how and show-how, trademarks, trade names, service
marks, emblems, logos, insignia and related marks and registrations, specifications,
technical manuals and data, libraries, blueprints, drawings, proprietary processes,
product information and development work-in-process;
	 
	   	“Purchase Price” has the meaning ascribed to it in Article 3.1;
	 
	   	“Purchase Price Adjustment” has the meaning ascribed to it in Article 3.3.6;
	 
	   	“Reference Liabilities” means the sum of the Accounts Date Liabilities plus an amount of
EUR 3.8 million, i.e. a total amount of EUR 10 million (ten million Euros);
	 
	   	“Seller’s Response” has the meaning ascribed to it in Article 3.3.3;
	 
	   	“Specific Environmental Compliance Costs” means the expenses to be made in order to remedy
certain non compliances of the Business, as currently operated, with Environmental Law, as
identified by the Parties; such expenses, which represent an estimated maximum total
amount of EUR 422,000, and the corresponding remediation works are listed in Annex
1(x);
	 
	   	“Shared Supply Agreements” has the meaning ascribed to it in Article 5.3.3(iii);
	 
	   	“Tax” means taxes, duties, levies, fees, assessments and governmental charges of any kind,
whether payable directly or by withholding, including without limitation, income,
franchise, property, sales, customs, value added, employment, gains, and social security
taxes and charges (including in respect of pension and retirement contributions, family
allowance contributions and all other contributions assessed on salaries), contributions
to complementary or supplementary retirement plans, contributions to unemployment funds,
CSG, CRDS, together with any interest, penalties or additions to tax with respect thereto;
	 
	   	“Transaction” means the sale and purchase of the Transfer Shares, as is contemplated in
this Agreement;
	 
	   	“Transfer Shares” has the meaning ascribed to it in paragraph E of the recitals hereto.

	 	1.2  	Interpretation

	   	In this Agreement (including in the recitals and Annexes thereto), unless the context
otherwise requires or unless otherwise specified hereinafter:

	 	(a)  	references to Articles and Annexes are references to articles of, and
annexes to, this Agreement;
	 
	 	(b)  	a reference to any agreement shall include any amendment, modification and
supplement thereto and waiver thereof which may become effective from time to time,
unless otherwise indicated;
	 
	 	(c)  	references to a person shall be construed so as to include any individual,
firm, company, government, state or agency of a state or any other entity
incorporated or established as a separate legal entity and shall include any
successor (by merger or otherwise) of such entity;
	 
	 	(d)  	references to times of the day are to Paris time;

6

 

	 	(e)  	references to any document being in “agreed form” is to a document in the
form signed or initialed by or on behalf of the Parties for identification;
	 
	 	(f)  	when calculating the period of time within which or following which any act
is to be done or step taken, the date which is the reference day in calculating such
period shall be excluded and if the last day of such period is not a Business Day,
the period shall end on the next day which is a Business Day;
	 
	 	(g)  	headings to Articles and Annexes are for convenience only and do not affect
in any way the interpretation thereof;
	 
	 	(h)  	the Annexes and any other attachments to this Agreement form an integral
part of this Agreement and shall have the same force and effect as if expressly set
out in the body of this Agreement and any reference to this Agreement shall include
the Annexes and any other attachments to this Agreement; and
	 
	 	(i)  	any statement which refers to the knowledge, information, belief or
awareness of Seller or any similar expression means the knowledge of the relevant
matters which Seller has or should reasonably have after having made appropriate
investigations.

	2.  	SALE AND PURCHASE OF THE TRANSFER SHARES
	 
	   	Upon the terms and subject to the conditions set forth in this Agreement, Seller hereby
undertakes to sell to Buyer at Closing and Buyer undertakes to purchase at Closing, all
but not less than all of the Transfer Shares, free and clear of any Encumbrances, together
with all rights then and thereafter attached thereto, including all dividends to be
distributed in respect of the Transfer Shares after the Closing Date.
	 
	3.  	PURCHASE PRICE

	 	3.1  	Price

	   	The aggregate purchase price for all the Transfer Shares (the “Purchase Price”)
shall be an amount equal to:

	 	(i)  	EUR 323,900,000 (three hundred and twenty three million nine hundred
thousand Euros) (the “Base Purchase Price”); plus or minus
	 
	 	(ii)  	the Purchase Price Adjustment, as determined in accordance with Article
3.3.

	 	3.2  	Payment

	   	The Base Purchase Price shall be paid in full in immediately available funds on the
Closing Date by Buyer to Seller in accordance with Article 6.3. The Purchase Price
Adjustment shall be paid in accordance with Article 3.3.6.

7

 

	 	3.3  	Purchase Price Adjustment
	 
	 	3.3.1  	Within thirty (30) days following the Closing Date, Seller shall prepare a
Closing Date balance sheet (the “Closing Date Balance Sheet”) in accordance with the
Accounting Rules and shall send to Buyer such Closing Date Balance Sheet together
with a statement setting forth its estimate of the Closing Working Capital (the
“Proposed Closing Working Capital”) and of the Closing Liabilities (the “Proposed
Closing Liabilities”). Such statement shall be reasonably detailed.
	 
	 	3.3.2  	Buyer shall have sixty (60) days to review the Proposed Working Capital
and the Proposed Closing Liabilities. In the event that Buyer disagrees with the
Proposed Closing Working Capital or the Proposed Closing Liabilities, Buyer shall
send to Seller no later than on the last Business Day of such sixty-day period, a
notice (the “Notice of Objection”) setting forth in reasonable details the
modifications to be made to the Proposed Closing Working Capital and/or the Proposed
Closing Liabilities.
	 
	 	3.3.3  	Seller shall then have twenty (20) days starting on the date of receipt of
the Notice of Objection to review and respond to the Notice of Objection (the
“Seller’s Response”).
	 
	 	3.3.4  	If Seller and Buyer are unable to resolve all of their disagreements
within thirty (30) days following the receipt by Buyer of Seller’s Response, the
items in dispute shall be submitted to the Independent Expert who shall determine in
accordance with Article 1592 of the French Civil Code the corrections to be made to
the Proposed Closing Working Capital and/or the Proposed Closing Liabilities. The
Independent Expert shall only make corrections to the Proposed Closing Working
Capital and/or the Proposed Closing Liabilities in respect of the items still in
dispute and shall make such corrections in accordance with the Accounting Rules. The
Independent Expert shall render its decision as to the items in dispute in writing
and shall give reasonable details in support of its decision. The Parties undertake
to make their best efforts to allow the Independent Expert to render its decision
within sixty (60) days from the date on which the items in dispute are referred to
it. In performing its duties, the Independent Expert shall comply with the principe
du contradictoire. The Independent Expert’s decision shall be final and binding on
Buyer and Seller. The fees and expenses of the Independent Expert shall be equally
shared by the Parties.
	 
	 	3.3.5  	The “Final Closing Working Capital” and the “Final Closing Liabilities”
shall be (i) the Proposed Closing Working Capital and the Proposed Closing
Liabilities if no Notice of Objection is sent to Seller during the sixty-day period
referred to in Article 3.3.2 above, (ii) the Proposed Closing Working Capital and the
Proposed Closing Liabilities as modified in accordance with the Notice of Objection
if no Seller’s Response is sent to Buyer within the twenty-day period referred to in
Article 3.3.3, or (iii) the Proposed Closing Working Capital and the Proposed Closing
Liabilities as adjusted either by (x) agreement of Buyer and Seller within the
thirty-day period referred to in Article 3.3.4 following Seller’s Response to the
Notice of Objection or (y) the Independent Expert.

8

 

	 	3.3.6  	On the tenth (10th) Business Day following the date on which the Final
Closing Working Capital and the Final Closing Liabilities have eventually been
determined in accordance with the provisions of Article 3.3.5 above, a purchase price
adjustment (the “Purchase Price Adjustment”), if any, shall be paid in immediately
available funds to the account designated for that purpose by the payee to the payor
as follows:

	 	(i)  	if the Final Closing Liabilities exceed the Reference
Liabilities, Seller shall pay to Buyer an amount equal to the difference
between the Final Closing Liabilities and the Reference Liabilities;
	 
	 	(ii)  	if the Final Closing Liabilities are less than the
Reference Liabilities, Buyer shall pay to Seller an amount equal to the
difference between the Reference Liabilities and the Final Closing
Liabilities;
	 
	 	(iii)  	if the Final Closing Working Capital is less than 101%
but not less than 99% of the Normative Working Capital, no amount shall be
due by any party to the other in respect of any Closing Working Capital
adjustment;
	 
	 	(iv)  	if the Final Closing Working Capital is less than 99% of
the Normative Working Capital, Seller shall pay to Buyer an amount equal to
the difference between 99% of the Normative Working Capital and the Final
Closing Working Capital; if the latter is below eighty two per cent (82%) of
the Normative Working Capital, the said difference shall bear interest at a
rate of 4% per year calculated pro rata temporis between the Closing Date
and the date of payment of the Purchase Price Adjustment;
	 
	 	(v)  	if the Final Closing Working Capital is more than 101% of
the Normative Working Capital, Buyer shall pay to Seller an amount equal to
the difference between the Final Closing Working Capital and 101% of the
Normative Working Capital.

