Execution Version
   
STOCK PURCHASE AGREEMENT
 
by and among
 
Tedea-Technological Development and Automation, Ltd.
 
as the Seller
 
Measurement Specialties, Inc.
 
as the Purchaser
 
and
 
Transducer Controls Corporation
 
as the Company
   
Dated as of September 30, 2011
   

 
 
 

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TABLE OF CONTENTS

       
Page
         
I.
CERTAIN INTERPRETIVE MATTERS
 
1
         
1.1
Certain Interpretive Matters
 
1
         
II.
SURRENDER OF CERTIFICATES; CLOSING; POST-CLOSING ADJUSTMENT
 
3
         
2.1
Purchase of Shares
 
3
           
2.2
Closing
 
3
           
2.3
Transaction Consideration
 
3
           
2.4
Post-Closing Transaction Consideration Adjustment
 
4
           
2.5
Proceedings
 
6
         
III.
REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND THE SELLER
 
6
         
3.1
Existence and Qualification
 
6
           
3.2
Authorization; Enforceability
 
6
           
3.3
Non-Contravention; Consents; Restrictive Documents
 
7
           
3.4
Capitalization
 
8
           
3.5
Financial Statements; the Company’s Books
 
8
           
3.6
No Undisclosed Liabilities
 
9
           
3.7
Interested Transactions
 
9
           
3.8
Tax Matters
 
9
           
3.9
Absence of Certain Changes
 
12
           
3.10
Contracts
 
14
           
3.11
Insurance Coverage
 
17
           
3.12
Litigation
 
17
           
3.13
Compliance with Laws; Licenses
 
17
           
3.14
Properties
 
18
           
3.15
Accounts Receivable
 
19
           
3.16
Inventories
 
19
           
3.17
Intellectual Property
 
19
           
3.18
Environmental Matters
 
22
           
3.19
Plans and Material Documents
 
23
           
3.20
Interests in Counterparties and Others
 
25
           
3.21
Relationships; Employee Compensation
 
26
           
3.22
Other Employment Matters
 
27

 
 
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TABLE OF CONTENTS
(continued)

       
Page
           
3.23
OSHA/Workers’ Compensation
 
27
           
3.24
No Indebtedness
 
28
           
3.25
Export Compliance
 
28
           
3.26
Customers and Suppliers
 
29
           
3.27
Absence of Sensitive Payments
 
29
           
3.28
Warranties
 
30
           
3.29
Securities Laws Compliance
 
30
           
3.30
Absence of Certain Business Practices
 
30
           
3.31
Finders’ Fees
 
30
           
3.32
Full Disclosure
 
31
         
IV.
REPRESENTATIONS AND WARRANTIES OF THE SELLER  
31
           
4.1
Organization
 
31
           
4.2
Authorization; Enforceability
 
31
           
4.3
Litigation
 
31
           
4.4
Non-Contravention
 
32
           
4.5
Finders’ Fees
 
32
         
V.
REPRESENTATIONS AND WARRANTIES  OF THE PURCHASER  
32
           
5.1
Organization
 
32
           
5.2
Authorization; Enforceability
 
32
           
5.3
Litigation
 
32
           
5.4
Non-Contravention
 
33
           
5.5
Finders’ Fees
 
33
           
5.6
Financial Capability
 
33
         
VI.
CERTAIN COVENANTS  
33
           
6.1
No Indebtedness or Liens
 
33
           
6.2
Further Assurances
 
33
           
6.3
Conduct of Business of the Company
 
34
           
6.4
Exclusive Dealing
 
34
           
6.5
Review of the Company
 
35
           
6.6
Reasonable Efforts
 
35
           
6.7
Termination of Certain Agreements and Similar Arrangements
 
36
           
6.8
Termination of 401(k) Plan
 
36

 
 
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TABLE OF CONTENTS
(continued)

       
Page
         
VII.
TAX MATTERS  
36
           
7.1
Preparation of Tax Returns; Control of Audits; Tax Refunds
 
36
           
7.2
Tax Claims
 
38
           
7.3
Transfer Taxes
 
39
           
7.4
Certain Definitions
 
39
           
7.5
Liability for Taxes
 
39
         
VIII.
CONDITIONS TO CLOSING  
40
           
8.1
Conditions to Obligations of the Purchaser at the Closing
 
40
           
8.2
Conditions to Obligations of the Seller
 
43
         
IX.
SURVIVAL; INDEMNIFICATION  
44
           
9.1
Survival
 
44
           
9.2
Indemnification by the Seller
 
45
           
9.3
Indemnification by the Purchaser
 
47
           
9.4
Indemnification Procedures
 
48
           
9.5
Miscellaneous Indemnification Provisions
 
49
         
X.
MISCELLANEOUS  
50
           
10.1
Termination
 
50
           
10.2
Notices
 
51
           
10.3
Amendments and Waivers
 
51
           
10.4
Expenses
 
52
           
10.5
Successors and Assigns
 
52
           
10.6
Third Party Beneficiaries
 
52
           
10.7
Release
 
52
           
10.8
Governing Law; Consent to Jurisdiction
 
53
           
10.9
Counterparts
 
53
           
10.10
Headings
 
53
           
10.11
Entire Agreement
 
53
           
10.12
Confidentiality
 
54
           
10.13
Severability
 
54
           
10.14
Legal Representation
 
55
           
10.15
Press Release and Announcements
 
55

 
 
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STOCK PURCHASE AGREEMENT
 
This STOCK PURCHASE AGREEMENT (this “Agreement”) is dated as of September 30,
2011, by and among Measurement Specialties, Inc., a New Jersey corporation (the
“Purchaser”), Transducer Controls Corporation, a California corporation, d.b.a.
Celesco Transducer Products, Inc. (the “Company”) and Tedea-Technological
Development and Automation, Ltd., an Israeli corporation and the sole
stockholder of the Company (the “Seller”).  The Purchaser, the Seller and the
Company will collectively be referred to herein as the “Parties.”
 
A.         Certain capitalized terms used but not defined elsewhere in the text
of this Agreement are defined in Annex I.
 
B.         The Seller owns all of the issued and outstanding capital stock of
the Company (the “Shares”).
 
C.         On the terms and subject to the conditions contained in this
Agreement, the Seller desires to sell all of the Shares to the Purchaser and to
receive in exchange therefore the Transaction Consideration, and the Purchaser
desires to purchase all of the Shares from the Seller and to pay in exchange the
Transaction Consideration (as set forth and subject to the post-Closing
Transaction Consideration adjustment as provided in Section 2.4 of this
Agreement).
 
Now therefore, the Parties agree as follows:
 
I.  CERTAIN INTERPRETIVE MATTERS.
 
1.1        Certain Interpretive Matters.
 
1.1.1           Unless the context requires otherwise, (a) all references to
Sections, Articles, Exhibits, Annexes or Schedules are to Sections, Articles,
Exhibits, Annexes, or Schedules of or to this Agreement, (b) the headings in
this Agreement are for convenience of reference only and will not control or
affect the meaning or construction of any provisions of this Agreement, (c) each
term defined in this Agreement has the meaning assigned to it, (d) each
accounting term not otherwise defined in this Agreement has the meaning commonly
applied to it in accordance with GAAP, (e) words in the singular include the
plural and vice versa, (f) all reference to $ or dollar amounts will be to
lawful currency of the United States, (g) to the extent the term “day” or “days”
is used, it will mean calendar days, (h) references to the masculine, feminine
or neuter gender include each other gender, (i) the words “herein,” “hereby,”
“hereof,” “hereunder,” and other words of similar import refer to this Agreement
as a whole and not to any particular Section, Article, or other subdivision, (j)
the terms “including” and “includes” mean “including or includes without
limitation,” (k) reference to, and the definition of, any document shall be
deemed a reference to such document as it may be amended, supplemented, revised,
or modified, in writing, from time to time but disregarding any amendment,
supplement, replacement or novation made in breach of this Agreement, (l)
reference to any Law shall be construed as a reference to such Law as
re-enacted, redesignated, amended or extended from time to time, (m) the
information contained in the Schedules is disclosed solely for the purposes of
this Agreement, and no information contained in any Schedule shall be deemed to
be an admission by any party hereto to any third Person of any matter
whatsoever, including an admission of any violation of any Laws or breach of any
agreement, and (n) each of the Schedules and the disclosures therein will apply
and consist of disclosures to the corresponding section or subsection of this
Agreement and to any other section that is specifically identified (by
cross-reference or otherwise) as being qualified by such exception or with
respect to which the relevance of such exception is apparent on the face of the
disclosure of such exception so long as such item is fairly described with
reasonable particularity and detail.
 
 
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1.1.2           The Parties intend that each representation, warranty and
covenant contained in this Agreement shall have independent significance.  If
any Party has breached any representation, warranty or covenant contained herein
in any respect, the fact that there exists another representation, warranty or
covenant relating to the same subject matter (regardless of the relative levels
of specificity), which such Party has not breached, shall not detract from or
mitigate the fact that such party is in breach of the first representation,
warranty or covenant.
 
1.1.3           No provision of this Agreement will be interpreted in favor of,
or against, any of the Parties by reason of the extent to which any such Party
or its counsel participated in the drafting of this Agreement or by reason of
the extent to which any such provision is inconsistent with any prior draft of
this Agreement or any provision of this Agreement.
 
1.1.4           All references to the “knowledge of the Company” or to words of
similar import will be deemed to be references to the actual knowledge of the
Knowledge Persons, and such knowledge that would reasonably be expected to be
known by such Knowledge Persons in the ordinary and usual course of the
performance of their professional responsibility, in each case after due
inquiry, including without limitation of the other personnel and records of the
Company and its Affiliates, provided that the Company shall not be required to
make direct inquiries of its customers or suppliers specifically as to the
accuracy of the representations and warranties contained herein.
 
1.1.5           When calculating the period of time before which, within which
or following which, any act is to be done or step taken pursuant to this
Agreement, the date that is the reference date in calculating such period shall
be excluded.  If the last day of such period is a non-Business Day, the period
in question shall end on the next succeeding Business Day.
 
 
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II.  SURRENDER OF CERTIFICATES; CLOSING; POST-CLOSING ADJUSTMENT.
 
2.1         Purchase of Shares.  On the terms and subject to the conditions set
forth in this Agreement, at the Closing, the Seller shall sell to the Purchaser,
and the Purchaser shall purchase from the Seller, all of the Seller’s right,
title and interest in and to the Shares, free and clear of all Liens (other than
the Liens to be released as a result of the Closing Indebtedness Payments) and
as from the Closing Date all risk relating to the Shares shall vest with the
Purchaser, subject to the representations and warranties herein.  In exchange
for the Shares, the Purchaser shall pay to the Seller at the Closing the
Transaction Consideration as provided in this Agreement.  For the avoidance of
any doubt, except as set forth in Article III, it is expressly agreed that all
of the Company’s property, leased real property, inventory, machinery and
equipment, spare parts, intellectual property, technology, software, hardware
and other personal property relating to its business shall be in AS IS physical
condition on the Closing Date.
 
2.2         Closing.  The closing (the “Closing”) of the transactions
contemplated by this Agreement will take place at the offices of DLA Piper LLP
(US), 1201 West Peachtree Street, Atlanta, GA 30309 at 10:00 A.M. Eastern Time,
on September 30th 2011 or on such other date and at such other place agreed to
by the Purchaser and the Seller (the date on which the Closing occurs is
referred to in this Agreement as the “Closing Date”.
 
2.3         Transaction Consideration.  The transaction consideration shall be
an amount equal to the sum of (i) Thirty Five Million Dollars ($35,000,000) plus
(ii) the excess of the Company’s cash over Indebtedness on the Closing Date or
minus (iii) the excess of Indebtedness over the Company’s cash on the Closing
Date  (the “Transaction Consideration”).  Three (3) Business Days prior to the
Closing, the Seller shall have caused the Company to deliver to the Purchaser,
in a form reasonably agreed upon by the Purchaser, a good faith calculation of
the amount of the Transaction Consideration (the “Transaction Consideration
Statement”). The Transaction Consideration shall be paid at the Closing by the
Purchaser as follows:
 
2.3.1           Closing Payments.
 
  (a)           the aggregate dollar amount to satisfy any Indebtedness to be
paid at the Closing (the “Closing Indebtedness Payments”) to the applicable
lenders identified in, and in accordance with, the pay-off letters (the “Pay-Off
Letters”) provided to the Purchaser prior to the Closing, which Pay-Off Letters
shall be in a commercially reasonable form satisfactory to the Purchaser and
indicate that such lenders have agreed to release immediately all Liens relating
to the properties and assets of the Company upon receipt of the amounts
indicated in such Pay-Off Letters (other than any such Liens which relate to
Indebtedness which shall not be paid at the Closing and which are the Permitted
Liens set forth on Schedule 6.1);
 
 
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  (b)           the aggregate dollar amount to satisfy any Selling Expenses that
remain unpaid at Closing and to pay said amount directly to the Persons entitled
thereto in accordance with invoices from such Persons provided to the Purchaser
prior to the Closing;
 
  (c)           by wire transfer of the amount of Two Million Dollars
($2,000,000) to the Escrow Agent pursuant to the terms of the Escrow Agreement;
and
 
  (d)           the remaining balance of the Transaction Consideration shall be
paid to the Seller by wire transfer of immediately available funds to an account
designated in writing to the Purchaser by the Seller at least two (2) Business
Days prior to the Closing.
 
2.3.2          Payment of the Transaction Consideration.  Except for the
post-Closing Transaction Consideration adjustment under Section 2.4 below, the
payment by the Purchaser of the Transaction Consideration in accordance with
Section 2.3 shall constitute payment by the Purchaser to the Seller and
satisfaction of the Purchaser’s obligation to pay such amount hereunder.
 
2.4        Post-Closing Transaction Consideration Adjustment.  The Transaction
Consideration shall be subject to adjustment after the Closing as specified in
this Section 2.4:
 
  (a)           Closing Balance Sheet.  As promptly as practicable, but in any
event within sixty (60) days after the Closing Date, the Seller shall prepare
and deliver to the Purchaser a balance sheet of the Company as of the Closing
and reflecting the Closing Working Capital audited by Ernst & Young - Israel
(the “Closing Balance Sheet”), together with a certificate of the Seller stating
that the Closing Balance Sheet was prepared in accordance with GAAP applied (to
the extent not inconsistent with GAAP) on a basis consistent with the
preparation of the Financial Statements and the Working Capital Target statement
attached hereto as Exhibit D (the “Working Capital Target Statement”).  The
Purchaser shall provide the Seller with full access during normal business hours
to (i) Mr. Dan Haklai and the same personnel who prepared the Financial
Statements, to the extent the same are then employees or contractors of the
Company or the Purchaser and (ii) those books and records of the Company
necessary to enable the Seller to confirm the accuracy of the Closing Balance
Sheet pursuant to this Section 2.4(a) and (iii) the staff of Ernst & Young -
Israel.
 
 
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  (b)           Disputes.  Unless the Purchaser timely disputes the Closing
Balance Sheet pursuant to this Section 2.4(b), the Closing Balance Sheet
delivered by the Seller to the Purchaser shall be final, binding and conclusive
on the Purchaser and the Seller.  The Purchaser may dispute the Closing Balance
Sheet only by sending a written notice (a “Dispute Notice”) to the Seller within
thirty (30) days of the Seller’s delivery of the Closing Balance Sheet to the
Purchaser.  The Dispute Notice must identify each disputed item on the Closing
Balance Sheet, specify the amount of such dispute and set forth, in reasonable
detail, the basis for such dispute.  In the event of such a dispute, the
Purchaser and the Seller shall attempt in good faith to reconcile their
differences, and any resolution by them as to any disputed items shall be final,
binding and conclusive on the Purchaser and the Seller.  If any such resolution
by the Purchaser and the Seller leaves in dispute amounts, the net effect of
which in the aggregate would not affect the Closing Working Capital on the
Closing Balance Sheet by more than 10%, then all such amounts shall be deemed to
be resolved in favor of the Closing Balance Sheet delivered by the Seller to the
Purchaser.  If the Purchaser and the Seller are unable to reach a resolution
with such effect within twenty (20) days after the Purchaser’s delivery of the
Dispute Notice to the Seller, then the Purchaser and the Seller shall promptly
submit any remaining disputed items to the Accounting Referee.  If any remaining
disputed items are submitted to the Accounting Referee for resolution (A) each
party will furnish to the Accounting Referee such workpapers and other documents
and information relating to the remaining disputed items as the Accounting
Referee may request and are available to that party, and each party will be
afforded the opportunity to present to the Accounting Referee any materials
relating to the disputed items and to discuss the resolution of the disputed
items with the Accounting Referee; (B) the determination by the Accounting
Referee, as set forth in a written notice to the Purchaser and the Seller, shall
be final, binding and conclusive on the Purchaser and the Seller; and (C) the
fees and disbursements of the Accounting Referee shall be allocated between the
Purchaser and the Seller in the same proportion that the aggregate amount of the
remaining disputed items submitted to the Accounting Referee that is
unsuccessfully disputed by each party (as finally determined by the Accounting
Referee) bears to the total amount of all remaining disputed items submitted to
the Accounting Referee.
 
  (c)           Purchase Price Adjustment.  The Closing Balance Sheet shall be
deemed to be final, binding and conclusive on the Purchaser and the Seller upon
the earliest of (A) the failure of the Purchaser to notify the Seller of a
dispute within thirty (30) days of the Seller’s delivery of the Closing Balance
Sheet to the Seller; (B) the resolution of all disputes by the Purchaser and the
Seller; and (C) the resolution of all disputes by the Accounting
Referee.  Within three (3) Business Days of the Closing Balance Sheet being
deemed final, binding and conclusive, a Transaction Consideration adjustment
shall be made as follows:
 
 (i)           In the event that the Closing Working Capital reflected on the
final Closing Balance Sheet is less than 90% of the average Working Capital on
the last day of each of the four (4) quarters ending 12/31/10, 3/31/11, 6/30/11
and 9/30/11 (the “Working Capital Target”) prepared on the same method that the
average on the last day of the 3 quarters ending 12/31/10, 3/31/11, 6/30/11 is
calculated in Exhibit D, then the Seller shall pay the Refund by wire transfer
of immediately available funds to an account designated by the Purchaser or
shall permit distribution of such amount to the Purchaser from the Escrow
Account (as defined in the Escrow Agreement).  The “Refund” means the amount by
which the Working Capital reflected on the Closing Balance Sheet is less than
the Working Capital Target.
 
 
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  (ii)           In the event that the Working Capital reflected on the final
Closing Balance Sheet exceeds 110% of the Working Capital Target, then the
Purchaser shall pay the Additional Consideration by wire transfer of immediately
available funds to an account designated by the Seller.  The “Additional
Consideration” means the amount by which the Working Capital on the Closing
Balance Sheet exceeds the Working Capital Target.
 
2.5         Proceedings.  Except as otherwise specifically provided for herein,
all proceedings that will be taken and all documents that will be executed and
delivered by the Parties on the Closing Date will be deemed to have been taken
and executed simultaneously, and no proceeding will be deemed taken nor any
document executed and delivered until all such proceedings have been taken, and
all such documents have been executed and delivered.
 
III.  REPRESENTATIONS AND WARRANTIES
OF THE COMPANY AND THE SELLER
 
The Company and the Seller, jointly and severally, represent and warrant to the
Purchaser as follows:
 
3.1         Existence and Qualification.  The Company is a corporation duly
incorporated, validly existing and in good standing as a corporation under the
Laws of the State of California.  The Company has the requisite corporate power
and authority and all Licenses, consents, and approvals required to carry on its
business as presently conducted.  Except as disclosed on Schedule 3.1, the
Company is duly qualified or licensed to conduct business as a foreign entity
and is in good standing in each jurisdiction where such qualification is
required.  The Company has delivered to the Purchaser true and complete copies
of its articles of incorporation, bylaws and other governing documents and any
amendments thereto and each as so delivered is in full force and effect and in
compliance with applicable Law.  The Company is not in violation of any
provision of its Organizational Documents.
 
3.2         Authorization; Enforceability.  The Company has the requisite
corporate power and authority to execute, deliver, and perform its obligations
under this Agreement and each Ancillary Agreement to which the Company is or
will be a party.  This Agreement and each Ancillary Agreement to which the
Company is or will be a party has been duly authorized, executed and delivered
by the Company.  This Agreement and each Ancillary Agreement to which the
Company is or will be a party has been or will be duly authorized, executed and
delivered by the Company, and once executed, will constitute, a legal, valid and
binding agreement of the Company, enforceable against the Company in accordance
with their respective terms (subject to bankruptcy, reorganization, or other
laws affecting creditors’ rights generally).
 
 
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3.3        Non-Contravention; Consents; Restrictive Documents.
 
