Execution Copy

STOCK PURCHASE AGREEMENT

BY AND AMONG

HOMELAND SECURITY CAPITAL CORPORATION,

TIMIOS ACQUISITION CORP.,

TIMIOS, INC.,

AND

DAL GROUP LLC
 
MAY 27, 2011

 
 

--------------------------------------------------------------------------------

 
 

TABLE OF CONTENTS
 

     
Page
     
I.
PURCHASE AND SALE OF SHARES
1
         
1.1
Purchase and Sale
1
 
1.2
Closing Date
2
 
1.3
Purchase Price
2
 
1.4
[Reserved]
2
 
1.5
Working Capital Adjustment.
2
 
1.6
Contingent Payments
3
 
1.7
Deliveries at the Closing
5
 
1.8
Withholding Rights
6
     
II.
REPRESENTATIONS AND WARRANTIES CONCERNING THE SELLER AND THE TRANSACTION
6
         
2.1
Authority and Enforceability
6
 
2.2
No Conflict or Violation
6
 
2.3
Third-Party Consents and Approvals
7
 
2.4
Ownership of Shares
7
 
2.5
No Bankruptcy
7
 
2.6
No Pending Proceedings; No Indebtedness
7
 
2.7
Acknowledgment
8
     
III.
REPRESENTATIONS AND WARRANTIES CONCERNING THE COMPANY AND ITS SUBSIDIARIES
8
         
3.1
Organization
8
 
3.2
Qualification; Location of Business and Assets
9
 
3.3
Subsidiaries
9
 
3.4
Third-Party Consents and Approvals
10
 
3.5
No Conflict or Violation
10
 
3.6
Capitalization
10
 
3.7
Financial Condition and Liabilities; Internal Controls
11
 
3.8
No Undisclosed Liabilities
12
 
3.9
Absence of Certain Changes
12
 
3.10
[Reserved]
14
 
3.11
Title; Business Assets
14
 
3.12
Condition of Assets
14
 
3.13
Real Property
14
 
3.14
Leased Personal Property
17
 
3.15
Employment Matters
17
 
3.16
Employee Benefit Plans
19
 
3.17
Material Contracts
22
 
3.18
Customers, Suppliers and Service Providers
24

 
i

--------------------------------------------------------------------------------

 

 
3.19
Tax Returns and Taxes
25
 
3.20
Licenses
27
 
3.21
Intellectual Property Rights
27
 
3.22
No Pending Proceedings
30
 
3.23
Compliance with Laws
30
 
3.24
Insurance Coverage
31
 
3.25
Relationships with Affiliates and Related Persons
31
 
3.26
Banks
32
 
3.27
Foreign Corrupt Practices Act and International Trade Sanctions
32
 
3.28
Brokers and Finders
32
 
3.29
Books and Records
32
 
3.30
Disclosure
32
     
IV.
REPRESENTATIONS AND WARRANTIES OF BUYER
33
         
4.1
Organization
33
 
4.2
Authority and Enforceability
33
 
4.3
Third-Party Consents
33
 
4.4
No Conflict or Violation
33
 
4.5
Investment Intent
33
 
4.6
Brokers and Finders
33
     
V.
PRE-CLOSING COVENANTS
34
         
5.1
Access and Investigation
34
 
5.2
Conduct of Business
34
 
5.3
Consents and Approvals; Regulatory Filings
36
 
5.4
Commercially Reasonable Efforts
37
 
5.5
Update Schedules
37
 
5.6
Exclusivity
37
 
5.7
Confidentiality
37
       
VI.
ADDITIONAL COVENANTS
38
         
6.1
Assistance in Proceedings
38
 
6.2
Retention of and Access to Books and Records
38
 
6.3
Further Assurances
38
 
6.4
Press Releases
38
 
6.5
Covenant Not to Compete; Non-Solicitation
39
 
6.6
Waiver of Earnout Obligations; Distribution of Escrow Fund
39
       
VII.
CONDITIONS TO CLOSING
40
         
7.1
Conditions to Obligation of Each Party
40
 
7.2
Conditions to Obligations of Buyer
40
 
7.3
Conditions to Obligations of Seller
43

 
ii

--------------------------------------------------------------------------------

 

VIII.
INDEMNIFICATION
44
         
8.1
Indemnification by Seller
44
 
8.2
Indemnification by Buyer
45
 
8.3
Indemnification Process; Defense of Third-Party Claims
45
 
8.4
Other Claims
47
 
8.5
Survival
47
 
8.6
Indemnification Limitations
48
 
8.7
Right of Setoff
48
 
8.8
Exclusive Remedy
49
 
8.9
Characterization of Payments
49
 
8.10
Calculation of Losses
49
       
IX.
TERMINATION
49
         
9.1
Termination
49
 
9.2
Effect of Termination
50
     
X.
TAXES
50
         
10.1
Transfer Taxes
50
 
10.2
Cooperation on Tax Matters
50
 
10.3
Tax Returns
51
 
10.4
Tax-Sharing Agreements
51
     
XI.
OTHER PROVISIONS
51
         
11.1
Waiver of Jury Trial
51
 
11.2
Appendices, Annexes, Exhibits and Schedules
51
 
11.3
Amendment
52
 
11.4
No Waiver
52
 
11.5
Entire Agreement
52
 
11.6
Governing Law
52
 
11.7
Notices
52
 
11.8
Execution of Agreement
53
 
11.9
Specific Performance
53
 
11.10
Expenses
53
 
11.11
Enforcement
53
 
11.12
Construction
54
 
11.13
Successors and Assigns; No Third Party Beneficiaries
54
 
11.14
[Reserved]
54
 
11.15
Definitions
54

 
iii

--------------------------------------------------------------------------------

 

APPENDIX A – DEFINITIONS

EXHIBITS

A
Form of Legal Opinion

B
Form of General Release

SCHEDULES

Schedule I –
Wire Transfer Instructions
Schedule II–
Working Capital Principles
Schedule 4.3 –
Third Party Consents
Schedule 5.3 –
Governmental Consents
Schedule 6.6 –
Designated Shareholders
Schedule 7.2(r) –
Creditor Consents

DISCLOSURE SCHEDULES

Seller Disclosure Schedule
Company Disclosure Schedule

 
iv

--------------------------------------------------------------------------------

 

STOCK PURCHASE AGREEMENT
 
THIS STOCK PURCHASE AGREEMENT (the “Agreement”) is made as of May 27, 2011, by
and among Homeland Security Capital Corporation, a Delaware corporation
(“HSCC”), Timios Acquisition Corp., a Delaware Corporation (“Buyer”), Timios,
Inc., a Delaware corporation (the “Company”), and DAL Group, LLC, a Delaware
limited liability company, and the sole stockholder of the Company (the
“Seller”).  HSCC, Buyer, the Company and the Seller are sometimes referred to
collectively herein as the “Parties” and each as a “Party.” Capitalized terms
not otherwise defined herein have the meanings set forth in Appendix A attached
hereto.
 
RECITALS
 
A.           The Seller owns all of the issued and outstanding capital stock of
the Company, which consists of 587,734 shares of common stock, $.01 par value
per share, of the Company.
 
B.            The Company and its Subsidiaries are engaged in the business of
providing settlement services and asset valuation, including but not limited to
title insurance and escrow services, (the “Business”) at their facilities
located in California and Texas.
 
C.           This Agreement contemplates a transaction in which Buyer will
purchase from the Seller, and the Seller will sell to Buyer, all of the shares
of capital stock of the Company (the “Shares”), in return for the cash
consideration and other obligations set forth below.
 
D.           As a condition and an inducement to Buyer entering into this
Agreement, concurrently with the execution and delivery of this Agreement,
Messrs. Stoffer, Davison and Splane (the “Designated Employees”) have entered
into employment agreements with the Company, dated as of the date hereof, which
agreements shall become effective upon the Closing (each, a “Post-Closing
Employment Agreement”), and replace and supersede in their entirety each of the
employment agreements currently in place with each such Designated Employee.
 
AGREEMENTS
 
In consideration of the foregoing and the mutual representations, warranties,
covenants and agreements herein contained, and intending to be legally bound
hereby, the parties hereto hereby agree as follows:
 
I.  PURCHASE AND SALE OF SHARES
 
1.1          Purchase and Sale.  Upon the terms and subject to the conditions of
this Agreement, at the Closing, the Seller shall sell, transfer and deliver to
Buyer, and Buyer shall purchase and accept from the Seller, all of the Seller’s
right, title and interest in and to all of the Shares, free and clear of all
Liens.
 

 
 

--------------------------------------------------------------------------------

 

1.2          Closing Date.  Subject to the terms and conditions hereof, the
closing of the transactions contemplated by this Agreement (the “Closing”) shall
take place remotely via the exchange of documents and signatures commencing at
10:00 a.m., prevailing Eastern time, on the third (3rd) Business Day following
the date on which all of the conditions set forth in Section 1.7 and Article VII
have been satisfied or waived (other than any such conditions that by their
terms cannot be satisfied until the Closing Date, which conditions shall be
required to be so satisfied or waived on the Closing Date), unless another time
and/or date is agreed to in writing by the Seller and  Buyer (such time and date
being herein called the “Closing Date”).  For financial and accounting purposes,
the Closing shall be deemed to have occurred as of 12:01 a.m. on the Closing
Date.
 
1.3          Purchase Price.  Subject to adjustment, as set forth herein, the
aggregate consideration (the “Purchase Price”) for the Shares payable to the
Seller shall be: (a) the Closing Payment, as may be adjusted pursuant to Section
1.5, plus (b) the Contingent Payments, if any, that become payable pursuant to
Section 1.6.
 
1.4          [Reserved]
 
1.5          Working Capital Adjustment. 
 
(a)           Two (2) Business Days prior to the Closing, the Company shall
deliver to Buyer a certificate (the “Working Capital Statement”) certified by
the Company’s Chief Financial Officer setting forth in reasonable detail a
calculation of its good faith estimate of the Working Capital (the “Estimated
Working Capital”), which shall be subject to reasonable approval by Buyer.
 
(b)           Within sixty (60) days following the Closing, Buyer shall deliver
to the Seller its calculation of Working Capital (the “Revised Working
Capital”).  If the Seller objects to the calculation of the Revised Working
Capital, the Seller shall deliver to Buyer, no later than twenty (20) days
following receipt of Buyer’s calculation of the Revised Working Capital, a
notice setting forth in reasonable detail such objections (a “Working Capital
Objection Notice”), together with reasonable supporting documentation.  If the
Seller does not timely deliver a Working Capital Objection Notice to Buyer or if
the Representative notifies Buyer that it has no objections, Buyer’s
determination of the Revised Working Capital shall be final and binding on all
parties.  If Buyer does not timely deliver its calculation of Working Capital to
the Seller, the Estimated Working Capital shall be final and binding on all
parties, unless Seller objects thereto, in which case Buyer must provide such
calculation.
 
(c)           If the Seller timely delivers a Working Capital Objection Notice
to Buyer, Buyer and the Seller shall attempt in good faith to resolve such
matters within twenty (20) days after receipt of the same by Buyer, and if
unable to do so, either Buyer or the Seller may refer all remaining disputes to
a nationally recognized accounting firm as mutually agreed upon by Buyer and the
Seller (the “Dispute Accounting Firm”) which shall be instructed to resolve such
disputes within thirty (30) days of the referral.  Buyer and the Seller shall
have the right to meet jointly with the Dispute Accounting Firm during this
period and to present their respective positions.  The resolution of disputes by
the Dispute Accounting Firm will be set forth in writing and will be conclusive
and binding upon the parties, upon the date of such resolution, absent manifest
error.  In making its determination, the Dispute Accounting Firm shall consider
only those items that the Seller and Buyer are unable to resolve and the Dispute
Accounting Firm shall be bound by the terms and conditions of this Agreement,
including the definition of Working Capital and the terms of this Section 1.5. 
The Seller and Buyer will each pay their own fees and expenses (including any
fees and expenses of their accountants and other representatives) in connection
with the resolution of any dispute under this Section 1.5 (excluding the fees
and expenses of the Dispute Accounting Firm).  The fees and expenses of the
Dispute Accounting Firm pursuant to this Section 1.5(c) shall be borne by Buyer
and the Seller, in inverse proportion as they may prevail on matters resolved by
the Dispute Accounting Firm, which proportionate allocations shall also be
determined by the Dispute Accounting Firm at the time the determination of such
firm is rendered on the merits of the matters submitted. 

 
2

--------------------------------------------------------------------------------

 
 
(d)           Upon the final determination of Working Capital in accordance with
this Section 1.5 (the “Final Working Capital”), the Purchase Price shall be
subject to adjustment as follows:
 
(i)           if the Final Working Capital exceeds the Working Capital Target,
the Purchase Price shall be increased by an amount equal to the amount by which
the Final Working Capital exceeds the Working Capital Target;
 
(ii)          if the Working Capital Target exceeds the Final Working Capital,
the Purchase Price shall be decreased by an amount equal to the amount by which
the Working Capital Target exceeds the Final Working Capital; or
 
(iii)         if the Final Working Capital equals the Working Capital Target,
then there shall be no further adjustment to the Purchase Price pursuant to this
Section 1.5(d).
 
Within ten (10) Business Days following the determination of the Final Working
Capital, (i) if the Purchase Price is increased pursuant to this Section 1.5(d)
(the amount of such increase, the “Positive Working Capital Adjustment Amount”),
subject to the provisions of Section 8.7, Buyer shall pay to the Seller the
Positive Working Capital Adjustment Amount by wire transfer of immediately
available funds and (ii) if the Purchase Price is decreased pursuant to this
Section 1.5(d), such decrease shall be paid to Buyer by the Seller by wire
transfer of immediately available funds, and, if necessary, satisfied by
deduction from any Contingent Payments.
 
1.6          Contingent Payments.
 
(a)           The Seller shall be eligible to earn an aggregate of up to an
additional One Million Three Hundred Fifty Thousand Dollars ($1,350,000) (a
“Maximum Contingent Payment Amount”) in contingent payments pursuant to this
Section 1.6.
 
(b)           Within thirty (30) days following the end of each calendar quarter
(each, a “Measurement Period”) commencing with the calendar quarter in which the
Closing Date occurs, Buyer, in good faith, shall calculate the Net Revenue for
such Measurement Period and shall deliver to the Seller a certificate setting
forth such calculation in reasonable detail, which calculation shall be final
and binding on all parties unless the Seller objects to such calculation as set
forth in Section 1.6(e) below.  Subject to the provisions of Section 8.7, within
ten (10) days following the final determination of the Net Revenue for such
Measurement Period, Buyer shall pay (or, if deposited with SunTrust Bank, as the
escrow agent (the “Escrow Agent”), cause the Escrow Agent to pay) to the Seller
an amount equal to five percent (5%) of the Net Revenue for such Measurement
Period (each, a “Contingent Payment”); provided, however, that the maximum
aggregate payments to which the Seller shall be entitled hereunder shall not
exceed the Maximum Contingent Payment Amount.

 
3

--------------------------------------------------------------------------------

 
 
(c)           If at any time prior to the one year anniversary of the Closing
Date, the Contingent Payments paid to the Seller (whether such payments are
placed in escrow as contemplated by this Agreement, paid to the Seller or offset
pursuant to the provisions of Sections 1.5 and 8.7) total, in the aggregate, an
amount equal to or greater than $1,100,000, then Buyer shall deposit, on behalf
of the Seller, any remaining Contingent Payments up to the Maximum Contingent
Payment Amount earned by the Seller on or prior to the first anniversary of the
Closing Date into escrow with the Escrow Agent to be held by the Escrow Agent
pursuant to the terms and conditions of an escrow agreement to be entered into
on the Closing Date (the “Escrow Agreement”).  Any such amount (in addition to
other remedies available to the Buyer Indemnified Persons as contemplated by
this Agreement) placed in escrow with the Escrow Agent shall be available to
satisfy claims by the Buyer’s Indemnified Persons for indemnification pursuant
to Article VIII hereof.  Promptly following the first year anniversary of the
Closing Date, any Contingent Payments placed in escrow pursuant to this Section
1.6(c) shall be released to the Seller by the Escrow Agent, less any amounts
used or which may be used, as the case may be, to satisfy any final or
unresolved claims for indemnification by the Buyer’s Indemnified Persons
pursuant to Article VIII hereof.
 
(d)           Upon payment of the aggregate Contingent Payments in the amount of
the Maximum Contingent Payment Amount (whether such payments are placed in
escrow as contemplated by this Agreement, paid to the Seller or offset pursuant
to the provisions of Sections 1.5 and 8.7), then, except with respect to the
Seller’s right to any amounts placed in escrow pursuant to Section 1.6(c), the
respective rights and obligations of the Seller and Buyer pursuant to this
Section 1.6 shall terminate.
 
(e)           With respect to Section 1.6(b), Buyer shall, upon the reasonable
request of the Seller, provide the Seller with reasonable evidence
substantiating such calculations; provided, however, that the Seller shall hold
all such information in strict confidence and shall not use any such information
for any purpose whatsoever other than to verify the calculation of Net Revenue.
 
(f)           If the Seller objects to the calculation of the Net Revenue or any
Contingent Payment, the Seller shall deliver to Buyer within thirty (30) days
following Seller’s receipt of Buyer’s calculation of the Net Revenue a written
notice setting forth in reasonable detail such objections (a “Net Revenue
Objection Notice”), together with all supporting documentation.  If the Seller
delivers a Net Revenue Objection Notice to Buyer, Buyer shall pay to Seller the
amount of the applicable Contingent Payment not in dispute, and shall deposit
any amount in dispute into escrow with the Escrow Agent to be held by the Escrow
Agent pursuant to the terms and conditions of the Escrow Agreement, and Buyer
and the Seller shall attempt in good faith to resolve the matters set forth in
the Net Revenue Objection Notice within twenty (20) days after receipt of the
same by Buyer.  If the Parties are unable to do so, either Buyer or the Seller
may refer all remaining disputes to the Dispute Accounting Firm which shall be
instructed to resolve such disputes within thirty (30) days of the referral. 
Buyer and the Seller shall have the right to meet jointly with the Dispute
Accounting Firm during this period and to present their respective positions. 
The resolution of disputes by the Dispute Accounting Firm will be set forth in
writing and will be conclusive and binding upon the parties, upon the date of
such resolution, absent manifest error.  In making its determination, the
Dispute Accounting Firm shall consider only those items that the Seller and
Buyer are unable to resolve and the Dispute Accounting Firm shall be bound by
the terms and conditions of this Agreement, including the definition of Net
Revenue and the terms of this Section 1.6.  The Seller and Buyer will each pay
their own fees and expenses (including any fees and expenses of their
accountants and other representatives) in connection with the resolution of any
dispute under this Section 1.6 (excluding the fees and expenses of the Dispute
Accounting Firm).  The fees and expenses of the Dispute Accounting Firm pursuant
to this Section 1.6(f) shall be borne by Buyer and the Seller, in inverse
proportion as they may prevail on matters resolved by the Dispute Accounting
Firm, which proportionate allocations shall also be determined by the Dispute
Accounting Firm at the time the determination of such firm is rendered on the
merits of the matters submitted.

 
4

--------------------------------------------------------------------------------

 
 
(g)           For purposes hereof, the term “Net Revenue” shall mean the
aggregate dollar amount of revenues (net of credits, discounts, refunds, rebates
and returns) recognized by the Business, including revenues from title insurance
and settlement services recognized by any Affiliate of HSCC, during a
Measurement Period, calculated in accordance with GAAP and Buyer’s accounting
principles.
 
1.7          Deliveries at the Closing.  Subject to the terms and conditions of
this Agreement, at the Closing:
 
(a)          The Seller shall deliver to Buyer:
 
(i)           certificate representing all of the Shares, free and clear of all
Liens, duly endorsed (or accompanied by duly executed stock powers) for transfer
to Buyer.  The Seller hereby agrees, at its own cost, to execute and deliver or
procure to be done and executed and delivered such other instruments and
documents and to do all such further acts and things as may be necessary for
effecting completely the transfer of the legal and beneficial ownership of the
Shares to the Buyer free and clear of all Liens;
 
(ii)          the various agreements, certificates and other documents and
instruments referred to in Section 7.2; and
 
(iii)         such other documents as Buyer or its counsel may reasonably
request to demonstrate satisfaction of the conditions and compliance with the
agreements set forth in this Agreement.
 
(b)          Buyer shall deliver to the Seller:
 
(i)          by wire transfers in immediately available funds in accordance with
the wire transfer instructions set forth on Schedule I, the Closing Payment;
 
(ii)          the various agreements, certificates and other documents and
instruments referred to in Section 7.3; and

 
5

--------------------------------------------------------------------------------

 
 
(iii)         such other documents as the Seller or its counsel may reasonably
request to demonstrate satisfaction of the conditions and compliance with the
agreements set forth in this Agreement.
 
1.8          Withholding Rights.  Buyer shall be entitled to deduct and withhold
from any amounts otherwise payable pursuant to this Agreement such amounts as
are required to be deducted and withheld with respect to the making of such
payments under the provisions of any applicable Tax Laws.  Any such withheld
amounts shall be treated for all purposes of this Agreement as having been paid
to the Person in respect of which such deduction and withholding was made.
 
II.  REPRESENTATIONS AND WARRANTIES CONCERNING THE SELLER AND THE TRANSACTION
 
Except as disclosed by the Seller in the disclosure schedule, dated as of the
date of this Agreement and attached hereto (the “Seller Disclosure Schedule”),
the Seller represents and warrants to Buyer as of the date hereof and as of the
Closing Date.  The Seller Disclosure Schedule shall be arranged in sections
corresponding to the numbered and lettered sections and subsections contained in
this Article II, and the disclosures in any section or subsection of the Seller
Disclosure Schedule shall qualify only the corresponding section or subsection
of this Article II.
 
2.1          Authority and Enforceability.  The Seller has full power and
authority to execute and deliver this Agreement and to perform its obligations
hereunder and to consummate the sale of the Shares and the other transactions
contemplated hereby.  The execution, delivery and performance of this Agreement
and the other agreements and documents to be executed and delivered by the
Seller pursuant to the provisions of this Agreement (the “Seller Documents”) and
the consummation by the Seller of the transactions contemplated hereby and
thereby have been duly and validly authorized by all necessary action on the
part of the Seller and no other proceedings on the part of the Seller are
necessary to authorize this Agreement or the Seller Documents or to consummate
the transactions contemplated hereby.  This Agreement has been, and at the
Closing the Seller Documents shall be, duly and validly executed and delivered
by the Seller and constitute, or shall constitute, the legal, valid and binding
obligations of the Seller, enforceable against the Seller in accordance with
their respective terms.
 