	 	3.3.7  	For the purpose of determination of the Proposed and Final Closing Working
Capital and the Proposed and Final Closing Liabilities, Buyer shall see that the
Company opens its books and records to Seller and its advisors and to the Independent
Expert as applicable and provide information as may be reasonably requested for that
determination. Similarly, Seller shall also open its books and records to Buyer and
its advisors as well as to the Independent Expert as applicable and provide
information as may be reasonably required for similar purposes, it being specified
that Buyer shall not have access to accounting data pertaining exclusively to
activities of the Seller other than the Business. The inventory takes (inventaires
des stocks) in the Premises of Seller in Sainte-Florine and Sablé to be conducted in
order to prepare the Closing Date Balance Sheet shall be completed in the presence of
Buyer and its advisors.

9

 

	4.  	CONDITIONS PRECEDENT TO CLOSING 

	 	4.1  	Conditions Precedent to the Obligations of both Seller and Buyer

	   	The obligations of the Parties to sell and purchase the Transfer Shares and to take the
other steps required to be taken by the Parties at Closing are subject to the obtaining of
all anti-trust clearances on or prior to the Closing Date, and such anti-trust clearance
shall be final.

	 	4.2  	Conditions Precedent to Buyer’s Obligations

	   	The obligations of Buyer to complete the Transaction contemplated hereunder on
the Closing Date is conditional upon the satisfaction or waiver of the following
conditions (which Buyer shall be entitled to waive in its sole discretion):

	 	(i)  	each of the representations or warranties made by Seller hereunder shall be
true and correct in all material respects at the Closing Date as though made on the
Closing Date (except otherwise specifically provided for);
	 
	 	(ii)  	the covenants of Seller to be performed or complied with on or prior to the
Closing Date under Articles 5.2, 5.3.1, 5.3.2, 5.3.3(i) and 5.3.3(ii)(a) shall have
been performed or complied with by Seller in all material respects on or prior to the
Closing Date; and
	 
	 	(iii)  	all Material Contracts Consents shall have been obtained.
	 
	 	4.3  	Conditions Precedent to Seller’s Obligations

	   	The obligations of Seller to complete the Transaction contemplated hereunder on the
Closing Date is conditional upon the satisfaction or waiver of the following conditions
(which Seller shall be entitled to waive in its sole discretion):

	 	(i)  	each of the representations or warranties made by Buyer hereunder shall be
true and correct in all material respects as of the Closing Date as though made on
the Closing Date (except otherwise specifically provided for); and
	 
	 	(ii)  	the covenants of Buyer to be performed or complied with on or prior to the
Closing Date shall be performed or complied with by Buyer in all material respects on
or prior to the Closing Date.
	 
	 	4.4  	Time Limit - Conditions Precedent Not Satisfied

	   	All the above conditions shall be satisfied at the latest on March 31, 2005. This
Agreement shall automatically terminate on the earliest of (i) the fifth (5th)
Business Day following the occurrence of any event that rendered any of the above
conditions incapable of being satisfied (unless this condition precedent has been waived
by the Party(/ies) entitled to waive it before this date) or (ii) March 31, 2005. The
Parties may nonetheless decide to postpone such time limit in the event the condition
precedent contemplated by Article 4.1 is not satisfied due to technical constraints.

10

 

	   	If this Agreement is so terminated, no Party shall have any liability or further
obligation to the other Party except for any liability arising from a breach of such
Agreement and for any obligation under Articles 11, 12, 13 and 14.
	 
	5.  	PRECOMPLETION COVENANTS

	 	5.1  	Conditions Precedent

	   	Seller and Buyer shall co-operate and use their respective commercially reasonable
endeavors in order to obtain satisfaction of the conditions referred to in Articles 4.1,
4.2 and 4.3 as soon as practicable after signature of this Agreement.

	 	5.2  	Ordinary Course of Business

	   	Except as otherwise specified herein, after the date hereof and until Closing, Seller
shall (and shall see that the Company) operate(s) and carry(ies) on the Business in the
ordinary course of business, as a bon père de famille, with due diligence as to preserve
the value of the business, its reputation and its relations with third parties,
Governmental Authorities and any other parties with which it has business relationships,
and shall not incur any liabilities other than those arising from the normal course of
business, consistent with past practices without change of policy or procedure and without
material interruption in nature, scope or manner, or as set forth in this Agreement.
	 
	   	In particular, Seller shall:

	 	(i)  	cause the Company not to declare or pay any dividends whether in cash,
securities or other property;
	 
	 	(ii)  	cause the Company not to issue or sell any capital stock, bond or other
securities, except as a result of the Contribution Agreement;
	 
	 	(iii)  	cause the Company not to change or amend its by-laws except as a consequence
of the Contribution Agreement;
	 
	 	(iv)  	not, except as contemplated in Annex 5.2(iv), sell, transfer, lease
or otherwise dispose of any property or assets forming part of the Business where the
value of such assets or property as reported in the Accounts exceed EUR 50,000 per
item (or EUR 100,000 in the aggregate), other than in the ordinary course of business
consistent with past practice;
	 
	 	(v)  	not fail to manage the working capital of the Business in the ordinary course
of business consistent with past practice;
	 
	 	(vi)  	not postpone or delay any of the investment which is planned in the
investment program attached as Annex 5.2(vi);
	 
	 	(vii)  	not fail to use commercially reasonable efforts to maintain the property and
assets forming the Business substantially in their current state of repair;
	 
	 	(viii)  	not implement general wage increases or other increase in benefits except as
required by law or collective agreements;

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	 	(ix)  	not issue guarantees or letters of comfort, and generally, incur indebtedness
with respect to the Business other than in the ordinary course of business;
	 
	 	(x)  	cause the Company not to do any of the items listed in paragraphs (iv) to
(ix) above.

	   	Prior to the Contribution Date, Seller shall not take, in respect of the Business, any
actions that would be inconsistent with the foregoing.

	 	5.3  	Contribution in Kind of the Business
	 
	 	5.3.1  	Contribution Agreement – Completion of the Contribution in Kind
	 
	 	   	On or before the Closing Date, Seller shall contribute the Business to the
Company, as a contribution in kind of an on-going concern without joint liability
between Seller and the Company (apport partiel d’actif placé sous le régime des
scissions sans solidarité – the “Contribution in Kind”). For that purpose, Seller
and the Company shall as soon as practicable enter into the contribution
agreement substantially in the form attached as Annex 5.3.1 (the
“Contribution Agreement”).
	 
	 	   	The Contribution in Kind shall be deemed completed when the last of the decisions
of the sole shareholders of Seller and the Company approving the Contribution in
Kind shall have been made.
	 
	 	5.3.2  	Contributed and Excluded Assets and Liabilities

	 	(i)  	Contributed Assets and Liabilities

	 	   	Except as set forth in Article 5.3.2(ii), Seller undertakes to contribute to the
Company pursuant to the Contribution Agreement all of the tangible and intangible
assets necessary to operate the Business as it is currently operated and certain
of the liabilities directly related to the Business (the “Contributed Assets and
Liabilities”), as follows:

	 	(a)  	subject to the provisions of Article 5.3.3, the benefits
of all the contracts pertaining to the Business, a non exhaustive list of
which as at the date hereof is given in Annex 5.3.2(i)(a), including
those entered into in the ordinary course of business between the date
hereof and the Closing Date and excluding those terminated in the ordinary
course of business between the date hereof and the Closing Date (the
“Contracts” and individually a “Contract”);
	 
	 	(b)  	all equipment, fixtures and supplies pertaining to the
Business, a non exhaustive list of which as at September 30, 2004 is
attached as Annex 5.3.2(i)(b), including the equipment, fixture and
supplies acquired since September 30, 2004 in the ordinary course of
business or in accordance with the investment program set forth in Annex
5.2(vi) and excluding any equipment, fixture and supplies sold in the
ordinary course of business between September 30, 2004 and the Closing Date;

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	 	(c)  	all intellectual property pertaining to the Business,
including but not limited to those listed in Annex 5.3.2(i)(c) (the
“Contributed Intellectual Property”);
	 
	 	(d)  	all Governmental Permits, which are assignable or
transferable to the Company, pertaining to the Business, including but not
limited to those identified in Annex 5.3.2(i)(d)(i);
	 
	 	   	Annex 5.3.2(i)(d)(ii) contains a list of all Governmental Permits
required by Law to operate the Business, which are not assignable or
transferable to the Company, and as such not included in the Contributed
Assets and Liabilities;
	 
	 	(e)  	the receivables and other current assets relating to the
Business;
	 
	 	(f)  	the payables relating to the Business;
	 
	 	(g)  	the inventory relating to the Business as well as the
inventory of Seller related to its interior electronic manufacturing
activities currently operated in Seller’s Premises in Sainte-Florine and in
Sablé;
	 
	 	(h)  	the Premises owned by Seller identified in Annex
5.3.2(i)(h);
	 
	 	(i)  	the software, software licenses (if legally assignable)
and hardware used to conduct the Business as identified in Annex
5.3.2(i)(i);
	 
	 	(j)  	the liabilities which are identified in Annex
5.3.2(i)(j), it being understood that the amount and creditors (but not
the nature) of such liabilities may be revised as a result of events
occurring in the ordinary course of business between the date hereof and the
Closing Date;
	 
	 	(k)  	claims and potential claims by clients or other third
parties in connection with products of the Business;
	 
	 	(l)  	any “Johnson Controls” marked sales and marketing or
packaging materials, other similar Johnson Controls identified sales and
marketing or packaging materials and marketing studies, but only to the
extent that such sales and marketing or packaging materials are necessary
for the Company to continue its operation without disruption during a six-
(6-)month period following the Closing Date (it being understood that such
restriction would not apply to the use of machinery and tooling being
engraved with any “Johnson Controls”).