3.3.1           Except as disclosed on Schedule 3.3.1, the execution, delivery
and performance by the Company and the Seller of this Agreement and each of the
Ancillary Agreements to which they are, as contemplated by this Agreement, to
become a party, did not and will not (a) violate the governing or Organizational
Documents of the Company, (b) violate any applicable material Law or Order, (c)
require any material filing with or material permit, consent, or approval of, or
require the giving of any material notice to (including under any right of first
refusal or similar provision), any court or other Person (including filings,
consents, or approvals required under any Licenses of the Company or the Seller,
or any Licenses, leases, franchises, contracts, or other agreements to which the
Company or the Seller is or will be a party), (d) result in a violation or
breach of, conflict with, constitute (with or without due notice or lapse of
time or both) a default under, or give rise to any right of termination,
cancellation, or acceleration of any right or obligation of, the Company or the
Seller, or to a loss of any benefit to which the Company or the Seller is
entitled, under any Material Contract or other material instrument binding upon
or providing rights to the Company or the Seller, or any License, or other
similar authorization held by the Company of the Seller, or (e) result in the
creation or imposition of any Lien (other than Permitted Liens) on any asset of
the Company or the Seller.
 
3.3.2           Except as disclosed on Schedule 3.3.2, neither the Seller nor
the Company is subject to, or a party to, any charter, bylaw, mortgage, Lien,
lease, License, instrument, Law, Order, or any other restriction of any kind or
character, that (a) has had or would reasonably be expected to have a Material
Adverse Effect or to materially and adversely affect any of the assets or
properties of the Company, (b) would prevent consummation of the transactions
contemplated by this Agreement and the Ancillary Agreements or compliance by the
Company or the Seller with the terms, conditions and provisions of this
Agreement and the Ancillary Agreements to which the Company or the Seller is, as
contemplated by this Agreement, to become a party, or the continued operation of
the Company’s business after the date of this Agreement or the Closing Date on
substantially the same basis as historically operated or (c) would restrict the
ability of the Company to acquire any property or assets, market, sell, or
otherwise distribute products or merchandise, or provide its services or conduct
business in any area.
 
 
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3.4        Capitalization.
 
3.4.1           The authorized capital stock of the Company consists of
100,000 shares of common stock (the “Common Stock”), of which 100 shares are
issued and outstanding.  No current or former stockholder or any other Person is
contesting the ownership of the Common Stock or any distributions or
contributions relating thereto.  Except as disclosed on Schedule 3.4.1, there
are no authorized or outstanding (a) shares of capital stock, equity interests,
or other securities of the Company, (b) securities of the Company convertible
into, exchangeable or exercisable for shares of capital stock, equity interests,
or other securities of the Company, (c) subscription, calls, commitments,
Contracts, options, warrants, or other rights to purchase or acquire from the
Company, or obligations of the Company to issue, any shares of capital stock,
equity interests, or other securities, including securities convertible into,
exchangeable or exercisable for shares of capital stock, equity interests, or
other securities of the Company, or (d) bonds, debentures, notes, or other
indebtedness that entitle the holders to vote (or convertible into, exchangeable
or exercisable for, securities that entitle the holders to vote) with holders of
shares of capital stock, equity interests, or other securities of the Company on
any matter (the items in clauses (a), (b), (c) and (d) being referred to
collectively as the “Company Securities”).  There are no outstanding obligations
of the Company to repurchase, redeem, or otherwise acquire the Company
Securities.
 
3.4.2           All of the Shares are duly authorized, validly issued, fully
paid, and non-assessable.  The Shares, which consist of all of the outstanding
Company Securities, are lawfully owned of record and beneficially held by the
Seller, free and clear of any Liens.  Except as disclosed on Schedule 3.4.2, the
Company Securities are not subject to any voting trust agreement, registration
rights agreements, pledge agreements, buy-sell agreements or other contract,
agreement, arrangement, commitment, option, proxy, pledge, right of first
refusal or preemptive right, or understanding, including any contract
restricting or otherwise relating to the ownership, voting rights, distribution
rights, or disposition thereof.  At the Closing, the Purchaser will acquire good
title to the Company Securities free and clear of Liens.
 
3.4.3           The Company does not own, directly or indirectly, any capital
stock, membership interests, or other securities of any Person.
 
3.4.4           The Seller directly owns one hundred percent (100%) of the
Shares.
 
3.5        Financial Statements; the Company’s Books.  The Company has delivered
to the Purchaser the Financial Statements, copies of which are attached as
Schedule 3.5.  The Financial Statements, except as indicated on the Financial
Statements or notes thereto,  (i) have been prepared in accordance with GAAP,
(ii) are true, correct and complete in all material respects, (iii) reflect the
consistent application of accounting principles throughout the periods involved,
(iv) except where inconsistent with GAAP, have been prepared using the same
accounting principles and practices as the Company has used historically, (v)
are derived from and accurately reflect the books and records (including the
general ledgers) of the Company, and (vi) other than adjustments made in the
Ordinary Course, which are not reflected on any Financial Statements that have
not been audited, fairly present in all material respects the consolidated
financial position of the Company at the dates thereof and the results of the
operations and cash flows of the Company for the periods indicated.  Except as
disclosed on Schedule 3.5, no financial statements of any Person other than the
Company are required by GAAP to be included in the financial statements of the
Company.  The Company has also made available to the Purchaser true and complete
copies of all letters and similar written correspondence of any kind from the
Company’s accountants to the Company during the thirty-six (36) months preceding
the execution of this Agreement, together with true and complete copies of all
responses thereto.  The Company’s independent auditor has not resigned or been
dismissed from its role as independent public accountant of the Company as a
result of or in connection with any disagreements with the Company on a matter
of accounting principles or practices, financial statements disclosure, auditing
scope or procedure.
 
 
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3.6        No Undisclosed Liabilities.  There are no liabilities or obligations
of the Company, or facts or circumstances, that could give rise to liabilities
of the Company, whether accrued, contingent, absolute, determined, determinable,
or otherwise (collectively “Liabilities”), other than (a) Liabilities fully
recorded or reserved for in the Balance Sheet as of the Balance Sheet Date, (b)
Liabilities specifically disclosed on Schedule 3.6, and (c) immaterial
Liabilities incurred since the Balance Sheet Date in the Ordinary Course.
 
3.7        Interested Transactions.  Schedule 3.7 contains a complete list of
(i) all amounts and obligations owed between any director, executive officer, or
the Seller or any of their Affiliates, on the one hand, and the Company, on the
other hand, and (ii) transactions and services provided since January 1,
2006 between any director, executive officer, or the Seller or any of their
Affiliates, on the one hand, and the Company, on the other hand.  Except as
disclosed on Schedule 3.7, since the Balance Sheet Date, there has not been any
accrual of liability or incurrence of an obligation by the Company to the Seller
or any of its Affiliates or between the Company and the Seller or any of its
Affiliates or any action taken (other than this Agreement) or any payment of
dividends or other payments of cash or property by the Company to the Seller or
any of its Affiliates, or the incurrence of any legal or financial obligation to
any such Person.
 
3.8        Tax Matters.
 
3.8.1           Except as disclosed on Schedule 3.8.1:
 
  (a)           All material Tax Returns required to be filed by the Company
have been duly and timely filed.  The Company has paid all Taxes due (whether or
not shown as due and owing on such Tax Returns) as of the Closing.  The
Company’s December 31, 2010 U.S. and California Income Tax Returns are under
extension until September 15, 2011.  These returns are currently being prepared
 
  (b)           The reserve for Tax liability set forth on the Balance Sheet has
been prepared in accordance with GAAP and, except where inconsistent with GAAP,
in accordance with the past custom and practice of the Company.
 
 
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  (c)           There are no Tax claims, audits or proceedings pending or, to
the knowledge of the Company, threatened against the Company.  To the knowledge
of the Company, there are no other circumstances which reasonably may be
expected to result in the assertion of any claim for Taxes against the Company
by any Government Authority with respect to any period for which Tax Returns are
required to be filed or Tax is required to be paid. There are no rulings,
subpoenas or requests for information pending with respect to the Company with
any Governmental Authority.  There are not currently in force any waivers or
agreements binding upon the Company for the extension of time for the assessment
or payment of any Tax.  There is not currently in effect any power of attorney
authorizing any Person to act on behalf of the Company, or receive information
relating to the Company, with respect to any Tax matters.
 
  (d)           The Company properly withheld and/or paid all Taxes required to
have been withheld and/or paid in connection with amounts paid or owing to the
Seller, employee, creditor, independent contractor, or other third party.  Each
Person providing services to the Company has been properly classified as an
employee or independent contractor, as the case may be, for all Tax purposes and
with respect to all Plans.
 
  (e)           True, correct and complete copies of all federal, state and
material local income Tax Returns filed by the Company for all periods ending
after December 31, 2005, have been heretofore provided to the Purchaser.  All
material elections with respect to Taxes affecting the Company have been
disclosed or attached to the Tax Returns of the Company.
 
  (f)           The Company is not, and never has been, a party to or bound by
any Tax allocation or Tax Sharing Agreement with any other Person and has no
contractual obligation to indemnify any other Person with respect to Taxes.  The
Company has not incurred any liability for the Taxes of any Person under Treas.
Reg. § 1.1502-6 (or any similar provision of state, local, or foreign law), as a
transferee or successor, by contract, or otherwise.
 
  (g)           The Company is not currently, and has not been for at least the
last six (6) years, a member of an affiliated group of corporations, within the
meaning of Section 1504 of the Code.
 
  (h)           The Company is not currently, and has not been for at least the
last six (6) years, a party to any joint venture, partnership or other
arrangement or contract which could be treated as a partnership for federal
income tax purposes.
 
  (i)           There are no Liens for Taxes upon any of the assets of the
Company, other than Permitted Liens.
 
 
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  (j)           The Company will not be required to include any item of income
in, or exclude any item of deduction from, taxable income for any taxable period
(or portion thereof) ending after the Closing Date as a result of any (i)
“closing agreement” as described in Section 7121 of the Code (or any
corresponding or similar provision of state, local or foreign Law) executed by
the Company prior to the Closing Date; (ii) change in method of accounting by
the Company for a taxable period ending on or prior to the Closing Date; (iii)
inter-company transactions or excess loss account described in Treasury
Regulations under Code Section 1502 (or any corresponding or similar provision
of state, local, or foreign income Tax law), in each case, relating to
transactions or events occurring on or before the Closing Date; (iv) installment
sale or open transaction disposition made on or prior to the Closing Date; or
(v) prepaid amount received on or prior to the Closing Date.
 
  (k)           The Company neither has made any payments nor is obligated to
make any payments that will not be fully deductible by reason of the provisions
of Section 280G of the Code.
 
  (l)           The Company is not, and has not been, a United States real
property holding corporation with the meaning of Section 897(c)(2) of the Code
during the applicable period specified in Section 897(c)(1)(A)(ii) of the Code
and no withholding of federal income Tax will be required under Section 1445 in
connection with the transaction contemplated by this Agreement.
 
  (m)           The Company has not entered into any transaction that is or
would be part of any “reportable transaction” under Sections 6011, 6111 or 6112
of the Code (or any similar provision under any state or local Law).
 
  (n)           The Company has not distributed stock of any Person, nor has had
its stock distributed by any Person, in a transaction that was purported or
intended to be governed in whole or in part by Sections 355 or 361 of the Code,
at any time within the past five (5) years.
 
  (o)           The Company has disclosed on its federal income Tax Returns all
material positions taken therein that would otherwise be reasonably likely to
give rise to a substantial understatement of federal income Tax within the
meaning of Code Section 6662.
 
  (p)           The Company does not have, and has not had, a permanent
establishment, as defined in any applicable Tax treaty or convention, in any
country other than the United States.
 
  (q)           The Company will not be required to reduce any Tax Attributes by
reason of the application of Treas. Reg. §1.1502-36 to the transactions
contemplated by this Agreement.  “Tax Attribute” shall mean any item of basis of
property, any item of loss (including a net operating loss carryover), any item
of credit and any other Tax item that would otherwise be taken into account in a
Tax period ending after the Closing Date.
 
 
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3.8.2           Schedule 3.8.2 contains a list of all jurisdictions (whether
foreign or domestic) to which any material Tax imposed on overall net income is
properly payable by the Company or will be properly payable by the Company as of
the Closing Date.  Other than as set forth on Schedule 3.8.2, no claim has been
made by a Taxing authority in a jurisdiction where the Company does not file a
Tax Return that it is or may be subject to Tax by that jurisdiction.
 
3.9        Absence of Certain Changes.  Except as disclosed on Schedule 3.9 or
as contemplated by this Agreement, since the Balance Sheet Date, the Company has
conducted its business in the Ordinary Course and the Company has not:
 
(a)           amended or modified its governing or Organizational Documents;
 
(b)           outside the Ordinary Course, changed any salaries or other
compensation of, or paid any bonuses to, any director, manager, officer, or
employee of the Company, or entered into any employment, severance, or similar
agreement with any director, manager, officer, or employee of the Company;
 
(c)           adopted, materially amended, or increased any benefits under any
profit sharing, bonus, deferred compensation, savings, insurance, pension,
retirement, or other Plan or policy;
 
(d)           outside the Ordinary Course, entered into, modified, amended,
extended or terminated, or waived, released, or assigned any rights or claims
under, any Material Contract, or materially changed any business practice;
 
(e)           incurred, assumed, or guaranteed any Indebtedness;
 
(f)            set aside or paid any distribution with respect to the Company
Securities, repurchased, redeemed, or otherwise acquired directly or indirectly,
any outstanding Company Securities;
 
(g)            made any material change in financial or Tax accounting methods
or practices, except as required by an applicable Law or GAAP, or made, changed,
revoked or modified any material Tax election;
 
(h)           changed its fiscal or Tax year;
 
(i)            issued or sold any Company Securities or made any other changes
in the Company’s capital structure
 
 
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(j)           directly or indirectly sold, leased, licensed, abandoned,
mortgaged or otherwise encumbered or subjected to any Lien (other than a
Permitted Lien) or otherwise disposed in whole or in part any of its material
properties, material assets or material rights or any interest therein;
 
(k)           entered into or amended the terms of any lease of real property;
 
(l)           (i) wrote-off as uncollectible any notes or Accounts Receivable,
except write-offs in the Ordinary Course charged to reserves, (ii) wrote-off,
wrote-up, or wrote-down any other material asset of the Company, except in the
Ordinary Course, or (iii) altered the customary time periods for collection of
Accounts Receivable or payments of accounts payable;
 
(m)           granted any Lien other than a Permitted Lien
 
(n)           paid, discharged, settled, or satisfied any claims, Liabilities,
or obligations (absolute, accrued, asserted or unasserted, contingent or
otherwise) or any action for Damages, in each case in excess of $20,000
individually or $50,000 in the aggregate, or commenced any lawsuit for Damages
in excess of $20,000 individually or $50,000 in the aggregate;
 
(o)           made any loan, advance, or capital contributions to or investment
in any Person;
 
(p)           incurred or committed to incur any capital expenditure or
authorization or commitment with respect thereto that in the aggregate exceeds
$50,000;
 
(q)           entered into any new line of business outside of its existing
lines of business;
 
(r)           terminated or closed any material facility or line of business;
 
(s)           caused or suffered any material damage, destruction, or other
casualty loss (whether or not covered by insurance) affecting the Business or
assets, which, individually or in the aggregate, has had or would reasonably be
expected to have, a Material Adverse Effect;
 
(t)           suffered any adverse change in its business, operations, or
financial condition or become aware of any event which may result in any such
adverse change, the effect of which has had or could have a Material Adverse
Effect;
 
(u)           waived, canceled, sold, leased or licensed or otherwise disposed
of, for less than the face amount thereof, any claim or right it has against
others;
 
 
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(v)           granted or paid any severance or termination pay to any former
officer, director, manager, or employee;
 
(w)          directly or indirectly acquired or agreed to acquire (i) by merging
or consolidating with, purchasing a substantial equity interest in or a
substantial portion of the assets of, making an investment in or loan or capital
contribution to or in any other manner, any corporation, partnership,
association or other business organization or division thereof or (ii) any
assets that are otherwise material to the Company;
 
(x)           merged or consolidated with any Person;
 
(y)           created any Subsidiary;
 
(z)           adopted or entered into a plan of complete or partial liquidation,
dissolution, restructuring, recapitalization or other reorganization; or
 
(aa)          committed, agreed to, or contracted to do any of the foregoing.
 
3.10      Contracts.
 
3.10.1       Except (i) for this Agreement and the Ancillary Agreements, (ii) as
disclosed on Schedule 3.10.1, and (iii) for any oral agreements that were
entered into in the Ordinary Course in connection with the employment of the
Company’s employees and contractors (which employees and contractors, and their
annual or other compensation, are disclosed on Schedule 3.21.2 and which oral
agreements are terminable by the Company at will without the payment of any
severance, penalty or other amount).  The Company is not a party to or bound by
any of the following agreements (whether written or oral):
 
(a)           any partnership, joint venture, or other similar Contract or
arrangement, or any Contract relating to the acquisition or disposition of any
business (whether by merger, sale of stock, sale of assets, or otherwise);
 
(b)           any Contract relating to Indebtedness (in any case, whether
incurred, assumed, guaranteed, or secured by any asset) or any Contract,
indenture, or other instrument that contains restrictions with respect to
payment of any distribution in respect of the equity interests of the Company;
 
(c)           any Contract that limits the Company from marketing, selling, or
otherwise distributing its products or merchandise or providing its services in
any geographic area, or from competing in any line of business or geographic
area or with any Person;
 
 
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(d)           any Contract or arrangement with (i) the Seller or any of its
Affiliates, (ii) any Person directly or indirectly owning, controlling, or
holding, with the power to vote, five percent (5%) or more of the outstanding
voting securities of the Seller or the Seller’s Affiliates, or (iii) any
director, manager or officer of the Company or with any “associate” or any
member of the “immediate family” (as such terms are respectively defined in
Rules 12b-2 and 16a-1 of the Exchange Act) of any such director, manager or
officer;
 
(e)           any management service, consulting, or any other similar type of
Contract with a value in excess of $50,000 in any twelve-month period;
 
(f)           any warranty, guaranty, or other similar undertaking with respect
to a contractual performance extended by the Company other than in the Ordinary
Course;
 
(g)           any employment, deferred compensation, severance, bonus,
retirement, or other similar Contract or plan with a value in excess of
$50,000 in any twelve-month period;
 
(h)           any Contract involving payments by or to the Company of more than
$20,000 in any twelve-month period;
 
(i)           any Contract with any agency, dealer, sales representative, or
distributor for the marketing, selling and distribution of the Company’s
products and services, with a value in excess of $50,000 in any twelve-month
period, other than dealer agreements that are substantially similar to the
Company’s form dealer agreement, which form the Company has delivered to the
Purchaser;
 
(j)           any material license or similar Contract;
 
(k)           any Contract, the termination of which or the failure of which to
be renewed, would reasonably be expected to have, individually or in the
aggregate, a Material Adverse Effect;
 
(l)            any leases of Company Real Property or material personal
property;
 
(m)           any Contract with any labor organization;
 
(n)           any Contract or commitment providing for payments based in any
manner upon the sales, purchases, receipts, income or profits of the Company;
 
(o)           any Contract that would prevent consummation of the transactions
contemplated by this Agreement and the Ancillary Agreements, compliance by the
Seller with the terms, conditions, and provisions of this Agreement and the
Ancillary Agreements, or the continued operation of the Business after the date
of this Agreement or the Closing Date on substantially the same basis as
historically operated;
 
 
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(p)           any Contract pursuant to which the Company (i) is granted or
obtains or agrees to obtain any right to use any material Intellectual Property
Right (other than standard form Contracts granting rights to use readily
available shrink wrap or click wrap software), (ii) is restricted in its right
to use or register any Intellectual Property Rights, or (iii) permits or agrees
to permit any other Person to use, enforce, or register any Company owned, used,
or held, Intellectual Property Rights, including any license agreements,
coexistence agreements, and covenants not to sue related to such Intellectual
Property Rights; or
 
(q)           any other Contract not made in the Ordinary Course that is
material to the Company.
 
3.10.2       Each Contract disclosed on Schedule 3.10.1 or any other schedule to
this Agreement or required to be disclosed on Schedule 3.10.1 (each a “Material
Contract”) is a valid and binding Contract of the Company and is in full force
and effect, and neither the Company nor any of its Affiliates nor, to the
knowledge of the Company, any other party thereto, is in default or breach in
any material respect under the terms of any such Material Contract.  There is no
event, occurrence, condition, or act (including the consummation of the
transactions contemplated by this Agreement and the Ancillary Agreements) that,
with the giving of notice or the passage of time, could become a material
default or material event of default under any such Material Contract by any of
the parties thereto.  The Company has delivered to the Purchaser true and
complete copies of each written Material Contract and true and complete
summaries of all oral Material Contracts (other than any oral Contracts that
were entered into in the Ordinary Course in connection with the employment of
the Company’s employees, which employees (including their annual compensation)
are disclosed on Schedule 3.21.2, and are terminable by the Company at will
without the payment of any severance, penalty or other amount).
 
