Exhibit 10.1

Execution Copy

AGREEMENT AND PLAN OF MERGER

by and among

UNITED STATIONERS SUPPLY CO.

(“Buyer”)

SW ACQUISTION CORP. (“Merger Sub”)

CPO COMMERCE, INC.

(“Company”)

CERTAIN SECURITIES HOLDERS OF COMPANY

(“Principal Holders”)

and

CAPSTAR CAPITAL, LLC,

as Representative of the Holders of Company Securities

(“Representative”)

dated

May 28, 2014

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TABLE OF CONTENTS

 

ARTICLE I The Merger      2   

Section 1.1

  Effective Time of the Merger      2   

Section 1.2

  Closing      2   

Section 1.3

  Effects of the Merger      2   

Section 1.4

  Directors and Officers of Surviving Corporation      2   

Section 1.5

  Taking of Necessary Action; Further Action      3    ARTICLE II Effect of the
Merger on Company Securities      3   

Section 2.1

  Merger Consideration      3   

Section 2.2

  Company Stock      3   

Section 2.3

  Company Options      4   

Section 2.4

  Company Warrants      5   

Section 2.5

  Exchange Fund; Option Payments      6   

Section 2.6

  Dissenting Shares      9   

Section 2.7

  Representative, Representative Fund      9   

Section 2.8

  Allocation Certificate; Closing Payments      13   

Section 2.9

  Merger Consideration Adjustment      15   

Section 2.10

  Earn Out Payment      17    ARTICLE III Representations and Warranties
Relating to Principal Holders      20   

Section 3.1

  Company Stock      20   

Section 3.2

  Authority; Capacity; No Conflict; Required Filings and Consents      20   

Section 3.3

  Litigation      21   

Section 3.4

  Disclosure      21   

Section 3.5

  Brokers and Finders      21   

Section 3.6

  Additional Representations of Joint Indemnification Holders      22   

Section 3.7

  NO ADDITIONAL REPRESENTATIONS OR WARRANTIES      22    ARTICLE IV
Representations and Warranties Relating to Company      22   

Section 4.1

  Organization, Standing, and Power      22   

Section 4.2

  Organizational Documents      22   

Section 4.3

  Capitalization      23   

Section 4.4

  Subsidiaries      23   

Section 4.5

  Authority; No Conflict; Required Filings and Consents      24   

Section 4.6

  Financial Statements      25   

Section 4.7

  Absence of Certain Changes      25   

Section 4.8

  No Undisclosed Liabilities      26   

Section 4.9

  Taxes      27   

Section 4.10

  Tangible Personal Property and Owned and Leased Real Property      29   

Section 4.11

  Inventory      30   

Section 4.12

  Intellectual Property      31   

Section 4.13

  Software and Information Technology      34   

Section 4.14

  Contracts      36   

Section 4.15

  Vendors and Suppliers      38   

Section 4.16

  Insurance      38   

Section 4.17

  Litigation      38   

Section 4.18

  Product Liability or Warranty Proceedings      39   

Section 4.19

  Environmental Matters      39   

 

Agreement and Plan of Merger    Page i

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Section 4.20

  Company Employee Plans      40   

Section 4.21

  Compliance with Law      42   

Section 4.22

  Employee and Labor Matters      43   

Section 4.23

  Related Party Transactions      44   

Section 4.24

  Certain Contracts      45   

Section 4.25

  Disclosure      45   

Section 4.26

  Brokers and Finders      45   

Section 4.27

  NO ADDITIONAL REPRESENTATIONS OR WARRANTIES      45    ARTICLE V
Representations and Warranties of Buyer and Merger Sub      45   

Section 5.1

  Organization, Standing and Power      46   

Section 5.2

  Authority; No Conflict; Required Filings and Consents      46   

Section 5.3

  Litigation      47   

Section 5.4

  Financial Capability      47   

Section 5.5

  Brokers and Finders      47   

Section 5.6

  NO ADDITIONAL REPRESENTATIONS OR WARRANTIES      47    ARTICLE VI Conduct of
Business      47   

Section 6.1

  Covenants of Company      47   

Section 6.2

  Confidentiality      50    ARTICLE VII Additional Agreements      51   

Section 7.1

  Access to Information      51   

Section 7.2

  Actions to Close Transaction      51   

Section 7.3

  Press Releases and Public Announcements      52   

Section 7.4

  Notification of Certain Matters      52   

Section 7.5

  Exclusivity      53   

Section 7.6

  Stockholder Consent and Related Matters      53   

Section 7.7

  Employee Matters      53   

Section 7.8

  Director and Officer Indemnification      54   

Section 7.9

  Inventory      55   

Section 7.10

  Stockholders Agreement      55   

Section 7.11

  Further Assurances      55    ARTICLE VIII Tax Matters      55   

Section 8.1

  Certain Tax Matters      55   

Section 8.2

  Cooperation and Records Retention      57    ARTICLE IX Conditions to Closing
     57   

Section 9.1

  Conditions to Each Party’s Obligation to Effect the Closing      57   

Section 9.2

  Additional Conditions to Obligation of Buyer and Merger Sub      57   

Section 9.3

  Additional Conditions to Obligation of Principal Holders and Company      59
   ARTICLE X TERMINATION AND AMENDMENT      60   

Section 10.1

  Termination      60   

Section 10.2

  Effect of Termination      61   

Section 10.3

  Fees and Expenses      61   

Section 10.4

  Amendment      61   

Section 10.5

  Extension; Waiver      61   

 

Agreement and Plan of Merger    Page ii

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ARTICLE XI INDEMNIFICATION      62   

Section 11.1

  Indemnification by the Holders      62   

Section 11.2

  Indemnification by Buyer      63   

Section 11.3

  Claims for Indemnification      63   

Section 11.4

  Survival      65   

Section 11.5

  Limitations and Other Terms      65   

Section 11.6

  Set-Off; Recourse to Earn-Out Payment      67   

Section 11.7

  Nature of Holders’ Obligations      68    ARTICLE XII MISCELLANEOUS      69   

Section 12.1

  Notices      69   

Section 12.2

  Entire Agreement      71   

Section 12.3

  No Third-Party Beneficiaries      71   

Section 12.4

  Assignment      71   

Section 12.5

  Severability      71   

Section 12.6

  Counterparts and Signature      71   

Section 12.7

  Interpretation      72   

Section 12.8

  Governing Law      72   

Section 12.9

  Remedies      72   

Section 12.10

  Submission to Jurisdiction      72   

Section 12.11

  Company Disclosure Letter      73   

Section 12.12

  Waiver of Jury Trial      73   

Section 12.13

  Performance of Merger Sub      73   

Section 12.14

  Waiver of Conflict; Disposition of Attorney-Client Privilege      73   
ARTICLE XIII DEFINITIONS      74   

Section 13.1

  Certain Defined Terms      74   

Section 13.2

  Additional Defined Terms      81   

SCHEDULES

Schedule A

  Principal Holders

Schedule B

  Working Capital Methodology

Schedule 4.24

  Specified Contracts

Schedule 6.1

  Conduct of Business

Schedule 7.7(a)

  Termination of Certain Company Employee Plans

Schedule 9.2(f)

  Termination of Certain Agreements

EXHIBITS

Exhibit A

  Form of SMH Guaranty

Exhibit B

  Form of Stockholder Consent

Exhibit C-1

  Form of Transmittal Letter (Company Stock and Company Warrants)

Exhibit C-2

  Form of Transmittal Letter (Company Options)

Exhibit D

  Form of Contribution Agreement

Exhibit E

  Form of Stockholder Notice

Exhibit F

  Form of Restrictive Covenant Agreement

Exhibit G

  Form of Paying Agent Agreement

 

Agreement and Plan of Merger    Page iii

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AGREEMENT AND PLAN OF MERGER

This Agreement and Plan of Merger (this “Agreement”) is entered into as of
May 28, 2014, by and among United Stationers Supply Co., an Illinois corporation
(“Buyer”), SW Acquisition Corp., a Delaware corporation and wholly owned
subsidiary of Buyer (“Merger Sub”), CPO Commerce, Inc., a Delaware corporation
(“Company” (which term shall include Company and its Subsidiaries taken as a
whole unless the context otherwise requires)), the holders of Company Securities
listed on Schedule A (the “Principal Holders”), and Capstar Capital, LLC, as
representative of the holders of Company Securities (“Representative”).

RECITALS

A. Company is engaged in the online marketing, merchandising and sale of new,
closeout, discontinued, excess and refurbished home improvement equipment and
products, tools, appliances, outdoor equipment, electronics, pumps, truck boxes,
home goods, and engine powered equipment and, in connection therewith and
incidental thereto, opportunistic business-to-business sales of such merchandise
(the “Business”).

B. Buyer and the boards of directors of Merger Sub and Company deem it advisable
and in the best interests of each corporation and their respective stockholders
that Buyer acquire Company.

C. The acquisition of Company will be effected through a merger (the “Merger”)
of Merger Sub with and into Company in accordance with the terms of this
Agreement and the Delaware General Corporation Law (the “DGCL”), as a result of
which Company will become a wholly owned subsidiary of Buyer.

D. Concurrently with the execution of this Agreement, the SMH Guarantors are
executing and delivering a Guaranty (the form of which is attached as Exhibit
A), pursuant to which the SMH Guarantors are guaranteeing all of the obligations
of SMH CPO Commerce, LLC hereunder, on the terms and conditions set forth
therein (the “SMH Guaranty”).

E. Immediately following the execution and delivery of this Agreement, the
Principal Holders and certain other stockholders of Company, collectively
representing a majority of the issued and outstanding shares of Company Common
Stock on an as converted basis, are expected to execute and deliver a written
consent (the form of which is attached as Exhibit B) approving the adoption of
this Agreement and the consummation of the Merger and the other transactions
hereunder as required by the applicable provisions of the DGCL and the
Certificate of Incorporation and Bylaws of Company (the “Stockholder Consent”).

F. Certain capitalized terms used in this Agreement are defined in Section 13.1.

In consideration of the foregoing and the respective representations,
warranties, covenants, and agreements set forth herein, the parties agree as
follows, intending to create a contract under seal:

 

Agreement and Plan of Merger    Page 1

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ARTICLE I

THE MERGER

Section 1.1 Effective Time of the Merger. Buyer and Company will jointly
prepare, and at the Closing Company shall cause to be filed with the Secretary
of State of the State of Delaware, a certificate of merger (the “Certificate of
Merger”) in such form as is required by, and executed by Company in accordance
with, the relevant provisions of the DGCL. The Merger shall become effective
upon the filing of the Certificate of Merger with the Secretary of State of the
State of Delaware or upon such later time and date as Buyer and Company may
mutually determine and set forth in the Certificate of Merger (the “Effective
Time”).

Section 1.2 Closing. The closing of the Merger (the “Closing”) shall take place
at 10:00 a.m. Central time (a) on May 30, 2014, (b) if the Closing cannot take
place on such date because all of the conditions set forth in ARTICLE IX shall
not have been satisfied or waived (other than those conditions that by their
nature are to be satisfied at the Closing, but subject to the satisfaction or
waiver thereof), on the second Business Day following the satisfaction or waiver
of such conditions (other than those conditions that by their nature are to be
satisfied at the Closing, but subject to the satisfaction or waiver thereof), or
(c) at such other date and time as Buyer and Company may mutually agree. The
date on which the Closing occurs is referred to as the “Closing Date.” The
Closing shall be held at the principal executive offices of Buyer in Deerfield,
Illinois, unless another place is agreed to by Buyer and Company; provided that,
to the extent Buyer and Company so agree, documents may be delivered and
exchanged at the Closing by PDF, facsimile, or other electronic means.

Section 1.3 Effects of the Merger. At the Effective Time, (a) Merger Sub will be
merged with and into Company, the separate existence of Merger Sub will cease,
and Company shall continue as the surviving corporation resulting from the
merger (Company following the Merger is sometimes referred to herein as
“Surviving Corporation”), (b) the certificate of incorporation of Surviving
Corporation shall be amended and restated in its entirety so that it is
identical to the certificate of incorporation of Merger Sub as in effect
immediately prior to the Effective Time, except that all references to the name
of Merger Sub therein will be changed to refer to the name of Company and
(c) the Bylaws of Surviving Corporation shall be amended and restated in their
entirety so that they are identical to the Bylaws of Merger Sub as in effect
immediately prior to the Effective Time, except that all references to the name
of Merger Sub therein will be changed to refer to the name of Company. Further,
the Merger will have the effects set forth in Section 259 of the DGCL. Without
limiting the generality of the foregoing, at the Effective Time, all of the
property, rights, privileges, immunities, powers and franchises of Company and
Merger Sub shall be vested in Company as the Surviving Corporation, and all of
the debts, liabilities, obligations and duties of Company and Merger Sub shall
become or remain, as the case may be, the debts, liabilities, obligations and
duties of Company as the Surviving Corporation.

Section 1.4 Directors and Officers of Surviving Corporation. The directors and
officers of Merger Sub immediately prior to the Effective Time will be the
initial directors and officers of Surviving Corporation, each to hold office in
accordance with the Certificate of Incorporation and Bylaws of Surviving
Corporation.

 

Agreement and Plan of Merger    Page 2

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Section 1.5 Taking of Necessary Action; Further Action. If, at any time after
the Effective Time, any further action is necessary or desirable to carry out
the purposes of this Agreement and to vest Surviving Corporation with full
right, title, and possession to all assets, properties, rights, privileges,
powers, and franchises of Company and Merger Sub, the officers and directors of
Company and Merger Sub are fully authorized in the name of their respective
corporations or otherwise to take all such lawful and necessary action.

ARTICLE II

EFFECT OF THE MERGER ON COMPANY SECURITIES

Section 2.1 Merger Consideration.

(a) The maximum aggregate consideration to be paid by Buyer and Merger Sub in
the Merger shall be an amount in cash (without interest) equal to $30.0 million,
plus (i) the Closing Cash, plus (ii) the Working Capital Excess (if any), minus
(iii) the Working Capital Deficiency (if any), minus (iv) the aggregate amount
of the Closing Indebtedness, minus (v) the aggregate amount of the Closing Date
Transaction Expenses, minus (vi) the aggregate amount of the Change in Control
Payments plus (vii) the amount of the Earn-Out Payment (if any) (as so adjusted,
without duplication of any item, the “Merger Consideration”).

(b) The allocation of the Merger Consideration (including the Closing Merger
Consideration, any Holder Adjustment Amount, any Representative Fund Remainder,
and any Earn-out Payment) among the Holders shall be determined by Company and
the Representative in accordance with Applicable Law, the Company’s Certificate
of Incorporation, and the terms of the Company Securities and shall be set forth
on the Allocation Certificate as provided in Section 2.7(a) (as the same may be
revised in accordance with Section 2.8(f)), and none of Buyer, Merger Sub or
Surviving Corporation shall have any responsibility or liability for such
allocation among the Holders.

Section 2.2 Company Stock.

(a) Conversion of Common Stock. At the Effective Time, by virtue of the Merger
and without any action on the part of Buyer, Merger Sub, Company, or their
respective equity holders:

(i) Capital Stock of Merger Sub. Each share of common stock of Merger Sub issued
and outstanding immediately prior to the Effective Time shall be converted into
and become one fully paid and non-assessable share of common stock, $0.001 par
value per share, of Surviving Corporation.

(ii) Conversion of Preferred Stock. Each share of Preferred Stock that is issued
and outstanding immediately prior to the Effective Time (other than Dissenting
Shares and shares to be cancelled in accordance with Section 2.2(a)(iv)) shall
be canceled and extinguished and shall be converted into the right to receive,
upon satisfaction of the conditions in Section 2.5, a cash amount (without
interest) equal to (i) the Preferred Stock Closing Per Share Merger

 

Agreement and Plan of Merger    Page 3

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Consideration, (ii) a ratable portion (as set forth on the Allocation
Certificate) of any Holder Adjustment Amount payable under Section 2.9(d),
(iii) a ratable portion (as set forth on the Allocation Certificate) of any
Representative Fund Remainder payable under Section 2.7(f) and (iv) a ratable
portion (as set forth on the Allocation Certificate) of any Earn-Out Payment
payable under Section 2.10 (collectively, the “Preferred Stock Per Share Merger
Consideration”).

(iii) Conversion of Common Stock. Each share of Company Common Stock that is
issued and outstanding immediately prior to the Effective Time (other than
Dissenting Shares and shares to be cancelled in accordance with
Section 2.2(a)(iv)) shall be canceled and extinguished and shall be converted
into the right to receive, upon satisfaction of the conditions in Section 2.5, a
cash amount (without interest) equal to (i) the Common Stock Closing Per Share
Merger Consideration, (ii) a ratable portion (as set forth on the Allocation
Certificate) of any Holder Adjustment Amount payable under Section 2.9(d),
(iii) a ratable portion (as set forth on the Allocation Certificate) of any
Representative Fund Remainder payable under Section 2.7(f) and (iv) a ratable
portion (as set forth on the Allocation Certificate) of any Earn-Out Payment
payable under Section 2.10 (collectively, the “Common Stock Per Share Merger
Consideration”).

(iv) Cancellation of Treasury Stock. All shares of Company Stock that are owned
by Company or by any wholly owned subsidiary of Company immediately prior to the
Effective Time shall be cancelled and shall cease to exist and no consideration
shall be delivered in exchange therefor.

(b) Accelerated Vesting of Restricted Stock. Prior to the Effective Time,
Company’s board of directors (or, if appropriate, any committee thereof) shall
adopt appropriate resolutions to, and Company shall take all other actions
necessary and appropriate to, provide that all restricted stock awards of
Company Common Stock outstanding immediately prior to the Effective Time shall
automatically become fully vested and free of any forfeiture restrictions at the
Effective Time. The holders of such shares of Company Common Stock shall be
treated in the Merger on the same terms and conditions as all other holders of
unrestricted Company Common Stock.

Section 2.3 Company Options.

(a) Prior to the Effective Time, Company’s board of directors (or, if
appropriate, any committee thereof) shall adopt appropriate resolutions to, and
Company shall take all other actions necessary and appropriate to, provide that,
immediately prior to the Effective Time, each Company Option outstanding
immediately prior to the Effective Time shall be accelerated and automatically
become fully vested.

