ARC Group Worldwide 8-K [arc-8k_040714.htm] 

 

Exhibit 10.26

 

membership interestS PURCHASE AGREEMENT

 

by and among

 

Nigel Sutton

 

Gregory Curtis

 

Frank Ferree

 

Dermot Rafferty

 

and

 

ARC Group Worldwide, Inc.

 

 

 

Dated as of April 7, 2014

 

 

 

 

 

 

TABLE OF CONTENTS

 

          Page             Section 1.   Defined Terms.   1 1.1   Definitions   1
1.2   Additional Defined Terms   9             Section 2.   Sale and Purchase of
Interests.   10 2.1   Purchase and Sale of Interests   10 2.2   Purchase Price  
10 2.3   Closing   10 2.4   Payment of Purchase Price   10 2.5   Working Capital
Adjustment   11 2.6   Working Capital Adjustment Procedure   11 2.7   Completion
of Audit   13 2.8   (Intentionally Omitted.)   13 2.9   Allocation of Purchase
Price   13 2.10   Withholding   13             Section 3.   Representations and
Warranties of Sellers Regarding the Company.   13 3.1   Good Standing and
Limited Liability Company Power of the Company   13 3.2   Capitalization; Title
to Interests   13 3.3   Subsidiary/Other Ownership Interest   14 3.4  
Enforceability   14 3.5   No Conflicts   14 3.6   Consents   14 3.7   Financial
Matters   15 3.8   Liabilities   15 3.9   Changes   15 3.10   Material Contracts
  17 3.11   Intellectual Property   19 3.12   Certain Assets   20 3.13   Real
Property   20 3.14   Proceedings; Orders   20 3.15   Compliance with Laws   21
3.16   Permits   21 3.17   Environmental Laws   21 3.18   Taxes and Tax Returns
  22 3.19   Labor Agreements and Actions and Deferred Compensation   23 3.20  
Employee Benefits   23 3.21   Inventory   24 3.22   Insurance   25 3.33  
Customers   25 3.24   Vendors and Suppliers   25 3.25   Bank Accounts   25 3.26
  Brokers   26

  

i

 

 

3.27   Product Standards   26 3.28   No Knowledge of Breaches   26 3.29   No
Indebtedness   26 3.30   Product Liability   26 3.31   Disclosure   26          
  Section 4. Representations and Warranties of Purchaser.   27 4.1   Good
Standing and Corporate Power   27 4.2   Access   27 4.3   Authorization   27 4.4
  No Conflicts   27 4.5   Governmental Approvals and Filings   27 4.6   Brokers
  28 4.7   Acquisition of Interests   28 4.8   Financial Capacity   28 4.9  
Non-Reliance of Purchaser   28             Section 5. Covenants of Both Parties
  29 5.1   Conduct of Business Prior to the Closing   29 5.2   Notices of
Certain Events   29 5.3   Confidentiality   30 5.4   Public Announcements   31
5.5   Access to Information   31 5.6   No Solicitation of Other Bids.   32      
      Section 6.   Other Agreements.   32 6.1   Further Assurances   32 6.2  
Employees   32 6.3   Access to Records After Closing   33 6.4   Tax Matters   33
6.5   Nonsolicitation and Noncompetition   35 6.6   Directors’ and Officers’
Indemnification and Insurance   36             Section 7.   Conditions to
Obligation of Purchaser to Close.   37 7.1   Accuracy of Representations and
Warranties   37 7.2   Satisfaction of Pre-Closing Covenants of Sellers   37 7.3
  No Change or Injunction   37 7.4   Additional Documents   38            
Section 8.   Conditions to Obligation of Sellers to Close.   38 8.1   Accuracy
of Representations and Warranties   38 8.2   Satisfaction of Pre-Closing
Covenants of Purchaser   38 8.3   No Injunction   39 8.4   Additional Documents
  39             Section 9. Indemnification and Related Matters.   39 9.1  
Indemnification by Sellers   39

 

ii

 

 

9.2   Indemnification by Purchaser   40 9.3   Expiration of Representations,
Warranties and Covenants   41 9.4   Order of Claims   41 9.5   Maintenance and
Release of Escrow   41 9.6   Indemnification Claims   43 9.7   Indemnification
Claims from Escrow Fund   43 9.8   Defense of Third Party Actions   45 9.9  
Subrogation   46 9.10   Exclusivity   46 9.11   Characterization of
Indemnification Payment   46 9.12   Financing   46             Section 10.  
Grounds for Termination   47 10.1   Termination   47 10.2   Notice of
Termination   47           Section 11.   Miscellaneous Provisions   47 11.1  
Expenses   47 11.2   Waiver   47 11.3   Disclosure Schedule   48 11.4  
Exclusivity of Agreement   48 11.5   Inurement   48 11.6   Governing Law   48
11.7   Venue, Jurisdiction and Forum   49 11.8   Time of the Essence   49 11.9  
Notices   49 11.10   Table of Contents and Headings   50 11.11   Assignment   51
11.12   Counterparts; Facsimile Signatures   51 11.13   Severability   51 11.14
  Entire Agreement   51 11.15   Waiver   51 11.16   Amendments   51 11.17  
Interpretation of Agreement   51

 

Schedule A   Membership Interests Schedule 1.1-A   Pro Forma Working Capital
Calculation Schedule 1.1-B   Pro Forma EBITDA Calculation       EXHIBIT A  
Escrow Agreement EXHIBIT B   Employment Agreements       Disclosure Schedule

 

iii

 

 

MEMBERSHIP INTERESTS PURCHASE AGREEMENT

 

THIS MEMBERSHIP INTERESTS PURCHASE AGREEMENT (this “Agreement”) is entered into
as of April 7, 2014, by and among Nigel Sutton, Gregory Curtis, Frank Ferree,
and Dermot Rafferty (collectively, “Sellers” and each individually, a “Seller”),
and ARC Group Worldwide, Inc., a Utah corporation (“Purchaser”).

 

Recitals

 

A.                Sellers own all of the membership interests (the “Interests”)
of Advance Tooling Concepts, LLC, a Colorado limited liability company (the
“Company”).

 

B.                Purchaser wishes to acquire one hundred percent (100%) of the
Interests from Sellers, in the respective amounts set forth on Schedule A
attached hereto, on the terms set forth in this Agreement.

 

Agreement

 

In consideration of the covenants and agreements contained herein and the other
good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, Purchaser and Sellers agree as follows:

 

Section  1.                 Defined Terms.

 

1.1              Definitions. For purposes of this Agreement (including the
Disclosure Schedule) the following terms have the meanings ascribed to them in
this Section 1.1:

 

“Affiliate” means, with respect to a Person, any other Person who directly or
indirectly owns or controls, or is owned or controlled by, or is under direct or
indirect common ownership or control with such Person. Without limiting the
generality of the foregoing, a Person shall be deemed to “own” another Person if
it owns, directly or indirectly, more than 50% of the capital stock or other
equity interest of such other Person.

 

“Applicable Law” means any federal, state, local, municipal, foreign or other
law, statute, legislation, constitution, principle of common law, resolution,
ordinance, code, edict, decree, proclamation, treaty, convention, rule,
regulation, ruling, directive, pronouncement, requirement, specification,
determination, decision, opinion or interpretation that is, as of the date of
this Agreement, issued, enacted, adopted, passed, approved, promulgated, made,
implemented or otherwise in effect by or under the authority of any Governmental
Body.

 

“ARC Common Stock” means (i) the shares of common stock, par value $.0005 per
share, of ARC Group Worldwide, Inc., and (ii) any capital stock into which such
common stock shall have been changed or any share capital resulting from a
reclassification of such common stock.

 

“Business Day” means any day other than a Saturday, Sunday or a day in which
banks in Colorado or Massachusetts are not open for business.

 

 

 

 

“Charter Documents” with respect to any particular entity shall mean: (a) if a
corporation, the articles or certificate of incorporation and the bylaws; (b) if
a general partnership, the partnership agreement and any statement of
partnership; (c) if a limited partnership, the limited partnership agreement and
the certificate of limited partnership; (d) if a limited liability company, the
certificate of formation or articles of organization and the limited liability
company agreement or operating agreement; (e) if another type of Entity, any
other charter or similar document adopted or filed in connection with the
creation, formation or organization of an Entity; (f) all shareholders’
agreements, voting agreements, voting trust agreements, joint venture
agreements, registration rights agreements or other agreements or documents
relating to the organization, management or operation of any Entity, or relating
to the rights, duties and obligations of the equity holders of any Entity; and
(g) any amendment or supplement to any of the foregoing.

 

“Claim Period” means 12 months from the Closing Date.

 

“Closing Date Tax Benefits” means the Tax deductions to Purchaser or the Company
from or relating to the payment of the Transaction Expenses of the Company and
the payment of any Closing Indebtedness.

 

“Closing Indebtedness” means all outstanding Indebtedness of the Company as of
the Closing Date.

 

“Closing Indebtedness Payoff Amount” means the aggregate amount of Closing
Indebtedness.

 

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

 

“Confidential Information” means any and all information, whether technical,
business, proprietary, financial or otherwise, of or relating to a party, its
Affiliates or its business that reasonably appears to be proprietary or
confidential in nature because of legends or other markings, the nature of the
information itself or the circumstances of disclosure, whether such information
is disclosed in writing, through electronic media, orally, visually or in any
other form.

 

“Contemplated Transactions” means the sale of the Interests and the other
transactions contemplated by this Agreement and the other Transaction
Agreements.

 

“Damages” means all actual out-of-pocket losses, damages (but excluding punitive
damages, consequential damages, exemplary damages, incidental damages and any
lost profits and decline in value), liabilities, claims, demands, settlements,
judgment awards, fines, penalties, fees (including any reasonable attorneys’
fees), charges or costs. Notwithstanding the foregoing, for the purposes of
computing the amount of Damages incurred by any Person: (a) there shall be
deducted an amount equal to the amount of any net tax benefit directly or
indirectly received or receivable by such Person or any of such Person’s
Affiliates in connection with such Damages or the circumstances giving rise
thereto; and (b) there shall be deducted an amount equal to the amount of any
insurance proceeds, indemnification payments, contribution payments, or
reimbursements directly or indirectly received or receivable by such Person or
any of such Person’s Affiliates in connection with such Damages or the
circumstances giving rise thereto.

 

2

 

 

“Disclosure Schedule” means the Disclosure Schedule attached to this Agreement.
The contents of each of the contracts and other documents referred to in the
Disclosure Schedule shall be deemed to be incorporated and referred to in the
Disclosure Schedule as though set forth in full therein.

 

“EBITDA” for any period, with respect to Company, Net Income for such period
plus, without duplication and to the extent deducted in calculating Net Income
for such period, the sum of (a) Interest Expense for such period, (b) the sum of
federal, state, local and foreign income taxes accrued or paid in cash during
such period, (c) the amount of depreciation and amortization expense deducted in
determining Net Income, (d) any extraordinary, unusual or non-recurring items
reducing Net Income for such period, and (e) any non-cash items reducing Net
Income for such period, minus (i) any extraordinary, unusual or non-recurring
items increasing Net Income for such period and (ii) any non-cash items
increasing Net Income for such period. Calculated as set forth on Schedule 1.1-B
using accounting principles, methodologies and practices consistent with GAAP,
unless otherwise consistent with classifications and methodologies used to
prepare the Company’s audited financial statements. Schedule 1.1-B attached
hereto is a pro forma example of the calculation of the trailing twelve months
EBITDA as of February 28, 2014.

 

“Employee Benefit Plan” means any (a) nonqualified deferred compensation or
retirement plan or arrangement, (b) qualified defined contribution retirement
plan or arrangement or qualified defined benefit retirement plan or arrangement
which is an employee pension benefit plan as defined in ERISA Section 3(2)
(including any multiemployer plan as defined in ERISA Section 3(37)), (c)
employee welfare benefit plan as defined in ERISA Section 3(1), or (d)
retirement, compensation, profit-sharing, deferred compensation, incentive,
performance award, phantom equity, stock or stock-based, change in control,
retention, severance, vacation, paid time off, fringe-benefit, material fringe
benefit, bonus or incentive plan or program and other similar agreement, plan,
policy, program or arrangement (and any amendments thereto) that is sponsored,
maintained or contributed to by the Company.

 

“Employment Agreements” means the employment agreements, substantially in the
form attached hereto as Exhibit B, to be entered into by and between the Company
and each respective Seller.

 

“Encumbrance” means any lien, pledge, hypothecation, charge, mortgage, security
interest, encumbrance, equity, trust, equitable interest, claim, preference,
right of possession, lease, tenancy, license, encroachment, covenant,
infringement, interference, Order, proxy, option, right of first refusal,
preemptive right, community property interest, legend, defect, impediment,
exception, reservation, limitation, impairment, imperfection of title, condition
or restriction of any nature (including any restriction on the voting of any
security, any restriction on the transfer of any security or other asset, any
restriction on the receipt of any income derived from any asset, any restriction
on the use of any asset and any restriction on the possession, exercise or
transfer of any other attribute of ownership of any asset).

 

3

 

 

“Entity” means any corporation (including any non-profit corporation), general
partnership, limited partnership, limited liability partnership, joint venture,
estate, trust, business, cooperative, foundation, society, political party,
union, company (including any limited liability company or joint stock company),
firm or other enterprise, association, organization or entity.

 

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

 

“Escrow Fund” means the escrow fund established pursuant to the Escrow
Agreement.

 

“Financing” means any debt financing proposed or committed to be entered into in
connection with the transactions contemplated by this Agreement.

 

“Financing Agreements” means any commitment letters, engagement letters, credit
agreements, guarantees, and pledge and security documents related to any
Financing.

 

“Financing Sources” means each Person (including, without limitation, each agent
and arranger) that has entered into agreements in connection with a proposed or
committed Financing, including (without limitation) any commitment letters,
engagement letters, credit agreements, loan agreements or indentures relating
thereto, together with each affiliate thereof and each officer, director,
employee, partner, controlling person, advisor, attorney, agent and
representative of each such Person or affiliate and their respective successors
and assigns.

 

“GAAP” means generally accepted United States accounting principles in effect as
of the Closing Date applied on a consistent basis with the past practice of the
Company.

 

“Governmental Body” means any nation, principality, state, commonwealth,
province, territory, county, municipality, district or other jurisdiction of any
nature; any federal, state, local, municipal, foreign or other government; any
governmental or quasi-governmental authority of any nature (including any
governmental division, subdivision, department, agency, bureau, branch, office,
commission, council, board, instrumentality, officer, official, representative,
organization, unit, body or Entity and any court or other tribunal); any
multi-national organization or body; or and individual, Entity or body
exercising, or entitled to exercise, any executive, legislative, judicial,
administrative, regulatory, police, military or taxing authority or power of any
nature.

 

“Hazardous Materials” means: (a) any material, substance, chemical, waste,
product, derivative, compound, mixture, solid, liquid, mineral or gas, in each
case, that is hazardous, acutely hazardous or toxic under Applicable Law; and
(b) any petroleum or petroleum-derived products, radon, radioactive materials or
wastes, asbestos in any form, lead or lead-containing materials, urea
formaldehyde foam insulation, and polychlorinated biphenyls regulated under
Applicable Law.

 

“Income Tax” means any federal, state, local, foreign or other Tax based on or
measured by reference to net income.

 

“Income Tax Return” means any Tax Return relating to Income Tax.

 

4

 

 

“Indebtedness” of any Person means, without duplication, (a) all outstanding
indebtedness of such Person for borrowed money or the deferred price (including
earnout or similar obligations) of property or services (other than trade
payables incurred in the Ordinary Course of Business which are not more than 90
days past due), (b) all outstanding indebtedness of such Person evidenced by a
note, bond, debenture or similar instrument, (c) all unreimbursed amounts drawn
under letters of credit issued for the account of such Person, (d) all capital
lease obligations as determined in accordance with GAAP, (e) all issued but
uncashed checks outstanding as of the Closing Date, (f) all fees, premiums,
penalties or expenses associated with the prepayment of any indebtedness,
including interest rate swap breakage costs, (g) interest accrued on any of the
foregoing; (h) all guaranties of any of the foregoing, in each case constituting
a Liability of the Company; and (i) obligations of the type referred to in
clauses (a) through (g) of this definition with respect to other Persons secured
by any Encumbrance on a property or asset of the Company.

 

“Intellectual Property” means: (a) all patents and patent applications, together
with all re-issuances, continuations, continuations-in-part, divisions,
revisions, extensions and re-examinations thereof; (b) all trademarks and
services marks, together with all goodwill associated therewith, and all
applications and registrations in connection therewith; (c) all copyrights and
all applications and registrations in connection therewith; (d) all trade
secrets enforceable under Applicable Law; and (e) in any medium of expression,
any and all ideas, techniques, processes, works of authorship, software
programs, software source documents, software architecture, algorithms,
formulae, inventions, apparatuses, equipment, models, sketches and drawings
related to current, future and proposed technologies, products and/or services,
research, experimental work, development, designs,notes and details thereof,
specifications, engineering information, financial information, procurement,
purchasing and manufacturing requirements,customer lists, contractual
relationships, business forecasts, sales and merchandising information, and
marketing plans.

 

“Knowledge of Sellers” and “To Sellers’ Knowledge” and similar phrases mean to
the actual knowledge of any Seller.

 

“Lease Agreements” mean agreements amending that certain Lease Agreement between
33 South Pratt, LLC and the Company, dated June 1, 2005, for a portion of the
building located at 33 South Pratt Parkway, Longmont, Colorado 80501, as amended
by that certain Extension of Lease, dated December 21, 2010, which extended the
lease term to May 1, 2012, and that certain Extension of Lease, dated July 2,
2012, which extends the lease term to May 31, 2017, which amendments (i)
terminate the personal guaranty of Sellers, (ii) assign the personal guaranty to
Purchaser, and (ii) create a two-year option to continue such lease.