3.10.3       Since January 1, 2009, the Company has not received any notice from
any Person (a) alleging breach of any Material Contract, (b) terminating or
threatening to terminate any Material Contract or (c) of intent not to renew a
Material Contract.
 
 
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3.11       Insurance Coverage.  Schedule 3.11  sets forth a complete copy of all
insurance policies and fidelity bonds covering the assets, business, operations,
employees, officers, directors and managers, as applicable, of the Company
(collectively, the “Policies”).  Schedule 3.11 also sets forth a list and
description of all claims made by the Company under the Policies (or any other
insurance policies which were in effect) within the past three (3) years.  With
respect to each Policy, the Company has delivered to the Purchaser a true and
complete copy of each such Policy (including all amendments thereto) and a true
and complete copy of each material document (including all amendments thereto)
prepared in connection with each such Policy.  All Policies are in full force
and effect and there is no claim by the Company pending under any of such
Policies as to which coverage has been questioned, denied, or disputed by the
issuers or underwriters of such policies or bonds of any of the Policies.  None
of the insurers of the Company have issued a reservation of rights letter in the
defense of claims.  All premiums due and payable under the Policies have been
paid, and the Company does not have any liability due for any retrospective
premium adjustment, audit premium adjustment, experience based liability or loss
sharing cost adjustment under any of the Policies.  There have been no gaps in
the Company’s insurance coverage during the five (5) year period immediately
preceding the Closing Date.  The Company has complied in all material respects
with the terms and conditions of all the Policies.  Following the Closing the
Policies will insure the Company and its Plans, assets, business, operations,
employees, officers and directors, as applicable, to the same extent as they
insured the Company and its Plans, assets, business, operations, employees,
officers and directors, as applicable, prior to the Closing.  To the knowledge
of the Company, no threatened termination of, or premium increase exists with
respect to, any of the Policies, and the consummation of the transactions
contemplated by this Agreement and the Ancillary Agreements will not result in
any termination of, or premium increase with respect to, any of the Policies or
any inability to assess claims that were incurred prior to Closing under any of
the Policies.  Since the last renewal date of any Policy, there has not been any
material adverse change in the relationship of the Company on the one hand, and
its insurers, on the other hand, on the premiums payable pursuant to such
Policies.
 
3.12       Litigation.  Except as disclosed on Schedule 3.12, there is no
action, suit, investigation, arbitration, or administrative or other proceeding
pending or, to the knowledge of the Company, threatened against or affecting the
Company, or any of its properties or assets.  Neither the Company, nor its
business, is subject to or bound by any Order that would prevent or otherwise
interfere with the ability of the Company or the Seller to consummate the
transactions contemplated by this Agreement.  None of the items described in
Schedule 3.12, individually or in the aggregate, if pursued and/or resulting in
a judgment or decision against the Company, would have a Material Adverse
Effect.
 
3.13      Compliance with Laws; Licenses.
 
3.13.1         Except as disclosed on Schedule 3.13.1, the Company is not and
has not been in material violation of any applicable Law or Order, nor does the
Company have knowledge of the issuance or proposed issuance of any notice by any
Governmental Authority of any violation or any alleged violation of any Law or
Order.
 
 
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3.13.2         Schedule 3.13.2 sets forth a list of each material License held
by the Company, or issued and held in respect of the Company, or required to be
so issued and held to carry on the business of the Company as currently
conducted.  Except as disclosed on Schedule 3.13.2, each License disclosed on
Schedule 3.13.2 is held by the Company, and is valid and in full force and
effect and will not be terminated or impaired (or become terminated or impaired)
as a result of the transactions contemplated by this Agreement or any Ancillary
Agreement.  The Company is not in material default under and, to the knowledge
of the Company, no condition exists that with notice or lapse of time or both
would constitute a material default or violation under any License held by the
Company.
 
3.14      Properties.
 
3.14.1         The Company does not own any real property.  Schedule 3.14.1 sets
forth a list of all real property leased or otherwise used by the Company (the
“Leased Real Property”).  All leases of Leased Real Property are valid, binding,
and enforceable in accordance with their respective terms against the Company
and, against each other party thereto, and the Company is a tenant or possessor
in good standing thereunder and all rents currently due under such leases have
been paid.  There does not exist under any such lease any material default by
the Company, or to the knowledge of the Company any other party thereto, or any
event which with notice or lapse of time or both would constitute a material
default by the Company, or to the knowledge of the Company any other party
thereto.  The Company is in peaceful and undisturbed possession of the space
and/or estate under each lease of which it is a tenant. Neither the Seller nor
any of its Affiliates are a landlord under any lease relating to Leased Real
Property.  Neither the Company, nor the Seller has received any notice of any
appropriation, condemnation, or like proceeding, or of any violation of any
applicable zoning Law or Order relating to or affecting the Leased Real
Property, and to the knowledge of the Company, no such proceeding has been
threatened or commenced.
 
3.14.2         Schedule 3.14.2 sets forth a list of all personal property
(including equipment), that is necessary for the conduct of the Business and is
owned or leased by the Company and indicates whether each item of personal
property is owned or leased.  The assets owned or leased by the Company
(including real, personal, tangible, and intangible property), or that it
otherwise has or will have the right to use (including real, personal, tangible,
and intangible property), constitute all of the assets held for use or used in
connection with the Business and, to the Company’s knowledge, are sufficient to
conduct the Business of the Company as presently conducted.  Except as set forth
on Schedule 3.14.2, the Company does not use any asset not owned by it.  The
Company has good and marketable title to all of its properties and assets,
including those listed and described in Schedule 3.14.2, in each case, free and
clear of all Liens except as specifically disclosed or reserved against in the
Financial Statements or on Schedule 3.14.2 (to the extent and in the amounts so
disclosed or reserved against) and except for liens arising from current taxes
not yet past due.  Except pursuant to this Agreement, the Company is not a party
to any contract or obligation whereby there has been granted to any Person an
absolute or contingent right to purchase, obtain or acquire any rights in any of
the assets, properties or operations of the Company.  All machinery and
equipment owned or leased by the Company are in good operating condition and a
state of repair, subject only to ordinary wear and tear, which is not such as to
affect adversely the operation of the business as presently conducted or
proposed to be conducted.
 
 
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3.15      Accounts Receivable.  The Accounts Receivable outstanding on the date
hereof do, and the Accounts Receivable outstanding on the Closing Date will,
represent sales actually made or services actually performed in the Ordinary
Course in bona fide, arms-length transactions completed in accordance with the
terms and provisions contained in any documents relating thereto and in material
compliance with applicable Laws.  Unless paid prior to the Closing Date, the
Accounts Receivable are or will be as of the Closing Date current and
collectible net of the respective reserves shown on the Balance Sheet.  All
Accounts Receivables have been fully collected or may be fully collected without
resort to litigation and without offset or counterclaim, in the aggregate face
amounts thereof (subject to the allowance for bad debt taken into account in the
determination of Closing Working Capital).  The Company’s reserves for Accounts
Receivable have been and will be adequate and determined in accordance with its
accounting principles.  No claims of rights of setoff exist that would exceed
such reserves.  The Company has not factored or discounted, or agreed to factor
or discount, any Accounts Receivable.  Schedule 3.15 contains a complete and
accurate list of all Accounts Receivable as of the Balance Sheet Date, which
list sets forth the aging of such Accounts Receivable.  The Company has complete
and correct copies of all instruments, documents and agreements evidencing any
of its Accounts Receivable and of all instruments, documents or agreements
creating security therefore.
 
3.16      Inventories.  All items included in the Inventories consist of a
quality and quantity usable and, with respect to finished goods, saleable, in
the Ordinary Course except for obsolete items and items of below-standard
quality, all of which have been written off or written down to net realizable
value in the Balance Sheet or on the accounting records of the Company as of the
Closing Date, as the case may be.  The Company is not in possession of any
inventory not owned by the Company, including goods already sold.  The
quantities of each item of Inventories (whether raw materials, work-in-process
or finished goods) are not excessive but are reasonable in the present
circumstances of the Company.  Work-in-process Inventories are now valued, and
will be valued on the Closing Date, according to GAAP.
 
3.17      Intellectual Property.
 
3.17.1         Schedule 3.17.1(a) sets forth a complete and correct list of all
of the Company’s (i) issued patents and patent applications, (ii) domain names
and registered trademarks and applications therefor, (iii) registered copyrights
and applications therefor and (iv) rights in material software and all
documentation, including user manuals and training material, related thereto,
which is owned by the Company in any jurisdiction in the world (the “Company
Owned Intellectual Property”).  Schedule 3.17.1(b) sets forth all material
licenses (other than shrink wrap licenses), sublicenses, and other similar
agreements, including any ongoing software or website maintenance agreements, as
to which the Company is a party, including the identity of all parties thereto
other than licenses and shrink wrap licenses for commercial off-the-shelf
software products (the “Company Licensed Intellectual Property”).
 
 
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3.17.2         The Company owns or has a valid and legally enforceable right to
use, free and clear of any Liens (other than Permitted Liens), all Intellectual
Property Rights necessary to conduct the Business of the Company as currently
conducted or as proposed to be conducted without any conflict with or
infringement or misappropriation of any rights or property of third parties.
 
3.17.3         To the knowledge of the Company, there is no unauthorized use,
disclosure, infringement, or misappropriation of, nor is there any valid basis
for any claim of infringement or misappropriation from any third party upon, the
Intellectual Property Rights or other proprietary rights of the Company or any
third party.
 
3.17.4         Except as disclosed on Schedule 3.17.4:
 
(a)           neither the Company’s use of any Intellectual Property Rights nor
the conduct of the Business as currently conducted or as conducted in the past
infringes any intellectual property rights or other proprietary rights of any
third party;
 
(b)           the Company has not received any written notice from any Person
alleging, challenging, or questioning that, and has no knowledge that, the
Company’s use of Intellectual Property Rights infringes on or misappropriates or
constitutes an unauthorized use of any trademark, service mark, trade name,
invention, patent, trade secret, copyright, domain name, know-how, or any other
similar type of proprietary Intellectual Property Right of any other Person;
 
(c)           to the knowledge of the Company, no Person is infringing on,
misappropriating, or using on an unauthorized basis, and the Company has no
knowledge of any facts, circumstances or conditions that a reasonable person
would conclude provide a valid basis for any such claim that any Person is
infringing on misappropriating, or using on an unauthorized basis, any
Intellectual Property Rights owned, used or held for use by the Company or that
any Person is considering or threatening such a claim;
 
(d)           no Company Owned Intellectual Property Right is subject to any
outstanding Order, stipulation, or agreement restricting the use thereof by the
Company restricting the licensing thereof by the Company to any Person;
 
(e)           the Company has not entered into any agreement to indemnify any
other Person against any charge of infringement of any Intellectual Property
Right;
 
 
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(f)           all developers, creators, inventors, and authors of Intellectual
Property Rights owned, used or held for use by the Company (other than the
Company Licensed Intellectual Property), who were not employees of the Company
at the time of the development, creation, invention, or authorship of such
Intellectual Property Rights have assigned in writing all of their rights,
title, and interest to such Intellectual Property Rights to the Company;
 
(g)           any Company Owned Intellectual Property Rights developed, created,
invented, or authored by individuals who were employed by the Company at the
time of such development, creation, invention, or authorship are the sole
property of the Company, and no such employee has any rights, title, or interest
in such Intellectual Property Rights.  All employees of the Company have
executed and delivered to the Company an agreement (i) transferring to the
Company as appropriate, any Intellectual Property Rights developed, created,
invented, or authored by such employee or (ii) prohibiting disclosure of the
Company’s confidential and proprietary information including non-public
information regarding  Intellectual Property Rights owned, used or held for use
by the Company;
 
(h)           in connection with the use of the Intellectual Property Rights
(other than Company Licensed Intellectual Property) by the Company, the Company
does not owe to any other Person any fee, royalty, or other payment as a result
of the use of such Intellectual Property Rights;
 
(i)           the Company is not using, and it will not be necessary to use, (i)
any inventions or other Intellectual Property Rights of any of its past or
present employees or contractors made prior to or outside the scope of their
employment by the Company or (ii) any confidential information or trade secrets
of any former employer of any such person;
 
(j)           there are no actions that must be taken by the Company within
sixty (60) days following the Closing Date that, if not taken, would result in
the loss of any Company Owned Intellectual Property, including the payment of
any registration, maintenance, or renewal fees or the filing of any responses to
U.S. Patent and Trademark Office actions, documents, applications, or
certificates for the purposes of obtaining, maintaining, perfecting, or
preserving or renewing any Company Owned Intellectual Property Rights;
 
(k)           the Company has taken necessary, appropriate or commercially
reasonable steps to protect and preserve the confidentiality of all of the
material Intellectual Property Rights owned, used, or held for use by the
Company and its confidential and proprietary information that is not otherwise
disclosed in published patents or patent applications or registered copyrights;
 
 
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(l)           the consummation of the transactions contemplated by this
Agreement will not result in the loss or impairment of or payment of any
additional material amounts with respect to, nor require the consent of any
other Person in respect of, the Company’s right to own, use or hold of use any
of the Intellectual Property Rights as owned, used or held for use in the
conduct of the Business of the Company; and
 
(m)           the Company has not failed to comply to any material extent with
any privacy policies applicable to any of the Company’s websites.
 
3.18      Environmental Matters.
 
3.18.1       Except as disclosed on Schedule 3.18.1:
 
(a)           During the period in which the Company was a tenant thereon,
Constituents of Concern have not been generated, recycled, used, treated, or
stored on, transported to or from, or released or disposed on, the Company Real
Property by the Company or, to the knowledge of the Company, by any other party,
or to the knowledge of the Company on any property adjoining or adjacent to the
Company Real Property except in a manner which would not reasonably be expected
to result in any liability under any Environmental Laws and in compliance with
Environmental Laws;
 
(b)          the Company is in compliance in all material respects with all
applicable Environmental Laws (including by obtaining all necessary
Environmental Permits for the ownership, use, and/or operation of the Company in
compliance with the requirements of all Environmental Laws), and the
requirements of Environmental Permits issued under such Environmental Laws;
 
(c)           there are no pending or, to the knowledge of the Company,
threatened Environmental Claims against the Company or the Company Real Property
or Leased Real Property;
 
(d)           there are no facts, circumstances, conditions, or occurrences
regarding the Company’s past or present business or operations on the Company
Real Property or Leased Real Property that will or would (i) form the basis of a
material Environmental Claim against the Company, or any of the Company Real
Property or Leased Real Property or assets or (ii) cause any such current
Company Real Property or Leased Real Property or assets to be subject to any
material restrictions on its ownership, occupancy, use, or transferability under
any Environmental Law;
 
(e)           there are no (i) underground storage tanks or sumps (ii)
landfills, (iii) surface impoundments, (iv) asbestos-containing material that
requires special handling under Environmental Laws or (v) equipment containing
polychlorinated biphenyls on any Company Real Property or Leased Real Property;
 
 
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(f)           Neither the Company, nor any Company Real Property is listed or,
to the knowledge of the Company, is proposed for listing on the National
Priorities List under CERCLA or on any similar federal, state, or foreign list
of sites requiring investigation or clean-up, nor has the Company received any
notice as a potentially responsible party under the foregoing;
 
(g)          there are no material Environmental Permits that are
nontransferable or require consent, notification, or other action to remain in
full force and effect following the consummation of the transactions
contemplated hereby; and
 
(h)           the Company has no material liability or obligation, and has not
entered into an agreement or consent order assuming any material liability or
obligation, under any Environmental Law (including any obligation to remediate
any Environmental Condition whether caused by the Company or any other Person).
 
3.18.2        The Company has delivered to the Purchaser true, correct and
complete copies of all environmental investigations, studies, audits, tests,
reviews, or other analyses by or on behalf of the Company or that are available
to the Company.
 
3.19      Plans and Material Documents.
 
3.19.1        Schedule 3.19.1 sets forth a list of all employee benefit plans
(as defined in Section 3(3) of ERISA), and all other compensation or benefit
plans, programs, arrangements, contracts, or schemes, written or oral, statutory
or contractual, with respect to which the Company, or any ERISA Affiliate of the
Company is a party, has or may have any obligation or liability to contribute or
otherwise or that are maintained, contributed to or sponsored by the Company or
any such ERISA Affiliate, for the benefit of any current or former employee,
officer or director of the Company or any such ERISA Affiliate, including any
plans provided by ADP under an ADP TotalSource professional employer
organization arrangement (collectively, the “Plans”) during the six year period
immediately preceding the Closing.  With respect to each Plan, the Company has
delivered to the Purchaser a true and complete copy of each such Plan (including
all amendments thereto) and a true and complete copy of each material document
(including all amendments thereto) prepared in connection with each such Plan
including, and to the extent applicable, (a) a copy of each trust or other
funding arrangement, (b) each summary plan description and summary of material
modifications, (c) the three most recently filed IRS Forms 5500 (including all
schedules) and (d) the most recent determination or opinion letter referred to
in Section 3.19.4.  Neither the Company, nor any ERISA Affiliate of the Company,
has made any express or implied commitment, whether legally enforceable or not,
to create or incur liability with respect to or cause to exist any employee
benefit plan, program, arrangement, contract, or scheme or to modify any Plan,
other than as required by Law.
 
 
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3.19.2         None of the Plans (a) is a plan that is or has ever been subject
to Title IV of ERISA, Section 302 of ERISA or Section 412 of the Code, (b) is a
“multiemployer plan” as defined in Section 3(37) of ERISA, or a multiple
employer plan, (c) is a plan maintained in connection with a trust described in
Section 501(c)(9) of the Code, (d) provides for the payment of separation,
severance, termination, or similar-type benefits to any Person,  (e) is subject
to Section 409A of the Code, or (f) provides for or promises retiree medical or
life insurance benefits to any current or former employee, officer, director,
manager, member, stockholder or partner, as applicable, of the Company, or any
ERISA Affiliate of the Company, except to the extent required by Law.  In
addition, neither the Company nor any ERISA Affiliate has at any time had any
liability with respect to any of the foregoing types of plans or
arrangements.  Each of the Plans is subject only to the federal or state Laws of
the United States or a political subdivision thereof.
 
3.19.3         Each Plan is in compliance in all material respects with, and has
for all relevant periods been operated in all material respects in accordance
with, its terms and the requirements of all applicable Laws, and the Company and
each ERISA Affiliate of the Company has satisfied in all material respects all
of its statutory, regulatory, and contractual obligations with respect to each
such Plan.  No action, suit, claim, or proceeding is pending or, to the
knowledge of the Company, threatened with respect to any Plan (other than
routine claims for benefits in the Ordinary Course) and no fact or event exists
that could give rise to any such action, suit, or claim.
 
3.19.4         Each Plan or related trust that is intended to be qualified or
exempt from taxation under Section 401(a), 401(k) or 501(a) of the Code is so
qualified and has either received a favorable EGTRRA determination, advisory, or
opinion letter from the IRS that it is so qualified or exempt or is established
on a pre-approved form of plan document that has received a favorable EGTRRA
opinion letter from the IRS that such form of plan document is so qualified or
exempt, and nothing has occurred since the date of such determination, advisory,
or opinion letter that would reasonably be expected to adversely affect the
qualified or exempt status of any Plan or related trust.
 
3.19.5         There have been no non-exempt prohibited transactions (within the
meaning of Section 406 of ERISA or Section 4975 of the Code) with respect to any
Plan.  Neither the Company, nor any ERISA Affiliate of the Company, has incurred
any liability for any excise tax arising under the Code with respect to a Plan
and no fact or event exists that could give rise to such liability.  Neither the
Company, nor any ERISA Affiliate of the Company, has incurred any liability
relating to Title IV of ERISA and no fact or event exists that could give rise
to any such liability.
 
3.19.6         All contributions, premiums, or payments required to be made with
respect to each Plan have been made on or before their due dates and within the
applicable time required by the Plan and applicable Law.  All such contributions
have been fully deducted for income tax purposes and no such deduction has been
challenged or disallowed by any Governmental Authority, and no fact or event
exists which could give rise to any such challenge or disallowance.
 
 
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3.19.7         There has been no amendment to, interpretation of, or
announcement (whether or not written) by the Company or any ERISA Affiliate of
the Company relating to, or change in employee participation or coverage under,
any Plan, singly or in the aggregate, that would materially increase the expense
of maintaining such Plan above the level of the expense incurred with respect
thereto for the most recent fiscal year ended prior to the date of this
Agreement.  Each Plan can be amended, terminated or otherwise discontinued after
the Closing in accordance with its terms, without liability to the Purchaser or
the Company or any ERISA Affiliate of the Company (other than ordinary
administration expenses or with respect to benefits previously earned, vested or
accrued thereunder).
 
