EXECUTION VERSION       ANNEX B

 

MEMBERSHIP INTEREST PURCHASE AGREEMENT

 

by and among

 

ARC WIRELESS SOLUTIONS, INC.,

 

QUADRANT MANAGEMENT, INC.,

 

QMP HOLDING CORP.,

 

QTS HOLDING CORPORATION,

 

JOHN SCHOEMER,

 

ARLAN CLAYTON,

 

ROBERT MARTEN,

 

QUADRANT METALS TECHNOLOGIES LLC, and

 

CARRET P.T., LP

 

April 6, 2012

 

 

 

 

TABLE OF CONTENTS

 

    Page       ARTICLE I - PURCHASE AND SALE; CLOSING   2 1.1 Purchase and Sale
  2 1.2 Purchase Price; Exchange of Equity Interests   3 1.3 The Closing   3 1.4
Actions at the Closing   3 1.5 Further Assurances   3 ARTICLE II -
REPRESENTATIONS AND WARRANTIES REGARDING THE QUADRANT SELLERS, THE COMPANY AND
THE SUBSIDIARIES   4 2.1 Existence; Authority   4 2.2 Capitalization   5 2.3 No
Adverse Consequences   6 2.4 Litigation   6 2.5 Compliance with Laws   6 2.6
Labor Matters   7 2.7 Employee Benefits; Employees   7 2.8 Real Property   8 2.9
Tangible Personal Property   9 2.10 Certain Contracts and Arrangements   9 2.11
Taxes   9 2.12 Financial Statements   10 2.13 Permits and Licenses   10 2.14
Environmental Conditions   11 2.15 Intellectual Property   11 2.16 Products   12
2.17 Accounts and Notes Receivable   13 2.18 Brokers and Finders   13 2.19
Absence of Changes   13 2.20 No Undisclosed Liabilities   14 2.21 Insurance   15
2.22 Related Party Transactions   15 2.23 Relationships with Customers and
Suppliers   16 2.24 Inventory; Supplier Deposits and Payments   16 2.25
Accredited Investor Status   16 2.26 Due Diligence Investigation   16 2.27
Disclosure   16 2.28 Disclaimer of Other Representations and Warranties   17
2.29 Claims   17 ARTICLE III - REPRESENTATIONS AND WARRANTIES REGARDING THE
INDIVIDUAL SELLERS   17 3.1 Authority   17 3.2 No Adverse Consequences   18 3.3
Ownership   18 3.4 Litigation   18 3.5 Claims   18 3.6 Accredited Investor
Status   19

 

 

 

 

TABLE OF CONTENTS (continued)

 

    Page       3.7 Due Diligence Investigation   19 3.8 Disclosure   19 3.9
Disclaimer of Other Representations and Warranties   19 ARTICLE IV
-REPRESENTATIONS AND WARRANTIES REGARDING THE BUYER   20 4.1 Organization   20
4.2 Authorization   20 4.3 Absence of Conflicts   20 4.4 Broker’s Fees   20 4.5
Disclosure   20 ARTICLE V – REPRESENTATIONS AND WARRANTIES REGARDING CARRET P.T.
  21 5.1 Organization   21 5.2 Authorization   21 5.3 Broker’s Fees   21 5.4
Disclosure   21 5.5 Accredited Investor Status   21 5.6 Due Diligence
Investigation   21 ARTICLE VI – COVENANTS   22 6.1 Closing Efforts   22 6.2
Operation of Business – Negative Covenants   22 6.3 Operation of Business –
Affirmative Covenants   23 6.4 Notices and Consents   24 6.5 Access.   24 6.6
Exclusivity.   24 6.7 Notice of Breaches; Supplemental Disclosure   26 6.8
Expenses   26 6.9 Board Recommendation   26 6.10 Refinancing   26 6.11
Distributions   26 ARTICLE VII - CONDITIONS TO CLOSING   27 7.1 Conditions to
Obligations of the Buyer   27 7.2 Conditions to Obligations of the Sellers   28
7.3 Conditions to Obligations of Carret P.T.   29 ARTICLE VIII –
INDEMNIFICATIONS   30 8.1 Survival of Representations and Warranties   30 8.2
Indemnification by Quadrant Sellers   30 8.3 Indemnification by the Individual
Sellers   31 8.4 Indemnification by Buyer   31 8.5 Limits on Indemnification  
31 8.6 Notice of Loss; Third Party Claims.   33 8.7 Character of Indemnification
Payments   35 8.8 Exclusive Remedy   35 8.9 Covenant Not to Transfer or Encumber
Buyer Stock   35 8.10 Parental Guarantee of Indemnification Obligations   35

 

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TABLE OF CONTENTS (continued)

 

    Page       ARTICLE IX - TAX MATTERS   35 9.1 Returns and Payment of Taxes.  
35 9.2 Cooperation on Tax Matters   36 9.3 Transfer Taxes   37 9.4  Tax Refunds
  37 ARTICLE X – TERMINATION   37 10.1 Termination of Agreement   37 10.2 Effect
of Termination   38 ARTICLE XI – DEFINITIONS   38 ARTICLE XII – MISCELLANEOUS  
47 12.1 Press Releases and Announcements   47 12.2 No Third Party Beneficiaries
  47 12.3 Entire Agreement   47 12.4 Succession and Assignment   47 12.5
Counterparts and Facsimile Signature   47 12.6 Headings   47 12.7 Notices   47
12.8 Governing Law   49 12.9 Amendments and Waivers   49 12.10 Severability   49
12.11 Submission to Jurisdiction   50 12.12 Construction   50

 

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MEMBERSHIP INTEREST PURCHASE AGREEMENT

 

This Membership Interest Purchase Agreement (this “Agreement”) is entered into
as of April 6, 2012, by and among ARC Wireless Solutions Inc., a Utah
corporation (the “Buyer”), QMP Holding Corp., a Delaware corporation (“QMP”),
QTS Holding Corporation, a Delaware corporation (“QTS” and together with QMP,
each a “Quadrant Seller” and collectively, the “Quadrant Sellers”), John
Schoemer, an individual, Arlan Clayton, an individual, Robert Marten, an
individual (each an “Individual Seller” and collectively, the “Individual
Sellers”, and together with QMP and QTS, each a “Seller” and collectively, the
“Sellers”), Quadrant Metals Technologies LLC, a Delaware limited liability
company (the “Company”), Quadrant Management, Inc., a Delaware corporation
(“QMI”), as guarantor of the indemnification obligations of the Quadrant Sellers
and Carret P.T., LP (“Carret P.T.”). The Buyer, the Sellers and the Company are
sometimes referred to herein individually as a “Party” and collectively as the
“Parties”. Certain capitalized and other terms used in this Agreement are
defined in Article XI.

 

RECITALS

 

A.         The Sellers collectively own all of the issued and outstanding
membership interests of the Company (collectively, the “Membership Interests”).

 

B.         The Sellers desire to sell to the Purchaser all of the Membership
Interests, on and subject to the terms and conditions set forth herein.

 

C.         A special committee of the Board of Directors of the Buyer (the
“Special Committee”) has (a) determined that the acquisition of the Company
provided for herein, in which the Buyer will acquire the Membership Interests
(the “Transaction”), is fair to and in the best interests of the Buyer; (b)
approved this Agreement and the transactions contemplated hereby; and (c)
recommended that the full Board of Directors of the Buyer approve and adopt this
Agreement, on and subject to the terms and conditions set forth herein.

 

D.         The Board of Directors of the Buyer has approved this Agreement and
deems it advisable and in the best interests of its shareholders to consummate
the Transaction by acquiring all of the Membership Interests in exchange for
newly issued shares of the Buyer’s common stock, par value $0.0005 par value per
share (the “Buyer Stock”), on the terms and subject to the conditions set forth
herein.

 

E.          Simultaneously with the closing of the Transaction, Carret P.T. will
purchase a certain number of shares of Buyer Stock.

 

NOW, THEREFORE, in consideration of the foregoing, the representations,
warranties and covenants herein contained, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
Parties hereby agree as follows:

 

 

 

 

ARTICLE I - PURCHASE AND SALE; CLOSING

 

1.1         Purchase and Sale. At the Closing, upon the terms and subject to the
conditions set forth herein, (a) the Buyer shall purchase from the Sellers, and
the Sellers shall sell, convey, assign, transfer and deliver to the Buyer, all
of the Membership Interests, free and clear of all Liens and (b) Carret P.T.
shall purchase from the Buyer 112,648 shares of Buyer Stock (the “Carret P.T.
Shares”).

 

1.2         Purchase Price; Exchange of Equity Interests.

 

(a)         In consideration of the sale and transfer of the Membership
Interests, the Buyer, upon surrender of the certificates held by Sellers
representing all of the Membership Interests duly endorsed for transfer (or such
other instruments of transfer as shall be reasonably acceptable to the Buyer)
shall deliver or caused to be delivered, in accordance with the allocation
schedule set forth on Schedule 1.2 (the “Allocation Schedule”), a number of
newly issued shares of Buyer Stock (the “Acquisition Consideration”) equal to
(x) Thirty One Million Four Hundred Thirty One Thousand Five Hundred Ninety Two
Dollars ($31,431,592), (the “Purchase Price”), divided by (y) a price per share
for the Buyer Stock of Four Dollars ($4.00), subject to adjustment for forward
stock splits, reverse stock splits, stock dividends and any other similar events
occurring after the date hereof.

 

(b)         Each Seller and Carret P.T. acknowledges and agrees that the Buyer
Stock (in the case of the Sellers, representing the Acquisition Consideration)
is not registered under the Securities Act or any state securities laws, and may
not be offered for sale, sold, assigned or transferred unless registered
thereunder or such Seller or Carret P.T. shall have delivered to the Buyer an
opinion by counsel reasonably satisfactory to the Buyer, in form, scope and
substance reasonably satisfactory to the Buyer, to the effect that the Buyer
Stock (in the case of the Sellers, representing the Acquisition Consideration)
held by such Seller or Carret P.T. may be sold, assigned or transferred pursuant
to an exemption from such registration. Each Seller and Carret P.T. further
acknowledges and agrees that any sale of the Buyer Stock (in the case of the
Sellers, representing the Acquisition Consideration) made in reliance on Rule
144 (or any amendment or applicable rule that operates to replace Rule 144)
promulgated under the Securities Act (“Rule 144”) may be made only in accordance
with the terms of Rule 144 and further, if Rule 144 is not applicable, any
resale of the Buyer Stock (in the case of Sellers, representing the Acquisition
Consideration) under circumstances in which such Seller or Carret P.T. (or the
person through whom the sale is made) may be deemed to be an underwriter (as
that term is defined in the Securities Act) may require compliance with other
applicable exemptions under the Securities Act or the rules and regulations
promulgated thereunder and applicable state securities laws.

 

(c)         Unless and until the shares of Buyer Stock (in the case of the
Sellers, representing the Acquisition Consideration) have been registered under
the Securities Act, the stock certificates representing the Buyer Stock will
bear a restrictive legend (the “Legend”) in substantially the following form:

 

THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED (THE “ACT”), OR APPLICABLE STATE SECURITIES LAWS
(COLLECTIVELY, THE “LAWS”). THE SECURITIES HAVE BEEN ACQUIRED FOR INVESTMENT AND
MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED IN THE ABSENCE OF
EITHER (I) AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE
LAWS, OR (II) AN OPINION OF COUNSEL PROVIDED TO THE ISSUER IN FORM, SUBSTANCE
AND SCOPE REASONABLY ACCEPTABLE TO THE ISSUER TO THE EFFECT THAT REGISTRATION IS
NOT REQUIRED UNDER THE LAWS DUE TO AN AVAILABLE EXEMPTION TO OR EXEMPTION FROM
THE REGISTRATION REQUIREMENTS OF THE LAWS.

 

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(d)         The number of shares of Buyer Stock issuable to each Seller in
accordance with the Allocation Schedule shall be rounded up or down, as
appropriate, to the nearest whole number to eliminate fractional shares.

 

(e)         In consideration for the issuance of the Carret P.T. Shares, Carret
P.T. shall pay the Buyer Four Hundred Fifty Thousand Five Hundred Ninety-Four
Dollars ($450,594) (the “Carret P.T. Purchase Price”) in cash.

 

1.3         The Closing. The Closing shall take place remotely, through the
exchange and delivery by facsimile or Portable Document Format (.pdf)
signatures, commencing at 9:00 a.m. local time on the Closing Date, or at such
other time and place as the Parties mutually agree.

 

1.4         Actions at the Closing. At the Closing:

 

(a)         the Company and each Seller shall deliver to the Buyer the various
certificates, instruments and documents referred to in Section 7.1;

 

(b)         the Buyer shall deliver or cause to be delivered to the Sellers the
various certificates, instruments and documents referred to in Section 7.2;

 

(c)         Carret P.T. shall deliver the Carret P.T. Purchase Price in cash in
accordance with the wire instructions provided by Buyer two (2) days prior to
Closing; and

 

(d)         each Seller shall deliver or cause to be delivered to the Buyer
certificates representing all of the Membership Interests held by such Seller,
duly endorsed for transfer, or if the Membership Interests are not evidenced by
certificates, then such other instruments of transfer as shall be reasonably
acceptable to the Buyer, for all of the Membership Interests held by such
Seller, which certificates or instruments of transfer shall, in the aggregate,
represent all of the Membership Interests and, upon such delivery, shall be
entitled to receive in exchange therefore such Seller’s allocable portion of the
Acquisition Consideration in accordance with the Allocation Schedule, which
shall be delivered to such Seller by the Transfer Agent as promptly as
practicable following the Closing.

 

1.5         Further Assurances. At any time and from time to time after the
Closing, at the Buyer’s request and without further consideration, each Seller
shall promptly execute and deliver such instruments of sale, transfer,
conveyance, assignment and confirmation, and take all such other action as the
Buyer may reasonably request, to transfer, convey and assign to the Buyer, and
to confirm the Buyer’s title to, all of the Membership Interests, to put the
Buyer in actual possession and operating control of the assets, properties and
Business of the Company and the Subsidiaries and to assist the Buyer in
exercising all rights with respect thereto and to carry out the purpose and
intent of this Agreement. In the event that the Company is delivered to the
Buyer with more than an aggregate of $250,000 in Acquired Company Cash on the
Closing Date, the Buyer shall not later than three business days thereafter
promptly deliver the balance of any and all funds in excess of such amount to
the Sellers, in cash, in each such case proportionate to the respective
percentage for each such Seller as set forth on the Allocation Schedule.

 

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ARTICLE II - REPRESENTATIONS AND WARRANTIES REGARDING THE QUADRANT SELLERS, THE
COMPANY AND THE SUBSIDIARIES

 

Each of QMP, QTS and the Company, jointly and severally, represent and warrant
to the Buyer that, except as set forth in the Disclosure Schedule, the
statements contained in this Article II are true and correct as of the date of
this Agreement and will be true and correct as of the Closing as though made as
of the Closing, except to the extent such representations and warranties are
specifically made as of a particular date (in which case such representations
and warranties will be true and correct as of such date). The Disclosure
Schedule shall be arranged in sections and paragraphs corresponding to the
numbered and lettered sections and paragraphs contained in this Article II. The
disclosures in any section or paragraph of the Disclosure Schedule shall qualify
only (a) the corresponding section or paragraph in this Article II and (b) other
sections or paragraphs in this Article II to the extent that it is clear from a
reading of the disclosure that such disclosure also qualifies or applies to such
other section or paragraph.

 

2.1         Existence; Authority.

 

(a)         Each of the Quadrant Sellers (i) is duly organized and validly
existing under the laws of the jurisdiction of its incorporation, (ii) has full
corporate power and authority, as applicable, to enter into this Agreement and
to carry out its respective term, (iii) has taken all corporate action necessary
to authorize the execution, delivery, and performance of this Agreement, and
(iv) is not in default under, or in violation of, any provision of its
Organizational Documents. This Agreement has been duly and validly executed and
delivered by the Quadrant Sellers. This Agreement is binding upon and
enforceable against each of the Quadrant Sellers in accordance with its terms,
except as enforceability may be limited or affected by (i) applicable
bankruptcy, insolvency, reorganization, moratorium, or other laws of general
application relating to or affecting creditors’ rights and remedies generally
and (ii) rules of law governing specific performance, injunctive relief, or
other equitable remedies. The execution and delivery by each of the Quadrant
Sellers of this Agreement, the performance by each Quadrant Seller of its
obligations hereunder and the consummation of the transactions contemplated
hereby does not and will not conflict with or result in a violation or breach of
any of the terms, conditions or provisions of the Organizational Documents of
any Quadrant Seller; require on the part of any Quadrant Seller any notice to or
filing with, or any permit, authorization, consent or approval of, any
Governmental entity; conflict with, result in a default under, result in the
acceleration of obligations under, create in any party the right to accelerate,
terminate, modify or cancel, or require any notice, consent or waiver under any
contract, lease, sublease, license, sublicense, franchise, permit, indenture,
agreement or mortgage for borrowed money, instrument of indebtedness, Lien or
other arrangement to which any Quadrant Seller is party or by which any Quadrant
Seller is bound or to which any of the assets of any Quadrant Seller are
subject; result in the imposition of any Lien upon any assets of any Quadrant
Seller; or (e) violation any order, writ, injunction, decree, statute, rule or
regulation applicable to any Quadrant Seller or any of its properties or assets.