	 	   	The employment contracts concerning the Business Employees (excluding those of
such employment contracts terminated in the ordinary course of business between
the date hereof and the Closing Date and including those of such employment
contracts concluded in the ordinary course of business between the date hereof
and the Closing Date in accordance with the recruiting program attached as
Annex 5.3.2(i)(k) shall be transferred to the Company in accordance with
Article L.122-12 of the French Labor Code or otherwise, provided that protected
employees (salariés protégés) shall not be transferred to the Company unless and
until the relevant French labor authorities (Inspection du Travail) have approved
such transfer.

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	 	   	No title, right or license of any kind shall be granted to the Company pursuant
to the Contribution in Kind with respect to Seller’s or any of its Affiliates’
Proprietary Information other than (a) the Contributed Intellectual Property or
(b) as contemplated by the Patent Co-Ownership Agreement referred to in Article
6.4(a).

	 	(ii)  	Excluded Assets and Liabilities

	 	   	The Contributed Assets and Liabilities shall not include any of the following:

	 	(a)  	any Intellectual Property or Proprietary Information
listed in Annex 5.3.2(ii)(a);
	 
	 	(b)  	any claim, right or interest of Seller in or to any
refund, rebate, abatement or other recovery for any Tax, together with any
interest due thereon or penalty rebate arising therefrom, for any periods
prior to the Contribution Date as regard VAT and income taxes;
	 
	 	(c)  	[intentionally omitted];
	 
	 	(d)  	any “Sagem” marked sales and marketing or packaging
materials, other similar Sagem identified sales and marketing or packaging
materials and any marketing or packaging materials and any marketing studies
except in relation to the Business, it being understood that such
restriction would not apply to the use of machinery and tooling being
engraved with any “Sagem” mark;
	 
	 	(e)  	any Contract listed in Annex 5.3.2(ii)(e);
	 
	 	(f)  	the participation held by Seller in Autronic, a company
duly organized under the laws of Tunisia;
	 
	 	(g)  	liabilities other than those mentioned in Article
5.3.2(i)(j) and Article 5.3.2(i)(k) and financial debts of Seller;
	 
	 	(h)  	the equipment, fixture, supplies and inventories as
listed or described in Annex 5.3.2(ii)(h).
	 
	 	5.3.3  	Contracts
	 
	 	(i)  	Contracts containing no change of control clauses

	 	   	As soon as possible after the date hereof, Seller and the Company shall jointly
notify by registered letter with acknowledgement of receipt, in the form set
forth in Annex 5.3.3(i), the contemplated transfer of each Contract
listed in Annex 5.3.2(i)(a) Part 1 to the counter-party of such
Contract, in order to inform such counter-party of the transfer of such Contract
to the Company and of the contemplated sale of the Transfer Shares to Buyer.

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	 	(ii)  	Contracts containing change of control clauses
	 
	 	(a)  	As soon as possible after the date hereof, Seller and the
Company shall jointly notify by registered letter with acknowledgement of
receipt, in the form set forth in Annex 5.3.3(ii)(a), the
contemplated transfer of each Contract listed in Annex 5.3.2(i)(a) Part
2 to the counter-party of such Contract, in order to request the consent
of such counter-party to the Transaction.
	 
	 	   	For the avoidance of doubt, Buyer and Seller agree that the absence of
consent of a counter-party (other than the Material Contracts Consents)
to the Transaction shall not prevent Closing to occur.
	 
	 	(b)  	Should a counter-party expressly refuse to give its
consent to the transfer of a Contract entered into between Seller and such
counter-party (other than the Material Contracts Consents), Seller shall keep
responsibility for the concerned Contract, which shall not be contributed to
the Company.
	 
	 	   	Buyer and Seller agree that in that case, to the extent not prohibited
by the concerned Contract or by other contractual undertakings of
Seller, Seller shall subcontract from the Closing Date to the Company
the supplying of all equipment required for the performance of the
concerned Contract, on same terms and conditions.
	 
	 	(c)  	The Parties and the Company will in addition continue
to try to obtain the consent of the concerned counter-party to transfer to
the Company of the non assigned Contract.
	 
	 	(d)  	More generally, should Seller or its Affiliates need
to subcontract to the Company any other supplies or services, the Parties
shall cooperate in good faith to reach an agreement on the terms and
conditions of the supplies or services to be so subcontracted.
	 
	 	(iii)  	Shared Supply Agreements 

	 	   	Agreements entered into by Seller with its suppliers and relating to both the
Business and other activities of Seller, a non exhaustive list of which is
attached as Annex 5.3.3(iii) (the “Shared Supply Agreements”) shall not
be contributed to the Company and shall be dealt with in accordance with the
terms of this Article 5.3.3(iii).

	 	(a)  	As soon as possible after the date hereof, the Parties
shall commit their best endeavors so that each of Seller and the Company
shall continue to benefit after Closing from the same contractual terms and
the same volume effects as currently awarded to Seller under the Shared
Supply Agreements.
	 
	 	   	For that purpose, Seller and Buyer shall in particular jointly approach
each of the suppliers concerned by the Shared Supply Agreements in
order to request from such suppliers their consent to

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	 	   	extend to the Company the same terms and conditions as those currently
benefiting to Seller.
	 
	 	(b)  	If the counter-party to any Shared Supply Agreement does
not consent to extend to the Company the same terms and conditions as those
currently benefiting to Seller, Seller shall retain the concerned Shared
Supply Agreement and, if requested by Buyer, supply the Company under the
same terms and conditions as those prevailing between Seller and the
counter-party under the concerned Shared Supply Agreement. Seller shall be
entitled to review the terms and conditions currently applicable under the
Shared Supply Agreements retained by Seller after August 31, 2005 and from
time to time after such date in order to reflect changes in the supply
conditions negotiated in the ordinary course of business with the
counter-parties concerned.
	 
	 	   	It is specified that Seller shall have no liability in case of default
or delay of the counter-party and Buyer shall not be entitled to any
warranty from Seller (and shall cause the Company to waive any warranty
from Seller) pertaining to products supplied by Seller to the Company
in accordance with this Article 5.3.3(iii)(b).
	 
	 	(c)  	The Parties and the Company will in addition continue to
try to obtain the consent of the concerned counter-party in order to extend
to the Company the terms and conditions of the retained Shared Supply
Agreements.
	 
	 	(iv)  	Material Contracts
	 
	 	   	As soon as possible after the date hereof, Seller undertakes to
organize, in cooperation with Buyer, joint visits of the Parties to
each of the customers listed in Annex 1(viii) Part 1 in order
to explain the Transaction to such customers and suppliers and to
encourage the obtaining of the consent of such customers and suppliers.
	 
	 	(v)  	Best efforts obligation
	 
	 	   	From the date hereof, Seller shall use its best efforts to obtain the
transfer of the Contracts to the Company, it being specified that this
obligation shall not be construed as an obligation for Seller or its
Affiliates to accept commercial concessions requested by
counter-parties as a condition of their consent and which would
otherwise not have been granted.

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	6.  	CLOSING

	 	6.1  	Closing Date and Place

	   	Closing shall take place in Paris on a date (the “Closing Date”) which shall be on the
fifteenth (15th) Business Day after the conditions precedent referred to in
Articles 4.1, 4.2 and 4.3 shall have all been satisfied or waived, or at any other earlier
date agreed by the Parties.
	 
	   	All actions provided for in Articles 6.2 to 6.4 to be taken at Closing shall be deemed to
occur at the same time and shall be legally completed only if all of them have been duly
performed.

	 	6.2  	Seller’s Obligations with a view to Closing

	   	On the Closing Date, Seller shall deliver, or procure delivery, to Buyer or its
representatives of the following:

	 	(a)  	a share transfer order (ordre de mouvement) in respect of the Transfer
Shares, duly executed in favor of Buyer as well as the updated share register and
shareholders minute book of the Company;
	 
	 	(b)  	the written resignation, effective upon Closing, of the Président of the
Company;
	 
	 	(c)  	executed copies of the minutes of the decision of the sole shareholder of
the Company appointing as President of the Company a person designated by Buyer at
least three (3) Business Days prior to Closing, such appointment becoming effective
only upon occurrence of the Closing;
	 
	 	(d)  	a copy of the report of the commissaires à la scission relating to the
Contribution in Kind and evidence of the filing of such report, five (5) original
copies of the executed Contribution Agreement, three (3) original copies of the
decision of the sole shareholder of Seller having approved the Contribution in Kind
and three (3) original copies of the decision of the sole shareholder of the Company
having approved the Contribution in Kind.
	 
	 	6.3  	Buyer’s obligations at Closing

	   	On the Closing Date, Buyer shall deliver to Seller appropriate documentation showing that
the Base Purchase Price has been paid to the bank account of Seller, the details of which
are given in Annex 6.3.