3.19.8         No employee or former employee of the Company or any ERISA
Affiliate of the Company, is, or will become, entitled to any bonus, retirement,
severance, job security, or similar benefit or enhanced such benefit (including
acceleration of vesting or exercise of an incentive award) as a result of the
transactions contemplated by this Agreement or any of the Ancillary
Agreements.  The consummation of the transactions contemplated by this Agreement
or any of the Ancillary Agreements will not result in any modification to the
service credits accrued by any employee or former employee under any of the
Plans.  No payment, deemed payment, or any other benefit under any Plan or other
compensatory arrangement could be nondeductible pursuant to Section 280G of the
Code or result in an excise tax under Section 4999 of the Code.
 
3.19.9         Except as provided on Schedule 3.19.9, the Company is not party
to any Contract or arrangement that is a “nonqualified deferred compensation
plan” subject to Section 409A of the Code.  Each such nonqualified deferred
compensation plan, if any, is in compliance with Section 409A of the Code, and
the United States Treasury Regulations and IRS guidance thereunder.
 
3.19.10       The Company has not had, within the six (6) years preceding the
date of this Agreement, any ERISA Affiliates.
 
3.20      Interests in Counterparties and Others.  Except as disclosed on
Schedule 3.20, neither the Seller, nor any officer or director of the Company,
nor any of their respective Affiliates possess, directly or indirectly, any
ownership or pecuniary interest in, or is a trustee, director, manager, officer,
Affiliate, or employee of, any Person that is a seller to, or supplier, lessor,
lessee, licensor, or competitor of the Company, including any counterparty to
any Material Contract.  The Company has not transferred any of its assets or
properties to, or bought any assets or properties from, the Seller or its
Affiliate, except for compensation, dividends, usual and customary benefits,
perquisites, and reimbursements of business expenses in the Ordinary
Course.  Ownership of five percent (5%) or less of any class of securities of a
Person whose securities are registered under the Exchange Act will not be deemed
to be an ownership interest for purposes of this Section 3.20.
 
 
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3.21      Relationships; Employee Compensation.
 
3.21.1         Except as disclosed on Schedule 3.21.1, none of the Company’s
lessors, suppliers, or vendors have canceled, terminated, or otherwise
materially altered or notified the Company in writing of, and the Company has no
knowledge of, any intention or otherwise threatened to cancel, terminate, or
materially alter its relationship with the Company effective prior to, as of, or
within one year after, the Closing.  There has not been, and to the Company’s
knowledge there will not be, any material change in relations with lessors,
suppliers or vendors of the Company, as a result of the transactions
contemplated by this Agreement or the Ancillary Agreements.  Except as disclosed
on Schedule 3.21.1, the Seller has not been notified by any employee or
independent contractor of the Company that such employee or contractor intends
to terminate his or her employment or engagement with the Company as a result of
the transactions contemplated by this Agreement.
 
3.21.2         Schedule 3.21.2 lists all employees of the Company and each such
employee’s annual salary, fees and bonus, as applicable.
 
3.21.3         Except for the employment agreements specifically set forth on
Schedule 3.21.3, none of the Seller, any officer or director of the Company, or
to the knowledge of the Company, any employee who receives annual compensation
(including base salary or wage rate and all forms of incentive compensation) in
excess of $20,000 per year is a party to, or is otherwise bound by, any
Contract, including any confidentiality, non-competition, or proprietary rights
Contract, between such employee, the Seller, officer or director or manager and
any other Person that in any way adversely affects or will affect (a) the
performance of his duties as an employee, stockholder, officer or director, or
manager of the Company, (b) the ability of the Company to conduct its business
consistent with past practice or (c) the ability of the Company to conduct its
business after the Closing in a manner consistent with the conduct of such
business by the Company prior to the Closing.
 
3.21.4         Schedule 3.21.4 lists all employees of the Company who are
disabled or hospitalized as a result of circumstances relating to their
employment.
 
 
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3.22      Other Employment Matters.
 
3.22.1         Except as disclosed on Schedule 3.22, (a) the Company is in
material compliance with all Laws respecting employment and employment practices
and terms and conditions of employment, including all minimum wage and overtime
Laws and wage payment Laws, child labor, immigration, employment discrimination,
disability rights or benefits Laws, and has not, and is not, engaged in any
unfair labor practice, (b) there is no unfair labor practice complaint against
the Company pending before the National Labor Relations Board, (c) there is no
labor strike, dispute, slowdown, or stoppage pending or threatened against or
involving the Company, (d) the Company is not a party to any collective
bargaining agreement and no collective bargaining agreement is currently being
negotiated by the Company, (e) the Company has not breached any collective
bargaining agreements, (f) to the Company’s knowledge, no representation
question exists respecting employees of the Company and (g) no claim in respect
of the employment of any employee of the Company has been asserted and is
currently pending or, to the knowledge of the Company, threatened, against the
Company.
 
3.22.2         To the knowledge of the Company, all employees, agents, and
contractors of the Company are legally authorized to work in the United States
either because of their status as United States citizens, legal permanent
residents, or by virtue of possessing a visa under Law relating to immigration
control which visa allows for such employee to work in the United States.  The
Company, has not hired, recruited or referred for a fee a Person who is not
legally authorized to be employed in the United States, to the knowledge of the
Company, employed a Person that is not legally authorized to be employed in the
United States.  The Company has properly completed all reporting and
verification requirements pursuant to any Law relating to immigration control
for all of its employees, agents and contractors including the Form I-9.  The
Company has retained for each current employee the Form I-9 throughout such
employee’s period of employment with the Company and has retained a Form I-9 for
each former employee of the Company for a period of one (1) year from the date
of termination of such employee or three (3) years from the date of hire,
whichever is later.  The Company has not received any written notice from any
Governmental Authority that, and the Company has no knowledge that, the Company
is in violation of any Law pertaining to immigration control or that any current
or former employee, agent or contractor of the Company is or was not legally
authorized to be employed in the United States or is or was using an invalid
social security number and there is no pending, or to the Company’s knowledge
threatened, charge or complaint under the Immigration Reform and Control Act of
1986 against the Company.
 
3.23      OSHA/Workers’ Compensation.
 
3.23.1         The Company has provided the Purchaser with all inspection
reports issued under OSHA or any other occupational health and safety
legislation.  Except as disclosed on Schedule 3.23.1, there are no outstanding
inspection orders or any pending or, to the knowledge of the Company, threatened
charges under OSHA or any other applicable occupational health and safety
legislation.  Except as disclosed on Schedule 3.23.1, there have been no fatal
or OSHA reportable accidents that could lead to charges under OSHA or any other
applicable occupational health and safety legislation.  Except as disclosed on
Schedule 3.23.1, the Company has complied in all material respects with any
Orders issued to such entity under OSHA or any other applicable occupational
health and safety Laws and there are no appeals of any Orders that are currently
outstanding.
 
 
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3.23.2         Except as disclosed on Schedule 3.23.2, there is not pending
against the Company any workers’ compensation claims, and, to the knowledge of
the Company, there are no facts that would give rise to such a claim or
complaint.  Except as disclosed on Schedule 3.23.2, the Company has not received
any written notice of a citation, penalty, or assessment from any agency with
responsibility for workers’ compensation or occupational safety and health.  The
Company is in material compliance with all Laws respecting worker’s
compensation.
 
3.24      No Indebtedness.  Except as disclosed on Schedule 3.24, as of, and
after giving effect to, the Closing, the Company will not have any Indebtedness.
 
3.25      Export Compliance.  Neither the Company nor any of its current or
former employees, representatives, agents, consultants, independent contractors,
subcontractors, leased employees, volunteers, or “temps” in connection with his
or her affiliation with, or the performance of his or her duties to, the
Company: (A) have engaged in any activity or transaction prohibited by or in
violation of any U.S. Export Control or Import Law; (B) have been the recipient
of a subpoena, warning letter, finding of violation letter, charging letter,
draft charging letter, or other document alleging a violation, or possible
violation, of any U.S. Export Control or Import Law from any U.S. Trade Control
Agency; (C) have been (x) the subject of an indictment for a violation or
violations of any U.S. Export Control or Import Law; (y) convicted of violating
any U.S. Export Control or Import Law or (z) barred or suspended, even
temporarily, from doing business with any agency of the U.S. Government as a
result of a violation of any U.S. Export Control or Import Law; (D) (x) are an
Embargoed Person; (y) are owned or controlled by, or is acting on behalf of, an
Embargoed Person or (z) have engaged in activities, dealings or transactions
with or involving an Embargoed Person; (E) have entered into a settlement, plea
agreement, or deferred prosecution agreement with any U.S. Trade Control Agency
for alleged violations of any U.S. Export Control or Import Law; or (F) have
been officially reprimanded or terminated in whole or in part due to his or her
violation of the Company’s policies and procedures related to U.S. Export
Control or Import Laws. There is no pending or, to the knowledge of the Company,
threatened U.S. Trade Control Agency proceeding, investigation, audit or
enforcement action against the Company or any of its current or former
employees, representatives, agents, consultants, independent contractors,
subcontractors, leased employees, volunteers, or “temps” in connection with his
or her affiliation with, or the performance of his or her duties to, the
Company.  The Company does not have any pending or anticipated disclosures to
any U.S. Trade Control Agency for potential violations of any U.S. Export
Control or Import Law.  All voluntary self disclosures that have been submitted
to a U.S. Trade Control Agency involving potential violations of U.S. Export
Control or Import Laws have been disclosed to the Purchaser.  The Company has
not reported any potential violations to a U.S. Trade Control Agency.
 
 
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3.26      Customers and Suppliers.
 
3.26.1         Schedule 3.26.1 sets forth a list of at least the twenty-five
(25) largest customers and at least the ten (10) largest suppliers of the
Company, as measured by the dollar amount of payments to or purchases therefrom,
during each of the three fiscal years ended immediately prior to the date of
this Agreement and the period beginning on the first day of the current fiscal
year and ending on the last day of the last month ending prior to the date of
this Agreement, showing purchases by and payments to the Company from and to
each such supplier and customer during such periods.
 
3.26.2         Since December 31, 2008, no customer or supplier required to be
listed on Schedule 3.26.1 has terminated its relationship with the Company or
materially changed the pricing or other terms of its business with the Company
and no such customer or supplier has notified the Company in writing that, and
the Company has no knowledge that, it intends to terminate or materially change
the pricing or other terms of its business with the Company.  The Company is, in
its good faith opinion, in good commercial working relationships with each
customer and supplier required to be listed on Schedule 3.26.1.
 
3.26.3         Except as set forth in Schedule 3.26.3, there exists no condition
or state of facts or circumstances known to the Company involving customers or
suppliers of or to the Business that would reasonably be expected to have a
Material Adverse Effect.
 
3.27      Absence of Sensitive Payments.  Neither the Company nor any of its
employees or officers have made any contributions, payments or gifts to or for
the private use of any governmental official, governmental employee or
governmental agent in any amount where either the payment or the purpose in
making such contribution, payment or gift is illegal under the Laws of the
United States or any other jurisdiction; has established or maintained any
unrecorded fund or asset for any purpose or made any false or artificial entries
on its books; or has made any payments to any Person with the intention or
understanding that any part of such payment was to be used for any purpose other
than that described in the document supporting the payment.  Neither the Seller
nor any of its employees or officers has taken any of the actions described in
the preceding sentence on behalf of the Company or the Company’s assets or
business.
 
 
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3.28       Warranties.  Except as set forth on Schedule 3.28, there is no
currently pending claim for product liability, warranty or other claims by any
third party (whether based on contract or tort and whether relating to personal
injury, including death, property damage or economic loss) arising from:  (i)
products sold or services rendered by the Company during periods through and
including the Closing Date, or (ii) the operation of the Business during the
period through and including the Closing Date.  All products sold or services
rendered by the Company in connection with the Business have been in conformity
with all applicable contractual commitments and all express and implied
warranties, and the Company has no material liability (and the Company has no
knowledge of any basis for any present or future action, suit, proceeding,
hearing, investigation, charge, complaint, claim, or demand giving rise to any
liability) for Damages in connection therewith, except as set forth on Schedule
3.28.  No products sold or services provided by the Company in connection with
the Business are subject to any guaranty, warranty, or other indemnity beyond
the Company’s standard terms and conditions of sale set forth on Schedule 3.28.
 
3.29       Securities Laws Compliance.  Each offer and sale, redemption and
repurchase of securities of the Company, including all convertible notes,
options, warrants and other rights to purchase or acquire the securities of the
Company, was in compliance with all applicable Laws and exempt from the
registration requirements of the Securities Act and other applicable Laws,
including any applicable state securities Laws.
 
3.30       Absence of Certain Business Practices.  Except as disclosed on
Schedule 3.30, neither the Company nor any officer, director, employee,
independent contractor, or any Person acting on behalf of the Company, has (a)
received, directly or indirectly, any rebates, payments, commissions,
promotional allowances, or any other economic benefits, regardless of their
nature or type, from any customer, governmental employee or other Person with
whom the Company has done business directly or indirectly, or (b) directly or
indirectly, given or agreed to give any gift or similar benefit to any customer,
governmental employee or other Person who is or may be in a position to help or
hinder the Company (or assist the Company in connection with any actual or
proposed transaction) which, in the case of either clause (a) or (b) above,
would reasonably be expected to subject the Company to any damage or penalty in
any civil, criminal, or governmental litigation.  Neither the Company nor, to
the knowledge of the Company, any officer, director, employee, independent
contractor or any Person acting on behalf of the Company, has used any funds for
unlawful contributions, gifts, entertainment, or other expenses relating to
political activity or otherwise, or has made any direct or indirect unlawful
payment to governmental officials or employees from the Company’s funds or been
reimbursed from the Company’s funds for any such payment, or to the knowledge of
the Company that any other Person associated with or acting on behalf of the
Company has engaged in any such activities.
 
3.31       Finders’ Fees.  Except as disclosed on Schedule 3.31, there is no
investment banker, broker, finder or other intermediary that has been retained
by or is authorized to act on behalf of the Seller, the Company, or any of their
respective Affiliates, who might be entitled to any fee or commission paid by
the Seller or the Company in connection with the transactions contemplated by
this Agreement or any Ancillary Agreement.  All amounts disclosed on Schedule
3.31 shall be paid by the Seller.
 
 
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3.32       Full Disclosure.  The representations and warranties of the Seller
and the Company contained in this Agreement and the Ancillary Agreements do not
contain any untrue statement of a material fact or omit to state a material fact
necessary in order to make the statements contained herein or therein, in light
of the circumstances under which they were made, not misleading.  Neither the
Seller nor the Company has made any representations or statements contained in
this Agreement that were misleading or inaccurate in any material respect or has
withheld from or failed to disclose to the Purchaser any material fact.
 
IV.  REPRESENTATIONS AND WARRANTIES
OF THE SELLER
 
The Seller hereby represents and warrants as follows:
 
4.1        Organization.  The Seller is duly formed, validly existing, and in
good standing as a corporation under the Laws of the country of Israel.
 
4.2        Authorization; Enforceability.  The Seller has the requisite
corporate power and authority to execute, deliver, and perform its obligations
under this Agreement and each Ancillary Agreement to which the Seller is or will
be a party.  This Agreement and each Ancillary Agreement to which the Seller is
or will be a party has been duly authorized, executed and delivered by the
Seller.  This Agreement and each Ancillary Agreement to which the Seller is or
will be a party has been or will be duly authorized, executed and delivered by
the Seller, and once executed, will constitute, a legal, valid and binding
agreement of the Seller, enforceable against the Seller in accordance with their
respective terms (subject to bankruptcy reorganization or other laws affecting
creditors’ rights generally).
 
4.3        Litigation.  Except as disclosed on Schedule 4.3, there is no action,
suit, investigation, arbitration, or administrative or other proceeding pending
or, to the knowledge of the Seller, threatened against or affecting the Seller
and to the knowledge of the Seller, there is no valid basis for any such action,
suit, investigation, or proceeding before any court or arbitrator or any
governmental body, agency, or official that, individually or in the aggregate,
if determined or resolved adversely to the Seller could or in the aggregate,
would reasonably be expected to adversely affect the ability of the Seller to
consummate the transactions contemplated by this Agreement or to otherwise
perform its obligations under this Agreement or any Ancillary Agreement (to
which the Seller is or will be a party).
 
 
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4.4        Non-Contravention.  The execution, delivery, and performance by the
Seller of this Agreement and each Ancillary Agreement (to which the Seller is or
will be a party) does not and will not (a) violate the Organizational Documents
of the Seller or any of the Seller’s Subsidiaries, or (b) violate any applicable
Law or Order or (c) require any filing with or permit, consent, or approval of,
or the giving of any notice to, any court or other Person, except in the case of
clauses (b) and (c) for such filings, Licenses, consents, approvals, or notices
and violations that, individually or in the aggregate would not reasonably be
expected to materially and adversely affect the Seller’s right or ability to
consummate the transactions contemplated by this Agreement or to otherwise
perform its obligations under this Agreement or any Ancillary Agreement (to
which the Seller is or will be a party).
 
4.5        Finders’ Fees.  There is no investment banker, broker, finder, or
other intermediary that has been retained by or is authorized to act on behalf
of the Seller or any Affiliate thereof, who might be entitled to any fee or
commission in connection with the transactions contemplated by this Agreement or
any Ancillary Agreement.
 
V.  REPRESENTATIONS AND WARRANTIES
OF THE PURCHASER
 
The Purchaser represents and warrants to the Seller as follows:
 
5.1        Organization.  The Purchaser is duly formed, validly existing, and in
good standing as a corporation under the Laws of the State of New Jersey.
 
5.2        Authorization; Enforceability.  The Purchaser has the requisite
corporate power and authority to execute, deliver, and perform its obligations
under this Agreement and each Ancillary Agreement to which the Purchaser is or
will be a party.  This Agreement and each Ancillary Agreement to which the
Purchaser is or will be a party has been duly authorized, executed and delivered
by the Purchaser.  This Agreement and each Ancillary Agreement to which the
Purchaser is or will be a party has been or will be duly authorized, executed
and delivered by the Purchaser, and once executed, will constitute, a legal,
valid and binding agreement of the Purchaser, enforceable against the Purchaser
in accordance with their respective terms.
 
5.3        Litigation.  There is no action, suit, investigation, arbitration, or
administrative or other proceeding pending or, to the knowledge of the
Purchaser, threatened against or affecting the Purchaser and to the knowledge of
the Purchaser, there is no valid basis for any such action, suit, investigation,
or proceeding before any court or arbitrator or any governmental body, agency,
or official that, individually or in the aggregate, if determined or resolved
adversely to the Purchaser could or in the aggregate, would reasonably be
expected to adversely affect the ability of the Purchaser to consummate the
transactions contemplated by this Agreement or to otherwise perform its
obligations under this Agreement or any Ancillary Agreement (to which the
Purchaser is or will be a party).
 
 
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5.4        Non-Contravention.  The execution, delivery, and performance by the
Purchaser of this Agreement and each Ancillary Agreement (to which the Purchaser
is or will be a party) does not and will not (a) (i) violate the governing or
Organizational Documents of the Purchaser or any of the Purchaser’s
Subsidiaries, or (ii) violate the governing or Organizational Documents of the
Company, (b) violate any applicable Law or Order or (c) require any filing with
or permit, consent, or approval of, or the giving of any notice to, any court or
other Person, except in the case of clauses (b) and (c) for such filings,
Licenses, consents, approvals, or notices and violations that, individually or
in the aggregate would not reasonably be expected to materially and adversely
affect the Purchaser’s right or ability to consummate the transactions
contemplated by this Agreement or to otherwise perform its obligations under
this Agreement or any Ancillary Agreement (to which the Purchaser is or will be
a party).
 
5.5        Finders’ Fees.  There is no investment banker, broker, finder, or
other intermediary that has been retained by or is authorized to act on behalf
of the Purchaser or any Affiliate thereof, who might be entitled to any fee or
commission in connection with the transactions contemplated by this Agreement or
any Ancillary Agreement.
 
5.6        Financial Capability.  Purchaser will have, as of the Closing Date,
sufficient funds to pay the Transaction Consideration and otherwise consummate
the transactions contemplated by this Agreement.
 
VI.  CERTAIN COVENANTS
 
6.1        No Indebtedness or Liens.  At or prior to the Closing, the Seller
shall cause, or shall have caused, the Company to satisfy all outstanding
Indebtedness, except as disclosed on Schedule 6.1.  At or prior to the Closing,
the Seller shall cause, or shall have caused, the Company to terminate all Liens
on or against any assets or equity interests of the Company, other than the
Permitted Liens or Liens to be released as a result of the Closing Indebtedness
Payments.
 
6.2        Further Assurances.  From time to time, as and when requested by any
Party to this Agreement, the other Parties will execute and deliver, or cause to
be executed and delivered, all such documents and instruments and will take, or
cause to be taken, all such further or other actions, as the requesting Party
may reasonably deem necessary or desirable to consummate the transactions
contemplated by this Agreement.
 
 
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6.3       Conduct of Business of the Company.
 