 

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(b)         The Company is a limited liability company duly organized and
validly existing under the laws of the State of Delaware. The Company is not in
default under, or in violation of, any provision of its Organizational
Documents. The Company is duly qualified or licensed to do business as a foreign
company in each jurisdiction in which it owns or leases real property and each
other jurisdiction in which the conduct of its business requires such
qualification. The Company has all necessary limited liability company power and
authority to own, lease, and operate its assets and properties and to carry on
its business as now conducted. The Company has all requisite power and authority
(limited liability company and other) to execute and deliver this Agreement and
the other agreements contemplated hereby and to perform its obligations
hereunder and thereunder. The execution and delivery by the Company of this
Agreement and the performance by the Company of this Agreement and the
consummation by the Company of the transactions contemplated hereby have been
duly and validly authorized by all necessary limited liability company and other
action on the part of the Company. This Agreement has been duly and validly
executed by the Company. This Agreement is binding upon and enforceable against
the Company in accordance with its terms, except as enforceability may be
limited or affected by (i) applicable bankruptcy, insolvency, reorganization,
moratorium, or other laws of general application relating to or affecting
creditors’ rights and remedies generally and (ii) rules of law governing
specific performance, injunctive relief, or other equitable remedies.

 

(c)         Each Subsidiary is a limited liability company duly organized and
validly existing under the laws of the jurisdiction of its formation. The
Subsidiaries are not in default under, or in violation of, any provision of its
Organizational Documents. Each Subsidiary is duly qualified or licensed to do
business as a foreign company in each jurisdiction in which it owns or leases
real property and each other jurisdiction in which the conduct of its business
requires such qualification. Each Subsidiary has all necessary limited liability
company power and authority to own, lease, and operate its assets and properties
and to carry on its business as now conducted.

 

2.2         Capitalization.

 

(a)         Each Quadrant Seller (i) is the record owner of and has the entire
right, title and interest in and to the Membership Interests indicated on
Section 2.2(a) of the Disclosure Schedule as being owned by such Quadrant
Seller, and (ii) has full right, power, capacity and authority to validly sell,
assign, convey and transfer such Membership Interests to Buyer. If and when
transferred to Buyer as provided in this Agreement, such Membership Interests
will be transferred free and clear of all Liens (other than restrictions on
transfer arising under the Securities Act and state or foreign securities laws),
encumbrances, or claims of any kind. No Quadrant Seller has granted or agreed to
grant to any other Person a right, whether absolute or contingent, to purchase
or acquire any of such Membership Interests, and no Person (other than Buyer)
has any such right.

 

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(b)         The Membership Interests are the only outstanding Equity Interests
of the Company. There are no issued or outstanding Equity Interests of the
Company other than the Membership Interests. The Membership Interests have been
duly authorized and are validly issued, and are fully paid, nonassessable and
free of all preemptive rights. The Membership Interests have been offered,
issued and sold by the Company in compliance with all applicable federal and
state securities laws.

 

(c)         All of the issued and outstanding Equity Interests of each
Subsidiary are duly authorized, validly issued, fully paid, nonassessable and
free of preemptive rights. All Equity Interests of each Subsidiary are held of
record and owned beneficially by those Persons listed in Section 2.2(c) of the
Disclosure Schedule and are held or owned free and clear of any restrictions on
transfer (other than restrictions under the Securities Act and state securities
laws), claims, Liens, options, warrants, rights, contracts, calls, commitments,
equities and demands. There are no obligations providing for the issuance,
disposition or acquisition of any Equity Interests of any Subsidiary. There are
no outstanding stock appreciation, phantom stock or similar rights with respect
to any Subsidiary. There are no voting trusts, proxies or other agreements or
understandings with respect to the voting of any Equity Interests of any
Subsidiary.

 

(d)         No Subsidiary controls, directly or indirectly, or has any direct or
indirect equity participation or similar interest in any corporation,
partnership, limited liability company, joint venture, trust or other business
association or entity. Except for the Subsidiaries, the Company does not
control, directly or indirectly, or have any direct or indirect equity
participation or similar interest in any corporation, partnership, limited
liability company, joint venture, trust or other business association or entity.

 

2.3         No Adverse Consequences. The execution, delivery, and performance of
this Agreement by the Quadrant Sellers or the Company (a)  does not require the
Quadrant Sellers, the Company or the Subsidiaries (i) to obtain the consent,
approval or authorization of any Governmental Entity having jurisdiction over
any Quadrant Seller, the Company or any Subsidiary, or obtain any consents,
approvals or authorizations prior to the Closing, or (ii) to submit or file any
notice, report or other filing with any Governmental Entity having jurisdiction
over any Quadrant Seller, the Company or any Subsidiary, file any report under
the Exchange Act, or submit or file any notice, report or other filing prior to
the Closing; (b) will not violate any Law and Regulation, judgment, order,
injunction, decree or ruling of any Governmental Entity applicable to any
Quadrant Seller, the Company or any Subsidiary; and (c) will not, either alone
or with the giving of notice or the passage of time or both, conflict with,
constitute grounds for termination of, or result in a material breach of the
terms, conditions or provisions of, or constitute a material default under any
Material Contract or Permit.

 

2.4         Litigation. There is no litigation, proceeding or investigation
pending or, to Knowledge of the Quadrant Sellers, threatened, against any
Quadrant Seller, the Company or any Subsidiary. There are no judgments, orders
or decrees outstanding against any Quadrant Seller, the Company or any
Subsidiary.

 

2.5         Compliance with Laws. Each Quadrant Seller, the Company and each
Subsidiary is in material compliance with all Laws and Regulations as in effect
on the date of this Agreement applicable to the conduct of the Business, or
applicable to the employees employed by the Company or any of the Subsidiaries.

 

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2.6         Labor Matters. Neither the Company nor any Subsidiary is party, or
otherwise subject, to any labor or collective bargaining agreement and there are
no labor unions or other organizations representing, purporting to represent or,
to the Knowledge of the Quadrant Sellers, attempting to represent any employees
of the Company or any Subsidiary. There is no representation petition respecting
any employees of the Company or any Subsidiary pending before any Governmental
Entity or, to the Knowledge of the Quadrant Sellers, threatened to be brought or
filed.

 

2.7         Employee Benefits; Employees.

 

(a)         Section 2.7(a) of the Disclosure Schedule sets forth a list of all
pension, retirement, profit sharing, deferred compensation, bonus, commission,
incentive, stock option, restricted stock, life insurance, health and disability
insurance, hospitalization, self-insured health plans, severance pay plans and
all other employee benefit plans or arrangements established or maintained by
the Company and the Subsidiaries, including, without limitation, any and all
such plans within the scope of ERISA, with respect to the Company and any
Subsidiary (each, an “Employee Benefit Plan” and collectively, the “Employee
Benefit Plans”).

 

(b)         With respect to each Employee Benefit Plan, the Quadrant Sellers
have delivered to the Buyer a correct and complete copy (or, to the extent no
such copy exists, an accurate description) thereof and, to the extent
applicable, (i) the most recent copies of all documents constituting or
embodying such Employee Benefit Plans, (ii) the most recent favorable IRS
determination or opinion letter, if applicable, (iii) the most recent summary
plan description, and (iv) the most recent Form 5500 and attached schedules, if
applicable.

 

(c)         Each Employee Benefit Plan has been administered in all material
respects in accordance with its terms and applicable law (including under ERISA
and the Code, as applicable), except as would not reasonably be expected to
result in material liability to the Company or the Subsidiaries. No suit,
administrative proceeding, action or other litigation has been brought or
threatened against or with respect to any such Employee Benefit Plan, including
any audit or inquiry by the IRS or United States Department of Labor.

 

(d)         Neither the Company nor any Subsidiary participates in or has
withdrawn from participation in a “multiemployer plan” as defined in ERISA
section 37A, any “multiple-employer welfare arrangement” as defined in ERISA
section 40A, or any employee pension benefit plans (within the meaning of ERISA
section 3(2)) maintained by multiple employers that are not members of the same
controlled group of entities. None of the Employee Benefit Plans is a defined
benefit pension plan subject to Title IV of ERISA.

 

(e)         With respect to each Employee Benefit Plan, none of the Quadrant
Sellers, the Company or any of the Subsidiaries is currently liable for any
material Taxes arising under Section 4971, 4972, 4975, 4979, 4980 or 4980B of
the Code, and no fact or event exists that would give rise to any such material
liability for Taxes. None of the Quadrant Sellers, the Company or any of the
Subsidiaries has incurred any material liability under or arising out of Title
IV of ERISA that has not been satisfied in full (other than any liability for
premiums to the Pension Benefit Guaranty Corporation arising in the ordinary
course), and no fact or event exists that would reasonably be expected to result
in such a liability.

 

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(f)         None of the Quadrant Sellers, the Company or any of the Subsidiaries
have incurred any material liability in respect of post-employment health,
medical or life insurance benefits for any current or former employee of the
Company or any Subsidiary, except as may be required under COBRA or similar Laws
and Regulations and at the expense of the current or former employee.

 

(g)         The Company has disclosed to the Buyer complete and accurate
information regarding the number of employees and sales persons currently
employed or engaged by the Company or any Subsidiary, together with the position
held by each person, the aggregate amount of the annual compensation (separating
base salary and other forms of compensation) paid to such persons and all
employee credit for unused vacation time and other paid time off that has been
accrued to date, together with all employment agreements to which the Company or
any Subsidiary is bound. The Company and each Subsidiary have accrued or paid in
full to those employees all wages, commissions, bonuses and other compensation
for all services performed by them through the date of this Agreement (other
than amounts accrued since the end of the last pay period and other than amounts
determined on a discretionary basis as of the end of the fiscal year June 30,
2012) and each of the Company and the Subsidiaries is not subject to any claim
for non-payment or non-performance of any of the foregoing.

 

(h)         There are no open workers’ compensation claims of employees of the
Company or any Subsidiary.

 

2.8         Real Property. Section 2.8 of the Disclosure Schedule sets forth a
list of all real property currently owned or leased by the Company or any
Subsidiary, and a list of all leases or other material agreements applicable
thereto. The Company or the applicable Subsidiary, as applicable, has good and
marketable title to all real property identified as being owned on Section 2.8
of the Disclosure Schedule, free and clear of any Lien, easement, environmental
lien, environmental use restriction, covenant or other restriction, except for
recorded easements, covenants and other non-environmental restrictions which do
not materially impair the uses, occupancy or value of such owned real property.
The Company and the Subsidiaries as of the date of this Agreement, have
delivered to Buyer copies of all leases and other material agreements applicable
to the properties set forth on Section 2.8 of the Disclosure Schedule. All such
leases are in full force and effect. Neither the Company nor any Subsidiary is
in material default under any such lease or other material agreement and, to the
Knowledge of the Quadrant Sellers, no event has occurred and is continuing that,
with the passage of time or upon giving of notice or both, would constitute an
event of material default thereunder. The improvements on the real property
owned or leased by the Company or any Subsidiary are in commercially reasonable
operating condition and are adequate and suitable for the purposes for which
they are presently being used and there are no condemnation or appropriation
proceedings pending or threatened against real property or the improvements
thereon. To the Knowledge of the Quadrant Sellers, the legal description for all
owned real property contained in the deed thereof describes such owned real
property fully and adequately.

 

8

 

 

2.9         Tangible Personal Property. The Company and each Subsidiary has good
and marketable title to, or the right to possession under valid leases of, all
of the tangible personal property used in Business presently conducted by the
Company or such Subsidiary that is material to the operation of such Business,
free and clear of all encumbrances, except Permitted Liens. All such tangible
personal property is adequate and suitable for the conduct by the Company and
each Subsidiary of the Business presently conducted by the Company and such
Subsidiary, and such use complies in all material respects with all applicable
Laws and Regulations. All such tangible personal property is in commercially
reasonable operating condition and is adequate and suitable for the purposes for
which it is presently being used and there are no condemnation or appropriation
proceedings pending or threatened against such tangible personal property or
improvements thereon.

 

2.10       Certain Contracts and Arrangements. Section 2.10 of the Disclosure
Schedule lists all of the written Contracts to which the Company or any
Subsidiary is a party and that are material to the conduct of the Business of
the Company or such Subsidiary, other than purchase orders entered into in the
Ordinary Course of Business, including all guarantees of any indebtedness or
other obligations of or by the Company or any Subsidiary (any such contract, a
“Material Contract”). The Company and the Subsidiaries have delivered to Buyer
copies of all written Material Contracts (including any and all amendments and
other modifications to such Material Contracts) or in the case of oral Material
Contracts, a complete and accurate written description of each Material
Contract. The Material Contracts are valid and binding obligations of the
Company or the applicable Subsidiary, and, to the Knowledge of the Quadrant
Sellers, the other parties thereto, enforceable against such parties in
accordance with their respective terms except as the same may be limited by
(a) applicable bankruptcy, insolvency, reorganization, moratorium or other Laws
and Regulations relating to or affecting the enforcement of creditors’ rights
generally and (b) Laws and Regulations governing specific performance,
injunctive relief or other equitable remedies. The Company, each Subsidiary and,
to the Knowledge of the Quadrant Sellers, each other party thereto, have
complied in all material respects with each such Material Contract to which it
is a party, and the Company, each Subsidiary and, to the Knowledge of the
Quadrant Sellers, each other party thereto have not caused or permitted to occur
a material default under any of Material Contracts, nor has the Company or any
Subsidiary granted or been granted any material waiver or forbearance with
respect to any of Material Contracts.

 

2.11       Taxes.

 

(a)         All material Tax Returns required to be filed by or on behalf of the
Company and each Subsidiary at Closing have been timely filed and all Taxes
shown to be due on those Tax Returns have been timely paid. All such Tax Returns
were correct and complete in all material respects and completely reflect the
income, franchise or other tax liability and all other information required to
be reported thereon.

 

9

 

 

(b)         Neither the Company nor any Subsidiary at Closing is the beneficiary
of any extension of time within which to file any Tax Return, other than
extensions which do not require the affirmative consent of the relevant
Governmental Entity, and no waiver of any statute of limitations in respect of
Taxes nor any agreement for extension of time with respect to a Tax assessment
or deficiency is in effect or been entered into by or on behalf of the Company
or any Subsidiary, as the case may be.

 

(c)         There is no pending dispute, claim, audit or investigation
concerning any Tax liability of the Company or any Subsidiary at Closing, by or
with any Tax authority either (i) for which the Company or any Subsidiary as of
the Closing, has received written notice or (ii) to the Knowledge of the
Quadrant Sellers, otherwise.

 

(d)         All material Taxes required by applicable Tax law to be withheld or
collected by or on behalf of the Company or any Subsidiary at Closing, in
connection with any amounts paid or owing to any employee or independent
contractor, creditor or other party relating to the Business have been duly
withheld or collected and, to the extent required, have been paid to the proper
Governmental Entity.

 

(e)         Neither the Company nor any Subsidiary has within the past five
years distributed stock of another company, or has had its stock distributed by
another company, in a transaction that was purported or intended to be governed
in whole or in part by Code Sections 355 or 361.

 

(f)         To the Knowledge of the Quadrant Sellers, the Quadrant Sellers do
not expect any Tax authority to assess any additional Taxes against or in
respect of the Company or any Subsidiary for any past period.

 

2.12       Financial Statements. The Company has provided to the Buyer the
Financial Statements. The Financial Statements were prepared using materially
accurate data derived from the books and records of the Company and each
Subsidiary and fairly present the financial condition of the Company and each
Subsidiary as of their respective dates and the results of their operations for
the periods indicated, in each case on a basis consistent with prior periods and
with the Accounting Standards.

 

2.13       Permits and Licenses. The Company and each Subsidiary holds all
Permits that are material to the Business and necessary for the lawful conduct
of the Business as currently conducted pursuant to the Laws and Regulations
applicable to the Company and each Subsidiary. Each Company or Subsidiary Permit
is in full force and effect, and will at Closing remain in full force and effect
for operations of the Business by the Company and each Subsidiary to the same
and full extent as the Business is operated as of the date hereof, and neither
the Company nor any Subsidiary is, or has received notice that it is, in default
(or with the giving of notice or lapse of time or both, would be in default)
under any such Permit.

 

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2.14       Environmental Conditions.

 

(a)         To Knowledge of the Quadrant Sellers, the Company and each of the
Subsidiaries is in material compliance with all material terms, conditions and
provisions of all applicable Environmental Laws and Environmental Permits.

 

(b)         The Company has not received written notice of, nor is the Company
currently the subject of, (i) a pending or, to the Knowledge of the Quadrant
Sellers, threatened Environmental Claim or (ii) a civil, criminal or
administrative complaint or notice of violation from any Governmental Entity
alleging a violation of, or liability under, any Environmental Laws applicable
to the Company.

 

(c)         No Subsidiary has received written notice of, nor is any Subsidiary
the subject of, (i) a pending or, to the Knowledge of the Quadrant Sellers,
threatened Environmental Claim or (ii) a civil, criminal or administrative
complaint or notice of violation from any Governmental Entity alleging a
violation of, or liability under, any Environmental Laws applicable to any
Subsidiary.