	 	6.4  	Other actions at Closing

	   	At Closing:

	 	(a)  	the Company and Seller shall enter into a French translation of the Patent
Co-Ownership Agreement substantially in the form attached as Annex 6.4(a);
	 
	 	(b)  	the Company and Seller shall execute a Transition Services Agreement
substantially in the form attached as Annex 6.4(b);

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	 	(c)  	the Company and Seller (as supplier) shall execute the Entrustment
Agreement referred in paragraph D of the recitals hereto substantially in the form
attached as Annex 6.4(c);
	 
	 	(d)  	the Company and Seller shall execute a free Loan for Use Agreement relating
to the production lines used by the Company for the performance of the Entrustment
Agreement substantially in the form attached as Annex 6.4(d);
	 
	 	(e)  	the Company (as supplier) and Seller shall execute an entrustment
agreement, the term-sheet of which is attached as Annex 6.4(e).

	7.  	REPRESENTATIONS AND WARRANTIES OF SELLER

The Seller represents and warrants to Buyer, on the date hereof and on the Closing Date (except
specifically otherwise provided for) that:

	 	7.1  	Capacity of Seller

	   	Seller is duly organized and validly existing and in good standing under the laws of
France.
	 
	   	Seller has the requisite power and authority to enter into and to perform this Agreement
and the other documents to be executed by it in accordance with this Agreement.
	 
	   	This Agreement and all other documents to be executed in accordance with it to which it is
a party constitute, or will when executed constitute, binding obligations of Seller in
accordance with their terms.

	 	7.2  	No Conflict or Effect

	   	The execution and the performance by Seller of this Agreement and any other agreement
entered into pursuant to this Agreement shall not constitute a violation of, or a default
under, or conflict with (i) any term or provision of its by-laws, or (ii) any contract to
which Seller is a party, the effect of which would impair the ability of Seller to perform
its obligations pursuant to this Agreement or to any other agreement entered into pursuant
to this Agreement, or (iii) any order, writ, injunction, decree, judgment or decision of
any legal body to which Seller is subject or by which Seller or any of its properties and
assets are bound, the effect of which would (i) materially impair the ability of Seller to
perform its obligations pursuant to this Agreement or to any other agreement entered into
pursuant to this Agreement or (ii) would result in the creation of any Encumbrance upon
the Transfer Shares or any of the Contributed Assets.

	 	7.3  	Ownership of the Transfer Shares

	   	Seller shall be the lawful owner of the Transfer Shares at Closing, free and clear of any
Encumbrances. Seller shall have valid and marketable title to the Transfer Shares, and
full legal right, authority and power to sell, transfer and convey the

18

 

	   	Transfer Shares to Buyer in accordance with the terms of this Agreement. At Closing, Buyer
shall have full title to the Transfer shares free and clear of any Encumbrances.

	 	7.4  	Due Incorporation – Contribution Agreement

	   	At Closing, the Company will be a French société par actions simplifiée unipersonnelle and
will be duly organized and validly existing, and no resolution will have been passed nor
any action taken for its dissolution.
	 
	   	The by-laws of the Company are attached as Annex 7.4.

	 	7.5  	Share Capital

	   	At Closing, all the issued share capital of the Company will be validly issued and fully
paid up. None of the issued and outstanding shares will have been issued in violation of
any pre-emptive rights or other third party’s rights existing under the Company’s by-laws
or any agreement to which the Company or Seller is or will be a party. All shares will be
ordinary shares, all of the same class, bearing the same rights and obligations as
provided in the by-laws of the Company.
	 
	   	The Transfer Shares shall represent all the shares issued and outstanding of the Company.
The Company will not have issued or granted any Company Securities other than the Transfer
Shares.
	 
	   	The shares of the Company will not be admitted to trading on any regulated securities
exchange.

	 	7.6  	No Subsidiary

	   	At Closing, the Company will not hold and will not have agreed to acquire by merger,
consolidation, purchase or otherwise any interest in any shares of any company or other
kind of partnership or corporate body.

	 	7.7  	Assets

	   	Except as disclosed in Annex 7.7(a), as a result of the Contribution in Kind, the
Company will own all the assets free and clear of all Encumbrances, necessary to operate
the Business as it is currently operated or will have a right to use such assets under the
lease agreements set forth in Annex 7.7(b).
	 
	   	All the assets referred above are in good operating condition, subject to normal wear and
tear.
	 
	   	Subject to bad debt provisions recorded in the Closing Date Balance Sheet, none of the
accounts receivable owed to the Company on the Closing Date is the subject of a claim
notified to the Company nor of a right of offset.

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	 	7.8  	Compliance with Law

	   	Except as disclosed in Annex 7.8, to Seller’s knowledge, Seller operates the
Business in all material respects in conformity with Law.
	 
	   	Neither Seller or the Company has received a notice alleging that the operation of the
Business is in material violation of any Law to which it is subject.

	 	7.9  	Litigation

	   	Except as disclosed in Annex 7.9, and as regards the Business, neither Seller or
the Company is engaged in any civil, criminal, administrative, arbitration, regulatory or
other proceedings, claims, investigations, inquiries, actions (including disciplinary) or
prosecutions in any jurisdiction for which the liability of Seller shall exceed EUR
50,000, and to Seller’s knowledge, none of the foregoing is pending or threatened by or
against Seller in connection with the operation or the ownership of the Business.
	 
	   	No judicial or arbitral decision and no decision from a Governmental Authority has been
rendered which may significantly affect the condition or prospects of the Business.

	 	7.10  	Insolvency and dissolution

	   	Neither Seller nor the Company is unable to pay its debts as and when they fall due (en
cessation des paiements) and is not subject to any proceedings with a view to the
prevention or resolution of business difficulties (prévention et règlement amiable des
difficultés des entreprises) or to a judgment of, or requested for, dissolution,
liquidation, bankruptcy or receivership.

	 	7.11  	Matters Pertaining to Seller and its Affiliates

	   	Except as disclosed in Annex 7.11, and subject to the provisions of Article 6.4,
neither Seller nor any of its Affiliates will be a party, at Closing, to any agreement for
the provision of goods, services, or other facilities to or by the Company, and no
intercompany loans owed (i) by the Company to Seller or its Affiliates or (ii) by Seller
or its Affiliates to the Company will be outstanding.

	 	7.12  	Accounts – Off-balance sheet undertakings

	   	The Accounts give a true and fair view in accordance with the Accounting Rules of the
assets, liabilities, state of affairs of the Business as at the Accounts Date and of the
results of its operations for the period running from October 1, 2003 through the Accounts
Date.
	 
	   	The Accounts have been prepared in accordance with the Accounting Rules applied on a
consistent basis by Seller and in accordance with the Carve-Out Principles.
	 
	   	The Carve-Out Principles have been determined by Seller and are such as they give a
reasonably true and fair view of the EBITA of the Business for the financial year closed
on the Accounts Date as if it were a stand alone operation.

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	   	Except as disclosed in Annex 7.12, the Company will not have any off-balance sheet
undertakings (engagements hors bilan) and will not have issued any warranties at Closing.

	 	7.13  	Position since Accounts Date

	   	Since the Accounts Date:

	 	(a)  	the Business has been conducted in the ordinary course so as to maintain it
as a going concern;
	 
	 	(b)  	there has been no disposal or acquisition by Seller of any asset within the
scope of the Business except in the ordinary course of business or planned in the
investment program attached as Annex 5.2(vi);
	 
	 	(c)  	Seller has not incurred, assumed or guaranteed any loans, borrowings,
indebtedness or other form of funding or credits or assistance or guarantees or
contingent liabilities, within the scope of the Business except in the ordinary
course of business.
	 
	 	7.14  	Contracts

	   	Except as disclosed in Annex 7.14(i), the Company is not a party to any contract,
arrangement or obligation which will remain in effect after Closing and:

	 	(a)  	which would be entered outside the ordinary course of the business and/or
not on arm’s length term, or
	 
	 	(b)  	under which all or part of the Business would be leased to and/or under the
management of any person, or
	 
	 	(c)  	which would restrict the freedom of the Company to carry any business which
it may see fit, or
	 
	 	(d)  	would provide for representations and warranties in connection with the
sale of assets or equity interests by the Company.

	   	Except as disclosed in Annex 7.14(ii), Seller and the Company will not have
defaulted in any material respects under any Contract which is of material importance to
the conduct of the Business as it is presently conducted.
	 
	   	All the Contracts are valid and legally enforceable in accordance with their terms on the
date hereof. On the date hereof, neither Seller nor the Company has received any
indication that a party to any Contract intends to terminate or materially amend any such
Contract and to Seller’s knowledge there is no reason to suspect that any such party
intends to proceed with any such termination or amendment in the future (whether as a
result of the completion or the Transaction or otherwise).

	 	7.15  	Intellectual Property Rights

	   	No claim for infringement of any Intellectual Property Right of any third party has been
notified to Seller or the Company in connection with the operation of the Business and, to
Seller’s knowledge, the operation of the Business and the corresponding sales of products
do not infringe any such Intellectual Property Rights.