 

“Liability” means any obligation or liability of any nature (including any
known, unknown, undisclosed, unaccrued, unasserted, contingent, indirect,
conditional, implied, vicarious, derivative, joint, several or secondary
liability), absolute or contingent, accrued or unaccrued, mature or unmatured,
due or to become due, regardless of whether such debt, obligation, duty or
liability is immediately due and payable.

 

5

 

 

“Material Adverse Effect” means any event, change, development or occurrence
that, either individually or in the aggregate with all other such events,
changes, developments or occurrences, has had a material adverse effect on the
historical operations, business, financial condition, liabilities, properties or
assets of the Company taken as a whole, other than any event, change,
development or occurrence arising out of or relating to (a) the economy,
political or financial markets in general; (b) changes in the industries in
which the Company operates; (c) changes in Applicable Laws or GAAP; (d) the
announcement of this Agreement or the Contemplated Transactions; (e) the taking
of any actions contemplated by this Agreement or any other Transaction
Agreement; or (f) acts of terrorism, war or other outbreak of hostilities. When
determining whether a Material Adverse Effect exists with respect to the
Company, the parties acknowledge that such determination shall be made from the
perspective of a reasonable person in the Company’s position.

 

“Matter” means any claim, demand, dispute, action, suit, examination, audit,
Proceeding, investigation, inquiry or other similar matter.

 

“Net Working Capital” means (a) Total Accounts Receivable plus Total Other
Current Assets plus Inventory, minus (b) Total Accounts Payable plus Total
Credit Cards plus Total Other Current Liabilities plus Deferred Revenue; in each
case calculated as set forth on Schedule 1.1-A using accounting principles,
methodologies and practices consistent with GAAP, unless otherwise consistent
with classifications and methodologies used to prepare the Company’s audited
financial statements, subject to an appropriate adjustment for the payment of
all Closing Indebtedness and Transaction Expenses of the Company at Closing.
Schedule 1.1-A attached hereto is a pro forma example of the calculation of the
Working Capital as of February 28, 2014.

 

“Order” means any order, judgment, injunction, edict, decree, ruling,
pronouncement, determination, decision, opinion, verdict, sentence, subpoena,
writ or award that has been issued, made, entered, rendered or otherwise put
into effect by or under the authority of any court, administrative agency or
other Governmental Body or any arbitrator or arbitration panel; or any contract
with any Governmental Body that has been entered into in connection with any
Proceeding.

 

“Ordinary Course of Business” means the ordinary course of business of the
Company consistent with past custom and practice (including with respect to
quantity and frequency) and is taken in the ordinary course of the normal,
day-to-day operations of the Company.

 

“Permits” means any permit, license, certificate, franchise, concession,
ratification, permission, clearance, confirmation, endorsement, waiver,
certification, designation, rating, registration, qualification or authorization
issued, granted, given or otherwise made available by or under the authority of
any Governmental Body or pursuant to any Applicable Law.

 

“Permitted Encumbrances” means (a) Encumbrances imposed by Applicable Law
related to the sale, transfer, pledge or other disposition of securities, (b)
purchase money Encumbrances and Encumbrances securing rental payments, (c)
easements, covenants, conditions, reservations, rights of way, and restrictions
of record, (d) any zoning or other governmentally established restrictions or
encumbrances, (e) pledges or deposits to secure obligations under workers or
unemployment compensation laws or similar legislation or to secure public or
statutory obligations, (f) mechanic’s, materialman’s, supplier’s, vendor’s or
similar Encumbrances arising or incurred in the Ordinary Course of Business and
(g) other Encumbrances incurred in the Ordinary Course of Business and not
incurred in connection with the borrowing of money.

 

6

 

 

“Person” means any individual, Entity or Governmental Body.

 

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

 

“Principal Market” means the Nasdaq Stock Market.

 

“Proceeding” means any action, suit, litigation, arbitration, proceeding
(including any civil, criminal, administrative, investigative or appellate
proceeding and any informal proceeding), prosecution, contest, hearing, inquiry,
inquest, audit, examination or investigation that has been commenced, brought,
conducted or heard by or before, or that otherwise has involved any Governmental
Body or any arbitrator or arbitration panel.

 

“Release” means any actual, or to the Knowledge of Sellers overtly threatened,
release, spilling, leaking, pumping, pouring, emitting, emptying, discharging,
injecting, escaping, leaching, dumping, abandonment, or disposing or allowing to
escape or migrate into or through the environment (including, without
limitation, ambient air (indoor or outdoor), surface water, groundwater, land
surface or subsurface strata or within any building, structure, facility or
fixture).

 

“Representatives” of a Person shall include:

 

(a)                 such Person’s Affiliates, shareholders, members, managers,
directors, officers, employees, agents, attorneys, investment bankers,
accountants and representatives; and

 

(b)                 all shareholders, directors, officers, employees, agents,
attorneys, investment bankers, accountants and representatives of each of such
Person’s Affiliates.

 

“Restricted Business” means any business or enterprise having the same or
similar commercial operations as the Company.

 

“Target Working Capital Amount” means $1,450,000.

 

“Tax” means any income tax, franchise tax, capital gains tax, estimated tax,
gross receipts tax, value added tax, surtax, excise tax, ad valorem tax,
transfer tax, stamp tax, sales tax, use tax, property tax, business tax,
occupation tax, inventory tax, occupancy tax, withholding tax or payroll tax
(including any fine, penalty or interest imposed on such amounts).

 

“Territory” shall mean the United States of America.

 

“Tax Return” means any return (including any information return), report,
declaration, estimate, form, election, certificate or other document required to
be filed with or submitted to, any Governmental Body in connection with the
determination, assessment, collection or payment of any Tax.

 

7

 

 

“Trading Day” means any day on which the common stock of ARC is traded on the
Principal Market, or, if the Principal Market is not the principal trading
market for such stock, then on the principal securities exchange or securities
market on which such stock is then traded; provided that “Trading Day” shall not
include any day on which the common stock of ARC is scheduled to trade on such
exchange or market for less than 4.5 hours or any day that it is suspended from
trading during the final hour of trading on such exchange or market (or if such
exchange or market does not designate in advance the closing time of trading on
such exchange or market, then during the hour ending at 4:00:00 p.m., New York
time).

 

“Transaction Agreements” mean this Agreement, the Escrow Agreement, and the
Employment Agreements.

 

“Transaction Expenses” means, with respect to any Person, all fees, costs and
expenses (including all legal fees and expenses, all fees and expenses payable
to any broker or finder, and all fees and expenses of any audit firm, investment
banking firm or accountant) that have been incurred in connection with the
Contemplated Transactions on behalf of or for the benefit of such Person.

 

“Unaudited Interim Financial Statements” mean the unaudited internal balance
sheet as of February 28, 2014 and the related unaudited internal income
statement for the twelve months then ended, of the Company.

 

“Unaudited Interim Financial Statements Date” means February 28, 2014.

 

“VWAP” means, for any security as of any date, the dollar volume-weighted
average price for such security on the Principal Market (or, if the Principal
Market is not the principal trading market for such security, then on the
principal securities exchange or securities market on which such security is
then traded) during the period beginning at 9:30:01 a.m., New York time, and
ending at 4:00:00 p.m., New York time, as reported by Bloomberg through its
“Volume at Price” function or, if the foregoing does not apply, the dollar
volume-weighted average price of such security in the over-the-counter market on
the electronic bulletin board for such security during the period beginning at
9:30:01 a.m., New York time, and ending at 4:00:00 p.m., New York time, as
reported by Bloomberg, or, if no dollar volume-weighted average price is
reported for such security by Bloomberg for such hours, the average of the
highest closing bid price and the lowest closing ask price of any of the market
makers for such security as reported in the “pink sheets” by Pink Sheets LLC
(formerly the National Quotation Bureau, Inc.). If the VWAP cannot be calculated
for such security on such date on any of the foregoing bases, the VWAP of such
security on such date shall be the fair market value as mutually determined by
the Company and the Holder. All such determinations shall be appropriately
adjusted for any share dividend, share split or other similar transaction during
such period.

 

8

 

 

1.2           Additional Defined Terms. In addition to the definitions set forth
in Section 1.1, for purposes of this Agreement (including the Disclosure
Schedule) the following terms have the meanings set forth in the Section
referenced in the following table:

 

Defined Term   Section Acquisition Proposal   5.6(a) Actual Working Capital
Amount   2.6(a) Agreed Amount   9.7(a) Agreement   Introduction Arbitration
Notice   9.7(e) CERCLIS   3.17(a) Claim Notice   9.6 Claimant   9.6 Claimed
Amount   9.6(c) Closing   2.3 Closing Date   2.3 Closing Balance Sheet   2.6(a)
Closing Financial Statements   2.6(a) Company Intellectual Property   3.11(b)
Environmental Laws   3.17(a) Escrow Agent   2.4(c) Escrow Agreement   2.4(c)
Escrow Release Date   9.5(c) Escrow Shares   2.4(c) Financial Statements  
3.7(a) GMB   3.26 Indemnification Cap   9.1(b) Indemnification Deductible  
9.1(b) Indemnified Party   9.9 Indemnifying Party   9.8 Indemnitee   9.8
Indemnitor   9.9 Independent Accountants   2.6(b) JAG   9.7(e) Kodak Case  
9.1(c)(iv) Leased Property   3.13 Material Contracts   3.10 Post-Closing
Decrease Amount   2.5(c) Post-Closing Increase Amount   2.5(b) Purchase Price  
2.2 Purchaser   Introduction Response Notice   9.7(a) Restricted Period   6.5(a)
Securities Act   9.5(a) Securityholder Group   11.2 Sellers   Introduction
Straddle Period   6.4(b) Tax Controversies   6.4(f)

 

(Remainder of Page Left Intentionally Blank)

 

9

 

 

Section  2.                 Sale and Purchase of Interests.

 

2.1              Purchase and Sale of Interests. Subject to the terms and
conditions of this Agreement, at the Closing, Sellers shall sell, convey,
transfer and assign to Purchaser, and Purchaser shall purchase and acquire, all
right, title and interest in and to the Interests, free and clear of all
Encumbrances (other than Permitted Encumbrances).

 

2.2              Purchase Price. Subject to adjustment in accordance with
Section 2.5, the purchase price payable by Purchaser for the Interests shall be
Twenty-Four Million Dollars ($24,000,000) ( the “Purchase Price”), payable in
accordance with Section 2.4.

 

2.3              Closing. Subject to fulfillment of the conditions precedent
specified in Section 7 and Section 8, the closing (the “Closing”) of the
Contemplated Transactions shall take place remotely via the electronic exchange
of documents and signatures no later than three (3) Business Days after delivery
of the financial audit referred to in Section 7.4(i) (such date of Closing, the
“Closing Date”), or at such other time, date or place as Purchaser and Sellers
may agree in writing. On the Closing Date, Purchaser shall deliver the Purchase
Price as set forth in and payable in accordance with Section 2.4. Subject to the
terms and conditions of this Agreement, at the Closing, the following Persons
shall deliver or cause to be delivered the following:

 

(a)                 Assignments of the Sellers’ Interests to Purchaser,

 

(b)                 Purchaser shall pay in full the Purchase Price by making the
payments specified in Section 2.4,

 

(c)                 The appropriate parties shall enter into the Transaction
Agreements, and

 

(d)                 The parties shall execute and deliver any other instruments,
documents and certificates that are required to be delivered pursuant to this
Agreement or as may be reasonably requested by either party to consummate the
Contemplated Transactions.

 

2.4              Payment of Purchase Price. The Purchase Price shall be paid at
Closing as follows:

 

(a)               The Closing Indebtedness Payoff Amount shall be delivered by
Purchaser (on behalf of Sellers) in immediately available funds for deposit in
accounts designated in writing by Sellers (such designation to occur no less
than one Business Day prior to the Closing);

 

(b)               The Transaction Expenses incurred by the Company or Sellers
shall be delivered by Purchaser (on behalf of Sellers) in immediately available
funds for deposit in accounts designated in writing by Sellers (such designation
to occur no less than one Business Day prior to the Closing);

 

10

 

 

(c)               The Purchaser shall deposit to Wuersch & Gering LLP (the
“Escrow Agent”) within five (5) Business Days prior to the Closing Date such
number of newly issued shares of ARC Common Stock equal in value to one hundred
twenty five percent (125%) of the amount which is ten percent (10%) of the
Purchase Price (the “Escrow Shares”), valued at the average VWAP for the twenty
(20) Trading Day period prior to such issuance date, which, subject to Section
9.5 below, will be replaced with ten percent (10%) of the Purchase Price in cash
immediately prior to final disbursement of the Escrow Fund, in accordance with
Section 9.5 below and the terms of the Escrow Agreement in substantially the
form attached hereto as Exhibit A(the “Escrow Agreement”);

 

(d)                 An amount equal to the Purchase Price less the amounts
specified in clauses (a), (b) and (c) of this Section 2.4 shall be delivered by
Purchaser by wire transfer of immediately available funds for deposit in the
accounts designated in writing by Sellers (such designations to occur no less
than one Business Day prior to the Closing).

 

2.5              Working Capital Adjustment.

 

(a)                 The Purchase Price shall be subject to adjustment following
the Closing in accordance with this Section 2.5 and Section 2.6.

 

(b)                 If the Actual Net Working Capital Amount is One Hundred
Twenty Five Thousand Dollars ($125,000) or more, greater than the Target Working
Capital Amount, then the Purchase Price shall be increased by the amount by
which the Actual Working Capital Amount exceeds the Target Working Capital
Amount (the “Post-Closing Increase Amount”), and the Post-Closing Increase
Amount shall be paid by Purchaser, within five (5) Business Days of the
Post-Closing Increase Amount becoming final in accordance with Section 2.6, by
wire transfer of immediately available funds to Sellers in the same proportions
as the Purchase Price payments and to the accounts designated for the Closing by
the Sellers.

 

(c)                 If the Actual Working Capital Amount is One Hundred Twenty
Five Thousand Dollars ($125,000) or more, less than the Target Working Capital
Amount, then the Purchase Price shall be reduced by the amount by which the
Target Working Capital Amount exceeds the Actual Working Capital Amount (the
“Post-Closing Decrease Amount”), and the Post-Closing Decrease Amount shall be
released by the Escrow Agent upon receipt of joint instructions from Sellers and
Purchaser to the Escrow Agent to release to Purchaser the Post-Closing Decrease
Amount from the Escrow Fund. The Escrow Fund shall be the sole source of payment
of any Post-Closing Decrease Amount due to Purchaser under this Agreement, and
Sellers shall have no liability therefor.

 

2.6              Working Capital Adjustment Procedure.

 

(a)                 Purchaser shall cause to be prepared the following: (i) a
balance sheet of the Company as of the Closing Date (the “Closing Balance
Sheet”), and (ii) a calculation of the Working Capital as set forth on the
Closing Balance Sheet (the “Actual Working Capital Amount”). Sellers shall cause
to be prepared the following: (i) a calculation of the Post-Closing Increase
Amount or the Post-Closing Decrease Amount, as applicable (collectively with the
Closing Balance Sheet and Actual Working Capital Amount, the “Closing Financial
Statements”). The Closing Financial Statements shall be prepared in conformity
with GAAP; provided, however, that the calculation of the Actual Working Capital
Amount shall be subject to the principles, methodologies, practices and
adjustments reflected in Schedule 1.1-A. After the Closing Date, Sellers and the
Company’s Representatives shall be permitted reasonable access to review the
books, records and work papers of the Company to facilitate the preparation of
the Closing Financial Statements. In addition, after the Closing Date, Sellers
and the Company’s Representatives may make inquiries and requests of Purchaser
and its Representatives with respect to the preparation of the Closing Financial
Statements, and Purchaser and its Representatives shall promptly respond to and
cooperate with, and Purchaser shall use its commercially reasonable efforts to
cause its Representatives to promptly respond to and cooperate with, such
inquiries and requests.

 

11

 

 

(b)                 Purchaser shall deliver the Closing Financial Statements to
Sellers within 60 days following the Closing Date. If within 30 days following
delivery of the Closing Financial Statements, Sellers have not given Purchaser
written notice of its objection as to any amounts or calculations set forth on
the Closing Financial Statements (which notice shall state in reasonable detail
the basis of Sellers’ objection), then the Post-Closing Increase Amount or the
Post-Closing Decrease Amount, as applicable, as set forth in the Closing
Financial Statements delivered by Purchaser shall be final, binding and
conclusive on the parties. If Sellers duly give Purchaser notice of objection,
and if Purchaser and Sellers fail to resolve the issues outstanding with respect
to the calculation of the Post-Closing Increase Amount or the Post-Closing
Decrease Amount, as applicable, within 30 days of Sellers’ receipt of Sellers’
objection notice, Sellers and Purchaser shall submit the issues remaining in
dispute to a mutually acceptable national firm of independent public accountants
(the “Independent Accountants”), for resolution; provided, however, that the
scope of the Independent Accountants’ review shall be limited to the matters set
forth in this Section 2.6 and shall not relate to the determination of the
Target Working Capital Amount nor to the appropriateness of the principles,
methodologies, practices or adjustments reflected in Schedule 1.1-A, which the
parties have mutually agreed are acceptable. Purchaser and Sellers agree that
any market or business developments after the Closing shall not be taken into
consideration and that the status of the Company’s affairs and market
circumstances at the time of the Closing shall prevail.