2.2          No Conflict or Violation.
 
(a)           Except as set forth in Section 2.2(a) of the Seller Disclosure
Schedule, neither the execution and delivery of this Agreement or the Seller
Documents by the Seller nor the consummation by the Seller of any of the
transactions contemplated hereby do or will (with or without notice or lapse of
time or both) (i) contravene, conflict with or result in a violation of any Law
or any Governmental Order to which the Seller is subject; (ii) contravene or
conflict with, result in any breach of, constitute a default under, or give to
others any rights of payment, termination, amendment, modification,
acceleration, suspension, revocation or cancellation of, or result in the
creation of any Lien on any of the assets of the Seller pursuant to, any
Contract to which the Seller is a party, or (iii) result in the creation of any
Lien on any of the Shares owned by the Seller.

 
6

--------------------------------------------------------------------------------

 
 
(b)           Except as set forth in Section 2.2(a) of the Seller Disclosure
Schedule, the Seller is not a party to a Contract that limits the ability of the
Seller to compete, directly or indirectly, in any line of business or with any
Person or in any geographic area or during any period of time.
 
2.3          Third-Party Consents and Approvals.  Except as set forth in Section
2.3 of the Seller Disclosure Schedule, no Consent is required for the execution,
delivery and performance of this Agreement and the Seller Documents by the
Seller and the consummation of the transactions contemplated hereby and thereby.
 
2.4          Ownership of Shares.  The Seller is the record and beneficial owner
of, and has good and valid title to, all of the Shares, free and clear of any
and all Liens.  There are no declared or accrued and unpaid dividends with
respect to any Shares.  Except for this Agreement, none of such Shares is
subject to (a) any option, warrant, purchase right or other Contract that
requires the Seller to sell, transfer or otherwise dispose of any of such Shares
or (b) any voting trust, proxy or other Contract or understanding with respect
to the voting, dividend rights, preferences, sale, acquisition or other
disposition of any of such Shares.  Upon delivery of such Shares to Buyer and
full payment therefore as contemplated hereby, Buyer shall acquire good and
valid title to all such Shares, free and clear of all Liens.
 
2.5          No Bankruptcy.  The Seller has not (i) made a general assignment
for the benefit of creditors, (ii) filed any voluntary petition in bankruptcy or
suffered the filing of an involuntary petition by any creditor(s), (iii)
suffered the appointment of a receiver to take possession of all or any portion
of its assets, (iv) suffered the attachment or judicial seizure of all or any
portion of its assets, (v) admitted in writing its inability to pay its debts as
they come due nor (vi) made an offer of settlement, extension or composition to
its creditors generally, and has not taken any affirmative action, or failed to
take any reasonable action, within its control, other than the failure to timely
pay certain outstanding liabilities, as a result of which any of the items
listed in this Section 2.5 would be likely to occur.
 
2.6          No Pending Proceedings; No Indebtedness.
 
(a)           Except as set forth in Section 2.6(a) of the Seller Disclosure
Schedule, there is no Proceeding pending or, to the Knowledge of the Seller,
threatened against the Seller or any of its properties or assets, at law or in
equity, the result of which could materially adversely affect the Seller, its
properties or assets, or the transactions contemplated hereby.  There are
presently no outstanding Governmental Orders against the Seller or any of its
properties or assets.  Further, there is no complaint, audit, proceeding,
investigation or claim against, or to the Knowledge of the Seller threatened
against, the Seller by any Governmental Authority.
 
(b)           Section 2.6(b) of the Seller Disclosure Schedule sets forth all
Proceedings that (i) involved the Seller or any of its Affiliates from and after
January 15, 2010 and (ii) are no longer pending (the “Seller Prior
Actions”).  All of the Seller Prior Actions have been concluded in their
entirety and the Seller does not have and will not have any Liability with
respect to the Seller Prior Actions.  The Seller has provided access to Buyer to
all formal written communications relating to any Seller Prior Actions between
the Seller and a Governmental Authority and any orders related thereto.

 
7

--------------------------------------------------------------------------------

 
 
(c)           Section 2.6(c) of the Seller Disclosure Schedule sets forth, as of
the Closing Date, all of the Seller’s (i) outstanding notes, loans, credit
agreements, bonds, debentures, indentures, mortgages, security agreements and
other Indebtedness, contingent or otherwise, (ii) any agreements to create,
issue or incur any notes, loans, credit agreements, bonds, debentures,
indentures, mortgages, security agreements or other Indebtedness whatsoever; and
(iii) any agreements of guarantee, indemnification, assumption or endorsement or
any other like commitment of the obligations, liabilities (contingent or
otherwise) or Indebtedness of any other Person to which the Seller is a party or
is bound.
 
2.7          Acknowledgment.  The terms and provisions of this Agreement were
negotiated without collusion, at arm’s length and are fair, reasonable and
consistent with existing market conditions.  The Seller has implemented a
marketing and bidding process that was fair, proper and reasonably calculated to
result in the highest and best value for the Company Assets.  The Seller also
has undertaken discussions with other potential purchasers of the Company Assets
and, based on those discussions and the Seller’s own knowledge of market
conditions, believes that the terms provided for in this Agreement, including
price, represent in their totality the most favorable terms available to the
Seller.  The Seller also represents that the consideration provided by Buyer for
the Company Assets pursuant to this Agreement (i) is fair and reasonable, (ii)
the highest and best offer for the Company Assets, (iii) will provide a greater
recovery for all of Seller’s stakeholders than would be provided by any other
practical available alternative and (iv) constitutes reasonably equivalent value
and fair consideration.  The transactions contemplated by this Agreement are not
being entered into by the Seller with the intention of hindering, delaying or
defrauding any of the Seller’s current or future creditors.
 
III.  REPRESENTATIONS AND WARRANTIES CONCERNING THE COMPANY AND ITS SUBSIDIARIES
 
Except as disclosed by the Company in the disclosure schedule, dated as of the
date of this Agreement and attached hereto (the “Company Disclosure Schedule”),
the Seller represents and warrants to Buyer as of the date hereof and as of the
Closing Date.  The Company Disclosure Schedule shall be arranged in sections
corresponding to the numbered and lettered sections and subsections contained in
this Article III, and the disclosures in any section or subsection of the
Company Disclosure Schedule shall qualify only the corresponding section or
subsection of this Article III.
 
3.1          Organization.  The Company is a corporation duly organized, validly
existing and in good standing under the laws of the state of its formation.  The
Company has all requisite power and authority to own, lease and operate its
properties and assets and to carry on the Business as it is now being
conducted.  The corporate record books (including the stock transfer records) of
the Company are correct and complete and contain accurate resolutions or other
consent action adopted by the Board of Directors of the Company with respect to
the Company since its date of formation.  The Company has heretofore delivered
to Buyer complete and correct copies of the Company’s record books (including
the stock transfer records), and the Organizational Documents.

 
8

--------------------------------------------------------------------------------

 
 
3.2          Qualification; Location of Business and Assets.  The Company is
duly licensed or qualified to do business as a foreign corporation and is in
corporate and tax good standing in the respective jurisdictions set forth in
Section 3.2 of the Company Disclosure Schedule, which jurisdictions are the only
jurisdictions wherein the character or location of the properties owned or
leased or the nature of activities conducted by it make such qualification
necessary, except where the failure to be so qualified has not had and could not
reasonably be expected to have, individually or in the aggregate, a Material
Adverse Effect.  There has not been any claim by any jurisdiction to the effect
that the Company is required to qualify or otherwise to be authorized to do
business as a foreign corporation in any jurisdiction in which such Company has
not qualified or obtained such authorization.  Set forth in Section 3.2 of the
Company Disclosure Schedule are (a) every state or foreign jurisdiction in which
the Company has employees or facilities and (b) the directors and officers of
the Company.
 
3.3          Subsidiaries.
 
(a)           Section 3.3(a) of the Company Disclosure Schedule sets forth for
each Subsidiary of the Company (a) its name and jurisdiction of incorporation or
other formation, (b) the number of authorized shares for each class of its
capital stock, and (c) the number of issued and outstanding shares of each class
of its capital stock, the names of the holders thereof, and the number of shares
held by each holder.  All of the issued and outstanding shares of capital stock
of each Subsidiary of the Company have been duly authorized and are validly
issued, fully paid and nonassessable.  The Company and/or one or more of its
Subsidiaries hold of record and beneficially all of the outstanding shares of
each Subsidiary of the Company free and clear of any and all Liens.  None of the
issued and outstanding capital stock of any of the Subsidiaries of the Company
has been issued in violation of any preemptive rights or applicable Law.  There
are no outstanding (i) securities of any Subsidiary of the Company convertible
into, or exchangeable or exercisable for any of the capital stock of any such
Subsidiary, (ii) options, warrants to purchase or subscribe, or other rights to
acquire from any Subsidiary of the Company any capital stock or other equity
securities or securities convertible into or exchangeable or exercisable for
capital stock or other equity securities of any Subsidiary of the Company, or
rights of first refusal or first offer relating to any capital stock or other
equity securities of any Subsidiary of the Company, or (iii) bonds, debentures,
notes or other Indebtedness or securities of any Subsidiary of the Company
having the right to vote (or convertible into, or exchangeable for, securities
having the right to vote) on any matters on which shareholders of any Subsidiary
of the Company may vote.  Except for the Subsidiaries set forth in Section
3.3(a) of the Company Disclosure Schedule, neither the Company nor any of its
Subsidiaries owns or has any right to acquire, directly or indirectly, any
outstanding capital stock of, or other equity interests in, any Person.

 
9

--------------------------------------------------------------------------------

 

(b)           Each Subsidiary is duly organized, validly existing and in good
standing under the laws of the state of its formation.  Each Subsidiary has all
requisite power and authority to own, lease and operate its properties and to
carry on its business as currently conducted and as proposed to be
conducted.  Each Subsidiary is duly licensed or qualified to do business as a
foreign corporation and is in corporate and tax good standing in the respective
jurisdictions set forth in Section 3.3(b) of the Company Disclosure Schedule,
which jurisdictions are the only jurisdictions wherein the character or location
of the properties owned or leased or the nature of activities conducted by it
make such qualification necessary, except where the failure to be so qualified
has not had and could not reasonably be expected to have, individually or in the
aggregate, a Material Adverse Effect.  The corporate record books (including the
stock transfer records) of each Subsidiary are correct and complete and contain
accurate resolutions or other consent action adopted by the Board of Directors
of such Subsidiary with respect to such Subsidiary since its date of
formation.  The Company has heretofore delivered to Buyer complete and correct
copies of each Subsidiary’s record books (including the stock transfer records),
and the Organizational Documents of each Subsidiary, as currently in effect. Set
forth in Section 3.3(b) of the Company Disclosure Schedule is (i) every state or
foreign jurisdiction in which the Company has employees or facilities and (ii)
the directors and officers of such Subsidiary.
 
3.4          Third-Party Consents and Approvals.  Except as set forth in Section
3.4 of the Company Disclosure Schedule, no Consent is required for the
consummation of the transactions contemplated by this Agreement.
 
3.5          No Conflict or Violation.  Except as set forth in Section 3.5 of
the Company Disclosure Schedule, neither the execution and delivery of this
Agreement nor the consummation of any of the transactions contemplated hereby do
or will (with or without notice or lapse of time or both) (a) contravene,
conflict with or result in a violation of any provision of the Organizational
Documents of the Company or its Subsidiaries; (b) contravene or conflict with or
result in a violation of any Law or any Governmental Order to which the Company
or its Subsidiaries is subject; (c) contravene, conflict with or result in a
violation of any of the terms or requirements of any Permit applicable to the
Company; or (d) contravene or conflict with, result in any breach of, constitute
a default under, or give to others any rights of payment, termination,
amendment, modification, acceleration, suspension, revocation or cancellation
of, or result in the creation of any Lien on any of the assets of the Company or
its Subsidiaries pursuant to, any Material Contract to which the Company or its
Subsidiaries is a party.
 
3.6          Capitalization.  The entire authorized capital stock of the Company
consists of 1,000,000 shares of common stock, $.01 par value, of which 587,734
shares are issued and outstanding and constitute the Shares.  All of the Shares
are duly authorized, validly issued, fully paid, and nonassessable and held of
record and beneficially by the Seller.  None of the issued and outstanding
Shares has been issued in violation of any preemptive rights or similar rights
created by statute, the Organizational Documents of the Company or any Contract
to which the Company is a party or by which the Company is bound or applicable
Law.  There are no outstanding (a) securities of the Company convertible into,
or exchangeable or exercisable for, Shares, (b) options, warrants to purchase or
subscribe, or other rights to acquire from the Company any Shares or other
equity securities or securities convertible into or exchangeable or exercisable
for Shares or other equity securities of the Company, or rights of first refusal
or first offer relating to any Shares or other equity securities of the Company,
or (c) bonds, debentures, notes or other Indebtedness or securities of the
Company having the right to vote (or convertible into, or exchangeable for,
securities having the right to vote) on any matters on which shareholders of the
Company may vote.  Except as set forth in Section 3.6 of the Company Disclosure
Schedule, there are no restrictions on the transfer of the Shares other than
those imposed by relevant federal and state securities Laws.

 
10

--------------------------------------------------------------------------------

 
 
3.7          Financial Condition and Liabilities; Internal Controls.
 
(a)           The Company has previously delivered to Buyer correct and complete
copies of the following financial statements (collectively, the “Financial
Statements”): (a) the audited consolidated balance sheets of the Company and its
Subsidiaries as of December 31, 2009 and 2010 and the related audited
consolidated statements of income, cash flow and shareholders equity for the
fiscal years then ended, together with the related notes thereto and the report
thereon of Vicenti Lloyd Stutzman LLP, and (b) the unaudited consolidated
balance sheet of the Company and its Subsidiaries as of March 31, 2011 (the
“Pre-Closing Balance Sheet”), and related consolidated statements of income,
cash flow and shareholders equity for the period then ended, all of which were
prepared in accordance with the books and records of the Company and its
Subsidiaries and in accordance with GAAP, consistently applied throughout the
periods involved, except, as to unaudited financial statements, that no notes to
such financial statements are included.  The Company will deliver to Buyer the
unaudited consolidated balance sheet of the Company and its Subsidiaries as of
April 30, 2011 on or before May 15, 2011.  The Financial Statements present
fairly in accordance with GAAP the financial condition, assets, liabilities and
the results of operations, cash flows and shareholders equity of the Company and
its Subsidiaries for the respective periods indicated, subject, in the case of
unaudited statements, to normal, recurring year-end audit adjustments (which
will not be material individually or in the aggregate).
 
(b)           There are no “off balance sheet arrangements” (as defined in Item
303(c) of Regulation S-K, as promulgated by the SEC) effected by the Company or
any of its Subsidiaries.
 
(c)           None of the Company, any of its Subsidiaries nor any director,
officer, employee, auditor, accountant or representative of the Company or any
of its Subsidiaries has received or otherwise had or obtained knowledge of any
complaint, allegation, assertion or claim, whether written or oral, regarding
the accounting or auditing practices, procedures, methodologies or methods of
the Company or any of its Subsidiaries or their respective internal accounting
controls, including any material complaint, allegation, assertion or claim that
the Company or any of its Subsidiaries has engaged in questionable accounting or
auditing practices, and no attorney representing the Company or any of its
Subsidiaries, whether or not employed by the Company or any of its Subsidiaries,
has reported evidence of a violation of securities laws, breach of fiduciary
duty or similar violation by the Company, any of its Subsidiaries or any of
their respective officers, directors, employees or agents to the board of
directors or any committee thereof or to any director or officer of the Company
or any of its Subsidiaries.
 
(d)           The financial books and records of the Company and each of its
Subsidiaries are true, complete and correct in all material respects, and,
except as set forth in Section 3.7(d) of the Company Disclosure Schedule, the
Company and each of its Subsidiaries maintains proper and adequate internal
accounting controls which provide reasonable assurance regarding the reliability
of financial reporting and the preparation of the financial statements in
accordance with GAAP and include policies and procedures that (i) pertain to the
maintenance of records that in reasonable detail accurately and fairly reflect
transactions and dispositions of assets of such entity; (ii) provide reasonable
assurance that transactions are recorded as necessary to permit preparation of
financial statements in accordance with GAAP, and that receipts and expenditures
of such entity are being made only in accordance with authorizations of
management and directors of such entity; and (iii) provide reasonable assurance
regarding prevention or timely detection of unauthorized acquisition, use or
disposition of such entity’s assets that could have a material effect on such
entity’s financial statements.  The Financial Statements have been prepared
using processes and procedures for which, to the Knowledge of the Seller and the
Company, there are not material weaknesses or significant deficiencies in
internal controls over financial reporting.

 
11

--------------------------------------------------------------------------------

 
 
3.8          No Undisclosed Liabilities.  Except as set forth in Section 3.8 of
the Company Disclosure Schedule, the Company and its Subsidiaries have no
Liabilities of any kind, except (a) Liabilities set forth on the face of the
Pre-Closing Balance Sheet, (b) Liabilities under an executory portion of a
Contract, (c) Liabilities for costs and expenses incurred in connection with the
transactions contemplated by this Agreement, and (d) current Liabilities
incurred in the Ordinary Course of Business since the date of the Pre-Closing
Balance Sheet that are not material to the Company (none of which results from,
arises out of, relates to, is in the nature of, or was caused by any breach of
contract, breach of warranty, tort, infringement, violation of Law,
environmental matter, claim or lawsuit).
 
3.9          Absence of Certain Changes.  Except as set forth in Section 3.9 of
the Company Disclosure Schedule, since July 26, 2010, the Company and its
Subsidiaries have conducted the Business only in the Ordinary Course of Business
and neither the Company nor any of its Subsidiaries has:
 
(a)           amended its respective Organizational Documents;
 
(b)           made any change in its capital stock or other securities, or
issued, delivered, pledged or otherwise encumbered, sold or disposed of any
shares of its capital stock or other securities or created, issued, delivered,
pledged or otherwise encumbered, sold or disposed of any securities convertible
into, or rights with respect to, or options or warrants to purchase or rights to
subscribe to, any shares of its capital stock or other securities, whether as a
result of any exercise thereof or otherwise;
 
(c)           become party to any subscriptions, warrants, rights, options,
convertible or exchangeable securities or other agreements or commitments of any
character relating to its issued and unissued capital stock or other securities,
or granted any equity appreciation or similar rights;
 
(d)           declared, set aside or paid any dividend or made or agreed to make
any other distribution or payment in respect of the Shares or any of its shares
of capital stock, or redeemed, purchased or otherwise acquired or agreed to
redeem, purchase or acquire any of the Shares or other shares of capital stock;
 
(e)           suffered any material casualty, damage, destruction or loss, or
any material interruption in use, of any material assets or properties, whether
or not covered by insurance;

 
12

--------------------------------------------------------------------------------

 
 
(f)           made any payment of or increase in any bonuses, salaries, or other
compensation to any shareholder, director, officer, or employee or entered into
any employment, severance, or similar Contract with any shareholder, manager,
officer or employee;
 
(g)          adopted, or increased the payments to or benefits under, any
Employee Plan for or with any employees of the Company or its Subsidiaries;
 
(h)           mortgaged, pledged or subjected any of its assets to any Lien;
 
(i)            accelerated, amended, terminated, or cancelled or had terminated
or cancelled any Contract, or canceled, modified or waived any debts or claims
held by it or waived any rights material to the Business;
 
(j)            sold, assigned, leased or in any way transferred or otherwise
disposed of any of its assets (tangible or intangible) or properties;
 
(k)           made or committed to make any capital expenditures or capital
additions or betterments exceeding $10,000 individually and $25,000 in the
aggregate;
 
(l)            had any material adverse change in its relationship with any of
its employees, salesmen, distributors, or independent contractors;
 
(m)          changed any of the accounting principles followed by it or the
methods of applying such principles or revalued any of its assets;
 
(n)           made any Tax election, changed any annual Tax accounting period,
amended any Tax Return, settled any income Tax Liability, entered into any
closing agreement, settled any Tax claim or assessment, surrendered any right to
claim a Tax refund or consented to any extension or waiver of the limitations
period applicable to any Tax claim or assessment;
 
(o)           instituted, settled, or agreed to settle any Proceeding related to
the assets of the Company, its Subsidiaries or the Business;
 
(p)           prepaid any of the obligations of the Company or its Subsidiaries
or any other obligations relating to the Business or accelerated the collection
of Receivables or extended the payment of accounts payable;
 
(q)           except for the execution of this Agreement, entered into any
transaction other than in the Ordinary Course of Business;
 
(r)           suffer or permit any default, or any event which, with the passage
of time or the giving of notice, or both, may become a default by the Company or
any of its Subsidiaries under any Contract;
 
(s)           amended any Material Contract;

 
13

--------------------------------------------------------------------------------

 
 
(t)           experienced a Material Adverse Effect or any event, change,
development or effect which, individually or together with other such events,
changes, developments or effects, could reasonably be expected to have a
Material Adverse Effect;
 
(u)           incurred any Indebtedness;
 
(v)          allowed or permitted, whether by action or inaction, any License to
lapse;
 
(w)          acquired or agreed to acquire by merging or consolidating with, or
by purchasing a substantial portion of the capital stock or assets of, or by any
other manner, any business or any corporation, partnership, limited liability
entity, joint venture, association or other business organization; or
 
(x)           committed to do any of the foregoing.
 
3.10        [Reserved].
 
3.11        Title; Business Assets.  The Company and its Subsidiaries are the
sole and exclusive legal and equitable owners of all right, title and interest
in, and have good and marketable title to, all of the properties, assets and
rights purported to be owned by the Company and its Subsidiaries, and the legal
and valid right to use all other assets, properties and rights used or held for
use by the Company and its Subsidiaries under Leases for Leased Real Property
and Personal Property, or any license agreements, free and clear of all Liens
(collectively, the “Company Assets”).  The Company Assets constitute all the
assets, properties, rights and Contracts used in connection with the operation
of the Company’s business and that are necessary to conduct the Company’s
business by Buyer following the Closing and to perform all of the Contracts of
the Company and its Subsidiaries.   No other Person, including any stockholder
or any Affiliate of the Company or the Seller, owns or has the right to use any
of the assets or property used in connection with the operation of the Company’s
business.
 