(b) At the Effective Time, each Company Option that is outstanding immediately
prior to the Effective Time shall be cancelled and, in exchange therefor, each
holder thereof shall be entitled to receive, in consideration of the
cancellation of such Company Option and in settlement therefor, a payment in
cash (subject to the terms

 

Agreement and Plan of Merger    Page 4

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of this Agreement, including Section 2.5, Section 2.9, Section 2.10 and ARTICLE
XI) of an amount equal to the product of (i) the total number of shares of
Company Common Stock subject to such Company Option, and (ii) the excess, if
any, of the Common Stock Per Share Merger Consideration over the exercise price
per share of Company Common Stock subject to such Company Option (such amounts
payable hereunder, the “Option Payments”), without interest thereon and less any
applicable withholdings and payable in accordance with the Allocation
Certificate and the terms of this Agreement. From and after the Effective Time,
any such cancelled Company Option shall no longer be exercisable by the former
holder thereof, but shall only entitle such holder to the payment of the Option
Payment as set forth herein. No holder of a Company Option that has an exercise
price per share of Company Common Stock that is equal to or greater than the
Common Stock Per Share Merger Consideration shall be entitled to any payment
with respect to such cancelled Company Option before, on, or after the Effective
Time. Holders of Company Options shall be given the opportunity to exercise
their Company Options, effective immediately prior to the Effective Time and
conditioned upon the consummation of the Merger, and thereby to receive the
Common Stock Per Share Merger Consideration pursuant to Section 2.2(a)(iii) for
each share of Company Common Stock issued upon exercise of such exercised
Company Options. For accounting purposes, the cancellation of Company Options
and the entitlement of the Holders of Company Options to the Option Payments
pursuant to this Section 2.3(b) shall be deemed to accrue as of immediately
prior to the Effective Time.

(c) Company shall take all actions necessary or appropriate to ensure that, as
of the Effective Time, (i) the Company Stock Plans shall terminate, and no
further Company Options or other rights with respect to Company Securities shall
be granted thereunder, and (ii) no holder of Company Options shall have any
rights to acquire, or other rights in respect of, the capital stock of Company,
except the rights contemplated by Section 2.3(b) hereof. Company, prior to
Closing, will make any appropriate accruals for Taxes (including withholding)
relating to the Closing Option Payments.

(d) Each Principal Holder acknowledges and agrees to this Section 2.3, and in
particular each Principal Holder holding a Company Option (a) acknowledges that
the right to receive an Option Payment pursuant to this Section 2.3 shall
constitute full satisfaction of Company’s obligations under such Company Option
and the Company Stock Plans, (b) waives the right to receive any notice in
connection with the Merger or this Agreement under such Company Option and the
Company Stock Plan or Plans under which such Company Option was issued, and
(c) agrees that from and after the Effective Time, such Company Option shall be
terminated and of no further force or effect.

Section 2.4 Company Warrants. At the Effective Time, by virtue of the Merger and
without any further action on the part of Buyer, Merger Sub, or Company, each
Company Warrant that is outstanding immediately prior to the Effective Time
shall be accelerated and automatically become fully vested, cancelled and, in
exchange therefor, each holder thereof shall be entitled to receive, in
consideration of the cancellation of such Company Warrant and in settlement
therefor, a payment in cash (subject to the terms of this Agreement, including
Section 2.5, Section 2.9, Section 2.10 and ARTICLE XI) of an amount equal to the
product of (i) the total number of shares of Company Preferred Stock subject to
such Company Warrant, and

 

Agreement and Plan of Merger    Page 5

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(ii) the excess, if any, of the Preferred Stock Per Share Merger Consideration
over the exercise price per share of Company Preferred Stock subject to such
Company Warrant (such amounts payable hereunder, the “Warrant Payments”),
without interest thereon and less any applicable withholdings and payable in
accordance with the Allocation Certificate and the terms of this Agreement. From
and after the Effective Time, any such cancelled Company Warrant shall no longer
be exercisable by the former holder thereof, but shall only entitle such holder
to the payment of the Warrant Payment. No holder of a Company Warrant that has
an exercise price per share of Company Preferred Stock that is equal to or
greater than the Preferred Stock Per Share Merger Consideration shall be
entitled to any payment with respect to such cancelled Company Warrant before,
on, or after the Effective Time. Each Principal Holder acknowledges and agrees
to this Section 2.4, and in particular each Principal Holder holding a Company
Warrant (a) acknowledges that the right to receive a Warrant Payment pursuant to
this Section 2.4 shall constitute full satisfaction of Company’s obligations
under the Company Warrant, (b) waives the right to receive any notice in
connection with the Merger or this Agreement under such Company Warrant,
including section 3.2, section 3.4 and section 6 thereof and (c) agrees that
from and after the Effective Time, such Company Warrant shall be terminated and
of no further force or effect.

Section 2.5 Exchange Fund; Option Payments. The procedures for exchanging
outstanding shares of Company Securities for the Merger Consideration pursuant
to the Merger are as follows:

(a) Paying Agent. At or prior to the Effective Time, Buyer shall deposit with
SunTrust Bank or another bank or trust company mutually acceptable to Buyer and
Company (the “Paying Agent”), for the benefit of the Holders, for payment
through the Paying Agent in accordance with this Section 2.5, cash in the amount
set forth in Section 2.8(e)(vi) (the “Exchange Fund”). Any other amounts
delivered to the Paying Agent for the benefit of the Holders pursuant to this
Agreement, including, without limitation, any Holdback Adjustment Amount,
Representative Fund Remainder or Earn-out Payment, shall, at the election of the
Representative, be deposited in the Exchange Fund and held and disbursed in
accordance with the terms of this Section 2.5.

(b) Exchange Procedure for Company Securities.

(i) Promptly (and in any event within two Business Days) after the Effective
Time, Buyer shall instruct the Paying Agent to mail a letter of transmittal in
the appropriate form attached as Exhibit C-1 or Exhibit C-2 hereto (each, a
“Transmittal Letter”) to each Holder (other than (x) Holders who have previously
delivered properly completed Transmittal Letters along with all Stock
Certificates and Book Entry Shares owned by such Holders and (y) Holders of
unexercised Company Options only) at such Holder’s address as set forth on the
Allocation Certificate. The Transmittal Letter shall, among other things,
(A) provide instructions for effecting the surrender of any stock certificate
(each, a “Stock Certificate”), book-entry share (each, a “Book-Entry Share”) or
warrant certificate (each, a “Warrant Certificate”) that immediately prior to
the Effective Time represented shares of Company Stock or Company Warrants in
exchange for the applicable Merger Consideration payable with respect thereto,
(B) require the Holders to confirm the appointment of the Representative as
representative of the Holders hereunder, and (C) require the Holders to agree to
the obligations set forth in ARTICLE XI.

 

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(ii) Upon surrender of a Stock Certificate, Book-Entry Shares or Warrant
Certificate for cancellation to the Paying Agent, together with a duly completed
Transmittal Letter, the Paying Agent shall pay the applicable Holder in exchange
therefor cash in an amount equal to that portion of the Merger Consideration
that such Holder has the right to receive pursuant to the provisions of this
ARTICLE II and the Allocation Certificate in respect of all Company Stock and
Company Warrants held by such Holder, and the Stock Certificates, Book-Entry
Shares and Warrant Certificates so surrendered shall immediately be cancelled.
Amounts payable to Holders with respect to shares of Company Stock or Company
Warrants shall be paid by the Paying Agent out of the Exchange Fund in
accordance with the Allocation Certificate by check or wire transfer in
accordance with the instructions provided by the Holders (A) with respect to the
portion of the Closing Merger Consideration payable to such Holders, within five
(5) Business Days (but in no event prior to the Effective Time) after
satisfaction by the applicable Stockholder of the conditions in this
Section 2.5, including completion of a Transmittal Letter, and (B) with respect
to all other amounts payable with respect to shares of Company Stock or Company
Warrants pursuant to this Agreement, promptly after such amounts are received by
the Paying Agent (provided that the conditions in clause (A) have been
satisfied).

(iii) The portion of the Option Payments payable to the holders of Company
Options pursuant to Section 2.3 at Closing (i.e., other than with respect to any
Holder Adjustment Amount, Representative Fund Remainder or Earn-out Payment)
(the “Closing Option Payments”) shall be paid through Company’s payroll systems
and procedures (and subject to withholding for applicable Taxes) as soon as
practicable following the effectiveness of the Merger, in accordance with the
Allocation Certificate, and following receipt by Company (or the Paying Agent,
if so directed by Company) of such documentation as shall be reasonably
requested by Company (or the Paying Agent), including a Transmittal Letter.
Arrangements for payment of the Closing Option Payments shall be made by Company
prior to the Closing. All other amounts payable to the Holders of Company
Options pursuant to this Agreement shall be payable, at the election of Company,
either by (A) the Paying Agent, promptly after such amounts are received by the
Paying Agent, by check or wire transfer in accordance with the instructions
provided by the Holders of Company Options or (B) Company through Company’s
payroll systems and procedures as soon as reasonably practical following receipt
of such amounts by Company (provided in each case that the conditions in the
preceding sentence have been satisfied).

(iv) In the event of a transfer of ownership of Company Stock or Company
Warrants that is not registered in the transfer records of Company, the
applicable Merger Consideration payable with respect thereto may be paid to a
person other than the person in whose name the Stock Certificate, Book-Entry

 

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Shares or Warrant Certificates so surrendered is registered, if presented to the
Paying Agent, accompanied by all documents required to evidence and effect such
transfer and by evidence that any applicable stock transfer Taxes have been
paid.

(v) Until surrendered as contemplated by this Section 2.5, each Stock
Certificate, Book-Entry Share or Warrant Certificate shall be deemed at any time
after the Effective Time to represent only the right to receive, upon (and only
upon) the surrender of such Stock Certificate, Book-Entry Share or Warrant
Certificate, together with a properly completed Transmittal Letter, a portion of
the Merger Consideration as contemplated by this Section 2.5, or with respect to
Stock Certificates or Book-Entry Shares representing Dissenting Shares, such
rights as are granted under Section 262 of the DGCL.

(c) No Further Ownership Rights in Company Securities. Payment of the Merger
Consideration in accordance with this Agreement is made in satisfaction of all
rights pertaining to shares of Company Stock, and from and after the Effective
Time there shall be no further registration of transfers on the stock transfer
books of Surviving Corporation of the shares of Company Stock that were
outstanding immediately prior to the Effective Time. If, after the Effective
Time, Stock Certificates, Book-Entry Shares or Warrant Certificates are
presented to Surviving Corporation or the Paying Agent for any reason, they
shall be cancelled and exchanged as provided in this ARTICLE II.

(d) Termination of Exchange Fund. Any portion of the Exchange Fund that remains
undistributed to the Holders for one (1) year after the Effective Time shall be
delivered by the Paying Agent to Buyer, upon demand, and any Holder who has not
previously complied with this Section 2.5 shall be entitled to receive only from
Buyer payment of its claim for the Merger Consideration as provided in this
ARTICLE II.

(e) Withholding Rights. Each of the Paying Agent, Buyer, Merger Sub and
Surviving Corporation shall be entitled to deduct and withhold from the
consideration otherwise payable to any Person pursuant to this ARTICLE II such
amounts as may be required to be deducted and withheld with respect to the
making of such payment under the Tax Code, or any provision of state, local or
foreign Tax Law. To the extent that amounts are so deducted and withheld by the
Paying Agent, Buyer, Merger Sub, or the Surviving Corporation, as the case may
be, such amounts shall be treated for all purposes of this Agreement as having
been paid to the Person in respect of which the Paying Agent, Buyer, Merger Sub
or Surviving Corporation, as the case may be, made such deduction and
withholding.

(f) Escheat. None of Buyer, Surviving Corporation or the Paying Agent shall be
liable to any Holder with respect to any funds delivered to a public official
pursuant to any applicable abandoned-property, escheat, or similar law.

(g) Lost Certificates. If any Stock Certificate or Warrant Certificate shall
have been lost, stolen, or destroyed, upon the making of an affidavit of that
fact by the person claiming such certificate to be lost, stolen, or destroyed
(including customary indemnification terms), the Paying Agent shall issue in
exchange for such lost, stolen, or destroyed Stock Certificate or Warrant
Certificate that portion of the Merger Consideration then deliverable in respect
thereof pursuant to this Agreement.

 

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Section 2.6 Dissenting Shares.

(a) Notwithstanding anything to the contrary contained in this Agreement, any
shares of Company Stock held by a holder who has not voted for, or executed a
written consent in favor of, approval of this Agreement and who has made a
proper demand for payment and appraisal of such shares of Company Stock in
accordance with Section 262 of the DGCL (any such shares being referred to as
“Dissenting Shares” until such time as such holder fails to perfect or otherwise
loses or withdraws such holder’s appraisal rights under the DGCL with respect to
such shares) shall not be converted into or represent the right to receive the
Merger Consideration otherwise payable with respect to such shares in accordance
with Section 2.2, but shall be entitled only to such rights as are granted by
the DGCL to a holder of Dissenting Shares.

(b) If any Dissenting Shares lose their status as such (through failure to
perfect, voluntary withdrawal, or otherwise), then, as of the later of the
Effective Time or the date of loss of such status, such shares shall
automatically be converted into and shall represent only the right to receive
Merger Consideration in accordance with Section 2.2 and subject to Section 2.7,
without interest thereon, upon surrender of the Stock Certificate or Book-Entry
Shares formerly representing such shares and a duly completed Transmittal
Letter.

(c) Company shall give Buyer: (i) prompt notice of any written demand for
payment and appraisal received by Company prior to the Effective Time pursuant
to the DGCL, any withdrawal of any such demand, and any other demand, notice, or
instrument delivered to Company prior to the Effective Time pursuant to the DGCL
that relates to such demand; and (ii) the opportunity to participate in all
negotiations and proceedings with respect to any such demand, notice, or
instrument. Company shall not make any payment or settlement offer prior to the
Effective Time with respect to any such demand, notice, or instrument unless
Buyer shall have given its written consent to such payment or settlement offer
or such payment or settlement is otherwise required by the DGCL. Each holder of
Dissenting Shares who, pursuant to the provisions of Section 262 of the DGCL,
becomes entitled to payment of the value of the Dissenting Shares will receive
payment therefor after the value therefor has been agreed upon or finally
determined pursuant to such provisions, and any Merger Consideration that would
have been payable with respect to such Dissenting Shares will be retained by
Buyer.

Section 2.7 Representative, Representative Fund.

(a) The parties agree and acknowledge that the Representative is executing this
Agreement solely for the purpose of agreeing to the provisions of this
Section 2.7 (provided, that, after the Closing, the Representative shall be
entitled to enforce all of the provisions of this Agreement on behalf of the
Holders).

 

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(b) The Holders (by virtue of the approval and adoption of this Agreement, their
execution and delivery of the Transmittal Letters and/or execution of this
Agreement (in each case as applicable)) (i) agree to the terms and conditions of
that certain Contribution Agreement, to be entered in by and among the Holders
and Representative in connection with the consummation of the transactions
contemplated hereby, substantially in the form of Exhibit D (the “Contribution
Agreement”), (ii) irrevocably nominate, constitute and appoint Representative as
the agent and true and lawful attorney-in-fact of the Holders, with full power
of substitution, to act in the name, place and stead of the Holders for purposes
of executing, delivering, acknowledging, certifying, filing, modifying, amending
or waiving any and all documents and taking any actions that Representative may,
in its sole discretion, determine to be necessary, desirable or appropriate in
connection with or arising out of this Agreement and its performance of its
duties hereunder and thereunder and (iii) grant Representative such powers and
authority as are necessary to carry out the functions assigned to it hereunder
(provided, however, that Representative shall have no obligation to act on
behalf of the Holders except as expressly provided herein), including the full
power, authority, and discretion to (A) take all action necessary to consummate
the transactions contemplated hereby; (B) receive the Representative Payment;
(C) allocate (in accordance with this ARTICLE II) and pay over any proceeds
received directly or indirectly on behalf of any Holder, including from the
Representative Fund, or pursuant to Section 2.10; (D) contest, negotiate,
compromise, and settle any claims by Buyer against the Holders or by the Holders
against Buyer or pursuant to this Agreement (including pursuant to ARTICLE XI or
Section 2.9); (E) give and receive all notices required or permitted to be given
under this Agreement and the Contribution Agreement, (F) take any and all
additional action as is contemplated to be taken by or on behalf of the Holders
by the terms of this Agreement and the Contribution Agreement; (G) subject to
the limitations in Section 10.4, to agree to, negotiate and enter into
amendments to this Agreement and any other documents contemplated by this
Agreement and (H) in each case, execute and deliver any documents, instruments,
certificates, or agreements that may be necessary, appropriate, or advisable in
connection therewith. A Holder will be deemed a party or a signatory to the
Contribution Agreement and any document, instrument, certificate, or agreement
that Representative signs on behalf of such Holder. The Representative may take
all actions necessary or appropriate in the judgment of the Representative for
the accomplishment of any of the foregoing, including retaining counsel,
accountants, appraisers and other advisers, all for the account of the Holders,
the Holders agreeing to be fully bound by the acts, decisions and agreements of
the Representative taken and done pursuant to the authority granted in this
Section 2.7. Notices and communications to or from the Representative shall
constitute notice to or from the Holders.

(c) Representative may resign at any time, and Representative may be removed by
the vote of Persons which collectively owned more than fifty percent (50%) of
the Company Stock outstanding immediately prior to the Closing (the “Majority
Holders”). In the event a Representative has resigned or been removed, a new
Representative shall be appointed by a vote of the Majority Holders, such
appointment to become effective upon the written acceptance thereof by the new
Representative. Any successor Representative must agree to be bound by the terms
of this Agreement and the Contribution Agreement applicable to Representative
and will thereupon become Representative for purposes of this Agreement and the
Contribution Agreement.

 

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(d) All decisions and actions by Representative, including any agreement between
Representative and Buyer relating to the defense or settlement of any claims for
which the Holders may be required to indemnify, or pay to, Buyer pursuant to
ARTICLE XI or Section 2.9, shall be binding upon all of the Holders, and no
Holder shall have the right to object, dissent, protest, or otherwise contest
the same.

(e) Except in the event of Representative’s fraud, gross negligence, or willful
misconduct, Representative shall not have any liability to any of the parties
hereto or the Holders for any act done or omitted hereunder as Representative
while acting in good faith and in the exercise of reasonable judgment, and any
act done or omitted pursuant to the advice of counsel shall be conclusive
evidence of such good faith.