 

(c)                 If issues are submitted to the Independent Accountants for
resolution, then:

 

(i)                   Sellers and Purchaser shall execute any agreement(s)
required by the Independent Accountants to accept their engagement pursuant to
this Section 2.6;

 

(ii)                 Sellers and Purchaser shall promptly furnish or cause to be
furnished to the Independent Accountants such work papers and other documents
and information relating to the disputed issues as the Independent Accountants
may request and are available to that party or its accountants or other agents,
and shall be afforded the opportunity to present to the Independent Accountants,
with a copy to the other party, any written material relating to the disputed
issues;

 

(iii)                the determination by the Independent Accountants, as set
forth in a written notice to be delivered by the Independent Accountants to both
Sellers and Purchaser, of the Post-Closing Increase Amount or the Post-Closing
Decrease Amount, as applicable, shall be final, binding and conclusive on the
parties as of the date of the determination notice sent by the Independent
Accountants; and

 

12

 

 

(iv)               Sellers, on one hand, and Purchaser, on the other hand, shall
each bear 50% of the fees and costs of the Independent Accountants for such
determination, provided, however, that the engagement agreement(s) referred to
in subpart (i) above may require the parties to be bound jointly and severally
to the Independent Accountants for those fees and costs, and in the event
Sellers or Purchaser pays to the Independent Accountants any amount in excess of
50% of the fees and costs of their engagement, the other party agrees to
reimburse Sellers or Purchaser, as applicable, to the extent required to
equalize the payments made by Sellers and Purchaser with respect to the fees and
costs of the Independent Accountants.

 

2.7              Completion of Audit. Prior to the Closing, the audits of the
Company’s financial statements for the fiscal years ended 2012 and 2013 shall be
completed in accordance with GAAP.

 

2.8              (Intentionally Omitted.)

 

2.9              Allocation of Purchase Price. Purchaser and Sellers agree that
the Purchase Price (and other capitalized costs) shall be allocated among the
assets of the Company in accordance with GAAP and the Code.

 

2.10            Withholding. The Purchaser or any of its designees shall be
entitled to deduct and withhold from any payment payable by the Purchaser to the
Sellers pursuant to this Agreement such amounts as the Purchaser or its designee
determines that it is required to deduct and withhold with respect to the making
of such payment under the Code or any Applicable Laws. To the extent that
amounts are so withheld by the Purchaser, such withheld amounts shall be treated
for all purposes of this Agreement as having been paid to the Sellers.

 

Section  3.                  Representations and Warranties of Sellers Regarding
the Company.

 

Subject to the limitations set forth in Section 9 and elsewhere in this
Agreement, Sellers, severally, in the proportions each of their respective
Interests bear to the total of all Interests, and not jointly, represent and
warrant to Purchaser as of the date hereof and as of the Closing Date as
follows, except as disclosed or otherwise referred to (i) in the Disclosure
Schedule, and (ii) in any of the documents identified in the Disclosure
Schedule.

 

3.1              Good Standing and Limited Liability Company Power of the
Company. The Company has been duly formed and is validly existing and in good
standing as a as a limited liability company under the laws of the State of
Colorado. The Company has all requisite limited liability company power and
authority to own and operate its property and its assets (other than the
property and assets it leases), to lease the property it operates as lessee and
to conduct the business in which it is currently, and is currently proposed to
be, engaged. The Company is duly qualified to transact business and is in good
standing in each jurisdiction in which the nature of its activities and its
properties (both owned and leased) makes such qualification necessary, except
for those jurisdictions in which the failure to so qualify would not be material
to the Company.

 

3.2              Capitalization; Title to Interests.

 

(a)                 Sellers own all of the Interests of the Company.

 

13

 

 

(b)                 The Interests were duly authorized and validly issued, fully
paid and non-assessable, and were issued in compliance with all applicable state
and federal laws concerning the issuance of securities. Sellers have good and
valid title to the Interests, free and clear of any Encumbrances, except
Permitted Encumbrances. On the Closing Date, Purchaser will acquire good title
to the Interests free of any Encumbrances, except for clause (a) of the
definition of Permitted Encumbrances and any Encumbrances created by or through
Purchaser or any of Purchaser’s Representatives.

 

(c)                 There are no outstanding options, warrants, rights
(including conversion or preemptive rights) or agreements for the purchase or
acquisition from the Company of any Interests, or arising contingently or
otherwise under contract or by operation of law, or the order of any court or
arbitral authority, or by action of any other administrative or regulatory
authority having jurisdiction over the Company or the Sellers.

 

3.3              Subsidiary/Other Ownership Interest. The Company does not
presently own or control, directly or indirectly, any interest in any other
Entity. The Company is not a participant in any joint venture or partnership.

 

3.4              Enforceability. This Agreement has been duly and validly
executed and delivered by each of the Sellers and constitutes, and upon the
execution and delivery by Sellers of the Transaction Agreements to which Sellers
area party, such Transaction Agreements shall constitute, legal, valid and
binding obligations of Sellers enforceable against each such Seller in
accordance with the respective terms of the Transaction Agreements, except as
enforceability may be limited by bankruptcy, insolvency, reorganizations,
moratorium or other laws affecting creditors’ rights generally, and general
equitable principles.

 

3.5              No Conflicts. The execution and delivery by each of the Sellers
of the Transaction Agreements, the performance of each of their obligations
under the Transaction Agreements and the consummation of the Contemplated
Transactions do not and shall not:

 

(a)                 conflict with or result in a violation or breach of any of
the terms, conditions or provisions of the Charter Documents of the Company;

 

(b)                 materially conflict with or result in a material violation
or breach of any term or provision of any Applicable Law or Order applicable to
the Company or Sellers; or

 

(c)                 materially conflict with or result in a material violation
or breach of, or constitute a default under, any Material Contract.

 

3.6              Consents. No consent, approval, order or authorization of, or
registration, qualification, designation, declaration or filing with, any
Governmental Body or any Person on the part of Sellers or the Company is
required in connection with the consummation of the Contemplated Transactions
which has not been obtained prior to the date of this Agreement.

 

14

 

 

3.7              Financial Matters.

 

(a)                 Attached to Section 3.7(a) of the Disclosure Schedule are
(i) the compiled balance sheet as of December 31, 2013, and the related
statements of income and changes in members’ equity for the year then ended of
the Company, and (ii) the Unaudited Interim Financial Statements (collectively
(i) and (ii), the “Financial Statements”). The Financial Statements have been
prepared in accordance with the books and records of the Company, have been
prepared in accordance with GAAP (except subject in the case of the Unaudited
Interim Financial Statements to normal, year-end adjustments) and fairly present
in all material respects the assets, liabilities, financial condition and
operating results of the Company as of the dates and for the periods, indicated
therein, subject to normal year-end adjustments (which have not yet been made
for the Unaudited Interim Financial Statements).

 

(b)                 Section 3.7(b) of the Disclosure Schedule sets forth an
accurate and complete aging of all accounts payable of the Company as of
February 28, 2014.

 

(c)                 Section 3.7(c) of the Disclosure Schedule sets forth an
accurate and complete aging of all accounts receivable of the Company as of
February 28, 2014. All accounts receivable of the Company have arisen in the
Ordinary Course of Business and are valid and enforceable claims.

 

(d)                 To the Knowledge of Sellers: (i) the Financial Statements
are auditable; (ii) there are no facts or circumstances that would impair
completion of audits of the Company financial statements for the calendar years
ended December 31, 2012 and December 31, 2013, respectively.

 

3.8              Liabilities. As of the date of this Agreement, the Company has
no Liabilities of a nature that are required to be disclosed in the liabilities
column of a balance sheet prepared in accordance with GAAP, other than
(a) liabilities reflected on the Financial Statements, (b) liabilities incurred
in the Ordinary Course of Business subsequent to the Unaudited Interim Financial
Statements Date, (c) obligations of the Company under contracts and commitments
incurred in the Ordinary Course of Business and not required under GAAP to be
reflected in the Financial Statements, and (d) as set forth in Section 3.8 of
the Disclosure Schedule.

 

3.9              Changes. Since the Unaudited Interim Financial Statements Date,
the Company has conducted its business in the Ordinary Course of Business in all
material respects. Without limiting the generality of the foregoing, except in
the Ordinary Course of Business or as would not reasonably be expected to be
material, since the Unaudited Interim Financial Statements Date, there has not
been:

 

(a)                 any material change in the assets, Liabilities, financial
condition or operating results of the Company from that reflected in the
Financial Statements;

 

(b)                 any damages, destruction or loss, whether or not covered by
insurance, materially and adversely affecting the assets, properties, financial
condition, operating results or business of the Company;

 

(c)                 any cancellation or waiver by the Company of a material
right or of a material debt owed to it, except as disclosed in Section 3.9(c) of
the Disclosure Schedule;

 

15

 

 

(d)                 any material change or amendment to a Material Contract or
any acceleration, termination, or cancellation of any Material Contract to which
the Company is a party or by which it is bound;

 

(e)                 except to the extent required by Applicable Law and as
disclosed in Section 3.9(e) of the Disclosure Schedule, any material change in
any compensation arrangement or agreement with any employee of the Company other
than Sellers, or any payment of any bonuses, whether monetary or otherwise, or
increase of any wages, salary, severance, pension or other compensation or
benefits in respect of its employees, officers, managers, independent
contractors or consultants, or any change to the terms of employment or terms of
termination for any employee, or action to accelerate the vesting or payment of
any compensation or benefit for any employee, officer, manager, independent
contractor or consultant;

 

(f)                  any issuance of Interests or other securities of the
Company or any rights, warrants or options to acquire, any Interests or any
other securities of the Company or the redemption, purchase or acquisition of
any Interests;

 

(g)                 except for the Closing Indebtedness, as set forth on the
Financial Statements, any incurrence by the Company of Indebtedness or any other
liabilities that would be commitments required to be disclosed in the footnotes
to financial statements under GAAP, individually for which it currently owes, or
in the future will owe in excess of $25,000;

 

(h)                 any payment of any dividend or other distribution by the
Company upon or with respect to any Interests, or the split, combination or
reclassification of any Interests, except as disclosed in Section 3.9(h) of the
Disclosure Schedule;

 

(i)                   any sale, assignment, transfer or other disposition of any
of the assets, contingent or otherwise, shown or reflected in the Financial
Statements of any material assets or properties of the Company;

 

(j)                  any resignation or termination of any officer, key employee
or group of employees of the Company;

 

(k)                 any direct or indirect loans, guarantees or advances or
capital contributions to, or investments in, any other Person, made by the
Company to any Person, except for payroll advances or loans to employees not in
excess of $1,000;

 

(l)                   any labor organization activity related to the Company;

 

(m)               any merger or consolidation with any other Person or the
acquisition of any material assets of any other Person or purchase of a
substantial portion of the assets or stock of, or by any other manner, any
business or any Person or any division thereof (other than the acquisition of
inventory in the ordinary course), or the adoption of any plan of
reorganization, full or partial liquidation or dissolution or filing of a
petition in bankruptcy under any provisions of federal or state bankruptcy Law
or consent to the filing of any bankruptcy petition against it under any similar
Law;

 

16

 

 

(n)                 any amendment to the Charter Documents of the Company or the
execution or filing of any instrument that, with the passage of time or
otherwise, would cause the merger, acquisition or the dissolution of the
Company;

 

(o)                 any material change in any method of accounting or
accounting practice of the Company, except as required by GAAP or as recommended
by the Company’s accounting firm so long as all Company accounting responsive to
such recommendations remains consistent with GAAP and as to which detailed
disclosures of each such change delivered by notice to Purchaser within one
Business Day of such recommendation;

 

(p)                 any material change by Company management, other than as
recommended by the Company’s accounting firm so long as all Company accounting
responsive to such recommendations remains consistent with GAAP and as to which
detailed disclosures of each such change shall be delivered by notice to
Purchaser within one Business Day of such recommendation, in the Company’s cash
management practices and its policies, practices and procedures with respect to
collection of accounts receivable, establishment of reserves for uncollectible
accounts, accrual of accounts receivable, inventory control, prepayment of
expenses, payment of trade accounts payable, accrual of other expenses, deferral
of revenue and acceptance of customer deposits;

 

(q)                 any transfer, assignment or grant of any license or
sublicense of any material rights under or with respect to any Intellectual
Property;

 

(r)                  the imposition of any Encumbrance upon any of the Company
properties, capital stock or assets, tangible or intangible;

 

(s)                  any agreement, understanding or arrangement with respect to
the sale or voting of any of its equity interests (including, without
limitation, any trusts, interest holders’ agreements, proxies, pledge agreements
or any similar instruments or agreements);

 

(t)                  enter into a new line of business or abandoned or
discontinued an existing lines of business;

 

(u)                 any purchase, lease or other acquisition of the right to
own, use or lease any property or assets, except for purchases of inventory or
supplies in the Ordinary Course of Business; or

 

(v)                 any agreement or commitment by the Company to do any of the
things described in this Section 3.9.

 

3.10           Material Contracts.

 

(a)                 Except as disclosed on Section 3.10(a) of the Disclosure
Schedule (the “Material Contracts”), the Company is not a party to or bound by:

 

(i)                   any current agreement providing for the sale by the
Company of products to a customer and pursuant to which the Company has
received, or has a contractual right to receive, payments in excess of $100,000
in the aggregate;

 

17

 

 

(ii)                 any current agreement for the purchase of materials,
inventory, supplies, goods, services, equipment or other assets pursuant to
which the Company (a) made payments of $100,000 or more during the year ended
December 31, 2013 or (b) is contractually required to make, over any period of
time, payments of $100,000 or more;

 

(iii)                any current agreement pursuant to which any Person is
contractually entitled to distribute the products of the Company;

 

(iv)               (A) any current lease of real property, or (B) any current
lease of personal property providing for annual lease payments of $25,000 or
more that cannot be terminated on less than 60 days’ notice without payment by
the Company of any material penalty;

 

(v)                 any current agreement relating to Indebtedness;

 

(vi)               any current agreement relating to any Liability in excess of
$25,000 per annum;

 

(vii)              any current material partnership, joint venture or other
similar agreement;

 

(viii)            any current agreement relating to the acquisition or
disposition of any material business (whether by merger, sale of membership
interests, sale of assets or otherwise);

 

(ix)               any current agreement that is exclusive or limits the freedom
of the Company to compete in any line of business or with any Person or in any
area and all agreements that require the Company to purchase its total
requirements of any product or service from a third party, or that contain “take
or pay” provisions;

(x)                 any current employment, executive consulting or compensation
agreement, or independent contractor agreement with any Person;

 

(xi)               any current material agreement relating to securities of the
Company or rights in connection therewith;

 

(xii)              any and all prior agreements with respect to which the
Company has any material tail-period Liability, contingent or otherwise;

 

(xiii)            any and all agreements with Governmental Bodies;

 

(xiv)            any and all agreements related to any currency transactions or
other hedging agreements;

 

(xv)             any and all agreements with the Company to which any of the
Sellers are party;

 

18

 

 

(xvi)            any current arrangement or agreement pursuant to which any
material Intellectual Property rights are licensed or sublicensed to or from the
Company (excluding any agreement relating to the license by the Company of
“off-the-shelf” software); or

 

(xvii)          any current agreement under which the Company has loaned money
or promised to lend money, or made any other loan or advance to, or other
investment in, any other Person, in each case in excess of $50,000.

 

(b)                 (i) Each Material Contract is in full force and effect;
(ii) neither the Company nor, to the Knowledge of Sellers, any other party
thereto, is in default or breach in any respect under the terms of any such
Material Contract; (iii) no event has occurred that, with the passing of time or
the giving of notice, would result in a default or breach of any such Material
Contract, or allow for termination or cancellation thereof; and (iv) each
Material Contract is a valid and binding agreement of the Company. The Company
has not received any written notice from any party to any such Material Contract
of any intention to terminate, cancel or otherwise fail to perform any
obligations of such party under any such Material Contract.

 

3.11           Intellectual Property.

 

(a)                 Section 3.11(a) of the Disclosure Schedule sets forth an
accurate and complete list of the material Intellectual Property owned by, or
exclusively licensed to, or otherwise utilized by, the Company that is subject
to rights or claims of ownership in the Intellectual Property by any third
party, or an application or registration for protection under Applicable Law. To
the Knowledge of Sellers, the Company has the right to use all material
Intellectual Property necessary to operate the business of the Company as
presently conducted free and clear of any Encumbrances, except for Permitted
Encumbrances and the rights of lenders.

 

(b)                 To the Knowledge of Sellers, the Company has not received
any written notice of infringement upon or misappropriation of the asserted
rights of any third party as to Intellectual Property owned or used by the
Company (the “Company Intellectual Property”). To the Knowledge of Sellers,
there has been no misappropriation or infringement of the Company Intellectual
Property by any third party.

 

(c)                 To the Knowledge of Sellers, it is not necessary to utilize
any inventions of any of the consultants or employees of the Company (or people
they currently intend to hire) made prior to their retention or employment, as
the case may be, by the Company, except for inventions that have been assigned
or licensed to the Company as of the date hereof. The Company has taken
reasonable steps to promote and preserve the security and confidentiality of the
Company Intellectual Property.

 

(d)                 The Company has not filed and does not maintain any
Intellectual Property registrations with any governmental authority.

 

19

 

 

(e)                 The Disclosure Schedule lists all licenses, sublicenses and
other agreements and arrangements whereby the Company is granted rights,
interests and authority, whether on an exclusive or non-exclusive basis, with
respect to any Intellectual Property that is used in or necessary for the
Company’s current or planned business or operations. Seller has provided
Purchaser with true and complete copies of all such agreements. All such
agreements are valid, binding and enforceable between the Company and the other
parties thereto, and the Company and such other parties are in full compliance
with the terms and conditions of such agreements.