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	   	Subject to the Patent Co-ownership Agreement and to software licenses which are accessible
to the Company at no additional significant cost, at Closing the Company will have full
and beneficial ownership of all the Intellectual Property Rights (i) currently owned by
Seller or any of its Affiliates and (ii) necessary for the continuation of the Business as
it is presently carried on including but not limited to that pertaining to the “camless
technology”. Except as disclosed in Annex 7.15, subject to software licenses which
are accessible to the Company at no additional significant cost, all Intellectual Property
Rights (i) necessary for the continuation of the Business as it is presently carried on
and (ii) which does not belong to Seller or any of its Affiliates shall, on or prior to
the Closing Date, have been licensed to the Company at terms and conditions which are not
more onerous than those currently benefiting to Seller. Counter-parties to licenses
containing change of control provisions shall have validly waived (whether expressly or
tacitly) their rights to terminate such licenses as a result of Buyer acquiring the
Transfer Shares.

	 	7.16  	Information Systems

	   	Subject to services to be provided under the Transition Services Agreement and as
disclosed in Annex 7.16, to Seller’s knowledge, at Closing, the Company will be
the legal and beneficial owner of, and will be entitled to freely use and dispose of, or
will have a valid right to use, all the information systems which are required for the
continuation of the Business as currently conducted.

	 	7.17  	Insurance

	   	To Seller’s knowledge, all insurance policies now in force for the benefit of the Business
are currently in full force and effect, and all premiums due and payable have been duly
and punctually paid.
	 
	   	Seller currently maintains (and will maintain until Closing) in full force and effect all
insurance policies which it is required to maintain under a contractual or legal
obligation or which, to Seller’s knowledge, are necessary to cover the risks normally
insured against by a person operating the Business, in the country of operations of the
Business, it being specified that the insurance coverage provided by such policies of
insurance will terminate or lapse by reason of the Transaction.

	 	7.18  	Tax

	   	Seller has properly and timely filed, or caused to be filed with all appropriate
Governmental Authorities, all Tax returns, reports and declarations required by applicable
Law to have been filed as regards the operation of the Business. All such Tax returns as
regards the Business are fair, complete and correct in all material respects.
	 
	   	All Taxes due in respect of the ownership or operation of the Business for all periods up
to the Closing Date have been paid in full or shall be sufficiently provisioned in the
Closing Date Balance Sheet.
	 
	   	The Company is not a member of any Tax group and will not incur any Tax as a result of it
leaving a Tax group.

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	 	7.19  	Real Property

	   	Except as disclosed in Annex 7.19, at Closing, all real property which is
necessary in the carrying out of the Business as it is presently conducted will be owned
or leased by the Company under a lease agreement or other arrangement which will provide
for the right for the Company to use such real property in the manner it is being used.
	 
	   	Except as disclosed in Annex 7.19, each lease or other arrangement with respect to
the use or occupation of a real property by the Company will be in full force and effect
at Closing and Seller (or the Company since the Contribution Date) has complied with its
obligations under the relevant agreement(s) in all material respects.

	 	7.20  	Business Employees
	 
	 	7.20.1  	Key Employees

	   	Annex 7.20.1(i) contains, in respect of each of the Key Employees the following
information:

	 	(a)  	name,
	 
	 	(b)  	current salary (including all benefits),
	 
	 	(c)  	length of service,
	 
	 	(d)  	length of any notice of termination of employment;
	 
	 	(e)  	severance payment(s); and
	 
	 	(f)  	other terms providing for benefits in excess of the applicable collective
bargaining agreements

	   	Except as disclosed in Annex 7.20.1(ii), no material change has been made in the
rate of remuneration or the benefits (including pension benefits) or in the other terms of
engagement of any Key Employee since the Accounts Date.
	 
	   	Except as disclosed in Annex 7.20.1(iii), no Key Employee has been given notice of
termination of his employment and nor has any Key Employee given notice to terminate his
employment.

	 	7.20.2  	Other Business Employees

	   	Except as disclosed in Annex 7.20.2, the terms and conditions of employment of all
Business Employees other than the Key Employees (i) do not provide for benefits in excess
of the regional or national collective bargaining agreements applicable to the industry to

which the Business belongs and (ii) are in line with the standard terms and conditions
applied in France by other employers engaged in a similar activity as the Business. All
amounts due to the Business Employees for all periods prior to the Closing Date have been
paid or shall be sufficiently provisioned in the Closing Date Balance Sheet.

	 	7.20.3  	Labor Disputes

	   	Except as disclosed in Annex 7.20.3, there is not and during the past three (3)
years there has not been any collective labor dispute affecting the Business and, to
Seller’s

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	   	knowledge, there are no facts or circumstances which might give rise to any such
collective labor dispute.

	 	7.20.4  	Employee Benefit Plans

	   	Except as disclosed in Annex 7.20.4, Seller does not provide, and has not
undertaken to provide, any material profit sharing, deferred compensation, severance pay,
health care, social, welfare, pension or retirement benefits or, more generally, material
rights of advantage to any Business Employees, including termination, indemnity or prior
notice rights, except for those required by Law or any regional or national collective
bargaining agreement the application of which is mandatory.

	 	7.21  	Environment

	   	Except as disclosed in Annex 7.8, Seller has obtained all relevant authorizations
and has made all required declarations pursuant to all applicable Environmental Law within
the context of the Business, and Seller has received no claim and no investigation is
being conducted by any Governmental Authority or any third party concerning failure to
comply with any Environmental Law within the context of the Business. As regards the
Business, Seller has not released into the air, water or ground, any substance which may
present any danger to public health and safety or the protection of environment and which
might give right to a claim by any public authority or any third party.
	 
	   	The Premises are not contaminated by any hazardous substances and have always been
operated by Seller in compliance with health and safety regulations.
	 
	   	The Premises are asbestos free as well as the products manufactured by the Business.
	 
	   	To the Seller’s best knowledge, no action has been undertaken by any administrative or
social security authority aiming at classifying any of the Premises as a site amiante.

	 	7.22  	Conformity of Products with Law

	   	The products sold with respect to the Business are in compliance with all applicable
safety, quality control and labeling material requirements and are free from any material
defect.
	 
	   	Except as disclosed in Annex 7.22, there has not been any general product recall,
rework, or post-sale warning by or to Seller, with respect to the period preceding
Closing, concerning any product which was manufactured and/or sold within the context of
the Business and there are no decisions and/or judgments against Seller or the Company
which within the context of the Business were based in whole or in part upon a product
defect.

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	 	7.23  	No Other Representations and Warranties

	   	Except as expressly set forth in this Article 7, Seller does not make any other
representation or warranty of any kind, express or implied by law or otherwise.

	 	7.24  	Update of Annexes

	   	Seller may from time to time prior to three (3) Business Days before the Closing Date, by
notice in accordance with this Agreement, supplement or amend Annex 7.7(a) to
Annex 7.22 to reflect any new information arising from facts or events occurring
after the date hereof, including one or more supplements or amendments to correct any
matter that would otherwise constitute a breach of any representation, warranty or
covenant contained herein, it being understood, however, that Seller shall, in accordance
with Article 9 and notwithstanding such disclosure supplement or amendment, indemnify
Buyer for any Loss which it may suffer by reason of the matters which are the object of
the additional disclosure.

	 	8.  	REPRESENTATIONS AND WARRANTIES OF BUYER

	   	Buyer represents and warrants to Seller on the Date hereof and on the Closing Date that:

	 	8.1  	Capacity of Buyer

	   	Buyer is duly organized and validly existing and in good standing under the laws of France
and has the requisite power and authority, to enter into and to perform this Agreement and
the other agreements and documents to be executed in accordance with it.
	 
	   	This Agreement and all other documents to be executed in accordance with it to which Buyer
is a party constitute, or will when executed constitute, binding obligations of Buyer in
accordance with their terms.

	 	8.2  	No Conflict

	   	The execution and the performance by Buyer of this Agreement and any other agreement
entered into pursuant to this Agreement shall not constitute a violation of, or a default
under, or conflict with (i) any term or provision of its by-laws, or (ii) any contract of
Buyer, the effect of which would impair the ability of Buyer to perform its obligations
pursuant to this Agreement or to any other agreement entered into pursuant to this
Agreement, or (iii) any order, writ, injunction, decree, judgment or any legal body to
which Buyer is a party or by which Buyer or any of its properties and assets are bound,
the effect of which would materially impair the ability of Buyer to perform its
obligations pursuant to this Agreement or to any other agreement entered into pursuant to
this Agreement.

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	 	8.3  	Insolvency and dissolution

	   	Buyer is not unable to meet its debts as they fall due (en cessation des paiements) and is
not subject to any bankruptcy or equivalent proceedings, in particular to any proceedings
with a view to the prevention or resolution of business difficulties (prévention et
règlement amiable des difficultés des entreprises). Buyer is not subject to a judgment of,
or requested for, dissolution, liquidation, bankruptcy or receivership. Buyer has the
financial resources to effect the Transaction.

	 	8.4  	Funding of the Transaction

	   	Buyer will at Closing have sufficient immediately available funds in cash or cash
equivalents to pay the Purchase Price or any other amounts due under this Agreement.