(f) At Closing, Representative will receive, from the Merger Consideration, the
Representative Payment as a non-exclusive fund for the payment of (i) all costs
and expenses incurred by or on behalf of Representative in its capacity as such
(including all costs and expenses incurred in connection with any dispute or
claim related to the transactions hereby) and (ii) any Damages or other payments
for which any Joint Indemnification Holder is jointly and severally liable
pursuant to Section 11.7(a), including (A) payment of any portion of the Final
Adjustment Amount required to be paid by the Holders pursuant to clause (ii)(B)
of Section 2.9(d) and (B) the indemnification obligations of the Holders set
forth in Section 11.1 (the “Representative Fund”). Representative shall
administer the Representative Fund in accordance with the terms of this
Agreement and the Contribution Agreement. At such time that Representative
believes, in its sole discretion, that no such additional fees, expenses or
payments will be incurred, Representative will deposit the remaining balance of
the Representative Fund (the “Representative Fund Remainder”) with the Paying
Agent for distribution thereof to the Holders or otherwise provide for
distribution to the Holders (in accordance with this ARTICLE II). The
Representative Fund shall be held by the Representative as agent and for the
benefit of the Holders in a segregated client account. The Holders shall not be
entitled to receive interest or other earnings on the Representative Fund. For
the avoidance of doubt, none of Buyer, Merger Sub or Surviving Corporation shall
have access to, or any responsibility or liability for the Representative’s use
or administration of, the Representative Fund, nor shall the Representative Fund
be deemed to limit the rights of Buyer, Merger Sub or the Surviving Corporation
under this Agreement.

(g) The Representative undertakes to perform such duties and only such duties as
are specifically set forth in this Agreement, and no implied covenants or
obligations shall be read into this Agreement against the Representative. The
Holders, severally in proportion to their respective Pro Rata Share, and not
jointly, shall indemnify and save and hold harmless the Representative and its
partners, members, stockholders, Affiliates, directors, officers, fiduciaries,
employees and agents from any Damages incurred by such parties based upon or
arising out of any act, whether of omission or commission, of the Representative
pursuant to the authority granted in this Section 2.7, including any

 

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additional fees and expenses it incurs beyond the Representative Payment, in
each case as such Damages are incurred or suffered. If not paid directly to the
Representative by the Holders, any such Damages may be recovered by the
Representative from the Representative Fund or any other payment payable to the
Holders hereunder.

(h) Without limiting Section 2.7(i), in no event may the Representative amend
this Agreement or any other document contemplated by this Agreement or executed
in connection with this Agreement to (i) create any personal liability of a
Holder under this Agreement or under any such other document to the extent not
already contemplated by this Agreement or (ii) take any action that would
adversely and disproportionately affect one group of Holders under this
Agreement in a manner different than the other Holders without the consent of
such adversely affected Holders; provided, however, that the Representative
shall be entitled to amend the Allocation Certificate in accordance with
Section 2.8(f).

(i) The Holders (by virtue of the approval and adoption of this Agreement, their
execution and delivery of the Transmittal Letters and/or execution of this
Agreement (in each case as applicable)) each agree, in addition to the
foregoing, that:

(i) Buyer shall be entitled to rely conclusively on the instructions and
decisions of Representative as to the settlement of any claims for
indemnification or payment by Buyer pursuant to ARTICLE XI, Section 2.8(f) or
Section 2.9, or any other actions required or permitted to be taken by
Representative hereunder, and no Holder shall have any cause of action against
Buyer or its Affiliates for any action taken by Buyer in reliance upon the
instructions or decisions of Representative.

(ii) All actions, decisions and instructions of Representative shall be
conclusive and binding upon all of the Holders, and no Holder shall have any
cause of action against Representative for any action taken, decision made, or
instruction given by Representative under this Agreement, except for fraud,
gross negligence, or willful misconduct by Representative in connection with the
matters described in this Section 2.7.

(iii) The provisions of this Section 2.7 are independent and severable, are
irrevocable and coupled with an interest, and shall be enforceable
notwithstanding any rights or remedies that any Holder may have in connection
with the transactions contemplated by this Agreement.

(iv) The provisions of this Section 2.7 shall be binding upon the executors,
heirs, legal representatives, personal representatives, successor trustees, and
successors of each Holder, and any references in this Agreement and the
Contribution Agreement to a Holder shall mean and include the successors to the
rights of the Holders hereunder, whether pursuant to testamentary disposition,
the laws of descent and distribution, or otherwise.

 

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Section 2.8 Allocation Certificate; Closing Payments.

(a) “Closing Merger Consideration” shall mean an amount equal to $30.0 million,
plus (i) the Estimated Closing Cash, plus (ii) the Estimated Working Capital
Excess (if any), minus (iii) the Estimated Working Capital Deficiency (if any),
minus (iv) the Estimated Closing Indebtedness, minus (v) the Estimated Closing
Date Transaction Expenses, minus (vi) the Estimated Change in Control Payments,
minus (vii) the Holdback Amount, minus (viii) the Representative Payment.

(b) At least two Business Days prior to the Closing Date, Company will deliver
to Buyer a certificate (the “Closing Certificate”), signed by Representative and
the Chief Executive Officer of Company, setting forth Company’s good faith
estimate, in each case as of the Closing Date, of:

(i) an unaudited balance sheet (the “Estimated Closing Date Balance Sheet”) of
Company as of the Closing Date, which Estimated Closing Date Balance Sheet shall
(A) be substantially in the form of the illustrative balance sheet included as
part of Schedule B (the “Illustrative Balance Sheet”), (B) reflect the
adjustments contemplated by Schedule B (the principles underlying such
adjustments, the “Balance Sheet Principles”), and (C) subject to the Balance
Sheet Principles, be prepared in accordance with GAAP (except for the absence of
footnotes) on a basis consistent with and utilizing the same principles,
practices, and policies as those used in preparing the Company Balance Sheet;

(ii) the Closing Cash, as derived from the Estimated Closing Date Balance Sheet
(such amount, the “Estimated Closing Cash”);

(iii) the Closing Working Capital and the resulting Working Capital Excess or
Working Capital Deficiency, as applicable, in each case as derived from the
Estimated Closing Date Balance Sheet (as applicable, the “Estimated Working
Capital Excess” or “Estimated Working Capital Deficiency”);

(iv) the aggregate Closing Date Transaction Expenses (the “Estimated Closing
Date Transaction Expenses”), together with a description and the amount of each
element thereof, and, to the extent applicable, the wire instructions for each
person or entity to whom such Closing Date Transaction Expenses are due and
payable on or after the Closing Date;

(v) an itemized description and the amount of each element of the Closing
Indebtedness (the “Estimated Closing Indebtedness”), and, to the extent
applicable, the wire instructions for each person or entity to whom Closing
Indebtedness is due and payable on or after the Closing Date;

(vi) the aggregate Change in Control Payments (the “Estimated Change in Control
Payments”), together with a description and the amount of each element thereof,
and, to the extent applicable, the wire instructions for each person or entity
to whom a Change in Control Payment is due and payable on or after the Closing
Date; and

(vii) the resulting calculation of the Closing Merger Consideration.

 

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(c) At least two Business Days prior to the Closing Date, Company will deliver
to Buyer a certificate (the “Allocation Certificate”), signed by Representative
and the Chief Executive Officer of Company, setting forth each of the following:

(i) the number of shares of Preferred Stock, the number of shares of Common
Stock, the number of Company Options, and the number of Company Warrants;

(ii) based on the calculation of the Closing Merger Consideration, the aggregate
Closing Option Payments, the portion of the aggregate Warrant Payments payable
at Closing, the Preferred Stock Per Share Closing Merger Consideration, the
Common Stock Per Share Closing Merger Consideration, the amount of each Closing
Option Payment and the amount of the Warrant Payment payable at Closing for each
Company Warrant;

(iii) the identity and mailing address of each Holder and the number and type of
Company Securities held by each such Holder;

(iv) the amount of the Closing Merger Consideration to be paid to each Holder;
and

(v) the Pro Rata Share of each Holder.

(d) Company will provide Buyer access to all supporting workpapers used in the
preparation of the Closing Certificate and the Allocation Certificate upon
Buyer’s request. The Allocation Certificate, as revised pursuant to
Section 2.8(f), shall be deemed the definitive calculation of the portion of the
Closing Merger Consideration and the Merger Consideration payable to each Holder
in connection with the Merger and the disbursement thereof.

(e) At the Closing, Buyer shall, or shall cause Merger Sub to, by wire transfer
of immediately available funds:

(i) pay all amounts due in satisfaction of the Closing Indebtedness to the
holders thereof, as set forth on the Closing Certificate;

(ii) pay all amounts due in satisfaction of the Closing Date Transaction
Expenses to the persons or entities owed such amounts, as set forth on the
Closing Certificate;

(iii) pay all amounts due in satisfaction of any Change in Control Payments to
the persons or entities owed such amounts, as set forth on the Closing
Certificate;

(iv) deposit the Representative Payment with the Representative as contemplated
by Section 2.7(f) hereof;

 

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(v) deposit the Closing Option Payments with Company; and

(vi) deposit with the Paying Agent, for the benefit of the Holders, an amount
equal to the Closing Merger Consideration minus Closing Option Payments.

(f) The Representative may amend the Allocation Certificate from time to time,
including, without limitation, in connection with the payment to the Holders of
the Closing Merger Consideration, any Holder Adjustment Amount, any
Representative Fund Remainder and any Earn-out Payment, in each case to the
extent applicable, solely to ensure that payments of the Merger Consideration
(and all components thereof) are paid to the Holders in accordance with
Applicable Law, the Company’s Certificate of Incorporation and the terms of the
Company Securities. The Allocation Certificate, as so amended, shall remain
subject to Section 11.1(e), and no such amendment to the Allocation Certificate
shall create any obligation of Buyer or Surviving Corporation with respect to
payments made prior to the date such amended Allocation Certificate is delivered
to them in accordance with this Agreement or relieve the Holders of any
liability they may have under Section 11.1(e). In connection with any amendment
of the Allocation Certificate, the Representative shall provide notification in
accordance with the Paying Agent Agreement of any revised payment provisions.

Section 2.9 Merger Consideration Adjustment.

(a) Within 60 days after the Closing Date, Buyer will deliver to Representative
(i) an unaudited balance sheet (the “Closing Date Balance Sheet”) of Company as
of the Closing, substantially in the form of the Illustrative Balance Sheet and
prepared in accordance with the Balance Sheet Principles and, subject to the
Balance Sheet Principles, GAAP (except for the absence of footnotes) and on a
basis consistent with and utilizing the same principles, practices, and policies
as those used in preparing the Company Balance Sheet and (ii) a written
statement setting forth in reasonable detail its determination of the actual
Closing Cash, Working Capital Excess (if any), Working Capital Deficiency (if
any), Closing Indebtedness, Closing Date Transaction Expenses and Change in
Control Payments, in each case, as of the Closing, and the resulting calculation
of the Merger Consideration (less the Holdback Amount, Representative Payment
and Earn-out Payment) (the “Final Closing Merger Consideration”).

(b) If Representative disagrees with the calculation of the Final Closing Merger
Consideration, Representative shall, within 30 days after receipt of the Closing
Date Balance Sheet, deliver a notice (an “Objection Notice”) to Buyer setting
forth Representative’s calculation of the amount of the Final Closing Merger
Consideration. If requested by Representative, Buyer shall provide to
Representative copies of all relevant documentation used in its calculation, if
any. If Representative does not deliver the Objection Notice to Buyer within 30
days after receipt by Representative of the Closing Date Balance Sheet, the
Final Closing Merger Consideration as calculated by Buyer will be conclusively
presumed to be true and correct in all respects and will be final and binding
upon the parties.

 

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(c) Representative and Buyer will use their respective commercially reasonable
efforts to resolve any disagreements as to the computation of the Final Closing
Merger Consideration, but if they do not obtain a final resolution within 60
days after Buyer’s receipt of the Objection Notice, then all amounts remaining
in dispute shall be submitted to the Neutral Auditor; provided, however, to the
extent agreed upon by Representative and Buyer, the 60-day period set forth in
the immediately preceding sentence may be extended. Buyer and Representative
will direct the Neutral Auditor to render a determination within 45 days of its
retention and Buyer and Representative will cooperate with the Neutral Auditor
during its engagement. The Neutral Auditor will consider only those items and
amounts set forth in the Objection Notice which Buyer and Representative are
unable to resolve; provided that each of Buyer and Representative shall be
entitled to make a presentation to the Neutral Auditor regarding the items and
amounts that they are unable to resolve and neither Buyer nor Representative
will meet separately with the Neutral Auditor. In making its determination, the
Neutral Auditor shall (i) be bound by the terms and conditions of this
Agreement, including the definition of Final Closing Merger Consideration and
the components thereof, the Illustrative Balance Sheet, the Balance Sheet
Principles, the example methodology for calculating Closing Working Capital as
set forth on Schedule B, and the terms of this Section 2.9, and (ii) not assign
any value with respect to a disputed amount that is greater than the highest
value for such amount claimed by either Representative or Buyer or that is less
than the lowest value for such amount claimed by either Representative or Buyer.
The determination of the Neutral Auditor will be conclusive and binding.
Representative shall pay a portion of the fees and expenses of the Neutral
Auditor equal to 100% multiplied by a fraction, the numerator of which is the
amount of disputed amounts submitted to the Neutral Auditor that are resolved in
favor of Buyer (that being the difference between the Neutral Auditor’s
determination and Representative’s determination) and the denominator of which
is the total amount of disputed amounts submitted to the Neutral Auditor (that
being the sum total by which Buyer’s determination and Representative’s
determination differ from the determination of the Neutral Auditor). Buyer shall
pay that portion of the fees and expenses of the Neutral Auditor that
Representative is not required to pay under this Section 2.9.

(d) The “Final Adjustment Amount” shall be an amount equal to the Closing Merger
Consideration less the finally determined Final Closing Merger Consideration.
Within three Business Days following the final determination of the Final
Closing Merger Consideration, (i) if the Final Adjustment Amount is positive and
less than or equal to the Holdback Amount, (A) a portion of the Holdback Amount
equal to the Final Adjustment Amount shall be retained by Buyer and (B) Buyer
shall pay the remainder, if any, of the Holdback Amount to Holders; (ii) if the
Final Adjustment Amount is positive and is greater than the Holdback Amount,
(A) the entire Holdback Amount shall be retained by Buyer and (B) Holders shall
(in accordance with and subject to Section 11.7) promptly pay Buyer an amount
equal to the excess of the Final Adjustment Amount over the Holdback Amount, or
(iii) if the Final Adjustment Amount is negative or zero, Buyer shall deposit
the absolute value of the Final Adjustment Amount plus the Holdback Amount with
the Paying Agent for distribution to the Holders (in accordance with this
ARTICLE II). Any amounts payable to the Holders pursuant to clauses (i) or
(iii) are referred to herein, in the aggregate, as the “Holder Adjustment
Amount.”

 

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Section 2.10 Earn Out Payment.

(a) For purposes of this Agreement, the following terms have the meanings given
them below:

(i) “Achievement Percentage” means, for any Earn-Out Period, the quotient of
(A) Sales Revenue for such period divided by (B) the Performance Objective for
such period, stated as a percentage.

(ii) “Earn-Out Amount” means, for any Earn-Out Period, (A) if the Achievement
Percentage for such Earn-Out Period is equal to or greater than 100%, an amount
equal to the Period Target Amount, (B) if the Achievement Percentage for such
Earn-Out Period is at least 90% but less than 100%, an amount equal to (1) a
fraction, the numerator of which is the amount by which Sales Revenue exceeded
90% of the Performance Objective for such Earn-Out Period and the denominator of
which is 10% of the applicable Performance Objective, multiplied by (2) the
Period Target Amount; and (C) if the Achievement Percentage for such Earn-Out
Period is less than 90%, zero (no Earn-Out Payment shall be made for such
Earn-Out Period).

(iii) “Earn-Out Payment” means the sum of the Earn-Out Amounts for each Earn-Out
Period, subject to any set-off pursuant Section 11.6. For the avoidance of
doubt, in no event will the Earn-Out Payment exceed the Target Amount.

(iv) “Earn-Out Period” means each of (A) the one-year period ending on the first
anniversary of the Closing Date (the “First Earn-Out Period”), (B) the two-year
period ending on the second anniversary of the Closing Date (the “Second
Earn-Out Period”) and (C) the three-year period ending on the third anniversary
of the Closing Date (the “Third Earn-Out Period”).

(v) “Sales Revenue” means, with respect to any Earn-Out Period, the sales
revenue of the Surviving Corporation (or any successor or assign of the
Business) during such Earn-Out Period relating to the Business, net of returns,
allowances and rebates and excluding intercompany revenue, but including vendor
promotions, services revenue, advertising revenue and shipping revenue, in each
case calculated in accordance with those Balance Sheet Principles denoted with a
dagger (†) on Schedule B and, subject to such Balance Sheet Principles, GAAP
applied on a consistent basis on the basis of its audited financial statements.

(vi) “Performance Objective” means,

 

  (A) for the First Earn-Out Period, $90 million,

 

  (B) for the Second Earn-Out Period, $198 million, and

 

  (C) for the Third Earn-Out Period, $331 million.

 

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(vii) “Period Target Amount” means,

(A) for the First Earn-Out Period, one-third of the Target Amount,

(B) for the Second Earn-Out Period, two-thirds of the Target Amount less any
Earn-Out Amount for the First Earn-Out Period, and

(C) for the Third Earn-Out Period, the Target Amount less the sum of the
Earn-Out Amount for the First Earn-Out Period, if any, plus the Earn-Out Amount
for the Second Earn-Out Period, if any.

(viii) “Target Amount” means $10 million.

(b) Within 60 days following the end of each Earn-Out Period, Buyer shall
prepare and deliver to Representative a schedule of the Sales Revenue and
Achievement Percentage for such Earn-Out Period (an “Earn-Out Schedule”),
setting forth such calculations in reasonable detail. Within 30 days after
delivery of an Earn-Out Schedule to Representative (during which period Buyer
shall provide reasonable access to such working papers and information relating
to the preparation of the Earn-Out Schedule as may be reasonably requested by
Representative), Representative may dispute all or a portion of the Earn-Out
Schedule by giving written notice (a “Earn-Out Objection Notice”) to Buyer
setting forth in reasonable detail the basis for any such dispute. Buyer and
Representative shall promptly commence good faith negotiations with a view to
resolving all such disputes. If Representative does not provide a Notice of a
Disagreement to Buyer within such 30-day period, the Earn-Out Schedule in the
form delivered by Buyer will be conclusive, final and binding. If Buyer and
Representative do not resolve such dispute (as evidenced by a written agreement
between them, in which case the Earn-Out Schedule as so agreed will be
conclusive, final and binding) within 30 days following delivery of the Earn-Out
Objection Notice, the dispute may be resolved in accordance with the provisions
of Section 2.9(c), mutatis mutandis, and the Earn-Out Schedule as so resolved
will be conclusive, final and binding.