 

(f)                  The Company Intellectual Property as formerly or currently
owned, licensed or used by the Company, and the Company’s conduct of its
business as formerly and currently conducted,have not and do not infringe,
violate or misappropriate the Intellectual Property of any Person. Neither
Seller nor the Company has received any communication, and no lawsuit has been
instituted, settled or, to Seller’s Knowledge, threatened, that alleges any such
infringement, violation or misappropriation.

 

3.12           Certain Assets. Other than with respect to real property or
interests in real property, such items being the subject of Section 3.13, and
Intellectual Property, such items being the subject of Section 3.11, the Company
has good and valid title to all assets owned by it, and valid and enforceable
leasehold interests in all tangible assets leased by it. Except as set forth in
Section 3.12 of the Disclosure Schedule, such owned assets and leased assets are
suitable for use in the Ordinary Course of Business (ordinary wear and tear
excepted) and constitute all of the tangible assets necessary to enable the
Company to conduct its business. Except for Permitted Encumbrances (including
those set forth in Section 3.12 of the Disclosure Schedule) all such owned
assets are owned, and such leased assets are leased, free and clear of all
Encumbrances. To the Knowledge of Sellers, the buildings, structures, furniture,
fixtures, machinery, equipment, vehicles and other items of tangible personal
property of the Company are in reasonably good operating condition, subject to
ordinary wear and tear, and are adequate for the uses to which they are being
put, and are sufficient for the continued conduct of the Company’s Ordinary
Course of Business.

 

3.13           Real Property. Section 3.13 of the Disclosure Schedule sets forth
an accurate and complete list of all real property in which the Company has a
leasehold interest (each, a “Leased Property”), the address of the Leased
Property and the amount of the lease payment for each period with respect to
which such amount is due. The Company does not hold fee title to any real
property. The Company has good and valid title to the leasehold estates in all
Leased Property, in each case free and clear of all Encumbrances, except for (x)
the following Encumbrances: (A) easements, covenants, rights-of-way and other
similar restrictions of record, (B) zoning, building or other similar
restrictions, (C) Encumbrances that have been placed by any developer, landlord
or other third party on property over which the Company has easement rights or
on any Leased Property and subordination or similar agreements relating thereto,
and (D) unrecorded easements, covenants, rights-of-way and other similar
restrictions; or (y) any other Permitted Encumbrance.

 

3.14           Proceedings; Orders. Section 3.14 of the Disclosure Schedule sets
forth an accurate and complete list of all Proceedings pending, or to the
Knowledge of Sellers, currently threatened, orally or in writing, against any
Seller or the Company. Neither Sellers nor the Company is a party or subject to
the provisions of any material Order. To the Knowledge of Sellers, there is no
investigation pending or threatened against the Company by or before any
Governmental Body.

 

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3.15           Compliance with Laws. To the Knowledge of Sellers, the Company
has materially complied with all Applicable Law (other than Environmental Laws,
which are addressed in Section 3.17 rather than this Section 3.15) applicable to
it. Other than as disclosed in Section 3.15 of the Disclosure Schedule, the
Company has not in the past six (6) years received, any written notice from any
Governmental Body regarding any actual, alleged, possible or potential material
violation of, or material failure to comply with, any Applicable Law on the part
of the Company. The Company has not, to the Knowledge of Sellers, been the
subject of any investigation conducted by any Governmental Body, except for
routine and periodic audits by the U.S. Department of Labor (including the
Occupational Safety and Health Administration) or similar state or municipal
agencies, or by municipalities with respect to sales taxes.

 

3.16           Permits. Section 3.16 of the Disclosure Schedule is an accurate
and complete list of each of the Permits held by the Company that are material
to the operations of the Company. The Company (i) holds the Permits that are
necessary for it to conduct its Ordinary Course of Business, each of which is in
full force and effect, and (ii) is in materially in compliance with each Permit
relating to it or any of its properties under Applicable Law. The Company has
not received any written notice from any Governmental Body alleging the
violation of, or failure to comply with, any term or requirement of any of its
Permits, or regarding the revocation, withdrawal, suspension, cancellation,
termination or modification of any of its Permits. All fees and charges with
respect to such Permits as of the date hereof have been paid in full. No event
has occurred that, with or without notice or lapse of time or both, would
reasonably be expected to result in the revocation, suspension, lapse or
limitation of any Permit. Each of the Permits shall continue in full force and
effect following the Closing Date so that the Company may continue to conduct
its operations in the Ordinary Course of Business.

 

3.17           Environmental Laws.

 

(a)                 The Company conducts its business and operations, and has
operated, in material compliance with all Applicable Laws relating to the
environment, including, without limitation, all environmental laws, ordinances
and regulations (“Environmental Laws”). The Company has not received written
notice of any material Proceedings against it based on or related to the
manufacture, processing, distribution, use, treatment, storage, disposal or
transport of Hazardous Materials. The Company has not received written notice
that it may have liability as an arranger or generator for disposal or treatment
at a site listed or proposed to be listed on the National Priorities List, as
published by the United States Environmental Protection Agency, or the
Comprehensive Environmental Response, Compensation and Liability Information
System (“CERCLIS”).

 

(b)                 The Company has obtained and is in material compliance with
any material environmental Permits required under Environmental Laws for the
ownership, lease, operation or use of the business or assets of the Company and
any such environmental Permits are in full force and effect and shall be
maintained in full force and effect by the Company through the Closing Date in
accordance with Environmental Law. With respect to any such environmental
Permits, Sellers have undertaken, or will undertake prior to the Closing Date,
any measures that can reasonably be taken to facilitate transferability of the
same.

 

21

 

 

(c)                 The Company has not received written notice that it may have
liability as a result of real property currently or formerly owned, operated or
leased or used for storage or as disposal facilities by the Company listed on,
or proposed for listing on, the National Priorities List or CERCLIS.

 

(d)                 There has been no Release of Hazardous Materials by the
Company in contravention of Environmental Laws with respect to the business or
assets of the Company on any real property currently or formerly owned, operated
or leased by the Company, and neither the Company nor any Seller has received
any notice that any real property currently or formerly owned, operated or
leased in connection with the business of the Company (including soils,
groundwater, surface water, buildings and other structure located on any such
real property) has been contaminated with any Hazardous Material which could
reasonably be expected to result in any material claim against, or a material
violation of any Environmental Laws or term of any Environmental Permit by,
Sellers or the Company.

 

(e)                 The Sellers have provided to the Purchaser true and complete
copies of any and all material environmental reports, studies, audits, records,
sampling data, site assessments, risk assessments and economic models with
respect to the business or assets of the Company or any currently or formerly
owned, operated or leased real property which are in the possession or control
of the Sellers or Company related to compliance with Environmental Laws, notices
and claims related to any and all environmental matters or the Release of
Hazardous Materials; and (ii) any and all material documents (including, without
limitation, costs of remediation, pollution control equipment and operational
changes) concerning planned or anticipated capital expenditures required to
reduce, offset, limit or otherwise control pollution and/or emissions, manage
waste or otherwise ensure compliance with Environmental Laws.

 

(f)                  To Sellers’ Knowledge, other than as disclosed in Section
3.17 of the Disclosure Schedule, there is no condition, event or circumstance
concerning the Release or regulation of Hazardous Materials that after the
Closing Date would materially increase the costs associated with the Ordinary
Course of Business operations of the Company.

 

3.18           Taxes and Tax Returns.

 

(a)                 The Company has filed all material Tax Returns required to
be filed by it. All such Tax Returns were reasonably believed to be complete and
correct in all material respects at the time of filing. The Company has paid all
Taxes shown on such Tax Returns. No audits or examinations of Tax Returns are
currently pending, and the Company has not received written notice of any such
audit or examination. The Company has never been a party to a Tax sharing
agreement or any other agreement to indemnify any Person for Tax liability
(other than a lease, license or other agreement the principal subject of which
is not Tax). The Company has withheld and paid all material Taxes required to
have been withheld and paid in connection with amounts paid to any employee,
independent contractor agent, shareholder or other Person for all periods for
which the statutory period of limitations for the assessment of such Tax has not
yet expired. The Company has not made an election to be treated as an
association for U.S. federal income tax purposes.

 

22

 

 

(b)                 No claim has been made by any Governmental Body in any
jurisdiction where the Company does not file Tax Returns that it is, or may be,
subject to Tax by that jurisdiction.

 

(c)                 There are no Encumbrances for Taxes upon the assets of the
Company.

 

(d)                 The Company is not a party to, or bound by, any closing
agreement or offer in compromise with any Governmental Body.

 

(e)                 The Company is not a party to any administrative action by
any Governmental Body related to any Taxes and to the Knowledge of Sellers there
are no pending or threatened actions by any Governmental Body in respect of any
Taxes.

 

(f)                  The Company is not, and has not been, a party to, or a
promoter of, a “reportable transaction” within the meaning of Section 6707
A(c)(1) of the Code and Treasury Regulations Section 1.6011 4(b).

 

3.19           Labor Agreements and Actions and Deferred Compensation. The
Company is not bound by or subject to (and none of the assets or properties of
the Company is bound by or subject to) any collective bargaining agreement or
any written or oral, express or implied, contract, commitment or arrangement
with any labor union, and no labor union has requested, or to the Knowledge of
Sellers, has sought to represent any of the employees, representatives or agents
of the Company. To the Knowledge of Sellers, the Company is not aware of any
officer or key employee, or that any group of key employees, intends to
terminate their employment with the Company, nor does the Company have a present
intention to terminate the employment of any of the foregoing. Except as set
forth in Section 3.19 of the Disclosure Schedule, the Company is not a party to
or bound by any currently effective deferred compensation agreement, bonus plan,
incentive plan, profit sharing plan, retirement agreement or other employee
compensation agreement. The Company has complied in all material respects with
all applicable state and federal equal employment opportunity and other
Applicable Law related to employment. There are no pending or, to the Knowledge
of Sellers, threatened, employment discrimination charges or complaints against
or involving the Company before any federal, state, or local board, department,
commission or agency. To the Knowledge of Sellers, no employee of the Company is
a party to or is bound by any agreement (other than an applicable Company
confidentiality agreement) that restricts the freedom of such employee to
compete in any way in the Company’s business.

 

3.20           Employee Benefits.

 

(a)                 Section 3.20(a) of the Disclosure Schedule sets forth an
accurate and complete list of each Employee Benefit Plan maintained, sponsored,
or contributed to by the Company or with respect to which the Company has any
Liability, including without limitation, each Employee Benefit Plan for any
employee, officer, manager, retiree, independent contractor or consultant of the
Company or any spouse or dependent of such individual, in each case whether
funded or unfunded, whether or not tax-qualified and whether or not subject to
ERISA.

 

23

 

 

(b)                 The Company does not currently sponsor, maintain, contribute
to or participate in or have any Liability or potential liability under (or with
respect to) any “defined benefit plan” (as defined in Section 3(35) of ERISA),
or any “multiemployer plan” (as defined in ERISA Section 3(37)), nor has the
Company ever done or had any of the foregoing. No asset of the Company is
subject to any lien under ERISA or the Code.

 

(c)                 To the Knowledge of Sellers, each of the Employee Benefit
Plans and all related trusts, insurance contracts and funds have been funded and
have been, in all material respects, maintained and administered in compliance
with their terms and in material compliance with the applicable provisions of
ERISA, the Code, and any other Applicable Law. With respect to each Employee
Benefit Plan, all required payments, premiums, contributions, distributions, or
reimbursements for all periods ending prior to or as of the Closing Date have
been made or properly accrued.

 

(d)                 With respect to each Employee Benefit Plan, the Company has
provided Purchaser with true, complete and correct copies of (to the extent
applicable): (i) all documents pursuant to which the Employee Benefit Plan is
maintained, funded and administered (including the plan and trust documents, any
amendments thereto, the summary plan descriptions (including any summary of
material modification), and any insurance contracts or service provider
agreements); (ii) the five most recent annual reports (Form 5500 series) filed
with the Internal Revenue Service, with applicable attachments, to the extent
any were required to be filed; and (iii) the most recent determination letter,
or opinion letter, as applicable, received from the Internal Revenue Service.

 

(e)                 No Employee Benefit Plan promises or provides retiree
medical or life insurance benefits to any Person, except for continuation
coverage required by Section 4980B of the Code or Part 6 of Title I of ERISA (or
similar state law).

 

(f)                  There are no Proceedings relating to the Employee Benefit
Plans pending or, to Sellers’ Knowledge, threatened, other than routine
administrative matters for benefits payable in the normal operation of the
Employee Plans.

 

(g)                 To the Knowledge of Sellers, no provision of any Employee
Benefit Plan could reasonably be expected to result in any material limitation
on Purchaser or any of its Affiliates from amending or terminating any Employee
Benefit Plan and no Employee Benefit Plan provides post-termination or retiree
welfare benefits to any individual for any reason.

 

(h)                 Each Employee Benefit Plan subject to Section 409A of the
Code has been operated in material good faith compliance with such section and
all applicable regulatory guidance promulgated thereunder (including notices,
rulings and proposed and final regulations).

 

3.21           Inventory. All inventory of the Company consists of a quality and
quantity usable and, with respect to finished goods, salable in the Ordinary
Course of Business, except for items of below-standard quality, all of which
have been or will be, as applicable, written off or written down to net
realizable value in the Unaudited Interim Financial Statements or on the
accounting records of the Company as of the Closing Date, as the case may be.
All inventories not written off have been priced at the lower of cost or market
basis. Except as set forth in Section 3.21 of the Disclosure Schedule, all such
inventory is owned by the Company free and clear of all Encumbrances, and no
inventory is held on a consignment basis. The quantities of each item of
inventory (whether raw materials, work-in-process or finished goods) are not
excessive, but are reasonable in the present circumstances and Ordinary Course
of Business of the Company.

 

24

 

 

3.22           Insurance. Section 3.22 of the Disclosure Schedule sets forth an
accurate and complete list of the insurance policies maintained by or for the
benefit of the Company. Such policies are in full force and effect and have been
underwritten by unaffiliated insurers and, to the Knowledge of Sellers, will be
in full force and effect immediately after the Closing. The Company has paid all
premiums on such policies due and payable prior to the date of this Agreement.
To the Knowledge of Sellers, the Company has not done anything by way of action
or inaction that invalidates any of such policies in whole or in part. No Seller
nor any of its respective Affiliates (including the Company) has received any
written notice of cancellation, termination, premium increase, or alteration of
coverage under, any of such insurance policies. The insurance policies do not
provide for any retrospective premium adjustment or other experience-based
liability on the part of the Company.

 

3.23           Customers. Section 3.23 of the Disclosure Schedule sets forth an
accurate and complete list based on revenues generated during the year ended
December 31, 2013, of the top 10 customers of the Company. The Company has not
received written notice from any customer identified in Section 3.23 of the
Disclosure Schedule indicating that such customer intends to cease dealing with
the Company. To the Knowledge of Sellers, no such customer has indicated within
the past year that it will stop or materially decrease the rate of buying
materials, products or services from the Company or materially modify such
customer’s business practices after the Closing Date. To the Knowledge of
Sellers, the Company has good relations with its customers.

 

3.24           Vendors and Suppliers. Section ‎3.24 of the Disclosure Schedule
is an accurate and complete list of the top 10 vendors and/or suppliers of the
Company based on expenses or expenditures paid to such entities during the year
ended December 31, 2013. The Company has not received written notice indicating
that any supplier or vendor identified in Section ‎3.24 of the Disclosure
Schedule intends to cease dealing with or materially and adversely change the
terms upon which it provides goods or services to the Company. To the Knowledge
of Sellers, no such supplier has indicated within the past year that it will
stop or materially decrease the rate of supplying materials, products or
services, as applicable, to the Company, or materially modify such supplier’s or
vendor’s business practices after the Closing Date.

 

3.25           Bank Accounts. Section 3.25 of the Disclosure Schedule sets forth
an accurate and complete list of the names of all financial institutions at
which a checking account, deposit account, securities account, safety deposit
box or other deposit or safekeeping arrangement is maintained by or on behalf of
the Company, and sets forth the numbers or other identification of all such
accounts and arrangements and the names of all persons authorized to draw
against any funds therein.

 

25

 

 

3.26           Brokers. Neither Sellers nor the Company have retained any broker
or finder in connection with any of the Contemplated Transactions other than
Green Manning & Bunch (“GMB”) and neither Sellers nor the Company have incurred
or agreed to pay, other than GMB, or taken any other action that would entitle
any Person to receive, any brokerage fee, finder’s fee or other similar fee or
commission with respect to any of the Contemplated Transactions. Sellers,
without adjustment to the Purchase Price and in accordance with Section 11.1,
are solely responsible to pay the brokerage fee of GMB, and Purchaser has no
liability or obligation to pay any fees or commissions to GMB with respect to
the Contemplated Transactions.

 

3.27           Product Standards. All design, development, production,
installation and servicing of Company products are in material compliance with
customer specifications. The Company has a Class 100,000 clean room and is ISO
9001:2008 and ISO 13485 certified.

 

3.28           No Knowledge of Breaches. No Seller has any Knowledge of any
breach of any representation, warranty or covenant contained in this Agreement.

 

3.29           No Indebtedness. At Closing, other than the Closing Indebtedness
Payoff Amount and as disclosed in Section 3.29 of the Disclosure Schedule, the
Company will not have any Indebtedness, contingent or otherwise, or assumed,
guaranteed, or endorsed the Indebtedness of any other Person, or canceled any
Indebtedness owed to it or released any claim possessed by it, other than trade
payables incurred in the Ordinary Course of Business. Other than as disclosed in
Section 3.29 of the Disclosure Schedule, as of the date hereof there is no
Indebtedness (i) which relates to any breach of contract, breach of warranty,
tort, infringement or violation of Applicable Law) and (ii) which, individually
or in the aggregate, greater than $25,000. All Indebtedness of the Company shall
at Closing be paid and forever satisfied with respect to any and all creditors
of the Company, contingent or otherwise, by the Company prior to Closing by the
Sellers or pursuant to the Closing Indebtedness Payoff Amount at the Closing. No
Indebtedness of any Seller shall impair the unencumbered and irrevocable
transfer of all right, title and interest in the Interests to the Purchaser at
Closing.