 

(d)         The Company and each Subsidiary has obtained and holds all
Environmental Permits which are required in respect of its Business, operations
or assets and properties.

 

(e)         The Business has not previously involved the use, handling,
manufacture, treatment, processing, storage, generation, release, discharge or
disposal of any Hazardous Substances, except for the use, handling, manufacture,
treatment, processing, storage, generation, release, discharge or disposal in
material compliance with Environmental Laws, and to the Knowledge of the
Quadrant Sellers there is no Liability under any Environmental Laws relating to
the use, handling, manufacture, treatment, processing, storage, generation,
release, discharge or disposal of any Hazardous Substances.

 

(f)         Set forth in Section 2.14(f) of the Disclosure Schedule is a list of
all documents (whether in hard copy or electronic form) that contain any
environmental reports, investigations, assessments or audits relating to
operations by the Company or any Subsidiary as well as to any property currently
or previously owned, leased or operated by the Company or any Subsidiary
(whether conducted by or on behalf of the Company, such Subsidiary or a third
party, and whether done at the initiative of the Company or a Subsidiary or
directed by a Governmental Entity or other third party) that the Company or any
Subsidiary has access to. A complete and accurate copy of each such document has
been provided to the Buyer.

 

2.15       Intellectual Property.

 

(a)         Section 2.15(a) of the Disclosure Schedule lists all Company
Registrations, in each case enumerating specifically the applicable filing or
registration number, title, jurisdiction in which the filing was made or from
which the registration issued, the date of filing or issuance, names of all
current applicant(s) and registered owner(s), as applicable. All assignments of
Company Registrations to the Company or any Subsidiary have been properly
executed and recorded. To the Knowledge of the Quadrant Sellers, all Company
Registrations are valid and enforceable, and all issuance, renewal, maintenance
and other payments that are or have become due with respect thereto have been
timely paid by or on behalf of the Company or the applicable Subsidiary.

 

11

 

 

(b)         The Company and each Subsidiary owns, free and clear of any lien,
inventorship challenge, nullity proceeding, interferences declared or commenced
or other encumbrance or restriction, or has the right to use, the Company
Intellectual Property. The Company Intellectual Property is adequate for the
Company and each Subsidiary to fulfill its respective obligations under the
Material Contracts and to conduct the Business as currently conducted. Other
than the Company Intellectual Property, no Intellectual Property is material to
the conduct of the Business.

 

(c)         Neither the Company nor any Subsidiary has received any written
claim or demand of any Person, and neither the Company nor any Subsidiary is a
party to any proceeding pending or, to the Knowledge of the Quadrant Sellers
threatened, which challenges the rights of the Company or any Subsidiary in
respect of (i) the Company Intellectual Property or (ii) the rights of the
Company or any Subsidiary in respect of any material trade secret owned or used
by it in the conduct of the Business. The Company Intellectual Property is not
subject to any outstanding order, ruling, decree, judgment or stipulation by or
with any court, arbitrator or administrative agency. To the Knowledge of the
Quadrant Sellers, neither the Company nor any Subsidiary is infringing on the
intellectual property rights of any Person.

 

(d)         Each item of Company Intellectual Property will be owned or
available for use by the Buyer (through the Company or the applicable
Subsidiary) following the Closing on substantially identical terms and
conditions as it was immediately prior to the Closing.

 

(e)         To the Knowledge of the Quadrant Sellers, each employee or
independent contractor of the Company or any Subsidiary who has developed or
participated in the development of material Company Intellectual Property within
the three (3) year period prior to the date hereof has executed a written
agreement expressly assigning to the Company or such Subsidiary all right, title
and interest in any inventions and works of authorship, whether or not
patentable, invented, created, developed, authored, conceived and/or reduced to
practice by the employee as part of such employee’s employment or such
independent contractor’s work for the Company or the relevant Subsidiary, and
all Intellectual Property rights therein, and has waived all moral rights
therein to the extent legally permissible.

 

2.16       Products. To the Knowledge of the Quadrant Sellers, no product
manufactured, sold, leased or delivered by the Company or any Subsidiary is
subject to any material guaranty, warranty or other indemnity beyond the
applicable standard terms and conditions of sale or lease. The Quadrant Sellers
have furnished Buyer with copies of the standard terms and conditions of sale
for the Company and each of the Subsidiaries. To the Knowledge of the Quadrant
Sellers, none of the Company or any Subsidiary have any Liability for any design
defect, product failure or other material product liability claim arising from
or related to any product of the Company or any Subsidiary.

 

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2.17       Accounts and Notes Receivable. The existing accounts receivable and
notes receivable of the Company and each Subsidiary, on a combined basis, all of
which are owed solely to the Company or the applicable Subsidiary, constitute
valid claims arising from bona fide transactions in the Ordinary Course of
Business and, to the Knowledge of the Quadrant Sellers, are collectible in
accordance with their terms at their recorded amounts. Reserves for doubtful
accounts have been established in accordance with the Accounting Standards. All
accounts receivable which are thirty (30) days or more past due as of the Sunday
before the date of this Agreement are set forth on Section 2.17 of the
Disclosure Schedule.

 

2.18       Brokers and Finders. Except as set forth on Section 2.18 of the
Disclosure Schedule, none of the Quadrant Sellers, the Company or any
Subsidiary, nor any of their respective officers, directors or employees have
employed any broker, finder or investment banker or incurred any liability for
any commission, brokerage or investment-banking fee, or finder’s fee in
connection with the transactions contemplated by this Agreement.

 

2.19       Absence of Changes. Since the date of the Most Recent Balance Sheet,
except as set forth on Section 2.19 of the Disclosure Schedule and except for
the transactions contemplated by this Agreement, there has not been any event or
development which, individually or together with other such events, could
reasonably be expected to have a Company Material Adverse Effect and the
Business has been conducted consistent with past practice. Without limiting the
foregoing, except as set forth on Section 2.19 of the Disclosure Schedule and
except for the transactions contemplated in this Agreement, since the date of
the Most Recent Balance Sheet none of the Quadrant Sellers, the Company or any
Subsidiary has (except to the extent such exception is limited to only the
Subsidiaries for purposes of performance of this Agreement):

 

(a)         From the date of the Most Recent Balance Sheet through the date
hereof, (i) declared, set aside or paid any dividend or other distribution in
respect of the Membership Interests of the Company that would result in less
than $250,000 in Acquired Company Cash to be available at Closing; or (ii) from
the date hereof through the Closing, effected any Pre-Closing Distribution which
would result in Non-Cash Working Capital of the Company on the Closing Date to
be less than 20% of the trailing twelve months’ Net Sales of the Company, as
determined as of the most recent calendar month-end prior to the Closing Date;
or (iii) directly or indirectly redeemed, purchased or otherwise acquired any
other Equity Interests;

 

(b)         authorized, issued, sold or otherwise disposed of, or granted any
option with respect to any Membership Interests of the Company, or modified or
amended any right of any holder of any Equity Interests of the Company or option
with respect thereto;

 

(c)         except as required by applicable Law and Regulation or any
employment agreement or other Employee Benefit Plan in existence as of the date
of this Agreement, or consistent with past practice, (i) increased salary, wages
or other compensation (including, without limitation, any bonuses, commissions
and any other payments) of any officer, employee or consultant of the Company or
any Subsidiary; (ii) established or modified (A) targets, goals, pools or
similar provisions under any Employee Benefit Plan, employment contract or other
employee compensation arrangement or (B) salary ranges, increase guidelines or
similar provisions in respect of any Employee Benefit Plan, employment Contract
or other employee compensation arrangement; or (iii) adopted, entered into,
amended, modified or terminated (in whole or in part) any Employee Benefit Plan;

 

13

 

 

(d)         (i) incurred or increased any indebtedness, (ii) made or agreed to
make any loans to any Person or (iii) made or agreed to make any voluntary
purchase, cancellation, prepayment or complete or partial discharge in advance
of a scheduled payment date with respect to, or waiver of any right of the
Company or any Subsidiary, or the Company or any Subsidiary under, any
indebtedness of or owing to the Company or such Subsidiary;

 

(e)         suffered any physical damage, destruction or other casualty loss
(whether or not covered by insurance) adversely affecting any of the real or
personal property or equipment of the material assets and properties of the
Company or any Subsidiary prior to Closing;

 

(f)         failed to pay or satisfy when due any material obligation of the
Company or any Subsidiary;

 

(g)         acquired any business or assets and properties of any Person
(whether by merger, consolidation or otherwise) or disposed or leased, or
incurred a Lien (other than a Permitted Lien) on, any assets and properties of
the Company or any Subsidiary, in each case, other than acquisitions or
dispositions of products in the Ordinary Course of Business of the Company and
such Subsidiary;

 

(h)         entered into, amended, modified, terminated (in whole or in part) or
granted a waiver under or given any consent with respect to any Intellectual
Property;

 

(i)         commenced, terminated or changed any line of the Business;

 

(j)         entered into any transaction with any member (or any member’s
Affiliates) or Affiliate of the Company or any Subsidiary;

 

(k)         made any change in the accounting methods or procedures of the
Company or any Subsidiary; or

 

(l)         entered into any agreement to do any of the things described in the
preceding paragraphs.

 

2.20       No Undisclosed Liabilities.

 

(a)         There are no expenses incurred in the Business that are not
reflected as an expense of the Company or a Subsidiary, as the case may be, in
the Most Recent Balance Sheet, other than expenses incurred between the date of
this Agreement and the Closing Date in the Ordinary Course of Business and which
are not, individually or in the aggregate, material to the Business.

 

14

 

 

(b)         As of the date of the Most Recent Balance Sheet, neither the Company
nor any Subsidiary had Liabilities on any of their assets and properties,
including, without limitation, Liabilities for borrowed money, taxes, accounts
payable (including rent arrears), amounts owed to any member (or any member’s
Affiliates or relatives) or Affiliates of the Company or any Subsidiary,
customer orders, customer advances and deposits, open purchase orders of the
Company or any Subsidiary (including, without limitation, commitments to
suppliers of the Company or any Subsidiary for work-in-process), advances and
deposits paid to suppliers of the Company or any Subsidiary commissions or other
compensation owed to employees of the Company or such Subsidiary, customer
claims, product liability or personal injury claims and warranty claims, except
(i) Liabilities set forth on the Most Recent Balance Sheet, (ii) Liabilities
incurred in the Ordinary Course of Business since the date of the Most Recent
Balance Sheet and in accordance with the provisions of this Agreement, or (iii)
Liabilities or obligations that are not, individually or in the aggregate,
material to the Business, or as otherwise permitted in this Agreement.

 

2.21       Insurance. Section 2.21 of the Disclosure Schedule sets forth a true
and complete list specifying the type of coverage and the insurer of all
liability, property, workers compensation, directors and officers liability and
other insurance policies (including any self-insurance programs, if any)
currently in effect that insure the Business of the Company or any Subsidiary,
the employees of the Company or any Subsidiary or affect or relate to the
ownership, use or operation of any of the assets and properties of the Company
or any Subsidiary. Each of these policies will continue in full force and effect
following the Closing, and will cover the Company, each Subsidiary, the Business
and the assets and properties of the Company and each Subsidiary after the
Closing. None of the Quadrant Sellers, the Company, any Subsidiary or any Person
to whom such policy has been issued has failed to give any significant notice or
present any significant claim under any such policy in due and timely fashion.

 

2.22       Related Party Transactions. Except as set forth on Section 2.22 of
the Disclosure Schedule, none of the Company nor any of the Subsidiaries is
indebted, directly or indirectly, to any of its directors, officers or employees
or to their respective spouses or children or to any Affiliate of any of the
foregoing, other than in connection with expenses or advances of expenses
incurred in the Ordinary Course of Business for salary, wages or other
compensation for other customary employee benefits made generally available to
all employees. Except as set forth on Section 2.22 of the Disclosure Schedule,
none of the Company’s or any Subsidiary’s directors, managers or officers, or
any members of their immediate families, or any Affiliate of the foregoing are,
directly or indirectly, indebted to the Company or any Subsidiary, or, to the
Knowledge of the Quadrant Sellers, have any (a) material commercial, industrial,
banking, consulting, legal, accounting, charitable or familial relationship with
any of the Company’s or any Subsidiary’s customers, suppliers, service
providers, joint venture partners, licensees or competitors; (b) direct or
indirect ownership interest in any Person with which the Company or Subsidiaries
is affiliated or with which the Company or any Subsidiary has a business
relationship, or any firm or corporation which competes with the Company or any
Subsidiary, except that directors, managers, officers or employees or Affiliates
of the foregoing may own stock in (but not exceeding two percent (2%) of the
outstanding capital stock of) publicly traded companies; or (c) financial
interest in any Material Contract.

 

15

 

 

2.23       Relationships with Customers and Suppliers. Since the date of the
Most Recent Balance Sheet, no business relationship of the Company or any
Subsidiary, with any customer, supplier or any group of customers or suppliers
whose purchases or sales, as the case may be, are individually or in the
aggregate material to the Business has been or, has been threatened in writing
to be, terminated, canceled or materially and adversely limited or modified,
and, to the Knowledge of the Quadrant Sellers, there exists no present condition
or state of facts or circumstances with respect to those business relationships
that would reasonably be expected to have a Material Adverse Effect on the
Business, or prevent the Company or any Subsidiary from conducting the Business
in substantially the same manner in which it is now conducted after the Closing.

 

2.24       Inventory; Supplier Deposits and Payments. The Quadrant Sellers have
disclosed to the Buyer prior to Closing all open supplier purchase orders as of
March 15, 2012 with respect to the Company and each Subsidiary, which list is,
to Sellers’ Knowledge, true and complete in all material respects. To the
Knowledge of the Quadrant Sellers, the Company and each Subsidiary owns all of
its inventory free and clear of any Liens, other than Permitted Liens.

 

2.25       Accredited Investor Status. Each Quadrant Seller is an “accredited
investor” as defined in Section 501 of Regulation D under the Securities Act.

 

2.26       Due Diligence Investigation. Each Quadrant Seller has been solely
responsible for its own due diligence investigation of the Buyer and its
business, and analysis of the merits and risks of the transaction contemplated
by this Agreement. Each Quadrant Seller has been given access to full and
complete information regarding the Buyer, and each Quadrant Seller has reviewed
such information and is familiar with it. The Quadrant Sellers have no Knowledge
of the existence or nonexistence or occurrence or nonoccurrence of any event,
condition or circumstance the existence, nonexistence, occurrence or
nonoccurrence of which would cause any representation or warranty of Buyer
contained in this Agreement to be untrue or inaccurate in any respect. The
Quadrant Sellers have entered into the transactions contemplated by this
Agreement with the understanding, acknowledgement and agreement that no
representations or warranties, express or implied, are made with respect to
future prospects (financial or otherwise) of the business of the Buyer. The
Quadrant Sellers acknowledge that no current or former stockholder, director,
officer, employee, Affiliate or advisor of Buyer has made or is making any
representations, warranties or commitments whatsoever regarding the subject
matter of the Agreements, express or implied.

 

2.27       Disclosure. No representation or warranty by the Company or any
Quadrant Seller contained in this Agreement, and no statement contained in the
Disclosure Schedule or any other document, certificate or other instrument
delivered or to be delivered by or on behalf of the Company or any Quadrant
Seller pursuant to this Agreement, contains or will contain any untrue statement
of a material fact or, to the Knowledge of the Quadrant Sellers, omits or will
omit to state any material fact necessary, in light of the circumstances under
which it was or will be made, in order to make the statements herein or therein
not misleading. The Company and the Sellers have provided the Buyer with access
to complete and accurate copies of all documents listed or described in the
Disclosure Schedule.

 

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2.28       Disclaimer of Other Representations and Warranties. Except for the
representations and warranties contained in this Article II, neither the
Quadrant Sellers nor any other Person makes any other express or implied
representation or warranty with respect to the Company, the Subsidiaries, the
Business, the Quadrant Sellers or transactions contemplated by this Agreement.
Each of the Quadrant Sellers disclaims any other representations or warranties,
whether made by the Quadrant Sellers or any of their respective Affiliates,
officers, directors, employees, agents or representatives. Except for the
representations and warranties contained in this Article II and the information
included in the Disclosure Schedule, as supplemented pursuant to Section 6.7,
each Quadrant Seller hereby disclaims all liability and responsibility for any
representation, warranty, projection, forecast, statement or information made,
communicated or furnished (orally or in writing) to Buyer or its respective
Affiliates or representatives (including any opinion, information, projection,
or advice that may have been or may be provided to Buyer by any director,
officer, employee, agent or representative of the Quadrant Sellers or any of
their respective Affiliates).

 

2.29       Claims. No Quadrant Seller has any actions, suits, causes of action
or Liabilities of any kind or nature, whether in law or equity, and whether
arisen, accrued or matured heretofore or hereafter, whether against the Company
or any of the Subsidiaries by reason of any cause, matter or thing whatsoever
occurring prior to the date hereof (collectively, “Claims”), including (a) any
Claims relating to or arising out of any Equity Interests of the Company held at
any time by any Quadrant Seller and (b) any dividends or distributions on such
Equity Interests; provided, however, that notwithstanding anything herein to the
contrary, nothing herein shall be deemed a release or discharge of any
obligation of the Buyer to perform any of the terms, conditions and agreements
contained in this Agreement or any other agreement contemplated hereby.