(c) No portion of the Earn-Out Payment will be payable prior to the later of
(i) March 1, 2017 and (ii) the date all Earn-Out Schedules have become
conclusive, final and binding pursuant to Section 2.9(c) (such later date, the
“Earn-Out Payment Date”). Subject to Section 11.6, if an Earn-Out Payment is due
hereunder, Buyer shall, by the Earn-Out Payment Date, deposit the Earn-Out
Payment with Paying Agent or Representative for subsequent distribution to the
Holders (in accordance with this ARTICLE II).

(d) In accordance with Section 11.6, Buyer may (i) set off against any Earn-Out
Payment payable under this Section 2.10 any Undisputed Indemnification Amount
and (ii) suspend payment of a portion of any Earn-Out Payment payable under this
Section 2.10 pending resolution of any claims relating to an unpaid amount owed
by a Holder to Buyer or Surviving Corporation hereunder, including pursuant to
Section 2.9, ARTICLE VIII, or this ARTICLE XI, to the extent (but only to the
extent) of any such claims until final resolution of such claims.

 

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(e) Except as set forth in this Section 2.10(e) and Section 2.10(f), Buyer will
have the right to operate the business of Surviving Corporation as it chooses,
in its sole discretion, and Buyer is not under any obligation to provide any
specific level of investment or financial assistance to Surviving Corporation or
to undertake any specific actions (or to refrain from taking any specific
actions) with respect to the operation of Surviving Corporation. Buyer is not
representing or warranting that any specific level of Sales Revenue will be
achieved. Notwithstanding anything in this Section 2.10 to the contrary, from
the Closing Date until the end of the Third Earn-out Period, Buyer shall, and
shall cause the Surviving Corporation to:

(i) maintain a separate accounting of Sales Revenue in a manner that reasonably
facilitates calculation of the Earn-out Payment as provided herein;

(ii) not take any action that would have the effect of shifting recognition of
Sales Revenue into or out of any Earn-out Period from Earn-out Periods in which
such Sales Revenue would otherwise be recognized in accordance with the Balance
Sheet Principles and, subject to the Balance Sheet Principles, GAAP consistently
applied; or

(iii) not (A) shift, redirect, or divert any business of the Surviving
Corporation to any other business or entity, or (B) take any other action, in
each case for the purpose of manipulating Sales Revenue and/or the Earn-Out
Payment; provided, that in the event any such action is taken for such purpose,
Buyer shall notify the Representative and such business shall continue to be
included in the calculation of Sales Revenue. For the avoidance of doubt, Buyer
shall not be deemed to have shifted, redirected or diverted Sales Revenue for
such purpose merely as a result of owning or operating a similar business,
providing (or failing to provide) any specific level of investment or financial
assistance provided to Surviving Corporation or the Business or otherwise
exercising its rights to operate the Business.

(f) In the event that, at any time from the Closing Date until the end of the
Third Earn-out Period, Buyer Parent, Buyer or the Surviving Corporation
(i) sells, transfers or assigns all or substantially all of the assets of the
Business or equity interests of the Surviving Corporation, including, without
limitation, pursuant to an asset sale, stock sale, merger, reorganization,
consolidation or otherwise or (ii) enters into any transaction that results in a
change of fifty percent (50%) or more of the direct or indirect ownership of
Buyer Parent, Buyer or the Surviving Corporation (subject to the ultimate
sentence of this Section 2.10(f), a “Subsequent Transaction”), then, upon the
closing of such Subsequent Transaction, the Earn-out Payment shall become
immediately due and payable. For the purposes of calculating the Earn-out
Payment payable upon the consummation of a Subsequent Transaction, the Earn-out
Amount payable with respect to each Earn-out Period that is not completed as of
the date of the closing of such Subsequent Transaction shall be deemed to be the
applicable Period Target Amount for

 

Agreement and Plan of Merger    Page 19

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each such Earn-out Period. A “Subsequent Transaction” shall not include, and no
acceleration of the Earn-Out Payment shall be required in connection with any
corporate restructuring or reorganization of Buyer Parent and its Subsidiaries
that does not result in a change of control of Buyer Parent.

(g) The right to receive any Earn-Out Payment is an integral part of the Merger
Consideration. The right to receive any Earn-Out Payment does not represent an
equity or ownership interest in Buyer or Surviving Corporation, does not entitle
the holder thereof to any rights (including voting, dividend or other rights)
other than the right to receive any Earn-Out Payment as expressly set forth in
this Section 2.10, and is not a “security” within the meaning of the Securities
Act or any other securities laws. The right to receive any Earn-Out Payment will
not be represented by any form of certificate or instrument and is not
assignable or transferable, except by operation of law.

ARTICLE III

REPRESENTATIONS AND WARRANTIES RELATING TO PRINCIPAL HOLDERS

Each Principal Holder, only as to such Principal Holder and not as to any other
Holder, represents and warrants to Buyer and Merger Sub that the statements
contained in this ARTICLE III are true and correct, except as specifically set
forth herein or in the disclosure letter delivered by Company to Buyer on the
date of this Agreement (the “Company Disclosure Letter”).

Section 3.1 Company Stock. Such Principal Holder has good and valid title to the
number of shares of Company Stock, Company Options and Company Warrants as set
forth opposite such Principal Holder’s name on Section 4.3(e) of the Company
Disclosure Letter, in each case free and clear of any Liens (other than
Permitted Liens). Except as set forth on Section 4.3(b) of the Company
Disclosure Letter, neither such Principal Holder nor any of its Affiliates is a
party to or is bound by any agreements or understandings with respect to the
voting or sale or transfer of any shares of Company Stock or other equity
interests of Company.

Section 3.2 Authority; Capacity; No Conflict; Required Filings and Consents.

(a) Such Principal Holder, if not a natural person, has the requisite power and
authority to execute and deliver this Agreement and each other document to be
executed by it in connection herewith (each a “Principal Holder Ancillary
Document”) and to perform its obligations hereunder and thereunder, all of which
have been duly authorized by all requisite corporate, partnership or limited
liability company action. Such Principal Holder, if a natural person, has the
legal capacity to execute and deliver this Agreement and each Principal Holder
Ancillary Document and to perform his or her obligations hereunder and
thereunder. No further action on the part of such Principal Holder is necessary
to authorize the execution, delivery and performance of this Agreement and each
Principal Holder Ancillary Document by such Principal Holder and the
consummation by such Principal Holder of the Merger and the other transactions
contemplated hereby and thereby. This Agreement has been, and at Closing each
Principal Holder Ancillary Document will be, duly executed and delivered by such
Principal Holder and, assuming that this Agreement and each Principal Holder
Ancillary Document is duly and validly authorized, executed, and delivered by
the other parties hereto and thereto, constitutes, or will constitute (as
applicable), a valid and binding

 

Agreement and Plan of Merger    Page 20

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agreement of such Principal Holder, enforceable against such Principal Holder in
accordance with its terms, subject to any applicable bankruptcy, reorganization,
insolvency, moratorium, or other similar Applicable Laws affecting creditors’
rights generally and principles governing the availability of equitable
remedies.

(b) The execution and delivery of this Agreement by such Principal Holder does
not, and the consummation by such Principal Holder of the transactions
contemplated by this Agreement will not, (i) conflict with, or result in any
violation or breach of, any provision of such Principal Holder’s organizational
documents, if such Principal Holder is not a natural person, (ii) conflict with,
or result in any violation or breach of, or constitute (with or without notice
or lapse of time, or both) a default (or give rise to a right of termination,
cancellation or acceleration of any obligation or loss of any benefit) under,
require a consent or waiver under, require the payment of a penalty under any of
the terms, conditions, or provisions of any contract, instrument, or obligation
to which such Principal Holder is a party or by which Company Stock owned by
such Principal Holder may be bound, (iii) or result in the imposition of any
Lien on Company Stock owned by such Principal Holder, or (iv) conflict with or
violate any permit, concession, franchise, license, judgment, injunction, order,
decree, statute, law, ordinance, rule, or regulation applicable to such
Principal Holder or Company Stock owned by such Principal Holder.

(c) No consent, approval, license, permit, order, or authorization of, or
registration, declaration, notice, or filing with, any court, arbitrational
tribunal, administrative agency or commission, or other governmental or
regulatory authority, agency, office or instrumentality (each a “Governmental
Entity”) is required by or with respect to such Principal Holder in connection
with the execution and delivery of this Agreement by such Principal Holder or
the consummation by such Principal Holder of the transactions contemplated by
this Agreement.

Section 3.3 Litigation. There is no action, suit, proceeding, claim,
arbitration, or investigation pending or, to such Principal Holder’s knowledge,
threatened against such Principal Holder or its properties, in each case by or
before any Governmental Entity, to restrain or prevent the carrying out of the
transactions contemplated by this Agreement or that would be reasonably likely
to adversely affect, or prevent, the Merger or otherwise impair the ability of
such Principal Holder to perform such Principal Holder’s obligations under this
Agreement.

Section 3.4 Disclosure. The representations and warranties contained in this
ARTICLE III do not contain any untrue statement of a fact or omit a fact
necessary to make the statements and information in this ARTICLE III not
misleading.

Section 3.5 Brokers and Finders. Neither Company nor any Affiliate of Company is
obligated for the payment of any fees or expenses of any investment banker,
broker, finder or similar party in connection with the origin, negotiation or
execution of this Agreement or in connection with the Merger or any other
transaction contemplated by this Agreement in each case based upon arrangements
made by or on behalf of such Principal Holders, except for any such fees and
expenses included in the Closing Date Transaction Expenses as set forth in the
Closing Certificate. Buyer and Surviving Corporation will not incur any
liability, either directly or indirectly, to any such investment banker, broker,
finder or similar party as a result of this Agreement, the Merger or any act or
omission of such Principal Holder or, to the extent applicable, any of its
employees, officers, directors, stockholders, agents or Affiliates.

 

Agreement and Plan of Merger    Page 21

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Section 3.6 Additional Representations of Joint Indemnification Holders. If such
Principal Holder is a Joint Indemnification Holder, the aggregate Pro Rata
Shares of the Joint Indemnification Holders is, and will be, not less than
68.3%.

Section 3.7 NO ADDITIONAL REPRESENTATIONS OR WARRANTIES. EXCEPT AS OTHERWISE
EXPRESSLY SET FORTH IN THIS ARTICLE III AND ARTICLE IV OR OTHERWISE PROVIDED IN
THIS AGREEMENT, EACH PRINCIPAL HOLDER EXPRESSLY (I) DISCLAIMS ANY
REPRESENTATIONS OR WARRANTIES OF ANY KIND OR NATURE, EXPRESS OR IMPLIED AND (II)
ALL LIABILITY AND RESPONSIBILITY FOR ANY REPRESENTATION, WARRANTY, STATEMENT OR
INFORMATION MADE, COMMUNICATED OR FURNISHED (ORALLY OR IN WRITING) TO BUYER OR
ITS AFFILIATES OR REPRESENTATIVES (INCLUDING ANY OPINION, INFORMATION,
PROJECTION, OR ADVICE THAT MAY HAVE BEEN OR MAY BE PROVIDED TO BUYER BY ANY
DIRECTOR, OFFICER, EMPLOYEE, AGENT, CONSULTANT, OR REPRESENTATIVE OF ANY
PRINICPAL HOLDER).

ARTICLE IV

REPRESENTATIONS AND WARRANTIES RELATING TO COMPANY

Company and Principal Holders represent and warrant to Buyer that the statements
contained in this ARTICLE IV are true and correct, except as specifically set
forth herein or in the Company Disclosure Letter.

Section 4.1 Organization, Standing, and Power. Company is a corporation duly
organized, validly existing, and in good standing under the laws of the State of
Delaware, has all requisite corporate power and authority to own, lease, and
operate its properties and assets and to carry on its business as now being
conducted, and is duly qualified to do business and, where applicable as a legal
concept, is in good standing as a foreign corporation in each jurisdiction in
which the character of the properties it owns, operates or leases or the nature
of its activities makes such qualification necessary, except in each case for
such failures to be so organized, qualified or in good standing, individually or
in the aggregate, that have not had and will not have a Company Material Adverse
Effect. Section 4.1 of Company Disclosure Letter contains a complete and
accurate list of the jurisdictions in which Company is qualified to do business
as a foreign corporation.

Section 4.2 Organizational Documents. Company has furnished to Buyer a complete
and correct copy of its Certificate of Incorporation and Bylaws, each as amended
to date. Such documents are in full force and effect, and Company is not in
violation of any of the provisions thereof.

 

Agreement and Plan of Merger    Page 22

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Section 4.3 Capitalization.

(a) The authorized capital stock of Company as of the date of this Agreement
consists of 10,000,000 shares of Company Common Stock and 5,000,000 shares of
Preferred Stock. The rights and privileges of each class of Company Stock are as
set forth in Company’s Certificate of Incorporation. As of the date of this
Agreement, (i) 7,258,239 shares of Company Common Stock were issued and
outstanding and (ii) 597,986 shares of Preferred Stock were issued and
outstanding.

(b) Except for the Company Stock, Company Options and Company Warrants or as set
forth on Section 4.3(b) of the Company Disclosure Letter, (i) there are no
equity securities of any class of Company, or any security exchangeable into or
exercisable for such equity securities, issued, reserved for issuance, or
outstanding and (ii) there are no options, warrants, equity securities, calls,
rights, commitments, or agreements of any character to which Company is a party
or by which Company is bound obligating Company to issue, exchange, transfer,
deliver, or sell, or cause to be issued, exchanged, transferred, delivered, or
sold, additional shares of capital stock or other equity interests of Company or
any security or rights convertible into or exchangeable or exercisable for any
such shares or other equity interests, or obligating Company to grant, extend,
accelerate the vesting of, otherwise modify or amend or enter into any such
option, warrant, equity security, call, right, commitment, or agreement. Company
does not have any outstanding stock appreciation rights, restricted stock,
restricted stock units, phantom stock, performance based equity rights or
similar equity rights or obligations. Except as set forth on Section 4.3(b) of
the Company Disclosure Letter, neither the Company nor any of its Affiliates is
party to or bound by any agreements or understandings with respect to the voting
or sale or transfer of any shares of Company Stock or other equity interests of
Company.

(c) All outstanding shares of Company Stock are, and all shares of Company
Common Stock subject to issuance as specified in this Section 4.3, upon issuance
on the terms and conditions specified in the instruments pursuant to which they
are issuable, will be, duly authorized, validly issued, fully paid, and
non-assessable and not subject to (other than Permitted Liens), or issued in
violation of, any Lien, purchase option, call option, right of first refusal,
preemptive right, or subscription right under any provision of the DGCL,
Company’s certificate of incorporation or bylaws, or any agreement to which
Company is a party or is otherwise bound.

(d) There are no obligations, contingent or otherwise, of Company to repurchase,
redeem, or otherwise acquire any shares of Company Stock or other capital stock
of Company.

(e) Section 4.3(e) of the Company Disclosure Letter lists, as of the date of
this Agreement, all Holders of record and all shares of Company Stock, Company
Options and Company Warrants held by each of them.

Section 4.4 Subsidiaries. Section 4.4 of the Company Disclosure Letter lists
each of the Subsidiaries of Company and the state in which it was incorporated
or organized. All of the outstanding shares of capital stock of, or other equity
or voting interests in, each Subsidiary of Company (a) are owned directly or
indirectly (as set forth on Section 4.4 of the Company Disclosure Letter) by
Company, (b) have been validly issued, were issued free of pre-emptive rights
and are fully paid and non-assessable, and (c) are free and clear of all Liens
(other than

 

Agreement and Plan of Merger    Page 23

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Permitted Liens), including any restriction on the right to vote, sell or
otherwise dispose of such capital stock or other equity or voting interests.
Except for such Subsidiaries, Company does not own, directly or indirectly, any
capital stock of, or other equity or voting interests in, any Person.

Section 4.5 Authority; No Conflict; Required Filings and Consents.

(a) Company has the corporate power and authority to execute and deliver this
Agreement and each other document to be executed by Company in connection
herewith (each a “Company Ancillary Document”) and to perform its obligations
hereunder and thereunder, all of which have been duly authorized by all
requisite corporate action. Except for execution and delivery of the Stockholder
Consent and the execution and filing of the Certificate of Merger, no further
corporate or stockholder action on the part of Company or the Holders is
necessary to authorize the execution, delivery and performance of this Agreement
and each Company Ancillary Document by Company and the consummation by Company
of the Merger and the other transactions contemplated hereby and thereby. This
Agreement has been, and at Closing each Company Ancillary Document will be, duly
executed and delivered by Company and, assuming that this Agreement and each
Company Ancillary Document is duly and validly authorized, executed, and
delivered by the other parties hereto and thereto, constitutes, or will
constitute (as applicable), a valid and binding agreement (or, in the case of
the Certificate of Merger a valid and binding instrument) of Company,
enforceable against Company in accordance with its terms, subject to any
applicable bankruptcy, reorganization, insolvency, moratorium, or other similar
Applicable Laws affecting creditors’ rights generally and principles governing
the availability of equitable remedies.

(b) Except as set forth on Section 4.5(b) of the Company Disclosure Letter, the
execution and delivery of this Agreement by Company does not, and the
consummation by Company of the transactions contemplated by this Agreement will
not, (i) conflict with, or result in any violation or breach of, any provision
of the Certificate of Incorporation or Bylaws of Company, (ii) conflict with, or
result in any violation or breach of, or constitute (with or without notice or
lapse of time, or both) a default (or give rise to a right of termination,
cancellation or acceleration of any obligation or loss of any benefit) under,
require a consent or waiver under, require the payment of a penalty under or
result in the imposition of any Liens on Company’s assets under, any of the
terms, conditions, or provisions of any Company Material Contract or other
contract, instrument, or obligation to which Company is a party or by which
Company or any of its properties or assets may be bound, or (iii) conflict with
or violate any permit, concession, franchise, license, judgment, injunction,
order, decree, statute, law, ordinance, rule, or regulation applicable to
Company or any of its properties or assets, except in the case of clauses
(ii) and (iii) of this Section 4.5(b) for any such conflicts, violations,
breaches, defaults, terminations, cancellations, accelerations, losses,
penalties or Liens, and for any consents or waivers not obtained that,
individually or in the aggregate, would not be material.