 

3.30           Product Liability. To the Knowledge of Sellers, no product
manufactured, sold, leased or delivered by the Company is subject to any
material guaranty, warranty or other indemnity beyond the applicable standard
terms and conditions of sale or lease. The Sellers have furnished Purchaser with
copies of the standard terms and conditions of sale for the Company. To the
Knowledge of the Sellers, the Company has no liability for any design defect,
product failure or other material product liability claim arising from or
related to any product of the Company.

 

3.31           Disclosure. No representation or warranty by the Company or any
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 Seller pursuant to this
Agreement, contains or will contain any untrue statement of a material fact or,
to the Knowledge of the 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 Purchaser with access to complete and accurate
copies of all documents listed or described in the Disclosure Schedule.

 

26

 

 

Section  4.                 Representations and Warranties of Purchaser.

 

Purchaser represents and warrants as of the date hereof and as of the Closing
Date as follows:

 

4.1              Good Standing and Corporate Power. Purchaser is validly
existing and in good standing as a corporation under the laws of the State of
Utah and has all necessary corporate power to execute and deliver this Agreement
and to perform its obligations under the Transaction Agreements to which it is a
party and to consummate the Contemplated Transactions.

 

4.2              Access. Purchaser and its Representatives have been given full
access to the assets, books, records, contracts and management personnel of the
Company, and have been given the opportunity to meet with officers and other
representatives of the Company for the purpose of investigating and obtaining
information regarding the condition (financial or otherwise), operations,
business, rights, properties, assets, liabilities and legal affairs of the
Company.

 

4.3              Authorization. The execution, delivery and performance of this
Agreement on behalf of Purchaser have been duly authorized by all necessary
action on the part of Purchaser and its board of directors, and no other action
on the part of Purchaser is necessary to authorize the execution, delivery and
performance of the Transaction Agreements to which it is a party and the
consummation of the Contemplated Transactions. This Agreement has been duly and
validly executed and delivered by Purchaser and constitutes, and upon the
execution and delivery by Purchaser of such Transaction Agreements, such
Transaction Agreements shall constitute, legal, valid and binding obligations of
Purchaser enforceable against it in accordance with their terms, except as
enforceability may be limited by bankruptcy, insolvency, reorganizations,
moratorium or other laws affecting creditors’ rights generally, and general
equitable principles.

 

4.4              No Conflicts. The execution and delivery by Purchaser of the
Transaction Agreements, the performance of its obligations under the Transaction
Agreements and the consummation of the Contemplated Transactions do not and
shall not:

 

(a)                 Conflict with or result in a violation or breach of any of
the terms, conditions or provisions of Purchaser’s Charter Documents;

 

(b)                 Conflict with or result in a violation or breach of any term
or provision of any Applicable Law or Order applicable to Purchaser; or

 

(c)                 Conflict with or result in a violation or breach of, or
constitute a default under, or require Purchaser to obtain any consent or
approval under the terms of, any material contract or license to which Purchaser
is a party or by which any of Purchaser’s assets or properties is bound.

 

4.5              Governmental Approvals and Filings. No consent, approval or
action of, filing with or notice to any Governmental Body on the part of
Purchaser is required in connection with the execution, delivery and performance
of the Transaction Agreements or the consummation of the Contemplated
Transactions.

 

27

 

 

4.6              Brokers. Purchaser has not retained any Person to act as a
broker or finder or agreed or become obligated to pay, or has taken any action
that might result in any Person claiming to be entitled to receive, any
brokerage commission, finder’s fee or similar commission or fee in connection
with any of the Contemplated Transactions.

 

4.7              Acquisition of Interests. Purchaser is acquiring the Interests
for its own account and for investment, and not with a view to, or for sale in
connection with, any distribution of any of such Interests.

 

4.8              Financial Capacity. Purchaser has adequate uncommitted liquid
reserves and/or a commitment letter from a qualified financial institution
necessary to make the payments required by Section 2.4 and otherwise to
consummate the Contemplated Transactions.

 

4.9              Non-Reliance of Purchaser.

 

(a)                 PURCHASER HEREBY ACKNOWLEDGES THAT SELLERS ARE NOT MAKING
ANY REPRESENTATION OR WARRANTY OTHER THAN THE REPRESENTATIONS AND WARRANTIES SET
FORTH IN THIS AGREEMENT. WITHOUT LIMITING THE GENERALITY OF THE FOREGOING,
PURCHASER HEREBY ACKNOWLEDGES THAT, EXCEPT TO THE EXTENT EXPRESSLY SET FORTH IN
THIS AGREEMENT, SELLERS ARE NOT MAKING ANY REPRESENTATION OR WARRANTY WITH
RESPECT TO (A) ANY FINANCIAL PROJECTION OR FORECAST RELATING TO THE COMPANY, (B)
MERCHANTABILITY, (C) FITNESS FOR ANY PARTICULAR PURPOSE, (D) THE VIABILITY OR
LIKELIHOOD OF SUCCESS OF THE BUSINESS OF THE COMPANY, OR (E) ANY OTHER
INFORMATION MADE AVAILABLE, WHETHER PURSUANT TO ANY PRESENTATION MADE BY OR ON
BEHALF OF THE COMPANY, PURSUANT TO ANY ELECTRONIC OR PHYSICAL DELIVERY OF
DOCUMENTATION OR OTHER INFORMATION, OR OTHERWISE, TO PURCHASER, ITS AFFILIATES
AND THEIR RESPECTIVE REPRESENTATIVES, AND PURCHASER EXPRESSLY DISCLAIMS ANY SUCH
REPRESENTATION OR WARRANTY.

 

(b)                 In connection with Purchaser’s investigation of Sellers, the
Company and the business conducted by the Company, Purchaser has received from
or on behalf of Sellers and/or the Company certain estimates, forecasts, plans
and financial projections. Purchaser acknowledges that there are uncertainties
inherent in attempting to make such estimates, forecasts, plans and financial
projections, that Purchaser is familiar with such uncertainties, that Purchaser
is taking full responsibility for making its own evaluation of the adequacy and
accuracy of all estimates, forecasts, plans and financial projections so
furnished to it (including the reasonableness of the assumptions underlying such
estimates, forecasts, plans, and financial projections), and that Purchaser
shall have no claim against Sellers or the Company or any of their
Representatives or Affiliates with respect thereto. Purchaser acknowledges and
agrees that Sellers makes no representation or warranty with respect to such
estimates, forecasts, plans and financial projections (including any such
underlying assumptions).

  

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Section  5.                  Covenants of Both Parties

 

5.1              Conduct of Business Prior to the Closing. From the date hereof
until the Closing, except as otherwise provided in this Agreement or consented
to in writing by Purchaser, each Seller shall, and shall cause the Company to,
(x) conduct the business of the Company in the Ordinary Course of Business; and
(y) use reasonable best efforts to maintain and preserve intact the current
organization, business and franchise of the Company and to preserve the rights,
franchises, goodwill and relationships of its employees, customers, lenders,
suppliers, regulators and others having business relationships with the Company.
Without limiting the foregoing, from the date hereof until the Closing Date,
each Seller shall use reasonable efforts to:

 

(a)                 cause the Company to preserve and maintain all of its
Permits;

 

(b)                 cause the Company to pay its debts, Taxes and other
obligations when due;

 

(c)                 cause the Company to maintain the properties and assets
owned, operated or used by the Company in the same condition as they were on the
date of this Agreement, subject to reasonable wear and tear;

 

(d)                 cause the Company to continue in full force and effect
without modification all insurance policies, except as required by Applicable
Law;

 

(e)                 cause the Company to perform all of its obligations under
all contracts relating to or affecting its properties, assets or business;

 

(f)                  cause the Company to maintain its books and records in
accordance with past practice;

  

(g)                 cause the Company to comply in all material respects with
all Applicable Laws; and

 

(h)                 cause the Company not to take or permit any action that
would cause any of the changes, events or conditions described in Section 3.9 to
occur.

 

5.2              Notices of Certain Events. Each of Sellers and Purchaser shall
promptly notify the other party of:

 

(a)                any fact, condition, change or event that (i) has had, or
reasonably be expected to have, individually or in the aggregate, a Material
Adverse Effect, (ii) causes or would be reasonably expected to cause any
representation or warranty made by such party in this Agreement not to be true
and correct as of the Closing Date to the extent that the failure of such
representation and warranty to be true and correct or (iii) would result in the
failure of any condition set forth in Section 7 or Section 8, as applicable;

 

(b)               any notice or other communication from any Person alleging
that the consent of such Person is or may be required in connection with the
transactions contemplated by this Agreement;

 

29

 

 

(c)                any notice or other communication from any Governmental Body
in connection with the transactions contemplated by this Agreement; and

 

(d)               with respect to Sellers, any actions, suits, claims,
investigations or proceedings commenced or, to the Knowledge of Sellers,
threatened in writing to be commenced against the Company or that relate to the
consummation of the transactions contemplated by this Agreement;

 

provided, however, that Purchaser’s receipt of information pursuant to this
Section 5.2 shall not, unless the Purchaser completes the Contemplated
Transactions notwithstanding such knowledge and the Purchaser delivers to the
Sellers written waiver thereof identifying with specificity such knowledge and
information, operate as a waiver or otherwise affect any representation,
warranty or agreement given or made by any Seller in this Agreement and shall
not be deemed to amend or supplement the Disclosure Schedules.

 

5.3              Confidentiality.

 

(a)                From the date hereof and after the Closing Date, each of the
parties shall hold, and shall use its best efforts to cause its officers,
directors, employees, accountants, counsel, consultants, advisors and agents, as
applicable, to hold, in confidence, unless compelled to disclose by judicial or
administrative process or by other requirements of Applicable Law, all
Confidential Information concerning each of the parties, and,

 

(b)               From the date hereof until the Closing Date, Purchaser shall
hold, and shall use its best efforts to cause its officers, directors,
employees, accountants, counsel, consultants, advisors and agents, as
applicable, to hold, in confidence, unless compelled to disclose by judicial or
administrative process or by other requirements of Applicable Law, all
Confidential Information of the Company, except to the extent that such
Confidential Information can be shown to have been (i) previously known on a
non-confidential basis by Purchaser; (ii) in the public domain through no fault
of either Purchaser or any other Person other than Sellers or the Company;
(iii) independently developed by Purchaser without reliance on such Confidential
Information; or (iv) received from a third party without breach of any duty of
confidentiality by such third party; provided, that Purchaser may disclose such
Confidential Information to its officers, directors, employees, accountants,
counsel, consultants, advisors and agents, as applicable, in connection with the
transactions contemplated by this Agreement so long as such Persons are informed
by Purchaser of the confidential nature of such Confidential Information and are
directed by Purchaser to treat such Confidential Information confidentially.

 

(c)                After the Closing Date, each of the Sellers shall hold in
confidence, unless compelled to disclose by judicial or administrative process
or by other requirements of Applicable Law, all Confidential Information
regarding the Company, except to the extent that such Confidential Information
can be shown to have been (i) previously known on a non-confidential basis by
one or more Sellers; (ii) in the public domain through no fault of Sellers or
any other Person other than Purchaser; (iii) independently developed by one or
more Sellers without reliance on such Confidential Information; or (iv) received
from a third party without breach of any duty of confidentiality by such third
party; provided, that Sellers and the Company may disclose such Confidential
Information to the Company’s officers, managers, employees, accountants,
counsel, consultants, advisors and agents, as applicable, in connection with (i)
the transactions contemplated by this Agreement so long as such Persons are
informed by Sellers or the Company of the confidential nature of such
Confidential Information and are directed by Sellers or the Company to treat
such Confidential Information confidentially.

 

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(d)               In the event any party is required by judicial or
administrative process or by other requirements of Applicable Law to disclose
the Confidential Information, such party shall, before making such disclosure,
give prompt notice thereof to each of the other parties and, to the extent
reasonably practicable, provide such reasonable cooperation and assistance as
each of the other parties may reasonably request (at such party’s expense) to
obtain an appropriate protective order or other appropriate remedy. In the event
that no such protective order or other remedy is obtained, such party shall
furnish only that portion of the Confidential Information which it is advised by
counsel is legally required to be furnished.

 

(e)                The obligation of each party to hold the Confidential
Information shall be satisfied if it exercises the same care with respect to
such Confidential Information as it would take to preserve the confidentiality
of its own similar information, but in no event less than a reasonable degree of
care.

 

(f)                The obligations of each party under this Section 5.3 shall
continue indefinitely following the date of disclosure of the Confidential
Information.

 

5.4              Public Announcements. Neither Purchaser, on the one hand, nor
any of the Sellers, on the other hand, shall issue any press release or make any
other public statement with respect to this Agreement or the transactions
contemplated hereby without the prior written consent of the other parties;
provided, however, that any party may issue a press release or make a public
statement with respect to this Agreement or the transactions contemplated hereby
if required to do so by a Governmental Body, by Applicable Law or any national
securities exchange.

 

5.5              Access to Information. From the date hereof until the Closing,
each Seller shall, and shall cause the Company to, (a) afford Purchaser and its
Representatives reasonable access to and the right to inspect all of the
properties, assets, premises, books and records, contracts and other documents
and data related to the Company; (b) furnish Purchaser and its Representatives
with such financial, operating and other data and information related to the
Company as Purchaser or any of its representatives may reasonably request; and
(c) instruct the Representatives of Seller and the Company to cooperate with
Purchaser in its investigation of the Company. If a Phase I environmental report
commissioned by Purchaser on any property occupied by the Company indicates that
further investigation should be conducted, the parties shall discuss further
investigation, including inspections, with the applicable property owner. Any
collection of soil samples of indoor or outdoor air, surface water, groundwater
or surface or subsurface land on, at, in, under or from the Company and its
facilities pursuant to this Section 5.5 shall be conducted with the property
owner’s consent, which the Sellers shall use their respective best efforts to
obtain, and in such manner as not to interfere unreasonably with the conduct of
the business of the Company. No investigation by Purchaser or other information
received by Purchaser shall operate as a waiver or otherwise affect any
representation, warranty or agreement given or made by each Seller in this
Agreement.

 

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5.6              No Solicitation of Other Bids.

 

(a)                 Prior to April 30, 2014, each Seller shall not, and shall
not authorize or permit any of its Affiliates (including the Company) or any of
its or their representatives to, directly or indirectly, (i) encourage, solicit,
initiate, facilitate or continue inquiries regarding an Acquisition Proposal;
(ii) enter into discussions or negotiations with, or provide any information to,
any Person concerning a possible Acquisition Proposal; or (iii) enter into any
agreements or other instruments (whether or not binding) regarding an
Acquisition Proposal. Each Seller shall immediately cease and cause to be
terminated, and shall cause its Affiliates (including the Company) and all of
its and their Representatives to immediately cease and cause to be terminated,
all existing discussions or negotiations with any Persons conducted heretofore
with respect to, or that could lead to, an Acquisition Proposal. For purposes
hereof, “Acquisition Proposal” shall mean any inquiry, proposal or offer from
any Person (other than Purchaser or any of its Affiliates) concerning (i) a
merger, consolidation, liquidation, recapitalization, share exchange or other
business combination transaction involving the Company; (ii) the issuance or
acquisition of membership interests or other interests of the Company; or (iii)
the sale, lease, exchange or other disposition of any significant portion of the
Company’s properties or assets.

 

(b)                 In addition to the other obligations under this Section 5.6,
each Seller shall promptly (and in any event within one (1) Business Day after
receipt thereof by such Seller or its Representatives) advise Purchaser orally
and in writing of any Acquisition Proposal, any request for information with
respect to any Acquisition Proposal, or any inquiry with respect to or which
could reasonably be expected to result in an Acquisition Proposal, the material
terms and conditions of such request, Acquisition Proposal or inquiry, and the
identity of the Person making the same.

 

(c)                 Each Seller agrees that the rights and remedies for
noncompliance with this Section 5.6 shall include having such provision
specifically enforced by any court having equity jurisdiction, it being
acknowledged and agreed that any such breach or threatened breach shall cause
irreparable injury to Purchaser and that money damages would not provide an
adequate remedy to Purchaser.

 

Section  6.                 Other Agreements.

 

6.1              Further Assurances. At any time and from time to time after the
Closing, Sellers and Purchaser shall, at the request of any of the other
parties, execute, acknowledge and deliver, or cause to be executed, acknowledged
and delivered, such instruments and other documents and perform or cause to be
performed such acts and provide such information, as may reasonably be required
to evidence or effectuate the Contemplated Transactions or for the performance
by Sellers or Purchaser of any of their other respective obligations under this
Agreement.

 

6.2              Employees.

 

(a)                 After the Closing, Purchaser and Sellers shall work together
in good faith to adopt an annual bonus program to reward employees of the
Company based on the achievement of the Company’s annual performance targets.

  

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(b)                 The Sellers shall deliver to Purchaser written resignations,
effective as of the Closing Date, of all limited liability company officers and
the manager of the Company (but not as employees) at least three (3) Business
Days prior to Closing.