 

ARTICLE III - REPRESENTATIONS AND WARRANTIES REGARDING THE INDIVIDUAL SELLERS

 

Each Individual Seller, severally and not jointly, represents and warrants to
the Buyer that, except as set forth in the Disclosure Schedule, the statements
contained in this Article III are true and correct as of the date of this
Agreement and will be true and correct as of the Closing as though made as of
the Closing, except to the extent such representations and warranties are
specifically made as of a particular date (in which case such representations
and warranties will be true and correct as of such date). The Disclosure
Schedule shall be arranged in sections and paragraphs corresponding to the
numbered and lettered sections and paragraphs contained in this Article III. The
disclosures in any section or paragraph of the Disclosure Schedule shall qualify
only (a) the corresponding section or paragraph in this Article III and (b)
other sections or paragraphs in this Article III to the extent that it is clear
from a reading of the disclosure that such disclosure also qualifies or applies
to such other section or paragraph.

 

3.1         Authority. Such Individual Seller is of sound mind and fully
competent to enter into this Agreement and to carry out its respective terms,
and has full power and authority to execute and deliver this Agreement and to
consummate the transactions contemplated hereby. This Agreement has been duly
and validly executed and delivered by Seller. This Agreement is binding upon and
enforceable against such Individual Seller in accordance with its terms, except
as enforceability may be limited or affected by (a) applicable bankruptcy,
insolvency, reorganization, moratorium, or other laws of general application
relating to or affecting creditors’ rights and remedies generally and (b) rules
of law governing specific performance, injunctive relief, or other equitable
remedies.

 

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3.2         No Adverse Consequences. The execution and delivery by such
Individual Seller of this Agreement, the performance by such Individual Seller
of its obligations hereunder and the consummation of the transactions
contemplated hereby does not and will not (a) conflict with or result in a
violation or breach of any of the terms, conditions or provisions of any
Organizational Documents to which such Individual Seller is a party; (b) require
on the part of such Individual Seller any notice to or filing with, or any
permit, authorization, consent or approval of, any Governmental Entity, or the
filing of any report under the Exchange Act, or the submission or filing of any
notice, report or other filing prior to the Closing; (c) conflict with, result
in a default under, result in the acceleration of obligations under, create in
any party the right to accelerate, terminate, modify or cancel, or require any
notice, consent or waiver under any contract, lease, sublease, license,
sublicense, franchise, permit, indenture, agreement or mortgage for borrowed
money, instrument of indebtedness, Lien or other arrangement to which such
Individual Seller is party or by which such Individual Seller is bound or to
which any of the assets of such Individual Seller are subject; (d) result in the
imposition of any Lien upon any assets of such Individual Seller; (e) violate
any Law and Regulation, order, writ, injunction, decree, statute, rule or
judgment applicable to such Individual Seller or any of its properties or
assets; or (f) cause the bankruptcy or insolvency of such Individual Seller.

 

3.3         Ownership. Except as set forth on Section 3.3 of the Disclosure,
such Individual Seller: (i) is the record owner of all Membership Interests
indicated on Section 3.3 of the Disclosure Schedule as being owned by Individual
Seller, (ii) has the entire right, title and interest in and to such Membership
Interests, and (iii) has full right, power, capacity and authority to validly
sell, assign, convey and transfer such Membership Interests to Buyer. If and
when transferred to Buyer as provided in this Agreement, such Membership
Interests will at Closing be transferred free and clear of all Liens (other than
restrictions on transfer arising under the Securities Act and state or foreign
securities laws), encumbrances, or claims of any kind. Such Individual Seller
has not granted or agreed to grant to any other Person a right, whether absolute
or contingent, to purchase or acquire any of the Membership Interests, and no
Person (other than Buyer) has any such right.

 

3.4         Litigation. There is no litigation, proceeding or investigation
pending or, to Knowledge of such Individual Seller, threatened, against such
Individual Seller. There are no judgments, orders or decrees outstanding against
such Individual Seller.

 

3.5         Claims. Such Individual Seller has no actions, suits, causes of
action or Liabilities of any kind or nature, whether in law or equity, and
whether arisen, accrued or matured heretofore or hereafter, whether against the
Company or any of the Subsidiaries by reason of any cause, matter or thing
whatsoever occurring prior to the date hereof (collectively, “Claims”),
including (a) any Claims relating to or arising out of any Equity Interests of
the Company held at any time by such Individual Seller and (b) any dividends or
distributions on such Equity Interests; provided, however, that notwithstanding
anything herein to the contrary, nothing herein shall be deemed a release or
discharge of any obligation of the Buyer to perform any of the terms, conditions
and agreements contained in this Agreement or any other agreement contemplated
hereby.

 

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3.6         Accredited Investor Status. Such Individual Seller is an “accredited
investor” as defined in Section 501 of Regulation D under the Securities Act.

 

3.7         Due Diligence Investigation. Such Individual Seller has been solely
responsible for his own due diligence investigation of the Buyer and its
business, and analysis of the merits and risks of the transaction contemplated
by this Agreement. Such Individual Seller has been given access to full and
complete information regarding the Buyer, and such Individual Seller has
reviewed such information and is familiar with it. Such Individual Seller has no
knowledge of the existence or nonexistence or occurrence or nonoccurrence of any
event, condition or circumstance the existence, nonexistence, occurrence or
nonoccurrence of which would cause any representation or warranty of Buyer
contained in this Agreement to be untrue or inaccurate in any respect. Such
Individual Seller has entered into the transactions contemplated by this
Agreement with the understanding, acknowledgement and agreement that no
representations or warranties, express or implied, are made with respect to
future prospects (financial or otherwise) of the business of the Buyer. Such
Individual Seller acknowledges that no current or former stockholder, director,
officer, employee, Affiliate or advisor of Buyer has made or is making any
representations, warranties or commitments whatsoever regarding the subject
matter of the Agreements, express or implied.

 

3.8         Disclosure. No representation or warranty by such Individual Seller
contained in this Agreement, and no statement contained in the Disclosure
Schedule or any other document, certificate or other instrument delivered or to
be delivered by or on behalf of such Individual Seller pursuant to this
Agreement, contains or will contain any untrue statement of a material fact or,
to the Knowledge of such Individual Seller, omits or will omit to state any
material fact necessary, in light of the circumstances under which it was or
will be made, in order to make the statements herein or therein not misleading.

 

3.9         Disclaimer of Other Representations and Warranties. Except for the
representations and warranties contained in this Article III, such Individual
Seller makes no other express or implied representation or warranty with respect
to the Company, the Subsidiaries, the Business, such Individual Seller or
transactions contemplated by this Agreement. Such Individual Seller disclaims
any and all other representations or warranties, whether made by such Individual
Seller or any of his Affiliates, agents or representatives. Such Individual
Seller hereby disclaims all liability and responsibility for any representation,
warranty, projection, forecast, statement or information made, communicated or
furnished (orally or in writing) to Buyer or its respective Affiliates or
representatives (including any opinion, information, projection, or advice that
may have been or may be provided to Buyer by any director, officer, employee,
agent or representative of such Individual Seller or any of their respective
Affiliates).

 

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ARTICLE IV -REPRESENTATIONS AND WARRANTIES REGARDING THE BUYER

 

The Buyer represents and warrants to the Sellers and Carret P.T. that the
statements contained in this Article IV are true and correct as of the date of
this Agreement and will be true and correct as of the Closing as though made as
of the Closing, except to the extent such representations and warranties are
specifically made as of a particular date (in which case such representations
and warranties will be true and correct as of such date):

 

4.1         Organization. The Buyer is a corporation duly organized, validly
existing and in good standing under the laws of the State of Utah. The Buyer has
all requisite power and authority (corporate and other) to carry on the
businesses in which it is engaged and to own and use the properties owned and
used by it.

 

4.2         Authorization. The Buyer has all requisite power and authority to
execute and deliver this Agreement and the other agreements contemplated hereby
and to perform its obligations hereunder and thereunder. The execution and
delivery by the Buyer of this Agreement and the other agreements contemplated
hereby and the consummation by the Buyer of the transactions contemplated hereby
and thereby have been duly and validly authorized by all necessary corporate
action on the part of the Buyer. This Agreement has been duly and validly
executed and delivered by the Buyer and constitutes a valid and binding
obligation of the Buyer, enforceable against the Buyer in accordance with its
terms.

 

4.3         Absence of Conflicts. Except as disclosed by the Buyer to the
Sellers prior to Closing, neither the execution and delivery by the Buyer of
this Agreement or any other agreement contemplated hereby, nor the performance
by the Buyer of its obligations hereunder or thereunder, nor the consummation by
the Company of the transactions contemplated hereby or thereby, will (a)
conflict with or violate any provision of the Organizational Documents of the
Buyer, each as amended and/or restated to date (b) require on the part of the
Buyer any notice to or filing with, or any Permit, authorization, consent or
approval of, any Governmental Entity, (c) conflict with, result in a breach of,
constitute (with or without due notice or lapse of time or both) a default
under, result in the acceleration of obligations under, create in any party the
right to accelerate, terminate, modify or cancel, or require any notice, consent
or waiver under, any contract, lease, sublease, license, sublicense, franchise,
Permit, indenture, agreement or mortgage for borrowed money, instrument of
indebtedness, Lien or other arrangement to which the Buyer is a party or by
which the Buyer is bound or to which any of its assets are subject, or (d)
violate any order, writ, injunction, decree, statute, rule or regulation
applicable to the Buyer or any of its properties or assets.

 

4.4         Broker’s Fees. Except as disclosed by the Buyer to the Sellers prior
to Closing, the Buyer has no Liability to pay any fees or commissions to any
broker, finder or agent with respect to the transactions contemplated by this
Agreement.

 

4.5         Disclosure. No representation or warranty by the Buyer contained in
this Agreement, and no statement contained in any other document, certificate or
other instrument delivered or to be delivered by or on behalf of the Buyer
pursuant to this Agreement, contains or will contain any untrue statement of a
material fact or omits or will omit to state any material fact necessary, in
light of the circumstances under which it was or will be made, in order to make
the statements herein or therein not misleading.

 

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ARTICLE V- REPRESENTATIONS AND WARRANTIES REGARDING CARRET P.T.

 

Carret P.T. represents and warrants to the Buyer that the statements contained
in this Article V are true and correct as of the date of this Agreement and will
be true and correct as of the Closing as though made as of the Closing, except
to the extent such representations and warranties are specifically made as of a
particular date (in which case such representations and warranties will be true
and correct as of such date):

 

5.1         Organization. Carret P.T. is a limited partnership duly formed,
validly existing and in good standing under the laws of the State of Delaware.

 

5.2         Authorization. Carret P.T. has all requisite power and authority to
execute and deliver this Agreement and the other agreements contemplated hereby
and to perform its obligations hereunder and thereunder. The execution and
delivery by Carret P.T. of this Agreement and the other agreements contemplated
hereby and the consummation by Carret P.T. of the transactions contemplated
hereby and thereby have been duly and validly authorized by all necessary
limited partnership action on the part of Carret P.T. This Agreement has been
duly and validly executed and delivered by Carret P.T. and constitutes a valid
and binding obligation of Carret P.T., enforceable against it in accordance with
its terms.

 

5.3         Broker’s Fees. Except as disclosed by Carret P.T. to Buyer prior to
Closing, Carret P.T. has no Liability to pay any fees or commissions to any
broker, finder or agent with respect to the transactions contemplated by this
Agreement.

 

5.4         Disclosure. No representation or warranty by Carret P.T. contained
in this Agreement, and no statement contained in any other document, certificate
or other instrument delivered or to be delivered by or on behalf of Carret P.T.
pursuant to this Agreement, contains or will contain any untrue statement of a
material fact or omits or will omit to state any material fact necessary, in
light of the circumstances under which it was or will be made, in order to make
the statements herein or therein not misleading.

 

5.5          Accredited Investor Status. Carret P.T. is an “accredited investor”
as defined in Section 501 of Regulation D under the Securities Act.

 

5.6         Due Diligence Investigation. Carret P.T. has been solely responsible
for its own due diligence investigation of the Buyer and its business, and
analysis of the merits and risks of the transaction contemplated by this
Agreement. Carret P.T. has been given access to full and complete information
regarding the Buyer, and Carret P.T. has reviewed such information and is
familiar with it. Carret P.T. has no knowledge of the existence or nonexistence
or occurrence or nonoccurrence of any event, condition or circumstance the
existence, nonexistence, occurrence or nonoccurrence of which would cause any
representation or warranty of Buyer contained in this Agreement to be untrue or
inaccurate in any respect. Carret P.T. has entered into the transactions
contemplated by this Agreement with the understanding, acknowledgement and
agreement that no representations or warranties, express or implied, are made
with respect to future prospects (financial or otherwise) of the business of the
Buyer. Carret P.T. acknowledges that no current or former stockholder, director,
officer, employee, Affiliate or advisor of Buyer has made or is making any
representations, warranties or commitments whatsoever regarding the subject
matter of the Agreements, express or implied.

 

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ARTICLE VI – COVENANTS

 

6.1         Closing Efforts. Except as expressly contemplated by Section 6.6,
each of the Parties shall use its commercially reasonable efforts to take all
actions and to do all things necessary, proper or advisable to consummate the
transactions contemplated by this Agreement, including using its commercially
reasonable efforts to ensure that (a) each of their respective representations
and warranties remain true and correct through the Closing Date and (b) the
conditions to the obligations of the other Parties to consummate the Closing are
satisfied.

 

6.2         Operation of Business – Negative Covenants. Except as expressly
contemplated by this Agreement, Sellers will not, without the consent of the
Buyer, which may not be unreasonably withheld, cause or permit the Company or
any Subsidiary to do any of the following with respect to the Company or any of
the Subsidiaries:

 

(a)         amend or otherwise change the operating agreements of the Company or
any of the Subsidiaries;

 

(b)         except as related to the Refinancing, issue, sell, pledge, dispose
of, grant, encumber or authorize the issuance, sale, pledge, disposition, grant
or encumbrance of (i) any membership interests of the Company or any Subsidiary,
or any options, warrants, convertible securities, or other rights of any kind to
acquire any membership interests, or any other ownership interest (including any
phantom interest), of the Company or the Subsidiaries or (ii) other than
Permitted Liens, any of the assets and properties material to the Company or any
Subsidiary;

 

(c)         acquire (including by merger, consolidation, or acquisition of stock
or assets) any Person or any division thereof or any material amount of assets,
except for acquisitions of inventory and supplies in the Ordinary Course of
Business and capital equipment not in excess of $100,000 per occurrence and
$200,000 in the aggregate;

 

(d)         incur or guarantee any indebtedness for borrowed money other than as
related to the Refinancing;

 

(e)         enter into or amend a contract, agreement, commitment, or
arrangement with respect to any prohibited matter set forth in Sections 6.2(c)
and (d);

 

(f)         increase the compensation payable or to become payable (other than
annual increases consistent with the Ordinary Course of Business) or grant any
severance or termination payment (other than severance or termination payments
consistent with the Ordinary Course of Business), to any of the directors,
officers, employees or consultants of the Company or any Subsidiary, except
pursuant to existing contractual arrangements or existing compensation plans;

 

22

 

 

(g)         enter into any employment or severance agreement with any director,
officer, employee or consultant of the Company or any Subsidiary;

 

(h)         establish, adopt, enter into or amend any bonus, compensation,
stock, pension, retirement, deferred compensation, employment, severance or
other plan, policy or arrangement for the benefit of any director, officer,
employee or consultant of the Company or any Subsidiary;

 

(i)         change Accounting Standards;

 

(j)         manufacture inventory in excess of production rates that are
reasonably related to current customer demands;

 

(k)         except for any Material Contracts related to the Refinancing, enter
into, extend, renew, or amend in any material respect any Material Contract or
terminate any Material Contract before the expiration of the term thereof;

 

(l)         violate, breach or default under, in any material respect, or take
or fail to take any action that (with or without notice or lapse of time or
both) would constitute a material violation or breach of, or default under, any
term or provision of (1) any Material Contract to which the Company or any
Subsidiary is a party or (2) any Permit (including without limitation any
Environmental Permit) held or used by the Company or any Subsidiary;

 

(m)         institute or settle any Legal Proceeding; or

 

(n)         split, combine or reclassify any of its Equity Interests; or
declare, set aside or pay any dividend or other distribution (whether in cash,
stock or property or any combination thereof) in respect of its Equity
Interests, other than Pre-Closing Distributions which do not result in (x) less
than $250,000 in Acquired Company Cash; or (y) Non-Cash Working Capital on the
Closing Date to be less than 20% of the trailing twelve months’ Net Sales of the
Company as determined as of the most recent calendar month-end prior to the
Closing Date.