3.12        Condition of Assets.  All tangible assets included in the Company
Assets have been maintained in accordance with normal industry practice and are
in good operating condition and repair in all material respects, subject only to
ordinary wear and maintenance, and are usable in the Ordinary Course of
Business, and there has not been any interruption of the operations of the
Company’s business due to the condition of any such assets or properties.  All
of the Personal Property owned or leased by the Company or its Subsidiaries
material to the business, operations or financial condition of the Company and
its Subsidiaries is in good operating condition and repair, subject only to
ordinary wear and maintenance, and are usable in the Ordinary Course of
Business.
 
3.13        Real Property.
 
(a)          Neither the Company nor any of its Subsidiaries own, or have ever
owned, any Owned Real Property.
 

 
14

--------------------------------------------------------------------------------

 

(b)          Section 3.13(b) of the Company Disclosure Schedule sets forth the
address of each parcel of Leased Real Property, and a true and complete list of
all leases covering each such Leased Real Property (including the date and name
of the parties to such Lease document) (“Real Property Leases”).  The Seller has
delivered to Buyer a true and complete copy of each Real Property Lease, and in
the case of any oral Real Property Lease, a written summary of the material
terms of such Real Property Lease, and, in each case, all amendments
thereto.  With respect to each of the Real Property Leases:
 
(i)           Such Real Property Lease is legal, valid and binding and
constitutes an enforceable obligation of the Company and its Subsidiaries and,
to the Knowledge of the Seller and the Company, of each other party thereto, and
is in full force and effect;
 
(ii)          The transactions contemplated by this Agreement do not require the
consent of, or any notice to, any other party to such Real Property Lease
(except for those Real Property Leases for which Lease Consents (as hereinafter
defined) are obtained), will not result in a breach of or default under such
Real Property Lease, and will not otherwise cause such Real Property Lease to
cease to be legal, valid, binding, enforceable and in full force and effect on
identical terms following the Closing;
 
(iii)         None of the Company’s or any of its Subsidiaries’ possession and
quiet enjoyment of the Leased Real Property under such Real Property Lease has
been disturbed and, to the Knowledge of the Seller and the Company, there are no
disputes with respect to such Real Property Lease;
 
(iv)         Neither the Company, nor any of its Subsidiaries nor, to the
Knowledge of the Seller and the Company, any other party to the Real Property
Lease, is in breach of or default under such Real Property Lease, and there
exists no event, condition or occurrence which (with or without due notice or
lapse of time, or both) would constitute such a breach, default or alleged
breach or default by the Company or its Subsidiaries or, to the Knowledge of the
Seller and the Company, the other party thereto of any of the foregoing;
 
(v)         No security deposit or portion thereof deposited with respect to
such Real Property Lease has been applied in respect of a breach of or default
under such Real Property Lease that has not been redeposited in full;
 
(vi)        Neither the Company nor any of its Subsidiaries owes, or will owe in
the future, any brokerage commissions or finder’s fees with respect to such Real
Property Lease;
 
(vii)       Neither the Company nor any of its Subsidiaries has subleased,
licensed or otherwise granted any person the right to use or occupy the Leased
Real Property or any portion thereof; and
 
(viii)      Neither the Company nor any of its Subsidiaries has collaterally
assigned or granted any other Lien in such Real Property Lease or any interest
therein.
 
(c)          The Leased Real Property identified in Section 3.13(b) of the
Company Disclosure Schedule (collectively, the “Real Property”) comprises all of
the real property used or intended to be used in the Business of the Company and
its Subsidiaries; and neither the Company nor any of its Subsidiaries is a party
to any agreement or option to purchase any real property or interest therein.

 
15

--------------------------------------------------------------------------------

 
 
(d)          The Real Property and all improvements, fixtures and structures
thereon is in material compliance with all applicable building, zoning,
subdivision, health and safety and other land use Laws, including The Americans
with Disabilities Act of 1990, as amended, and all insurance requirements
affecting the Real Property (collectively, the “Real Property Laws”).  Neither
the Company nor any of its Subsidiaries has received any notice of violation of
any Real Property Law and, to the Knowledge of the Seller and the Company, there
is no basis for the issuance of any such notice or the taking of any action for
such violation.
 
(e)           The Company and its Subsidiaries hold all Real Property free and
clear of all Liens, claims or rights of any third parties, and the possession of
the Real Property (collectively, the “Premises”) by the Company or its
Subsidiaries has not been disturbed and no claim has been asserted against the
Company or its Subsidiaries adverse to their respective rights in such
Premises.  All improvements, fixtures and structures on the Premises, and the
current uses of the Premises, conform to all Real Property Laws, and the Real
Property Laws permit the presently existing improvements and the conduct and
continuation of the Company’s business as being conducted on the Premises.  All
improvements, fixtures and operating systems included in the Premises are in
good operating condition and repair (ordinary wear and tear excepted) and there
does not exist any condition which materially interferes with the use of such
property and improvements.
 
(f)           Neither the Company nor any of its Subsidiaries has granted any
leases or licenses, nor created any tenancies, affecting the Premises.  There
are no other parties in possession of any portion of the Premises as trespassers
or otherwise.
 
(g)           Neither the Company nor any of its Subsidiaries a party to or is
not otherwise bound by, nor is any of the Premises subject to, any Contract
requiring it to pay any commissions or other compensation to any brokers or
agents in connection with any of the Premises, and has had no dealings with any
broker or agent with respect to the Premises upon which any such broker or agent
would be entitled to a commission or other compensation.
 
(h)          To the Knowledge of the Seller and the Company, (i) there are no
Laws now in existence or under active consideration by any Governmental
Authority which would require the tenant of any Real Property to make any
expenditure in excess of $10,000 to modify or improve such Real Property to
bring it into compliance therewith and (ii) the Company and its Subsidiaries are
not required to expend more than $10,000 in the aggregate under all Real
Property Leases to restore the Real Property at the end of the term of the Real
Property Leases to the condition required under the Leases (assuming the
conditions existing in such Real Property as of the date hereof).

 
16

--------------------------------------------------------------------------------

 
 
3.14        Leased Personal Property.  Section 3.14 of the Company Disclosure
Schedule contains a correct and complete list of all leases and other agreements
(the “Personal Property Leases”) under which the Company or any of its
Subsidiaries leases, holds or operates any Personal Property owned by any other
Person (the “Leased Personal Property”).  The Company has delivered to Buyer
correct and complete copies of all Personal Property Leases, including all
amendments thereto.  The Company is the owner and holder of the leasehold
interests purported to be granted by each Personal Property Lease, and all of
such Personal Property Leases are valid, binding and enforceable obligations of
the Company and its Subsidiaries, and, to the Knowledge of the Seller and the
Company, of each other party thereto, and are in full force and effect, and
there is no default by the Company or any of its Subsidiaries  thereunder and no
event has occurred that, with notice or lapse of time or both, would constitute
a default or permit termination, modification or acceleration thereunder.  To
the Knowledge of the Seller and the Company, there is no default by any other
party under any such Personal Property Leases.  No consent of, or notice to, any
other party to the Personal Property Lease is required under any Personal
Property Lease as a result of or in connection with, and the enforceability of
any such Personal Property Lease will not be affected by, the execution,
delivery and performance of this Agreement, or the transactions contemplated
hereby.
 
3.15        Employment Matters.
 
(a)          Section 3.15(a) of the Company Disclosure Schedule lists the name,
date of hire and/or appointment, rate of pay or annual compensation (including
actual or potential bonus payments and the terms of any commission payments or
programs), title(s), and status of employment or engagement, along with any
arrangement to increase the annual salary, commissions, allowances or wage
rates, of (i) each present director and officer and (ii) each employee of the
Company or any of its Subsidiaries (each, a “Company Employee”).  The Company
has provided to Buyer annual vacation, sick and other paid time off allowance,
amount of accrued vacation, sick and other paid time off and the economic value
thereof, description of other fringe benefits and terms of severance benefits
for the Company Employees.  Section 3.15(a) of the Company Disclosure Schedule
also identifies each employee and independent contractor of the Company or any
of its Subsidiaries who is not fully available to perform his or her duties as a
result of disability or other leave and sets forth the basis of such leave and
the anticipated date of return to full service.  Section 3.15(a) of the Company
Disclosure Schedule sets forth all employment, consulting, independent
contractor, severance pay, continuation pay, termination or indemnification
Contracts between the Company and any current or former Company Employee or
under which the Company or any of its Subsidiaries may have any Liability.
 
(b)          Section 3.15(b) of the Company Disclosure Schedule lists the names
and addresses of all agents or agencies of the Company or any of its
Subsidiaries (including powers of attorney) with power or authority to bind the
Company or any of its Subsidiaries in any material respect and the purpose and
scope of authority of such agency.
 
(c)           Except as disclosed on Section 3.15(c) of the Company Disclosure
Schedule:

 
17

--------------------------------------------------------------------------------

 
 
(i)           neither the Company nor any of its Subsidiaries is a party to any
collective bargaining agreement or other contract or agreement with any labor
organization or other representative of any of its Company Employees nor is any
such contract or agreement presently being negotiated, and neither the Company
nor any of its Subsidiaries has any knowledge of any union organizing activities
by the Company Employees or employees of any of the Subsidiaries;
 
(ii)          there is no unfair labor practice or discrimination charge or
complaint pending or, to the Knowledge of the Seller and the Company, threatened
against or otherwise affecting the Company Employees;
 
(iii)         no grievance is pending or, to the Knowledge of the Seller and the
Company, threatened from any Company Employee, and neither the Company nor any
of its Subsidiaries has received written notice or written claim asserting that
the Company or any of its Subsidiaries is not in compliance with any applicable
Law covering employment or employment practices, terms and conditions of
employment, wages, work hours or occupational safety and health practices;
 
(iv)        except for the Post-Closing Employment Agreements, neither the
Company nor any of its Subsidiaries is negotiating any new employment or
consulting contract;
 
(v)          no Proceeding by or before any Governmental Authority brought by or
on behalf of any employee, prospective employee, former employee, retiree, labor
organization or other representative of the employees of the Company or any of
its Subsidiaries is pending or, to the Knowledge of the Seller and the Company,
threatened;
 
(vi)         neither the Company nor any of its Subsidiaries is a party to or
otherwise bound by, any Governmental Order relating to employees or employment
practices, wages, hours, and terms and conditions of employment with respect to
its business;
 
(vii)        the Company and its Subsidiaries have paid in full, or accrued in
their financial books and records, to all Company Employees, all wages,
salaries, commissions, bonuses, benefits and other compensation due to such
Company Employees or otherwise arising under any policy, practice, agreement,
plan, program, statute or other Law;
 
(viii)       neither the Company nor any of its Subsidiaries is liable for any
severance pay or other payments to any Company Employee or former employee or
independent contractor arising from the termination of employment or services or
the transactions contemplated by this Agreement, and neither the Company nor any
of its Subsidiaries will have any liability under any benefit or severance
policy, practice, agreement, plan, or program which exists or arises, or may be
deemed to exist or arise, under any applicable law or otherwise, as a result of
or in connection with the transactions contemplated by this Agreement or as a
result of the termination by the Company or any of its Subsidiaries of any
Persons employed or engaged by the Company or any of its Subsidiaries on or
prior to the Closing Date;

 
18

--------------------------------------------------------------------------------

 
 
(ix)         neither the Company nor any of its Subsidiaries has effectuated any
layoffs of Company Employees, nor has the Company or any of its Subsidiaries
planned or announced any such action or program for the future;
 
(x)           to the Knowledge of the Seller and the Company, the services of
all essential Company Employees will continue to be available on the same terms
and at the same locations for the continuation of the Business of the Company or
any of its Subsidiaries after consummation of the transactions contemplated
hereby;
 
(xi)         all current employees of the Company who work in the United States
are, and all former employees of the Company who worked in the United States
whose employment terminated, voluntarily or involuntarily, within the three
years prior to the date of this Agreement, were legally authorized to work in
the United States.  The Company has completed and retained the necessary
employment verification paperwork under the Immigration Reform and Control Act
of 1986 (“IRCA”) for the employees hired prior to the date of this Agreement,
and the Company has complied with anti discrimination provisions of the
IRCA.  Further, at all times prior to the date of this Agreement, the Company
was in material compliance with both the employment verification provisions
(including the paperwork and documentation requirements) and the
anti-discrimination provisions of IRCA; and
 
(xii)        neither the Company nor any of its Subsidiaries has direct or
indirect liability with respect to any misclassification of any person as an
independent contractor rather than as an employee, or with respect to any
employee leased from another employer.
 
(d)           Neither the Company, nor its Subsidiaries nor, to the Knowledge of
the Seller and the Company, any Company Employee, is in violation of any term of
any employment, consulting, independent contractor, non-disclosure,
non-competition, inventions assignment or any other Contract (or any other legal
obligation such as a trade secrets statute or common law duty of loyalty)
relating to the relationship of such Company Employee with the Company or any
other Person or has been notified that such Company Employee may be in violation
of any such Contract or other legal obligation.  Each Company Employee who is
required to be licensed by applicable Law is so licensed, and complete and
accurate copies (if any) of such Licenses have been delivered to Buyer.
 
(e)           During the preceding twelve (12) months, the Company and its
Subsidiaries have had adequate levels of staffing to conduct its business in a
commercially reasonable manner.  The current Company Employees constitute
sufficient personnel to continue the operations of the Company’s business
uninterrupted following the Closing.
 
3.16        Employee Benefit Plans.
 
(a)           Section 3.16(a) of the Company Disclosure Schedule contains an
accurate and complete list of all Employee Plans.

 
19

--------------------------------------------------------------------------------

 

(b)           Except as disclosed in Section 3.16(b) of the Company Disclosure
Schedule: (i) all accrued contributions, claims and other payments required to
be made by the Company or any of its Subsidiaries to any Employee Plan through
the Closing Date have been made or reserves adequate for such purposes as of the
Closing Date have been set aside therefore and reflected on the Pre-Closing
Balance Sheet; (ii) neither the Company nor any of its Subsidiaries is in
default in any material respect in performing any of its contractual obligations
under any of the Employee Plans or any related trust agreement or insurance
contract, and there are no outstanding or unfunded liabilities of any Employee
Plan other than liabilities for benefits to be paid to participants in such
Employee Plan; and (iii) all such contributions are fully deductible under the
Code as employer contributions.
 
(c)           Neither the Company nor any of its Subsidiaries has maintained,
established, sponsored, participated in or contributed to any qualified
retirement plan; and neither the Company, nor any of its Subsidiaries or
Affiliates, has ever maintained, established, sponsored, participated in or
contributed to any qualified defined contribution money purchase pension plan,
qualified defined benefit pension plan (that is subject to ERISA Title IV and
Code Section 412), a “multiemployer pension plan” (as defined in ERISA §3(37)),
or a “multiple employer plan” as defined under ERISA and the Code.  For purposes
of this Section 3.16, the term “Affiliate” shall have the meaning ascribed under
ERISA Section 4001 and Code Section 414(b), (c) or (m).
 
(d)           Neither the Company or any of its Subsidiaries nor any Affiliate
has ever maintained, established, sponsored, participated in, contributed to or
promised (whether in oral or written form) to establish (i) any “employee
welfare benefit plan” (as defined in ERISA Section 3(1)) that provides benefits
to or on behalf of any individual following retirement or other termination of
employment (other than to the extent required by Code Section 4980B), (ii) any
multiemployer or multiple employer welfare arrangement, fund or plan (as defined
under ERISA), or (iii) any “funded welfare plan” within the meaning of Code
Section 419.
 
(e)           Except as disclosed in Section 3.16(e) of the Company Disclosure
Schedule, neither the Company or any of its Subsidiaries maintains and has not
entered into any Employee Plan or other document, plan or agreement that is
considered a non-qualified deferred compensation plan (as defined under Code
Section 409A), or that contains any change in control provisions which would
cause an increase or acceleration of benefits or vesting or contains any benefit
entitlements (including severance pay, unemployment compensation, or any other
type of payment) to employees or former employees of the Company or any of its
Subsidiaries or other provisions, which would cause an increase in liability of
the Company or any of its Subsidiaries or to the Buyer as a result of the
transactions contemplated by this Agreement or any related action thereafter.
 
(f)           Neither the Company nor any of its Subsidiaries has ever
maintained, established, sponsored, participated in or contributed to any
self-insured plan that provides benefits to employees (including, without
limitation, any plan pursuant to which a stop-loss policy or contract applies).
 
(g)          With respect to each of the Employee Plans:

 
20

--------------------------------------------------------------------------------

 

(i)           each Employee Plan has been established, maintained, funded and
administered in all material respects in accordance with its governing
documents, and all applicable provisions of ERISA, the Code, COBRA , HIPAA  or
other applicable law, and all regulations or rules promulgated thereunder;
 
(ii)          all disclosures to Company Employees and all filings and other
reports relating to each such Employee Plan and required (under ERISA, the Code,
other applicable law, including federal and state securities laws, and all
regulations thereunder) to have been made or filed on or before the Closing Date
have been or will be duly and timely made or filed by that date;
 
(iii)         there is no Proceeding (other than routine claims for benefits),
pending or, to the Knowledge of the Seller and the Company, threatened with
respect to any such Employee Plan, its related assets or trusts, or any
fiduciary, administrator or sponsor of such Employee Plan;
 
(iv)         the Company has delivered to Buyer true and complete copies of the
following: the current Employee Plan document (including a written description
of all oral Employee Plans), any amendments thereto, and the related summary
plan description or summary annual reports, if any; each trust or custodial
agreement and each deposit administration, group annuity, insurance or other
funding agreement associated with each such Employee Plan; for the last three
Employee Plan years, the financial information or reports (including any FASB
required reports, if applicable), relating to each such Employee Plan; all
Internal Revenue Service and other governmental agency rulings relating thereto,
and all applications for such rulings; and all filing and reports (including the
Annual Report Form 5500 series, if applicable) filed with any governmental
agency at any time during the three year period ending on the Closing Date,
along with all schedules and reports filed therewith;
 
(v)          neither any such Employee Plan nor any other Person or entity has
engaged in a “prohibited transaction” (as defined in ERISA Section 406 or Code
Section 4975) with respect to such Employee Plan, for which no individual or
class exemption exists;
 
(vi)        each Employee Plan which is a “group health plan” (as defined in
Code Section 5000(b)(1)) has complied and will comply in all material respects
with the applicable requirements of ERISA Sections 601 and 602, Code Section
162(k) (through December 31, 1988) and Code Section 4980B (commencing on January
1, 1989), and HIPPA (including the portability, non-discrimination and
administrative simplification requirements of HIPAA);
 
(vii)       each Employee Plan can be amended, terminated or otherwise
discontinued after the Closing in accordance with its terms, without liability
to Buyer or Seller (other than ordinary administrative expenses);
 
(viii)       neither the Company or any of its Subsidiaries is subject to any
penalty or tax with respect to any Employee Plan under Section 502(i) of ERISA
or Sections 4975 through 4980 of the Code;

 
21

--------------------------------------------------------------------------------

 
 
(ix)         the Company and any of its Subsidiaries have timely made all
contributions and other payments required by and due under the terms of each
Employee Plan and
 
(x)          to the extent subject to Code Section 409A, each Employee Plan
complies with and has been operated in good faith compliance with Code Section
409A.
 
3.17        Material Contracts.
 
(a)           Section 3.17(a) of the Company Disclosure Schedule contains a
correct and complete list of the following Contracts to which the Company or any
of its Subsidiaries is a party or any of their respective assets are currently
bound or subject (and with respect to any oral Contract provides a complete
description of the terms of such Contract) (collectively, the “Material
Contracts”):
 
(i)           each Contract that involves performance of services by the Company
or any of its Subsidiaries of an amount or value in excess of $10,000;
 
(ii)         each Contract that involves performance of services or delivery of
goods or materials to the Company or any of its Subsidiaries of an amount or
value in excess of $10,000;
 
(iii)         each Contract that was not entered into in the Ordinary Course of
Business that involves expenditures or receipts in excess of $10,000;
 
(iv)         all notes, loans, credit agreements, mortgages, indentures,
security agreements, operating leases, capital leases and other Contract
relating to Indebtedness of the Company or any of its Subsidiaries and any
Contract of suretyship or guaranty;
 
(v)         each Contract for capital expenditures in excess of $10,000;
 
(vi)        each Contract with management, independent contractors, or
consultants (or similar arrangements) which are not cancellable without penalty
or further payment and without thirty (30) days’ or more notice;
 
(vii)       all employee agreements, Contracts with consultants and independent
contractors, and all bonus, commission, compensation, pension, insurance,
retirement, deferred compensation and other plans, Contracts and other
arrangements for the benefit of any Company Employee;
 
(viii)      each Contract with any broker, distributor, dealer, representative,
franchise, agency, sales promotion, market research, marketing consultant or
advertising company;
 
(ix)         each Contract that limits the ability of the Company or any of its
Subsidiaries (or any manager or officer thereof) to compete in any line of
business or with any Person or in any geographic area or during any period of
time;

 
22

--------------------------------------------------------------------------------

 
 
(x)          each power of attorney of the Company or any of its Subsidiaries
that is currently effective and outstanding;
 
(xi)         each license agreement or other Contract relating to Intellectual
Property owned or license by the Company or used in connection with the Business
(each a “License Agreement”);
 
(xii)        each Contract containing any restrictions with respect to payment
of dividends or any other distributions in respect of the capital stock of the
Company or its Subsidiaries;
 
(xiii)       each Company Contract, including any stock option plan, stock
appreciation rights plan or stock purchase plan related to shares of the
Company’s stock, any of the benefits of which will be increased, or the vesting
of benefits of which will be accelerated by the occurrence of any of the
transactions contemplated by this Agreement or the value of any of the benefits
of which will be calculated on the basis of any of the transactions contemplated
by this Agreement;
 
(xiv)       each Contract concerning the issuance, delivery, pledge or other
encumbrance, proxy, redemption, sale or disposal of any shares of capital stock
or other securities of the Company or its Subsidiaries or the creation,
issuance, delivery, pledge or other encumbrance, proxy, redemption, sale or
disposal of any securities convertible into, or rights with respect to, or
options or warrants to purchase or rights to subscribe to, any shares of capital
stock or other securities of the Company or its Subsidiaries;
 
(xv)        each joint venture, partnership or other Contracts involving a share
of profits or losses with another Person;
 
(xvi)       each Contract between or among the Company or any of its
Subsidiaries, the Seller or any Affiliate or Related Person of the Company or
the Seller;
 
(xvii)      any material Contract which is terminable upon or prohibits a change
of ownership or control of the Company;
 
(xviii)     each Contract granting or permitting any Lien upon the assets or the
properties of the Company or any of its Subsidiaries; and
 
(xix)       each other Contract, whether or not made in the Ordinary Course of
Business, which is material to the Company or any of its Subsidiaries or the
conduct of the Business, or the absence of which would have a Material Adverse
Effect.
 