 

6.3              Access to Records After Closing. From and after the Closing
Date, Purchaser and Sellers and their respective Representatives shall have
reasonable access to inspect and copy all books and records relating to the
Company that the other parties hereto or their respective Representatives may
retain after the Closing Date. Such access shall be afforded by the party
maintaining such records upon receipt of reasonable advance notice and during
normal business hours. Nothing contained in this Section 6.3 shall require
Purchaser or the Company to retain any books or records longer than such books
or records would otherwise have been retained in the Ordinary Course of Business
but for the Contemplated Transactions; provided, however, that if the party
maintaining such records shall desire to dispose of any of such books and
records, such party shall, prior to such disposition, give the other party
hereto a reasonable opportunity, at such other party’s expense, to segregate and
remove such books and records as such other party may select.

 

6.4              Tax Matters.

 

(a)                 Sellers shall be liable and shall indemnify Purchaser for
all Taxes imposed on or with respect to the Company or the Interests relating to
any Pre-Closing Tax Period, but only to the extent such Taxes exceed the amount,
if any, reserved for Taxes shown on the Closing Balance Sheet and taken into
account for purposes of the Actual Working Capital Amount.

 

(b)                 In the case of any Taxable period that includes (but does
not end on) the Closing Date (a “Straddle Period”), the amount of any Taxes
based upon or measured by income, receipts or payroll for the Pre-Closing Tax
Period will be determined based upon an interim closing of the books as of the
Closing Date; provided, however, that any Closing Date Tax Benefits will be
treated as being allocable to the portion of the Straddle Period ending on the
Closing Date. The amount of Taxes other than Taxes based upon or measured by
income, receipts or payroll for a Straddle Period which relate to the
Pre-Closing Tax Period will be deemed to be the amount of such Tax for the
entire Straddle Period multiplied by a fraction, the numerator of which is the
number of days in the Taxable period ending on the Closing Date and the
denominator of which is the number of days in such Straddle Period.

 

(c)                 Sellers shall, at their own expense, prepare or cause to be
prepared and file or cause to be filed all Pre-Closing Tax Period Income Tax
Returns. Purchaser shall, at its expense, prepare or cause to be prepared all
other Pre-Closing Tax Period Tax Returns of the Company that are filed after the
Closing Date, and all Straddle Period Tax Returns of the Company; provided,
however, that such Pre-Closing Tax Period Tax Returns and Straddle Period Tax
Returns shall be prepared in a manner consistent with the past practices of the
Company unless otherwise required by Applicable Law. At least thirty (30) days
prior to the due date (taking into account any extensions) of such Pre-Closing
Tax Period Tax Returns or Straddle Period Tax Returns prepared by Purchaser,
Purchaser shall deliver such Tax Returns to Sellers for review and comment.
Sellers shall provide comments to such Pre-Closing Tax Period Tax Returns or
Straddle Period Tax Returns, as applicable, within fifteen (15) days of its
receipt of such Pre-Closing Tax Period Tax Returns or Straddle Period Tax
Returns, as applicable, and Purchaser shall incorporate any timely comments
requested by Sellers provided that such comments are consistent with past
practice and Applicable Law.

 

33

 

 

(d)                 Without the prior written consent of Sellers, neither
Purchaser nor the Company shall amend any Tax Return of the Company for a
Pre-Closing Tax Period or Straddle Period, or waive any limitations period with
respect to such Tax returns.

 

(e)                 Any Tax refunds that are received by the Company that are
attributable to a Pre-Closing Tax Period shall be for the account of Sellers,
and the Company shall pay such Tax refund to Sellers as soon as practicable
after actual receipt, but only to the extent that such refund was not taken into
account for purposes of the Actual Working Capital Amount.

 

(f)                  Purchaser shall have the right to control any Tax audits,
Tax disputes or administrative, judicial or other proceedings (“Tax
Controversies”) with respect to the Company; provided, however, that in the case
of any Tax Controversy that relates exclusively to any Taxes that could give
rise to a liability of Sellers under this Agreement, Sellers may participate in
such Tax Controversy at Sellers’ expense, and Purchaser shall not enter into any
agreement that represents a final determination of the matter without Sellers’
consent, which consent shall not unreasonably be withheld. Sellers shall
execute, or cause to be executed, powers of attorney or other documents
reasonably necessary to enable Purchaser to take all actions desired by
Purchaser with respect to Tax Controversies.

 

(g)                 In the event Purchaser, the Company or any Affiliate of
Purchaser or the Company receives any document with respect to the Tax matters
of the Company or the Interests that could affect Sellers, or Sellers or any
Affiliate of Sellers receives any document with respect to the Tax matters of
the Company or the Interests, the party receiving such document shall supply a
copy of such document to the potentially affected party within seven calendar
days of receipt. For this purpose, such Tax documents shall include requests for
information, notices of proposed adjustments, revenue agent’s reports or similar
reports and notices of deficiency. Any information provided or obtained under
this Section 6.4(g) shall be kept confidential, except as may otherwise be
necessary in connection with the filing of a Tax Return, refund claims, Tax
audits, Tax claims or Tax Controversies or as required by Applicable Law.

 

(h)                 Purchaser and Sellers shall cooperate fully, as and to the
extent reasonably requested by the other party, in connection with the filing of
Tax Returns and any audit, litigation or other proceeding with respect to Taxes.
Such cooperation shall include the retention and (upon the other party’s
request) the provision of records and information reasonably relevant to any
such audit, litigation or other proceeding and making employees available on a
mutually convenient basis to provide additional information and explanation of
any material provided hereunder. Sellers and Purchaser agree (i) to retain all
books and records with respect to Tax matters pertinent to the Company relating
to any taxable period beginning before the Closing Date until expiration of the
statute of limitations (and, to the extent notified by Purchaser or Sellers, any
extensions thereof) of the respective taxable periods, and to abide by all
record retention agreements entered into with any taxing authority, and (ii) to
give the other party reasonable written notice prior to transferring, destroying
or discarding any such books and records and, if the other party so requests,
Purchaser or Sellers, as the case may be, shall allow the other party to take
possession of such books and records.

 

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(i)                   Purchaser and Sellers agree, upon request, to use their
best efforts to obtain any certificate or other document from any Governmental
Body or any other Person as may be necessary to mitigate, reduce or eliminate
any Tax that could be imposed (including with respect to the transactions
contemplated hereby).

 

(j)                  All transfer (including real estate transfer), documentary,
sales, use, stamp, registration and other such Taxes and fees (including any
penalties and interest) incurred in connection with the transactions
contemplated by this Agreement will be borne by Purchaser, and the parties will
cooperate to file or cause to be filed all necessary Tax Returns and other
documentation with respect to all such transfer, documentary, sales, use, stamp,
registration and other Taxes and fees if required by Applicable Law.

 

6.5              Nonsolicitation and Noncompetition.

 

(a)                 For a period of five (5) years commencing on the Closing
Date (the “Restricted Period”), each of the Sellers (other than while employed
by the Company pursuant to each Seller’s respective Employment Agreement) shall
not, and shall not permit any of its Affiliates to, directly or indirectly,
(i) engage in or assist others in engaging in the Restricted Business in the
Territory; (ii) have an interest in any Person that engages directly or
indirectly in the Restricted Business in the Territory in any capacity,
including as a partner, shareholder, member, employee, principal, agent, trustee
or consultant; or (iii) intentionally interfere in any material respect with the
business relationships (whether formed prior to or after the date of this
Agreement) between the Company and customers or suppliers of the Company.
Notwithstanding the foregoing, each Seller may own, directly or indirectly,
solely as an investment, securities of any Person traded on any national
securities exchange if such Seller is not a controlling Person of, or a member
of a group which controls, such Person and does not, directly or indirectly, own
five percent (5%) or more of any class of securities of such Person.

 

(b)                 During the Restricted Period, each Seller shall not, and
shall not permit any of its Affiliates to, directly or indirectly, hire or
solicit any employee of the Company or encourage any such employee to leave such
employment or hire any such employee who has left such employment, except
pursuant to a general solicitation which is not directed specifically to any
such employees; provided, that nothing in this Section 6.5 shall prevent any
Seller or any of its Affiliates from hiring (i) any employee whose employment
has been terminated by the Company or Purchaser or (ii) after 365 days from the
date of termination of employment, any employee whose employment has been
terminated by the employee.

 

(c)                 During the Restricted Period, each Seller shall not, and
shall not permit any of its Affiliates to, directly or indirectly, solicit or
entice, or attempt to solicit or entice, any clients or customers of the Company
or potential clients or customers of the Company for purposes of diverting their
business or services from the Company.

 

35

 

 

(d)                 Each Seller acknowledges that a breach or threatened breach
of this Section 6.5 would give rise to irreparable harm to Purchaser, for which
monetary damages would not be an adequate remedy, and hereby agrees that in the
event of a breach or a threatened breach by any Seller of any such obligations,
Purchaser shall, in addition to any and all other rights and remedies that may
be available to it in respect of such breach, be entitled to equitable relief,
including a temporary restraining order, an injunction, specific performance and
any other relief that may be available from a court of competent jurisdiction
(without any requirement to post bond).

 

(e)                 Each Seller acknowledges and expressly agrees that the
restrictions contained in this Section 6.5 are fair, reasonable and necessary to
protect the legitimate interests of Purchaser and constitute significant and
material inducement to Purchaser to enter into this Agreement and consummate the
transactions contemplated by this Agreement. In the event that any covenant
contained in this Section 6.5 should ever be adjudicated to exceed the time,
geographic, product or service, or other limitations permitted by Applicable Law
in any jurisdiction, then any court is expressly empowered to reform such
covenant, and such covenant shall be deemed reformed, in such jurisdiction to
the maximum time, geographic, product or service, or other limitations permitted
by Applicable Law. The covenants contained in this Section 6.5 and each
provision hereof are severable and distinct covenants and provisions. The
invalidity or unenforceability of any such covenant or provision as written
shall not invalidate or render unenforceable the remaining covenants or
provisions hereof, and any such invalidity or unenforceability in any
jurisdiction shall not invalidate or render unenforceable such covenant or
provision in any other jurisdiction.

 

6.6              Directors’ and Officers’ Indemnification and Insurance.

 

(a)                 From and after the Closing Date, Purchaser agrees that it
will (i) except with respect to matters which are subject to indemnification of
Purchaser by Sellers under Article IX hereto, indemnify and hold harmless,
against any costs or expenses (including attorney’s fees), judgments, fines,
losses, claims, damages or liabilities incurred in connection with any claim,
action, suit, proceeding or investigation, whether civil, criminal,
administrative or investigative, and provide advancement of expenses to, all
past and present directors, officers, managers, employees and agents of the
Company and their subsidiaries (in all of their capacities) (A) to the same
extent such persons are indemnified or have the right to advancement of expenses
as of the date of this Agreement by the Company pursuant to the Charter
Documents of the Company in existence on the date hereof and (B) without
limiting the generality of clause (A), to the fullest extent permitted by
Applicable Law, in each case, for acts or omissions at or prior to the Closing
Date (including for acts or omissions occurring in connection with the approval
of this Agreement and the consummation of the Contemplated Transactions),
(ii) include and cause to be maintained in effect in the Charter Documents of
the Company for a period of four (4) years after the Closing Date, the
provisions regarding elimination of liability of directors and managers,
indemnification of officers, directors, managers and employees and advancement
of expenses to officers, directors, managers and employees that are in the
Charter Documents of the Company immediately prior to Closing provided that any
and all such provisions shall not be construed as waivers of indemnification of
Purchaser by Sellers under Article IX hereto; and (iii) cause to be maintained
for a period of four (4) years after the Closing Date directors’ and officers’
liability insurance and fiduciary liability insurance maintained by the
Purchaser (provided that Purchaser (or any successor) may substitute therefor
policies of at least the same coverage and amounts containing terms and
conditions which are, in the aggregate, commercially reasonable) with respect to
claims arising from facts or events that occur on and after the Closing Date
(including for acts or omissions occurring in connection with the approval of
this Agreement and the consummation of the Contemplated Transactions), provided
that any and all such policies shall not be construed as waivers of
indemnification of Purchaser by Sellers under Article IX hereto. Such substitute
policies shall be issued by nationally recognized insurance companies. The
obligations of Purchaser under this Section 6.6 shall not be terminated or
modified in such a manner as to adversely affect any indemnitee, director,
manager, officer or employee to whom this Section 6.6 applies without the
consent of such affected person (it being expressly agreed that the indemnitees,
directors, managers, officers or employees to whom this Section 6.6 applies
shall be third party beneficiaries of this Section 6.6).

 

36

 

 

(b)                 If Purchaser or any of its successors or assigns (i) shall
consolidate with or merge into any other corporation or entity and shall not be
the continuing or surviving company or entity of such consolidation or merger or
(ii) shall transfer all or substantially all of its properties and assets to any
individual, corporation or other entity, then, and in each case, proper
provisions shall be made so that the successors and assigns of Purchaser shall
assume all of the obligations set forth in this Section 6.6.

 

Section  7.                 Conditions to Obligation of Purchaser to Close.

 

The obligation of Purchaser to purchase the Interests and otherwise consummate
the Contemplated Transactions is subject to the satisfaction, as of the Closing
Date, of the following conditions (any of which may be waived by Purchaser in
whole or in part):

 

7.1              Accuracy of Representations and Warranties. Each of the
representations and warranties of Sellers set forth in this Agreement that is
qualified by materiality or as to a Material Adverse Effect shall be true and
correct in all respects, and each of the representations and warranties of
Sellers set forth in this Agreement that is not so qualified shall be true and
correct, in each case, as of the Closing Date as though made on and as of the
Closing Date (except to the extent that such representations and warranties
speak as of another date).

 

7.2              Satisfaction of Pre-Closing Covenants of Sellers. All of the
covenants and obligations that Sellers are required to comply with or to perform
at or prior to the Closing (considered collectively), and each of such covenants
and obligations (considered individually), shall have been duly complied with
and performed in all material respects.

 

7.3              No Change or Injunction. Since the Unaudited Interim Financial
Statements Date, there shall have occurred no change, event, circumstance or
development (including, without limitation, with respect to the Company’s
relationships with its customers or suppliers) that, individually or taken
together with all other changes, events, circumstances or developments, has had,
or could likely be expected in the future to have, a Company Material Adverse
Effect. There shall not be in effect, at the Closing Date, any injunction or
other binding Order of any court or other tribunal having jurisdiction over
Purchaser that prohibits the purchase of the Interests by Purchaser or the
Financing.

 

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7.4              Additional Documents. Sellers shall have delivered, or caused
to be delivered, to Purchaser the following:

 

(a)                 the Escrow Agreement, executed by Sellers;

 

(b)                 the Employment Agreements, executed by each respective
Seller;

 

(c)                 a certificate executed by Sellers certifying that each of
the conditions specified in Sections 7.1, 7.2, and 7.3 has been satisfied;

 

(d)                 evidence reasonably satisfactory to Purchaser that all
Closing Indebtedness has been repaid in full prior to the Closing Date or will
be paid on the Closing Date in accordance with Section 2.4(a);

 

(e)                 evidence reasonably satisfactory to Purchaser that the
Encumbrances set forth on Section 3.12 of the Disclosure Schedules shall have
been released (or committed to be released pursuant to payoff letters reasonably
satisfactory to Purchaser) and completed copies of UCC-3 termination statements
related to such Encumbrances shall have been filed (or committed to be filed
pursuant to payoff letters reasonably satisfactory to Purchaser);

 

(f)                  the resignations referenced in Section 6.2(b);

 

(g)                 a certificate of good standing or existence of the Company
issued as of a date not more than five days prior to the Closing Date by the
Colorado Secretary of State;

 

(h)                 satisfactory completion of the due diligence of the Company;
and

 

(i)                   a completed financial audit for each of fiscal years 2012
and 2013, in accordance with GAAP.

 

Section  8.                 Conditions to Obligation of Sellers to Close.

 

The obligation of Sellers to cause the Interests to be sold to Purchaser and
otherwise consummate the Contemplated Transactions is subject to the
satisfaction, as of the Closing Date, of the following conditions (any of which
may be waived by Sellers in whole or in part):

 

8.1              Accuracy of Representations and Warranties. Each of the
representations and warranties of Purchaser set forth in this Agreement shall be
true and correct in all material respects, in each case, as of the Closing Date
as though made on and as of the Closing Date (except to the extent that such
representations and warranties speak as of another date).

 

8.2               Satisfaction of Pre-Closing Covenants of Purchaser. All of the
covenants and obligations that Purchaser is required to comply with or to
perform at or prior to the Closing (considered collectively), and each of such
covenants and obligations (considered individually), shall have been duly
complied with and performed in material all respects.

 

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8.3              No Injunction. There shall not be in effect, at the Closing
Date, any injunction or other binding Order of any court or other tribunal
having jurisdiction over the Company or Sellers that prohibits the sale of the
Interests to Purchaser.

 

8.4              Additional Documents. Purchaser shall have delivered, or caused
to be delivered, to Sellers the following:

 

(a)                 the Purchase Price in accordance with Section 2.4;

 

(b)                 the Escrow Agreement, executed by Purchaser and the Escrow
Agent;

 

(c)                 the Employment Agreements, executed by the Company;

 

(d)                 evidence reasonably satisfactory to Sellers that the
requirements of Section 6.6 will be satisfied immediately following the Closing;

 

(e)                 a certificate executed by an authorized officer of Purchaser
certifying that each of the conditions specified in Sections 8.1, 8.2 and 8.3
has been satisfied;

 

(f)                  a certificate of good standing for Purchaser issued as of a
date not more than 5 days prior to the Closing Date by the appropriate
governmental agency (e.g., Secretary of State) of its jurisdiction of
incorporation;

 

(g)                 a certificate of the Secretary of Purchaser certifying, (i)
as complete, accurate and in effect as of the Closing, (A) attached copies of
Purchaser’s Charter Documents, (B) all requisite resolutions or actions of
Purchaser’s board of directors approving the execution and delivery of this
Agreement, the other Transaction Agreements and the consummation of the
Contemplated Transactions, and (ii) as to the incumbency and signatures of the
officers of Purchaser executing this Agreement and any other Transaction
Document or other document, certificate or instrument relating to the
Contemplated Transactions; and

 

(h)                 the Lease Agreements, executed by Purchaser, the Company and
the applicable landlord.