 

6.3         Operation of Business – Affirmative Covenants. Except as provided in
this Agreement and as related to the Refinancing, unless the Buyer otherwise
agrees, Sellers shall, and shall cause the Company and each of the Subsidiaries
to:

 

(a)         Other than Pre-Closing Distributions, conduct the Business in the
Ordinary Course of Business and in material conformity with applicable Laws and
Regulations, and with any licenses, Permits, and other authorizations issued to
it by any Governmental Entity, and promptly following receipt deliver notice to
Buyer and copies of any communication or notice received from any Governmental
Entity or other Person alleging any violation of any such Law and Regulation;

 

23

 

 

(b)         exercise commercially reasonable efforts to (i) preserve the
Business intact, (ii) preserve present commercially significant relationships
with and maintain the goodwill of with suppliers and customers, and others
having business relations with the Company or any Subsidiary, (iii) keep in full
force and effect the Company, each Subsidiary and the Company’s and each
Subsidiary’s limited liability company existence and all material rights
(including Company Intellectual Property) relating to the Business, (iv)
maintain the assets of the Company and each Subsidiary in adequate and suitable
condition for the purposes for which they are presently being used, and (v)
maintain its inventory, pay its trade creditors and other accounts, and collect
its receivables in the Ordinary Course of Business; and

 

(c)         maintain the respective Company and Subsidiary books and records in
accordance with the Accounting Standards.

 

6.4         Notices and Consents. Sellers shall give, or cause the Company and
each Subsidiary to give, such notices to third parties, and shall use
commercially reasonable efforts to obtain any third-party consents, that Buyer
may reasonably request in connection with the transactions contemplated by this
Agreement, including without limitation those set forth on Schedule 7.1(a).

 

6.5         Access.

 

(a)         The relevant Seller will permit, and will cause the Company and each
Subsidiary to permit, representatives of the Buyer to have access during normal
business hours with reasonable notice, and in a manner so as not to interfere
with the normal operations of the Company and the Subsidiaries, as the case may
be, to all premises, properties, personnel, books, records (including Tax
records), contracts and documents of or pertaining to the Company and each
Subsidiary, in each case as Buyer may reasonably request.

 

(b)         Within fifteen (15) business days after the end of each month ending
prior to the Closing, beginning with March 2012, the Sellers shall cause the
Company and each Subsidiary to furnish to the Buyer an unaudited income
statement for such month and a balance sheet as of the end of such month,
prepared on a basis consistent with the Financial Statements. Such financial
statements shall present fairly the consolidated financial condition and results
of operations of the Company and each Subsidiary as of the dates thereof and for
the periods covered thereby, and shall be consistent with the books and records
of the Company and each Subsidiary.

 

6.6         Exclusivity.

 

(a)         During the period from the date of this Agreement to the Closing or
the earlier termination of this Agreement in accordance with Article X hereof,
except as required by law, each Seller and the Company shall not, and each such
Party shall cause each the Subsidiaries and each of their officers, directors,
employees, representatives and agents not to, directly or indirectly, through
any officer, director, manager, employee, Affiliate, agent or representative or
otherwise, (i) initiate, solicit, encourage or otherwise facilitate any inquiry,
proposal, offer or discussion with any party (other than the Buyer or its
representatives) concerning any acquisition, equity or debt financing, joint
venture, merger, reorganization, consolidation, recapitalization, business
combination, liquidation, dissolution, share exchange, sale of stock, sale of
material assets or similar business transaction (collectively, an “Alternative
Transaction”) involving the Company or any Subsidiary, (ii) engage in
negotiations or enter into any agreement with any party (other than the Buyer or
its Affiliates or representatives) concerning any such transaction, or (iii)
furnish any information concerning the business, properties or assets of the
Company or any Subsidiary (other than the Buyer or its representatives), except
in the Ordinary Course of Business.

 

24

 

 

(b)         Notwithstanding anything to the contrary in this Agreement, the
Buyer is expressly entitled to initiate, solicit, encourage or otherwise
facilitate any inquiry, proposal, offer or discussion with any party concerning
an Alternative Transaction involving the Buyer and, upon receiving a proposal or
offer that the Buyer, upon the recommendation of the Special Committee, believes
in good faith, after consultation with outside legal counsel and financial
advisors, constitutes or would reasonably be expected to result in a Superior
Proposal, make a Buyer Adverse Recommendation Change and enter into an
Alternative Transaction; provided, that the Special Committee follows the
procedures set forth in Section 6.6(c) below.

 

(c)         Except as set forth in this Section 6.6(c), the Buyer shall not make
any Buyer Adverse Recommendation Change or enter into any Alternative
Transaction. Notwithstanding the foregoing, at any time prior to the receipt of
the Requisite Buyer Vote, the Board of Directors of the Buyer may, upon the
recommendation of the Special Committee, make a Buyer Adverse Recommendation
Change and the Buyer may enter into a proposed Alternative Transaction if: (i)
the Buyer promptly notifies the Sellers, in writing, at least ten (10) business
days (the “Notice Period”) before making a Buyer Adverse Recommendation Change
or entering into an Alternative Transaction of its intention to take such
action, which notice shall state expressly that the Buyer has received a
Superior Proposal that the Board of Directors of the Buyer intends to declare a
Superior Proposal and that the Board of Directors of the Buyer intends to make a
Buyer Adverse Recommendation Change; (ii) the Buyer attaches to such notice the
most current version of the proposed agreement (which version shall be updated
on a prompt basis) and the identity of the third party making such Superior
Proposal; (iii) the Buyer shall, during the Notice Period, negotiate with the
Sellers in good faith to make such adjustments in the terms and conditions of
this Agreement so that such Alternative Transaction ceases to constitute a
Superior Proposal, if the Sellers, in their discretion, propose to make such
adjustments (it being agreed that in the event that, after commencement of the
Notice Period, there is any material revision to the terms of a Superior
Proposal, including, any revision in price, the Notice Period shall be extended,
if applicable, to ensure that at least three (3) business days remains in the
Notice Period subsequent to the time the Buyer notifies the Sellers of any such
material revision (it being understood that there may be multiple extensions));
(iv) the Special Committee determines in good faith, after consulting with
outside legal counsel and financial advisors, that such Alternative Transaction
continues to constitute a Superior Proposal after taking into account any
adjustments made by the Sellers during the Notice Period in the terms and
conditions of this Agreement and any anticipated interference or adverse impact
on or with respect to Buyer’s acquisition of Advance Forming Technology, Inc., a
Colorado corporation, and the acquisition of the assets and assumed liabilities
of AFT Europa KFT, a Hungarian limited liability company, through the
acquisition of a special purpose entity to be formed subsequent to the date
hereof (the “AFT Acquisition”)

 

25

 

 

6.7         Notice of Breaches; Supplemental Disclosure. During the period from
the date of this Agreement to the Closing or the earlier termination of this
Agreement in accordance with Article X hereof, the Company and each Seller shall
promptly deliver to the Buyer in a writing specifically referring to this
Section 6.7 supplemental information concerning events or circumstances, whether
occurring prior to or subsequent to the date hereof which would render any
representation, warranty or statement of the Company or any Seller in this
Agreement or the Disclosure Schedule incomplete or inaccurate in any material
respect at any time after the date of this Agreement until the Closing. Any such
supplemental information concerning events or circumstances occurring subsequent
to the date hereof shall be deemed to update the Disclosure Schedule and this
Agreement with respect to any affected representation, warranty or statement,
and no claim for any related breach or misrepresentation may be made thereon to
the extent that Buyer does not elect to terminate this Agreement as a result of
such disclosure. Notwithstanding the foregoing, any such supplemental
information based on material events or material circumstances that existed or
occurred prior to the date hereof shall not be deemed to avoid or cure any
misrepresentation or breach of warranty, or constitute an amendment or waiver of
any representation, warranty or statement in this Agreement or the Disclosure
Schedule, or limit the availability of claims for indemnification related to
such events or circumstances irrespective of the Buyer’s closing of the
Transaction.

 

6.8         Expenses. Except as otherwise expressly provided herein, the Buyer
will pay all fees and expenses (including legal and accounting fees and
expenses) incurred by it in connection with the transactions contemplated hereby
and the Sellers will pay all fees and expenses incurred by the Sellers and the
Company in connection with the transactions contemplated hereby. The Buyer, on
the one hand, and the Sellers, on the other hand, shall be responsible for
payment of one-half of all sales or transfer Taxes (including real property
transfer Taxes) arising out of the conveyance of the Membership Interests to the
Buyer.

 

6.9         Board Recommendation. The Board of Directors of the Buyer shall,
subject to Section 6.6 of this Agreement, recommend the Acquisition to the
Buyer’s disinterested shareholders entitled to vote thereon for approval (the
“Buyer Board Recommendation”).

 

6.10       Refinancing. The Company may, at its sole discretion, refinance its
current debt obligations (approximately $7,500,000) and in connection therewith
borrow up to $28,000,000 from commercial bank(s) secured by all of the assets
and properties of the Company, the Subsidiaries and Advanced Forming Technology,
Inc. (the “Refinancing”).

 

6.11       Distributions. Notwithstanding any limitation otherwise contained
herein, the Parties acknowledge that the Company may make distributions of cash
to its members prior to the Closing Date so long as all closing conditions of
Article VII are satisfied or waived, such waiver to be effective only if given
in writing following the express authorization thereof by the Special Committee.

 

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ARTICLE VII - CONDITIONS TO CLOSING

 

7.1         Conditions to Obligations of the Buyer. The obligation of the Buyer
to consummate the Closing is subject to the satisfaction of the following
conditions precedent, each of which may be waived in writing in the sole
discretion of the Buyer and, except as otherwise set forth herein, shall be
deemed waived by consummation of the Closing:

 

(a)          each Seller and the Company shall each have obtained at its own
expense (and shall have provided copies thereof to the Buyer) all of the
waivers, Permits, consents, approvals or other authorizations, and effected all
of the registrations, filings and notices, set forth on Schedule 7.1(a), and all
other waivers, Permits, consents, approvals or other authorizations, and
effected all of the registrations, filings and notices, which are necessary for
the consummation of the transactions contemplated by this Agreement or are
material to the conduct of the Business;

 

(b)          without giving effect to any supplemental disclosure pursuant to
Section 6.7, the representations and warranties of the Company and the Sellers
in this Agreement shall be true and correct in all respects (in the case of any
representation or warranty qualified by materiality or Company Material Adverse
Effect) or true and correct in all material respects (in the case of any
representation or warranty not qualified by materiality or Company Material
Adverse Effect), in either case, as of the date hereof and as of the Closing
Date, other than representations or warranties that expressly speak only as of a
specific date or time, which shall be true and correct (or true and correct in
all material respects, as the case may be) as of such specified date or time;

 

(c)         each of the Sellers and the Company shall have performed or complied
with each of its agreements and covenants required to be performed or complied
with under this Agreement as of or prior to the Closing;

 

(d)         there shall have occurred no change, event, circumstance or
development (including, without limitation, with respect to the Company’s or any
Subsidiary’s relationships with its customers or suppliers) that, individually
or taken together with all other changes, events, circumstances or developments,
has had, or could reasonably be expected in the future to have, a Company
Material Adverse Effect;

 

(e)         no Legal Proceeding shall be pending or threatened in writing
wherein an unfavorable judgment, order, decree, stipulation or injunction would
(i) prevent consummation of the transactions contemplated by this Agreement,
(ii) cause the transactions contemplated by this Agreement to be rescinded
following consummation of any such transaction or (iii) have, individually or in
the aggregate, a Company Material Adverse Effect, and no such judgment, order,
decree, stipulation or injunction shall be in effect;

 

(f)         the Sellers and the Company shall have delivered to the Buyer the
Company Certificate;

 

27

 

 

(g)        the Buyer shall have obtained consent to proceed with the Closing by
the Requisite Buyer Vote;

 

(h)        the Buyer shall have received the opinion of its financial advisor as
to the fairness of the transaction contemplated by this Agreement from a
financial point of view, which opinion shall be in form and substance reasonably
acceptable to the Buyer and the Special Committee;

 

(i)         the Buyer shall have received a written waiver to that certain
Financial Advisory Agreement dated as of January 23, 2009 in the form attached
hereto as Exhibit A , duly executed by QMI;

 

(j)        the Buyer shall have received a written amendment to that certain
letter agreement dated October 28, 2011 in the form attached hereto as Exhibit
B, by and between QMI and the Company, duly executed by QMI;

 

(k)       the Buyer shall have received certificates of good standing (or the
substantial equivalent) of the Company and each Subsidiary in their
jurisdictions of organization and the various foreign jurisdictions in which
they are qualified;

 

(l)        the Buyer shall have received certificates from the Company and each
Subsidiary (without qualification as to knowledge, materiality or otherwise),
signed on behalf of the subject Company or Subsidiary, as applicable, by the
Secretary of the subject Company or Subsidiary, as applicable, regarding
certified Organizational Documents, the incumbency of officers of the subject
Company or Subsidiary, as applicable, and the adoption of authorizing
resolutions by the directors, managers and equity holders of the subject Company
or Subsidiary, as applicable;

 

(m)      the Company shall have Acquired Company Cash of not less than $250,000
at Closing, and Non-Cash Working Capital on the Closing Date shall be not less
than 20% of the trailing twelve months’ Net Sales of the Company, as determined
as of the most recent calendar month-end prior to the Closing Date; and

 

(n)       if the Buyer is required to file an application pertaining to the
continuation of listing for trading of the Buyer’s common stock on a national
securities exchange, such application or applications, as the case may be, shall
have been approved in writing by the respective securities regulatory
organizations having jurisdiction over such application and the Buyer’s common
stock shall remain eligible and qualified for trading on at least one national
securities exchange immediately following the Closing Date and will retain such
eligibility and qualification immediately following the Closing Date free from
any delisting determination, notice of non-compliance with listing criteria or
similar proceeding.

 

7.2         Conditions to Obligations of the Sellers. The obligation of the
Sellers to consummate the Closing is subject to the satisfaction of the
following conditions precedent, each of which may be waived in writing in the
sole discretion of the Sellers and shall be deemed waived by consummation of the
Closing:

 

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(a)         the representations and warranties of the Buyer in this Agreement
shall be true and correct in all respects (in the case of any representation or
warranty qualified by materiality) or true and correct in all material respects
(in the case of any representation or warranty not qualified by materiality), in
either case, as of the date hereof and as of the Closing Date, other than
representations or warranties that expressly speak only as of a specific date or
time, which shall be true and correct (or true and correct in all material
respects, as the case may be) as of such specified date or time;

 

(b)         the Buyer shall have performed or complied with each of its
agreements and covenants required to be performed or complied with under this
Agreement as of or prior to the Closing; and

 

(c)         the Buyer shall have delivered to the Sellers the Buyer Certificate.

 

7.3         Conditions to Obligations of Carret P.T. The obligation of Carret
P.T. to consummate the Closing is subject to the satisfaction of the following
conditions precedent, each of which may be waived in writing in the sole
discretion of Carret P.T. and shall be deemed waived by consummation of the
Closing:

 

(a)          the representations and warranties of the Buyer in this Agreement
shall be true and correct in all respects (in the case of any representation or
warranty qualified by materiality) or true and correct in all material respects
(in the case of any representation or warranty not qualified by materiality), in
either case, as of the date hereof and as of the Closing Date, other than
representations or warranties that expressly speak only as of a specific date or
time, which shall be true and correct (or true and correct in all material
respects, as the case may be) as of such specified date or time;

 

(b)          the Buyer shall have performed or complied with each of its
agreements and covenants required to be performed or complied with under this
Agreement as of or prior to the Closing;

 

(c)          the Buyer shall have delivered to Carret P.T. the Buyer
Certificate; and

 

(d)          the Buyer shall have obtained consent to proceed with the Closing
by the Requisite Buyer Vote.

 

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ARTICLE VIII - INDEMNIFICATIONS

 

8.1         Survival of Representations and Warranties.

 

(a)          The representations and warranties of the Quadrant Sellers
contained in this Agreement shall survive the Closing until the fifteen (15)
month anniversary of the Closing, except that: (i) the representations and
warranties made pursuant to Section 2.1 (Existence; Authority) and Section 2.2
(Capitalization) shall survive indefinitely and (ii) the representations and
warranties made pursuant to Section 2.7 (Employee Benefits), Section 2.11
(Taxes), Section 2.14 (Environmental Conditions) and Section 2.16 (Products)
shall survive until sixty (60) days after the expiration of the applicable
statute of limitations. The representations identified in clauses (i) and (ii)
of this Section 8.1(a) are herein referred to as the (“Quadrant Seller
Fundamental Representations”).

 

(b)          The representations and warranties of the Individual Sellers
contained in Article III of this Agreement shall survive the Closing until the
six (6) month anniversary of the Closing, except that the representations and
warranties made pursuant to Section 3.1 (Authority) and Section 3.3 (Ownership)
(the “Individual Seller Fundamental Representations”) shall survive
indefinitely.

 

(c)          The representations and warranties of Buyer contained in this
Agreement shall survive the Closing until the fifteen (15) month anniversary of
the Closing, except that the representations and warranties made pursuant to
Section 4.1 (Organization) and Section 4.2 (Authorization) (collectively, the
“Buyer Fundamental Representations”) shall survive indefinitely.