	 	9.  	CLAIMS FOR LOSSES BY BUYER
	 
	 	9.1  	Liability of Seller
	 
	 	   	From and after Closing, subject to and in accordance with the provisions of this
Agreement, Seller agrees to indemnify and hold Buyer and the Company harmless
from and against any and all Losses incurred by Buyer or the Company arising out
of, based upon, attributable to or resulting from:

	 	(i)  	any inaccuracy or breach of any representation or
warranty on the part of Seller contained herein; and
	 
	 	(ii)  	any breach of any covenant or agreement on the part of
Seller contained therein.

	 	9.2  	Exclusions and Limitations of Seller’ Liability

	   	Notwithstanding any other provisions of this Agreement, Seller shall not be liable under
this Agreement:

	 	9.2.1  	Time Limits
	 
	 	   	in respect of any claim unless (A) in the case of a claim resulting from a breach
of the representations and warranties contained in Article 7.1 through 7.6
(inclusive), a Claim Notice (as defined in Article 9.4.1) is given by Buyer to
Seller within a period of ten (10) years after Closing; (B) in the case of a
claim resulting from a breach of the representations and warranties contained in
Article 7.18 (Tax), Article 7.21 (Environment) or Article 7.22 (Conformity of
Products with Law), a Claim Notice (as defined in Article 9.4.1) is given by
Buyer to Seller within a period of four (4) years after Closing; and (C) in all
other cases, a Claim Notice (as defined in Article 9.4.1) is given by Buyer to
Seller within eighteen (18) months after Closing;
	 
	 	9.2.2  	Minimum Claims
	 
	 	   	in respect of any claim made under Article 9.1 arising from any single
circumstance if the aggregate amount for which Seller would be liable under this
Agreement in respect of such claim does not exceed a threshold

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	 	 	of EUR 125,000 (one hundred and twenty five thousand Euros), it being understood
that (i) if such amount is exceeded in respect of an individual claim, subject as
otherwise provided in this Agreement, the full amount of such liability in
respect of that claim shall be recoverable from Seller (without prejudice to the
other provisions of this Agreement and in particular to the provisions of Article
9.2.3) and (ii) that any series of claims having the same cause shall be regarded
for the purpose of this Article 9.2.2 as a single claim;
	 
	 	9.2.3  	Deductible (franchise)
	 
	 	   	unless the cumulative and aggregate amount for which Seller is liable under
Article 9.1(i) (the “Amount of Claims”) exceeds a deductible (franchise) equal to
EUR 6,500,000 (six point five million Euros), it being understood that if such
deductible is exceeded, Seller shall only be liable for the amounts in excess of
such deductible;
	 
	 	9.2.4  	Maximum Claims
	 
	 	   	in respect of all claims made under this Agreement which would exceed in
aggregate, 30% (thirty per cent) of the Purchase Price;
	 
	 	9.2.5  	Contingent Liabilities
	 
	 	   	in respect of any liability which is contingent unless and
until such contingent liability becomes an actual liability;
	 
	 	9.2.6  	Provisions in the Closing Date Balance Sheet
	 
	 	   	in respect of any claim if and to the extent that specific provision or reserve
is made for the matter giving rise to the claim in the Closing Date Balance
Sheet;
	 
	 	   	as a matter of example, claims made in connection with Losses resulting from a
breach of the representations and warranties contained in Article 7.22
(Conformity of Products with Law) shall only be accounted for in the Amount of
Claims (as defined in Article 9.2.3) when the sum of all such claims shall exceed
the amount of the provisions related to products manufactured or sold in
connection with the Business taken into account in the Purchase Price Adjustment
(and only above such amount of provisions);
	 
	 	9.2.7  	Disclosures
	 
	 	   	in respect of any claim when the matter giving rise to such claim was expressly
disclosed to Buyer in the Accounts, this Agreement or the Annexes
(notwithstanding the fact that the numbering of the Annex in which such matter
was disclosed did not correspond to the Article containing the representations
and warranties that were breached);

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	 	9.2.8  	Changes in legislation, etc.
	 
	 	   	in respect of any Loss if such Loss is a consequence of:

	 	(a)  	changes in legislation: the passing of, or any
change in, after the date of this Agreement, any law, rule, regulation or
established administrative practice of any government, governmental
department, agency or regulatory body;
	 
	 	(b)  	accounting changes: any change in accounting
policies, bases or practice of Buyer or any of its Affiliates, introduced or
having effect after Closing;

	 	9.2.9  	Insurance
	 
	 	   	in respect of any claim to the extent that any Losses arising from the matter
giving rise to such claim are actually covered by insurance proceeds received on
account of such Losses by the Company;
	 
	 	9.2.10  	Net Benefit
	 
	 	   	in respect of any claim for any Losses suffered by Buyer to the extent of any
corresponding net benefit to Buyer or arising therefrom;
	 
	 	9.2.11  	Purchase Price Adjustment
	 
	 	   	in respect of any claim to the extent that the matter giving rise to such claim
has already been taken into account in the calculation of the Purchase Price
Adjustment;
	 
	 	9.2.12  	Environmental matters
	 
	 	   	in respect of any claim resulting from a breach of the representations and
warranties contained in Article 7.21 (Environment), provided that:

	 	(a)  	such breach has already been identified during the due
diligence investigations conducted prior to the date hereof by Buyer and its
advisors in the Premises, these due diligence investigations and the outcome
thereof being described in the “Phase I” and “Phase II” reports issued by
the Buyer’s advisors further to such investigations, which are attached as
Annex 9.2.12 to this Agreement; and/or
	 
	 	(b)  	such breach relates to former activities of Valeo or of
its current or former Affiliates or to the employment of Business Employees
by Valeo or its current or former Affiliates in the past; and/or
	 
	 	(c)  	such breach is a consequence of Buyer’s decision to phase
down industrial activities at one of the Premises more than three (3) years
after the Closing Date.

	 	9.2.13  	Identified breaches
	 
	 	   	Buyer has not identified on the date hereof any breach of the representations and
warranties of Seller likely to give rise to a claim under this Agreement.

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	 	9.2.14  	Exceptions
	 
	 	   	Notwithstanding any of the foregoing, the provisions of Articles 9.2.2 (Minimum
claims), 9.2.3 (Deductible) and 9.2.4 (Maximum claims) shall not apply to claims
resulting from a breach of Seller’s covenants or a breach of the representations
and warranties set forth in Articles 7.1 through 7.6 (inclusive), for which the
aggregate cap shall be an amount equal to the Purchase Price; provided however
that the provisions of Article 9.2.2 (Minimum claims) shall apply to a breach of
Seller’s covenants set forth in Article 5. Furthermore, the provisions of
Articles 9.2.2 (Minimum claims), 9.2.3 (Deductible) and 9.2.4 (Maximum claims)
shall not be applicable in case of wilful misconduct (dol).
	 
	 	9.3  	Mitigation of Losses

	   	Buyer shall act in good faith to mitigate any Loss incurred by it and shall in particular
take any appropriate and reasonable steps in the ordinary course of business to perform
its obligations and enforce its rights against third parties.

	 	9.4  	Conduct of claims
	 
	 	9.4.1  	Notifications
	 
	 	   	If Buyer becomes aware of any matter that may give rise to a claim against Seller
under this Agreement, notice of that fact shall be given to Seller within thirty
(30) Business Days or, in case of urgency, as soon as reasonably practical after
Buyer has become aware of such matter. Such notice (excluding its exhibits) shall
be in the English language or in French with an English translation.
	 
	 	   	Any claim for Losses under Article 9.1 shall be asserted by giving to Seller
written notice of the claim in question, specifying (in reasonable detail) the
matter which gives rise to the claim, the nature of the claim and the amount
claimed in respect thereof (setting forth, in reasonable detail, the claimant’s
calculation of the loss thereby alleged to have been suffered by it) (a “Claim
Notice”).
	 
	 	9.4.2  	Investigation by Seller
	 
	 	   	Without prejudice to the validity of the claim or alleged claim in question,
Buyer shall allow, and shall procure that the Company allows, Seller and its
accountants and professional advisors to investigate at Seller’s costs the matter
or circumstance alleged to give rise to such claim, and whether and to what
extent any amount is payable in respect of such claim and for such purpose Buyer
shall give, and shall procure that the Company gives, subject to all reasonable
costs and expenses being reimbursed to them, all such information and assistance,
including access to personnel and the right to examine and copy or photograph any
assets, accounts, documents and records, all to the extent reasonably related to
the matter of the claim in question and as the Seller or its accountants or
professional advisors may

29

 

	 	   	reasonably request. Seller agrees to keep all such information confidential and
only to use it for the purpose of the claim in question.
	 
	 	9.4.3  	Third party claim/liability
	 
	 	   	If the claim for Losses under Article 9.1 is a result of or in connection with a
claim by or liability to a third party then:

	 	(a)  	no admission of liability shall be made by or on
behalf of Buyer or the Company and the claim shall not be compromised,
disposed of or settled without the prior written consent of Seller (which
consent shall not be unreasonably withheld);
	 
	 	(b)  	Seller shall have the right to participate at
Seller’s expense and with counsel of its choice in the defense of a third
party claim by the Company. In such event, Buyer shall afford Seller and
its counsel the opportunity to comment and the right to object (which
right shall not be unreasonably exercised) with respect to the conduct of
the defense of the claim. Buyer shall keep Seller reasonably informed of
the progress of any third party claim and its defense and Buyer shall
(including with respect to product recalls) send to Seller the material
notices, written communication and filings (including court paper)
relating to such claim; and
	 
	 	(c)  	Seller shall not be liable until such claim or
liability becomes an actual, due and payable liability.