6.3.1          During the period from the date of this Agreement through the
Closing, the Company will, and the Seller will use its best efforts, to cause
the Company to, conduct its operations only in the Ordinary Course (including
managing its working capital in accordance with its past practice and custom)
and, without limiting the generality or effect of the foregoing, the Company
will and the Seller will use its best efforts to:  (a) preserve intact its
business organization, (b) keep available the services of its officers and key
employees, (c) continue in full force and effect without material modification
all Policies, (d) pay its Indebtedness and trade and other accounts payable
punctually when and as the same will become due and payable and perform and
observe, in all material respects, its duties and obligations under all Material
Contracts, (e) other than terminations in the ordinary course of business,
maintain its relationships and goodwill with material suppliers, franchisees,
distributors, manufacturers, customers, landlords, key employees, agents and
others having business relationships with it, and (f) take any action that is
required so that all representations or warranties of the Company and the Seller
are true and correct in all material respects (except for those qualified by
materiality, knowledge or Material Adverse Effect, which should be true in all
respects) as of the Closing.  The Company will, and the Seller will use its best
efforts to cause the Company to, confer with the Purchaser concerning
operational matters of a material nature and report periodically to the
Purchaser concerning the business, operations, and finances of the Company.
 
6.3.2          Without limiting the generality or effect of Section 6.3.1, prior
to the Closing, the Company will not, except (i) as set forth in Schedule 6.3.2,
(ii) as required by applicable Law, or (iii) as otherwise contemplated by this
Agreement, without the prior written consent of the Purchaser (which consent
shall not be unreasonably withheld or delayed) take any action or suffer any
event described in Section 3.9.
 
6.4        Exclusive Dealing.  During the period from the date of this Agreement
to the earlier of the Closing or the termination of this Agreement in accordance
with its terms, the Seller will not, nor shall the Seller permit the Company,
any of their Affiliates, or other representatives of any of the foregoing
(including advisors, agents, attorneys, employees, or consultants) to, take any
action to, directly or indirectly, encourage, initiate, solicit, or engage in
discussions or negotiations with, or provide any information to any Person,
other than the Purchaser (and its Affiliates and representatives), concerning
any purchase of any interests or any merger, asset sale, contribution,
recapitalization, investment in, or similar transaction involving the
Company.  From the date of this Agreement until the earlier of the Closing or
the termination of this Agreement in accordance with its terms, the Seller will,
and will cause the Company to, promptly (and in any event within two (2)
Business Days thereof) disclose to the Purchaser the existence or occurrence of
any proposal or contract that it, he or she or any of their representatives
described above may receive or become aware of in respect of any such
transaction and the identity of the Person from whom such a proposal or Contract
is received.
 
 
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6.5        Review of the Company.  Prior to the Closing, the Seller will, and
will cause the Company to, permit the Purchaser, directly or through its
Affiliates or representatives, to review the properties, books, and records of
the Company and their financial and legal conditions to the extent the Purchaser
deems it necessary or advisable to familiarize itself with such properties and
other matters, provided, however, such review shall not unreasonably disrupt the
Company’s operation and provided further that no employee will be approached
without consent and coordination of the management of the Company.  The Seller
will, and will cause the Company to, permit the Purchaser and their
representatives to have, after the date of execution of this Agreement,
reasonable access to the premises and to all the books and records of the
Company and to cause the officers of the Company to furnish the Purchaser with
such financial and operating data and other information with respect to the
Business, properties, assets and Liabilities of the Company as the Purchaser may
from time to time reasonably request, provided, however, such review shall not
unreasonably disrupt the Company’s operation.  The Seller will, and will cause
the Company to, deliver or cause to be delivered to the Purchaser such
additional instruments, documents, certificates, and opinions as the Purchaser
may reasonably request for the purpose of (a) verifying the information set
forth in this Agreement or on any Schedule attached to this Agreement and (b)
consummating or evidencing the transactions contemplated by this Agreement. All
nonpublic information provided to, or obtained by, Purchaser in connection with
the transactions contemplated hereby shall be “Information” for purposes of the
Confidentiality Agreement entered into by the Seller and the Purchaser dated as
of December 9, 2009 (the “Non-Disclosure Agreement”).  Notwithstanding the
foregoing, Seller shall not be required to disclose any information if such
disclosure would contravene any applicable Law.  Upon the Closing, the
Non-Disclosure Agreement shall: (a) terminate with respect to any Information
(as defined therein) of the Company and/or the Business, and (b) continue in
full force and effect with respect to any other Information of or relating to
the Seller.
 
6.6        Reasonable Efforts.  The Company will, and the Seller will cause the
Company to, and the Purchaser will, cooperate and use its reasonable efforts to
take, or cause to be taken, all appropriate actions (and to make, or cause to be
made, all filings necessary, proper or advisable under applicable Laws) to
consummate and make effective the transactions contemplated by this Agreement,
including their respective reasonable efforts to obtain, prior to the Closing,
all Licenses and parties to contracts with the Company, as applicable, as are
necessary for the consummation of the transactions contemplated by this
Agreement and to fulfill the conditions to the transactions contemplated by this
Agreement.  Notwithstanding any other provision of this Agreement, in no event
will the Purchaser or any of its Affiliates (including the Company after the
Closing) be required to (a) enter into or offer to enter into any divestiture,
hold-separate, business limitation, or similar agreement or undertaking in
connection with this Agreement or the transactions contemplated by this
Agreement or (b) make any payment in connection with any consent or approval or
condition to Closing set forth in any section of Article VIII that is necessary
or advisable for the Seller or the Company to obtain or satisfy in order to
consummate the transactions contemplated by this Agreement.
 
 
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6.7        Termination of Certain Agreements and Similar Arrangements.  Except
for any Ancillary Agreements entered into in connection with the transactions
contemplated by this Agreement, at or prior to the Closing, the Seller will
cause any and all voting trusts or agreements, registration rights agreements,
pledge agreements, buy-sell agreements, rights of first refusal or preemptive
rights, stockholders agreements, proxies or similar agreements, arrangements or
understandings relating to the Shares to be terminated and will provide the
Purchaser with documentation reasonably satisfactory to the Purchaser evidencing
such termination.
 
6.8        Termination of 401(k) Plan.  Prior to the Closing Date, by proper
resolution of the Company’s Board of Directors, and adoption of plan amendments,
if necessary, the Company will cease all contributions to and discontinue the
right of all participants to accrue additional benefits under the Company’s
401(k) plan, and terminate the Company’s 401(k) plan, effective no later than
one day prior to the Closing Date.  The form and substance of such resolutions
and amendments will be subject to the reasonable advance review and approval by
Purchaser’s counsel.  The Company shall take such other actions to terminate
Plans before the Closing Date as requested by Purchaser.
 
VII.  TAX MATTERS
 
7.1        Preparation of Tax Returns; Control of Audits; Tax Refunds.
 
7.1.1          The Seller shall prepare or cause to be prepared for filing by
the Company all Tax Returns for the Company for all Tax periods ending on or
before the Closing Date that are due after the Closing Date.  Such Tax Returns
shall be prepared in a manner consistent with the terms of this Agreement and
the Company’s past practices, except to the extent required by applicable
Law.  Such Tax Returns (including any related work papers or other information
reasonably requested by the Purchaser), shall be provided to the Purchaser not
later than ten (10) days before the due date for filing such Tax Returns
(including extensions), and the Purchaser shall thereafter cause all such Tax
Returns to be timely filed by the Company.  The Seller will timely pay (or cause
to be timely paid) all Pre-Closing Tax Liabilities (as such term is defined
herein) shown as due and owing on all such Tax Returns, other than to the extent
that an accrual with respect to such Tax is included as a current liability and
taken into account for purposes of determining the Transaction Consideration
adjustment stipulated in Section 2.4 above.
 
 
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7.1.2          The Purchaser shall cause the Company to prepare or cause to be
prepared, and file or cause to be filed, all Tax Returns for the Company for all
Tax periods that begin before the Closing Date and end after the Closing Date
(the “Straddle Periods”).  Such Tax Returns shall be prepared in a manner
consistent with the Company’s past practices, except to the extent required by
applicable Law.  Such Tax Returns (including any related work papers or other
information reasonably requested by the Seller) shall be provided to the Seller
for its review not later than forty-five (45) days before the due date for
filing such Tax Returns (including extensions).  If the Seller does not provide
the Purchaser with a written description of the items in the Tax Returns that
the Seller intends to dispute within fifteen (15) days following the delivery to
the Seller of such documents, the Seller shall be deemed to have accepted and
agreed to such documents in the form provided, and the Purchaser shall
thereafter cause such Tax Returns to be timely filed by the Company in the form
provided to the Seller.  The Purchaser and the Seller agree to consult with each
other and to negotiate in good faith any timely-raised issue arising as a result
of the review of such Tax Returns to permit the filing of such Tax Returns as
promptly as possible, which good faith negotiations shall include each side
exchanging in writing their positions concerning the matter or matters in
dispute and a meeting to discuss their respective positions.  In the event the
parties are unable to resolve any dispute within ten (10) days following the
delivery of written notice by the Seller of such dispute, then the Seller and
the Purchaser shall mutually engage and submit such dispute to, and the same
shall be finally resolved in accordance with the provisions of this Agreement by
Ernst & Young LLP or, if such firm declines the representation, a nationally
recognized accounting firm mutually agreed on by the Seller and the Purchaser
(the accounting firm ultimately chosen, the “Accounting Referee”).  The
Purchaser and the Seller shall jointly request the Accounting Referee to resolve
any issue in dispute at least five business days before the due date of such Tax
Return, in order that such Tax Return may be timely filed.  The Accounting
Referee shall make a determination with respect to any disputed issue within
five Business Days before the due date (including extensions) for the filing of
the Tax Return in question, and the Purchaser shall cause the Company to file
such Tax Return on the due date (including extensions) therefor in a manner
consistent with the determination of the Accounting Referee.  The determination
of the Accounting Referee shall be binding on all parties; provided that any
such determination shall be limited to the resolution of issues in dispute.  The
fees and disbursements of the Accounting Referee shall be borne by the Party
(i.e., the Seller, on the one hand, and the Purchaser, on the other hand, that
assigned amounts to items in dispute that were, on a net basis, furthest in
amount from the amount finally determined by the Accounting Referee).  In
addition to the Straddle Period Tax Returns prepared by the Purchaser pursuant
to this Section 7.1.2, the Purchaser shall also submit to the Seller, together
with such Straddle Period Tax Returns, a proposed allocation of the Taxes with
respect to any such Straddle Period for which the Seller is responsible pursuant
to Section 7.5.1 hereof (“Seller’s Straddle Period Allocation”), and the dispute
resolution mechanism set forth in this Section 7.1.2 shall also apply with
respect to such proposed Seller’s Straddle Period Allocation.  The Seller shall
pay to the Purchaser on or before the date which is the later of three business
days before the due date of each applicable Tax Return (after giving effect to
any valid extensions), or five days after such final determination, the amount
of the Pre-Closing Tax Liabilities for which the Seller is responsible as
determined herein.
 
 
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7.1.3          The Purchaser and the Seller shall cooperate fully in connection
with the filing of Tax Returns pursuant to this Section 7.1 and, subject in all
respects to the provisions of Section 7.2 hereof, in connection with any audit,
litigation or other proceeding with respect to Taxes of the Company.  Such
cooperation shall include the reasonable furnishing or making available during
normal business hours of personnel, powers of attorney, and the retention and
(upon a party’s request) the provision of records and information that are
reasonably relevant to the preparation of any such Tax Return or to any such
audit, litigation or other proceeding.  The Purchaser and the Seller shall (a)
retain or cause to be retained all books and records that are in its or his
possession with respect to Tax matters pertinent to the Company relating to any
Pre-Closing Period or Straddle Period until the expiration of the applicable
statute of limitations (and, to the extent notified by the Purchaser or the
Seller, any extension thereof) of the applicable taxable periods, and abide by
all record retention agreements entered into with any Governmental Authority,
and (b) give the other parties hereto reasonable written notice before
transferring, destroying or discarding any such books and records and, if the
other party so requests, the Purchaser or the Seller, as the case may be, shall
allow the other party to take possession of such books and records.
 
7.1.4          The Purchaser and the Seller shall, upon request, use their
commercially reasonable efforts to obtain any certificate or other document from
any Person as may be necessary to mitigate, reduce or eliminate any Tax that
could be imposed (including with respect to the transaction contemplated
hereby).
 
7.1.5          To the extent that, subsequent to the date hereof, the Company
receives any Tax refund attributable to the period of time prior to the Closing,
or the Purchaser receives any such Tax refund attributable to the operations of
the Company prior to the Closing, such Tax refund shall be the property of the
Seller, other than to the extent set forth in the following sentence, and the
Purchaser shall cause the Company to remit such Tax refund to the Seller within
ten (10) Business Days of receipt thereof.  The foregoing shall not apply with
respect to (i) any Tax refund that is reflected as an asset that is taken into
account for purposes of determining the Transaction Consideration adjustment
stipulated in Section 2.4 above or (ii) any Tax refund attributable to the
carryback of a net operating loss that is attributable to any Post-Closing Tax
Period.
 
7.2        Tax Claims.  In the event a claim is made or a deficiency alleged
following the Closing relating to the Company by the IRS or any other taxing
authority, which, if successful, would result in a loss or liability in respect
of which indemnity properly may be sought against the Seller pursuant to this
Agreement (collectively, an “Indemnity Tax Matter”), then the following shall
apply:
 
7.2.1          After the Company receives actual notice of such claim or alleged
deficiency, the Purchaser shall, or the Purchaser shall cause the Company to,
promptly notify the Seller in writing of such claim or alleged deficiency.
 
 
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7.2.2          The Seller shall have the right to represent the interests of the
Company before the relevant Governmental Authority with respect to any Indemnity
Tax Matter and shall have the right to control the defense, compromise or other
resolution of any such Indemnity Tax Matter, including responding to inquiries,
filing Tax Returns and contesting, defending against and resolving any
assessment for additional Taxes or notice of Tax deficiency or other adjustment
of Taxes of, or relating to, such Indemnity Tax Matter.  The Purchaser shall
have the right (but not the duty) to participate in the defense of such
Indemnity Tax Matter and to employ counsel, at the Purchaser’s own expense,
separate from counsel employed by the Seller, and the Seller shall keep the
Purchaser informed with respect to the commencement, status and nature of any
such Indemnity Tax Matter and will, in good faith, allow the Purchaser to
consult with it regarding the conduct of or positions taken in any such Action.
 
7.2.3          Notwithstanding the provisions of Section 7.2.2, the Seller shall
not settle or compromise any Indemnity Tax Matter without the prior written
consent of the Purchaser, which shall not be unreasonably withheld, conditioned,
or delayed, unless such settlement or compromise would have no net adverse Tax
impact upon the Company or the Purchaser, which shall be determined taking into
account any indemnification payment actually made by the Seller to the Company
and/or the Purchaser pursuant to the provisions hereof coincident with any such
settlement or compromise, in which case the consent of the Purchaser shall not
be required with respect to such settlement or compromise.
 
7.3        Transfer Taxes.  All transfer, documentary, sales, use, stamp,
registration, value added, and other such similar Taxes and fees (including any
penalties and interest) incurred in connection with this Agreement or the
transactions contemplated by this Agreement, will be borne and paid by the
Seller when due, and the Seller will, at its own expense, file all necessary Tax
Returns and other documentation with respect to all such Taxes and fees.
 
7.4        Certain Definitions.  For purposes of this Article VII the following
terms shall have the following meanings:
 
7.4.1           “Post-Closing Tax Period” means any taxable period beginning
after the Closing Date.
 
7.4.2           “Pre-Closing Tax Period” means any taxable period ending on or
before the Closing Date, including without limitation the Pre-Closing Portion of
any Straddle Period.
 
7.5        Liability for Taxes.
 
7.5.1           The Seller will be solely responsible for the following Taxes
(collectively, the “Pre-Closing Tax Liabilities”):  (i) all Taxes imposed upon
the Seller, (ii) all Taxes imposed upon the Company with respect to Pre-Closing
Tax Periods and which are attributable to operations of the Company prior to the
Closing Date; and (iii) with respect to Straddle Periods (if any), all Taxes
imposed upon the Company which are allocable, pursuant to Section 7.5.3, to the
Pre-Closing portion of such Straddle Period.
 
 
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7.5.2           The Company will be solely responsible for any and all Taxes
(collectively, the “Post-Closing Tax Liabilities”) of, or payable by, the
Company that do not constitute Pre-Closing Tax Liabilities, including without
limitation, in the case of Taxes with respect to a Straddle Period, all Taxes
which are allocable, pursuant to Section 7.5.3, to the portion of such taxable
year or period commencing after the Closing Date.
 
7.5.3           In order to apportion appropriately any income Taxes relating to
any taxable year or period that includes a Straddle Period, the parties will, to
the extent permitted under applicable Laws, consider the Closing Date as the
last day of the taxable year or period of the Company.  In the case of any
Straddle Period, the portion of any income Taxes that is allocable to the
portion of the Pre-Closing portion of such Straddle Period will be deemed equal
to the amount that would be payable if the taxable year or period ended on the
Closing Date based on the actual operations of the Company through and as of the
Closing Date (except that, solely for purposes of determining the marginal tax
rate applicable to income during such period in a jurisdiction in which such tax
rate depends upon the level of income, annualized income shall be taken into
account, for an equitable sharing of such income Taxes) and the books of the
Company will be deemed to be closed as of the close of business on the Closing
Date.  For purposes of computing the income Taxes attributable to the two
portions of a Straddle Period, the amount of any item that is taken into account
only once for a taxable period (e.g., the benefit of graduated tax rates,
exemption amounts, etc.) shall be allocated between the two portions of the
Straddle Period in proportion to the number of days in each portion.  In order
to apportion appropriately any Taxes (other than income Taxes) relating to any
taxable year or period that includes a Straddle Period, the portion of such Tax
which relates to the Pre-Closing portion of such Straddle Period shall be deemed
to be the amount of such Tax for the entire Tax period multiplied by a fraction,
the numerator of which is the number of days in the Tax period ending on the
Closing Date and the denominator of which is the number of days in the entire
Tax period.  All determinations necessary to give effect to the allocation set
forth in this Section 7.5.3 shall be made in a manner consistent with the prior
practice of the Company.
 
7.5.4           The Seller shall pay the Purchaser with regard to its Section
7.5 indemnities within ten (10) days of receiving notice from the Purchaser.
 
VIII.  CONDITIONS TO CLOSING
 
8.1        Conditions to Obligations of the Purchaser at the Closing.  The
obligations of the Purchaser to consummate the Closing are subject to the
satisfaction of the following conditions.  Any condition specified in this
Section 8.1 may be waived if consented to by the Purchaser; provided, however,
that no such waiver shall be effective against the Purchaser unless it is set
forth in writing and signed by the Purchaser.
 
 
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8.1.1           Representations, Warranties and Covenants of the Company and the
Seller.  (a) Each of the representations and warranties of the Company and the
Seller made in this Agreement shall be true and correct in all material respects
(or, if any specific representation or warranty of the Company or the Seller is
expressly qualified by concepts of “knowledge,” “materiality” or “Material
Adverse Effect,” then such representations and warranties shall be true and
correct in all respects) as of the date of this Agreement and as of the Closing
(as if made anew at and as of the Closing); (b) the Seller shall, and shall have
caused the Company to, have performed and complied in all material respects
(except for those covenants set forth in Section 2.1.1 which shall have been
performed in all respects) with all terms, agreements and covenants contained in
this Agreement required to be performed or complied with by the Seller or the
Company on or before the Closing Date; and (c) the Seller shall have delivered
to the Purchaser a certificate, dated the Closing Date, confirming the
satisfaction of the conditions contained in Sections 8.1.1 (Representations,
Warranties and Covenants of the Company and the Seller), 8.1.3 (No Injunction,
Etc.), 8.1.4 (No Proceedings), 8.1.5 (Required Filings), 8.1.8 (Third Party
Consents; Governmental Approvals), 8.1.9 (No Material Adverse Effect), 8.1.12
(Release of Liens) and such other evidence of compliance with their obligations
as the Purchaser may reasonably request.
 
8.1.2           Officer’s Certificate.  The Company shall have delivered to the
Purchaser at the Closing a certificate from an officer of the Company, dated as
of the Closing Date, certifying that (i) the Organizational Documents of the
Company attached to the certificate are true and complete; (ii) such
Organizational Documents have been in full force and effect in the form attached
from and after the date of the adoption of the resolutions referred to in clause
(iii) below and no amendment to such Organizational Documents has occurred since
the date of the last amendment annexed thereto, if any; and (iii) the
resolutions adopted by the Seller and the board of directors of the Company (or
a committee thereof duly authorized) authorizing the execution, delivery and
performance of this Agreement, the Ancillary Agreements, and the consummation of
all other transactions contemplated by this Agreement, as determined by the
Purchaser in its reasonable discretion, attached to the certificate, were duly
adopted at a duly convened meeting thereof, at which a quorum was present and
acting throughout or by unanimous written consent, remain in full force and
effect, and have not been amended, rescinded or modified, except to the extent
attached thereto.
 