(c) Other than the filing of the Certificate of Merger with the Secretary of
State of the State of Delaware, no consent, approval, license, permit, order, or
authorization of, or registration, declaration, notice, or filing with, any
Governmental Entity is required by or with respect to Company in connection with
the execution and delivery of this Agreement by Company or the consummation by
Company of the transactions contemplated by this Agreement.

 

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Section 4.6 Financial Statements. Company has delivered or otherwise made
available to Buyer (a) Company’s audited balance sheet as of each of February 1,
2014 and February 2, 2013 and the related financial statements for each of the
fiscal years then ended and (b) the unaudited balance sheet of Company as of
May 3, 2014 (the “Company Balance Sheet”) and the related unaudited financial
statements of Company for the three-month period then ended (all of the
foregoing financial statements of Company and any notes thereto are hereinafter
collectively referred to as the “Company Financial Statements”). Company
Financial Statements fairly present in all material respects the financial
condition of Company at the dates therein indicated and the results of
operations of Company for the periods therein specified in accordance with
United States generally accepted accounting principles (“GAAP”), in each case,
as applied on a consistent basis throughout the periods indicated, except that
the unaudited financial statements do not contain footnotes and are subject to
normal and recurring year-end adjustments. The financial records of Company, all
of which Company has made available to Buyer, are true, correct and complete in
all material respects, represent actual, bona fide transactions, and have been
maintained in accordance with Applicable Laws. The Company maintains a system of
internal controls that is in all material respects adequate for a privately held
company its size.

Section 4.7 Absence of Certain Changes. Except as expressly contemplated by this
Agreement or set forth in Section 4.7 of the Company Disclosure Letter, between
January 31, 2014 and the date of this Agreement, the business of Company has
been conducted in the Ordinary Course of Business, and there has not occurred:

(a) any event that has had, or would reasonably be expected to have, a Company
Material Adverse Effect;

(b) any acquisition (i) by merging or consolidating with, or by purchasing all
or a substantial portion of the assets or any stock of, or by any other manner,
any business or any corporation, partnership, joint venture, limited liability
company, association, or other business organization or division thereof, or
(ii) of any assets that are material, in the aggregate, to Company, taken as a
whole, other than acquisitions of inventory in the Ordinary Course of Business;

(c) any sale, lease, license, pledge, or other disposition of any material asset
of Company, other than sales of inventory in the Ordinary Course of Business;

(d) any amendment to the certificate of incorporation or bylaws of Company;

(e) any increase or enhancement of the compensation or benefits, including, with
respect to any severance or Change in Control Payment, of any Company employee,
other than immaterial increases of compensation or benefits of non-management
employees in the Ordinary Course of Business;

 

Agreement and Plan of Merger    Page 25

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(f) (i) any declaration or payment of any dividends or other distribution in
respect of any Company Stock or other capital stock of Company, (ii) any split,
combination, or reclassification of any of the capital stock of Company or
issuance or authorization for the issuance of any other securities in respect
of, in lieu of, or in substitution for shares of its Company Stock or other
capital stock or any of its other securities, or (iii) any purchase, redemption,
or other acquisition of any shares of its Company Stock or other capital stock
or any other of its securities or any rights, warrants or options to acquire any
such shares or other securities, in each case other than as provided by Company
Stock Plan or the terms of Company Options or Company Warrants;

(g) (i) the incurrence of any Indebtedness or any guarantee of any Indebtedness
of another Person (other than (A) in connection with the financing of trade
receivables in the Ordinary Course of Business, (B) letters of credit or similar
arrangements issued to or for the benefit of suppliers and manufacturers in the
Ordinary Course of Business and (C) pursuant to existing credit facilities in
the Ordinary Course of Business), (ii) any issuance, sale or amendment of any
debt securities or warrants or other rights to acquire any debt securities of
Company, any guarantee of any debt securities of another Person, any “keep well”
or other agreement to maintain any financial statement condition of another
Person or any arrangement having the economic effect of any of the foregoing,
(iii) any loans, advances, or capital contributions to, or investment in, any
other Person, other than Company, or (iv) any hedging agreement or other
financial agreement or arrangement designed to protect Company against
fluctuations in commodities prices or exchange rates;

(h) any other guarantee by Company or any of its Subsidiaries of the obligations
of another Person;

(i) any issuance, delivery, sale, grant, pledge, or other disposition or
encumbrance by the Company of any shares of Company Stock, any other voting
securities or any securities convertible into or exchangeable for, or any
rights, warrants or options to acquire, any such shares, voting securities or
convertible or exchangeable securities;

(j) any changes in the Company’s accounting methods, principles or practices,
except as required by a change in GAAP; or

(k) any making, revocation or amendment of any Tax election, any change of any
method of Tax accounting or Tax procedure or practice, or any settlement or
compromise of any material Tax contest with respect to Company.

Section 4.8 No Undisclosed Liabilities. Except liabilities (a) reflected on,
reserved against or otherwise disclosed on the Company Balance Sheet,
(b) incurred in the Ordinary Course of Business since the date of Company
Balance Sheet, (c) constituting contractual obligations of Company arising in
the Ordinary Course of Business (and which do not arise out of, relate to or
result from any breach of contract by Company) pursuant to the terms of any
Company Material Contract (or a contract not required to be disclosed in Company
Disclosure

 

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Letter to avoid a breach of Section 4.14(a)), or (d) created by this Agreement,
Company does not have any material liabilities of any nature (whether accrued,
absolute, contingent, matured, unmatured or other) whether or not required by
GAAP to be reflected on a balance sheet of Company.

Section 4.9 Taxes.

(a) Company has filed all Tax Returns that it was required to file and has paid
all material Taxes due and owing, whether or not shown as due on any Tax Return.
Each Tax Return filed by Company is complete and accurate in all material
respects. Except as set forth on Section 4.9(a) of the Company Disclosure
Letter, Company is not currently the beneficiary of any extension of time within
which to file any Tax Return.

(b) Company has made available to Buyer correct and complete copies of all
federal income Tax Returns, examination reports and statements of deficiencies
assessed against or agreed to by Company since January 1, 2008.

(c) Section 4.9(c) of the Company Disclosure Letter lists all federal, state,
local, and foreign Tax Returns filed with respect to Company for taxable periods
ended on or after December 31, 2007 that have been audited or currently are the
subject of audit. There are no requests for rulings or determinations, or
applications requesting permission for a change in accounting practices, in
respect of Taxes, pending with any Governmental Entity. Except as set forth on
Section 4.9(c) of the Company Disclosure Letter, there are no pending or, to
Company’s Knowledge, threatened audits, investigations, claims, proposals, or
assessments that have been submitted to Company in writing for or relating to
any Taxes of Company.

(d) Company has not received in writing any claim, proposal or assessment of
Taxes of Company by any Tax authority or other Governmental Entity. Company has
not (i) waived any statute of limitations with respect to Taxes of Company, or
(ii) agreed to any extension of time with respect to a Tax assessment or
deficiency related to any such Taxes, which waiver or agreement is currently in
effect.

(e) Company does not have any liability for the Taxes of any Person under
Treasury Regulation Section 1.1502-6 (or any similar provision of state, local,
or foreign Applicable Law), by contract or otherwise, as a transferee or
successor. Company is not a party to any Tax-sharing agreement.

(f) All material Taxes that Company is required by Applicable Law to withhold or
collect, including sales and use taxes, and amounts required to be withheld for
Taxes of employees, have been duly withheld or collected and, to the extent
required, have been paid over to the proper Governmental Entities or are held in
separate bank accounts for such purpose.

(g) In the past five years, Company has not been a party to a transaction that
has been reported as a reorganization within the meaning of Tax Code
Section 368, and has not distributed a corporation (or been distributed) in a
transaction that is reported to qualify under Tax Code Section 355.

 

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(h) Company has not engaged in a transaction that would be reportable by or with
respect to Company pursuant to Tax Code Sections 6111 or 6112 or Treasury
Regulation Section 1.6011-4(b)(1) and (2) under the Tax Code.

(i) Company will not be required to include any item of income in, or exclude
any item of deduction from, taxable income for any taxable period (or portion
thereof) ending after the Closing Date as a result of (i) any installment sale
or open transaction disposition made on or prior to the Closing Date, (ii) any
prepaid amount received on or prior to the Closing Date (other than prepaid
amounts received in the Ordinary Course of Business), (iii) any “closing
agreement,” as described in Tax Code Section 7121 (or any corresponding
provision of state, local, or foreign income Tax law) made on or prior to the
Closing Date, (iv) any intercompany transaction or any excess loss account
within the meaning of Treasury Regulation Section 1.1502-19 under the Tax Code
(or any corresponding or similar provision or administrative rule of federal,
state, local or foreign Tax law) entered into on or prior to the Closing Date,
(v) a change in the method of accounting made on or prior to the Closing Date
for a period ending on or prior to the Closing Date, or (vi) any deferral of
income under Tax Code Section 108(i) as a result of the acquisition of a debt
instrument.

(j) Company has never had a permanent establishment in any jurisdiction other
than the United States.

(k) Except as set forth on Section 4.9(k) of the Company Disclosure Letter,
Company is not party to any agreement, contract, arrangement, or plan that has
resulted in or would result, separately or in the aggregate, in the payment of
any “excess parachute payment” within the meaning of Tax Code Section 280G (or
any corresponding provision of state, local, or foreign Tax law) including as a
result of the Merger or the other transactions contemplated in this Agreement.
Company does not have any obligation or any liability to compensate an
individual for excise Taxes pursuant to Tax Code Section 4999 of the Tax Code.

(l) The unpaid Taxes of Company will not, as of the Closing Date, exceed the
reserve for Tax liability set forth on the Closing Date Balance Sheet.

(m) No claim has been made in writing to the Company or, to Company’s Knowledge,
threatened by a Tax authority in any jurisdiction asserting that Company is or
may be subject to Taxes imposed by that jurisdiction but not paid by Company,
including sales and use Taxes required to be collected by Company and remitted
to that jurisdiction and income Taxes payable to that jurisdiction.
Section 4.9(m) of Company Disclosure Letter lists all jurisdictions with which
Company has or has had a nexus for sales, use and income Tax purposes for
Taxable periods beginning on or after January 1, 2008, and Company is not
required to file any Tax Returns or collect any Taxes in any other jurisdiction.

(n) Company has (i) filed or caused to be filed with the appropriate
Governmental Entity all material reports required to be filed with respect to
any unclaimed property and has remitted to the appropriate Governmental Entity
all material unclaimed property required to be remitted, or (ii) delivered or
paid all material unclaimed property to its original or proper recipient.

 

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Section 4.10 Tangible Personal Property and Owned and Leased Real Property.

(a) Company has good and valid title to, or a valid leasehold interest in or a
valid license for or a right to use, each of the items of tangible personal
property used by it, shown on Company Balance Sheet or acquired by it after the
date of Company Balance Sheet (except for any asset disposed of in the Ordinary
Course of Business since the date of Company Balance Sheet), in each case,
except as set forth on Section 4.10(a) of the Company Disclosure Letter, free
and clear of any Liens other than any Permitted Lien.

(b) All equipment and other tangible personal property owned or leased by
Company or used in Company’s business are in good condition and repair, normal
wear and tear excepted. Section 4.10(b) of the Company Disclosure Letter sets
forth a complete and accurate list and a brief description of all personal
property owned or leased by Company with an individual value of $50,000 or
greater.

(c) Section 4.10(c) of the Company Disclosure Letter lists all real property and
all interests in real property, in each case that is leased or occupied by
Company or that Company has the right to occupy, now or in the future (each,
whether written or oral, being a “Real Property Lease” and any real property
leased or occupied under a Real Property Lease being “Leased Real Property”).
Company does not own, nor has it ever owned, any real property. Company does not
let any real property or interests in any real property to any other Person.

(d) Company has a valid leasehold interest under each Real Property Lease free
and clear of all Liens, except for (i) any Permitted Liens, and (ii) any other
Lien on the applicable fee title, the payment or performance of which is not the
responsibility of Company as tenant under the applicable Real Property Lease.
Neither Company nor any other party is in material default or otherwise in
material breach under any Real Property Lease. Each Real Property Lease is in
full force and effect with respect to Company, and to Company’s Knowledge, with
respect to each other party thereto and constitutes the entire agreement between
the parties thereto, and there are no other agreements, whether oral or written,
between such parties with respect thereto. No party to any Real Property Lease
has exercised any termination right with respect thereto. Company has provided
to Buyer a true, correct and complete copy of each Real Property Lease. All rent
and other sums and charges payable by the relevant Company as tenant thereunder
are current. No party to any Real Property Lease has repudiated any provision
thereof and there is no dispute, oral agreement or forbearance program in effect
with respect to any Real Property Lease. Company has not received written or, to
Company’s Knowledge, oral notice from any insurance company that such insurance
company will require any alteration to any Leased Real Property for continuance
of a policy insuring such property or the maintenance of any rate with respect
thereto (other than any notice of alteration that has been completed), to the
extent that such alteration is the responsibility of Company.

 

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(e) Since January 1, 2013, Company has not given any mortgagee or other third
party any estoppel certificates or similar instruments that would preclude
assertion after Closing of any claim by the tenant under any Real Property Lease
or affect any of the tenant’s rights or obligations under such Real Property
Lease. Company has not contested since January 1, 2013, and is not currently
contesting, any operating costs, real estate taxes or assessments or other
charges payable by the tenant under such Real Property Lease. To Company’s
Knowledge, there are no pending or threatened actions or proceedings regarding
condemnation or other eminent domain actions or proceedings affecting the Leased
Real Property, or any part thereof, or of any sale or other disposition of the
Leased Real Property or any part thereof in lieu of condemnation.

(f) To Company’s Knowledge, (i) no landlord under any Real Property Lease (A) is
in default under any of its obligations under any mortgage encumbering any
Leased Real Property, (B) is seeking relief under any reorganization,
arrangement, consolidation, readjustment, liquidation, dissolution or similar
arrangement or proceeding under any state or federal bankruptcy or other
Applicable Laws, or (C) has agreed, pursuant to any state or federal bankruptcy
or other Applicable Laws, to the appointment of any trustee, receiver or
liquidator for any of the Leased Real Property; and (ii) no foreclosure is
pending or threatened with respect to any Leased Real Property.

Section 4.11 Inventory.

(a) Company has delivered to Buyer a true, correct and complete list of all
inventories of Company as of the date of the Company Balance Sheet (the
“Inventory”). Section 4.11(a) of the Company Disclosure Letter sets forth a
true, correct and complete list of all Inventory as of the close of business on
the date of the Company Balance Sheet, including for each stock keeping unit
included on such schedule, (i) the total quantity of such stock keeping unit on
hand in the Inventory as of such date, (ii) the total quantity of such stock
keeping unit on order for the Inventory as of such date, and (iii) the cost of
such stock keeping unit.

(b) With respect to the Inventory, (a) all of such Inventory is merchantable and
fit for the purpose for which it was procured or produced, (b) all of such
Inventory is fairly reflected in all material respects in the inventory accounts
on the Company Balance Sheet, in accordance with GAAP and including all
appropriate reserves, (c) all of such Inventory (except to the extent of
reserves for inventory shown on the face of the Company Balance Sheet, including
any notes thereto), consists of a quality usable and salable in its Ordinary
Course of Business and was acquired by Company in the Ordinary Course of
Business, (d) none of such inventory is damaged or defective, (e) all of such
Inventory not written off is valued for the purposes of the Company Balance
Sheet at the lower of cost (using FIFO) or market values, (f) none of such
Inventory is on assignment or consignment and (g) all Inventories are located at
one of Company’s warehouse facilities.

 

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Section 4.12 Intellectual Property.

(a) Company IP. Section 4.12(a) of the Company Disclosure Letter sets forth a
true and complete list of: (i) all registered trademarks, service marks, trade
names and domain names and pending applications to register any trademarks,
service marks or trade names; (ii) patents and pending patent applications; and
(iii) registered copyrights and pending applications to register copyrights, in
each case owned by Company on the date hereof (all of the foregoing being
collectively referred to as the “Company Registered IP”). Except as set forth in
Section 4.12(a) of Company Disclosure Letter, Company either owns free and clear
of all Liens (except for Permitted Liens), or has sufficient rights to use, all
patents, copyrights, trademarks, service marks, trade names, trade dress, domain
names, trade secrets, software, copyrightable works, database and related
documentation (collectively, “Intellectual Property”) used in the conduct of
Company’s business as currently conducted (such Intellectual Property, the
“Company IP”). Except as set forth in Section 4.12(a) of Company Disclosure
Letter: (x) all patents and registrations for trademarks and copyrights included
in Company Registered IP are valid, subsisting and enforceable and will not
require any action to be taken within 30 days after the Closing to maintain or
renew such items; (y) all pending patent applications and pending applications
to register any unregistered trademarks, service marks, trade names or
copyrights included in Company Registered IP are pending and in good standing
and will not require any action to be taken within 30 days after the Closing to
maintain or renew such items; and (z) to Company’s Knowledge, there are no
pending or threatened actions by third parties challenging the validity or
enforceability of, or contesting Company’s rights with respect to, any such
pending applications included in Company Registered IP. During the last three
(3) years, Company has not received any written notice or claim challenging the
validity or enforceability of any Company Registered IP.

(b) Inbound and Outbound Licenses.

(i) Section 4.12(b)(i) of the Company Disclosure Letter lists, as of the date
hereof, all license agreements and other contracts material to the conduct of
Company’s business as it is currently conducted pursuant to which Company has
the right to practice, use, copy or otherwise exploit any Intellectual Property
owned by third parties (“Inbound Licenses”), provided, however, that
Section 4.12(b)(i) of the Company Disclosure Letter need not list Inbound
Licenses that are (i) included as “standard equipment” on any computers acquired
by Company or (ii) consist of any Open Source Software or standard end-user
license contracts for off-the-shelf software not in excess of $5,000 per seat.