	 	9.4.4  	Non-Interference
	 
	 	   	Buyer will not voluntarily initiate any environmental investigation by
Governmental Authorities having authority for the Premises unless required by
Law.
	 
	 	9.4.5  	Failure to comply
	 
	 	   	A failure to comply with this Article 9.4 shall not deprive Buyer from its right
to claim for indemnification under Article 9.1 but the indemnification due
hereunder shall be reduced in so far and to the extent Seller establishes that
such a failure to comply was detrimental to it.
	 
	 	9.5  	Subrogation - Subsequent Recovery

	   	Upon payment by Seller of an amount in discharge of any claim under this Agreement, Seller
shall be subrogated within the meaning of Article 1250 1° of the French Civil Code to
Buyer’s and/or Company’s rights in connection with such claim vis-a-vis any third party.
In that event, Buyer shall issue (or shall cause the Company to issue) any quittance
subrogative as might be requested by Seller.
	 
	   	If Seller pays an amount in discharge of any claim under this Agreement and Buyer or the
Company subsequently recovers (whether by payment, discount, credit, relief or otherwise)
from a third party a sum which is referable to the subject matter of the claim and which
would not otherwise have been received by Buyer or the Company, Buyer shall pay, or shall
procure that the Company pays, to Seller an amount equal

30

 

	   	to the sum recovered from the third party (less any reasonable costs and expenses incurred
in obtaining such recovery) but only to the extent the amounts so previously recovered
from third parties by Buyer or the Company exceed the amount of the deductible set forth
in Article 9.2.3.

	 	9.6  	Double Claims

	   	Buyer shall not be entitled to recover from Seller under this Agreement more than once in
respect of the same Loss suffered.

	 	9.7  	Payment

	   	The payment of any sum due by Seller to Buyer or the Company under Article 9.1 shall be
made within ten (10) Business Days of the date when the amount of Seller’s liability shall
have been finally determined pursuant to either an amicable settlement between Buyer and
Seller or an enforceable (exécutoire) decision of a court or arbitration tribunal of
competent jurisdiction.
	 
	   	Payment due by Seller hereunder shall be made to Buyer with respect to Buyer’s Losses and
to the Company with respect to the Company’s Losses. In the first case, it shall be
treated as a price reduction.

	10  	OTHER COVENANTS

	 	10.1  	Non Solicitation – Non compete
	 
	 	10.1.1  	To the fullest extent permissible under applicable Law, for a period of two (2)
years after the Closing, Seller shall not, whether for its own account or for the
account of any other person, directly or indirectly, solicit, endeavor to entice away
any of the Business Employees listed in Annex 1(iii) or otherwise directly
interfere with the relationship of the Company or any of its successors with any
person who is employed by or otherwise engaged to perform services for the Company or
any of its successors. Notwithstanding the above, Seller shall not be deemed in
breach of this covenant if it recruits Business Employees through untargeted general
advertising campaigns.
	 
	 	10.1.2  	For a period of three (3) years following the Closing Date, Seller undertakes and
shall cause its Affiliates to undertake, not to compete directly or indirectly with
the Company in connection with Business as of the Closing Date, including the
“camless technology” (the “Business at Closing”). This undertaking shall not
prevent:

	 	(i)  	Seller’s Brazilian Affiliate Johnson Controls Automotive
Electronics do Brasil Ltda (the “Brazilian Affiliate”) to operate its
activities in accordance with Article 10.7;
	 
	 	(ii)  	Seller from exercising its rights under the Patent
Co-ownership Agreement;

31

 

	 	(iii)  	Seller from purchasing any company which, directly or
indirectly, compete with the Company in connection with the Business at
Closing, provided such company’s turnover generated by the competing
business does not represent more than twenty (20)% of such company’s total
turnover and provided further that Seller undertakes to offer and/or to
cause to offer to Buyer at fair market value the acquisition of the part of
the business which competes with the Company in connection with the Business
at Closing and, in the event Buyer is unable or unwilling to purchase this
part of the business, to use its best efforts to sell the business at its
fair market value within six (6) months following its acquisition. No such
constraint shall apply if the competing business represents less than five
(5)% of such company’s total turnover;
	 
	 	(iv)  	Seller from operating its electrical and energy
management and body controls activity for hybrid vehicles.

	 	10.2  	Formalities

	   	Buyer shall cause the Company to fulfill all the registration, filing and publication
formalities subsequent to the Contribution in Kind, to the extent that such formalities
shall not already have been complied with at Closing. Costs relating to such formalities
are included in the Carve-Out Costs and shall as such be dealt with as indicated in
Article 10.3.

	 	10.3  	Carve-out costs

	   	The Parties have agreed that Seller shall bear all the Carve-Out Costs up to a maximum
amount of EUR 1,900,000 (one million nine hundred thousand Euros). Other Carve-Out Costs
shall be borne by the Company after the Closing Date and/or by Buyer.
	 
	   	As a consequence:

	 	(i)  	if the Carve-out Costs borne by Seller (as described hereafter) are more
than EUR 1,900,000, Buyer shall cause the Company to reimburse Seller, upon
presentation of adequate documentary evidence of the carve-out works performed and
the expenses disbursed, for the amount of such Carve-Out Costs exceeding EUR
1,900,000; any amount due under this Article 10.3(i) shall be paid on the tenth
(10th) Business Day following the date on which the Final Closing Working
Capital and the Final Closing Liabilities have eventually been determined in
accordance with the provisions of Article 3.3.5;
	 
	 	(ii)  	if the Carve-out Costs borne by Seller (as described hereafter) are less
than EUR 1,900,000, Seller shall reimburse the Company for Carve-Out Costs paid by
the Company after the Closing Date and/or by Buyer upon presentation of adequate
documentary evidence of the carve-out works performed and the expenses disbursed;
however, the amounts to be reimbursed by Seller under this Article 10.3(ii) shall in
no event exceed the

32

 

	 	   	difference between (A) EUR 1,900,000 and (B) Carve-Out Costs borne by Seller (as
described hereafter).

	   	For the purposes of this Article 10.3, Carve-Out Costs borne by Seller shall include (i)
Carve-Out Costs paid by Seller before or on Closing and (ii) Carve-Out Costs owed by
Seller and not paid at Closing but paid thereafter.
	 
	   	Seller shall have no obligation to undertake or complete the actions corresponding to
Carve-Out Costs before the Closing Date. Seller shall nevertheless make all its best
efforts to make sure that information technology related carve-out works (as identified in
Annex 1(iv)) shall be completed at or as soon as possible after the Closing Date
and that the temporary lay-out Pontoise related carve-out works (as identified in
Annex 1(iv)) shall be completed before Closing Date. Seller shall provide on the
Closing Date all adequate documentary evidence for the carve-out actions completed and
Carve-Out Costs disbursed on or before such date.
	 
	   	For the avoidance of doubt, it is recalled that costs in connection with the carving-out
of the Business (including Carve-Out Costs) and related debts/provisions of the Company
shall not be taken into account for the calculation of the Purchase Price Adjustment.
	 
	   	Seller shall not bear any Carve-Out Cost related to works undertaken more than eighteen
(18) months after the Closing Date.

	 	10.4  	Specific Environmental Compliance Costs

	   	Seller shall do its best efforts to complete before Closing all the environmental works
listed in Annex 1(x) Part 1 in compliance with the deadlines indicated in such
Annex and shall bear all the related Specific Environmental Compliance Costs. If such
works have not been completed by the Closing Date, the Company or the Buyer shall perform
such works, and Seller shall reimburse the Buyer or the Company of the corresponding
Specific Environmental Compliance Costs upon presentation of adequate documentary evidence
of the works performed and the expenses disbursed. It is however specified that Specific
Environmental Costs borne by Seller in connection with each of the works listed in
Annex 1(x) Part 1 shall not exceed the amount specified for such work in Annex
1(x) Part 1.
	 
	   	Seller shall also reimburse to Buyer or to the Company, upon presentation of adequate
documentary evidence of the works performed and the expenses disbursed, the Specific
Environmental Compliance Costs corresponding to Annex 1(x) Part 2, which shall
not be completed before Closing. It is however specified that Specific Environmental Costs
borne by Seller in connection with each of the works listed in Annex 1(x) Part 2
shall not exceed the amount specified for such work in Annex 1(x) Part 2.
	 
	   	For the avoidance of doubt, it is recalled that environmental costs (including Specific
Environmental Compliance Costs) and related debts/provisions of the Company shall not be
taken into account for the calculation of the Purchase Price Adjustment.

33

 

	   	Seller shall not bear any Specific Environmental Compliance Cost related to works
undertaken more than two (2) years after the Closing Date.

	 	10.5  	Retained litigation

	   	Buyer shall give, and shall procure that the Company gives, subject to all reasonable
costs and expenses being reimbursed to them, all such information and assistance,
including access to personnel, and the right to examine and copy or photograph any assets,
accounts, documents and records, all to the extent reasonably related to any lawsuit
related to the Business and which would not be contributed to the Company, as Seller or
its accountants or professional advisors may reasonably request. Seller agrees to keep all
such information confidential and only to use it for the purpose of the lawsuit in
question.