8.1.3           No Injunction, Etc.  No provision of any applicable Law, Order
or proceeding shall be in effect that shall prohibit or restrict the
consummation of the Closing, or that shall impact adversely the operation of the
Business.
 
 
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8.1.4           No Proceedings.  No proceeding challenging this Agreement, the
Ancillary Agreements or the transactions contemplated by this Agreement or the
Ancillary Agreements or seeking to prohibit, alter, prevent, or materially delay
the Closing or seeking Damages incident to this Agreement, the Ancillary
Agreements or the transactions contemplated by this Agreement or the Ancillary
Agreements, shall have been instituted by any Person before any Governmental
Authority and be pending.
 
8.1.5           Required Filings.  All actions by or in respect of, or filings
by, the Company or the Seller with any Person required to permit the
consummation of the Closing shall have been taken or made at or prior to the
Closing.
 
8.1.6           Opinion of Counsel.  The Purchaser shall have received one or
more opinions of counsel to the Company and the Seller, dated the Closing Date,
substantially in the forms attached as Exhibit A.
 
8.1.7           Ancillary Agreements.  Each of the Ancillary Agreements shall
have been executed and delivered at the Closing by the Company, the Seller and
any other parties that are, as contemplated by this Agreement, to become a party
thereto.
 
8.1.8           Third Party Consents; Governmental Approvals.  All consents,
approvals, or waivers, if any, disclosed on any Schedule attached to this
Agreement or otherwise required in connection with the consummation of the
transactions contemplated by this Agreement shall have been received.  All of
the consents, approvals, authorizations, exemptions, and waivers from
Governmental Authorities that shall be required in order to enable the Purchaser
to consummate the transactions contemplated by this Agreement shall have been
obtained.
 
8.1.9           No Material Adverse Effect.  The Business shall have been
conducted in the Ordinary Course and no change, event, occurrence, or
circumstance shall have occurred or arisen since the date of this Agreement
that, individually or when considered together with all other matters, has had
or would reasonably be expected to have a Material Adverse Effect.
 
8.1.10         Good Standing Certificates.  The Seller shall have caused the
Company to have delivered to the Purchaser a certificate of good standing for
the Company from the Secretary of State of the State of California, as of a date
within ten (10) days of the Closing Date.
 
8.1.11         Transaction Consideration Statement.  The Seller shall have
delivered to the Purchaser the Transaction Consideration Statement in accordance
with the requirements of this Agreement.
 
8.1.12         Release of Liens.  Except for Permitted Liens and as disclosed on
Schedule 6.1, all Liens on or against any assets or Securities of the Company
shall have been released at or prior to the Closing, and the Seller shall have
provided the Purchaser with documentation reasonably satisfactory to the
Purchaser evidencing such release.
 
 
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8.1.13         Stock Certificates and Transfer Powers.  The Seller shall have
delivered to the Purchaser the certificates, or affidavits of loss in lieu
thereof, representing all of the Shares (duly endorsed in blank or accompanied
by duly executed transfer documents).
 
8.1.14         Restrictive Covenants and Release Agreements. The Seller shall
have entered at the Closing into restrictive covenants and release agreements
with the Company in substantially the form attached hereto as Exhibit B (the
“Restrictive Covenants Agreement”).
 
8.1.15         FIRPTA Certificate.  The Seller shall have delivered a
certificate, in such form as is reasonably satisfactory to the Purchaser, to the
effect that the Company is not and has not been a United States real property
holding corporation, as defined in Section 897(c)(2) of the Code, at any time
during the period specified in Section 897(c)(1)(A)(ii) of the Code and ending
on the Closing Date.
 
8.1.16         Members’ of the Board of Directors and Officers’
Resignations.  The Company shall have delivered at the Closing evidence of the
resignation of the Company’s board of directors and officers effective as of the
Closing.
 
8.1.17         Due Diligence.  The results of the Purchaser’s legal, accounting
and financial due diligence investigations shall not have revealed material
negative findings as determined by Purchaser in its sole discretion.
 
8.1.18         Other Deliveries.  The Company and the Seller shall have
delivered such other documents, instruments, and certificates as the Purchaser
may reasonably request.
 
8.1.19         Termination of Affiliate Agreements.  The management agreement
between the Company and the Seller and the consulting agreement between the
Company and an Affiliate of Mr. Gorfung shall have been terminated.
 
8.2        Conditions to Obligations of the Seller.  The obligations of the
Seller to consummate the Closing are subject to the satisfaction of the
following conditions.  Any condition specified in this Section 8.2 may be waived
if consented to by the Seller; provided, however, that no such waiver shall be
effective against the Seller unless such waiver is set forth in writing and
signed by the Seller.
 
8.2.1           Representations, Warranties, and Covenants of the Purchaser.
 (a) Each of the representations and warranties of the Purchaser made in this
Agreement shall be true and correct in all material respects  (or, if any
specific representation or warranty of the Purchaser is expressly qualified by
concepts of  “knowledge”, “materiality” or “Material Adverse Effect,” then such
representations and warranties shall be true and correct in all respects) as of
the date of this Agreement and as of the Closing (as if made anew at and as of
the Closing); and (b) the Purchaser shall have performed and complied with all
terms, agreements and covenants contained in this Agreement required to be
performed or complied with by the Purchaser on or before the Closing Date.
 
 
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8.2.2           No Injunction, Etc.  No provision of any applicable Law and no
Order shall be in effect with respect to the Purchaser that shall prohibit the
consummation of the Closing.
 
8.2.3           Ancillary Agreements.  Each of the Ancillary Agreements to which
the Purchaser is a party shall have been executed and delivered by the Purchaser
or its designee.
 
8.2.4           Required Filings.  All actions by or in respect of, or filings
by, the Purchaser required to be made or done to permit the consummation of the
Closing shall have been taken or made.
 
IX.  SURVIVAL; INDEMNIFICATION
 
9.1        Survival.  The representations and warranties of the Parties
contained in this Agreement or in any certificates or other writing delivered
pursuant to this Agreement or in connection herewith will survive the Closing
for twenty four (24) months thereafter; provided, however, that (a) the
representations and warranties contained in Section 3.1 (Existence and
Qualification), Section 3.2 (Authorization; Enforceability), Section 3.3
(Non-Contravention; Consents; Restrictive Documents), Section 3.4
(Capitalization), Section 3.7 (Interested Transactions), Section 3.20 (Interests
in Counterparties and Others) and Section 3.31 (Finders’ Fees), Article IV
(Seller Representations) and Article V (Purchaser Representations) shall survive
the Closing indefinitely, (b) the representations and warranties contained in
Section 3.8 (Tax Matters), Section 3.18 (Environmental Matters), Section 3.19
(Plans and Material Documents), and Section 3.25 (Export Compliance)
(collectively, the representations and warranties in the foregoing (a) and (b)
are referred to herein as the “Fundamental Reps”)  shall survive the Closing
until the longer of (i) sixty (60) days past the expiration of the statute of
limitations applicable to matters covered thereby (after giving effect to any
waiver or extension thereof granted by the applicable Party or the pendency of
any litigation or dispute resolution process) or (ii) the date which is twenty
four (24) months after the Closing Date, and (c) the representations and
warranties and certifications contained in the certificates delivered pursuant
to Section 8.1.2 shall survive for the same duration that the representations
and warranties to which they are applicable survive.  Notwithstanding the
preceding sentence, any representation or warranty in respect of which indemnity
may be sought under this Agreement shall survive the time at which it would
otherwise terminate pursuant to the preceding sentence if written notice of the
inaccuracy or breach thereof giving rise to such right of indemnity has been
given to the Party against whom such indemnification may be sought prior to such
time.  Subject to any applicable statutes of limitations, all covenants and
agreements of the Parties contained in this Agreement will survive the Closing
indefinitely in accordance with their terms.
 
 
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9.2        Indemnification by the Seller.
 
9.2.1         Subject to the terms and conditions of this Article IX, the Seller
shall indemnify, defend, and hold harmless the Purchaser and its equity owners,
directors, managers, officers, employees, and Affiliates (the “Purchaser
Indemnified Parties”), provided that there is no Duplication of Recovery against
any and all Damages actually incurred or suffered by the Purchaser Indemnified
Parties to the extent resulting from:
 
(a)           any failure of any representation or warranty made by the Company
or the Seller in this Agreement or any certificate delivered pursuant to this
Agreement to be true and correct as of the date hereof and as of the Closing;
 
(b)           any breach of any covenant or agreement made or to be performed by
the Seller or, prior to the Closing, the Company, pursuant to this Agreement;
 
(c)           any Pre-Closing Tax Liabilities, other than to the extent that
such Pre-Closing Tax Liabilities are reflected as a current liability taken into
account for purposes of determining the Transaction Consideration adjustment
stipulated in Section 2.4 above; and
 
(d)           any past, present or future claim with respect to, and any
obligation or Liability or loss relating to: (i) any activity or transaction by
the Company that is or was, or is or was alleged to be, prohibited by or in
violation of any U.S. Export Control or Import Law, including the failure to
renew any registration required by the International Traffic in Arms
Regulations, (ii) the failure of the Company to update its 401(k) Plan timely
for changes in the law including the failure to timely adopt an amended and
restated EGTRRA plan document, (iii) the matters identified on Schedule 3.12 or
required by Section 3.12 to be identified thereon, and all current or future
matters reasonably related thereto or an extension thereof; provided, however,
that in the case of this subpart (iii) the Purchaser has first used commercially
reasonable efforts (which shall not include resorting to litigation) to recover
such Damages from any applicable insurer, and (iv) any bonus amounts or cash or
in-kind severance benefits (including perquisites) offered or promised to any
current or former employee or consultant of the Company other than to the extent
that such Liability is reflected on the Transaction Consideration Statement and
reduced the Transaction Consideration.
 
For purposes of this Section, “Duplication of Recovery” means that Seller or
Purchaser, as applicable, shall not be obligated to indemnify more than one
Purchaser Indemnified Party or Seller Indemnified Party for the same identical
Damages (for the purpose of illustration: if Seller indemnifies one of
Purchaser’s Affiliates for Damages caused by discovery of a payable amount,
Seller shall not be obligated to indemnify Purchaser for Damages arising from
any reduction in the value of their shareholdings in said Affiliate as a result
of the discovery of said payable).
 
 
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9.2.2         Time Limitations.  The Purchaser Indemnified Parties shall have no
right to recover any amounts pursuant to Section 9.2.1(a) unless on or before
the relevant survival date specified in Section 9.1 (the “Survival Date”), the
Purchaser notifies the Seller in writing of a claim specifying the factual basis
of that claim in reasonable detail to the extent then known by the Purchaser.
 
9.2.3         Limitations on Indemnification of the Purchaser Indemnified
Parties.
 
(a)           The Seller shall not have any liability under Section 9.2.1(a)
unless the aggregate amount of Damages incurred by the Indemnified Parties and
indemnifiable thereunder exceeds $175,000 (the “Basket”) and, in such event, the
Seller shall be required to pay only  amounts exceeding the amount of such
Basket (and not the Basket amount), provided, however, the foregoing deductible
provision shall not apply to a breach of the Fundamental Reps or a fraudulent
breach of the representations or warranties contained in Article III.
 
(b)           Seller shall not be required to indemnify any Purchaser
Indemnified Party under Section 9.2.1(a) for an aggregate amount exceeding
$5,000,000; provided, however, the foregoing cap provision shall not apply to a
breach of the Fundamental Reps or a fraudulent breach of the representations or
warranties contained in Article III.
 
(c)           For purposes of determining the failure of any representations or
warranties to be true and correct, the breach of any covenants or agreements,
and calculating Damages hereunder any materiality or Material Adverse Effect
qualifications in the representations, warranties, covenants and agreements
shall be disregarded.
 
(d)           The indemnification obligations of Seller under this Article IX
shall be reduced by the amount of any insurance proceeds or other third party
indemnification payments that any Purchaser Indemnified Party has actually
received (net of expenses reasonably incurred by the Purchaser Indemnified Party
in collecting such amount, including any deductible amounts, attorneys’ fees,
retroactive premium adjustments and expenses) in respect of such Damages as of
the date of the actual indemnification payment under this Article IX.
 
(e)           For the avoidance of doubt, the Purchaser Indemnified
Parties  acknowledge and agree that following the Closing, the indemnification
provisions in this Article IX shall be the exclusive remedy of the Purchaser
Indemnified Parties with respect to the transactions contemplated by this
Agreement other than claims for fraud or willful misconduct; provided, however,
that notwithstanding the foregoing the Purchaser shall be entitled to bring an
action for injunctive or other equitable relief to enforce the terms of this
Agreement, including specific performance.
 
 
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9.2.4         For the avoidance of doubt, other than in connection with a breach
of a representation and warranty set forth in Article III, the Purchaser
Indemnified Parties  acknowledge and agree that no Damages will be indemnified
relating to the physical states of the Company’s property, leased real property,
inventory, machinery and equipment, spare parts, intellectual property,
technology, software, hardware and other personal property relating to the
Business, since they shall be on the Closing Date otherwise in an AS IS physical
condition or repair.
 
9.2.5         The Seller (a) expressly waives any rights of indemnification of
the Seller against the Company for acts, circumstances, and events that give
rise to indemnification obligations of the Seller arising under this Section
9.2, and (b) agree and acknowledge that they will have no right of contribution
from, or right of subrogation against, the Company in the event they are
required to take, or refrain from taking, any action, whether by the payment of
money or otherwise, as a result of this Section 9.2.
 
9.3        Indemnification by the Purchaser.
 
9.3.1         Subject to the terms and conditions of this Article IX, the
Purchaser will indemnify, defend, and hold harmless the Seller, its Affiliates
and its respective officers, directors, managers, stockholders, members,
partners, representatives and agents (collectively, the “Seller Indemnified
Parties”) against any and all Damages actually incurred or suffered by the
Seller Indemnified Parties to the extent resulting from: (a) any failure of any
representation or warranty made by the Purchaser in this Agreement or any
certificate delivered pursuant to this Agreement to be true and correct as of
the date hereof and as of the Closing; (b) any breach of any covenant or
agreement made or to be performed by the Purchaser pursuant to this Agreement;
(c) any fraud, willful misconduct or criminal acts of Purchaser or any
Affiliate, officer, employee or agent thereof and (d) acts or omissions of
Purchaser or the Company after the Closing other than to the extent arising out
of or in connection with any matter with respect to which the Purchaser is
entitled to indemnification pursuant to this Agreement.
 
 
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9.4        Indemnification Procedures.
 
9.4.1          Except as provided in Article VII with respect to certain Tax
matters, if any Person who or which is entitled to seek indemnification under
Section 9.2 or 9.3 (an “Indemnified Party”) receives notice of the assertion or
commencement of any Third Party Claim against such Indemnified Party with
respect to which the Person against whom or which such indemnification is being
sought (an “Indemnifying Party”) is obligated to provide indemnification under
this Agreement, the Indemnified Party will give such Indemnifying Party
reasonably prompt written notice thereof; provided, however, that if the
Indemnified Party receives a complaint, petition, or any other pleading in
connection with a Third Party Claim which requires the filing of an answer or
other responsive pleading, the Indemnified Party shall furnish the Indemnifying
Party with a copy of such pleading at least ten (10) Business Days prior to the
date a responsive pleading thereto is required to be filed (or promptly upon
receipt by the Indemnified Party, if the Indemnified Party receives such
complaint, petition or other pleading within such ten (10) Business Day
period).  Such notice by the Indemnified Party will describe the Third Party
Claim in reasonable detail, will include copies of all available material
written evidence thereof, and will indicate the estimated amount, if reasonably
practicable, of the Damages that have been or may be sustained by the
Indemnified Party.  The Indemnifying Party will have the right to participate in
the defense of such Third Party Claim at the Indemnifying Party’s expense, or at
its option (subject to the limitations set forth in this Section 9.3.1) to
assume the defense of thereof by appointing a recognized and reputable counsel
acceptable to the Indemnified Party to be the lead counsel in connection with
such defense; provided that:
 
  (a)           The Indemnifying Party must give the Indemnified Party written
notice of its election to assume control of the defense of the Third Party Claim
within ten (10) Business Days of the Indemnifying Party’s receipt of notice of
the Third Party Claim.
 
  (b)           The Indemnified Party shall be entitled to participate in the
defense of the Third Party Claim and to employ counsel of its choice for such
purpose; provided that the fees and expenses of such separate counsel shall be
borne by the Indemnified Party, except that the Indemnifying Party shall pay (i)
any fees and expenses of such separate counsel that are incurred prior to the
date the Indemnifying Party effectively assumes control of such defense and (ii)
the fees and expenses of such separate counsel if the Indemnified Party has been
advised by counsel that a reasonable likelihood exists of a conflict of interest
between the Indemnifying Party and the Indemnified Party.
 
  (c)           The Indemnifying Party shall not be entitled to assume control
of the defense of the Third Party Claim (unless otherwise agreed to in writing
by the Indemnified Party) and shall pay the fees and expenses of counsel
retained by the Indemnified Party if (i) the Indemnifying Party does not
unconditionally acknowledge in writing its obligation to indemnify and hold the
Indemnified Party harmless with respect to the Third Party Claim, (ii) the Third
Party Claim relates to or arises in connection with any criminal or
quasi-criminal proceeding, action, indictment, allegation or investigation,
(iii) the Third Party Claim seeks injunctive or other equitable relief
applicable to the Indemnified Party, or (iv) the Indemnifying Party fails to
take reasonable steps necessary to defend diligently the Third Party Claim
within ten Business Days after receiving written notice from the Indemnified
Party that the Indemnified Party reasonably believes (upon having received
advice from reputable counsel) that the Indemnifying Party has failed to take
such steps.
 
 
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(d)           Without the prior written consent of the Indemnified Party, the
Indemnifying Party will not enter into any settlement of any Third Party Claim
that would lead to loss, liability, or create any financial or other obligation
on the part of the Indemnified Party for which the Indemnified Party is not
entitled to indemnification hereunder, or which provides for injunctive or other
non-monetary relief applicable to the Indemnified Party, or does not include an
unconditional release of all Indemnified Parties.
 
9.4.2          Any claim by an Indemnified Party on account of Damages that does
not result from a Third Party Claim (a “Direct Claim”) will be asserted by
giving the Indemnifying Party reasonably prompt written notice thereof, but in
any event not later than 30 days after the Indemnified Party becomes aware of
such Direct Claim.  Such notice by the Indemnified Party will describe the
Direct Claim in reasonable detail, will include copies of all available material
written evidence thereof, and will indicate the estimated amount, if reasonably
practicable, of Damages that has been or may be sustained by the Indemnified
Party.  The Indemnifying Party will have a period of five (5) Business Days
within which to respond in writing to such Direct Claim.  If the Indemnifying
Party does not so respond within such five Business Day period, the Indemnifying
Party will be deemed to have rejected such claim, in which event the Indemnified
Party will be free to pursue such remedies as may be available to the
Indemnified Party at the Indemnifying Party’s expense pursuant to the terms and
subject to the provisions of this Agreement.
 
9.4.3          A failure to give timely notice or to include any specified
information in any notice as provided in Section 9.4.1 or 9.4.2 will not affect
the rights or obligations of any Party, except and only to the extent that, as a
result of such failure, any Party that was entitled to receive such notice was
deprived of its right to recover any payment under its applicable insurance
coverage or was otherwise prejudiced as a result of such failure.
 
9.5        Miscellaneous Indemnification Provisions.
 
9.5.1          Purchaser Knowledge.  The right to indemnification or other
remedy based upon the representations, warranties, covenants and agreements
shall not be affected by any investigation (including any environmental
investigation or assessment) conducted or any knowledge acquired or capable of
being acquired at any time prior to Closing with respect to the accuracy or
inaccuracy of or compliance with any such representations, warranties, covenants
and agreements except to the extent the Seller demonstrates conclusively that
Frank Guidone had actual knowledge (without imputation from others) of an actual
breach of such representation or warranty set forth in Article III.
 
9.5.2          Transaction Consideration Adjustment.  The Parties agree that any
indemnification payment made pursuant to this Agreement shall be treated as an
adjustment to the Transaction Consideration for Tax purposes, unless otherwise
required by Law.
 
 
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9.5.3          The Indemnifying Party and the Indemnified Party shall reasonably
cooperate with each other with respect to resolving any claim or liability with
respect to which one party is obligated to indemnify the other party hereunder,
including by making all reasonable best efforts to mitigate or resolve any such
claim or liability.
 