(b)          The Company has delivered to Buyer a correct and complete copy of
each written Material Contract (as amended to date).  Each Material Contract is
valid, binding and enforceable on all respective parties thereto and is in full
force and effect.  Each Material Contract will continue to be valid, binding,
enforceable on all respective parties thereto, and in full force and effect on
identical terms following the consummation of the transactions contemplated
hereby.  The Company or its Subsidiaries have not received any notice from any
other party to a Material Contract of the termination or threatened termination
thereof, or of any claim, dispute or controversy with respect thereto, nor, to
the Knowledge of the Seller and the Company, has any event occurred or
circumstance exists, which could reasonably be expected to result in such
termination, claim, dispute or controversy.

 
23

--------------------------------------------------------------------------------

 
 
(c)           The Company or its Subsidiaries, as the case may be, has performed
in all material respects all obligations imposed on it to date under each
Material Contract.  Neither the Company nor any of its Subsidiaries is in breach
or default in any material respect under any Material Contract, and no event has
occurred or circumstances exist which, with notice or lapse of time or both,
would constitute a material breach or default by the Company or any of its
Subsidiaries thereunder or permit termination, modification or acceleration
thereunder.
 
(d)           To the Knowledge of the Seller and the Company, no other party is
in breach or default in any material respect under any Material Contract, and no
event has occurred or circumstances exist which, with notice or lapse of time or
both, would constitute a material breach or default by any other party
thereunder or permit termination, modification or acceleration thereunder.  No
other party has repudiated any provision of any Material Contract.
 
(e)           None of the payments required to be made by the Company or any of
its Subsidiaries under any Material Contract has been prepaid more than thirty
(30) days prior to the due date of such payment thereunder.
 
(f)            No consent of, or notice to, any third party is required under
any Material Contract as a result of or in connection with, and neither the
enforceability nor any of the terms or provisions of any Material Contract will
be affected in any manner by, the execution, delivery and performance of this
Agreement, or the transactions contemplated hereby.
 
3.18        Customers, Suppliers and Service Providers.  Except as set forth in
Section 3.18 of the Company Disclosure Schedule, no Significant Customer,
Significant Supplier or a Significant Service Provider of the Company or any of
its Subsidiaries has (i) cancelled, threatened to cancel or otherwise terminated
or threatened to terminate its business relationship with the Company or any of
its Subsidiaries, (ii) reduced or has threatened to reduce its purchases from
the Company or any of its Subsidiaries, or (iii) has sought or is seeking to
change the amount payable to the Company in connection with the purchase of
products or services, including in each case after the consummation of the
transactions contemplated hereby, and the Company and its Subsidiaries do not
plan to limit or alter their business relationship with them in any material
respect.  The term “Significant Customer” means any of the ten (10) largest
customers, by dollar volume, of the Company and its Subsidiaries during the 2010
calendar year, the term “Significant Supplier” means any of the five (5) largest
suppliers, by dollar volume, of the Company and its Subsidiaries during the 2010
calendar year, and the term “Significant Service Provider” means any of the five
(5) largest service providers, by dollar volume, of the Company and its
Subsidiaries during the 2010 calendar year.  Section 3.18 of the Company
Disclosure Schedule contains a true and correct list of the Significant
Customers, Significant Suppliers and Significant Service Providers and the
dollar volume of business with each Significant Customer, Significant Supplier
and Significant Service Provider during calendar year 2010.  There are no, and
since July 26, 2010 have not been any, disputes with any Significant Customer,
Significant Supplier or Significant Service Provider.  The Company or its
Subsidiaries have not made any sales of its products or services to any Person
outside of the United States.

 
24

--------------------------------------------------------------------------------

 
 
3.19        Tax Returns and Taxes.
 
(a)           The Company and its Subsidiaries have (i) timely filed all Tax
Returns which are required to be filed by them with respect to any Taxes; and
(ii) timely paid all Taxes due or payable by the Company or any of its
Subsidiaries whether or not shown as due and payable on any Tax Returns.  All
Tax Returns properly reflect the liabilities of the Company and its Subsidiaries
for Taxes for the periods, properties or events covered thereby.  Except as set
forth in Section 3.19(a) of the Company Disclosure Schedule, no extensions of
time in which to file any Tax Returns have been executed or filed with any
Governmental Authority.
 
(b)           Neither the Company nor any of its Subsidiaries has received any
notice of assessment of additional Taxes and has not executed or filed with any
taxing authority any agreement extending the period of assessment of any
Taxes.  There are no claims, examinations, Proceedings or proposed deficiencies
for Taxes pending or, to the Knowledge of the Seller and the Company, threatened
against the Company or any of its Subsidiaries.
 
(c)           There are no Liens on any assets of the Company or any of its
Subsidiaries that arose in connection with any failure (or alleged failure) to
pay any Tax.
 
(d)           The Company and its Subsidiaries are current in the payment of all
withholding and other employee Taxes which are due and payable.  The accruals
for Taxes contained in the Pre-Closing Balance Sheet are adequate to cover all
liabilities for Taxes of the Company and its Subsidiaries for all periods ending
on or before March 31, 2011, and include adequate provisions for all deferred
Taxes.  All Taxes for periods beginning after March 31, 2011, will be paid or
are adequately reserved against on the books of the Company and its
Subsidiaries.
 
(e)           Neither the Company nor any of its Subsidiaries has been audited
by the Internal Revenue Service or any other Governmental Authority within the
past five years.  Neither the Company nor any of its Subsidiaries nor the Seller
have waived any statute of limitations in respect of Taxes or agreed to any
extension of time with respect to a Tax assessment or deficiency.  There are no
outstanding written requests by any Governmental Authority that the Company or
any of its Subsidiaries waive any statute of limitations in respect of Taxes or
agree to an extension of time with respect to a Tax assessment or deficiency.
 
(f)            Except as set forth in Section 3.19(f) of the Company Disclosure
Schedule, all Taxes that the Company or any of its Subsidiaries is or was
required by Law to withhold, deduct or collect have been duly withheld, deducted
and collected and, to the extent required, have been paid to the proper
Governmental Authority or other Person.  There is no tax sharing agreement, tax
allocation agreement, tax indemnity obligation or similar written or unwritten
agreement, arrangement, understanding or practice with respect to Taxes
(including any advance pricing agreement, closing agreement or other arrangement
relating to Taxes) that will require any payment by the Company or any of its
Subsidiaries.

 
25

--------------------------------------------------------------------------------

 
 
(g)           Neither the Company nor any Subsidiary (i) has been a member of an
affiliated group within the meaning of Code Section 1504(a) (or any similar
group defined under a similar provision of state, local or foreign law) and (ii)
has liability for Taxes of any person (other than the Company or any of its
Subsidiaries) under Treas. Reg. section 1.1502-6 (or any similar provision of
state, local or foreign law), as a transferee or successor by contract or
otherwise.
 
(h)           The Company and its Subsidiaries have disclosed on their federal
income Tax Returns all positions taken in such Tax Returns that could give rise
to a substantial understatement of federal income Tax within the meaning of
Section 6662 of the Code.
 
(i)            The Company and its Subsidiaries have not made any payments, are
not obligated to make any payments, and are not a party to any Contract that
under any circumstances would reasonably be expected to obligate it to make any
payments that will not be deductible under Section 280G of the Code or would
constitute compensation in excess of the limitation set forth in Section 162(m)
of the Code.
 
(j)            Neither the Company nor any of its Subsidiaries will be required
to include any item of income in, or exclude any item of deduction from, taxable
income for any Tax period that begins after the Closing Date as a result of (i)
any change in method of accounting for a taxable period ending on or prior to
the Closing Date, (ii) any “closing agreement” as described in Code Section 7121
(or any corresponding or similar provision of state, local or foreign law)
executed on or prior to the Closing Date, (iii) any intercompany transactions or
any excess loss account described in Treasury Regulation Section 1.1502-19 (or
any corresponding or similar provision of state, local or foreign law), (iv) the
installment method of accounting, the completed contract method of accounting or
the cash method of accounting with respect to a transaction that occurred prior
to the Closing Date, or (v) any prepaid amount received on or prior to the
Closing Date.
 
(k)           Neither the Company nor any of its Subsidiaries has participated
in any reportable transaction as defined in Code Section 6707A or Treasury
Regulation Section 1.6011-4(b) and (c)(3), or any transaction that is the same
as or substantially similar to one of the types of transactions that the
Internal Revenue Service has determined to be a tax avoidance transaction and
identified by notice, regulation, or other form of published guidance as a
“listed transaction,” as set forth in Treasury Regulation Section
1.6011-4(b)(2).
 
(l)            Neither the Company nor any of its Subsidiaries has distributed
the stock of another Person, or has had its stock distributed by another Person,
in a transaction that was purported or intended to be governed, in whole or in
part, by Sections 355 or 361 of the Code.
 
(m)           Neither the Company nor any of its Subsidiaries is a party to any
agreement, contract, arrangement, or plan that has resulted or would result,
separately or in the aggregate, in the payment of any “excess parachute payment”
within the meaning of Code Section 280G (or any corresponding provision of
state,  local, or foreign Tax Law).

 
26

--------------------------------------------------------------------------------

 

(n)           No claim has ever been made by a Governmental Authority in a
jurisdiction where the Company or any of its Subsidiaries has never paid Taxes
or filed Tax Returns asserting that the Company or any Subsidiary is or may be
subject to Taxes assessed by such jurisdiction.
 
(o)           The Company has not been a United States real property holding
corporation within the meaning of Section 897(c)(2) of the Code during the
applicable period specified in Section 897(c)(1)(A)(ii) of the Code, and no
transaction contemplated by this Agreement is subject to withholding under Code
Section 1445 (relating to “FIRPTA”).
 
3.20        Licenses.  Section 3.20 of the Company Disclosure Schedule contains
a complete and accurate list of (a) all Licenses used by the Company or any of
its Subsidiaries in the operation or conduct of the Business or that relate to
the Company’s or any of its Subsidiaries’ assets and (b) the agent
identification number given to the Company by each of Stewart Title Company,
Lawyers Title Insurance Company and Fidelity National Title Insurance
Company.  The Licenses of the Company or its Subsidiaries constitute all
Licenses that are necessary for the lawful operation or conduct of the Business
as presently conducted and are required for the lawful use, lease, occupancy and
ownership of the assets of the Company or any of its Subsidiaries.  The Company
and its Subsidiaries are in compliance with each of the Licenses, and no event
has occurred which constitutes or, after notice or lapse of time or both, would
constitute a breach or default under any of the Licenses or would permit
revocation or termination of any of the Licenses.  The Licenses are in full
force and effect and are renewable by their terms or in the Ordinary Course of
Business without the need to comply with any special qualification procedures or
to pay any amounts other than routine filing fees.  None of the Licenses will be
adversely affected by consummation of the transactions contemplated by this
Agreement.  During the two (2) years preceding the date of this Agreement,
neither the Company nor any of its Subsidiaries has received notice of any
Proceeding, and, to the Knowledge of the Seller and the Company, no such
Proceeding is pending, relating to the cancellation, suspension, revocation,
modification or non-renewal of any License.
 
3.21        Intellectual Property Rights.
 
(a)           Section 3.21(a) of the Company Disclosure Schedule sets forth a
complete and accurate list of all United States and foreign Patents, Marks
(including unregistered Marks), Net Names and registered Copyrights comprising
Company Intellectual Property, indicating for each, the applicable jurisdiction,
registration number (or application number) and date issued (or date
filed).  All registered and applied for Patents, Marks and Copyrights included
in the Company Intellectual Property are currently pending, in material
compliance with all legal requirements, are valid and enforceable, and are not
subject to any fees, responses or actions falling due within one hundred eighty
(180) days after the Closing Date.  No such Mark has been or is now involved in
any cancellation Proceeding before the United States Patent and Trademark Office
(the “USPTO”) and, to the Knowledge of the Seller and the Company, no such
action is threatened with respect to any of such Marks.  All Marks included in
the Company Intellectual Property have been in continuous use by the Company
since they were first used by the Company.  To the Knowledge of the Seller and
the Company, there has been no prior use of such Marks by any Person which would
confer upon such Person superior rights in such Marks; and the registered Marks
have been continuously used in the form appearing in, and in connection with the
goods and services listed in, their respective registration certificates or
identified in their respective pending applications.  There are no Patents
included in the Company Intellectual Property. No Copyright registration or
copyrightable work included in the Company Intellectual Property has been or is
now involved in any litigation.  To the Knowledge of the Seller and the Company,
there are no Marks of any third party potentially conflicting with the Marks
included in the Company Intellectual Property.

 
27

--------------------------------------------------------------------------------

 
 
(b)           The Company Intellectual Property set forth in Section 3.21(a) of
the Company Disclosure Schedule constitutes all of the Intellectual Property
used by, required in or necessary for the operation of the Business as currently
conducted and proposed to be conducted.  The Company or one of its Subsidiaries
is the owner or licensee of all right, title and interest in and to each of the
Intellectual Property Rights comprising the Company Intellectual Property, free
and clear of all Liens, and has the right to use without payment to a third
party all of the Company Intellectual Property.
 
(c)           None of the Company Intellectual Property has been or is the
subject of any pending (or, to the Knowledge of the Seller and the Company,
threatened) litigation or claim of infringement, or outstanding Judgment,
arbitration award, agreement or stipulation restricting in any manner the use,
transfer or licensing thereof by the Company or any of its Subsidiaries, or
which may affect the validity, use or enforceability of the Company Intellectual
Property.
 
(d)           The operation of the Business as it has been, currently is and
proposed to be, conducted, the sale or use of the Company’s or its Subsidiaries’
products and services, and the use of the Company Intellectual Property in
connection therewith has not, does not and will not, when conducted in
substantially the same manner following the Closing, infringe upon, violate, or
misappropriate in any manner the Intellectual Property or other rights of any
third party or constitute unfair trade practices.  Neither the Company nor any
of its Subsidiaries has received any notice contesting its right to use any of
the Company Intellectual Property or that the conduct of the Business as
currently conducted would infringe upon, violate, misappropriate the
Intellectual Property or other rights of any third party, nor is the Company or
any of its Subsidiaries aware of any basis for such a claim.
 
(e)           To the Knowledge of the Seller and the Company, no Person has or
is infringing, violating or misappropriating any Company Intellectual Property,
nor is the Company or any of its Subsidiaries aware of any basis for such a
claim.  There is no Proceeding pending or, to the Knowledge of the Seller and
the Company, threatened alleging that the conduct of the Business infringes
upon, violates or constitutes the unauthorized use of the Intellectual Property
or other rights of any third party, nor is the Company or any of its
Subsidiaries aware of any basis for such a claim.  The Company and its
Subsidiaries have not threatened to bring, and the Company or its Subsidiaries
have not brought, any action regarding the ownership, use, validity or
enforceability of any Company Intellectual Property.

 
28

--------------------------------------------------------------------------------

 

(f)           The Company or its Subsidiaries have taken all reasonable steps
and precautions in accordance with normal industry practice to protect the
Company Intellectual Property, including all rights in confidential information
(including entering into appropriate confidentiality, nondisclosure and
non-competition agreements with all officers, directors and employees of the
Company or any of its Subsidiaries with access to or knowledge of the
confidential information).  All inventions, discoveries, Trade Secrets, ideas
and works, whether or not patented or patentable or otherwise protectable under
Law, created, prepared, developed or conceived by employees or independent
contractors of the Company are the exclusive property of the Company and were
either created, prepared, developed or conceived by (i) employees of the Company
within the scope of their employment or (ii) by independent contractors who have
duly assigned their rights to the Company pursuant to enforceable written
agreements.  All of the copyrightable materials incorporated in, underlying or
used with the products or services of the Company and its Subsidiaries have been
created by employees of the Company or its Subsidiaries within the scope of
their employment by the Company or its Subsidiaries or by independent
contractors of the Company or its Subsidiaries who have executed agreements
expressly assigning all right, title and interest in such copyrightable
materials to the Company and its Subsidiaries.  No portion of such copyrightable
material was jointly developed with any third party.  Except pursuant to
enforceable confidentiality obligations in favor of the Company, there has been
no disclosure to any third party of any confidential information included in the
Company Intellectual Property.  No current or former employee, consultant,
contractor, partner or investor of the Company is in unauthorized possession of
any of the Software included in the Company Intellectual Property.
 
(g)           All Net Names have been registered in the name of the Company or
one of its Subsidiaries and are in compliance with all applicable Law.  No Net
Name has been or is now involved in any dispute, opposition, invalidation or
cancellation Proceeding and, to the Knowledge of the Seller and the Company, no
such Proceeding is threatened with respect to any Net Name.  To the Knowledge of
the Seller and the Company, there is no domain name application pending of any
other Person which would or would potentially interfere with or infringe any Net
Name.
 
(h)           Section 3.21(h) of the Company Disclosure Schedule describes all
databases used by the Company and its Subsidiaries (the “Databases”).  Following
the Closing, the Databases will have at least the same information and
functionality as existed prior to the Closing.  No Person (other than the
Company) has any right, title or interest in or to any of the information
contained in any of the Databases and the Company or its Subsidiaries have not
sold, assigned, leased, transferred, permitted the use of or otherwise disclosed
to any Person any information contained in any of the Databases, including any
Personally Identifiable Information.  The collection, use, transfer, import,
export, storage, protection, disposal, and disclosure by Company of Personally
Identifiable Information has not violated, and, if performed after Closing in
substantially the same manner as performed immediately prior to Closing, will
not violate any published Privacy Statement or any applicable Law relating to
data collection, use, privacy, storage or protection (collectively, “Data Laws”)
and industry standards, including payment card industry data security
standards.   The transactions contemplated by this Agreement will not result in
the violation of any Data Laws or any Privacy Statement.  Company has, at all
times, taken reasonable measures to protect and maintain the confidential nature
of the Personally Identifiable Information provided to the Company by
individuals, in accordance with the terms of any published Privacy Statement and
all Data Laws, including the implementation and maintenance of written
information security plans and policies. The Company and its Subsidiaries have
the right to sell and assign all of their rights in and to the Databases and all
information contained therein, and any such sale and assignment (a) will not
violate the Privacy Statement applicable to any Personally Identifiable
Information contained therein at the time it was collected, (b) will not require
the delivery of any notice to or consent from any Person, or (c) prohibit the
transfer of Personally Identifiable Information collected and in the possession
or control of Company to Purchaser.

 
29

--------------------------------------------------------------------------------

 
 
3.22        No Pending Proceedings.
 
(a)           Except as set forth in Section 3.22(a) of the Company Disclosure
Schedule, there is no Proceeding pending or, to the Knowledge of the Seller and
the Company, threatened against or affecting the Company or any of its
Subsidiaries or any of their respective properties or assets, at law or in
equity, nor does the Seller or the Company know of any event or set of
circumstances which are reasonably likely to result in a Proceeding, the result
of which could materially adversely affect the Company, any of its Subsidiaries,
or their respective assets or the transactions contemplated hereby.  There is no
Proceeding pending or threatened against any other Person by the Company or any
of its Subsidiaries.  There are presently no outstanding Governmental Orders
against or affecting the Company, any of its Subsidiaries or any of their
respective properties or assets.  Further, (A) there is no complaint, audit,
proceeding, investigation or claim against, or to the Knowledge of the Seller
and the Company (and employees with responsibility for data privacy matters) of
the Company, threatened against, the Company by any Governmental Authority, or
by any Person respecting the collection, use, transfer, import, export, storage,
protection, disposal or disclosure of Personally Identifiable Information in
connection with the Company/s business, and (B) there have been security
breaches compromising the confidentiality or integrity of such Personally
Identifiable Information.
 
(b)           Section 3.22(b) of the Company Disclosure Schedule sets forth all
Proceedings that (i) involved the Company or any of its Subsidiaries at any time
during the past five (5) years and (ii) are no longer pending (the “Prior
Actions”).  All of the Prior Actions have been concluded in their entirety and
the Company does not have and will not have any Liability with respect to the
Prior Actions.  The Company has provided access to Buyer to all formal written
communications relating to any Prior Actions between the Company and a
Governmental Authority and any orders related thereto.
 
(c)           Neither the Company nor any of its Subsidiaries has received any
material, written communication or advice from outside legal counsel that it is
exposed, from a legal standpoint, to any Liability relating to the operation of
the Business.
 
3.23       Compliance with Laws.  The Company and its Subsidiaries have complied
and are in compliance, in each case in all material respects, with all Laws
applicable to them and to their assets, properties, operations and the
Business.  No notice, citation, summons or order has been assessed and no
investigation or review is pending or, to the Knowledge of the Seller and the
Company, threatened by any Governmental Authority with respect to any alleged
violation by the Company or any of its Subsidiaries of any Law.  To the
Knowledge of the Seller and the Company, no event has occurred or circumstance
exists that (with or without notice or lapse of time), could reasonably be
expected to constitute or result in a violation by the Company or any of its
Subsidiaries of, or a failure on the part of the Company or any of its
Subsidiaries to comply with, any Law.  The Company is not now, or has previously
been, in violation of or noncompliant with any applicable Environmental Laws or
Environmental Permits.  None of the Company’s securities have been offered or
sold in such a manner as to make the sale of such securities not exempt from the
registration requirements of applicable securities Laws, and all such securities
have been offered and are being sold in compliance with all applicable
securities Laws.