	 	10.6  	Grants and Subsidies

	   	As soon as reasonably possible after the date hereof, Seller and the Company shall jointly
notify in the form set forth in Annex 10.6 the various Governmental Authorities
from which Seller has obtained grants or subsidies in connection with the Business so as
to inform them of the contemplated Transaction and to request their consent to the
transfer to the Company of the grants or subsidies obtained.
	 
	   	Should the Company be bound to reimburse the amount of any subsidy (other than a loan
granted by any Governmental Authority) because the relevant Governmental Authority refuses
the transfer of such subsidy to the Company and the transfer of the Transfer Shares to
Buyer for any reason except the management of the Business and/or the projects underlying
such grants or subsidies after the Closing Date, Seller shall reimburse the Company for
such amount within ten (10) Business Days from the repayment of such amount by the
Company.

	 	10.7  	Activities of the Brazilian Affiliate
	 
	 	10.7.1  	Subject to Article 10.7.2, Seller shall cause the Brazilian Affiliate to terminate
the manufacturing and the sale of products of the Business currently manufactured
and/or sold by the Brazilian Affiliate as from the Closing Date.
	 
	 	10.7.2  	Notwithstanding Article 10.7.1, the Brazilian Affiliate shall have the right to
perform, for a period of three (3) years, its obligations under the contracts entered
into by the Brazilian Affiliate with respect to products of the Business prior to the
date hereof, as such contracts are disclosed in Annex 10.7.2, it being
specified that such contracts shall not be renewed whether tacitly or expressly by
the Brazilian Affiliate after the date hereof.
	 
	 	   	To the extent necessary, Buyer shall cause the Company to grant the Brazilian
Affiliate with a free right to use the Contributed Intellectual Property
currently used by the Brazilian Affiliate for the manufacturing and/or the sale
of products of the Business, provided that such right shall not be used by the
Brazilian Affiliate for other purposes than the

34

 

	 	   	performance of the contracts entered into by the Brazilian Affiliate with respect
to products of the Business prior to the date hereof.
	 
	 	10.7.3  	Beginning on the Closing Date and during a three (3) year period, Seller shall
furthermore provide Buyer with its reasonable assistance in Buyer’s efforts to
develop the Business on the territories of Mercosur.

	11  	CONFIDENTIALITY

	 	11.1  	Subject to Article 12 and Article 11.2, the Parties shall treat as strictly
confidential all information received or obtained as a result of entering into or
performing this Agreement which relates to:

	 	(a)  	the negotiations relating to this Agreement or any
document referred to in this Agreement; or
	 
	 	(b)  	the provisions or subject matter of this Agreement or any
document referred to in this Agreement; or
	 
	 	(c)  	in the case of Seller, Buyer or any of its Affiliates,
and in the case of Buyer, Seller or any of its Affiliates.

	 	11.2  	Buyer and Seller may disclose information to a third party which would
otherwise be confidential if and to the extent:

	 	(a)  	required by the law of any relevant jurisdiction or for
the purposes of any legal proceedings; or
	 
	 	(b)  	required by any recognized securities exchange or by any
regulatory or governmental body; or
	 
	 	(c)  	such information is disclosed on a strictly confidential
basis to that third party’s professional advisors, auditors or bankers for
the purpose of advising that third party in connection with this Agreement
provided that such disclosure shall be made subject to the terms set out in
Article 11.1; or
	 
	 	(d)  	the information has come into the public domain otherwise
than through that third party; or
	 
	 	(e)  	prior written consent to the disclosure has been given by
the other Party; or
	 
	 	(f)  	required to obtain the satisfaction of conditions
precedent listed in Article 4.1 to 4.3; or
	 
	 	(g)  	required to enable a Party to enforce its rights or
remedies under this Agreement,

	 	   	provided that any such information disclosed pursuant to Article 11.2 (a) and
Article 11.2 (b) shall be disclosed only after consultation (where practicable)
with the other Party.

35

 

	 	11.3  	The present confidentiality undertaking shall remain in force for a period
of five (5) years starting from the date of signature of this Agreement.
	 
	 	12  	ANNOUNCEMENTS
	 
	 	12.1  	Subject to Article 12.2, no Party shall make or issue at any time (whether
before or after Closing) any announcement, circular or other publicity relating to
any matter referred to in this Agreement without the other Party’s prior written
approval of the form and content of such announcement. Such undertaking shall remain
in force for a period of two (2) years starting from the date of signature of this
Agreement.
	 
	 	12.2  	Article 12.1 does not apply to any announcement, circular or other
publicity:

	 	(a)  	required by the law of any relevant jurisdiction or by
the rules or regulations of any recognized securities exchange or of any
regulatory or governmental body; or
	 
	 	(b)  	which is made or sent by or on behalf of Buyer or Seller
after Closing advising the press, employees, customers, suppliers or agents
of the Company of the change in control of the Company.

	 	13  	MISCELLANEOUS
	 
	 	13.1  	All communications, notices and disclosures required or permitted by this
Agreement shall be in writing and shall be given (i) by hand delivery, by prepaid
registered or certified mail (with return receipt requested), (ii) by an established
overnight courier providing proof of delivery or (iii) by facsimile (provided that a
confirmation copy is also sent no later than the next Business Day by any of the
means listed in (i) or (ii)), addressed as follows, unless and until any Party
notifies the other Party in accordance with this Article 13.1 of a change of address:
	 
	 	   	If to Seller:

	 
	 	   	Johnson Controls Automotive Electronics

18, rue Jules César

95520 Osny

France

Fax: (33) 1 30 17 68 66

Attn: Group Counsel
	 
	 	   	With a copy to:
	 
	 	   	Dr. Volkmar Schneider, Vice-President General Counsel Europe

JCI Beteiligungs GmbH

Industriestraâe 20-30

51399 Burscheid,

36

 

	 	   	Allemagne

Fax: (49) 2174 65 3134

	 
	 	   	If to Buyer:

	 
	 	   	Valeo

43, rue Bayen

75017 Paris

Fax: (33) 1 40 55 21 69

Attn: General Counsel
	 
	 	   	Any notification under this Agreement shall be deemed made on the date of its
receipt (it being specified that, in case of notification by telecopy, the date
of receipt shall be the date on which the confirmation copy has been sent in
accordance with the provisions of this Article 13.1).
	 
	 	13.2  	Valeo may, at any time until three (3) Business Days before the Closing,
assign or transfer all, but not part, of its rights and obligations arising under
this Agreement to any of its Affiliates, provided that it shall remain severally
liable in respect of such obligations until full performance of such obligations or
until written express release by Seller.
	 
	 	13.3  	The Parties shall each pay their own costs, charges and expenses in
relation to the negotiation, preparation, execution and implementation of this
Agreement including, without limitation, filing fees and fees and expenses of
attorneys, accountants, financial advisors, lenders or brokers.
	 
	 	   	Seller represents and warrants to Buyer that it has not employed the services of
any investment bank, financial advisor, broker or intermediary in connection with
the Transaction other than Société Générale (whose fees and expenses will be
borne by Seller).
	 
	 	   	Buyer represents and warrants to Seller that has not employed the services of any
investment bank, financial advisor, broker or intermediary in connection with the
Transaction other than Merrill Lynch (whose fees and expenses will be borne by
Buyer).
	 
	 	13.4  	This Agreement (together with all Schedules, Annexes, Exhibits and
documents referred to in it or executed at Closing) constitutes the entire agreement
and understanding between the Parties with respect to its subject matter and replaces
and supersedes all prior agreements, arrangements, undertakings or statements
regarding such subject matter.
	 
	 	13.5  	No variation of this Agreement shall be effective unless made in writing
and signed by the Parties.
	 
	 	13.6  	If part of this Agreement is or becomes invalid or non-binding, the Parties
shall remain bound to the remaining part. The relevant Parties shall in that event
replace the invalid on non-binding part by provisions which are valid

37

 

	 	   	and binding and the effect of which, given the contents and purpose of this
agreement, is to the greatest extent possible similar to the invalid or
non-binding part.

	14  	GOVERNING LAW AND DISPUTE RESOLUTION

	 	14.1  	Governing Law

	   	This Agreement shall be governed by, and construed in all respects in accordance with,
French law.

	 	14.2  	Jurisdiction

	   	All disputes arising in connection with this Agreement shall be submitted to the sole
jurisdiction of the Commercial Court of Paris.

	15  	LIST OF ANNEXES
	 
	   	[Redacted]

	 	 	 	 	 	 	 
	Valeo	 	Johnson Controls Automotive Electronics
	 
	 	 	 	 	 	 
	By:

	 	/s/ Vincent Marcel
	 	By:
	 	/s/ Antje Merlin
	

	 	 
	 	 	 	 
	Name:

	 	Vincent Marcel
	 	Name:
	 	Antje Merlin
	Title:

	 	Group Vice President of Financial Affairs
	 	Title:
	 	Group Counsel
	 
	 	 	 	 	 	 
	

	 	 	 	By:
	 	/s/ Fernando de Miguel
	

	 	 	 	 	 	 
	

	 	 	 	Name:
	 	Fernando de Miguel
	

	 	 	 	Title:
	 	VP General Manager Electronics

38

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