X.  MISCELLANEOUS.
 
10.1       Termination.
 
10.1.1        This Agreement may be terminated at any time prior to the Closing:
 
  (a)           by the written consent of the Purchaser and the Seller;
 
  (b)           by the Purchaser, if there has been a breach by the Company or
the Seller of any covenant, representation, or warranty contained in this
Agreement that would prevent or has prevented the satisfaction of any condition
to the obligations of the Purchaser, as applicable, at the Closing, and such
breach has not been waived by the Purchaser, as applicable, or, in the case of a
covenant breach, cannot be or has not been cured by the Company or the Seller
within the earlier of (i) ten (10) days after written notice thereof from the
Purchaser or (ii) the Closing Date;
 
  (c)           by the Seller, if there has been a breach by the Purchaser of
any covenant, representation, or warranty contained in this Agreement that would
prevent or has prevented the satisfaction of any condition to the obligation of
the Seller at the Closing, and such breach has not been waived by the Seller or,
in the case of a covenant breach, cannot be or has not been cured by the
Purchaser, as applicable, within the earlier of (i) ten (10) days after written
notice thereof by the Seller or (ii) the Closing Date; or
 
  (d)           the Purchaser or the Seller if the transactions contemplated
hereby have not been consummated by September 30, 2011; provided, however, that
(i) the Purchaser or the Seller, as applicable, will not be entitled to
terminate this Agreement pursuant to this Section 10.1.1(d) if the Purchaser’s
breach of this Agreement, on the one hand, and the Company’s or the Seller’s
breach of this Agreement, on the other hand, has prevented the consummation of
the transactions contemplated by this Agreement.
 
 
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10.1.2         If this Agreement is terminated pursuant to Section 10.1.1, all
further obligations of the Parties under this Agreement (other than pursuant to
Section 10.4, which will continue in full force and effect) will terminate
without further liability or obligation of either Party to the other parties
hereunder; provided, however, that (a) the Purchaser will not be released from
liability hereunder if this Agreement is terminated and the transactions
abandoned by reason of (i) failure of the Purchaser to have performed its
material obligations under this Agreement or (ii) any material misrepresentation
made by the Purchaser of any matter set forth in this Agreement and (b) the
Company and the Seller will not be released from liability hereunder if this
Agreement is terminated and the transactions abandoned by reason of (i) failure
of either the Company or the Seller to have performed its or his material
obligations under this Agreement or (ii) any material misrepresentation made by
the Company or the Seller of any matter set forth in this Agreement.  Nothing in
this Section 10.1.2 will relieve any Party to this Agreement of liability for
breach of this Agreement occurring prior to any termination, or for breach of
any provision of this Agreement which specifically survives termination
hereunder.
 
10.2       Notices.  Any notice, request, instruction or other document required
or permitted to be given under this Agreement by any Party to another Party will
be in writing and will be given to such Party (a) at its address set forth in
Annex II attached to this Agreement or to such other address as the Party to
whom notice is to be given may provide in a written notice to the Party giving
such notice or (b) if such Party is the Seller, at the address of the Seller set
forth in Annex II or at an address specified in a written notice to the
Purchaser.  Each such notice, request, or other communication will be effective
(x) if given by certified mail, return receipt requested, with postage prepaid
addressed as aforesaid, upon receipt (and refusal of receipt shall constitute
receipt), (y) one (1) Business Day after being furnished to a nationally
recognized overnight courier for next Business Day delivery, or (z) on the date
sent if sent by electronic mail or facsimile transmission, receipt confirmed in
each case.  THE PARTIES CONSENT TO THE RECEIPT OF ANY SERVICE OF PROCESS
DELIVERED AND RECEIVED BY THE  OTHER PARTY AT THE ADDRESS AS SET FORTH IN ANNEX
II BY CERTIFIED MAIL AND WITH A RETURN RECEIPT REQUESTED AND WITH POSTAGE
PREPAID.
 
10.3       Amendments and Waivers.
 
10.3.1        Any provision of this Agreement may be amended or waived if, but
only if, such amendment or waiver is in writing and is signed, in the case of an
amendment, by the Purchaser and the Seller (or by any successor to either
Party), or in the case of a waiver, by the Party against whom the waiver is to
be effective.
 
10.3.2        No failure or delay by any Party in exercising any right, power,
or privilege under this Agreement will operate as a waiver thereof nor will any
single or partial exercise thereof preclude any other or further exercise
thereof or the exercise of any other right, power, or privilege.  The rights and
remedies provided will be cumulative and not exclusive of any rights or remedies
provided for in this Agreement by Law.
 
 
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10.4       Expenses.  The Purchaser will pay or cause to be paid the fees and
expenses incurred by the Purchaser (and its Affiliates) in connection with the
transactions contemplated by this Agreement or relating to the negotiation,
preparation or execution of this Agreement or any documents or agreements
contemplated hereby or the performance or consummation of the transactions
contemplated by this Agreement.  The Seller will pay or cause to be paid the
Selling Expenses.  In the event of any litigation brought to enforce or
interpret this Agreement, or arising out of its negotiation, performance, or
subject matter, the Party who prevails will be entitled to recover its
attorneys’ fees and costs, including those incurred at trial, in any bankruptcy
or other proceeding, on appeal, and in enforcing any judgment, as determined by
the court.
 
10.5       Successors and Assigns.  The provisions of this Agreement will be
binding upon and inure to the benefit of the Parties and their respective
successors and assigns; provided, however, that no Party may assign, delegate or
otherwise transfer any of its rights or obligations under this Agreement without
the consent of each other Party to this Agreement; and, provided, further, that
(a) the Purchaser may assign any of its rights under this Agreement to any
Affiliate; and (b) the Purchaser and its Affiliates may at or after the Closing
assign their rights under this Agreement to any of its financing sources as
collateral security.
 
10.6       Third Party Beneficiaries.  Except as provided in Article IX, this
Agreement is for the sole benefit of the Parties and their permitted assigns and
nothing herein expressed or implied will give or be construed to give to any
Person, other than the Parties and such permitted assigns, any legal or
equitable rights under this Agreement.
 
10.7       Release.  Effective as of the Closing, the Seller and the Seller’s
Affiliates, hereby release and forever discharge the Company, and its directors,
managers, officers, employees, agents and Affiliates of any of the foregoing,
from any and all any rights, claims, demands, debts, Liabilities, costs,
expenses, attorneys’ fees, obligations, promises, covenants, agreements,
contracts, charges, suits, proceedings, actions, or causes of actions, of any
kind, known or unknown, suspected or unsuspected, at Law or in equity, which the
Seller or the Seller’s Affiliate now has, has ever had or may hereafter have
against any such released party arising contemporaneously with or prior to the
Closing or on account of or arising out of any matter, cause or event occurring
contemporaneously with or prior to the Closing; provided, however, that without
limiting the foregoing, nothing contained in this Section 10.7 shall operate to
release any claim by the Seller arising out of or relating to this Agreement or
any Ancillary Agreement.
 
 
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10.8       Governing Law; Consent to Jurisdiction.  This Agreement will be
governed by, and construed in accordance with, the Laws of the State of
California without regard to the conflict of laws rules of such state.  Each of
the Parties hereby irrevocably consents and agrees that it shall bring any
action, suit or proceeding with respect to any matter arising under or relating
to this Agreement or any Ancillary Agreement or the subject matter hereof or
thereof in the United States District Court of the Central District of
California (or if jurisdiction is not available in such court, then in a state
court of the State of California sitting in the City of Los Angeles), unless
such party, based on the good faith advice of its counsel, determines that any
such court may not exercise or have jurisdiction over the other Party or such
matter or that a judgment rendered by such court may not be enforceable in the
jurisdiction of the organization of the other Party or a jurisdiction in which
such other Party’s office(s) or assets are located.  Each of the Parties hereby
irrevocably accepts and submits, for itself and in respect of its properties, to
the jurisdiction of the United States District Court of the Central District of
California (or if jurisdiction is not available in such court, then in a state
court of the State of California sitting in the City of Los Angeles), in person
am, generally and unconditionally, with respect to any such action, suit or
proceeding.  Each of the Parties hereby irrevocably consents to the service of
process in any such action, suit or proceeding in any such court by the mailing
of a copy thereof by registered or certified mail, postage prepaid, to such
party at the address specified in Section 10.2 for notices to such Party.  In
addition to or in lieu of any such service, service of process may also be made
in any other manner permitted by applicable Law.  Each of the Parties hereby
irrevocably and unconditionally waives any objection or defense which it may now
or hereafter have to the laying of venue to any such action, suit or proceeding
in the United States District Court of the Central District of California (or if
jurisdiction is not available in such court, then in a state court of the State
of California sitting in the City of Los Angeles) and hereby irrevocably and
unconditionally waives and agrees not to plead or claim that any such action,
suit or proceeding brought in such court has been brought in an inconvenient
forum.
 
10.9       Counterparts.  This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which shall
constitute the same agreement, and the execution of a counterpart of the
signature page to this Agreement shall be deemed the execution of a counterpart
of this Agreement.  The delivery of this Agreement may be made by facsimile or
portable document format (pdf), and such signatures shall be treated as original
signatures for all applicable purposes.
 
10.10      Headings.  The headings in this Agreement are for convenience of
reference only and will not control or affect the meaning or construction of any
provisions of this Agreement.
 
10.11      Entire Agreement.  This Agreement and the Ancillary Agreements
(including the Schedules, Exhibits, and Annexes hereto and thereto) constitute
the entire agreement among the Parties with respect to the subject matter of
this Agreement and such Ancillary Agreements, and is a complete and final
integration thereof.  This Agreement and the Ancillary Agreements (including the
Schedules, Exhibits, and Annexes) supersede all prior agreements and
understandings, both oral and written, between the Parties with respect to the
subject matter of this Agreement and such Ancillary Agreements, including the
Letter of Intent dated May 2, 2011 (the “LOI”); provided that Section 6 of the
LOI and the other provisions of the LOI as they relate to Section 6 thereof
shall remain in full force and effect on their terms.
 
 
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10.12     Confidentiality.  In consideration of the benefits of this Agreement
to the Seller and in order to induce the Purchaser to enter into this Agreement,
the Seller hereby covenants and agrees that from the date of this Agreement,
through, and after the Closing, the Seller and its Affiliates shall, and shall
cause the Company to, keep confidential and not disclose to any other Person or
use for their own benefit or the benefit of any other Person any information
regarding the Company.  The obligation of the Seller and its Affiliates under
this Section 10.12 shall not apply to information which: (a) is or becomes
generally available to the public without breach of the commitment provided for
in this Section 10.12; or (b) is required to be disclosed by Law, order or
regulation of a court or tribunal or government authority; provided, however,
that in any such case, the Seller shall notify the Purchaser as early as
reasonably practicable prior to disclosure to allow the Purchaser to take
appropriate measures to preserve the confidentiality of such
information.  Notwithstanding the forgoing, each party and their respective
employees, representatives and agents may disclose to any and all persons,
without limitation of any kind, the tax treatment and tax structure of the
transactions contemplated herein and all materials of any kind (including
opinions and other tax analyses) that are provided to such party or such person
relating to such tax treatment and tax structure.  The authorization to disclose
set forth in this section does not apply to the extent non-disclosure is
necessary to comply with securities laws, and does not extend to disclosure of
any other information, including: (i) any portion of any materials to the extent
not related to the tax treatment or tax structure of the transactions
contemplated herein, (ii) the identities of participants or potential
participants in the transactions contemplated herein, (iii) the existence or
status of any negotiations, (iv) any pricing or financial information (except to
the extent such pricing or financial information is related to the tax treatment
or tax structure of the transactions contemplated herein), or (v) any other term
or detail not relevant to the tax treatment or tax structure of the transactions
contemplated herein.
 
10.13     Severability.  If any provision of this Agreement or the application
of any such provision to any Person or circumstance is held invalid, illegal or
unenforceable in any respect by a court of competent jurisdiction, such
invalidity, illegality or unenforceability will not affect any other provision
and such invalid, illegal or unenforceable provision will be reformed, construed
and enforced as if such provision had never been contained herein and there had
been contained in this Agreement instead such valid, legal and enforceable
provisions as would most nearly accomplish the intent and purpose of such
invalid, illegal or unenforceable provision.
 
 
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10.14     Legal Representation.  In any dispute or proceeding arising under or
in connection with this Agreement including under Article IX, the
Purchaser Indemnified Parties shall have the right, at their election, to retain
DLA Piper LLP (US) (“DLA Piper”) to represent them in such matter and the
Seller, for itself and for its successors and assigns and for the other Seller
Indemnified Parties (including, prior to the Closing, the Company) and their
respective successors and assigns, hereby irrevocably waives and consents to any
such representation in any such matter.  The Seller acknowledges that the
foregoing provision shall apply whether or not DLA Piper provides legal services
to the Company after the Closing Date.  The Seller, for itself and its
successors and assigns and for the other Seller Indemnified Parties (including
the Company) and their respective successors and assigns, hereby irrevocably
acknowledges and agrees that all communications between the Purchaser
Indemnified Parties and their counsel, including DLA Piper, made in connection
with the negotiation, preparation, execution, delivery and closing under, or any
dispute or proceeding arising under or in connection with, this Agreement, or
any matter relating to any of the foregoing, are privileged communications
between the Purchaser Indemnified Parties and such counsel and neither the
Seller, nor any Person purporting to act on behalf of or through the Seller,
will seek to obtain the same by any process.
 
10.15     Press Release and Announcements.  Unless required by Law (in which
case each Party agrees to consult with the other Parties prior to any such
disclosure as to the form and content of such disclosure), no press releases or
other releases of information related to this Agreement or the transactions
contemplated hereby will be issued or released without the consent of the
Purchaser and the Seller.
 
[THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK]
 
 
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The Parties have caused this Agreement to be duly executed by their respective
authorized officers as of the day and year first above written.
 
PURCHASER:
 
COMPANY:
         
MEASUREMENT SPECIALTIES,
INC.
 
TRANSDUCER CONTROLS
CORPORATION
         
By:
   
By:
 
Name: 
   
Name: 
 
Its:
   
Its:
           
SELLER:
               
TEDEA-TECHNOLOGICAL
DEVELOPMENT AND
AUTOMATION, LTD.
               
By:
       
Name:
       
Its:
       

(Signature page to Stock Purchase Agreement)
 
 
 

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Annex I
 
DEFINITIONS
 
In addition to the terms defined elsewhere in this Agreement, the following
terms have the following meanings when used herein with initial capital letters:
 
“Accounting Referee”:  as set forth in Section 7.1.2.
 
“Accounts Receivable”: all accounts receivable, including trade and
miscellaneous accounts receivable, arising out of the Business.
 
“Additional Consideration”:  as set forth in Section 2.4(c)(i).
 
“Affiliate”:  with respect to any Person, any other Person directly or
indirectly controlling, controlled by or under common control with the first
Person.  For the purposes of this definition, “control,” when used with respect
to any Person, means the possession, directly or indirectly, of the power to
direct or cause the direction of the management and policies of such Person,
whether through the ownership of voting securities, by contract or otherwise,
and the terms “controlling” and “controlled” have meanings correlative to the
foregoing.  With respect to any natural Person, “Affiliate” will include such
Person’s grandparent, any descendants of such Person’s grandparent, such
Person’s spouse, the grandparents of such Person’s spouse, and any descendants
of the grandparents of such Person’s spouse (in each case, whether by blood,
adoption or marriage).
 
“Agreement”:  as set forth in the introductory paragraph.
 
“Ancillary Agreements”:  shall mean this Agreement, the Restrictive Covenants
Agreement, the Escrow Agreement  and the other documents, instruments and
agreements to be entered into pursuant hereto and thereto.
 
“Balance Sheet”:  the consolidated balance sheet of the Company, as of the
Balance Sheet Date, included in the Company’s Financial Statements.
 
“Balance Sheet Date”:  June 30, 2011.
 
“Basket”:  as set forth in Section 9.2.3.
 
“Business”:  the business of manufacturing linear position sensors and rotary
position sensors for commercial, industrial and testing applications, as
currently conducted by the Company.
 
“Business Day”:  any day other than a Saturday or Sunday or a day on which the
Federal Reserve Bank of New York is closed.
 
 
 

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“Capital Lease Obligations”:  with respect to any Person, for any applicable
period, the obligations of such Person that are permitted or required to be
classified and accounted for as capital obligations under GAAP, and the amount
of such obligations at any date will be the capitalized amount of such
obligations at such date determined in accordance with GAAP.
 
“CERCLA”:  the Federal Comprehensive Environmental Response Compensation and
Liability Act, 42 U.S.C. § 9601 et seq.
 
“Closing”:  as set forth in Section 2.2.
 
“Closing Balance Sheet”:  as set forth in Section 2.4(a).
 
“Closing Date”:  as set forth in Section 2.2.
 
“Closing Indebtedness”:  any Indebtedness of the Company as of the Closing.
 
“Closing Indebtedness Payments”:  as set forth in Section 2.4.1(a)
 
“Closing Working Capital”: the Working Capital of the Company as of the Closing.
 
“Code”:  the Internal Revenue Code of 1986, as amended, and regulations
promulgated thereunder.
 
“Common Stock”:  as set forth in Section 3.4.1.
 
“Company”:  as set forth in the introductory paragraph.
 
“Company Licensed Intellectual Property”:  as set forth in Section 3.17.1.
 
“Company Owned Intellectual Property”:  as set forth in Section 3.17.1.
 
“Company Real Property”:  any real property and improvements at any time owned,
leased, used, operated, or occupied (whether for storage, disposal, or
otherwise) by the Company.
 
“Company Securities”:  as set forth in Section 3.4.1.
 
“Constituent of Concern”:  any hazardous substance, hazardous waste, hazardous
material, pollutant or contaminant, any petroleum hydrocarbon and any
degradation product of a petroleum hydrocarbon, asbestos, PCB, airborne mysote,
mold spores, or similar substance, or any substance classified or defined as
hazardous, extremely hazardous, toxic or dangerous under any Environmental Laws.
 
“Contracts”:  contracts, leases and subleases, franchises, agreements, licenses,
arrangements, commitments, letters of intent, memoranda of understanding,
promises, obligations, rights, instruments, documents, indentures, mortgages,
security interests, guarantees, and other similar arrangements whether written
or oral, other than the Plans.
 
 
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“Current Assets”:  the Company’s collective (a) cash and cash equivalents; (b)
Accounts Receivable (net of allowance for doubtful accounts), (c) inventories
(net of reserve for obsolescence), (d) prepaid expenses and (e) other current
assets, all determined in accordance with GAAP applied consistently with past
practices of the Company.
 
“Current Liabilities”:  the Company’s collective (a) accounts payable, (b)
unearned revenues, and (c) other current Liabilities, including accrued payroll
expenses, accrued Liabilities for payroll, sales, use, employment, income and
other Taxes and Liabilities to make distributions to any Person, all determined
in accordance with GAAP applied consistently with past practices of the Company.
 
“Damages”:  any and all debts, losses (including diminution in value), claims,
damages, costs, fines, judgments, awards, penalties, interest, obligations,
payments, settlements, suits, demands, expenses and Liabilities of every type
and nature, together with all reasonable costs and expenses (including
reasonable attorneys’ and other legal fees and out-of-pocket expenses) actually
incurred in connection with any of the foregoing and including the reasonable
cost of the investigation, preparation or defense of any action in connection
therewith, and the assertion of any claims under this Agreement, and the cost of
any Tax, interest, penalty or addition to Tax.
 
“Defined Expenses” collectively means the fees and expenses incurred or incident
to this Agreement and the Ancillary Agreements and in preparing to consummate
and consummating the transactions contemplated by this Agreement, including
reasonable out-of-pocket costs and expenses (including the out-of-pocket fees,
disbursements, and other charges of legal counsel, consultants, and
accountants).
 
“Direct Claim”:  as set forth in Section 9.4.2.
 
“DLA Piper”: as set forth in Section 10.15.
 
“Embargoed Person”: means any person, country or entity subject to trade
restrictions under United States Law, including, without limitation, the
International Emergency Economic Powers Act, 50 U.S.C. §§ 1701, et seq., the
Trading with the Enemy Act, 50 U.S.C. §§ App.1, et seq., the Export
Administration Act, 50 U.S.C. app. §§ 2401-2420, the Arms Export Control Act, 22
U.S.C. §§ 2751-2794, or any statutes, regulations or Executive Orders
implemented by the U.S. Treasury Department’s Office of Foreign Assets Control
(“OFAC”), the U.S. Commerce Department’s Bureau of Industry and Security (“BIS”)
or the United States Department of State Directorate of Defense Trade Controls
(“DDTC”).
 