(ii) Section 4.12(b)(ii) of the Company Disclosure Letter lists, as of the date
hereof, all license agreements and other contracts material to the conduct of
Company’s business as it is currently conducted to which Company is bound and
pursuant to which any person or entity (other than Company) is authorized to
exploit any Company Registered IP or pursuant to which Company granted any
rights under any other Intellectual Property owned by Company (“Company-Owned
IP”) to any person or entity (the “Outbound Licenses” and, collectively

 

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with the Inbound Licenses, the “Intellectual Property Agreements”), provided,
however, that Section 4.12(b)(ii) of the Company Disclosure Letter need not list
Outbound Licenses that are: (1) standard terms governing third parties’ access
to, and use of, Company’s Websites; (2) licenses to Company IP granted in the
Ordinary Course of Business pursuant to contracts substantially in the form of
one of the forms made available to Buyer; (3) confidentiality or nondisclosure
agreements entered into in the Ordinary Course of Business; and (4) agreements
with current and former employees, officers, contractors, and consultants of
Company entered into in the Ordinary Course of Business.

(iii) With respect to the Intellectual Property Agreements: (A) all are binding
and enforceable obligations of Company and, to Company’s Knowledge, the other
parties thereto, (B) Company and, to Company’s Knowledge, each other party
thereto have performed in all material respects their obligations thereunder and
(C) neither Company nor, to Company’s Knowledge, any other party thereto is in
material default or material breach of any obligations thereunder. Company has
not received written notice that any third party to any Intellectual Property
Agreement intends to cancel, terminate or refuse to renew (if renewable) any
such Intellectual Property Agreement, or to exercise or decline to exercise any
option or right thereunder.

(c) Protection. Company has taken reasonable measures to protect, preserve and
maintain the secrecy and confidentiality of Company confidential and proprietary
information and data. Each current and former director, officer, employee and
independent contractor of Company who has contributed to the creation or
development of any Company-Owned IP: (i) has been an employee of Company at the
time of creation or development of that Company-Owned IP and such employee
created such Company-Owned IP within the scope of his or her employment with
Company; (ii) is a party to a written “work-for-hire” or similar agreement with
the Company that includes provisions assigning all of his or her rights to such
Company-Owned IP to Company or (iii) has executed and delivered to Company an
agreement assigning all of their rights to such Company-Owned IP to Company. No
current or former director, officer, employee or independent contractor of
Company who has contributed to the creation or development of any Company-Owned
IP that is material to the conduct of Company’s business as currently conducted:
(i) has any right, license, claim or interest in or with respect to
Company-Owned IP; (ii) is, to Company’s Knowledge, in violation of any term or
covenant of any employment contract, patent disclosure agreement, invention
assignment agreement, non-disclosure agreement or non-competition agreement;
(iii) is, to Company’s Knowledge, party to any contract with any prior employer
or other party that prohibits or otherwise restricts such employee from
assigning all of his or her rights to such Company-Owned IP to Company; or
(iv) has, to Company’s Knowledge, developed any Company-Owned IP that is subject
to any agreement under which such employee, consultant or independent contractor
has assigned or otherwise granted to any third party any rights in or to such
Company-Owned IP.

 

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(d) Conflicts, Etc. Neither the execution, delivery or performance of this
Agreement nor the consummation of the transactions contemplated herein will:
(i) constitute a breach or default under any Intellectual Property Agreement;
(ii) cause the termination or loss of, or give rise to a right of termination of
or to cause the loss of, any rights of Company to use any Company IP by
Surviving Corporation in the conduct of Company’s business as it is currently
conducted, including any rights under any Intellectual Property Agreement or
(iii) impair the right of Surviving Corporation to exploit any Company-Owned IP
in the conduct of the business as it is currently conducted. To the Company’s
Knowledge, no current or former director, officer, employee or independent
contractor of Company has incorporated any trade secrets or other proprietary
information of any third party in the development or creation of any
Company-Owned IP without the permission of Company and such third party. Except
with respect to Inbound Licenses, and except as set forth on Section 4.12(d) of
the Company Disclosure Letter, there are no ongoing royalties, honoraria, fees
or other payments payable by Company to any third person or entity as a result
of the ownership, use, possession, license, sale, marketing, or disposition of
any Company IP by Company for the conduct of Company’s business as currently
conducted, and none will become payable solely as a result of the consummation
of the Merger.

(e) Infringement Upon Company Intellectual Property. Except as set forth on
Section 4.12(e) of the Company Disclosure Letter, (i) to the Company’s
Knowledge, no third party is misappropriating or infringing upon any
Company-Owned IP, and (ii) during the past three (3) years, Company has not
received any written notice that any third party is infringing, violating or
misappropriating any part of Company-Owned IP or otherwise making any
unauthorized use or disclosure of any part of Company-Owned IP.

(f) Infringement Upon Third-Party Intellectual Property. Except as set forth on
Section 4.12(f) of the Company Disclosure Letter (provided that for purposes of
ARTICLE XI, the disclosures on Section 4.12(f) of the Company Disclosure Letter,
including any cross-references thereto, shall be disregarded), during the past
three (3) years, Company has not received any written notice or claim that any
Company IP used by Company in the conduct of Company’s business has infringed,
violated or misappropriated the Intellectual Property owned by that third party.
The exploitation by or on behalf of the Company of Intellectual Property used in
the conduct of the Business as previously and currently conducted did not and
does not infringe, violate or misappropriate any Intellectual Property owned by
any third party.

(g) Privacy. A privacy statement (the “Privacy Statement”) addressing the
collection, retention, use and distribution of the personally identifiable
information of individuals visiting the websites owned, operated or controlled
by Company (“Company Websites”) is posted and accessible to individuals on each
Company Website. Company and the conduct of the business as currently conducted
comply in all material respects with the Privacy Statements applicable to any
given set of personally identifiable information collected by Company via the
Company Websites; (ii) all Applicable Laws regarding the collection, retention,
use and disclosure of personally identifiable information; and (iii) all
applicable payment card industry standards regarding data security. Company has
taken reasonable measures to protect and maintain the confidential nature of
personally identifiable information provided to Company by individuals via the
Company Websites and to protect personally identifiable information

 

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collected from individuals against loss, theft and unauthorized access or
disclosure. Company has not received any written claims, notices or complaints
regarding Company’s information practices or the disclosure, retention, or
misuse of any personally identifiable information by the Federal Trade
Commission, any similar foreign bodies, or any other Governmental Entity.

(h) Government/University Development. No government funding, facilities of a
university, college, other educational institution or research center, or
funding from third parties was used in the development of Company-Owned IP. No
current or former employee or independent contractor of Company who was involved
in, or who contributed to, the creation or development of any Company-Owned IP
has performed services for any Governmental Entity, university, college, or
other educational institution or research center related to Company-Owned IP
during a period of time during which such employee, consultant or independent
contractor was also performing services for Company.

Section 4.13 Software and Information Technology.

(a) Section 4.13(a) of the Company Disclosure Letter sets forth a true, correct
and complete list, for each item of Company Software, of all Open Source
Software that (i) is incorporated in or bundled with such Company Software, or
from which any portion of such Company Software is derived, or (ii) is used in
connection with the development of such Company Software. Section 4.13(a) of the
Company Disclosure Letter also lists, for each such item of Open Source
Software, the agreement under which such item is licensed to Company. Company is
in compliance with the terms under which Company has licensed any Open Source
Software. Company’s use of Open Source Software has not had the effect and, to
the extent Surviving Corporation continues to use the Open Source Software
consistent with the Ordinary Course of Business following the Merger, will not,
immediately following the Merger, have the effect of requiring any Company
Software, or any portions thereof, modifications thereto or derivative works
thereof, to be (A) disclosed or distributed in source code form to any third
party (including making the source code publicly available), (B) licensed to
third parties for the purpose of making derivative works or redistributing such
Company Software, or (C) licensed or otherwise distributed to third parties at
no charge.

(b) Except as set forth on Section 4.13(b) of the Company Disclosure Letter, all
right, title and interest in and to the Company Software is (and immediately
after giving effect to the Merger, will be) owned by Company free and clear of
all Liens (other than Permitted Liens), and, to Company’s Knowledge, no other
party other than Company, including any employee or independent contractor
utilized by Company in the development of such Company Software, has any
interest in the Company Software, including any security interest, license,
contingent interest or otherwise, except for licenses granted in the Ordinary
Course of Business.

(c) Company has taken reasonable measures to protect, preserve and maintain the
secrecy and confidentiality of, and has not disclosed the source code for, the
Company Software or any other confidential material or trade secret pertaining
to the Company Software to any third party. No source code (or any aspect or
portion thereof) for any Company Software has been provided to any escrow agent
or other third party.

 

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(d) Company has not received any written communication from any third party
indicating that the Company Software, or Company’s delivery of services through
the use thereof, have failed, or are failing, to perform as warranted in Company
Material Contracts with such third parties, nor that Company is in breach of any
of its obligations under any Company Material Contract with respect to the
performance of Company Software.

(e) The Software does not contain, and Company has taken reasonable precautions,
including industry standard virus-scanning software, to prevent the presence of,
any malicious code, program, or other internal component in Company Software
(e.g., computer virus, computer worm, computer time bomb, or similar component)
that would damage, destroy, or alter the Software or databases (including any
content therein) or other software, firmware, or hardware used by Company or
Company’s customers, or that could, in any unintended manner, reveal, damage,
destroy, or alter any data or other information accessed through or processed by
the Software.

(f) Company is not, and to Company’s Knowledge no other party is, in material
breach or material default under any Company Material Contract, license,
sublicense or other contract to which the Company is party covering or relating
to the Software and has not performed any act or omitted to perform any act
which, with notice or lapse of time or both, will become or result in a material
violation, breach or default thereunder. No litigation is pending or, to
Company’s Knowledge, has been threatened against Company which challenges the
legality, validity, enforceability or ownership of any license, sublicense or
other contract to which the Company is party covering or relating to any
Software.

(g) Company has sufficient rights to use all Software, databases, Company
Websites, e-commerce platforms and associated documentation used or held for use
in connection with the operation of the business as presently conducted (the “IT
Assets”), all of which rights shall survive unchanged the consummation of the
transactions contemplated hereby. The IT Assets are sufficient to conduct the
business of Company as currently conducted. The IT Assets have not materially
malfunctioned or failed and do not contain any viruses, bugs, faults or other
devices or effects that (i) enable or assist any person to access without
authorization the IT Assets, or (ii) otherwise significantly adversely affect
the functionality of the IT Assets, except as disclosed in their documentation.
Company uses commercially reasonable efforts to secure and protect the IT Assets
to the extent under the control of Company. No person has gained unauthorized
access to any IT Assets under the control of Company or, to the Company’s
Knowledge, any other IT Assets. Company has implemented reasonable backup and
disaster recovery technology, plans, procedures and facilities consistent with
industry practices. Company has in place with the third party owners and
operators of all data centers which provide services to it, written agreements
that ensure that such third parties adhere to and are in compliance with the
standards and requirements as set forth in this sub-section.

 

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(h) Company does not have any contractual obligations to maintain data in a
manner that logically or physically separates data of one customer from that of
another.

(i) Section 4.13(i) of the Company Disclosure Letter sets forth a true, correct
and complete list of contracts under which Company promises that an IT Asset
will perform to a service level specified in such contract (collectively
“SLAs”). To the Company’s Knowledge, during the past three (3) years, Company
has not breached, defaulted or provided credits to any other party under any SLA
for an IT Asset.

Section 4.14 Contracts.

(a) Section 4.14(a) of Company Disclosure Letter sets forth a complete and
accurate list as of the date of this Agreement of the following contracts,
agreements, commitments, arrangements or understandings of any kind, whether
written or oral, to which Company is a party or by which Company or any of its
assets is bound (collectively, the “Company Material Contracts”):

(i) any Real Property Lease;

(ii) any agreement (or group of related agreements) for the lease of personal
property from or to third parties providing for lease payments in excess of
$50,000 per year;

(iii) any agreement (or group of related agreements) for the purchase, sale or
license of products by Company or for the furnishing or receipt of services by
Company which provides for payments to or from Company (or which applied to
transactions resulting in payments to or from the Company in 2013, provided such
agreement is currently in effect) of (A) more than $1,000,000, in the case of
agreements for the purchase of inventory in the Ordinary Course of Business from
any single vendor or (B) more than $100,000 annually or $250,000 over the term
of such agreement, in the case of any other agreements;

(iv) any agreement concerning the establishment or operation of a partnership,
joint venture, or limited liability company;

(v) any agreement (or group of related agreements) under which Company has
created, incurred, assumed or guaranteed (or may create, incur, assume or
guarantee) Indebtedness (including capitalized lease obligations but excluding
accounts payable for inventory purchased in the Ordinary Course of Business);

(vi) any agreement for the disposition of any significant portion of the assets
or business of Company (other than sales of products in the Ordinary Course of
Business) or any agreement for the acquisition of the assets or business of any
other entity (other than purchases of inventory, equipment and other tangible
personal property in the Ordinary Course of Business);

 

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(vii) any currently effective contract for the employment or engagement of any
executive officer, employee, or other individual on an employment, consulting,
or independent contractor basis that (A) is not terminable at will (for any
lawful reason or for no reason) without penalty, severance obligation, or other
liability or (B) provides for the payment or acceleration of payment of cash or
other compensation or payment or acceleration of any other benefits under any
compensation or benefit plan, program, or agreement, upon the consummation of
the transactions contemplated by this Agreement;

(viii) any agreement that grants any exclusive marketing, distribution,
Intellectual Property, or other similar rights to any third party or otherwise
purports to prohibit or limit the right of Company or any of its Affiliates
(including, in accordance with the terms of the Contracts in effect on the date
hereof, Buyer or any of its Affiliates after the Closing) to make, sell, market,
advertise or distribute any products or services or use, transfer, license,
distribute or enforce any of Company’s Intellectual Property;

(ix) any agreement that purports to limit either the type of business or the
geographic area in which Company or any Affiliates of Company (including, in
accordance with the terms of the Contracts in effect on the date hereof, Buyer
or any of its Affiliates after the Closing) may engage in business;

(x) any agreement that grants a third party “most favored nation” status or
purports to require Company or any of its Affiliates (including, in accordance
with the terms of the Contracts in effect on the date hereof, Buyer or any of
its Affiliates after the Closing) to offer a third party the same or better
price for a product or service if Company or such Affiliate offers a lower price
for the same product or service to another third party;

(xi) each agreement under which Company has advanced or loaned any other Person
outstanding amounts in the aggregate for such Person exceeding $25,000;

(xii) each outstanding power of attorney with respect to Company; and

(xiii) any other agreement that is material to the Company and not otherwise
disclosed pursuant to Section 4.14(a).

(b) Company has made available to Buyer a complete and accurate copy of each
written Company Material Contract and accurate descriptions of all material
terms of all non-written Company Material Contracts.

(c) Each Company Material Contract is in full force and effect with respect to
Company, and to Company’s Knowledge, with respect to each other party thereto,
except to the extent a Company Material Contract has previously expired in
accordance with its terms, and except as the enforceability of such Company
Material Contract may be limited by principles of public policy and subject to
the laws of general application relating to bankruptcy, insolvency and the
relief of debtors and rules of law governing specific performance, injunctive
relief or other equitable remedies. Neither Company nor any other party to any
Company Material Contract is in material violation of or in material default
under any Company Material Contract.

 

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Section 4.15 Vendors and Suppliers.

(a) Section 4.15(a) of the Company Disclosure Letter contains a complete and
accurate list of the names of each of the top 15 vendors and suppliers (based on
purchase of goods or products for resale) for each of the two most recently
completed fiscal years (each such vendor and supplier, a “Material Business
Partner”). Since January 1, 2013, (i) no Material Business Partner has expressed
any intention or indication to Company in writing, or, to the Company’s
Knowledge, orally, that such Material Business Partner intends to terminate its
business relationship with Company or to materially limit or alter its business
relationship with Company and (ii) Company has not received any written notice
from any Material Business Partner of any increase in the price (excluding
normal price fluctuations and immaterial price increases in the Ordinary Course
of Business) or material and adverse change in the quality and delivery terms
and conditions on which such supplier or vendor will continue to make delivery
of its products.

(b) Section 4.15(b) the of the Company Disclosure Letter contains a complete and
accurate list of the names of each of the vendors and suppliers from whom
Company has obtained or has a contractual right to obtain (pursuant to written
agreements in effect) co-operative advertising payments, volume rebates, or
volume credits for each of the two most recently completed fiscal years and the
current fiscal year and the aggregate amount of such payments earned in each of
the two most recently completed fiscal years and in the first quarter of the
current fiscal year. Since January 1, 2013, none of such vendors or suppliers
has expressed any intention or indications to Company in writing, or, to the
Company’s Knowledge, orally, that such supplier or vendor intends to modify,
alter or limit its vendor co-operative payments.

Section 4.16 Insurance. Section 4.16 of the Company Disclosure Letter sets forth
a complete list of all policies of fire and casualty, liability and other forms
of insurance held by Company. Such policies include all legally required
workers’ compensation insurance. To Company’s Knowledge, there is no claim
pending under any of such policies or bonds as to which coverage has been denied
or disputed by, or with respect to which any rights have been reserved, by the
underwriters of such policies or bonds. All premiums due and payable under all
such policies and bonds have been paid (it being understood that installment
payments not yet due and payable will be paid prior to the Closing in the
Ordinary Course of Business when and to the extent due and payable), and Company
is otherwise in material compliance with the terms of such policies and bonds.
All such policies are in full force and effect. To Company’s Knowledge, no
insurance carrier has threatened in writing termination of, or premium increase
outside the Ordinary Course of Business with respect to, any such policies.

Section 4.17 Litigation. Except as set forth on Section 4.17 of the Company
Disclosure Letter, there is no action, suit, proceeding, claim, arbitration, or
investigation (a) pending or, to Company’s Knowledge, threatened against Company
or its properties, or (b) to Company’s Knowledge, pending or threatened against
any of its officers, directors or employees

 

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in their capacities as officers, directors or employees of Company, in each case
by or before any Governmental Entity. There are no judgments, orders or decrees
outstanding against Company. Section 4.17 of the Company Disclosure Letter lists
each lawsuit, administrative charge, action or proceeding, by or before any
Governmental Entity against Company or to which Company has been a party, in
each case at any time since January 1, 2011.

Section 4.18 Product Liability or Warranty Proceedings.

(a) Section 4.18 of the Company Disclosure Letter sets forth (i) a list of all
forms of warranties, guarantees and return policies of Company in respect of any
of Company’s products and services that are currently in effect (the “Warranty
Obligations”), and (ii) the experience of Company since January 1, 2011 with
respect to warranties, guarantees and warranty or return policies of or relating
to Company’s products and services. Company has delivered or made available to
Buyer true and correct copies of the forms of the Warranty Obligations.