(d)          The representations and warranties set forth in this Agreement
speak only as of the date of this Agreement and as of the date of the Closing
(except for representations and warranties that are made as of a specific date,
which representatives and warranties speak only as of such date). Claims for
indemnification based on the breach of a representation or warranty may only be
made if the Party or Parties seeking indemnification (an “Indemnified Party”)
delivers a Claim Notice pursuant to Section 8.6 to the Party or Parties from
whom indemnification is sought (an “Indemnifying Party”) before the expiration
of the applicable survival period specified in Section 8.1. No claim for
indemnification based on a breach of a representation or warranty may be brought
after the expiration of the applicable survival period, except that (i) claims
with respect to which a Claim Notice has been delivered prior to the expiration
of the applicable survival period shall survive as to such claim until finally
resolved and (ii) claims based on fraud shall survive for the applicable statute
of limitations.

 

8.2         Indemnification by Quadrant Sellers. The Quadrant Sellers, jointly
and severally, shall indemnify and hold harmless Buyer and their respective
Affiliates (including the Company and the Subsidiaries), officers, directors,
employees, agents, successors and assigns (each a “Buyer Indemnified Party”)
from and against any and all Liabilities, losses, diminution in value, damages,
claims, costs and expenses, interest, fines, deficiencies, court costs,
litigation costs, awards, judgments and penalties (including attorneys’ and
consultants’ fees and expenses) actually suffered or incurred by all or any of
them (including, but not limited to, any Action brought or otherwise initiated
by any of them) (a “Loss”), arising out of or relating to:

 

(a)          any breach of any representation or warranty made by any Quadrant
Seller contained in this Agreement;

 

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(b)          any non-fulfillment or failure to perform or other breach of any
covenant or agreement by any of the Quadrant Sellers (or, with respect to
periods before Closing, by the Company and the Subsidiaries) contained in this
Agreement; and

 

(c)          any Liability of Buyer (i) for Taxes of the Company or any
Subsidiary for all Pre-Closing Tax Periods and (ii)  for Taxes of any Quadrant
Seller or any of such Quadrant Seller’s Affiliates (other than the Company and
the Subsidiaries) by application of Treasury Regulation Section 1.1502-6 or any
similar state, local or foreign Tax law.

 

8.3         Indemnification by the Individual Sellers. The Individual Sellers,
severally and not jointly, shall indemnify and hold harmless the Buyer
Indemnified Parties from and against any and all Losses arising out of or
relating to:

 

(a)          any breach of any representation or warranty made by such
Individual Seller contained in this Agreement; and

 

(b)          any non-fulfillment or failure to perform or other breach of any
covenant or agreement by such Individual Seller contained in this Agreement.

 

8.4         Indemnification by Buyer. Buyer shall indemnify and hold harmless
each Seller and its respective Affiliates, officers, directors, employees,
agents, successors and assigns (each a “Seller Indemnified Party”) from and
against any and all Losses, arising out of or relating to:

 

(a)          any breach of any representation or warranty made by Buyer
contained in this Agreement;

 

(b)         any non-fulfillment or failure to perform or other breach of any
covenant or agreement by the Buyer contained in this Agreement; or

 

(c)          any Liability incurred by Seller for Taxes of the Company or
Subsidiary for all Post-Closing Tax Periods.

 

To the extent that Buyer’s undertakings set forth in this Section 8.4 are
unenforceable, Buyer shall contribute the maximum amount permitted under
applicable Law and Regulation to the payment and satisfaction of all Losses
incurred by the Seller Indemnified Parties.

 

8.5         Limits on Indemnification.

 

(a)         Quadrant Seller Limitations. Notwithstanding anything to the
contrary contained in this Agreement:

 

(i)         Other than with respect to claims based on fraud or relating to the
Section 2.1 (Existence; Authority) and Section 2.2 (Capitalization), the
Quadrant Sellers shall not be liable for indemnification pursuant to Section
8.2(a) unless and until the aggregate amount of all claims under Section 8.2 and
Section 8.3 exceeds $200,000 (at which point the Quadrant Sellers shall become
liable only with respect to claims in excess of $200,000);

 

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(ii)          The Quadrant Sellers shall have no liability for indemnification
under Section 8.2(a) in excess of fifteen percent 15% of the Value of the
Acquisition Consideration, except that with respect to claims based on fraud or
breach of a Quadrant Seller Fundamental Representation such liability shall be
limited to an amount equal to one hundred percent (100%) of the Value of the
Acquisition Consideration received by the Quadrant Sellers;

 

(b)          Individual Seller Limitations. Notwithstanding anything to the
contrary contained in this Agreement:

 

(i)          Other than with respect to claims based on fraud or relating to the
Individual Seller Fundamental Reps, the Individual Sellers shall not be liable
for indemnification pursuant to Section 8.3(a) unless and until the aggregate
amount of all claims under Section 8.2 and Section 8.3 exceeds $200,000 (at
which point the Individual Sellers shall become liable only with respect to
claims in excess of $200,000);

 

(ii)          The Individual Sellers shall have no liability for indemnification
under Section 8.3(a) in excess of fifteen percent 15% of the Value of the
Acquisition Consideration, except that with respect to claims based on fraud or
breach of an Individual Seller Fundamental Representation such liability shall
be limited to an amount equal to one hundred percent (100%) of the Value of the
Acquisition Consideration received by such Individual Seller.

 

(c)          In calculating the indemnifiable Losses suffered by the Indemnified
Party as a result of any breach of this Agreement, the recoverable amount of any
claim shall reduced by any amounts the Indemnified Party has received from third
parties in connection with the matter, including any indemnification or other
recovery under any contract, agreement, or arrangement between a Buyer
Indemnified Party and any third party and any insurance proceeds. The
Indemnified Party will use commercially reasonable efforts to pursue third party
recoveries and otherwise mitigate the indemnifiable Losses. However, nothing in
this Section 8.5(c) precludes an Indemnified Party from giving notice of its
indemnity claim before exhausting its remedies. If the Indemnified Party
receives any third party payments after an indemnification payment is made that
relates thereto, the Indemnified Party will promptly repay to the Indemnifying
Party the amount of the indemnification payment the Indemnifying Party would not
have paid had the third-party payment reduced the original indemnification
payment.

 

(d)          An Indemnified Party shall not assert claims with respect to, or
recover damages for, Losses that are in the nature of consequential or punitive
damages or claims for loss of profit, except to the extent the Indemnified Party
is required to pay punitive damages to a third party pursuant to a Third Party
Claim (as defined in Section 8.6(d)).

 

(e)          Notwithstanding any provision of this Agreement to the contrary,
Buyer is not entitled to indemnification under Section 2.11 (Taxes) with respect
to the Taxes attributable to the post-Closing portion of any Straddle Period.

 

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(f)          An Indemnified Party may not recover duplicative indemnifiable
Losses in respect of a single set of facts or circumstances under more than one
representation, warranty, covenant, or agreement in this Agreement.

 

(g)          To the extent that Sellers’ undertakings set forth in this Article
VIII may be unenforceable, the Quadrant Sellers and Individual Sellers, as
applicable, shall contribute the maximum amount that they are permitted to
contribute under applicable Laws and Regulations to the payment and satisfaction
of all Losses incurred by Buyer Indemnified Parties. Notwithstanding anything to
the contrary herein, the aggregate Liability for each shall not exceed one
hundred percent (100%) of such Seller’s allocable portion of the Value of the
Acquisition Consideration.

 

(h)          For purposes of clarity, each Seller is severally but not jointly
liable for the payment and satisfaction of all Losses incurred by the Buyer
Indemnified Parties, except that the Individual Sellers shall not be liable for
any Losses attributable to a breach of Article II herein or any breach of any
and all covenants and agreements made by any other Party to this Agreement.

 

(i)          Notwithstanding anything contained herein to the contrary, any
indemnity claim against the Sellers pursuant to this Article VIII shall be
satisfied solely by the delivery by the applicable Seller Indemnifying Party (or
QMI pursuant to the guaranty set forth in Section 8.10), of a number of shares
of Buyer Stock that have a Value equal to the amount to be recovered by the
Buyer Indemnified Parties.

 

(j)          For purposes of this Article VIII, the “Value” of any Buyer Stock
delivered in satisfaction of an indemnity claim shall be equal to $4.00 per
share, subject to adjustment for forward stock splits, reverse stock splits,
stock dividends and any other similar events occurring after the date hereof.

 

8.6         Notice of Loss; Third Party Claims.

 

(a)          An Indemnified Party shall give the Indemnifying Party prompt
notice of any matter that an Indemnified Party has determined has given or could
give rise to a right of indemnification under this Agreement, as soon as
practicable, stating the amount of the Loss (the “Claimed Amount”), if known,
and method of computation of the Loss, and containing a reference to the
provisions of this Agreement in respect of which the right of indemnification is
claimed or arises (a “Claim Notice”).

 

(b)          Within twenty (20) calendar days after delivery of a Claim Notice,
the Indemnifying Party shall deliver to the Indemnified Party a written response
(a “Response”), in which the Indemnifying Party shall (i) agree that the
Indemnified Party is entitled to receive all of the Claimed Amount; (ii) agree
that the Indemnified Party is entitled to receive part, but not all, of the
Claimed Amount; or (iii) dispute that the Indemnified Party is entitled to
receive all or a portion of the Claimed Amount. The Indemnifying Party may
contest the payment of all or a portion of the Claimed Amount only based upon a
good faith belief that all or such portion of the Claimed Amount does not
constitute Loss for which the Indemnified Party is entitled to indemnification
under this Article VIII. If no Response is delivered by the Indemnifying Party
within such twenty (20) day period, the Indemnifying Party shall be deemed to
have agreed that all of the Claimed Amount is owed to the Indemnified Party.

 

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(c)          During the thirty (30) day period following the delivery of a
Response that reflects a dispute as to the Claimed Amount (a “Dispute”), the
Indemnifying Party and the Indemnified Party shall use good faith efforts to
resolve the Dispute. If the Dispute is not resolved within such thirty (30) day
period, the Indemnifying Party and the Indemnified Party shall discuss in good
faith the submission of the Dispute to binding arbitration. The provisions of
this Section 8.6(c) shall not obligate the Indemnifying Party and the
Indemnified Party to submit to arbitration or any other alternative dispute
resolution procedure with respect to any Dispute, and in the absence of an
agreement by the Indemnifying Party and the Indemnified Party to arbitrate a
Dispute, such Dispute shall be resolved in a state or federal court sitting in
the State of New York, in accordance with Section 12.11.

 

(d)          If an Indemnified Party receives notice of any Action, demand or
assessment (each, a “Third Party Claim”) against it or that may give rise to a
claim for Loss under this Section 8.6(d), the Indemnified Party shall give the
Indemnifying Party notice of the Third Party Claim within thirty (30) days (ten
(10) days in the case of any Third Party Claim relating to Tax) of the receipt
of notice. However, the failure to provide notice does not release the
Indemnifying Party from any of its obligations under this Article VIII except to
the extent that the Indemnifying Party is materially prejudiced by the failure.
To the extent permitted by the law applicable to the Third Party Claim, the
Indemnifying Party is entitled to assume and control the defense of the Third
Party Claim at its expense and through counsel of its choice if it gives notice
of its intention to do so to the Indemnified Party within ten (10) days of the
receipt of notice from the Indemnified Party. However, to the extent permitted
by the law applicable to the Third Party Claim, the Indemnified Party is
entitled, at its own expense, to participate in the defense of the Third Party
Claim.

 

(e)          If the Indemnifying Party exercises the right to undertake the
defense against a Third Party Claim as provided above, the Indemnified Party
shall reasonably cooperate with the Indemnifying Party in the defense and make
available to the Indemnifying Party, at the Indemnifying Party’s expense, all
witnesses, pertinent records, materials, and information in the Indemnified
Party’s possession or under the Indemnified Party’s control relating thereto as
the Indemnifying Party reasonably requires. Similarly, if the Indemnified Party
is, directly or indirectly, conducting the defense against a Third Party Claim,
the Indemnifying Party shall reasonably cooperate with the Indemnified Party in
the defense and make available to the Indemnified Party, at the Indemnifying
Party’s expense, all witnesses, records, materials, and information in the
Indemnifying Party’s possession or under the Indemnifying Party’s control
relating thereto as the Indemnified Party reasonably requires.

 

(f)          The Indemnified Party shall not consent to the entry of any
judgment or enter into any settlement with respect to the Third-Party Claim
without the prior written consent of the Indemnifying Party, which consent shall
not be withheld unreasonably.

 

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8.7         Character of Indemnification Payments. Sellers and Buyer agree to
treat all payments made pursuant to this Article VIII (Indemnification) as
adjustments to the Purchase Price contained in Section 1.2(a) for Tax purposes,
unless otherwise required by applicable Laws and Regulations.

 

8.8         Exclusive Remedy. After the Closing, except in the case of fraud,
the sole remedy of an Indemnified Party for all indemnifiable Losses with
respect to the transactions contemplated by this Agreement is the indemnity set
forth in Article VIII (Indemnification) (it being understood that nothing in
this Section 8.8 shall limit the Parties’ rights to specific performance or
other equitable remedies with respect to the covenants referred to in Article IX
(Tax Matters)).

 

8.9         Covenant Not to Transfer or Encumber Buyer Stock. The Sellers
covenant and agree, for purposes of assuring the respective indemnification
obligations of the Sellers set forth in this Article VIII, on the Closing Date
and for a period of one hundred eighty (180) days thereafter, the Sellers shall
not sell, transfer, pledge, option, mortgage, hypothecate or permit any Lien,
attachment, trustee process or any other judicial process of any creditor of any
party to encumber the Buyer Stock. Nothing herein shall be deemed to limit any
greater periods which are applicable to rights of indemnification hereunder or
any actions for enforcement of such rights to indemnification. Notwithstanding
anything to the contrary in this Agreement, in the event a Seller lacks the
number of shares of Buyer Stock required to satisfy an indemnity claim against
such Seller pursuant to this Article VIII or is otherwise unable to satisfy such
an indemnity claim as a result of a breach of this Section 8.9, such Seller
shall be required to purchase the requisite number of shares from one or more
third parties on the open market.

 

8.10         Parental Guarantee of Indemnification Obligations. QMI, as the sole
owner of all the issued and outstanding Equity Interests of QMP and QTS, and in
consideration of the covenants, agreements and undertakings of the Buyer set
forth in this Agreement, from which QMI acknowledges it will receive substantial
benefit, hereby unconditionally guarantees the full, prompt and complete
performance by QMP and QTS of their respective obligations of indemnification
that arise under, or are related to, performance of this Article VIII. This
guarantee shall be construed as a separate and independent obligation of QMI, as
principal obligor, and not merely as a surety, continuing as an absolute and
unconditional guarantee of performance of the indemnification obligations of QMP
and QTS during the respective periods of effectiveness for such indemnification
and not as a guarantee of collection.

 

ARTICLE IX - TAX MATTERS

 

9.1         Returns and Payment of Taxes.

 

(a)          Sellers shall (i) prepare and timely file (or cause to be prepared
and filed) all Tax Returns required to be filed by or with respect to the
Company and any of the Subsidiaries, for all Tax Periods ending on or before the
Closing Date, including all federal, state, local or foreign consolidated or
separate returns and combined reports in which Company or any of the
Subsidiaries may be or is required to join, and (ii) timely pay all Taxes due
with respect thereto. The Parties agree that the Company and the Subsidiaries
shall be treated for these purposes as ceasing to be part of any consolidated or
combined group of the Sellers or its Affiliates as of the end of the day on the
Closing Date, except with respect to extraordinary transactions or events
occurring after the Closing but before the end of the day on the Closing Date.

 

35

 

 

(b)          Buyer shall (i) prepare and timely file (or cause to be prepared
and filed) all Tax Returns of the Company and the Subsidiaries, as required to
be filed after the Closing Date other than those Tax Returns described in
Section 9.1(a), and (ii) timely pay all Taxes due with respect thereto. To the
extent any such Tax Return includes a Pre-Closing Tax Period or is a return for
which the Sellers could otherwise have an indemnification obligation pursuant to
Article VIII, Buyer shall (x) prepare such Tax Returns consistent with past
practices unless a contrary position is required by applicable Laws and
Regulations, (y) allow Sellers a reasonable time, and in no event less than
twenty (20) Business Days for any Income Tax Return, to review and comment on
the Tax Returns prior to filing, and (z) not file such Tax Returns without
Sellers’ prior consent, which shall not be unreasonably withheld, conditioned or
delayed. Sellers shall reimburse Buyer for the portion of the Taxes shown as due
on any Straddle Period Tax Return that are attributable to the Pre-Closing Tax
Period on or before the later of ten (10) Business Days after request from Buyer
for such reimbursement and five (5) Business Days before such tax is due and
payable.