 

Section  9.                 Indemnification and Related Matters.

 

9.1              Indemnification by Sellers.

 

(a)                 After Closing and subject to the limitations set forth in
this Section 9 and elsewhere in this Agreement, Sellers shall indemnify and hold
harmless from any Damages that Purchaser actually incurs as a direct result of
(i) any breach by Sellers of any representation or warranty of Sellers set forth
in Section 3; (ii) any breach of any covenant of Sellers set forth in Section 5;
or(iii) the Kodak Case.Any and all such indemnification by each Seller shall be
proportionate with respect to each such Seller by reference to the percentage of
Membership Interests as set forth on Schedule A attached hereto.

 

39

 

 

(b)                 Subject to Section 9.1(c), Sellers shall not be required to
make any indemnification payment pursuant to Section 9.1(a), until such time as
the total amount of all Damages for which indemnification is required that have
been suffered or incurred by Purchaser exceed $50,000 (the “Indemnification
Deductible”). If the total amount of such Damages exceeds the Indemnification
Deductible, Purchaser shall be entitled to be indemnified against and
compensated and reimbursed for all Damages for which indemnification is required
that are actually incurred (including those comprising the Indemnification
Deductible). Subject to Section 9.1(c), the aggregate liability of Sellers under
this Agreement shall not exceed twenty percent (20%) of the Purchase Price (the
“Indemnification Cap”).

 

(c)                 The Indemnification Cap set forth in Section 9.1(b) shall
not apply to:

 

(i)                   any breach of the representations and warranties set forth
in Section 3.1 (Good Standing and Limited Liability Company Power of the
Company), Section 3.2 (Capitalization; Title to Interests), Section 3.4
(Enforceability), Section 3.11 (Intellectual Property), Section 3.17
(Environmental Laws), Section 3.18 (Taxes and Tax Returns) and Section 3.26
(Brokers);

 

(ii)                 any claim resulting from third-party litigation where the
underlying claim arose prior to the Closing Date;

 

(iii)                any claim for or based on intentional fraud of Sellers; and

 

(iv)               any and all Proceedings pending, or to the Knowledge of
Sellers, currently threatened, orally or in writing, against any Seller or the
Company as of the date hereof, including, without limitation, that certain
Chapter 11 Case No. 12-10202 (ALG) case pending in the United States Bankruptcy
Court Southern District of New York, captioned In re: EASTMAN KODAK COMPANY, et
al., Debtors, THE KODAK GUC TRUST, by and through Alan D. Halperin, as Trustee,
Plaintiff, vs. ADVANCE TOOLING CONCEPTS, LLC, Defendant (the “Kodak Case”);

 

provided, however, notwithstanding the foregoing, Sellers’ liability for any of
the matters identified in clause (i) through (iii) above shall not exceed the
proceeds actually received by Sellers in connection with the Contemplated
Transactions. If Sellers’ indemnification obligation under Section 9.1 arises in
respect of any indemnifiable event (i) for which Purchaser receives
indemnification from Sellers, and (ii) may reasonably result in any Tax benefit
to Purchaser or its Affiliates that would not, but for such indemnifiable event,
be available, such indemnification obligation of Sellers shall be reduced by an
amount equal to the Tax savings which may be reasonably produced by such Tax
benefit.

 

9.2              Indemnification by Purchaser. After Closing and subject to the
limitations set forth in this Section 9 and elsewhere in this Agreement,
Purchaser shall indemnify Sellers against any Damages that Sellers actually
incurs as a direct result of (a) any breach by Purchaser of any representation
or warranty of Purchaser set forth in Section 4; or (b) any breach of any
covenant of Purchaser set forth in Section 5. Purchaser shall also pay to
Sellers any and all proceeds received by the Company (net of any and all
applicable Taxes and all third party fees, costs, expenses and disbursements
incurred by the Company) in respect of claims against the Kodak GUC Trust as the
bankruptcy estate of Eastman Kodak Company.

 

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9.3              Expiration of Representations, Warranties and Covenants.

 

(a)                 Except as set forth in Sections 9.3(b) and 9.3(c), all of
the representations and warranties of Sellers and Purchaser set forth in this
Agreement shall terminate and expire, and shall cease to be of any force or
effect, at 10:00 a.m. (Colorado time) upon the last day of the Claim Period, and
all Liability of Sellers and Purchaser with respect to such representations and
warranties shall thereupon be extinguished.

 

(b)                 Except as set forth in Section 9.3(c), the representations
and warranties (i) set forth in Section 3.11 (Intellectual Property) shall
remain in full force and effect until the date that is the two year anniversary
of the Closing Date, (ii) set forth in Section 3.17 (Environmental Laws),Section
3.18 (Taxes and Tax Returns), and Section 3.30 (Product Liability) shall remain
in full force and effect and survive until 60 days after the expiration of the
relevant statute of limitations, and (iii) set forth in Section 3.1 (Good
Standing and Limited Liability Company Power of the Company), Section 3.2
(Capitalization; Title to Interests), Section 3.4 (Enforceability), Section 3.26
(Brokers), Section 4.1 (Good Standing and Corporate Power), Section 4.3
(Authorization), and Section 4.6 (Brokers) shall survive indefinitely following
the Closing.

 

(c)                 Notwithstanding anything in this Section 9.3 to the
contrary, if, prior to the relevant expiration date, a party hereto shall have
duly delivered a Claim Notice in conformity with all of the applicable
procedures set forth in the Escrow Agreement and in Section 9.6, then the
specific indemnification claim set forth in such Claim Notice shall survive the
otherwise applicable expiration date and shall not be extinguished thereby until
resolution of the matter in accordance with this Agreement and the Escrow
Agreement.

 

9.4              Order of Claims. Purchaser hereby acknowledges that prior to
asserting any claim for indemnification against Sellers, all indemnification
claims and any indemnification payments to Purchaser resulting therefrom under
this Agreement shall be made exclusively out of the Escrow Fund. Purchaser
hereby further acknowledges that unless and until there remains no amount on
deposit in the Escrow Fund, whether as a result of indemnification claims or
release of funds pursuant to the terms of the Escrow Agreement, Purchaser’s sole
and exclusive remedy for indemnification claims hereunder or for any claims
relating to the Contemplated Transactions shall be a claim against the Escrow
Fund, pursuant to the provisions set forth in this Section 9.

 

9.5              Maintenance and Release of Escrow.

 

(a)                 The Escrow Shares will be issued by the Purchaser pursuant
to Section 4(2) of the Securities Act of 1933, as amended (the “Securities
Act”), and shall be certificated in the name of “Wuersch & Gering LLP as Escrow
Agent.” All of the Escrow Shares shall be duly authorized, validly issued, fully
paid and non-assessable as and when issued by the Purchaser.

 

(b)                 All of the Escrow Shares shall be “restricted securities”
when issued by the Purchaser, as such term is defined under Rule 144(a)(3), and
all Escrow Shares shall be eligible for resale by the Sellers under Rule
144(d)(iii) as and when released from the escrow pursuant to the exemptions from
registration under Rule 144 of the Securities Act available to the extent the
Sellers comply with their requisite conditions as sellers of restricted
securities in order to qualify for such resale under Rule 144.

 

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(c)                 Subject to the following provisions of this Section 9.5, the
Escrow Fund shall be released by Escrow Agent to Sellers at 10:00 a.m. (New York
time) on the one (1) year anniversary of the Closing Date (the “Escrow Release
Date”).

 

(d)                 The Escrow Shares will be replaced with cash representing
ten percent (10%) of the Purchase Price if the average VWAP of the Common Stock
for the twenty (20) Trading Day period preceding the last Trading Day in any
calendar month prior to the Escrow Release Date is less than Five Dollars
($5.00) per share of Common Stock.

 

(e)                 The Escrow Shares will be replaced with cash representing
ten percent (10%) of the Purchase Price not less than five (5) Business Days
prior to the Escrow Release Date, provided, however, if a Claim Notice has been
duly delivered prior to the Escrow Release Date by Purchaser to Sellers and the
Escrow Agent in conformity with all of the applicable procedures set forth in
this Agreement and the Escrow Agreement, then the Escrow Fund may remain in the
form of Escrow Shares until the definitive determination and resolution of the
claimed Damages relating to such Claim Notice.

 

(f)                  After definitive determination and resolution of the
Damages relating to such Claim Notice, the Escrow Shares shall within three (3)
Business Days thereafter be replaced by cash in amount equal to ten percent
(10%) of the Purchase Price, less the amount of such Damages, and thereafter
released. 

 

(g)                 If the average VWAP of the Common Stock for the twenty (20)
Trading Day period preceding the last Trading Day of each calendar month during
the period in which such Claim Notice is subject to resolution is less than Five
Dollars ($5.00) per share of Common Stock, then the Escrow Shares will be
replaced with cash representing ten percent (10%) of the Purchase Price and,
such amount, after definitive determination and resolution of the Damages
relating to such Claim Notice, less the amount of such Damages, shall be
released.

 

(h)                 If the value of the Escrow Shares, as determined by
reference to the average VWAP of the Common Stock for the twenty (20) Trading
Day period preceding the last Trading Day of each calendar quarter prior to the
Escrow Release Date, is less than one hundred twenty five percent (125%) of such
amount which is equal to ten percent (10%) of the Purchase Price, then the
Purchaser shall, within the first five (5) business days after each such
calendar quarter, deposit into escrow additional Escrow Shares such that the
value of all Escrow Shares held in escrow shall equal one hundred twenty five
percent (125%) of such amount which is ten percent (10%) of the Purchase Price,
as determined by reference to the average VWAP of the Common Stock for the
twenty (20) Trading Day period preceding the last Trading Day of the immediately
preceding calendar quarter.

 

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(i)                   At the termination of the escrow, Purchaser shall pay to
Sellers the amount of cash required to settle the escrow in accordance with the
foregoing provisions of this Section 9.5, and upon such payment all Escrow
Shares will be released to Purchaser. If the escrow balance is not fully and
timely paid to Sellers in cash in accordance with the foregoing provisions of
this Section 9.5, Escrow Agent will deliver such number of Escrow Shares to the
Sellers (or such broker or agent of Sellers as specified in writing to the
Escrow Agent) together with duly executed medallion guaranteed stock powers,
sufficient to pay any such deficiency in respect of the escrow to Sellers, as
determined by reference to the average VWAP of the Common Stock for the twenty
(20) Trading Day period preceding the last Trading Day of the immediately
preceding calendar month.

 

(j)                  The unpaid balance of any remaining escrow deficiency,
other than such deficiency as to which a Claim Notice has been duly delivered to
Sellers prior to the Escrow Release Date and as to which the matters specified
in such Claim Notice remain unresolved, shall accrue interest at the rate of
twenty percent (20%) per annum from the Escrow Release Date until paid, and
Sellers shall be entitled to demand immediate payment and to recover all
collection costs, including reasonable attorneys’ fees.

 

9.6              Indemnification Claims. If either party hereto (the “Claimant”)
wishes to assert an indemnification claim against the other party hereto, the
Claimant shall deliver to the other party a written notice (a “Claim Notice”)
setting forth:

 

(a)                 the specific representation and warranty or covenant alleged
to have been breached by such other party;

 

(b)                 a detailed description of the facts and circumstances giving
rise to the alleged breach of such representation and warranty or covenant; and

 

(c)                 a detailed description of, and a reasonable estimate of the
total amount of, the Damages actually incurred or expected to be incurred by the
Claimant as a direct result of such alleged breach (such amount, the “Claimed
Amount”).

 

A copy of any Claim Notice from Purchaser as Claimant shall be delivered by
Purchaser to the Escrow Agent contemporaneously with the delivery of such Claim
Notice to Sellers.

 

9.7              Indemnification Claims from Escrow Fund. An indemnification
claim to recover Damages from the Escrow Fund shall be subject to the following
terms:

 

(a)                 During the 45 day period commencing upon the delivery to
Sellers and the Escrow Agent of a Claim Notice, Sellers shall deliver to
Purchaser and to the Escrow Agent a written response (the “Response Notice”) in
which Sellers: (i) agrees that the full Claimed Amount is owed to Purchaser;
(ii) agrees that part (but not all) of the Claimed Amount (the “Agreed Amount”)
is owed to Purchaser; or (iii) asserts that no part of the Claimed Amount is
owed to Purchaser. Any part of the Claimed Amount that is not agreed by Sellers
to be owing to Purchaser pursuant to the Response Notice shall be referred to as
the “Contested Amount.”

 

(b)                 If Sellers delivers a Response Notice agreeing that the full
Claimed Amount is owed to Purchaser, then the Escrow Agent shall disburse to
Purchaser from the Escrow Fund, cash in an amount equal to the Claimed Amount.

 

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(c)                 If Sellers delivers a Response Notice agreeing that less
than the full Claimed Amount is owed to Purchaser, then the Escrow Agent shall
disburse to Purchaser from the Escrow Fund cash in an amount equal to the Agreed
Amount.

 

(d)                 If Sellers delivers a Response Notice indicating that there
is a Contested Amount, Sellers and Purchaser shall attempt in good faith to
resolve the dispute related to the Contested Amount. If Sellers and Purchaser
resolve such dispute as to all or a portion of the Contested Amount, then
Sellers and Purchaser shall execute a written settlement agreement, and Sellers
and Purchaser shall deliver to the Escrow Agent a joint instruction to disburse
to Purchaser from the Escrow Fund cash in an amount equal to the amount
specified in such settlement agreement.

 

(e)                 If Sellers and Purchaser are unable to resolve any part of
the dispute relating to any Contested Amount during the 45 day period commencing
upon the delivery of the Response Notice, then with respect to the remaining
Contested Amount, either Purchaser or Sellers may submit the unresolved portion
of the claim described in the Claim Notice to binding arbitration by delivering
a written notice of a demand to arbitrate (the “Arbitration Notice”) to the
other party. Within 15 days after delivery of the Arbitration Notice, Sellers
and Purchaser shall attempt to select a mutually acceptable arbitrator to
resolve the dispute. In the event that Sellers and Purchaser cannot agree on a
mutually acceptable arbitrator within 30 days after delivery of the Arbitration
Notice, either party may make application to the U.S. District Court for the
District of Denver, Colorado for the appointment of an arbitrator, who shall be
a member of the Judicial Arbiter Group (“JAG”), or if no member of JAG is
reasonably available, a former judge from a U.S. District Court, a U.S. Court of
Appeals or Supreme Court of the State of Colorado, or the Federal District Court
in and for the State of Colorado. The arbitration hearing will be held in
Denver, Colorado and Sellers and Purchaser hereby consent to such venue. The
arbitration proceeding shall be conducted to expedite resolution and minimize
costs. The arbitrator shall have authority to award only (i) money damages,
(ii) attorneys’ fees, costs and expert witness fees to the prevailing party, and
(iii) sanctions for abuse or frustration of the arbitration process. The
arbitrator’s compensation, and the administrative costs of the arbitration,
shall be borne by the parties in the manner set forth in the arbitration award,
as determined by the arbitrator. The parties agree to use commercially
reasonable efforts to cause the arbitration hearing to be conducted within 75
days after the appointment of the arbitrator. The arbitrator shall issue a final
decision within 15 days after the conclusion of the arbitration hearing. The
final decision of the arbitrator shall relate solely: (i) to whether Purchaser
is entitled to recover the Contested Amount (or a portion thereof), and the
portion of such Contested Amount that Purchaser is entitled to recover; and
(ii) to the determination of the non-prevailing party (including the amount of
fees and expenses to be paid by such party) as provided below. The arbitrator
shall furnish the final decision to Sellers, Purchaser and the Escrow Agent in
writing and the final decision shall constitute a conclusive determination of
the issue(s) in question, binding upon Sellers and Purchaser and not to be
contested by any of them. In the final decision, the arbitrator shall determine
whether Purchaser or Sellers are the non-prevailing party in the arbitration.
The non-prevailing party shall pay the reasonable expenses (including attorneys’
fees) of the prevailing party, and the fees and expenses associated with the
arbitration (including the arbitrator’s fees and expenses). Purchaser and
Sellers shall deliver to the Escrow Agent, within three (3) Business Days
following the receipt of the final decision, a copy of the final decision and
the Escrow Agent shall disburse to Purchaser from the Escrow Fund cash in an
amount equal to the amount specified in such final decision, if any. Judgment on
any arbitration award may be entered in any court having jurisdiction.

 

44

 

 

9.8              Defense of Third Party Actions. If either party hereto (the
“Indemnitee”) receives notice or otherwise obtains knowledge of any Matter or
any threatened Matter that may give rise to an indemnification claim against the
other party hereto (the “Indemnifying Party”), then the Indemnitee shall
promptly deliver to the Indemnifying Party a written notice describing such
Matter in reasonable detail; provided, however, that for the sole purpose of
determining whether a Matter or threatened Matter may give rise to an
indemnification claim against Sellers within the meaning of this sentence, the
limitations set forth in Section 9.1 shall not be taken into account. The timely
delivery of such written notice by the Indemnitee to the Indemnifying Party
shall be a condition precedent to any liability on the part of the Indemnifying
Party under this Section 9 with respect to such Matter. The Indemnifying Party
shall have the right, at its option, to assume the defense of any such Matter
with its own counsel. If the Indemnifying Party elects to assume the defense of
any such Matter, then:

 

(a)                 notwithstanding anything to the contrary contained in this
Agreement, the Indemnifying Party shall not be required to pay or otherwise
indemnify the Indemnitee against any attorneys’ fees or other expenses incurred
on behalf of the Indemnitee in connection with such Matter following the
Indemnifying Party’s election to assume the defense of such Matter;

 

(b)                 the Indemnitee shall make available to the Indemnifying
Party all books, records and other documents and materials that are under the
direct or indirect control of the Indemnitee or any of the Indemnitee’s
Representatives and that the Indemnifying Party considers necessary or desirable
for the defense of such Matter;

 

(c)                 the Indemnitee shall execute such documents and take such
other actions as the Indemnifying Party may reasonably request for the purpose
of facilitating the defense of, or any settlement, compromise or adjustment
relating to, such Matter;

 

(d)                 the Indemnitee shall otherwise fully cooperate as reasonably
requested by the Indemnifying Party in the defense of such Matter;

 

(e)                 the Indemnitee shall not admit any Liability with respect to
such Matter; and

 

(f)                  the Indemnifying Party shall have the exclusive right to
settle, adjust or compromise such Matter, on such terms as it may deem
appropriate, without the consent or approval of the Indemnitee or any other
Person.