(b) There have not been any material deviations from the terms of the Warranty
Obligations, and salespersons, employees and agents of Company are not
authorized to undertake obligations to any customer or other Person in excess of
such Warranty Obligations. To the Company’s Knowledge, all products
manufactured, designed or sold by Company (i) are and were free from defects and
(ii) satisfy any and all written specifications related thereto, except for such
defects and failures to satisfy specifications that would not, in the aggregate,
be material.

(c) There is no material claim, suit, action, proceeding or investigation
(i) pending or, to Company’s Knowledge, threatened against Company or (ii) to
Company’s Knowledge, pending or threatened against any of Company’s vendors, in
each case with respect to products purchased by Company from such vendor,
arising out of or related to a product liability claim or breach of warranty.
Company has not received written notice as to any claim for personal injury or
death, any claim for property, economic, punitive or exemplary damages, any
claim for contribution or indemnification or any claim for injunctive relief, in
each case in connection with any product manufactured, sold, leased or
distributed by Company. Since January 1, 2012, there has not been any product
recall (voluntary, involuntary or otherwise) by Company or, to Company’s
Knowledge, with respect to any product manufactured, sold, leased or distributed
by it.

(d) Since January 1, 2011, none of the Company’s merchandise vendors has denied
any product liability, Intellectual Property infringement or breach of warranty
claim tendered to it by the Company in writing.

Section 4.19 Environmental Matters.

(a) Company has obtained all permits that are required under any Environmental
Law. Company is in compliance in all material respects with all Environmental
Laws and the terms and conditions of all permits issued pursuant to any
Environmental Law.

 

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(b) There is no Environmental Claim pending or, to Company’s Knowledge,
threatened as of the date of this Agreement against Company, nor to Company’s
Knowledge do any facts or circumstances exist that would support such an
Environmental Claim.

(c) Company has not installed, used, generated, treated, disposed of or arranged
for the disposal of any Hazardous Substance in a manner so as to create any
material liability under any Environmental Law for Company.

(d) Company has delivered to Buyer true and correct copies of all material
reports and investigations prepared by or on behalf of Company or to Company’s
Knowledge disclosed to Company, relating in any way to the environmental or
physical condition of any of the Leased Real Property or relating to compliance
with Environmental Law by Company.

Section 4.20 Company Employee Plans.

(a) Section 4.20(a) of the Company Disclosure Letter sets forth a complete and
accurate list as of the date of this Agreement of all Company Employee Plans.

(b) Each Company Employee Plan has been maintained and administered in all
material respects in accordance with ERISA, the Tax Code, all other Applicable
Laws, and in accordance with its terms. With respect to each Company Employee
Plan Company has provided to Buyer a complete and accurate copy of (i) the plan
document for such Company Employee Plan (where no text exists, a written summary
has been provided), and (ii) as applicable, the most recent annual report (Form
5500) filed with the IRS, (iii) as applicable, each trust agreement, group
annuity contract, and summary plan description, summary of material
modifications, if any, and amendments thereto relating to such Company Employee
Plan and (iv) as applicable, the most recent opinion, advisory or determination
letter received from the IRS.

(c) All contributions or premiums with respect to the Company Employee Plans
have been timely paid or accrued consistent with Applicable Law.

(d) With respect to each Company Employee Plan (i) there has been no non-exempt
prohibited transaction within the meaning of Section 406 of ERISA and Tax Code
Section 4975; (ii) to the Company’s Knowledge, no unaffiliated third party
fiduciary within the meaning of Section 3(21) of ERISA has breached any
fiduciary duty imposed under Title I of ERISA and (iii) no other fiduciary
within the meaning of Section 3(21) of ERISA has breached any fiduciary duty
imposed under Title I of ERISA.

(e) Since 2008, neither Company nor any of its ERISA Affiliates has maintained,
contributed to or been obligated to contribute to (i) a Company Employee Plan
subject to Section 412 of the Tax Code or Title IV of ERISA, (ii) a
“multiemployer plan” (as defined in Section 4001(a)(3) of ERISA), (iii) a
“multiple employer plan” (as defined in Section 4063 of ERISA) or (iv) a
“multiple employer welfare arrangement” (as defined in Section 3(40) of ERISA).

 

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(f) Except as set forth on Section 4.20(f) of the Company Disclosure Letter,
Company is not a party to any oral or written compensatory agreement or
understanding with any director, executive officer or other employee, or
consultant of Company (i) the benefits of which are contingent, or the terms of
which are altered, upon the occurrence of the transactions contemplated by this
Agreement, (ii) providing for employment that is not subject to termination by
Company on notice of 30 days or less, (iii) providing severance benefits after
the termination of employment of such director, executive officer, employee or
consultant or (iv) the benefits of which shall be increased, or the vesting or
payment of the benefits of which shall be accelerated, by the occurrence of any
of the transactions contemplated by this Agreement or the value of any of the
benefits of which shall be calculated on the basis of any of the transactions
contemplated by this Agreement, except in the case of any of clauses (i) through
(iv) as provided in this Agreement or as required by Applicable Law.

(g) No Company Employee Plan provides for medical or other welfare benefits to
any employee beyond such employee’s retirement or other termination of service,
except as required by Applicable Law.

(h) There is no claim, suit, action, proceeding or investigation pending, or to
Company’s Knowledge, threatened against Company with respect to any Company
Employee Plan or against any Company Employee Plan, except for routine claims in
the Ordinary Course of Business for benefits, appeals of such claims and
domestic relations order proceedings.

(i) Company has not announced any plan or commitment, whether legally binding or
not, to create an additional Company Employee Plan or amend or modify any
existing Company Employee Plan except as may be required by Applicable Law.

(j) Each Company Employee Plan that is a “nonqualified deferred compensation
plan” (as defined for purposes of Section 409A(d)(1) of the Tax Code) that is
subject to Section 409A of the Tax Code complies in all material respects with
Section 409A of the Tax Code.

(k) All Company Employee Plans that are intended to be qualified under section
401(a) of the Tax Code have received opinion, advisory or determination letters
from the IRS to the effect that such Company Employee Plans are qualified under
section 401(a) of the Tax Code, no such determination letters have been revoked
and revocation has not been threatened, and no act or omission has occurred,
that would reasonably be expected to adversely affect its qualification. The
trusts related to such Company Employee Plans are exempt from federal income Tax
under section 501(a) of the Tax Code.

(l) Company has complied in all material respects with the continuation coverage
provisions of the Consolidated Omnibus Budget Reconciliation Act of 1985 and any
applicable state laws mandating welfare benefit continuation coverage for
employees (“COBRA”). Section 4.20(l) of the Company Disclosure Letter sets forth
a complete list of any Person who is receiving continuation coverage under COBRA
as of the date hereof, and Company will supplement such list to be complete and
accurate as of the Effective Time.

 

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(m) The Company will have no further liability or obligation after the Closing
with respect to the Company Employee Plans terminated pursuant to Section 7.7,
other than routine administrative and wind-down obligations generally applicable
to termination of similar employee benefit plans and the funding of
contributions accrued during the payroll period during which the Closing occurs
or which relate to periods of service prior to the plan termination (provided
the full amount of such contributions is reflected as a current liability on
both the Estimated Closing Date Balance Sheet and the Closing Date Balance
Sheet).

Section 4.21 Compliance with Law.

(a) Company has complied, and is now and at the Closing Date will be in
compliance, in all material respects with all applicable laws, treaties, rules,
regulations, ordinances, judgments, and orders of all Governmental Entities
(“Applicable Laws”).

(b) Company holds all material permits, governmental licenses and approvals
from, and has made all filings with, Governmental Entities that are necessary
for Company to conduct its business as presently conducted without any violation
of Applicable Laws (“Governmental Permits”), and all such Governmental Permits
held by Company are in full force and effect. Since January 1, 2011, Company has
not received any written notice from any Governmental Entity that (i) alleges
any violation of Applicable Laws or any Governmental Permit or any failure to
comply with any term or requirement of any Governmental Permit, or
(ii) threatens any revocation, withdrawal, suspension, cancellation, termination
or modification of any Governmental Permit.

(c) Since January 1, 2011, neither Company, nor any officer, director or
employee of Company, nor any agent or representative of Company, acting in such
capacity, has: (i) used any funds for unlawful contributions, gifts,
entertainment or other unlawful expenses relating to political activity;
(ii) directly or indirectly violated or taken any act in furtherance of
violating any provision of the Foreign Corrupt Practices Act of 1977, the U.K.
Bribery Act 2010 or any other anti-bribery or anti-corruption laws of any
jurisdiction applicable to Company (collectively, the “Anti-Corruption Laws”);
or (iii) made any other payment or provided anything of value to anyone in
violation of Applicable Laws. In addition, without limiting the foregoing, since
January 1, 2011, Company has: (A) has maintained its books and records in a
manner that, in reasonable detail, accurately and fairly reflects in all
material respects the transactions and disposition of its assets; (B) has not
established or maintained any material fund or asset that has not been recorded
in its books and records; and (C) has maintained a system of internal accounting
controls and procedures sufficient to provide reasonable assurance of compliance
with the Anti-Corruption Laws and other Applicable Laws.

 

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(d) Company has not directly or indirectly sold or solicited any products to any
entity or enterprise located in those countries that are identified in Part 746
(Embargoes and Other Special Controls) of the U.S. Export Administration
Regulations, in the Sanctions Program of the U.S. Department of Commerce, by the
U.S. Foreign Assets Control Regulations, or on the U.S. Department of State
Defense Trade Controls Embargo Reference Chart. None of products Company
manufactures, designs or sells are controlled under or subject to the
International Traffic in Arms Regulations. Section 4.21(d) of Company Disclosure
Letter includes a true and complete list of all Export Control Classification
Numbers (ECCNs), and any export licenses or Commodity Classification Automated
Tracking System (CCATS) numbers (as applicable) for all products currently
manufactured, designed or sold by, and all technologies of, Company’s business.
Without limiting Section 4.21(a), Company has at all times been, and is
currently, in compliance with all U.S. and foreign customs and import laws and
regulations, and has paid all fees, duties, levies and other amounts required to
be paid pursuant thereto.

(e) There are no circumstances that would, if Company were subject to the
Exchange Act, require disclosure by Company under Section 13(p) or Section 13(r)
of the Exchange Act.

Section 4.22 Employee and Labor Matters.

(a) Company has complied, and is now and at the Closing Date will be in
compliance, in all material respects with all Applicable Laws relating to
employment, including laws relating to discrimination, hours of work, and the
payment of wages or overtime wages. To Company’s Knowledge, there are no
complaints, demands, lawsuits, or other proceedings pending against Company
brought by or on behalf of any current or former applicant for employment,
employee, independent contractor, or any class of the foregoing, relating to any
such law or regulation, or alleging breach of any express or implied contract of
employment, of any law or regulation governing employment or termination
thereof, or of any other discriminatory, wrongful, or tortuous conduct in
connection with the employment relationship.

(b) There are no pending or, to the Company’s Knowledge, threatened
investigations, audits, complaints, or proceedings against Company by or before
any Governmental Entity respecting or involving any current or former applicant
for employment, any employee, independent contractor, or any class of the
foregoing.

(c) Each employee has completed and Company has retained an Immigration and
Naturalization Service Form I-9 in accordance with Applicable Laws. No current
employee is an alien who is authorized to work in the United States in
non-immigrant status.

(d) Company has paid in full all amounts owed to current and former Company
employees for wages, salaries, bonuses, vacation, other paid time off, and
commissions due and payable, and Company has fully reserved in its books of
account all amounts, if any, for wages, salaries, vacation, other paid time off,
bonuses, and commissions payable but not yet due to such Company employees.

 

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(e) Any individual who has performed or is performing services for Company who
has been classified as an independent contractor, as an employee of some other
entity whose services are leased to Company, or as any other non-employee
category by Company has been or is correctly so classified and has not been or
is not in fact a common law employee of Company.

(f) No Company employee is covered by any collective bargaining agreement, and
no collective bargaining agreement is being negotiated by Company. Company is
not the subject of any proceeding asserting that Company has committed an unfair
labor practice or is seeking to compel it to bargain with any labor union or
labor organization. There are no pending or, to Company’s Knowledge, threatened
labor strikes, disputes, walkouts, work stoppages, slow-downs or lockouts
involving Company, and there have not been any such actions during the past five
years. To Company’s Knowledge, no union organizing campaign or activity is in
progress with respect to any employees of Company, and no question concerning
representation exists respecting such employees.

(g) No current employee classified as “exempt” under the Fair Labor Standards
Act has given notice to a Company representative of his or her intent to
terminate employment with Company.

(h) The employment relationship between Company and each current employee is
“employment at will.”

(i) Except as set forth on Section 4.22(i) of the Company Disclosure Letter,
there are no workers’ compensation claims pending against Company, nor, to
Company’s Knowledge, are there any facts that would give rise to such claim.

(j) Except as set forth on Section 4.22(j) of the Company Disclosure Letter, no
current employee is receiving short or long term disability benefts or is on a
leave of absence.

(k) Company has not engaged in any employee layoff or plant closing activities
within the last three years that triggered the application of or violated the
Worker Adjustment Retraining and Notification Act of 1988 (the “WARN Act”), or
any similar state or local mass layoff statute, rule or regulation.

(l) Company is not a government contractor or subcontractor with any affirmative
action obligations under state or federal law.

Section 4.23 Related Party Transactions. Except as set forth on Section 4.23 of
the Company Disclosure Letter, no director or officer of Company, Holder,
Affiliate of any Holder, or director or officer of any Holder or any such
Affiliate (regardless of the capacity of such Person, including as an individual
or trustee), to Company’s Knowledge, (a) has been involved in any business
arrangement or relationship (including as a party to a contract) with Company at
any time since January 1, 2013 (other than as a director, an employee or an
independent contractor providing services to Company in the Ordinary Course of
Business); (b) owns, licenses or leases any asset used in the business of
Company; or (c) owns, directly or indirectly, any interest in any Person that
competes with Company.

 

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Section 4.24 Certain Contracts.

(a) Company has not received any “rate negotiation services” within the meaning
of the contract listed on Schedule 4.24(a) (“Specified Contract A”).

(b) The “Term” of the contract listed on Schedule 4.24(b) (“Specified Contract
B”) shall expire no later than July 31, 2015, after which time Specified
Contract B shall expire without any further obligation on behalf of Company or
its Affiliates for the payment of any “Consulting Fee” (as defined in the
Specified Contract B).

Section 4.25 Disclosure. The representations and warranties contained in this
ARTICLE IV do not contain any untrue statement of a fact or omit a fact
necessary to make the statements and information in this ARTICLE IV not
misleading.

Section 4.26 Brokers and Finders. Neither Company nor any Affiliate of Company
is obligated for the payment of any fees or expenses of any investment banker,
broker, finder or similar party in connection with the origin, negotiation or
execution of this Agreement or in connection with the Merger or any other
transaction contemplated by this Agreement, except for any such fees and
expenses included in the Closing Date Transaction Expenses as set forth in the
Closing Certificate. Buyer and Surviving Corporation will not incur any
liability, either directly or indirectly, to any investment banker, broker,
finder or similar party as a result of this Agreement, the Merger or any act or
omission of Company or any of its employees, officers, directors, stockholders,
agents or Affiliates.

Section 4.27 NO ADDITIONAL REPRESENTATIONS OR WARRANTIES. EXCEPT AS OTHERWISE
EXPRESSLY SET FORTH IN THIS ARTICLE IV (AS MODIFIED BY THE COMPANY DISCLOSURE
LETTER) OR OTHERWISE PROVIDED IN THIS AGREEMENT, COMPANY AND EACH PRINCIPAL
HOLDER EXPRESSLY (I) DISCLAIMS ANY REPRESENTATIONS OR WARRANTIES OF ANY KIND OR
NATURE, EXPRESS OR IMPLIED, AS TO THE CONDITION, VALUE OR QUALITY OF COMPANY AND
ITS BUSINESS, PROPERTIES, RIGHTS, ASSETS, LIABILITIES AND FINANCIAL CONDITION
AND (II) ALL LIABILITY AND RESPONSIBILITY FOR ANY REPRESENTATION, WARRANTY,
STATEMENT OR INFORMATION MADE, COMMUNICATED OR FURNISHED (ORALLY OR IN WRITING)
TO BUYER OR ITS AFFILIATES OR REPRESENTATIVES (INCLUDING ANY OPINION,
INFORMATION, PROJECTION, OR ADVICE THAT MAY HAVE BEEN OR MAY BE PROVIDED TO
BUYER BY ANY DIRECTOR, OFFICER, EMPLOYEE, AGENT, CONSULTANT, OR REPRESENTATIVE
OF COMPANY).

ARTICLE V

REPRESENTATIONS AND WARRANTIES OF BUYER AND MERGER SUB

Buyer and Merger Sub, jointly and severally, represent and warrant to Company
that the statements contained in this ARTICLE V are true and correct.

 

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Section 5.1 Organization, Standing and Power. Each of Buyer and Merger Sub is a
corporation duly organized, validly existing, and in good standing under the
laws of the State of Delaware, has all requisite corporate power and authority
to own, lease, and operate its properties and assets and to carry on its
business as now being conducted, and is duly qualified to do business and, where
applicable as a legal concept, is in good standing as a foreign corporation in
each jurisdiction in which the character of the properties it owns, operates or
leases or the nature of its activities makes such qualification necessary,
except in each case for such failures to be so organized, qualified or in good
standing, individually or in the aggregate, that would not have a Buyer Material
Adverse Effect.

Section 5.2 Authority; No Conflict; Required Filings and Consents.

(a) Each of Buyer and Merger Sub has all requisite corporate power and authority
to enter into this Agreement and to consummate the transactions contemplated by
this Agreement. The execution and delivery of this Agreement and the
consummation of the transactions contemplated by this Agreement by Buyer and
Merger Sub have been duly authorized by all necessary corporate action on the
part of each of them. This Agreement has been duly executed and delivered by
Buyer and Merger Sub and constitutes the valid and binding obligation of each of
them, enforceable against each of them in accordance with its terms, subject to
the any applicable bankruptcy, reorganization, insolvency, moratorium, or other
similar Applicable Laws affecting creditors’ rights generally and principles
governing the availability of equitable remedies.