 

(c)          For purposes of this Agreement, in the case of any Straddle Period,
the amount of Taxes attributable to the Pre-Closing Period shall be calculated
as follows: (i) in the case of any Taxes that are based upon or measured by
income, receipts, profits or wages, that are imposed in connection with the sale
or other transfer of property or services, or that are required to be withheld
and collected, the amount of such Taxes that are attributable to the Pre-Closing
Tax Period shall be determined on the basis of a closing of the books as of the
end of the Closing Date (and for such purpose, the taxable period of any
partnership or other pass-through entity in which the Company or any of the
Subsidiaries holds a beneficial interest shall to the extent practical be deemed
to terminate at such time); and (ii) in the case of other Taxes, the amount of
such Taxes that are attributable to the Pre-Closing Tax Period shall equal the
amount of such Tax for the entire taxable period multiplied by a fraction, the
numerator of which is the number of days in the taxable period through and
including the Closing Date, and the denominator of which is the total number of
days in the taxable period.

 

(d)          Neither Buyer nor any of its Affiliates shall file any amended Tax
Return for or including any Pre-Closing Tax Period without Sellers’ consent.

 

9.2         Cooperation on Tax Matters. Sellers, Company and Buyer shall
reasonably cooperate, and shall cause their respective Affiliates, officers,
employees, agents, auditors and other representatives reasonably to cooperate,
in preparing, executing and filing all Tax Returns relating to the Company and
any of the Subsidiaries and in resolving all disputes and audits relating to
Taxes of the Company and any of the Subsidiaries. Such cooperation shall include
maintaining and making available to each other all records relating to Taxes of
the Company or any Subsidiary and making employees available on a mutually
convenient basis to provide additional information or explanation of any
materials provided hereunder or to testify at any proceedings relating to Taxes
of the Company or any Subsidiary. Sellers and Buyer agree (a) to retain all
books and records with respect to Tax matters pertinent to the Company and any
of the Subsidiaries relating to any Tax Period beginning before the Closing Date
until the applicable statute of limitations (as may be extended) has expired and
to abide by all record retention agreements entered into with any Governmental
Entity; and (b) to allow the other Party and its representatives at times and
dates mutually acceptable to the Parties, to inspect, review and make copies of
such records as such Party may deem necessary or appropriate from time to time,
such activities to be conducted during normal business hours at such Party’s
expense.

 

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9.3         Transfer Taxes. All Transfer Taxes incurred in connection with
Buyer’s acquisition of the Membership Interests shall be borne equally among the
Buyer and Sellers. To the extent a Seller pays any Transfer Tax for which it is
not liable under this Section 9.3, the Buyer shall reimburse the relevant Seller
for such Transfer Tax within ten (10) Business Days of delivery to the Buyer of
evidence of payment of such Transfer Tax to the applicable Governmental Entity.
Notwithstanding anything to the contrary in this Agreement, any refund of
Transfer Taxes is for the benefit of the Party who paid the Taxes (whether
directly or by way of reimbursing the other Party) and, if applicable, shall be
paid over to the Party within the (10) Business Days of another Party’s receipt
of the refund.

 

9.4          Tax Refunds. Any Tax refunds (whether by payment, credit, offset,
reduction in Tax or otherwise) relating to any Pre-Closing Tax Period received
after the Closing Date by Buyer, the Company or any of their Affiliates (as
determined after the Closing Date) shall be for the account of Seller, and Buyer
shall pay over to Seller the amount of any such refund within ten (10) Business
Days after its receipt.

 

ARTICLE X - TERMINATION

 

10.1        Termination of Agreement. This Agreement may be terminated prior to
the Closing as provided below:

 

(a)          the Parties may terminate this Agreement by mutual written consent;

 

(b)          the Buyer may terminate this Agreement by giving written notice to
the Sellers in the event any Seller or the Company is in breach of any
representation, warranty or covenant contained in this Agreement, and such
breach, individually or in combination with any other such breach, (i) would
cause the conditions set forth in clauses (a), (b) or (c) of Section 7.1 not to
be satisfied and (ii) is not cured within fifteen (15) calendar days following
delivery by the Buyer to the Sellers of written notice of such breach;

 

(c)          the Sellers may terminate this Agreement by giving written notice
to the Buyer in the event the Buyer is in breach of any representation, warranty
or covenant contained in this Agreement, and such breach, individually or in
combination with any other such breach, (i) would cause the conditions set forth
in clauses (a) or (b) of Section 7.2 not to be satisfied and (ii) is not cured
within fifteen (15) calendar days following delivery by the Sellers to the Buyer
of written notice of such breach;

 

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(d)          the Buyer may terminate this Agreement by giving written notice to
the Sellers if the Closing shall not have occurred on or before June 25, 2012,
by reason of the failure of any condition precedent under Section 7.1 (unless
the failure results primarily from a breach by the Buyer of any representation,
warranty or covenant contained in this Agreement);

 

(e)          the Sellers may terminate this Agreement by giving written notice
to the Buyer if the Closing shall not have occurred on or before June 25, 2012,
by reason of the failure of any condition precedent under Section 7.2 (unless
the failure results primarily from a breach by a Seller or the Company of any
representation, warranty or covenant contained in this Agreement); or

 

(f)          the Buyer may terminate in connection with a Superior Proposal in
accordance with Section 6.6.

 

10.2        Effect of Termination. If any Party terminates this Agreement
pursuant to Section 10.1, all obligations of the Parties hereunder shall
terminate without any Liability of any Party to any other Party (except for any
Liability of any Party for willful or knowing breaches of this Agreement or for
breaches of Sections 6.5 or 6.6).

 

ARTICLE XI - DEFINITIONS

 

For purposes of this Agreement, each of the following terms shall have the
meaning set forth below.

 

“Accounting Standards” shall mean the principles, policies, procedures,
practices, applications, methodologies and other elections materially consistent
with GAAP and applied consistently by the applicable Company or Subsidiary over
the course of the three (3) years immediately preceding the Closing.

 

“Action” shall mean any claim, action, suit, arbitration, inquiry, audit,
examination, proceeding, investigation or audit by or before any Governmental
Entity.

 

“Acquired Company Cash” means cash and cash equivalents (including marketable
securities and short term investments) on hand in the accounts of the Company
and its Subsidiaries as of the close of business on the day before the Closing
Date.  For the avoidance of doubt, the Carret P.T. Purchase Price shall not be
included in the calculation of Acquired Company Cash.

 

“AFT Acquisition” shall have the meaning set forth in Section 6.6.

 

“Acquisition Consideration” shall have the meaning set forth in Section 1.2(a).

 

“Affiliate” shall mean any affiliate, as defined in Rule 12b-2 under the
Exchange Act.

  

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“Agreement” shall have the meaning set forth in the first paragraph of this
Agreement.

 

“Business” shall mean the respective businesses operated by each of the Company
and each of the Subsidiaries, as applicable.

 

“Business Combination” shall mean with respect to any Person any (i) merger,
consolidation or combination to which such Person is a party, (ii) any sale,
issuance dividend, split or other disposition of any capital stock or other
equity interests (or any security or loan convertible into or exchangeable for
such capital stock or other equity interests) of such Person, (iii) any tender
offer (including without limitation a self- tender), exchange offer,
recapitalization, liquidation, dissolution or similar transaction, (iv) any
sale, dividend or other disposition of all or a material portion of the assets
and properties of such Person or (v) the entering into of any agreement or
understanding, or the granting of any rights or options, with respect to any of
the foregoing.

 

“Business Day” shall mean any day that is not a Saturday, a Sunday or other day
on which banks are required or authorized by law to be closed in New York, New
York USA.

 

“Buyer” shall have the meaning set forth in the first paragraph of this
Agreement.

 

“Buyer Adverse Recommendation Change” shall mean a public statement by the Board
of Directors of the Buyer that withdraws, amends, modifies or materially
qualifies, in a manner adverse to the Company and the Sellers, the Buyer Board
Recommendation.

 

“Buyer Certificate” shall mean a certificate delivered by the Buyer (without
qualification as to knowledge, materiality or otherwise), signed on behalf of
the Buyer by an authorized officer of the Buyer, to the effect that each of the
conditions specified in clauses (a) and (b) of Section 7.2 is satisfied in all
respects.

 

“CERCLA” shall mean the federal Comprehensive Environmental Response,
Compensation, and Liability Act of 1980, as amended.

 

“Closing” shall mean the closing of the transactions contemplated by this
Agreement.

 

“Closing Date” shall mean the date two (2) Business Days after the satisfaction
or waiver of all of the conditions to the obligations of the Parties to
consummate the Closing contemplated hereby (excluding the delivery at the
Closing of any of the documents set forth in Article VII), or such other date as
may be mutually agreeable to the Parties.

 

“COBRA” shall mean Part 6 of Title I of ERISA, as amended.

 

“Code” shall mean the Internal Revenue Code of 1986, as amended.

 

“Company” shall have the meaning set forth in the first paragraph of this
Agreement.

  

39

 

 

“Company Certificate” shall mean a certificate delivered by the Sellers and the
Company (without qualification as to knowledge, materiality or otherwise),
signed by each of the Sellers (and in the case of QMP and QTS, signed on behalf
of QMP and QTS by each entity’s respective chief executive officer and chief
financial officer) and signed on behalf of the Company by the chief executive
officer and chief financial officer of the Company, to the effect that each of
the conditions specified in clauses (a) through (e) of Section 7.1 is satisfied
in all respects.

 

“Company Intellectual Property” shall mean the Company Owned Intellectual
Property and the Company Licensed Intellectual Property.

 

“Company Licensed Intellectual Property” shall mean all Intellectual Property
that is licensed to the Company or a Subsidiary by any third party.

 

“Company Material Adverse Effect” shall mean any material adverse change, event,
circumstance or development with respect to, or material adverse effect on, (a)
the business, assets, Liabilities, capitalization, condition (financial or
other) or results of operations of the Company or any of the Subsidiaries, taken
as a whole, (b) the ability of the Buyer to operate the Business immediately
after the Closing or (c) the ability of the Company or the Sellers to perform
its obligations under this Agreement or promptly consummate the transactions
contemplated by this Agreement. For the avoidance of doubt, the parties agree
that the terms “material,” “materially” and “materiality” as used in this
Agreement with an initial lower case “m” shall have their respective customary
and ordinary meanings, without regard to the meaning ascribed to Company
Material Adverse Effect.

 

“Company Owned Intellectual Property” shall mean all Intellectual Property owned
or purported to be owned by the Company or a Subsidiary, in whole or in part.

 

“Company Registrations” shall mean Intellectual Property Registrations that are
registered or filed in the name of the Company or any Subsidiary, alone or
jointly with others.

 

“Contract” shall mean any agreement, lease, license, evidence of indebtedness,
mortgage, indenture, security agreement or other contract or other commitment
(whether written or oral).

 

“Disclosure Schedule” shall mean the disclosure schedule provided by the Company
and the Sellers to the Buyer on the date hereof and accepted in writing by the
Buyer.

 

“Environmental Claims” shall mean any claims relating in any way to any
Environmental Law or any Environmental Permit, including any and all actual
claims by Governmental Entities or any Person for investigation, enforcement,
cleanup, removal, response, remediation, damages, liability, loss contribution,
indemnification, cost recovery, compensation or injunctive relief, resulting
from: (a) an alleged violation of liability under any Environmental Law; (b) an
alleged injury to health, safety or the Environment; (c) the violation of any
Environmental Permit or condition thereof; or (d) the presence, release, use,
discharge, transport, spill, leak, movement, migration, or disposal of any
Hazardous Materials at any location, including but not limited to any off-site
location to which Hazardous Materials or materials containing Hazardous
Materials have been sent for handling, storage, treatment, or disposal.

 

40

 

 

“Environmental Law” shall mean any federal, state or local law, statute, rule,
order, directive, judgment, Permit or regulation or the common law relating to
the environment, occupational health and safety, or exposure of Persons or
property to Materials of Environmental Concern, including any statute,
regulation, administrative decision or order pertaining to: (a) the presence of
or the treatment, storage, disposal, generation, transportation, handling,
distribution, manufacture, processing, use, import, export, labeling, recycling,
registration, investigation or remediation of Materials of Environmental Concern
or documentation related to the foregoing; (b) air, water and noise pollution;
(c) groundwater and soil contamination; (d) the release, threatened release, or
accidental release into the environment, the workplace or other areas of
Materials of Environmental Concern, including emissions, discharges, injections,
spills, escapes or dumping of Materials of Environmental Concern; (e) transfer
of interests in or control of real property which may be contaminated; (f)
community or worker right-to-know disclosures with respect to Materials of
Environmental Concern; (g) the protection of wild life, marine life and
wetlands, and endangered and threatened species; (h) storage tanks, vessels,
containers, abandoned or discarded barrels and other closed receptacles; and (i)
health and safety of employees and other Persons. As used above, the term
“release” shall have the meaning set forth in CERCLA.

 

“Environmental Permits” shall mean all permits, approvals, certifications,
franchise identification numbers, licenses, registrations and other
authorizations required under or issued pursuant to any applicable Environmental
Law, including all amendments thereto and conditions thereof.

 

“Equity Interest” shall mean (a) with respect to a corporation, any and all
shares of capital stock and any options, warrants, convertible securities,
subscription rights or other such agreements with respect thereto; (b) with
respect to a partnership, limited liability company, trust or similar Person,
any and all units, other equity ownership interests or other partnership or
limited liability company interests, including economic or profits interests and
any options, warrants, convertible securities, subscription rights or other such
agreements with respect thereto; and (c) with respect to any other Person, any
other equity ownership in such Person.

 

“ERISA” shall mean the Employee Retirement Income Security Act of 1974, as
amended.

 

“Exchange Act” shall mean the Securities Exchange Act of 1934, as amended.

 

“Facilities” means any real property, leaseholds or other interests currently or
formerly owned or operated by the Company or any of the Subsidiaries and any
buildings, plants, structures or equipment (including motor vehicles) currently
or formerly owned or operated by the Company or any of the Subsidiaries.

 

“Financial Statements” shall mean:

 

(a)          the consolidated audited balance sheet and statement of income,
changes in equity holders’ equity and cash flows of the Company and each
Subsidiary as of and for the fiscal years ended June 30, 2009, 2010 and 2011, as
certified without qualification by the auditors of the Company and each
Subsidiary; and

 

41

 

 

(b)          the consolidated unaudited balance sheet and statement of income,
changes in equity holders’ equity and cash flows of the Company and each
Subsidiary as of September 30, 2011 and December 31, 2011 and for any calendar
month between the date of this Agreement and the Closing Date, and the related
consolidated unaudited statements of operations, changes in equity holders’
equity and cash flows for each of the months then ended.

 

“GAAP” shall mean United States generally accepted accounting principles
consistently applied over the period in question.

 

“Governmental Entity” shall mean any domestic or foreign court, arbitrational
tribunal, administrative agency or commission or other domestic or foreign
governmental or regulatory authority or agency.

 

“Hazardous Materials” shall mean (a) any petroleum or petroleum products,
radioactive materials, asbestos in any form that is or could become friable,
urea formaldehyde foam insulation and transformers or other equipment that
contain dielectric fluid containing levels of polychlorinated biphenyls (PCBs),
hydrogen 3, and tritium (b) any other chemicals, materials or substances defined
as or included in the definition of “hazardous substances”, “hazardous wastes”,
“hazardous materials”, “extremely hazardous wastes”, “restricted hazardous
wastes”, “toxic substances”, “toxic pollutants”, “contaminants” or “pollutants”,
or words of similar import, under any applicable Environmental Law, (c) any
other chemical, material or substance which is regulated by any Environmental
Law or Governmental Entity and (d) a Hazardous Substance.

 

“Hazardous Substance” shall have such meaning as defined in 42 USC § 9601(14)
and as defined in any applicable state or local legislation or regulations.

 

“Intellectual Property” shall mean the following subsisting throughout the
world:

 

(a)        Patent Rights;

 

(b)        Trademarks and all goodwill in the Trademarks;

 

(c)        copyrights, designs, data and database rights and registrations and
applications for registration thereof, including moral rights of authors;

 

(d)        mask works and registrations and applications for registration
thereof and any other rights in semiconductor topologies under the laws of any
jurisdiction;

 

(e)        inventions, invention disclosures, statutory invention registrations,
trade secrets and confidential business information, know-how, manufacturing and
product processes and techniques, research and development information,
financial, marketing and business data, pricing and cost information, business
and marketing plans and customer and supplier lists and information, whether
patentable or nonpatentable, whether copyrightable or noncopyrightable and
whether or not reduced to practice; and

 

42

 

 

(f)          other proprietary rights relating to any of the foregoing
(including remedies against past, current or future infringement thereof and
rights of protection of interest therein under the laws of all jurisdictions).

 

“Intellectual Property Registrations” shall mean Patent Rights, registrations or
filings for any Trademarks, registered copyrights and designs, mask work
registrations and applications for each of the foregoing.

 

“IRS” shall mean the Internal Revenue Service.

 

“Knowledge of the Individual Seller,” “Knowledge of such Individual Seller” and
phrases of like import shall mean the knowledge of each of John Schoemer, Arlan
Clayton and Robert Marten, as applicable.

 

“Knowledge of the Quadrant Seller,” “Quadrant Sellers’ Knowledge” and phrases of
like import shall mean the knowledge of each of Robert Marten (FloMet), Jeanne
Paskus (General Flange); Roger Mehok (Tubefit); Steve Johnson (Tekna Seal).

 

“Laws and Regulations” shall mean federal, state, local and foreign laws, rules,
regulations and orders.