 

If the Indemnifying Party elects not to assume the defense of such Matter, then
the Indemnitee shall proceed diligently to defend such Matter with the
assistance of counsel satisfactory to the Indemnifying Party; provided, however,
that the Indemnitee shall not settle, adjust or compromise such Matter, or admit
any Liability with respect to such Matter, without the prior written consent of
the Indemnifying Party (which consents shall not be unreasonably withheld).

 

45

 

 

9.9               Subrogation. To the extent that either party hereto (the
“Indemnitor”) makes or is required to make any indemnification payment to the
other party hereto (the “Indemnified Party”), the Indemnitor shall be entitled
to exercise, and shall be subrogated to, any rights and remedies (including
rights of indemnity, rights of contribution and other rights of recovery) that
the Indemnified Party or any of the Indemnified Party’s Representatives may have
against any other Person with respect to any Damages, circumstances or Matter to
which such indemnification payment is directly or indirectly related. The
Indemnified Party shall permit the Indemnitor to use the name of the Indemnified
Party and the names of the Indemnified Party’s Representatives in any
transaction or in any Proceeding involving any of such rights or remedies; and
the Indemnified Party shall take such actions as the Indemnitor may reasonably
request for the purpose of enabling the Indemnitor to perfect or exercise the
Indemnitor’s right of subrogation hereunder.

 

9.10           Exclusivity. The right of Sellers and Purchaser to assert
indemnification claims and receive indemnification payments pursuant to this
Section 9 shall be the sole and exclusive right and remedy exercisable by such
party with respect to any breach by the other party hereto of any covenant,
representation or warranty or otherwise under this Agreement or relating to the
Contemplated Transactions, except in the case of fraud; and Sellers and
Purchaser hereby waive and release any and all tort claims and causes of action
that may be based upon, arise out of or relate to this Agreement or the
Contemplated Transactions, or the negotiation, execution or performance of this
Agreement (including any tort claim or cause of action based upon, arising out
of or related to any representation or warranty made in or in connection with
this Agreement or as an inducement to enter into this Agreement).

 

9.11           Characterization of Indemnification Payment. Any payment made
pursuant to or in connection with this Section 9 shall be deemed to be an
adjustment to the Purchase Price to the extent permitted by Applicable Law.

 

9.12           Financing. Notwithstanding anything to the contrary set forth
herein, each Seller (on behalf of itself and any of its Affiliates, directors,
officers, employees, agents and representatives) hereby waives any rights or
claims against any Financing Source in connection with this Agreement, the
Financing, the Financing Agreements or in respect of any other document or
theory of law or equity (whether in tort, contract or otherwise) or in respect
of any oral or written representations made or alleged to be made in connection
herewith or therewith and each Seller (on behalf of itself and any of its
Affiliates, directors, officers, employees, agents and representatives) agrees
not to commence any action or proceeding against any Financing Source in
connection with this Agreement, the Financing, the Financing Agreements or in
respect of any other document or theory of law or equity and agrees to cause any
such action or proceeding asserted by (on behalf of itself and any of its
Affiliates, directors, officers, employees, agents and representatives) in
connection with this Agreement, the Financing, the Financing Agreements or in
respect of any other document or theory of law or equity against any Financing
Source to be dismissed or otherwise terminated. In furtherance and not in
limitation of the foregoing waiver, it is acknowledged and agreed that no
Financing Source shall have any liability for any claims or damages to any
Seller in connection with this Agreement, the Financing, the Financing
Agreements or the transactions contemplated hereby or thereby.

 

46

 

 

Section  10.             Grounds for Termination.

 

10.1          Termination. This Agreement may be terminated at any time prior to
the Closing:

 

(a)                 by written agreements of Purchaser and Sellers;

 

(b)                 by either Purchaser or Sellers if the Closing shall not have
been consummated on or before April 30, 2014;

 

(c)                 by either Purchaser or Sellers if the other party has
breached in any material respect any of its representations, warranties,
covenants or agreements contained in this Agreement, which breach has not been
cured within thirty (30) days following written notice of such breach by the
non-breaching party to the breaching party; provided, that there shall be no
such cure period for any breach of the provisions of Sections 5.2, 5.3 or 5.4;
and

 

(d)                 by either Purchaser or Sellers if there shall be any
Applicable Law or regulation that makes consummation of the transactions
contemplated hereby illegal or otherwise prohibited or if consummation of the
transactions contemplated hereby would violate any nonappealable final order,
decree or judgment of any court or Governmental Body having competent
jurisdiction.

 

10.2          Notice of Termination. The party desiring to terminate this
Agreement pursuant to clauses 10.1(b) through 10.1(d) shall give notice of such
termination to the other party.

 

Section  11.             Miscellaneous Provisions.

 

11.1          Expenses. Other than as specifically provided in this Agreement:
(a) all Transaction Expenses incurred by or on behalf of Purchaser shall be
borne and paid exclusively by Purchaser; and (b) all Transaction Expenses
incurred by or on behalf of the Company or Sellers shall be borne and paid
exclusively by the Company or Sellers at or before the Closing.

 

11.2           Waiver. Each of the parties hereto acknowledge and agree, on its
own behalf and on behalf of its Representatives and Affiliates that the Company
is the client of Bryan Cave LLP (“Bryan Cave”), that an attorney-client
relationship exists between those parties, that Purchaser will not assume,
acquire, or become a party to such relationship or any attorney-client
privilege, and that after the Closing such privilege shall continue for the
exclusive benefit of the Sellers. After the Closing, it is possible that Bryan
Cave will represent one or more Sellers (individually, or collectively, the
“Securityholder Group”) in connection with the Escrow Account and any claims
made thereunder pursuant to this Agreement. Purchaser and the Company hereby
agree that Bryan Cave (or any successor) may represent the Securityholder Group
in the future in connection with administration of the Escrow Account and any
claims that may be made thereunder pursuant to this Agreement. Bryan Cave (or
any successor) may serve as counsel to Securityholder Group in connection with
any litigation, claim, or obligation arising out of or relating to this
Agreement or the Contemplated Transactions and each of the parties hereto hereby
consents thereto and waives any conflict of interest arising therefrom and each
of such parties shall cause any Affiliate thereof to consent to waive any
conflict of interest arising from such representation. Each of the parties
hereto acknowledges that such consent and waiver is voluntary, has been
carefully considered and the parties have consulted with counsel or been advised
they should do so in this connection.

 

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11.3           Disclosure Schedule. Each section of the Disclosure Schedule
qualifies the correspondingly numbered representation and warranty or covenant
and any other representation or warranty, if the disclosure is reasonably
apparent to such other representation or warranty. The Disclosure Schedule is
qualified in its entirety by reference to specific provisions of the Agreement,
and is not intended to constitute, and shall not be construed as constituting,
any representation or warranty or covenant of Sellers, except as and to the
extent expressly provided in the Agreement. Inclusion of information in the
Disclosure Schedule shall not be construed as an admission that such information
is material to Sellers or the Company or their respective assets, liabilities,
financial condition, results, business and/or operations. The fact that any item
of information is contained in the Disclosure Schedule shall not be construed to
mean that such information is required to be disclosed by the Agreement. Such
information shall not be used as a basis for interpreting the term “material,”
“materially” or “materiality” in the Agreement. References to any document in
the Disclosure Schedule do not purport to be complete and are qualified in their
entirety by the document itself. Capitalized terms used but not defined in the
Disclosure Schedule shall have the same meanings given them in this Agreement.

 

11.4           Exclusivity of Agreement. The parties hereto have voluntarily
agreed to define their rights, liabilities, and obligations respecting the
subject matter of this Agreement exclusively in contract pursuant to the express
terms and provisions of the Transaction Agreements; and the parties hereto
expressly disclaim that they are owed any duties or are entitled to any remedies
not expressly set forth in these Transaction Agreements. Furthermore, the
parties each hereby acknowledge that this Agreement embodies the justifiable
expectations of sophisticated parties derived from arm’s-length negotiations;
all parties to this Agreement specifically acknowledge that no party has any
special relationship with another party that would justify any expectation
beyond that of an ordinary acquirer and an ordinary target in an arm’s-length
transaction. The sole and exclusive remedies for any breach of the terms and
provisions of this Agreement (including any representations and warranties set
forth herein) shall be those remedies available at law or in equity for breach
of contract only (as such contractual remedies may be further limited or
excluded pursuant to the express terms of this Agreement).

 

11.5           Inurement. The Agreement inures to the benefit of and is binding
upon the Parties and their respective heirs, executors, administrators,
successors and permitted assigns. Except as provided in Sections 9.12 and 11.7
and this Section 11.5, no provision of this Agreement is intended to confer any
rights, benefits, remedies, obligations or liabilities hereunder upon any Person
other than the parties hereto and their respective successors and permitted
assigns; provided that the Financing Sources shall be intended third parties
beneficiaries of Sections 9.12 and 11.7 and this Section 11.5 and shall be
entitled to enforce such provisions directly (and no amendment or modification
to such provisions in respect to the Financing Sources may be made without the
prior consent of the Financing Sources).

 

11.6           Governing Law. This Agreement shall be construed in accordance
with, and governed in all respects by, the laws of the State of New York
(without giving effect to principles of conflicts of law).

 

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11.7           Venue, Jurisdiction and Forum. Without limiting the generality of
any other provision herein (including Section 9.6), any legal action or other
legal proceeding relating to this Agreement or the enforcement of any provision
of this Agreement may be brought or otherwise commenced in any state or federal
court sitting in Denver, Colorado. Each party to this Agreement:

 

(a)                 expressly and irrevocably consents and submits to the
personal jurisdiction of each state and federal court sitting in Denver,
Colorado (and each appellate court located in the State of Colorado) in
connection with any such legal proceeding;

 

(b)                 agrees that each state and federal sitting in Denver,
Colorado shall be deemed to be a convenient forum; and

 

(c)                 agrees not to assert (by way of motion, as a defense or
otherwise), in any such legal proceeding commenced in any state or federal court
sitting in Denver, Colorado, any claim that such party is not subject personally
to the jurisdiction of such court, that such legal proceeding has been brought
in an inconvenient forum, that the venue of such proceeding is improper or that
this Agreement or the subject matter of this Agreement may not be enforced in or
by such court.

 

Notwithstanding anything in this Agreement to the contrary, each of the parties
hereto hereby agrees that it will not bring or support any action, cause of
action, claim, cross-claim or third-party claim of any kind or description,
whether in law or in equity, whether in contract or in tort or otherwise,
against the Financing Sources in any way relating to this Agreement, the
Financing Agreements, or any of the transactions contemplated hereby or thereby,
including, without limitation, any dispute arising out of or relating in any way
to the Financing or the performance thereof, in any forum other than the Supreme
Court of the State of New York, County of New York, or, if under applicable law
exclusive jurisdiction is vested in the federal courts, the United States
District Court for the Southern District of New York (and the appellate courts
thereof), and that the provisions immediately below relating to the waiver of
jury trial shall apply to any such action, cause of action, claim, cross-claim
or third-party claim.

  

11.8           Time of the Essence. Time is of the essence for this Agreement.

 

11.9           Notices. All notices and other communications under this
Agreement shall be in writing and shall be deemed to have been duly received
(a) if given by facsimile or electronic transmission (including email), when
transmitted and the appropriate facsimile or other electronic transmission
confirmation received if transmitted on a Business Day and during normal
business hours of the recipient, and otherwise on the next Business Day
following transmission, (b) if given by certified or registered mail, return
receipt requested, postage prepaid, three Business Days after being deposited in
the US mails, and (c) if given by courier or other means, when received or
personally delivered, and addressed as follows (or at such other address as the
intended recipient shall have specified in a written notice given to the other
party hereto):

 

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if to Purchaser:

 

ARC Group Worldwide, Inc.
Attn: Drew M. Kelley, Chief Financial Officer
810 Flightline Blvd.
Deland, FL 32724

 

with a copy to:

 

Wuersch & Gering LLP
100 Wall Street, 10th Floor
New York, NY 10005
Attention: Travis L. Gering, Esq.
Fax: 610-819-9104
e-mail: travis.gering@wg-law.com

 

if to Sellers:

 

Nigel Sutton

4834 Malibu Drive

Berthoud, CO 80513

 

Gregory Curtis

10770 King Street

Westminster, CO 80031

 

Frank Ferree

789 Turquoise Trail

Estes Park, CO 80517

 

Dermot Rafferty

23 E. 15th Avenue

Longmont, CO 80504

 

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

 

Christopher Hazlitt, Esq.
Bryan Cave LLP
1801 13th Street, Suite 300
Boulder, CO 80302
Fax: (303) 247-8348
Email: chris.hazlitt@bryancave.com

 

11.10        Table of Contents and Headings. The table of contents of this
Agreement and the underlined headings contained in this Agreement are for
convenience of reference only, shall not be deemed to be a part of this
Agreement and shall not be referred to in connection with the construction or
interpretation of this Agreement.

 

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11.11        Assignment. No party hereto may assign (whether by direct
assignment or indirect assignment through a corporate merger or conversion) any
of its rights or delegate any of its obligations under this Agreement to any
other Person without the prior written consent of the other parties hereto,
provided, however, the Purchaser may upon notice to Sellers at any time at or
prior to Closing, without consent of Sellers and without any further action
required on the part of Sellers, assign any and all rights of Purchaser hereto
to any subsidiary of Purchaser.

 

11.12        Counterparts; Facsimile Signatures. This Agreement may be executed
in one or more counterparts, each of which when executed and delivered shall be
an original, and all of which when executed shall constitute one and the same
instrument. The exchange of copies of this Agreement and of signature pages by
facsimile or other electronic transmission shall constitute effective execution
and delivery of this Agreement as to the parties and may be used in lieu of the
original Agreement for all purposes. Signatures of the parties transmitted by
facsimile or other electronic means shall be deemed to be their original
signatures for all purposes.

 

11.13        Severability. In the event that any provision of this Agreement, or
the application of such provision to any Person or set of circumstances, shall
be determined to be invalid, unlawful, void or unenforceable to any extent, the
remainder of this Agreement, and the application of such provision to Persons or
circumstances other than those as to which it is determined to be invalid,
unlawful, void or unenforceable, shall not be affected and shall continue to be
valid and enforceable to the fullest extent permitted by Applicable Law.

 

11.14        Entire Agreement. This Agreement, and the other Transaction
Agreements set forth the entire understanding of Purchaser, the Company and
Sellers and supersede all other agreements and understandings between those
parties relating to the subject matter hereof and thereof.

 

11.15        Waiver. No failure on the part of any party hereto to exercise any
power, right, privilege or remedy under this Agreement, and no delay on the part
of any party hereto in exercising any power, right, privilege or remedy under
this Agreement, shall operate as a waiver thereof; and no single or partial
exercise of any such power, right, privilege or remedy shall preclude any other
or further exercise thereof or of any other power, right, privilege or remedy.

 

11.16        Amendments. This Agreement may not be amended, modified, altered or
supplemented except by means of a written instrument executed on behalf of
Purchaser, the Company and Sellers.

 

11.17        Interpretation of Agreement.

 

(a)                 Each party hereto acknowledges that it has participated in
the drafting of this Agreement, and any applicable rule of construction to the
effect that ambiguities are to be resolved against the drafting party shall not
be applied in connection with the construction or interpretation of this
Agreement.

 

(b)                 Whenever required by the context hereof, the singular number
shall include the plural, and vice versa; the masculine gender shall include the
feminine and neuter genders; and the neuter gender shall include the masculine
and feminine genders.

 

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(c)                 As used in this Agreement, the words “include” and
“including,” and variations thereof, shall not be deemed to be terms of
limitation, and shall be deemed to be followed by the words “without
limitation.”

 

(d)                 References herein to “Sections” and “Exhibits” are intended
to refer to Sections of and Exhibits to this Agreement.

 

(REMAINDER OF PAGE INTENTIONALLY LEFT BLANK)

 

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This Agreement has been duly executed and delivered by Purchaser and Sellers as
of the date set forth above.

 

  PURCHASER:         ARC Group Worldwide, Inc.         By: /s/ Jason Young  
Name: Jason Young   Title: Chief Executive Officer         SELLERS:         /s/
Nigel Sutton   Nigel Sutton       /s/ Frank Ferree   Frank Ferree       /s/
Gregory Curtis   Gregory Curtis       /s/ Dermot Rafferty   Dermot Rafferty

 

Signature Page of Membership Interests Purchase Agreement

 

 

 

 

Schedule A

 

Membership Interests

 

Member Units Percentage of
Membership Interests Nigel Sutton 43,000 43% Frank Ferree 19,000 19% Dermot
Rafferty 19,000 19% Gregory Curtis 19,000 19% TOTAL 100,000 100%