 
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“Environmental Claim”:  any claim; litigation; demand; action; cause of action;
suit; loss; cost, including attorneys’ fees, diminution in value, and expert’s
fees; Damages; punitive damage, fine, penalty, expense, liability, criminal
liability, strict liability, judgment, governmental or private investigation and
testing; notification of status of being potentially responsible for clean-up of
any facility or for being in violation or in potential violation of any
requirement of Environmental Law; proceeding; consent or administrative order,
agreement, or decree; Lien; personal injury or death of any Person; or property
damage (including diminution in value Damages), whether threatened, sought,
brought, or imposed, that is related to or that seeks to recover Damages related
to, or seeks to impose liability for: (a) improper use or treatment of wetlands,
pinelands, or other protected land or wildlife; (b) radioactive materials
(including naturally occurring radioactive materials); (c) pollution,
contamination, preservation, protection, decontamination, remediation, or
clean-up of the air, surface water, groundwater, soil or protected lands; (d)
solid, gaseous, or liquid waste generation, handling, discharge, release,
threatened release, treatment, storage, disposal, or transportation; (e)
exposure of Persons or property to any Constituent of Concern and the effects
thereof; (f) the release or threatened release (into the indoor or outdoor
environment), generation, manufacture, processing, distribution in commerce,
use, application, transfer, transportation, treatment, storage, disposal, or
remediation of a Constituent of Concern; (g) injury to, death of, or threat to
the health or safety of any Person or Persons caused directly or indirectly by
any Constituent of Concern; (h) destruction caused directly or indirectly by any
Constituent of Concern or the release or threatened release of any Constituent
of Concern to any property (whether real or personal); (i) the implementation of
spill prevention and/or disaster plans relating to any Constituent of Concern;
(j) community right-to-know and other disclosure Laws; or (k) maintaining,
disclosing, or reporting information to Governmental Authorities or any other
third Person under, or complying or failing to comply with, any Environmental
Law.  The term “Environmental Claim” also includes any Damages incurred in
testing related to or resulting from any of the foregoing.
 
“Environmental Condition”:  a condition with respect to the environment that has
resulted or could result in Damages to the Company under applicable
Environmental Laws.
 
“Environmental Law”:  means all applicable Laws, Environmental Permits, and
similar items of any Governmental Authority relating to the protection of human
health or safety, or the environment, including: (a) all requirements pertaining
to liability for reporting, management, licensing, permitting, investigation,
and remediation of emissions, discharges, releases, or threatened releases of a
Constituent of Concern; (b) all requirements pertaining to the protection of the
health and safety of employees or the public; and (c) all other limitations,
restrictions, conditions, standards, prohibitions, obligations, and timetables
contained therein or in any notice or demand letter issued, entered,
promulgated, or approved thereunder.  The term “Environmental Law” includes (i)
CERCLA, the Federal Water Pollution Control Act (which includes the Federal
Clean Water Act), the Federal Clean Air Act, the Federal Solid Waste Disposal
Act (which includes the Resource Conservation and Recovery Act), the Federal
Toxic Substances Control Act, the Federal Insecticide, Fungicide and Rodenticide
Act, and OSHA, each as amended from time to time, any regulations promulgated
pursuant thereto, and any state or local counterparts and (ii) any common Law or
equitable doctrine (including injunctive relief and tort doctrines such as
negligence, nuisance, trespass, strict liability, contribution and
indemnification) that may impose liability or obligations for injuries or
Damages due to, or threatened as a result of, the presence of, effects of, or
exposure to any Constituent of Concern.
 
 
iv

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“Environmental Permits”:  all Licenses relating to or required by Environmental
Laws and necessary for or held in connection with the conduct of the business.
 
“ERISA”:  the Employee Retirement Income Security Act of 1974, as amended.
 
“ERISA Affiliate”:  any Person that would be considered a single employer within
the meaning of Section 4001 of ERISA or Section 414 of the Code.
 
“Escrow Agent”:  Citibank, N.A.
 
“Escrow Agreement”:  the Escrow Agreement to be dated as of the Closing Date,
substantially in the form of Exhibit C attached hereto.
 
“Exchange Act”:  the Securities Exchange Act of 1934, as amended, and the rules
and regulations promulgated thereunder.
 
“Financial Statements”: the audited balance sheets of the Company as of December
31, 2010 and December 31, 2009, together with the related statements of income
and cash flow for the periods then ended, and the unaudited Balance Sheet,
together with the related unaudited statements of income and cash flow for the
period ending on the Balance Sheet Date, all of which are attached as Schedule
3.5.1.
 
“Force Majeure Event”:  as set forth in Section 3.31.
 
“Fundamental Reps”: as set forth in Section 9.1.
 
“GAAP”:  generally accepted accounting principles in effect from time to time in
the International IFRS, applied on a consistent basis.
 
“Governmental Authority”:  any federal, state, county, city, municipal, or other
local or foreign government or any subdivision, authority, commission, board,
bureau, court, administrative panel, or other instrumentality thereof.
 
 
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“Guarantee”:  of or by any Person (the “guaranteeing person”), means, without
duplication, (a) any obligation, contingent or otherwise, of such Person
guaranteeing or having the economic effect of guaranteeing any Indebtedness of
any other Person (the “primary obligor”) in any manner, whether directly or
indirectly, and including any obligation of the guaranteeing person, direct or
indirect, (i) to purchase or pay (or advance or supply funds for the purchase or
payment of) such Indebtedness (whether arising by virtue of partnership
arrangements, by agreement to keep well, to purchase assets, goods, securities
or services, to take-or-pay or otherwise) or to purchase (or to advance or
supply funds for the purchase of) any security for the payment of such
Indebtedness, (ii) to purchase or lease property, securities or services for the
purpose of assuring the owner of such Indebtedness of the payment of such
Indebtedness, (iii) to maintain working capital, equity capital or any other
financial statement condition or liquidity of the primary obligor so as to
enable the primary obligor to pay such Indebtedness or (iv) entered into for the
purpose of assuring in any other manner the holders of such Indebtedness of the
payment thereof or to protect such holders against loss in respect thereof (in
whole or in part) or (b) any Lien on any assets of the guaranteeing person
securing any Indebtedness of any other Person, whether or not such Indebtedness
is assumed by the guaranteeing person.
 
“Indebtedness”:  with respect to any Person, without duplication, (a) all
obligations of such Person for borrowed money, whether short-term or long-term,
and whether secured or unsecured, or with respect to deposits or advances of any
kind (other than deposits and advances of any Person relating to the purchase of
products or services of the Company in the Ordinary Course), (b) all obligations
of such Person evidenced by bonds, debentures, notes or similar instruments, (c)
all obligations of such Person upon which interest charges are customarily paid
(other than trade payables incurred in the Ordinary Course), (d) all obligations
of such Person under conditional sale or other title retention agreements
relating to property or assets purchased by such Person, (e) all obligations of
such Person issued or assumed as the deferred purchase price of property or
services (other than current trade payables incurred in the Ordinary Course),
(f) all Indebtedness of others secured by (or for which the holder of such
Indebtedness has an existing right, contingent or otherwise, to be secured by)
any Lien on property owned or acquired by such Person, whether or not the
obligations secured thereby have been assumed, (g) all Guarantees by such Person
of Indebtedness of others, (h) all Capital Lease Obligations of such Person, (i)
all net payments that such Person would have to make in the event of an early
termination, on the date Indebtedness of such Person is being determined, in
respect of outstanding interest rate protection agreements, foreign currency
exchange arrangements or other interest or exchange rate hedging arrangements,
(j) all obligations including reimbursement obligations of such Person in
respect of letters of credit, fidelity bonds, surety bonds, performance bonds
and bankers’ acceptances, (l) obligations of such Person to purchase, redeem,
retire, defease or otherwise acquire for value any capital stock of such Person
or any warrants, rights or options to acquire such capital stock, (m) renewals,
extensions, refundings, deferrals, restructurings, amendments and modifications
of any such Indebtedness or Guarantee and (n) any other obligation that in
accordance with GAAP is required to be reflected as debt on the balance sheet of
such Person (other than trade payables and current accruals incurred in the
Ordinary Course).  The Indebtedness of any Person will include the Indebtedness
of any partnership in which such Person is a general partner, other than to the
extent that the instrument or agreement evidencing such Indebtedness expressly
limits the liability of such Person in respect thereof.
 
“Indemnified Party”:  as set forth in Section 9.4.1.
 
 
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“Indemnifying Party”:  as set forth in Section 9.4.1.
 
“Indemnity Tax Matter”: as set forth in Section 7.2.
 
“Intellectual Property Right”:  all trademarks, trademark rights, service marks,
service mark rights, tradenames, tradename rights, copyrights, works of
authorship, inventions (whether patentable or not), invention disclosures,
industrial models, industrial designs, utility models, certificates of
invention, designs, emblems and logos, trade secrets, manufacturing formulae,
technical information, patents, patent applications, moral rights, mask work
registrations, franchises, franchise rights, customer and supplier lists, and
related identifying information together with the goodwill associated therewith,
product formulae, product designs, product packaging, business and product
names, slogans, rights of publicity, improvements, processes, specifications,
technology, methodologies, computer software (including all source code and
object code), firmware, development tools, flow charts, annotations, all Web
addresses, sites and domain names, all data bases and data collections and all
rights therein, any other confidential and proprietary right or information,
whether or not subject to statutory registration, as each of the foregoing
rights may arise anywhere in the world, and all related technical information,
manufacturing, engineering and technical drawings, know-how, and all pending
applications and registrations of patents, and the right to sue for past
infringement, if any, in connection with any of the foregoing, and all
documents, disks, records, files, and other media on which any of the foregoing
is stored, and other proprietary rights, in the case of each of the foregoing
which is owned by the Company or used or held for use by such Person in
connection with its respective business.
 
“IRS”:  the Internal Revenue Service.
 
“Inventories”: all inventories of the Company, wherever located, including all
finished goods, work in process, raw materials, spare parts and all other
materials and supplies to be used or consumed by the Company in the production
of finished goods.
 
“Knowledge Persons”: shall mean all the following individuals:  Mota Gorfung,
Danny Haklai, Michael Katz, James A. Bishop, Jessica Bell, Pinhas Wolman, Scott
E. Yankie, and Robert Simon.
 
“Law”:  any federal, state, county, city, municipal, foreign, or other
governmental statute, law, rule, regulation, ordinance, order, code, treaty or
requirement (including pursuant to any settlement agreement or consent decree)
and any License granted under any of the foregoing, or any requirement under the
common law, or any other pronouncement having the effect of Law of any
Governmental Authority, in each case as in effect as of the Closing Date.
 
“Leased Real Property”:  as set forth in Section 3.14.1.
 
“Liabilities”: as set forth in Section 3.6.
 
 
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“License”: shall mean all approvals, agreements, authorizations, permits,
licenses, easements, orders, certificates, registrations, franchises,
qualifications, rulings, waivers, variances or other form of permission,
consent, exemption or authority issued, granted, given or otherwise made
available by or under the authority of any Governmental Authority.
 
“Lien”:  with respect to any property or asset, any mortgage, deed of trust,
lien, pledge, hypothecation, assignment, charge, option, preemptive purchase
right, easement, encumbrance, security interest, or other adverse claim of any
kind in respect of such property or asset.  For purposes of this Agreement, a
Person will be deemed to own subject to a Lien any property or asset that it has
acquired or holds subject to the interest of a vendor or a lessor under any
conditional sale agreement, capital lease, or other title retention agreement
(or any financing lease having substantially the same economic effect as any of
the foregoing) relating to such property or asset.
 
“LOI”: as set forth in Section 10.12.
 
“Material Adverse Effect”:  any change or effect that is or would reasonably be
expected to be materially adverse to (a) the Business, assets, Liabilities,
condition (financial and other), results of operations or prospects of the
Company, taken as a whole, or (b) the ability of the Seller to timely perform
its obligations under this Agreement or the Ancillary Agreements; except for
changes in general economic, regulatory, financial or political conditions.
 
“Material Contract”:  as set forth in Section 3.10.2.
 
“Necessary Items”:  as set forth in Section 3.31.
 
“Ordinary Course”:  with respect to an action taken by any Person, an action
that (a) is consistent in nature, scope and magnitude with the past practices of
such Person, and (b) does not require authorization by the board of directors or
the Seller (or by any Person or group of Persons exercising similar authority)
and does not require any other separate or special authorization of any nature.
 
“Order”:  any writ, judgment, injunction, order, or decree (including any
consent decree) that is issued, promulgated or entered by or with a Governmental
Authority, in each case whether preliminary or final.
 
“Organizational Documents” means the certificate of incorporation, bylaws and
similar governing documents of a Person, as applicable, in each case as amended.
 
“OSHA”:  the Federal Occupational Safety and Health Act of 1970, as amended from
time to time.
 
“Parties”:  as set forth in the introductory paragraph.
 
 
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“Pay-Off Letters”:  as set forth in Section 2.4.1(a).
 
“Permitted Liens”:  (a) Liens for Taxes, assessments or other similar
governmental charges that are not yet due or that are being contested in good
faith by appropriate proceedings and that are fully and properly reserved for in
the Balance Sheet; (b) any mechanics’, workmen’s, repairmen’s and other similar
Liens arising or incurred in the Ordinary Course in respect of obligations that
are not overdue and that are fully and properly reserved for in the Balance
Sheet; or (c) Liens affecting the Company Real Property arising from easements,
easement agreements, rights-of-way, restrictions, or minor title defects
(whether or not recorded) that arise in the Ordinary Course and that do not
detract materially from the value of the property subject thereto or materially
impair the use of the property subject thereto; (d) Liens encumbering Leased
Real Property (other than Liens based on actions or inactions of the Company);
(e) Liens relating to any equipment leases and (f) Liens set forth on Schedule
6.1.
 
“Person”:  an individual, a corporation, a partnership, a limited liability
company, an association, a trust, a joint stock company, a joint venture, an
unincorporated organization, any Governmental Authority, or other entity or
organization.
 
“Plans”:  as set forth in Section 3.19.1.
 
“Policies”:  as set forth in Section 3.11.
 
“Post-Closing Tax Liabilities”: as set forth in Section 7.5.2.
 
“Post-Closing Tax Period”: as set forth in Section 7.4.1.
 
“Pre-Closing Tax Liabilities”: as set forth in Section 7.5.1.
 
“Pre-Closing Tax Period”: as set forth in Section 7.4.2.
 
“Promissory Note”: as set forth in Section 2.4.1(c).
 
“Purchaser”:  as set forth in the introductory paragraph.
 
“Purchaser Indemnified Parties”:  as set forth in Section 9.2.1.
 
“Regulatory Authority”:  shall mean any federal or state regulatory body or
agency having jurisdiction or regulatory authority over the Company as of the
Closing Date.
 
“Restrictive Covenants Agreement”: as set forth in Section 8.1.14.
 
“Securities Act”:  the Securities Act of 1933, as amended, and the rules and
regulations promulgated thereunder.
 
 
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“Selling Expenses”:  all of the fees and expenses incurred by or on behalf of
the Company in connection with the transactions contemplated by this Agreement
or relating to the negotiation, preparation or execution of this Agreement or
any documents or agreements contemplated hereby or the performance or
consummation of the transactions contemplated by this Agreement, including (a)
all brokers’ or finders’ fees, and (b) fees and expenses of counsel, advisors,
consultants, investment bankers, accountants, and auditors and experts.
 
“Seller Indemnified Parties”:  as set forth in Section 9.3.1.
 
“Seller”:  as set forth in the introductory paragraph.
 
“Seller’s Straddle Period Allocations”: as set forth in Section 7.1.2.
 
“Shares”:  as set forth in Recital B.
 
“Straddle Periods”:  as set forth in Section 7.1.2.
 
“Subsidiary”:  with respect to any Person, (a) any corporation, of which a
majority of the total voting power of shares of stock entitled (without regard
to the occurrence of any contingency) to vote generally in the election of
directors thereof is at the time owned or controlled, directly or indirectly, by
that Person or one or more of the other Subsidiaries of that Person or a
combination thereof or (b) any limited liability company, partnership,
association, or other business entity, of which a majority of the partnership,
membership or other similar ownership interests thereof is at the time owned or
controlled, directly or indirectly, by that Person or one or more Subsidiaries
of that Person or a combination thereof.  For purposes of this definition, a
Person or Persons will be deemed to have a majority ownership interest in a
limited liability company, partnership, association, or other business entity if
such Person or Persons will be allocated more than 50% of the limited liability
company, partnership, association, or other business entity gains or losses, or
is or controls the managing member or general partner of such limited liability
company, partnership, association, or other business entity.
 
“Survival Date”:  as set forth in Section 9.2.2.
 
“Tax”:  (a) any net income, alternative or add-on minimum tax, gross income,
gross receipts, sales, use, ad valorem, value added, margins, transfer,
franchise, profits, license, payroll, employment, excise, severance, stamp,
occupation, premium, property, environmental, or windfall profit tax,
withholding on amounts paid to or by the Company, or any of its Affiliates,
custom, duty, or other tax, escheat of unclaimed funds or property, governmental
fee, or other like assessment or charge of any kind whatsoever, together with
any interest, penalty, addition to tax, or additional amount imposed by any
Governmental Authority, (b) any liability of the Company or any of its
Affiliates for the payment of any amounts of any of the foregoing types as a
result of being a member of an affiliated, consolidated, combined, or unitary
group, or being a party to any agreement or arrangement whereby liability of the
Company, or of any of its Affiliates for payment of such amounts was determined
or taken into account with reference to the liability of any other Person, and
(c) any liability of the Company, or of any of its Affiliates for the payment of
any amounts as a result of being a party to any Tax Sharing Agreements or with
respect to the payment of any amounts of any of the foregoing types as a result
of any express or implied obligation to indemnify any other Person.
 
 
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“Tax Attribute”: as set forth in Section 3.8.1(q).
 
“Tax Returns”:  all returns, declarations, reports, claims for refund,
information returns or other documents (including any related or supporting
schedules, statements or information, or any amendment thereto) filed with or
submitted to, or required to be filed with or submitted to, any Governmental
Authority in connection with the determination, assessment or collection of any
Taxes of any party or the administration, implementation, or enforcement of or
compliance with any Laws relating to any Taxes.
 
“Tax Sharing Agreements”:  all existing Tax sharing agreements or arrangements
(whether oral or written) binding the Company, or any of its Affiliates.
 
“Third Party Claim”:  any claim, demand, action, suit, or proceeding made or
brought by any Person who or that is not a party to this Agreement.
 
 “Transaction Consideration”:  as set forth in Section 2.4.
 
“Transaction Consideration Statement”:  as set forth in Section 2.3.
 
 “U.S. Export Control Laws”: means the Export Administration Regulations (15
C.F.R. Parts 730-744); U.S. Foreign Trade Regulations (15 C.F.R. Part 30); the
International Traffic in Arms Regulations (22 C.F.R. Parts 120-130); the U.S.
Treasury Department, Office of Foreign Assets Control regulations (30 C.F.R.
Parts 500-599; and the Antiboycott laws (15 C.F.R. Part 760 and Section 999 of
the U.S. Internal Revenue Code)).
 
“U.S. Import Laws”: means Laws administered by Customs under Title 19 of the
U.S. Code and Title 19 of the Code of Federal Regulations and the U.S.
Department of Justice, Bureau of Alcohol, Tobacco, Firearms and Explosives
(“BATFE”) regulations (27 C.F.R. Part 447).
 
“U.S. Trade Control Agencies”: includes, but is not limited to, BATFE, BIS,
DDTC, DOJ, Internal Revenue Service, OFAC, Office of Antiboycott Compliance,
U.S. Census Bureau, Foreign Trade Division, and U.S. Immigration and Customs
Enforcement.
 
“Working Capital”:  an amount equal to Current Assets less Current Liabilities.
 
“Working Capital Target Statement”:  as set forth in Section 2.4(a).
 
“Working Capital Target”:  as set forth in Section 2.4(c)(i).
 
 
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Annex II

NOTICES
 
To the Purchaser:
 
Measurement Specialties, Inc.
1000 Lucas Way
Hampton, VA  23666
Attention:  Frank Guidone, CEO
 
with a copy (which shall not constitute notice) to:
 
DLA Piper LLP (US)
One Atlantic Center, Suite 2800
1201 West Peachtree Street
Atlanta, GA  30309-3450
Fax:  (404) 682-7990
Attention:  Joseph B. Alexander, Jr., Esq.
 
To the Seller:
 
Tedea Ltd.
85 Medinat Hayehudim St.
Business Park - G Bldg - 7th Floor
46766 Herzliya - Israel
Fax: 972-9-9569081
E-mail: Mota@tedea.com
 
with a copy (which shall not constitute notice) to:

DAN OFFER, Adv.
 
OFFER AVNON OFFER & Co., Law Office
113 HAYARKON ST., TEL-AVIV 63573, ISRAEL
TEL: +972-3-5272272
FAX: +972-3-5271736
MOBILE: +972-54-4321333
E-MAIL: DAN.OFFER@OAO-LAW.CO.IL
 
 
 

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And
 
John J. Molloy, III
18134 Kingsport Drive
Malibu, CA  90265
E-mail: john.molloy@live.com

 

 
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Exhibits
 
Exhibit A – Opinion of Counsel by counsel of the Seller
 
Exhibit B – Form of Restrictive Covenants Agreement
 
Exhibit C – Escrow Agreement
 
Exhibit D – Working Capital Target Statement
 
 
 

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