 

“Legal Proceeding” shall mean any action, suit, proceeding, claim, complaint,
hearing, arbitration or investigation before any Governmental Entity or before
any arbitrator.

 

“Liability” shall mean any direct or indirect indebtedness, liability, claim,
loss, damage, deficiency, cost, expense, fines, penalties, responsibility or
obligation (whether known or unknown, whether asserted or unasserted, whether
absolute or contingent, whether secured or unsecured, whether choate or
inchoate, whether fixed or unfixed, whether accrued or unaccrued, whether
liquidated or unliquidated, and whether due or to become due and regardless of
when asserted), including any liability for Taxes.

 

“Lien” shall mean any mortgage, pledge, lien, encumbrance, charge or other lien
(whether arising by contract or by operation of law), other than (a) mechanic’s,
materialmen’s and similar liens, (b) liens arising under worker’s compensation,
unemployment insurance, social security, retirement and similar legislation and
(c) liens on goods in transit incurred pursuant to documentary letters of
credit, in each case arising in the Ordinary Course of Business of the Company
and the Subsidiaries and not material to the Company and the Subsidiaries, taken
as a whole.

 

“Materials of Environmental Concern” shall mean any: pollutants, contaminants or
hazardous substances (as such terms are defined under CERCLA), pesticides (as
such term is defined under the Federal Insecticide, Fungicide and Rodenticide
Act), solid wastes and hazardous wastes (as such terms are defined under the
Resource Conservation and Recovery Act), chemicals, other hazardous, radioactive
or toxic materials, oil, petroleum and petroleum products (and fractions
thereof), or any other material (or article containing such material) listed or
subject to regulation under any law, statute, rule, regulation, order, Permit,
or directive due to its potential, directly or indirectly, to harm the
environment or the health of humans or other living beings.

 

43

 

 

“Membership Interests” shall have the meaning set forth in the recitals to this
Agreement.

 

“Most Recent Balance Sheet” shall mean, with regard to the Company or any
Subsidiary, the balance sheet included in the Financial Statements of the
Company or such Subsidiary, as applicable, as of June 30, 2011.

 

“Net Sales” shall mean the aggregate of all products sales and all tooling sales
of the Company and the Subsidiaries, less all Ordinary Course of Business
adjustments for returns and allowances.

 

“Non-Cash Working Capital” shall mean, with respect to the Company and the
Subsidiaries on a consolidated basis, the aggregate dollar amount of all trade
accounts receivable, total inventory and prepaid expenses minus the aggregate
dollar amount of all trade accounts payable, accrued payroll and all other
accrued liabilities and expenses as determined in accordance with the Accounting
Standards. For purposes of Clarity, Non-Cash Working Capital excludes any and
all cash and cash equivalents (including marketable securities and short term
investments).

 

“Notice Period” shall have the meaning set forth in Section 6.6(c).

 

“Ordinary Course of Business” shall mean the ordinary course of business
consistent with past custom and practice (including with respect to frequency
and amount).

 

“Organizational Documents” means a Person’s charter, articles of organization,
certificate of incorporation, certificate of formation, limited liability
company agreement, partnership agreement, bylaws or other similar organizational
documents, as applicable.

 

“Parties” shall have the meaning set forth in the first paragraph of this
Agreement.

 

“Party” shall have the meaning set forth in the first paragraph of this
Agreement.

 

“Patent Rights” shall mean all patents, patent applications, utility models,
design registrations and certificates of invention and other governmental grants
for the protection of inventions or industrial designs (including all related
continuations, continuations-in-part, divisionals, reissues and reexaminations).

 

“Permits” shall mean all permits, licenses, registrations, certificates, orders,
clearances, approvals, franchises, variances and similar rights issued by or
obtained from any Governmental Entity (including those issued or required under
Environmental Laws and those relating to the occupancy or use of owned or leased
real property).

 

44

 

 

“Permitted Liens” means (a) minor imperfections of title that do not materially
detract from the value or impair the use of any asset; (b) liens for Taxes,
assessments, and other governmental charges or levies not yet due and payable or
delinquent and which are being contested in good faith by appropriate action and
as to which adequate reserves have been established in accordance with the
Accounting Standards; (c) statutory liens of mechanics, materialmen,
warehousemen or carriers, and similar liens arising by operation of Law and
Regulation in the Ordinary Course of Business for sums not yet due or being
contested in good faith and as to which adequate reserves have been established
in accordance with the Accounting Standards; (d) applicable zoning laws and
ordinances and municipal regulations and rights reserved to or vested in any
Governmental Entity to control or regulate real property and realty rights; (e)
liens related to the Refinancing; and (f) liens relating to the indebtedness
existing on the date hereof and set forth on Schedule X.

 

“Person” shall mean any natural person, corporation, general partnership,
limited partnership, limited liability company, limited liability partnership,
proprietorship, trust, union, association, court, tribunal, agency, government,
department, commission, self-regulatory organization, arbitrator, board, bureau,
instrumentality, Governmental Entity or other entity, enterprise, authority or
business organization.

 

“Pre-Closing Distribution” means any dividend or other distribution to the
holders of Equity Interests of the Company declared or effected from and after
the date hereof (whether of cash, property or other assets, which property or
other assets shall be valued at their fair market value and the time of such
Pre-Closing Distribution).

 

“Pre-Closing Tax Period” means any Tax Period ending on or before the Closing
Date and that portion of any Straddle Period through the Closing Date.

 

“Purchase Price” shall have the meaning set forth in Section 1.2(a).

 

“Release” shall mean any spilling, leaking, emitting, discharging, depositing,
escaping, dispersing, leaching, dumping or other releasing into the environment,
whether intentional or unintentional.

 

“Requisite Buyer Vote” shall mean the adoption of this Agreement and the
approval of the Transaction by the affirmative vote of the holders of at least a
majority of shares held by disinterested holders of the Buyer’s common stock
present and voting on such proposal (in person or by proxy) at a meeting at
which at least a majority of all shares of the Buyer’s common stock are present
for quorum purposes.

 

“Securities Act” shall mean the Securities Act of 1933, as amended.

 

“Seller” shall have the meaning set forth in the first paragraph of this
Agreement.

 

“Straddle Period” means any Tax Period beginning on or before the Closing Date
and ending after the Closing Date.

  

45

 

 

“Subsidiaries” and “Subsidiary” shall mean, individually or collectively, as
applicable, FloMet LLC, a Delaware limited liability company, Tekna Seal LLC, a
Florida limited liability company, General Flange & Forge LLC, a Delaware
limited liability company, TubeFit LLC, a Delaware limited liability company.

 

“Superior Proposal” shall mean a bona fide written proposal or offer from a
third party regarding an Alternative Transaction between such third party and
the Buyer that the Buyer, acting through the Special Committee, determines in
good faith (after consultation with outside legal counsel and financial
advisors) is more favorable from a financial point of view to the holders of the
Buyer’s common stock than the Acquisition, taking into account (a) all financial
considerations; (b) the identity of the third party making such a proposal or
offer; (c) the anticipated timing, conditions (including any financing condition
or the reliability of any debt or equity funding commitments) and prospects for
completion of such a proposal or offer; (d) the other terms and conditions of
such proposal or offer and the implications thereof on the Buyer, including
relevant legal, regulatory and other aspects of such proposal or offer deemed
relevant by the Special Committee; and (e) any revisions to the terms of this
Agreement and the Acquisition proposed by the Company and the Sellers during the
Notice Period set forth in Section 6.6(c).

 

“Taxes” shall mean any and all taxes, charges, fees, duties, contributions,
levies or other similar assessments or Liabilities in the nature of a tax,
including income, gross receipts, corporation, ad valorem, premium, value-added,
net worth, capital stock, capital gains, documentary, recapture, alternative or
add-on minimum, disability, estimated, registration, recording, excise, real
property, personal property, sales, use, license, lease, service, service use,
transfer, withholding, employment, unemployment, insurance, social security,
national insurance, business license, business organization, environmental,
workers compensation, payroll, profits, severance, stamp, occupation, windfall
profits, customs duties, franchise and other taxes of any kind whatsoever
imposed by the United States or any state, local or foreign government, or any
agency or political subdivision thereof, and any interest, fines, penalties,
assessments or additions to tax imposed with respect to such items or any
contest or dispute thereof.

 

“Tax Period” means any period prescribed by any Governmental Entity for which a
Tax Return is required to be filed or a Tax is required to be paid.

 

“Tax Returns” shall mean any and all reports, returns, declarations or
statements relating to Taxes, including any schedule or attachment thereto and
any related or supporting workpapers or information with respect to any of the
foregoing, including any amendment thereof.

 

“Trademarks” shall mean all registered trademarks and service marks, logos,
Internet domain names, corporate names and doing business designations, all
registrations and applications for registration of the foregoing, common law
trademarks and service marks and trade dress.

 

46

 

 

ARTICLE XII - MISCELLANEOUS

 

12.1         Press Releases and Announcements. No Party shall issue any press
release or public announcement relating to the subject matter of this Agreement
without the prior written approval of the other Parties; provided, however, that
any Party may make any public disclosure it believes in good faith is required
by applicable law, regulation or stock market rule (in which case the disclosing
Party shall use reasonable efforts to advise the other Parties and provide them
with a copy of the proposed disclosure prior to making the disclosure).

 

12.2         No Third Party Beneficiaries. This Agreement shall not confer any
rights or remedies upon any Person other than the Parties and their respective
successors and permitted assigns.

 

12.3         Entire Agreement. This Agreement (including the documents referred
to herein) constitutes the entire agreement among the Parties and supersedes any
prior understandings, agreements or representations by or among the Parties,
written or oral, with respect to the subject matter hereof.

 

12.4         Succession and Assignment. This Agreement shall be binding upon and
inure to the benefit of the Parties named herein and their respective successors
and permitted assigns. No Party may assign either this Agreement or any of its
rights, interests or obligations hereunder without the prior written approval of
the other Parties.

 

12.5         Counterparts and Facsimile Signature. This Agreement may be
executed in two (2) or more counterparts, each of which shall be deemed an
original but all of which together shall constitute one and the same instrument.
This Agreement may be executed by facsimile signature.

 

12.6         Headings. The section headings contained in this Agreement are
inserted for convenience only and shall not affect in any way the meaning or
interpretation of this Agreement.

 

12.7         Notices. All notices, requests, demands, claims and other
communications hereunder shall be in writing. Any notice, request, demand, claim
or other communication hereunder shall be deemed duly delivered two (2) Business
Days after it is sent by registered or certified mail, return receipt requested,
postage prepaid, or one (1) Business Day after it is sent for next Business Day
delivery via a reputable nationwide overnight courier service, in each case to
the intended recipient as set forth below:

 

To the Buyer:

 

ARC Wireless Solutions, Inc.

6330 N. Washington St., Unit 13

Denver, CO 80216

Attn: Special Committee of the Board of Directors

Telecopy: (303) 467-5208

 

47

 

 

with a copy to Buyer Special Committee Counsel:

 

Garvey Schubert Barer

100 Wall Street, 20th Floor

New York, NY 10005-3708

Attn: Hillary H. Hughes, Esq.

Telecopy: (212) 431-8700

To the Company and each of the Sellers and counsel:

 

Quadrant Metals Technologies LLC

810 Flightline Blvd.

DeLand, FL 32724

Attn: Robert Marten, CEO
Telecopy: (386) 736-6063

 

with copies to:

 

Quadrant Management Inc.

40 West 57th Street, 20th Floor
New York, NY 10019
Attn: Keerat Kaur
Telecopy: (212) 231-3939

Wuersch & Gering LLP
100 Wall Street, 21st Floor
New York, NY 10005
Attn: Travis L. Gering, Esq.
Telecopy: (212) 509-9559

 

To Carret P.T.:

 

Carret P.T., LP

c/o Quadrant Management Inc.

40 West 57th Street, 20th Floor
New York, NY 10019
Attn: Marco Vega
Telecopy: (212) 231-3939

To each of the Sellers at the address set forth on the Allocation Schedule.

 

Any Party may give any notice, request, demand, claim or other communication
hereunder using any other means (including personal delivery, expedited courier,
messenger service, telecopy, telex, ordinary mail or electronic mail), but no
such notice, request, demand, claim or other communication shall be deemed to
have been duly given unless and until it actually is received by the party for
whom it is intended. Any Party may change the address to which notices,
requests, demands, claims and other communications hereunder are to be delivered
by giving the other Parties notice in the manner herein set forth.

 

48

 

 

12.8         Governing Law. All matters arising out of or relating to this
Agreement and the transactions contemplated hereby (including its
interpretation, construction, performance and enforcement) shall be governed by
and construed in accordance with the internal laws of the State of New York
without giving effect to any choice or conflict of law provision or rule
(whether of the State of New York or any other jurisdiction) that would cause
the application of laws of any jurisdictions other than those of the State of
New York.

 

12.9         Amendments and Waivers. The Parties may mutually amend any
provision of this Agreement at any time prior to the Closing. No amendment of
any provision of this Agreement shall be valid unless the same shall be in
writing and signed by all of the Parties. No waiver of any right or remedy
hereunder shall be valid unless the same shall be in writing and signed by the
Party giving such waiver. No waiver by any Party with respect to any default,
misrepresentation or breach of warranty or covenant hereunder shall be deemed to
extend to any prior or subsequent default, misrepresentation or breach of
warranty or covenant hereunder or affect in any way any rights arising by virtue
of any prior or subsequent such occurrence.

 

12.10         Severability. Any term or provision of this Agreement that is
invalid or unenforceable in any situation in any jurisdiction shall not affect
the validity or enforceability of the remaining terms and provisions hereof or
the validity or enforceability of the offending term or provision in any other
situation or in any other jurisdiction. If the final judgment of a court of
competent jurisdiction declares that any term or provision hereof is invalid or
unenforceable, the Parties agree that the court making the determination of
invalidity or unenforceability shall have the power to limit the term or
provision, to delete specific words or phrases, or to replace any invalid or
unenforceable term or provision with a term or provision that is valid and
enforceable and that comes closest to expressing the intention of the invalid or
unenforceable term or provision, and this Agreement shall be enforceable as so
modified.

 

49

 

  

12.11         Submission to Jurisdiction. Each Party (a) submits to the
jurisdiction of any state or federal court sitting in New York County, New York,
in any action or proceeding arising out of or relating to this Agreement
(including any action or proceeding for the enforcement of any arbitral award
made in connection with any arbitration of a Dispute hereunder), (b) agrees that
all claims in respect of such action or proceeding may be heard and determined
in any such court, (c) waives any claim of inconvenient forum or other challenge
to venue in such court, (d) agrees not to bring any action or proceeding arising
out of or relating to this Agreement in any other court and (e) waives any right
it may have to a trial by jury with respect to any action or proceeding arising
out of or relating to this Agreement. Each Party agrees to accept service of any
summons, complaint or other initial pleading made in the manner provided for the
giving of notices in Section 12.7; provided that nothing in this Section 12.11
shall affect the right of any Party to serve such summons, complaint or other
initial pleading in any other manner permitted by law.

 

12.12         Construction.

 

    (a)          The language used in this Agreement shall be deemed to be the
language chosen by the Parties to express their mutual intent, and no rule of
strict construction shall be applied against any Party.

 

    (b)          Any reference to any federal, state, local or foreign statute
or law shall be deemed also to refer to all rules and regulations promulgated
thereunder, unless the context requires otherwise.

 

    (c)          Any reference herein to “including” shall be interpreted as
“including without limitation.”

 

    (d)          Any reference to any Article, Section or paragraph shall be
deemed to refer to an Article, Section or paragraph of this Agreement, unless
the context clearly indicates otherwise.

 

[Remainder of the Page Intentionally Left Blank]

 

50

 

  

IN WITNESS WHEREOF, the Parties have executed this Agreement as of the date
first above written. 

 

BUYER:     SELLERS:           ARC WIRELESS SOLUTIONS, INC.   QMP HOLDING CORP.  
        By: /s/ G. Jonathan Bernstein   By: /s/ John Schoemer Name: /s/ G.
Jonathan Bernstein    Name: John Schoemer  Title: Chairman of the Special
Committee Title: President                 QTS HOLDING CORPORATION              
  By: /s/ John Schoemer        Name: John Schoemer        Title: President     
            /s/ John Schoemer       JOHN SCHOEMER               /s/ Arlan
Clayton       ARLAN CLAYTON               /s/ Robert L. Marten       ROBERT L.
MARTEN                 COMPANY:                 QUADRANT METALS TECHNOLOGIES LLC
                By: /s/ Robert L. Marten        Name: /s/ Robert Marten       
Title: President & CEO

 

Signature Page to Membership Interest Purchase Agreement

 

 

 

 

  GUARANTOR OF QMP AND QTS   INDEMNIFICATION OBLIGATIONS:       QUADRANT
MANAGEMENT INC.       By: /s/ Marco Vega   Name: Marco Vega    Title: CFO

 

Signature Page to Membership Interest Purchase Agreement 

 

 

 

 

  CARRET P.T.:       CARRET P.T., LP       By: /s/ Susan V. Demers     Name: 
Susan V. Demers     For Vicali Services (BVI) Inc. - Director

 

Signature Page to Membership Interest Purchase Agreement