 
30

--------------------------------------------------------------------------------

 
 
3.24       Insurance Coverage.  The Company and its Subsidiaries presently
maintain, and have at all times prior to the date hereof maintained, liability,
errors & omissions, casualty, property loss and other insurance coverages upon
its properties and with respect to the conduct of its Business in such amounts,
of such kinds and with such reputable insurance carriers as are generally deemed
appropriate and sufficient for companies of a similar size engaged in similar
types of business and operations.  Section 3.24 of the Company Disclosure
Schedule sets forth a complete and correct list of all insurance policies
maintained by the Company or any of its Subsidiaries and indicating for each
policy the insurance company, type of coverage, annual premium and whether the
terms of such policy provide for retrospective premium adjustments, together
with a history of all claims made by the Company thereunder since January 1,
2005, which insurance, except as described on Section 3.24 of the Company
Disclosure Schedule, will remain in full force and effect in accordance with
policy terms, with respect to all events occurring prior to the Closing
Date.  Section 3.24 of the Company Disclosure Schedule also states whether each
such policy is carried on a “claims made” or “occurrence” basis.  Each of such
policies are valid, outstanding and enforceable and there is no default with
respect to any provision contained in any such policy, nor has there been any
failure to give any notice or present any claim under any such policy in a
timely fashion or in the manner or detail required by the policy.  The Company
or one of its Subsidiaries has paid all premiums due, and has otherwise
performed all of its obligations, under each policy of insurance to which it is
a party or that provides coverage to the Company or one of its Subsidiaries.  No
notice of cancellation or non-renewal with respect to, or disallowance of any
claim under, any such policy has been received by the Company or any of its
Subsidiaries.  Neither the Company nor any of its Subsidiaries has been refused
any insurance, nor has its coverage been limited by any insurance carrier to
which it has applied for insurance or with which it has carried insurance during
the last five years.  The Company or any of its Subsidiaries have never
maintained, established, sponsored, participated in or contributed to any
self-insurance plan.  There are no outstanding claims under any such policy
which have gone unpaid for more than thirty (30) days, or as to which the
insurer has disclaimed liability.
 
3.25       Relationships with Affiliates and Related Persons.  Except as
disclosed in Section 3.25 of the Company Disclosure Schedule, neither the
Company, nor any of its Subsidiaries, nor the Seller nor any their respective
Affiliates, shareholders, members, directors, officers, or managers has, or has
had, any interest in any property (whether real, personal or mixed and whether
tangible or intangible) used in or pertaining to the Company’s assets,
properties, operations and the Business.  Neither the Company, nor any of its
Subsidiaries, nor the Seller nor any of their respective Affiliates,
shareholders, members, directors, officers, or managers owns, or has owned, of
record or as a beneficial owner, an equity interest or any other financial or
profit interest in any Person that has (a) had business dealings or a material
financial interest in any transaction with the Company or any of its
Subsidiaries other than business dealings or transactions disclosed in Section
3.25 of the Company Disclosure Schedule, each of which has been conducted in the
Ordinary Course of Business with the Company or one of its Subsidiaries at
substantially prevailing market prices and on substantially prevailing market
terms or (b) engaged in competition with the Company or one of its Subsidiaries
with respect to any line of the products or services of the Company or any of
its Subsidiaries in any market presently served by the Company or any of its
Subsidiaries.  Except as set forth in Section 3.25 of the Company Disclosure
Schedule, neither the Company, nor any of its Subsidiaries nor the Seller nor
any of their respective Affiliates, shareholders, members, directors, officers,
or managers is a party to any Contract with, or has any claim or right against,
the Company or any of its Subsidiaries.
 
 
31

--------------------------------------------------------------------------------

 
 
3.26       Banks.  Section 3.26 of the Company Disclosure Schedule contains a
complete and correct list of the names and locations of all banks in which the
Company or any of its Subsidiaries has accounts or safe deposit boxes, and the
names of all persons authorized to draw thereon or to have access thereto.
 
3.27       Foreign Corrupt Practices Act and International Trade
Sanctions.  None of the Company, any of its Subsidiaries or any of their
respective officers, directors, agents, employees or any other person acting on
its behalf has, directly or indirectly (i) used any corporate or other funds for
unlawful contributions, payments, gifts, or entertainment, or made any unlawful
expenditures relating to a political activity, to government officials,
candidates or members of political parties or organization, or established or
maintained any unlawful or unrecorded funds in violation of Section 104 of the
Foreign Corrupt Practices Act of 1977, as amended, or any similar applicable
Law, (ii) paid, accepted or received any unlawful contributions, payments,
expenditures or gifts, or (iii) violated or failed to comply with any export
restrictions, anti-boycott regulations, embargo restrictions or other similar
applicable Law.
 
3.28       Brokers and Finders.  Except as set forth on Section 3.28 of the
Company Disclosure Schedule, neither the Company nor any of its Subsidiaries has
employed any broker or finder or incurred any liability for any financial
advisory fees, brokerage fees, commissions or finders’ fees, and no broker or
finder has acted directly or indirectly for the Company or any of its
Subsidiaries in connection with this Agreement or the transactions contemplated
herein.
 
3.29       Books and Records.  The books and records of the Company and its
Subsidiaries delivered or made available to Buyer are complete and accurate in
all material respects and reflect the assets, liabilities, prospects, business,
financial condition and results of operations of the Company and its
Subsidiaries and have been maintained in accordance with prudent business
practices.
 
3.30       Disclosure.  No representation or warranty made under any provisions
of this Agreement (including the exhibits and schedules hereto) nor any
information furnished by the Seller in any other agreement, document,
certificate, schedule, list or other writing furnished or to be furnished to
Buyer pursuant hereto, contains or will contain when made any untrue statement
of a material fact or omits or will omit when made to state a material fact
necessary in order to make the statements contained herein or therein, in light
of the circumstances under which such statements are made, not
misleading.  There is no fact known to the Seller or the Company which could
reasonably be expected to have, individually or in the aggregate, a Material
Adverse Effect that has not been set forth in this Agreement or any Schedule
hereto.
 
 
32

--------------------------------------------------------------------------------

 
 
IV.  REPRESENTATIONS AND WARRANTIES OF BUYER
 
Buyer and HSCC, jointly and severally, hereby represent and warrant to the
Seller as of the date hereof and as of the Closing Date:
 
4.1         Organization.  Buyer is a corporation duly incorporated, validly
existing and in good standing under the laws of the state of its
incorporation.  Buyer has all requisite corporate power and authority to own,
lease and operate its properties and assets and to carry out its business as and
where now being conducted.
 
4.2         Authority and Enforceability.  Buyer has full corporate power and
authority to execute and deliver this Agreement and to perform its obligations
hereunder and to consummate the transactions contemplated hereby. The execution,
delivery and performance of this Agreement and all other agreements and
documents to be delivered by Buyer pursuant to the provisions of this Agreement
(the “Buyer Documents”) have been duly authorized by all necessary company
action on the part of Buyer and no other proceedings on the part of Buyer are
necessary to authorize this Agreement or the Buyer Documents or to consummate
the transactions contemplated hereby.  This Agreement has been, and at the
Closing the Buyer Documents shall be, duly executed and delivered by Buyer and
constitute, or shall constitute, the legal, valid and binding obligation of
Buyer enforceable in accordance with their respective terms.
 
4.3         Third-Party Consents.  Except as set forth on Schedule 4.3, no
consent, authorization or approval of, and no registration or filing with, any
Person is required for the execution, delivery and performance of this Agreement
and the Buyer Documents by Buyer and the consummation of the transactions
contemplated hereby.
 
4.4         No Conflict or Violation.  Neither the execution and delivery of
this Agreement or the Buyer Documents nor the consummation by Buyer of any of
the transactions contemplated hereby do or will (with or without notice or lapse
of time or both) (a) contravene, conflict with or result in a violation of any
provision of the Organizational Documents of Buyer; (b) contravene or conflict
with or result in a violation of any Law or any Governmental Order to which
Buyer is subject; (c) contravene or conflict with or result in a violation of
any of the terms or requirements of any License applicable to Buyer; or (d)
contravene or conflict with, result in any breach of, constitute a default
under, any material Contract to which Buyer is a party.
 
4.5         Investment Intent.  Buyer is acquiring the Shares for its own
account for investment and not with a view to their distribution within the
meaning of Section 2(11) of the Securities Act.  Buyer understands that the
Shares have not been registered under the Securities Act or any state securities
laws and are being transferred to Buyer, in part, in reliance on the foregoing
representation.
 
4.6         Brokers and Finders.  Buyer has not employed any broker or finder or
incurred any liability for any financial advisory fees, brokerage fees,
commissions or finders’ fees, and no broker or finder has acted directly or
indirectly for Buyer in connection with this Agreement or the transactions
contemplated herein.
 
 
33

--------------------------------------------------------------------------------

 
 
V.  PRE-CLOSING COVENANTS
 
5.1         Access and Investigation.
 
(a)           Between the date of this Agreement and the Closing Date, and upon
reasonable notice, the Company will, and the Seller will cause the Company, its
Subsidiaries and its Representatives to, (a) afford Buyer and its
Representatives (collectively, “Buyer Group”) full and free access, during
regular business hours, to the Company’s and its Subsidiaries’ personnel,
properties (including subsurface testing), Contracts, Licenses, books and
records and other documents and data, such rights of access to be exercised in a
manner that does not unreasonably interfere with the operations of the Company
and its Subsidiaries; (b) furnish Buyer Group with copies of all such Contracts,
Licenses, books and records and other documents and data as Buyer may reasonably
request; (c) furnish Buyer Group with such additional financial, operating and
other relevant data and information as Buyer may reasonably request; (d) provide
reasonable access to the Significant Suppliers and Significant Customers of the
Company and its Subsidiaries in a manner as shall be mutually agreeable between
Buyer and the Company; (e) make available (i) all Representatives of the Company
and its Subsidiaries for discussion of the Company’s businesses, properties or
personnel and (ii) all Company Employees for discussion of the post-Closing
employment arrangements with Buyer as the Buyer may reasonably request; and (f)
otherwise cooperate and assist, to the extent reasonably requested by Buyer,
with Buyer’s investigation of the properties, assets and financial condition
related to the Company and its Subsidiaries. No investigation pursuant to this
Section 5.1 or otherwise shall affect any representations, warranties, covenants
or agreements of the Company or the Seller set forth herein.
 
(b)           Without limiting the generality of Section 5.1(a), prior to the
Closing Date, the Company shall deliver to Buyer within fifteen (15) days after
the last day of each calendar month, an unaudited balance sheet for the Company
and its Subsidiaries as of the end of such month and the related statements of
income and cash flow for the Company and its Subsidiaries for such monthly
period, prepared by the Company and certified by the Company’s Chief Financial
Officer (the “Pre-Closing Financial Statements”).  The Pre-Closing Financial
Statements shall be prepared in accordance with the books and records of the
Company and its Subsidiaries and fairly and accurately present the financial
condition of the Company and its Subsidiaries as of the dates indicated and the
results of operations of the Company and its Subsidiaries for the respective
periods indicated, and shall be prepared in accordance with GAAP, except for the
absence of complete footnote disclosure as required by GAAP, and subject to
changes resulting from normal year-end audit adjustments, which adjustments
shall not in any event be material.
 
5.2         Conduct of Business.
 
(a)           Except as otherwise contemplated by this Agreement, during the
period from the date of this Agreement and continuing until the Closing Date,
the Company shall and shall cause its Subsidiaries, and the Seller agrees to
cause the Company and its Subsidiaries to operate the Business in the Ordinary
Course of Business, and to use all commercially reasonable efforts to:
 
 
34

--------------------------------------------------------------------------------

 
 
(i)           preserve the Business intact and conserve the goodwill related
thereto;
 
(ii)          preserve intact the present business organization of the Company
and its Subsidiaries and keep available the services of the Company and its
Subsidiaries’ officers, agents and Company Employees;
 
(iii)         to maintain in effect the Material Contracts; and
 
(iv)         preserve present relationships with suppliers, customers, lenders
and others having business dealings with them.
 
(b)           In connection with the foregoing, and without limiting the
generality of this Section 5.2, between the date hereof and the Closing Date,
the Company shall and shall cause its Subsidiaries, and the Seller shall cause
the Company and its Subsidiaries to:
 
(i)           maintain the Company and its Subsidiaries’ assets (including
offices, properties and equipment) in the Ordinary Course of Business in good
operating order and condition, reasonable wear and tear excepted;
 
(ii)          continue to extend customers credit, collect Receivables and pay
accounts payable and similar obligations and otherwise handle short-term assets
and liabilities in the Ordinary Course of Business;
 
(iii)         maintain in full force and effect and in the same amounts policies
of insurance comparable in amount and scope of coverage to that now maintained
by or on behalf of the Company or its Subsidiaries;
 
(iv)         continue to maintain its books and records in accordance with GAAP;
 
(v)          maintain its Licenses and continue to actively pursue Licenses in
process;
 
(vi)         continue its cash management practices in the Ordinary Course of
Business;
 
(vii)        confer with Buyer prior to implementing operational decisions of a
material nature; and
 
(viii)       otherwise report periodically to Buyer concerning the status of its
Business, operations and finances.
 
(c)           Without the prior written consent of Buyer, neither the Company
nor any of its Subsidiaries shall make or change any election, change any annual
accounting period, adopt or change any accounting method, file any amended Tax
Return, enter into any closing agreement, settle any Tax claim or assessment
relating to the Company or any of its Subsidiaries, surrender any right to claim
a refund of Taxes, consent to any extension or waiver of the limitation period
applicable to any Tax claim or assessment relating to the Company or any of its
Subsidiaries, or take any other similar action relating to the filing of any Tax
Return or the payment of any Tax, if such election, adoption, change, amendment,
agreement, settlement, surrender, consent or other action would have the effect
of increasing the Tax liability of the Company or any of its Subsidiaries for
any period ending after the Closing Date or decreasing any Tax attribute of the
Company or any of its Subsidiaries existing on the Closing Date.
 
 
35

--------------------------------------------------------------------------------

 
 
(d)           Without the prior written consent of Buyer, neither the Company
nor any of its Subsidiaries shall fail to maintain in full force and effect all
insurance currently in effect, hire or terminate any employee, consultant or
independent contractor, change the compensation (including bonus or commission
payments) payable or to become payable to its Company Employees, or grant any
severance or termination pay or stock options to, or enter into or amend any
Contract with any director, officer or employee of the Company, or establish,
adopt, enter into or amend any bonus, compensation, stock or other equity
option, deferred compensation, employment, termination, severance or other plan,
agreement or arrangement for the benefit of any current or former Company
Employee, or adopt a plan of complete or partial liquidation, dissolution,
merger, consolidation, restructuring, recapitalization or other reorganization.
 
(e)           Without the prior written consent of Buyer, and without limiting
the generality of any other provision of this Agreement, the Company shall not
and shall cause its Subsidiaries, and the Seller shall cause the Company and its
Subsidiaries not to take any affirmative action, or fail to take any reasonable
action within its control, as a result of which any of the changes or events
listed in Section 3.9 would be likely to occur.
 
5.3         Consents and Approvals; Regulatory Filings.
 
(a)           The Company will, and the Seller will cause the Company and its
Subsidiaries to, use all commercially reasonable efforts and make every good
faith attempt to obtain, prior to the Closing Date, all Consents specified in
Section 3.4 of the Disclosure Schedule.
 
(b)           Notwithstanding Section 5.3(a), the Parties understand and agree
that the Seller and the Company will be required to file certain documents and
obtain certain approvals in order to complete the transactions contemplated
hereby, which filings and approvals include, without limitation, the filings
with Governmental Authorities (and in each of the states) set forth on Schedule
5.3 in support of the Seller’s and the Company’s request for approval of a
change in control of the Company and certain of its Subsidiaries (the
“Filings”).  Each Party will furnish all information, including certificates,
consents and opinions of experts, deemed reasonably necessary by the other Party
for the preparation of the Filings.
 
(c)           Buyer shall use commercially reasonable efforts to cooperate with
the Seller and the Company in providing information necessary to complete the
Filings and in obtaining the approval of the transactions contemplated herein by
the necessary Governmental Authorities in each of the states set forth on
Schedule 5.3. Buyer, the Seller, the Company and its Subsidiaries each shall
cooperate and coordinate with each other in taking such actions as may be
required to obtain such approvals, including, without limitation, giving notice
of any public hearing regarding this Agreement or the transaction contemplated
hereby to any persons required by such Governmental Authorities in the manner
prescribed by such Governmental Authorities and submitting such information as
may be reasonably available pursuant to the requests by such Governmental
Authorities.  The Seller will use commercially reasonable efforts to file or
send notices to Governmental Authorities as soon as possible following the
signing of this Agreement.
 
 
36

--------------------------------------------------------------------------------

 
 
5.4         Commercially Reasonable Efforts.  Subject to the terms and
conditions of this Agreement, each of the Parties shall use all commercially
reasonable efforts to take, or cause to be taken, all actions and to do, or
cause to be done, all things necessary or advisable to consummate the
transactions provided for in this Agreement as soon as reasonably practicable.
 
5.5         Update Schedules.  The Company shall, and the Seller shall cause the
Company to, promptly disclose to Buyer any information contained in its
representations and warranties or the Schedules which, because of an event
occurring after the date hereof, is incomplete or is no longer correct as of all
times after the date hereof until the Closing Date; provided, however, that none
of such disclosures shall be deemed to modify, amend or supplement the
Disclosure Schedule for the purpose of determining the accuracy of any of the
representations and warranties made by the Company and the Seller in this
Agreement, including for purposes of Article II, Article III or Article VIII
hereof, unless Buyer shall have consented thereto in writing.
 
5.6         Exclusivity.  The Company and the Seller grant to Buyer the
exclusive right to acquire the Shares until the Final Termination Date.  The
Company shall not and shall cause its Subsidiaries not to, and the Seller shall
cause the Company and its Subsidiaries not to, directly or indirectly (a)
solicit, initiate or encourage the submission of any proposal or offer from any
Person relating to the acquisition of the Shares or any capital stock or other
voting securities, or any substantial portion of the assets of, the Company or
any of its Subsidiaries (including any acquisition structured as a merger,
consolidation or share exchange) or (b) participate in any discussions or
negotiations regarding, furnishing any information with respect to, assist or
participate in, or facilitate in any other manner any effort or attempt by any
Person to do or seek any of the foregoing.  The Seller will notify Buyer
immediately if any Person makes any proposal, offer, inquiry or contact with
respect to any of the foregoing and the Seller shall provide copies and disclose
the terms thereof to Buyer, and shall immediately cease and cause to be
terminated and shall use its reasonable best efforts to cause all Company/Seller
Representatives to immediately terminate and cause to be terminated all existing
discussions or negotiations with any such Persons.  Without limiting the
foregoing, it is agreed that any violation of the restrictions set forth above
by any Affiliate of the Company, its Subsidiaries or the Seller or any of their
Representatives, whether or not such Person is purporting to act on behalf of
the Company, any of its Subsidiaries or the Seller, shall be deemed to be a
breach of this Section 5.6 by the Company, its Subsidiary or the Seller, as
applicable.
 
5.7         Confidentiality.
 
(a)           The confidentiality agreement between DJSP Enterprises, Inc. and
all of its Affiliates, on the one hand, and HSCC and all of its Affiliates, on
the other hand, dated April 12, 2011 shall continue in effect until the Closing
occurs.
 
(b)           From and after the Closing Date, the Seller shall hold, and shall
cause its Representatives to hold, in confidence all confidential data or
information with respect to the Company and its Business and all terms and
conditions of this Agreement using the same standard of care to protect such
confidential data or information or terms and conditions as it used to protect
such confidential information prior to the Closing Date.
 
 
37

--------------------------------------------------------------------------------

 
 
VI.  ADDITIONAL COVENANTS
 
6.1         Assistance in Proceedings.  The Company shall and shall cause its
Subsidiaries to, and the Seller shall cause the Company and its Subsidiaries to,
cooperate with Buyer and its Representatives in the contest or defense of, and
make available its personnel and provide any testimony and access to its books
and records in connection with, any Proceeding involving or relating to (a) any
of the transactions contemplated by this Agreement or (b) any action, activity,
circumstance, condition, conduct, event, fact, failure to act, incident,
occurrence, plan, practice, situation, status or transaction on or before the
Closing Date involving the Company, its Subsidiaries or its Business or the
Seller.
 
6.2         Retention of and Access to Books and Records.  After the Closing
Date, Buyer shall retain for a period consistent with Buyer’s record-retention
policies and practices the books and records of the Company and its
Subsidiaries.  Buyer shall provide the Seller and its Representatives reasonable
access thereto, during normal business hours and on at least three days’ prior
written notice, for any reasonable business purpose specified by the Seller in
such notice, including, but not limited to, verification of the Final Working
Capital, Working Capital adjustments, and Contingent Payment amounts,
preparation of SEC filings or response to SEC requests, preparation of financial
statements or tax returns, or dealing with tax audits. After the Closing Date,
the Seller shall provide Buyer and its Representatives reasonable access to such
books and records of the Seller relating to the Company, its Subsidiaries or the
Business during normal business hours and on at least three days’ prior written
notice, for any reasonable business purpose specified by Buyer in such notice.
 
6.3         Further Assurances.  After the Closing, without further
consideration, the Company shall, and the Seller shall and shall cause its
Subsidiaries to cause the Company and its Subsidiaries to, execute, acknowledge,
and deliver any further deeds, assignments, conveyances, and other assurances,
documents, and instruments of transfer, reasonably requested by Buyer, and shall
take any other action consistent with the terms of this Agreement that may
reasonably be requested by Buyer for the purpose of assigning, transferring and
delivering the Shares to Buyer or to better enable Buyer to complete, perform or
discharge any of the liabilities or obligations assumed by Buyer.  Each of the
Parties will cooperate with the other and execute and deliver to the other
parties hereto such other instruments and documents and take such other actions
as may be reasonably requested from time to time by any other party hereto as
necessary to carry out, evidence and confirm the intended purposes of this
Agreement.
 
6.4         Press Releases.  Except as required by applicable law, the Seller
and the Company shall not and the Company shall cause its Subsidiaries not to,
(and each shall use commercially reasonable efforts to cause their respective
Representatives not to), give notice to third parties or otherwise make any
public statement or releases concerning this Agreement or the transactions
contemplated hereby except for such written information as shall have been
approved in writing as to form and content by Buyer.
 
 
38

--------------------------------------------------------------------------------

 
 
6.5         Covenant Not to Compete; Non-Solicitation.
 
(a)           Solicitation of Work or Business. The Seller agrees that for a
period commencing on the Closing Date and ending on the second anniversary of
the Closing Date (the “Restricted Period”) it will not, directly or indirectly,
own any interest in, manage, control, participate in, consult with, render
services for, or in any other manner engage in any business that is competitive
with the Business; provided, however, that the foregoing shall not prohibit the
Seller or from the passive ownership (i.e., the Seller does not directly or
indirectly participate in the business or management of the applicable entity)
of less than 1% of the stock of a publicly-held company whose stock is traded on
a national securities exchange.  The Seller agrees that this Section 6.5(a) is
reasonable with respect to its duration, geographical area and scope.  In
particular, the Seller acknowledges and agrees that the geographic scope of this
restriction is necessary to protect the goodwill and confidential and
proprietary information of the Company.
 
(b)           During the Restricted Period, the Seller agrees that it will not,
directly or indirectly, (i) induce, encourage or solicit any customer, supplier,
licensee, licensor, or other business relation of the Company to cease doing or
reduce its business with the Company or (ii) in any way interfere with the
relationship between any such customer, supplier, licensee, licensor or other
business relation of the Company (including, but not limited to, making any
negative or disparaging statements or communications about the Company).
 
(c)           During the Restricted Period, the Seller will not, and will cause
its board of managers, officers, and key employees not to, directly or
indirectly, induce, encourage or solicit any employee, independent contractor or
agent of the Company, other than Stephen J. Bernstein, to leave the employ of
the Company or sever its agency relationship with the Company and will not, and
will cause its directors, officers, managers and key employees not to, directly
or indirectly, employ any person who was an employee or agent of the Company at
any time during the six (6) months preceding the first solicitation or hiring of
such person.
 
(d)           Buyer and the Seller specifically acknowledge and agree that the
remedy at Law for any breach of this Section 6.5 will be inadequate and Buyer,
in addition to any other relief available to it, shall be entitled to seek
temporary and permanent injunctive relief.
 
(e)           If the final judgment of a court of competent jurisdiction
declares that any term or provision of this Section 6.5 is invalid or
unenforceable, Buyer and the Seller agrees that the court making the
determination of invalidity or unenforceability shall have the power to reduce
the scope, duration, or area of the term or provision with a term or provision
that is valid and enforceable and that comes closest to expressing the intention
of the invalid or unenforceable term or provision.
 
6.6         Waiver of Earnout Obligations; Distribution of Escrow Fund.  Prior
to the Closing, the Seller and the Company shall, and shall cause the Seller’s
Representative and any other applicable Buyer’s Indemnified Person (as each such
terms are defined in the SPA) to, issue and deliver to the Escrow Agent (as such
term is defined in the 2010 Escrow Agreement) in accordance with the 2010 Escrow
Agreement, a joint instruction for distribution of the Escrow Fund (as such term
is defined in the 2010 Escrow Agreement) to the former shareholders of the
Company whose names and percentages of former share ownership of the Company are
listed on Schedule 6.6 (the “Shareholders”) and shall terminate the 2010 Escrow
Agreement in accordance with its terms.  In addition, the Shareholders whose
percentage of former share ownership of the Company, in the aggregate, shall not
be less than 87% of the Company (collectively, the “Designated Shareholders”),
the Company and the Seller shall enter into an agreement, pursuant to which,
among other things, the Designated Shareholders shall waive, in exchange for the
receipt of their portion of the Escrow Fund, any right to receive any contingent
payment under the SPA.
 
 
39

--------------------------------------------------------------------------------

 
 
VII.  CONDITIONS TO CLOSING
 
7.1         Conditions to Obligation of Each Party.  The respective obligations
of each party to effect the Closing shall be subject to the satisfaction at or
prior to the Closing of the following conditions:
 
(a)           No Injunctions or Restraints; Illegality.  No temporary
restraining order, preliminary or permanent injunction or other similar order
(whether temporary, preliminary or permanent) issued by any court of competent
jurisdiction or other legal restraint or prohibition shall be in effect which
prevents the consummation of the transactions contemplated hereby, nor shall any
Proceeding brought by any Governmental Authority seeking any of the foregoing be
pending, and there shall not be any action taken, or any Law enacted, entered,
enforced or deemed applicable to the transactions contemplated hereby, which
makes the consummation of such transactions, as contemplated herein, illegal.
 
(b)           Governmental Approvals.  All approvals of, or declarations or
filings with, any Governmental Authority necessary for the consummation of the
transactions contemplated hereby, if any, shall have been obtained or made.
 
7.2         Conditions to Obligations of Buyer.  The obligations of Buyer to
consummate the transactions provided for by this Agreement are subject, at the
discretion of Buyer, to the satisfaction at or prior to the Closing of each of
the following conditions:
 
(a)           The representations and warranties contained in Article II and
Article III of this Agreement that are qualified by “materiality,” “Material
Adverse Effect” or a similar qualifier shall be true and correct in all
respects, and each of such representations and warranties that is not so
qualified shall be true and correct in all material respects, in each case, as
of the date hereof and as of the Closing Date as if originally made as of the
Closing Date, except that those representations and warranties that are made as
of a specific date shall be determined as of such date, and Buyer shall have
received a certificate to such effect signed by the Seller and the Company.
 
(b)           All of the agreements and covenants that Seller and the Company
are required to perform or comply with pursuant to this Agreement at or prior to
the Closing Date shall have been performed or complied with in all material
respects, and Buyer shall have received a certificate to such effect signed by
the Seller and the Company.
 
(c)           Since the date of this Agreement, there shall not have occurred a
Material Adverse Effect, or any events, changes, developments or effects which,
individually or in the aggregate, could reasonably be expected to have a
Material Adverse Effect, and Buyer shall have received a certificate to such
effect signed by the Seller and the Company.
 
 
40

--------------------------------------------------------------------------------

 
 
(d)           Each of the Consents specified in Sections 2.3 of the Seller
Disclosure Schedule and 3.4 of the Company Disclosure Schedule, and on Schedules
4.3 and 5.3 or otherwise necessary to permit the transactions contemplated by
this Agreement shall have been obtained and shall be in full force and effect.
 
(e)           As of the Closing, each Post-Closing Employment Agreement
delivered by the Designated Employees on the date hereof shall be in full force
and effect and each Designated Employee shall have performed or complied with
each obligation, agreement, and covenant to be performed or complied with by
such Designated Employee thereunder on or prior to the Closing Date.
 
(f)            The Escrow Fund (as such term is defined in the 2010 Escrow
Agreement) shall have been distributed to the Shareholders as contemplated by
Section 6.6.
 
(g)           The 2010 Escrow Agreement shall have been terminated.
 
(h)           Resignations and releases executed by such of the managers,
directors and officers of the Company and its Subsidiaries as are designated by
Buyer shall have been delivered to Buyer in the form reasonably satisfactory to
Buyer.
 
(i)            The Company shall have obtained and delivered to Buyer a written
consent with respect to each of the Leases pursuant to which consent of the
landlord or other party is required, and a waiver of landlord liens, collateral
assignment of lease or leasehold mortgage from the landlord or other party whose
consent thereto is required under each such Lease (the “Lease Consents”), in
form and substance satisfactory to Buyer.
 
(j)            No action, suit or proceeding shall have been instituted by any
Person which seeks to prohibit, restrict or delay consummation of the
transactions contemplated herein or any of the conditions material to
consummation of the transactions contemplated herein.
 
(k)           Dykema Gossett PLLC, counsel to the Seller and the Company, shall
have delivered to Buyer a legal opinion in the form attached hereto as Exhibit
A.
 
(l)            The Company shall have delivered to Buyer copies of waivers
executed by the Designated Shareholders with respect to the earn-out under the
SPA, as contemplated by Section 6.6.
 
(m)          The Company and each Subsidiary shall have delivered to Buyer a
certificate of the Company’s or such Subsidiary’s Secretary, dated as of the
Closing Date, in form and substance reasonably satisfactory to Buyer, certifying
as to and attaching (if applicable): (i) its complete and accurate copies of the
Organizational Documents, (ii) the incumbency of the officers executing this
Agreement and (iii) complete and accurate copies of resolutions of the Board of
Directors and the sole stockholder authorizing and approving the execution,
delivery and performance of this Agreement and the transactions contemplated
hereby, and the acts of the officers of the Company in carrying out the terms
and provisions hereof and thereof.
 
 
41

--------------------------------------------------------------------------------

 

 
(n)           The Company and each Subsidiary shall have delivered to Buyer a
certificate of legal existence and corporate good standing from the Secretary of
State of its jurisdiction of incorporation and any jurisdiction where it is
qualified to do business, which certificates shall be dated no more than three
(3) Business Days prior to the Closing Date.
 
(o)           The Seller shall have delivered to Buyer a duly executed and
acknowledged certificate, in form and substance acceptable to Buyer and in
compliance with the Code and Treasury Regulations, certifying such facts as to
establish that the sale of the Shares are exempt from withholding under Section
1445 of the Code.
 
(p)           The Seller and each Affiliate of the Company shall have executed
and delivered to Buyer a general release in favor of Buyer and its Affiliates in
the form attached hereto as Exhibit B, which shall include, among other things,
a release of any claims the Seller or its Affiliates may have against the
Company under the SPA (each, a “General Release”).
 
(q)           The signatories to the bank accounts of the Company shall have
been changed to Buyer’s satisfaction.
 
(r)           The Seller and the Company shall have delivered to Buyer written
consents to the transactions contemplated by this Agreement  from the Seller’s
creditors listed on Schedule 7.2(r) in the form and substance reasonably
satisfactory to Buyer.
 
(s)           The Seller and the Company shall have delivered to Buyer the
Escrow Agreement duly executed by the Seller, the Company and the Escrow Agent.
 
(t)            All Liens on any of the assets of the Company shall have been
fully released and discharged pursuant to such documents in form and substance
reasonably satisfactory to Buyer, and the Seller or the Company shall have made
all necessary filings and taken all other action necessary to effect such
releases and discharges including, without limitation, filing all necessary UCC
termination statements in all applicable jurisdictions.
 
(u)           Buyer shall have received from the Seller audited consolidated
financial statements (“Audited Financial Statements”) of the Company and its
Subsidiaries for all years required to be included in a Form 8-K to be filed by
HSCC as a result of consummation of this Agreement, with such Audited Financial
Statements to be prepared in accordance with GAAP, consistently applied
throughout the periods, and with the report of the Company’s auditor and consent
in connection therewith to be unqualified.
 
(v)           Any intercompany indebtedness, including any payments due by the
Company to the Seller for services rendered by the Seller or its Affiliates
prior to the Closing Date, shall be paid in full or otherwise discharged prior
to the Closing.
 
(w)           The Seller and Default Servicing, LLC, a Delaware limited
liability company and a wholly-owned subsidiary of the Seller (“Default”) shall
have entered into, and consummated the transactions contemplated by, an asset
purchase agreement by and among HSCC or its Affiliate, the Seller and Default
(the “Asset Purchase Agreement”), pursuant to which HSCC or such Affiliate shall
purchase substantially all of the assets of Default.
 
 
42

--------------------------------------------------------------------------------

 
 
(x)           The Company shall have been released as a guarantor of any and all
Company Indebtedness or Indebtedness of the Seller or any of its Affiliates,
including, without limitation, as a guarantor under the Bank of America
Agreements.
 
(y)           The Seller and the Company shall have delivered to Buyer such
other instruments, certificates, documents or materials as may be reasonably
requested by Buyer in connection with the consummation of the transactions
contemplated hereby.
 
7.3         Conditions to Obligations of Seller.  The obligations of the Seller
to consummate the transactions provided for by this Agreement are subject, in
the discretion of the Seller, to the satisfaction at or prior to the Closing
Date of each of the following conditions:
 
(a)           The representations and warranties of Buyer contained in this
Agreement shall have been true and correct on and as of the date hereof and
shall be true and correct on and as of the Closing Date as if originally made on
and as of the Closing Date, except that those representations and warranties
that are made as of a specific date shall be determined as of such date, and the
Seller shall have received a certificate to such effect signed by Buyer.
 
(b)           All of the agreements and covenants that Buyer is required to
perform or comply with pursuant to this Agreement at or prior to the Closing
Date shall have been performed or complied with in all material respects, and
the Seller shall have received a certificate to such effect signed by the Chief
Executive Officer of the Buyer.
 
(c)           Buyer shall have delivered to the Seller and the Company the
Escrow Agreement duly executed by the Buyer and the Escrow Agent.
 
(d)           HSCC and Buyer shall have delivered to the Seller a certificate of
HSCC’s or Buyer’s Secretary, dated as of the Closing Date, in form and substance
reasonably satisfactory to the Seller, certifying as to and attaching (if
applicable): (i) its complete and accurate copies of the Organizational
Documents, (ii) the incumbency of the officers executing this Agreement and
(iii) complete and accurate copies of resolutions of the Board of Directors and
the sole stockholder authorizing and approving the execution, delivery and
performance of this Agreement and the transactions contemplated hereby, and the
acts of the officers of the Company in carrying out the terms and provisions
hereof and thereof.
 
(e)           HSCC and Buyer shall have delivered to the Seller a certificate of
legal existence and corporate good standing from the Secretary of State of its
jurisdiction of incorporation and any jurisdiction where it is qualified to do
business, which certificates shall be dated no more than three (3) Business Days
prior to the Closing Date.
 
(f)           No action, suit or proceeding shall have been instituted by any
Person which seeks to prohibit, restrict or delay consummation of the
transactions contemplated herein or any of the conditions material to
consummation of the transactions contemplated herein.
 
 
43

--------------------------------------------------------------------------------

 
 
(g)           The transactions contemplated by the Asset Purchase Agreement
shall have been consummated on or before a date set by the Seller by written
notice to HSCC and Buyer not earlier than June 30, 2011, unless HSCC and Buyer
waive the condition set forth in Section 7.2(w) by written notice to the Seller
within five (5) Business Days after the Seller’s notice.
 
(h)           HSCC and Buyer shall have delivered to the Seller and the Company
such other instruments, certificates, documents or materials as may be
reasonably requested by the Seller and the Company in connection with the
consummation of the transactions contemplated hereby.
 
VIII.  INDEMNIFICATION
 
8.1         Indemnification by Seller.  From and after the Closing, the Seller
shall indemnify and hold harmless Buyer, the Company, its Subsidiaries, their
successors and assigns, and their officers, directors, employees, agents and
Affiliates (“Buyer’s Indemnified Persons”), and prior to Closing, the Company
and its Subsidiaries, jointly and severally with the Seller, shall indemnify and
hold harmless Buyer and its officers, directors, employees, agents and
Affiliates, from and against, and shall reimburse such Persons for, any and all
losses, liabilities, damages, demands, deficiencies, judgments, assessments,
taxes, sanctions, levies, fines, penalties, costs, interest and Legal Expenses
(collectively, “Losses”), whether or not involving a third-party claim, arising
out of, based upon or in any way relating to:
 
(a)           any misrepresentation in, inaccuracy or breach of any
representation or warranty of the Seller or the Company set forth in this
Agreement or the Schedules, or in any certificate, transfer instrument,
document, writing, or other instrument delivered by the Seller or the Company
pursuant to this Agreement (disregarding, for purposes hereof, any materiality
standards, including any Material Adverse Effect standards set forth herein or
therein);
 
(b)           any breach or nonfulfillment of any covenant, agreement or other
obligation of the Seller or the Company in this Agreement or in any certificate,
document, writing or instrument delivered by the Seller or the Company pursuant
to this Agreement;
 
(c)           any claim or Liability related to (i) title and escrow claims, in
which the material facts underlying such claim occurred prior to the Closing
Date or (ii) any breach of an obligation, whether contractual or otherwise, that
occurred prior to the Closing Date, except with respect to obligations occurring
prior to the Closing Date which, by their terms, are to be performed on or after
the Closing Date;
 
(d)           any claim or Liability arising from or relating to products sold
or services performed by the Company on or before the Closing Date;
 
(e)           any claim or Liability to any current or former stockholder or
other security holder of the Company which arises out of or is based upon any
matter, event, dispute, fact or circumstance that existed on or prior to the
Closing Date (other than Liabilities to the Seller arising from the transactions
contemplated by this Agreement);
 
 
44

--------------------------------------------------------------------------------

 
 
(f)           any obligation, claim or Liability arising from or related to
claims under Employee Plans which have been incurred but not reported as of the
Closing Date;
 
(g)           any obligation, claim or Liability arising from or related to the
Company’s failure to comply with any law applicable to any Employee Plan on or
before the Closing Date;
 
(h)           any Pre-Closing Tax Liabilities;
 
(i)            any Company Indebtedness or transaction expenses of the Company
or the Seller not satisfied prior to the Closing;
 
(j)            any claim or Liability related to the SPA;
 
(k)           any claim or Liability related to the 2010 Escrow Agreement;
 
(l)            any claim related to avoiding or otherwise challenging any of the
transactions contemplated by this Agreement; and
 
(m)          enforcement of this Section 8.1.
 
8.2         Indemnification by Buyer.  Buyer and HSCC, jointly and severally,
shall indemnify and hold harmless the Seller (“Seller’s Indemnified Persons”)
from and against, and shall reimburse the Seller for, any and all Losses arising
out of, based upon or in any way relating to:
 
(a)           any misrepresentation in, inaccuracy or breach of any
representation or warranty of Buyer set forth in this Agreement or in any
certificate, transfer instrument, document, writing, or other instrument
delivered by Buyer pursuant to this Agreement;
 
(b)           any breach or nonfulfillment of any covenant, agreement or other
obligation of Buyer in this Agreement or in any certificate, document, writing
or instrument delivered by Buyer pursuant to this Agreement;
 
(c)           any claims by third parties to the extent caused by the acts or
omissions of the Company, its Subsidiaries or Buyer after the Closing Date,
including claims for Losses which arise out of Buyer’s operation of the Business
or by virtue of Buyer’s ownership of the Company after the Closing Date;
provided, however that Buyer shall not have any liability under this Section
8.2(c) to the extent that any action or omission giving rise to any such Loss
commenced prior to the Closing and continued following the Closing; and
 
(d)           enforcement of this Section 8.2.
 
8.3         Indemnification Process; Defense of Third-Party Claims.
 
(a)           If any legal proceedings shall be instituted or any claim is
asserted by any third party in respect of which any party hereto may have an
obligation to indemnify another party, the party asserting such right to
indemnity (the “Indemnified Party”) shall give the party from whom indemnity is
sought (the “Indemnifying Party”) written notice thereof, but any failure to so
notify the Indemnifying Party shall not relieve it from any liability that it
may have to the Indemnified Party other than to the extent the Indemnifying
Party is actually prejudiced thereby.
 
 
45

--------------------------------------------------------------------------------

 
 
(b)           The Indemnified Party may defend any third party claim with
counsel of its own choosing, and shall act in a commercially reasonable manner
and in accordance with its good faith business judgment in handling such third
party claim.  All costs (including attorneys’ fees) incurred by the Indemnified
Party in defending such third party claim shall be at the cost and expense of
the Indemnifying Party, and the Indemnifying Party will promptly reimburse the
Indemnified Party therefor in accordance with this Section 8.3.  The
Indemnifying Party shall have the right, at its option and expense, to
participate in the defense of such proceeding or claim, but not to control the
defense, negotiation or settlement thereof, which control shall at all times
rest with the Indemnified Party.  Notwithstanding the two preceding sentences,
if the Indemnifying Party (i) admits in writing its liability to the Indemnified
Party hereunder with respect to such proceeding or claim; and (ii) furnishes
evidence of its financial ability to indemnify the Indemnified Party reasonably
satisfactory to the Indemnified Party, the Indemnifying Party may assume control
of the defense at its expense through counsel reasonably satisfactory to such
Indemnified Party; provided, however, that:
 
(i)           the Indemnified Party shall be entitled to participate in the
defense of such claim and to employ counsel at its own expense to assist in the
handling of such claim; provided, however, that the employment of such counsel
shall be at the expense of the Indemnifying Party if the Indemnified Party
determines in good faith that such participation is appropriate in light of
defenses not available to the Indemnifying Party, conflicts of interest or other
similar circumstances;
 
(ii)          no Indemnifying Party shall consent to the entry of any judgment
or enter into any settlement that does not include as an unconditional term
thereof the giving by each claimant or plaintiff to each Indemnified Party of a
release from all liability in respect of such claim; and
 
(iii)         the Indemnifying Party shall not be entitled to control (but shall
be entitled to participate at its own expense in the defense of), and the
Indemnified Party shall be entitled to have sole control over, the defense or
settlement of (A) any claim to the extent the claim seeks an order, injunction,
non-monetary or other equitable relief against the Indemnified Party which, if
successful, could materially interfere with the business, operations, assets,
condition (financial or otherwise) or prospects of the Indemnified Party or (B)
any claim relating to Taxes.
 
(c)           If the Indemnified Party elects not to defend such third party
claim, the Indemnified Party shall promptly provide notice to the Indemnifying
Party.  After written notice by the Indemnifying Party to the Indemnified Party
of its assumption of control of the defense of any such action pursuant to this
Section 8.3, the Indemnifying Party shall not be liable to such Indemnified
Party hereunder for any Legal Expenses subsequently incurred by such Indemnified
Party in connection with the defense thereof other than reasonable costs of
investigation and of liaison counsel for the Indemnified Party; provided,
however, that the Indemnifying Party shall be liable for such Legal Expenses if
the Indemnified Party determines in good faith that the incurrence of the same
is appropriate in light of defenses not available to the Indemnifying Party,
conflicts of interest or other similar circumstances.  If the Indemnifying Party
does not assume control of the defense of such claim as provided in this Section
8.3, the Indemnified Party shall have the right to defend such claim in such
manner as it may deem appropriate at the cost and expense of the Indemnifying
Party, and the Indemnifying Party will promptly reimburse the Indemnified Party
therefor in accordance with this Section 8.3.  The reimbursement of fees, costs
and expenses required by this Section 8.3 shall be made by periodic payments
during the course of the investigations or defense, as and when bills are
received or expenses incurred.
 
 
46

--------------------------------------------------------------------------------

 
 
(d)           The Indemnified Party shall obtain the prior written approval of
the Indemnifying Party before entering into any settlement of a third party
claim or ceasing to defend against such claim (with such approval not to be
unreasonably withheld or conditioned).
 
(e)           The Indemnifying Party and the Indemnified Party shall make
available to each other and their counsel and accountants all books and records
and information relating to any third party claims, keep each other apprised as
to the details and progress of all proceedings relating thereto and render to
each other such assistance as may be reasonably required to ensure the proper
and adequate defense of any and all third party claims.
 
8.4          Other Claims.  A claim for indemnification for any matter not
involving a third-party claim shall be asserted by the Indemnified Party to the
Indemnifying Party in writing, setting forth specifically the obligation with
respect to which the claim is made, the facts giving rise to and the alleged
basis for such claim and, if known or reasonably ascertainable, the amount of
the liability asserted or which may be asserted by reason thereof, but any
failure to so notify the Indemnifying Party shall not relieve it from any
liability that it may have to the Indemnified Party other than to the extent the
Indemnifying Party is actually prejudiced thereby.
 
8.5          Survival.  Subject to the time limitations of this Section 8.5, all
representations, warranties, covenants and obligations contained in this
Agreement and in any certificate, document, writing or instrument delivered
pursuant to this Agreement shall survive the Closing and the consummation of the
transactions contemplated by this Agreement.  The representations and warranties
of each party contained in this Agreement shall survive the Closing for a period
of twelve (12) months following the Closing Date; provided, however, that (i)
the representations and warranties set forth in Sections 2.1 (Authority and
Enforceability), 2.4 (Ownership of Shares), 2.5 (No Bankruptcy) and 2.6
(Acknowledgement), and in Sections 3.1 (Organization), 3.3 (Subsidiaries), 3.6
(Capitalization), 3.25 (Relationships with Affiliates and Related Persons), and
3.28 (Brokers and Finders) shall survive indefinitely, (ii) the representations
and warranties set forth in Section 3.16 (Employee Benefit Plans) and Section
3.19 (Tax Returns and Taxes), shall survive until 60 days after the running of
the applicable statute of limitations with respect to the taxable period to
which the particular claim relates, and (iii) the representations and warranties
set forth in Sections 3.20 (Licenses) and 3.23 (Compliance with Laws) shall
survive for the length of the applicable statute of limitations.  Any claim for
indemnity under Sections 8.1(a) or 8.2(a) shall be asserted in writing within
the foregoing time periods, except for claims arising as a result of fraud,
willful breach, willful or intentional misrepresentation or omission of a
material fact in connection with this Agreement, or criminal liability, as to
which the limitations of this Section 8.5 shall not apply.  For convenience of
reference, the date upon which any representation or warranty shall terminate is
referred to herein as the “Survival Date.”  The right to indemnification,
reimbursement or other remedy based upon such representations, warranties,
covenants and obligations shall not be affected by any investigation conducted
with respect to, or any knowledge acquired (or capable of being acquired) at any
time, whether before or after the execution and delivery of this Agreement or
the Closing Date, with respect to the accuracy or inaccuracy of or compliance
with any such representation, warranty, covenant or obligation.
 
 
47

--------------------------------------------------------------------------------

 
 
8.6          Indemnification Limitations.
 
(a)           Except for Losses relating to breaches of Sections 2.1, 2.4, 2.5,
2.6, 3.1, 3.3, 3.6, 3.16, 3.19, 3.20, 3.23, 3.25, and 3.28, Losses arising as a
result of fraud, willful breach, willful or intentional misrepresentation or
omission of a material fact in connection with this Agreement or criminal
liability, and Losses relating to Sections 8.1(e), 8.1(j), 8.1(k) or 8.1(l), as
to all of which the limitations of this Section 8.6 shall not apply, (i) Buyer’s
Indemnified Persons may not assert any claim for Losses under Section 8.1(a)
until the aggregate amount of such claims under this Agreement exceed $25,000
(the “Basket”), whereupon (subject to Section 8.6(a)(ii) below) Buyer’s
Indemnified Persons shall be entitled to receive the amount of all Losses,
including the Basket; and (ii) in no event shall the aggregate liability of the
Seller for claims of Losses under Section 8.1 or otherwise exceed the amount
equal to the Remaining Payments (the “Cap”); provided, however, that the
Seller’s aggregate liability for claims of Losses under Section 8.1(a) shall not
exceed $250,000 (the “Mini Cap”).
 
(b)           Seller’s Indemnified Persons may not assert any claim for Losses
under Section 8.2(a), except for Losses relating to breaches of Sections 4.1,
4.2 or 4.5 and Losses arising as a result of fraud, willful breach, willful or
intentional misrepresentation or omission of a material fact in connection with
this Agreement, or criminal liability, as to which the limitations of this
Section 8.6 shall not apply, until the aggregate amount of such claims under
Section 8.2(a) exceed the Basket, whereupon Seller’s Indemnified Persons shall
be entitled to receive the amount of all Losses, including the Basket, and in no
event shall the aggregate liability of Buyer for claims of Losses under Section
8.2 exceed the amount equal to the Closing Payment plus the Remaining Payments
(except that Buyer’s aggregate liability for claims of Losses under Section 8.2
shall be reduced by the Mini Cap on the first anniversary of the Closing Date,
except with respect to claims made by Seller’s Indemnified Parties under Section
8.2(a) on or before the first anniversary of the Closing Date in accordance with
the terms of this Agreement, which shall survive and be subject to the Mini Cap
until such time as such claim or claims have been resolved); provided, however,
that Buyer’s aggregate liability for claims for Losses under Section 8.2(a)
shall not exceed the Mini Cap.
 
(c)           Notwithstanding the foregoing, neither Party may assert a claim
for Losses under this Article VIII unless such claim, individually, exceeds
$1,000.
 
8.7          Right of Setoff.  Subject to the right of Buyer to seek specific
performance and injunctive relief to enforce the terms of any covenants herein,
the Buyer shall satisfy any Losses which a Buyer’s Indemnified Party is entitled
to recover, pursuant to this Agreement or otherwise, solely by setting off,
recovering from, or collecting from (i) any Positive Working Capital Adjustment
Amount that would otherwise be payable to the Seller pursuant to Section 1.5,
and (ii) any Contingent Payment that is payable or that becomes payable to the
Seller pursuant to Section 1.6 (including any Contingent Payments or escrow
funds placed with the Escrow Agent pursuant to the terms of the Escrow
Agreement, whether held by the Escrow Agent or deposited by the Escrow Agent
with a court or other party in connection with the resolution of any dispute
relating to those payments) (the “Remaining Payments”).
 
 
48

--------------------------------------------------------------------------------

 

 
8.8          Exclusive Remedy.  Except for claims of fraud, willful breach,
willful or intentional misrepresentation or omission of a material fact in
connection with this Agreement, or criminal liability, the parties hereby
acknowledge and agree that from and after the Closing, subject to the right of
Buyer to seek specific performance and injunctive relief to enforce the terms of
any covenants herein, the exclusive remedy of the parties hereto with respect to
any and all claims arising in connection with or relating to the transactions
contemplated under this Agreement shall be pursuant to the provisions set forth
in this Article VIII.
 
8.9          Characterization of Payments.  The Parties agree that any payment
pursuant to an indemnification obligation under this Article VIII shall be
treated for Tax purposes as an adjustment to the Purchase Price.
 
8.10       Calculation of Losses.  Subject to the other provisions of this
Article VIII:
 
(a)           Each Indemnified Party shall use commercially reasonable efforts
to mitigate Losses, including seeking recovery under insurance policies and from
third parties.  Any insurance proceeds or recoveries from Third Parties received
by an indemnified party with respect to any Losses shall reduce, on a
dollar-for-dollar basis, the amount payable to such Indemnified Party under the
indemnification provisions of this Article VIII.
 
(b)           Neither the Seller nor the Company shall be required to make
indemnification payment pursuant to this Article VIII for any Loss reflected in
the calculation of the Working Capital.
 
IX.  TERMINATION
 
9.1          Termination.  This Agreement may be terminated at any time prior to
Closing:
 
(a)           by mutual consent of Buyer and the Seller;
 
(b)           by either Buyer or the Seller if there has been a material breach
of any representation or warranty, or breach or non-performance in any material
respect of a covenant or agreement on the part of the other party set forth in
this Agreement, which breach or failure to perform would render unsatisfied any
condition contained in Section 7.2 or 7.3, as applicable, and is incapable of
being cured, or, if capable of being cured, has not been cured by the breaching
party within ten days after the non-breaching party has notified the breaching
party;
 
(c)           by either Buyer or the Seller at any time after July 30, 2011 (the
“Final Termination Date”), provided that if the Closing shall not have occurred
by the Final Termination Date as the result of a breach of this Agreement, then
any party responsible for such breach may not avail itself of the right under
this Section 9.1, and provided further, that in any such event, the
non-breaching party(ies) shall not be deprived of any remedy hereunder or at law
against the breaching party, and provided further, that if the only condition
precedent not met as of the Final Termination Date is that the Parties have not
received all of the approvals of Governmental Authorities set forth on Schedule
5.3, then either Buyer or the Seller may extend the Final Termination Date to up
to three (3) months after the date of this Agreement; or
 
 
49

--------------------------------------------------------------------------------

 
 
(d)           by either Buyer or the Seller if a court of competent jurisdiction
or Governmental Authority shall have issued an order, decree or ruling or taken
any other action, in each case permanently restraining, enjoining or otherwise
prohibiting the transactions contemplated by this Agreement and such order,
decree, ruling or other action shall have become final and non-appealable.
 
(e)           unless HSCC and Buyer shall have waived the condition contained in
Section 7.2(w), by the Seller in the event the transactions contemplated by the
Asset Purchase Agreement shall not have been consummated prior to the date set
by the Seller in the written notice contemplated in Section 7.3(g).
 
9.2          Effect of Termination.  In the event of termination of this
Agreement pursuant to Section 9.1, this Agreement shall forthwith terminate and
become void, and there shall be no liability on the part of any party hereto to
any other and all rights and obligations of any party hereto will cease, except
that (a) this Section 9.2 and Article XI shall survive any such termination and
(b) nothing herein shall relieve any party from liability for any breach of this
Agreement prior to the termination hereof.
 
 
X.  TAXES
 
10.1        Transfer Taxes.  All sales, use and transfer taxes, including any
value added, stock transfer, gross receipts, stamp duty and real, personal, or
intangible property transfer taxes, due by reason of the consummation of the
purchase of the Shares hereunder (collectively, the “Transfer Taxes”), including
any interest or penalties in respect thereof, shall be borne by the Seller.  The
Seller and Buyer shall cooperate with each other and use their commercially
reasonable efforts to minimize the transfer taxes attributable to the transfer
of the Shares.
 
10.2        Cooperation on Tax Matters.
 
(a)           The Seller and Buyer agree to cooperate, and shall cause their
respective Affiliates, officers, employees, agents, auditors and representatives
to cooperate, and to furnish or cause to be furnished to the other, upon
request, as promptly as practicable, such information (including access to books
and records) and assistance relating to the Company and its Subsidiaries as is
reasonably necessary for the filing of any Tax Return, the preparation for any
Tax audit, the prosecution or defense of any claim, suit or proceeding relating
to any proposed Tax adjustment for which the Seller or Buyer retains liability
under Article VIII or this Article X.  Buyer and the Seller shall keep all such
information and documents received by them confidential unless otherwise
required by Law.
 
(b)           Buyer and the Seller agree to retain or cause to be retained all
books and records pertinent to the Company and its Subsidiaries until the
applicable period for assessment of Taxes under applicable Law (giving effect to
any and all extensions or waivers) has expired, and such additional period as
necessary for any administrative or judicial proceedings relating to any
proposed assessment, and to abide by and cause the Company and its Subsidiaries
to abide by all record retention agreements entered into with any Governmental
Authority with respect to Tax Matters.  The Seller and Buyer agree to give the
other reasonable notice prior to transferring, discarding or destroying any such
books and records relating to Tax matters and, if so requested, the Seller and
Buyer shall allow the requesting party to take possession of such books and
records.
 
 
50

--------------------------------------------------------------------------------

 
 
(c)           Buyer and the Seller shall cooperate with each other in the
conduct of any audit or other proceedings for any Tax purposes and they shall
each execute and deliver such powers of attorney and other documents as are
reasonably necessary to carry out the intent of this Agreement; provided,
however, that Buyer shall control the audit of any of the Company’s Tax Returns.
 
10.3        Tax Returns.  Buyer shall prepare or cause to be prepared and file
or cause to be filed all Tax Returns for the Company and its Subsidiaries that
are filed after the Closing Date. For any Tax Returns that apply to periods
prior to the Closing Date, Buyer shall provide a copy of such Tax Returns to the
Seller for review at least fifteen (15) days prior to the date on which Tax
Returns will be filed.  Any dispute over the Tax Returns arising between the
Seller and Buyer shall be submitted to a tax accountant chosen by the Seller for
determination in accordance with this Agreement.
 
10.4        Tax-Sharing Agreements.  All tax-sharing agreements or similar
agreements with respect to or involving the Company and its Subsidiaries shall
be terminated as of the Closing Date and, after the Closing Date, the Company
and its Subsidiaries shall not be bound thereby or have any liability
thereunder.
 
XI.  OTHER PROVISIONS
 
11.1        Waiver of Jury Trial.  EACH OF THE PARTIES HERETO WAIVES TO THE
FULLEST EXTENT PERMITTED BY APPLICABLE LAW ANY RIGHT IT MAY HAVE TO TRIAL BY
JURY IN RESPECT OF ANY CLAIM, DEMAND, ACTION OR CAUSE OF ACTION BASED ON, OR
ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS AGREEMENT, OR ANY COURSE OF
CONDUCT, COURSE OF DEALING, VERBAL OR WRITTEN STATEMENT OR ACTION OF ANY PARTY
HERETO, IN EACH CASE WHETHER NOW EXISTING OR HEREAFTER ARISING, AND WHETHER IN
CONTRACT, TORT, EQUITY OR OTHERWISE.  THE PARTIES HERETO EACH HEREBY AGREES THAT
ANY SUCH CLAIM, DEMAND, ACTION OR CAUSE OF ACTION SHALL BE DECIDED BY COURT
TRIAL WITHOUT A JURY AND THAT THE PARTIES HERETO MAY FILE AN ORIGINAL
COUNTERPART OF A COPY OF THIS AGREEMENT WITH ANY COURT AS EVIDENCE OF THE
CONSENT OF THE PARTIES HERETO TO THE WAIVER OF THEIR RIGHT TO TRIAL BY JURY.
 
11.2        Appendices, Annexes, Exhibits and Schedules.  All Recitals,
Appendices, Annexes, Exhibits and Schedules referred to herein are intended to
be and hereby are specifically made a part of this Agreement.
 
 
51

--------------------------------------------------------------------------------

 
 
11.3        Amendment.  This Agreement and the Appendices, Exhibits and
Schedules hereto may not be amended except by an instrument in writing signed on
behalf of each of the parties hereto.
 
11.4        No Waiver.  No failure of any party to this Agreement to exercise
any power or right given it under this Agreement, or to insist upon strict
compliance with any provision of this Agreement, and no custom or practice at
variance with the terms of this Agreement shall constitute a waiver any such
party’s right to demand strict compliance with the terms of this Agreement.
 
11.5        Entire Agreement.  This Agreement, together with the Appendices,
Exhibits and Schedules hereto, constitutes the entire Agreement between the
parties pertaining to the subject matter hereof and supersedes all prior and
contemporaneous agreements, understandings, negotiations and discussions,
whether oral or written, of the parties.
 
11.6        Governing Law.  This Agreement shall be governed by, construed,
interpreted and the rights of the parties determined in accordance with the laws
of the State of Delaware (regardless of the laws that might be applicable under
principles of conflicts of law).
 
11.7        Notices.  All notices and other communications hereunder shall be in
writing and shall be deemed given (a) on the day of service if served personally
on the party to whom notice is given, (b) on the date of receipt if delivered by
telecopy or nationally recognized overnight courier, or (c) on the third (3rd)
Business Day after deposit in the U.S. mail if mailed to the party to whom
notice is given by registered or certified mail, postage prepaid, return receipt
requested and properly addressed as follows:
 
If to Buyer or the Company, addressed to:

Homeland Security Capital Corporation
1005 North Glebe Road, Suite 550
Arlington, VA 22201
Attention:        C. Thomas McMillen
Facsimile:        (703) 528-0956
 
with a copy (which will not constitute notice) to:
Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C.
666 Third Avenue 
New York, NY 10017
Attention:        Kenneth R. Koch
Facsimile:        (212) 983-9115
 
If to the Seller, addressed to:
 
DAL Group, LLC
950 South Pine Island Road
Plantation, Florida 33324
Attention:        Stephen J. Bernstein, President and CEO
Facsimile:        (786) 999-0260
 
 
52

--------------------------------------------------------------------------------

 
 
with a copy (which will not constitute notice) to:
 
Dykema Gossett PLLC
400 Renaissance Center
Detroit, Michigan 48243
Attention:         Thomas S. Vaughn
Facsimile:         (313) 568-6594
 
or to such other place and with such other copies as either party may designate
as to itself by written notice to the others.
 
11.8        Execution of Agreement.  This Agreement may be executed in one or
more counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.  Copies (whether
photostatic, facsimile or otherwise) of this Agreement may be made and relied
upon to the same extent as an original.  The exchange of copies of this
Agreement and of signature pages by facsimile transmission or e-mail 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 e-mail shall be deemed to be their
original signatures for all purposes.
 
11.9        Specific Performance.  The Parties agree that irreparable damage
would occur if any provision of this Agreement were not performed in accordance
with the terms hereof any that the Parties shall be entitled to an injunction or
injunctions to prevent breaches of this Agreement or to enforce specifically the
performance of the terms and provisions hereof, without bond or other security
required, in addition to any other remedy to which they are entitled at law or
in equity.
 
11.10     Expenses.  Regardless of whether the transactions contemplated hereby
are consummated, each party hereto shall pay its or their own costs and
expenses, including legal, accounting, consulting and other professional fees,
incurred in connection with the negotiation, preparation, investigation, and
performance by such party of this Agreement and the transactions contemplated
hereunder.  For the avoidance of doubt, the Seller shall be pay all of the
Company’s costs and expenses, including legal, accounting, consulting and other
professional fees, incurred in connection with the negotiation, preparation,
investigation, and performance by such party of this Agreement and the
transactions contemplated hereunder.
 
11.11     Enforcement.  In the event any party resorts to legal action to
enforce or interpret any provision of this Agreement, the prevailing party will
be entitled to recover the costs and expenses of such action so incurred,
including reasonable attorney’s fees, from any party that opposes the prevailing
party in such legal action.
 
 
53

--------------------------------------------------------------------------------

 
 
11.12     Construction.
 
(a)          The parties acknowledge that they have participated jointly in the
negotiation and drafting of the terms of this Agreement.  In the event an
ambiguity or question of intent or interpretation arises, this Agreement shall
be construed as if drafted jointly by the parties and no presumption or burden
of proof shall arise favoring or disfavoring any party by virtue of the
authorship of any of the provisions of this Agreement.
 
(b)          Unless the context of this Agreement otherwise requires, (i) words
of any gender include each other gender; (ii) words using the singular or plural
number also include the plural or singular number, respectively; (iii) the terms
“hereof,” “herein,” “hereby” and derivative or similar words refer to this
entire Agreement; (iv) the terms “include” and “including”, and variations
thereof, will not be deemed to be terms of limitation, but rather will be deemed
to be followed by the words “without limitation”, and (v) the terms “Article” or
“Section” refer to the specified Article or Section of this Agreement.
 
(c)          Whenever this Agreement refers to a number of days, such number
shall refer to calendar days unless Business Days are specified.  All accounting
terms used herein and not expressly defined herein have the meanings given to
them under GAAP on the date hereof.  The headings of the several Articles and
Sections herein are inserted for convenience of reference only and are not
intended to be part of or to affect the meaning or interpretation of this
Agreement.
 
11.13     Successors and Assigns; No Third Party Beneficiaries.  No party may
assign any of its rights or delegate any of its obligations under this Agreement
without the prior written consent of the other parties, except that Buyer may
assign any of its rights and delegate any of its obligations under this
Agreement to any Subsidiary of Buyer; provided, however, that HSCC and Buyer
shall remain liable to Seller for any payments due under this
Agreement.  Subject to the preceding sentence, this Agreement will apply to, be
binding in all respects upon and inure to the benefit of the successors and
permitted assigns of the parties. Nothing expressed or referred to in this
Agreement will be construed to give any Person other than the parties to this
Agreement any legal or equitable right, remedy or claim under or with respect to
this Agreement or any provision of this Agreement, except such rights as shall
inure to a successor or permitted assignee pursuant to this Section 11.13.  This
Agreement and all of its provisions and conditions are for the sole and
exclusive benefit of the parties to this Agreement and their successors and
assigns.
 
11.14     [Reserved]
 
11.15     Definitions.  Capitalized terms used herein and not otherwise defined
herein have the meanings set forth in Appendix A attached hereto.
 
[THE REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
 
 
54

--------------------------------------------------------------------------------

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

 
Homeland Security Capital Corporation
         
/s/ C. Thomas McMillen
 
By:
C. Thomas McMillen
 
Its:
CEO

 
Timios Acquisition Corp.
         
/s/ C. Thomas McMillen
 
By:
C. Thomas McMillen
 
Its:
CEO

 
Timios, Inc.
         
/s/ Stephen J. Bernstein
 
By:
Stephen J. Bernstein
 
Its:
Vice President

 
DAL Group, LLC
         
/s/ Stephen J. Bernstein
 
By:
Stephen J. Bernstein
 
Its:
President and CEO

 
Signature Page to Timios Stock Purchase Agreement

 
 

--------------------------------------------------------------------------------

 
 
APPENDIX A
 
Definitions
 
For purposes of this Agreement, the following terms shall have the meanings
specified or referred to in this Appendix A:
 
 
“2010 Escrow Agreement” means that certain Escrow Agreement by and among the
Seller, the Shareholders and U.S. Bank National Association dated as of July 26,
2010.
 
“Affiliate” means, with respect to any specified Person, a Person that directly,
or indirectly through one or more intermediaries, controls or is controlled by,
or is under common control with, the Person specified.  With respect to any
natural person, the term Affiliate shall also include any member of such
person’s immediate family, any family limited partnership or similar entity for
such person and any trust, voting or otherwise, of which such person is a
trustee or of which such person or any of such person’s immediate family is a
beneficiary.  With respect to any trust, the term Affiliate shall also include
the beneficiary or trustee of such trust.  For purposes of the foregoing, the
term “control” and variations thereof means the possession of the power to
direct or cause the direction of the management or policies of a Person, whether
through the ownership of voting securities, by Contract or otherwise.
 
“Agreement” is defined in the Preamble.
 
“Asset Purchase Agreement” is defined in Section 7.2(w).
 
“Audited Financial Statements” is defined in Section 7.2(u).
 
“Bank of America Agreements” means (1) the Loan Agreement, dated as of March 18,
2010, by and between Seller and BA Note Acquisition LLC (as successor in
interest of Bank of America, N.A.), (2) Undated General Subordination and
Assignment (Continuing and Unconditional) between BA Note Acquisition LLC (as
successor in interest of Bank of America, N.A.) and certain creditors of the
Seller, (3) Undated Continuing and Unconditional Guaranty by the Company in
favor of BA Note Acquisition LLC (as successor in interest of Bank of America,
N.A.), (4) Undated Security Agreement (Multiple Use) between BA Note Acquisition
LLC (as successor in interest of Bank of America, N.A.) and the Company, and (5)
Master Loan and Security Agreement Number 21087-70000 dated May 19, 2010, by and
between Seller and Banc of America Leasing & Capital, LLC, and all documents
ancillary thereto.
 
“Basket” is defined in Section 8.6(a).
 
“Business” is defined in the Recitals.
 
“Business Day” means any day that is not a Saturday, Sunday or other day on
which banks are required or authorized by Law to be closed in New York City.
 
“Buyer” is defined in the Preamble.
 
“Buyer Documents” is defined in Section 4.2.
 
 
APP A-1

--------------------------------------------------------------------------------

 
 
“Buyer Group” is defined in Section 5.1(a).
 
“Buyer’s Indemnified Persons” is defined in Section 8.1.
 
“Cap” is defined in Section 8.6(a).
 
“Closing” is defined in Section 1.2.
 
“Closing Date” is defined in Section 1.2.
 
“Closing Payment” means the sum of $1,150,000.
 
“COBRA” means the Consolidated Omnibus Budget Reconciliation Act.
 
“Code” means the Internal Revenue Code of 1986, as amended.
 
“Company” is defined in the Recitals.
 
“Company Assets” is defined in Section 3.11.
 
“Company Disclosure Schedule” is defined in Article III.
 
“Company Employee” is defined in Section 3.15(a).
 
“Company Indebtedness” means the Indebtedness of the Company evidenced by notes,
debentures, bonds or other similar instruments which in each case shall include
the current and long-term portion of such Indebtedness or as reflected on the
Financial Statements, in each case outstanding as of immediately prior to the
Closing plus any costs or expenses arising or resulting from the payment of any
such Indebtedness prior to the Closing (including any pre-payment fees or
penalties).
 
“Company Intellectual Property” means all Intellectual Property owned, licensed,
used or held by the Company or any of its Subsidiaries.
 
“Consent” means any consent, approval, authorization, permission, ratification
or waiver from, notice to, or registration or filing with, any Person.
 
 
“Contingent Payment” is defined in Section 1.6(b).
 
“Contract” any agreement, contract, subcontract, lease, instrument, note,
option, purchase order, work order, customer order, license or sublicense or
other commitment or undertaking of any nature (whether written or oral), in each
case that is legally binding.
 
“Data Laws” is defined in Section 3.21(h).
 
“Databases” is defined in Section 3.21(h).
 
“Default” is defined in Section 7.2(w).
 
 
APP A-2

--------------------------------------------------------------------------------

 
 
“Designated Shareholders” is defined in Section 6.6.
 
“Dispute Accounting Firm” is defined in Section 1.5(c).
 
“Employee Plans” means employment related plans, including but not limited to,
employment or consulting agreements, collective bargaining and supplemental
agreements, pension, profit sharing, incentive, bonus, deferred compensation,
retirement, stock option, stock purchase, stock-related, severance, medical,
hospitalization, dental, prescription, life insurance, disability, vacation,
salary continuation, sick pay, welfare, fringe benefit and other employee
benefit plans, contracts, programs, policies and arrangements, whether written
or oral, which the Company or any of its Subsidiaries maintains or under which
the Company or any of its Subsidiaries has any obligations with respect to any
employee or former employee, officer or former officer, director or former
director.
 
“Environmental Laws” means all Laws, Environmental Permits, Governmental Orders,
or legally binding agreements relating to the use, management or disposal of
Hazardous Substances, or to pollution, or protection of endangered species,
natural resources, human health, safety or the environment, including: the
Comprehensive Environmental Response, Compensation and Liability Act of 1980, as
amended by the Superfund Amendments and Reauthorization Act of 1986, 42 USC §
9601 et seq. (herein collectively “CERCLA”; the Resource Conservation and
Recovery Act of 1976 and subsequent Hazardous and Solid Waste Amendments of
1984, 42 U.S.C. § 6901 et seq. (herein, collectively, RCRA”), the Hazardous
Materials Transportation Act, as amended, 49 U.S.C. § 1801, et seq. (the
“Hazardous Materials Transportation Act”); the Clean Water Act, as amended, 33
U.S.C. § 1311, et seq. (the “Clean Water Act”); the Clean Air Act, as amended,
42 U.S.C. § 7401-7642, (the “Clean Air Act”); the Toxic Substances Control Act,
as amended, 15 U.S.C. § 2601 et seq. (the “Toxic Substances Control Act”), the
Federal Insecticide, Fungicide, and Rodenticide Act as amended, 7 U.S.C. §
136-136y (“FIFRA”), the Emergency Planning and Community Right-to-Know Act of
1986 as amended 42 U.S.C § 11001, et seq. (Title III of SARA) (“EPCRA”) and
similar or related state and local laws.
 
“Environmental Permits” means Licenses which are or have been required under or
are or have been issued pursuant to Environmental Laws.
 
“ERISA” means the Employee Retirement Income Security Act of 1974.
 
“Escrow Agent” is defined in the Recitals.
 
“Escrow Agreement” is defined in section 1.6(c).
 
“Estimated Working Capital” is defined in Section 1.5(a).
 
“Final Termination Date” is defined in Section 9.1(c).
 
“Final Working Capital” is defined in Section 1.5(d).
 
“Financial Statements” is defined in Section 3.7(a).
 
 
APP A-3

--------------------------------------------------------------------------------

 
 
“GAAP” means United States generally accepted accounting principles and
practices, consistently applied throughout the specified period and on a basis
consistent with the basis on which the Financial Statements referred to in
Section 3.7 were prepared.
 
“Governmental Authority” means the government of the United States or any
foreign country or any state or political subdivision thereof and any entity,
agency, body or authority exercising executive, legislative, judicial,
regulatory or administrative functions of or pertaining to government.
 
“Governmental Order” means any legally binding order, writ, judgment,
injunction, decree, stipulation, award or determination of any Governmental
Authority.
 
“Hazardous Substance” means any and all substances, materials or wastes or
constituent thereof, whether liquid, solid, semisolid, sludge and/or gaseous,
which have been defined or classified as hazardous, toxic or harmful pursuant to
any Environmental Laws, or which are regulated pursuant to such Environmental
Laws, including petroleum and each of its chemical constituents and by-products,
urea formaldehyde foam insulation, polychlorinated biphenyls, and asbestos in
any form.
 
“HIPAA” means the Health Insurance Portability and Accountability Act of 1996.
 
“HSCC” is defined in the Preamble.
 
“Indebtedness” means (i) the principal of and/or interest accrued on (A)
indebtedness for money borrowed and (B) indebtedness evidenced by notes,
debentures, bonds or other similar instruments which in each case shall include
the current and long-term portion of such indebtedness; (ii) all obligations
issued or assumed as the deferred purchase price of property (but excluding
accounts payable arising in the ordinary course of business consistent with past
practice); (iii) all obligations for the reimbursement of any obligor on any
letter of credit or similar credit transaction servicing obligations of a Person
or of a type described in clauses (i) and (ii) above and (iv) and (v) below, but
only to the extent of the obligation secured; (iv) all obligations to pay rent
or other amounts under any lease of real property or personal property which
obligations are required to be classified and accounted for as capital leases in
accordance with GAAP, and the amount of such obligations shall be the
capitalized amount thereof determined in accordance with GAAP; and (v) all
guarantees of obligations of the type referred to in clauses (i) through (iv) of
other Persons.
 
“Indemnified Party” is defined in Section 8.3(a).
 
“Indemnifying Party” is defined in Section 8.3(a).
 
 
APP A-4

--------------------------------------------------------------------------------

 
 
“Intellectual Property” means worldwide trademarks, service marks, trade names,
trade dress, designs, logos, slogans and general intangibles of like nature,
together with all goodwill related to the foregoing (whether registered or not,
but including any registrations and applications for any of the foregoing)
(collectively, “Marks”); patents (including the ideas, inventions and
discoveries described therein, any pending applications, any registrations,
patents  or patent applications based on applications that are continuations,
continuations-in-part, divisional, reexamination, reissues, renewals of any of
the foregoing and applications and patents granted on applications that claim
the benefit of priority to any of the foregoing) (collectively, “Patents”);
works of authorship or copyrights (including any registrations, applications and
renewals for any of the foregoing) and other rights of authorship (collectively,
“Copyrights”); trade secrets and other confidential or proprietary information,
know-how, confidential or proprietary technology, processes, work flows,
formulae, algorithms, models, user interfaces, customer, supplier and user
lists, databases, pricing and marketing information, inventions, marketing
materials, inventions and discoveries (whether patentable or not) (collectively,
“Trade Secrets”); computer programs and other Software, macros, scripts, source
code, object code, binary code, methodologies, processes, work floes,
architecture, structure, display screens, layouts, development tools,
instructions and templates; published and unpublished works of authorship,
including audiovisual works, databases and literary works; rights in, or
associated with a person’s name, voice, signature, photograph or likeness,
including rights of personality, privacy and publicity; rights of attribution
and integrity and other moral rights; Uniform Resource Locators (URLs) and Net
Names and applications therefor (and all interest therein), IP addresses,
adwords, key word associations and related rights; all other proprietary,
intellectual property and other rights relating to any or all of the foregoing;
all copies and tangible embodiments of any or all of the foregoing (in whatever
form or medium, including electronic media); and all rights to sue for and any
and all remedies for past, present and future infringements of any or all of the
foregoing and rights of priority and protection of interests therein under the
Laws of any jurisdiction.
 
“IRCA” is defined in Section 3.15(c).
 
“Knowledge of the Seller” and words of similar import means, with respect to any
matter in question, the actual knowledge of Stephen Bernstein, after making due
and reasonable inquiry of such matter, which shall include due inquiry of any
Person having primary responsibility for such matter.
 
“Knowledge of the Company” and words of similar import means, with respect to
any matter in question, the actual knowledge of Trevor Stoffer, Raymond Davison,
and Leonard Splane, after making due and reasonable inquiry of such matter,
which shall include due inquiry of any Person having primary responsibility for
such matter.
 
“knowledge,” “to the knowledge” or “known,” and words of similar import means,
with respect to any matter in question, the actual knowledge of a Person after
making due and reasonable inquiry of such matter, which shall include due
inquiry of any Person having primary responsibility for such matter.
 
“Law” means any law, ordinance, code, statute, rule, regulation, order,
judgment, injunction, award, or decree of any court, arbitrator, administrative
agency, regulatory body or authority and governmental body or authority, whether
federal, state, local or foreign.
 
“Lease Consents” is defined in Section 7.2(i).
 
“Leased Personal Property” is defined in Section 3.14.
 
 
APP A-5

--------------------------------------------------------------------------------

 
 
“Leased Real Property” means all leasehold or subleasehold estates and other
rights to use or occupy any land, buildings, structures, improvements, fixtures
or other interest in real property held by the Company or its Subsidiaries.
 
“Legal Expenses” means reasonable attorney’s, accountants’, investigators’, and
experts’ fees, and expenses reasonably sustained or incurred in connection with
the defense or investigation of any Losses.
 
“Liabilities” means any and all debts, liabilities, guarantees, commitments and
obligations, whether fixed, contingent or absolute, asserted or unasserted,
matured or unmatured, liquidated or unliquidated, accrued or not accrued, known
or unknown, due or to become due, whenever or however arising (including whether
arising out of any contract or any tort based on negligence or strict liability)
and whether or not the same would be required by GAAP to be stated in financial
statements or disclosed in the notes thereto.
 
“License Agreement” is defined in Section 3.17(a)(xi).
 
“Licenses” means all permits, approvals, consents, registrations, licenses,
certificates, variances or other authorizations granted by or obtained from any
Governmental Authority.
 
“Lien” means any pledge, lien, charge, claim, encumbrance, security interest,
mortgage, option, restriction on transfer (including without limitation any
buy-sell agreement or right of first refusal or offer), forfeiture, penalty,
license, equity or other right of another Person of every nature and description
whatsoever, other than liens for Taxes for the current tax year which are not
yet due and payable.
 
“Losses” is defined in Section 8.1.
 
“Material Adverse Effect” means any fact, event, change, development or effect
that, individually or together with any one or more other facts, events,
changes, developments or effects, is materially adverse to (a) the assets,
operations, capitalization, reasonably likely business prospects, results of
operations or financial condition of the Company and its Subsidiaries, taken as
a whole, or (b) the ability of the Seller and the Company to consummate the
transactions contemplated by this Agreement, except to the extent resulting from
(u) changes in general local, domestic, foreign, or international economic
conditions, (v) changes affecting generally the industries or markets in which
the Company and its Subsidiaries operate, (w) acts of war, sabotage or
terrorism, military actions or the escalation thereof, (x) any changes in
applicable laws or accounting rules or principles, including changes in GAAP,
(y) any other action required by this Agreement, or (z) the announcement of the
transactions contemplated by this Agreement (provided, however, with respect to
each of clauses (u) through (x) above, that such general conditions do not
affect the Company in a disproportionate manner).
 
“Material Contracts” is defined in Section 3.17(a).
 
“Maximum Contingent Payment Amount” is defined in Section 1.6(a).
 
“Measurement Period” is defined in Section 1.6(b).
 
 
APP A-6

--------------------------------------------------------------------------------

 
 
“Mini Cap” is defined in Section 8.6(a).
 
“Net Names” means all internet web sites and internet domain names presently
used by the Company or any of its Subsidiaries.
 
 
“Net Revenue” is defined in Section 1.6(g).
 
 
“Net Revenue Objection Notice” is defined in Section 1.6(f).
 
“Ordinary Course of Business” means the usual and ordinary course of business
consistent with past custom and practice (including with respect to quantity and
frequency) of the Company and its Subsidiaries.
 
“Organizational Documents” means (a) with respect to any corporation, those
instruments that at the time constitute its corporate charter as filed or
recorded under the Laws of the jurisdiction of its incorporation, including the
articles or certificate of incorporation, organization or association, and its
by-laws or memorandum of association, in each case including all amendments
thereto, as the same may have been restated, (b) with respect to any limited
liability company, those instruments that at the time constitute its certificate
of formation as filed or recorded under the Laws of the jurisdiction of its
organization, and its operating agreement or limited liability company
agreement, in each case including all amendments thereto, as the same may have
been restated, and (c) with respect to any other entity, the equivalent
organizational or governing documents of such entity.
 
“Owned Real Property” means all land, together with all buildings, structures,
improvements, and fixtures located thereon, and all easements and other rights
and interests appurtenant thereto, owned by the Company or its Subsidiaries.
 
“Person” or “person” means an individual, a partnership, limited partnership, a
corporation, a limited liability company, proprietorship, an association, a
joint stock company, a trust, a joint venture, an unincorporated organization,
union, any other business entity, or a Governmental Authority (or any
department, agency, or political subdivision thereof).
 
“Personal Property” means all tangible personal property and interests therein,
including all machinery, equipment, tools, dies, jigs, patterns, molds, trade
fixtures, furniture, furnishings, vehicles, computer hardware, drawings, designs
and blue prints
 
“Personal Property Leases” is defined in Section 3.14.
 
“Personally Identifiable Information” means information that can be used to
identify or contact Persons, which may include their first and last name,
physical address, e-mail address and telephone number.
 
 
“Positive Working Capital Adjustment Amount” is defined in Section 1.5(d).
 
“Pre-Closing Financial Statements” is defined in Section 5.1(b).
 
“Premises” is defined in Section 3.13(e).
 
 
APP A-7

--------------------------------------------------------------------------------

 
 
“Prior Actions” is defined in Section 3.22(b).
 
“Privacy Statement” means each of the Company’s privacy policies previously or
currently published on any Company website, contained within the Company’s terms
of use, or otherwise made available by the Company regarding the collection,
retention, use, disclosure, transfer and/or distribution of Personally
Identifiable Information, including from visitors and users of any Company
website.
 
“Proceeding” means any claim, action, charge, complaint, suit, litigation,
arbitration, grievance, inquiry, proceeding, hearing, audit, examination or
investigation (including any civil, criminal, administrative, investigative or
appellate proceeding) by or before any Governmental Authority or arbitrator.
 
“Purchase Price” is defined in Section 1.3.
 
“Real Property” is defined in Section 3.13(c).
 
“Real Property Laws” is defined in Section 3.13(d).
 
“Receivables” means all accounts receivable, notes receivable and other amounts
receivable from third parties.
 
“Related Person” means (i) with respect to a particular individual, each other
member of such individual’s family, including the individual’s spouse, any other
natural person who is related to the individual or the individual’s spouse
within the second degree, and any other natural person who resides with such
individual, and (ii) with respect to a specified Person other than an
individual, each shareholder, partner or member or employee of such specified
Person and each Person that serves as a director, officer, or manager of such
specified Person (or in a similar capacity) of such specified Person.
 
“Remaining Payments” is defined in Section 8.7.
 
“Representative” means with respect to a particular Person, any director,
officer, manager, employee, agent, consultant, advisor, accountant, financial
advisor, legal counsel or other representative of that Person.
 
“Revised Working Capital” is defined in Section 1.5(b).
 
“Remaining Payments” is defined in Section 8.7.
 
“SEC” means the United States Securities and Exchange Commission.
 
“Securities Act” means the Securities Act of 1933, as amended.
 
“Seller” is defined in the Preamble.
 
“Seller Disclosure Schedule” is defined in Article II.
 
“Seller Documents” is defined in Section 2.1.
 
 
APP A-8

--------------------------------------------------------------------------------

 

 
“Seller’s Indemnified Persons” is defined in Section 8.2.
 
“Seller Prior Actions” is defined in Section 2.6(a).
 
“Shareholders” is defined in Section 6.6.
 
“Shares” is defined in the Recitals.
 
“Significant Customer” is defined in Section 3.18.
 
“Significant Service Provider” is defined in Section 3.18.
 
“Significant Supplier” is defined in Section 3.18.
 
“Software” means all computer programs, known by any name, including all
versions thereof, and all related documentation, training manuals and materials,
user manuals, technical and support documentation, source code, object,
executable or binary code, code libraries, algorithms, macros, scripts, compiler
directives, program architecture, design concepts, system designs, program
structure, sequence and organizations, comments, screens, user interfaces,
report formats, templates, menus, buttons and icons and all files, data,
materials, manuals, design notes and other items and documentation related
thereto or associated therewith.
 
“SPA” means that certain Stock Purchase Agreement by and among the Seller, the
Company and former shareholders of the Company dated April 16, 2010.
 
“Subsidiary” means, with respect to any Person, any other domestic or foreign
corporation, limited liability company, general or limited partnership,
unincorporated association or other business entity of which (i) if a
corporation, a majority of the total voting power of the capital stock entitled
(without regard to the occurrence of any contingency) to vote in the election of
directors, managers or trustees thereof is at the time owned or Controlled,
directly or indirectly, by that Person or one or more of the other Subsidiaries
of that Person or a combination thereof, or (ii) if a limited liability company,
partnership, association or other business entity, a majority of the partnership
or other similar ownership interests thereof is at the time owned or Controlled,
directly or indirectly, by that Person or one or more Subsidiaries of that
Person or a combination thereof.
 
 “Tax” or “Taxes” means any assessment of any kind or nature imposed by any
Governmental Authority, any federal, state, local, or foreign income, gross
receipts, license, payroll, employment, excise, severance, stamp, occupation,
premium, windfall profits, environmental (including taxes under Code §59A),
duties including customs duties, capital stock, franchise, profits, withholding,
social security (or similar), unemployment, disability, real property, personal
property, sales, use, transfer, registration, value added, alternative or add-on
minimum, estimated, or other tax of any kind whatsoever, whether computed on a
separate or consolidated, unitary or combined basis or in any other manner,
including any interest, penalty, deficiency, or addition thereto, whether
disputed or not and including any obligation to indemnify or otherwise assume or
succeed to the liability for Taxes of any other Person.
 
 
APP A-9

--------------------------------------------------------------------------------

 
 
“Tax Return” means any report, return, declaration, statement or other
information required to be supplied to a taxing authority in connection with
Taxes.
 
“Transfer Taxes” is defined in Section 10.1.
 
“Working Capital” means an amount equal to the Working Capital Assets minus the
Working Capital Liabilities, all as of the close of business on the Closing
Date.
 
“Working Capital Assets” means the current assets of the Company determined in
accordance with GAAP applied on a consistent basis and in a manner consistent
with the calculation of Current Assets set forth on Schedule II hereto and
subject to the principles, if any, set forth on Schedule II hereto.
 
“Working Capital Liabilities” means the Company’s current liabilities determined
in accordance with GAAP applied on a consistent basis and in a manner consistent
with the calculation of Current Liabilities set forth on Schedule II hereto and
subject to the principles, if any, set forth on Schedule II hereto.
 
“Working Capital Statement” is defined in Section 1.5(a).
 
“Working Capital Objection Notice” is defined in Section 1.5(b).
 
“Working Capital Target” means $150,000.

 
APP A-10

--------------------------------------------------------------------------------