(b) The execution and delivery of this Agreement by Buyer and Merger Sub do not,
and the consummation by Buyer and Merger Sub of the transactions contemplated by
this Agreement will not, (i) conflict with, or result in any violation or breach
of, any provision of the articles of incorporation or bylaws of Buyer or Merger
Sub, (ii) conflict with, or result in any violation or breach of, or constitute
(with or without notice or lapse of time, or both) a default (or give rise to a
right of termination, cancellation or acceleration of any obligation or loss of
any benefit) under, require a consent or waiver under, constitute a change in
control under, require the payment of a penalty under or result in the
imposition of any Lien on Buyer’s or Merger Sub’s assets under, any of the
terms, conditions or provisions of any lease, license, contract or other
agreement, instrument or obligation to which Buyer or Merger is a party or by
which it or any of their properties or assets may be bound, or (iii) subject to
compliance with the requirements specified in Section 5.2(c), conflict with or
violate any permit, concession, franchise, license, judgment, injunction, order,
decree, statute, law, ordinance, rule or regulation applicable to Buyer or any
of its respective properties or assets, except in the case of clauses (ii) and
(iii) of this Section 5.2(b) for any such conflicts, violations, breaches,
defaults, terminations, cancellations, accelerations, losses, penalties or
Liens, and for any consents or waivers not obtained, that, individually or in
the aggregate, would not have a Buyer Material Adverse Effect.

(c) No consent, approval, license, permit, order or authorization of, or
registration, declaration, notice or filing with, any Governmental Entity or any
stock market or stock exchange on which shares of Buyer’s common stock are
listed for trading is required by or with respect to Buyer in connection with
the execution and delivery of this Agreement by Buyer or the consummation by
Buyer of the transactions contemplated by this Agreement.

 

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(d) No vote of the holders of any class or series of Buyer’s capital stock or
other securities is necessary for the consummation by Buyer of the transactions
contemplated by this Agreement.

Section 5.3 Litigation. As of the date of this Agreement, there is no lawsuit or
other legal proceeding pending or, to the knowledge of Buyer, threatened,
against Buyer or Merger Sub challenging the transactions contemplated by this
Agreement or that would reasonably be expected to have a Buyer Material Adverse
Effect.

Section 5.4 Financial Capability. Buyer and Merger Sub collectively have or will
have (when such amounts are required to be paid hereunder) sufficient funds to
pay the aggregate Merger Consideration contemplated by this Agreement and to
perform the other obligations of Buyer and Merger Sub contemplated by this
Agreement.

Section 5.5 Brokers and Finders. Neither Company nor any Affiliate of Company is
obligated for the payment of any fees or expenses of any investment banker,
broker, finder or similar party in connection with the origin, negotiation or
execution of this Agreement or in connection with the Merger or any other
transaction contemplated by this Agreement in each case based upon arrangements
made by or on behalf of Buyer or Merger Sub. Company and the Holders will not
incur any liability, either directly or indirectly, to any such investment
banker, broker, finder or similar party as a result of this Agreement, the
Merger or any act or omission of Buyer, Merger or any of their employees,
officers, directors, stockholders, agents or Affiliates.

Section 5.6 NO ADDITIONAL REPRESENTATIONS OR WARRANTIES. EXCEPT AS OTHERWISE
EXPRESSLY SET FORTH IN THIS ARTICLE V OR OTHERWISE PROVIDED IN THIS AGREEMENT,
BUYER AND MERGER SUB EXPRESSLY (I) DISCLAIM ANY REPRESENTATIONS OR WARRANTIES OF
ANY KIND OR NATURE, EXPRESS OR IMPLIED AND (II) ALL LIABILITY AND RESPONSIBILITY
FOR ANY REPRESENTATION, WARRANTY, STATEMENT OR INFORMATION MADE, COMMUNICATED OR
FURNISHED (ORALLY OR IN WRITING) TO COMPANY, HOLDERS OR THEIR RESPECTIVE
REPRESENTATIVES (INCLUDING ANY OPINION, INFORMATION, PROJECTION, OR ADVICE THAT
MAY HAVE BEEN OR MAY BE PROVIDED TO COMPANY OR ANY HOLDER BY ANY DIRECTOR,
OFFICER, EMPLOYEE, AGENT, CONSULTANT, OR REPRESENTATIVE OF BUYER OR MERGER SUB).

ARTICLE VI

CONDUCT OF BUSINESS

Section 6.1 Covenants of Company. During the period commencing on the date of
this Agreement and ending at the Closing or such earlier date as this Agreement
may be terminated in accordance with its terms (the “Pre-Closing Period”),
Company shall carry on its business in the Ordinary Course of Business and shall
use commercially reasonable efforts to maintain and preserve its business
organization, assets and properties and to preserve its business relationships
with customers, strategic partners, suppliers, distributors and others having
business

 

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dealings with it. In addition and without limiting the foregoing, except for
Company’s performance of its express obligations under this Agreement; or as set
forth in Schedule 6.1, during the Pre-Closing Period, Company shall not,
directly or indirectly, do any of the following without the prior written
consent of Buyer:

(a) (i) declare, set aside or pay any dividends on, or make any other
distributions (whether in cash, securities, or other property) in respect of,
any of Company Stock; (ii) split, combine, or reclassify any of Company Stock or
issue or authorize the issuance of any other securities in respect of, in lieu
of, or in substitution for shares of Company Stock or any of its other
securities; or (iii) purchase, redeem, or otherwise acquire any shares of
Company Stock or any other of its securities or any rights, warrants or options
to acquire any such shares or other securities, except, in the case of this
clause (iii), for the acquisition of shares of Company Stock from former
employees, directors and consultants in accordance with agreements providing for
the repurchase of shares in connection with any termination of services to
Company;

(b) issue, deliver, sell, grant, pledge, or otherwise dispose of or encumber any
shares of Company Stock, any other voting securities or any securities
convertible into or exchangeable for, or any rights, warrants or options to
acquire, any such shares, voting securities or convertible or exchangeable
securities, other than the issuance of shares of Company Stock pursuant to the
exercise or settlement of Company Options or Company Warrants outstanding as of
the date hereof;

(c) amend its certificate of incorporation or bylaws;

(d) make any expenditure or commitment in an amount in excess of $100,000 (in
any one case) or $250,000 (in the aggregate), other than purchases of inventory
in the Ordinary Course of Business;

(e) enter into any agreement, contract, covenant, instrument, lease, license or
commitment involving an annualized cost to Company exceeding $50,000 (in any one
case) or $100,000 (in the aggregate) or which would otherwise be a Company
Material Contract, or terminate, extend, amend or modify the terms of any of the
foregoing, except for terminations, extensions, amendments or modifications in
the Ordinary Course of Business;

(f) enter into any inbound license agreement with respect to Intellectual
Property with any third party (other than inbound “shrink-wrap” and similar
publicly available commercial end-user licenses) or transfer to any Person any
Intellectual Property, except for non-exclusive outbound license or service
agreements entered into in the Ordinary Course of Business and in substantially
the form delivered to Buyer or its counsel;

(g) commence, settle or compromise any litigation, except for settlements or
compromises solely for cash and do not involve more than $100,000 in any one
case or $250,000 in the aggregate;

(h) hire or fire any management employees;

 

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(i) enter into any agreement under which Company would be restricted from
selling, licensing or otherwise distributing any products or providing services
to customers or potential customers or any class of customers;

(j) pay, discharge or satisfy, in an amount in excess of $100,000 (in any one
case) or $250,000 (in the aggregate), any claim, liability or obligation
(absolute, accrued, asserted or unasserted, contingent or otherwise), other than
any Indebtedness under the Credit Facility or any Closing Date Transaction
Expenses, except in the Ordinary Course of Business;

(k) acquire (i) by merging or consolidating with, or by purchasing all or a
substantial portion of the assets or any stock of, or by any other manner, any
business or any corporation, partnership, joint venture, limited liability
company, association or other business organization or division thereof or
(ii) any assets that are material to Company, except in the case of this clause
(ii) purchases of inventory in the Ordinary Course of Business or acquisitions
pursuant to any existing Company Material Contract;

(l) sell, lease, license, pledge, or otherwise dispose of or encumber any
properties or assets of Company other than in the Ordinary Course of Business;

(m) make any changes in accounting methods, principles or practices, except as
required by a change in GAAP;

(n) make, revoke or amend any Tax election, change any method of Tax accounting
or Tax procedure or practice, settle, or compromise any material Tax contest
with respect to Company;

(o) (i) incur any Indebtedness or guarantee any such Indebtedness of another
Person (other than (A) in connection with the financing of trade receivables in
the Ordinary Course of Business, (B) letters of credit or similar arrangements
issued to or for the benefit of suppliers and manufacturers in the Ordinary
Course of Business and (C) pursuant to existing credit facilities in the
Ordinary Course of Business), (ii) issue, sell or amend any debt securities or
warrants or other rights to acquire any debt securities of Company, guarantee
any debt securities of another Person, enter into any “keep well” or other
agreement to maintain any financial statement condition of another Person or
enter into any arrangement having the economic effect of any of the foregoing,
(iii) make any loans, advances or capital contributions to, or investment in,
any other Person; provided, however, that Company may, in the Ordinary Course of
Business, invest in debt securities maturing not more than 90 days after the
date of investment, (iv) grant or have come into existence any Lien on any asset
other than a Permitted Lien; or (v) enter into any hedging agreement or other
financial agreement or arrangement designed to protect Company against
fluctuations in commodities prices or exchange rates;

(p) any other guarantee by Company or any of its Subsidiaries of the obligations
of another Person; or

 

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(q) except as required to comply with Applicable Law, a Company Material
Contract or a Company Employee Plan, (i) adopt, enter into, terminate or amend
any employment, collective bargaining agreement or Company Employee Plan,
(ii) increase the compensation or fringe benefits of, or pay any bonus to, any
director, officer or management employee, (iii) accelerate the payment, right to
payment or vesting of any compensation or benefits other than as contemplated by
this Agreement, (iv) grant any stock options, stock appreciation rights, stock
based or stock related awards, performance units or restricted stock, or
(v) take any action to fund or in any other way secure the payment of
compensation or benefits under any Company Employee Plan;

(r) enter into any arrangement or relationship of the type described in
Section 4.23; or

(s) authorize any of the foregoing actions or commit or agree, in writing or
otherwise, to take any of the foregoing actions.

Section 6.2 Confidentiality.

(a) The parties acknowledge that Buyer and Company have previously executed a
confidentiality agreement, dated as of November 19, 2012 (the “Confidentiality
Agreement”), which Confidentiality Agreement shall continue in full force and
effect in accordance with its terms, except as expressly modified herein, until
the Closing, at which time it shall terminate.

(b) From and after the date hereof, Company and each Principal Holder shall
maintain in confidence, and each shall cause its agents, representatives and
Affiliates to maintain in confidence, and none of them shall use to the
detriment or competitive disadvantage of Buyer or its Affiliates, any
confidential information of Buyer or its Affiliates obtained in connection with
this Agreement or any of the transactions contemplated hereby and, after
Closing, the confidential, proprietary or other non-public information of
Company. The foregoing covenants shall not apply (i) with respect to information
that is already known to a party or to others not bound by a duty of
confidentiality or such information that becomes publicly available through no
fault of such party, (ii) to the extent necessary or appropriate in making any
filing or obtaining any consent or approval required for the consummation of the
transactions contemplated by this Agreement, (iii) to the extent required under
Applicable Law, including reporting the transactions contemplated by this
Agreement on Tax Returns and disclosure requirements under the federal
securities laws and the rules and regulations issued thereunder, and (iv) to the
extent necessary or appropriate in connection with the enforcement or defense of
any right, remedy or claim relating to this Agreement or claims for
indemnification made hereunder (including third-party claims). If the
transactions contemplated by this Agreement are not consummated, Company and
Principal Holders shall return or destroy as much of confidential information
received from Buyer and Merger Sub as Merger Sub may reasonably request. Company
and each Principal Holder acknowledge that they are aware of their obligations
under Applicable Laws relating to trading in securities on the basis of material
non-public information and agree not to trade on the basis of any such
information received in connection with Agreement or the transactions
contemplated hereby.

 

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ARTICLE VII

ADDITIONAL AGREEMENTS

Section 7.1 Access to Information. During the Pre-Closing Period, Company shall
afford to Buyer’s officers, employees, accountants, counsel and other
representatives, reasonable access, upon reasonable notice, during normal
business hours and in a manner that does not disrupt or interfere with business
operations, to all of its properties, books, contracts, commitments, management
employees and records as Buyer shall reasonably request, and, during such
period, Company shall furnish promptly to Buyer all other information concerning
its business, properties, assets and personnel as Buyer may reasonably request.
Buyer will hold any such information which is nonpublic in confidence in
accordance with the Confidentiality Agreement. Notwithstanding the foregoing,
Company may withhold (i) any document or information the disclosure of which
would violate the terms of a confidentiality agreement with a third party,
(ii) information that, if disclosed, would violate an attorney client or other
privilege or would constitute a waiver of rights as to attorney work product or
attorney-client privilege, or (iii) information, the disclosure of which would
violate Applicable Law. If any material is withheld by Company pursuant to the
preceding sentence, Company shall inform Buyer in writing as to the general
nature of what is being withheld and the materiality or significance of such
information and shall use commercially reasonable efforts to enable disclosure
of such information.

Section 7.2 Actions to Close Transaction.

(a) Subject to the terms hereof, each of Company, Principal Holders, Buyer and
Merger Sub shall use its and their commercially reasonable efforts to:

(i) take, or cause to be taken, all actions, and do, or cause to be done, and to
assist and cooperate with the other parties in doing, all things necessary,
proper or advisable to fulfill and cause to be satisfied, the conditions in
ARTICLE IX (but with no obligation to waive any such condition) and to
consummate and make effective the transactions contemplated hereby as promptly
as practicable;

(ii) as promptly as practicable, obtain from any Governmental Entity or any
other third party any consents, licenses, permits, waivers, approvals,
authorizations, or orders required to be obtained or made by any party hereto in
connection with the authorization, execution and delivery of this Agreement and
the consummation of the transactions contemplated hereby;

(iii) as promptly as practicable, make all necessary filings, and thereafter
make any other required submissions, with respect to this Agreement and the
Merger required under (A) any applicable federal or state securities laws; and
(B) any other Applicable Law;

(iv) exercise their respective commercially reasonable efforts to have vacated
any order, stay, decree, judgment, injunction (preliminary or permanent),
statute, rule, or regulation that has the effect of making the Merger illegal or
otherwise prohibiting consummation of the Merger; and

(v) execute or deliver any additional instruments necessary to consummate the
transactions contemplated by, and to fully carry out the purposes of, this
Agreement.

 

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(b) At or prior to Closing, each of Company and Buyer shall give any notices to
third parties, and use, and cause their Subsidiaries, as applicable, to use,
their commercially reasonable efforts to obtain (i) the Required Consents,
(ii) any third-party consents that are disclosed or required to be disclosed in
Company Disclosure Letter or are otherwise required in connection with the
Merger, and (iii) any third party consents required in connection with the
Merger that are required to prevent the occurrence of an event that would
reasonably be expected to have a Company Material Adverse Effect or a Buyer
Material Adverse Effect prior to or after the Closing.

(c) Prior to Closing, Company shall use its commercially reasonable efforts to

(i) obtain a subordination, non-disturbance and attornment agreement for each
Real Property Lease subject to any mortgage or other Lien, in form and substance
reasonably satisfactory to Buyer, executed by each mortgagee or other party
holding a Lien on such Leased Real Property, if any; and

(ii) obtain an estoppel certificate for each Real Property Lease, in a form and
substance reasonably satisfactory to Buyer, executed by each applicable
landlord.

Section 7.3 Press Releases and Public Announcements. Prior to Closing, neither
Company and Holders, on the one hand, or Buyer and Merger Sub, on the other
hand, will issue any press release or make any public announcement relating to
the subject matter of this Agreement without the prior written approval of the
other party, except as may be required by Applicable Law. Following the Closing,
Holders will not issue any press release or make any public announcement
relating to the subject matter of this Agreement without the prior written
approval of Buyer, except as may be required by Applicable Law.

Section 7.4 Notification of Certain Matters. During the Pre-Closing Period, each
of Buyer and Merger Sub, on the one hand, and Company and the Principal Holders,
on the other hand, shall give prompt notice to the other of (a) the occurrence,
or failure to occur, of any event, which occurrence or failure to occur is
reasonably likely to cause any representation or warranty of such party
contained in this Agreement to be untrue or inaccurate in any material respect,
in each case at any time from and after the date of this Agreement until the
Closing, or (b) any material failure of such party to comply with or satisfy any
covenant, condition or agreement to be complied with or satisfied by it under
this Agreement. Notwithstanding the above, the delivery of any notice pursuant
to this Section 7.4 will not limit or otherwise affect the remedies available
hereunder to the other party or its Affiliates or the conditions to Buyer’s
obligation to consummate the Closing.

 

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Section 7.5 Exclusivity. The Principal Holders and Company will not, directly or
indirectly, through any representative or otherwise (a) solicit, or entertain
offers from, negotiate with or in any manner initiate, encourage the submission
of, discuss, accept or consider any inquiry, contact, proposal or offer from any
Person relating to the acquisition of any capital stock or other voting
securities, or any substantial portion of the assets or business, of Company
(including any acquisition structured as a merger, consolidation, share
exchange, or otherwise) (a “Takeover Proposal”) or (b) participate in any
discussions or negotiations regarding, furnish 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. Company will notify
Buyer of any such inquiry, contact, proposal, or offer within 24 hours of
receipt or awareness thereof. Company, at the request of Buyer, shall require
any Person who has previously received confidential information from Company in
connection with any of the foregoing to return or destroy such information.

Section 7.6 Stockholder Consent and Related Matters.

(a) Immediately following the execution of this Agreement, Company will deliver
to Buyer the Stockholder Consent, duly executed by each Principal Holder. During
the Pre-Closing Period, Company shall use its reasonable efforts to obtain
signatures to the Stockholder Consent of all Stockholders who did not execute
such Stockholder Consent.

(b) Promptly following the date hereof, but in any event no later than the
Business Day preceding the Closing Date, Company shall provide the notices
required by Sections 228 and 262 of the DGCL to the Stockholders entitled to
receive such notices. Such notices shall be substantially in the form of Exhibit
E.

(c) Each Principal Holder agrees, until the earlier of the Effective Time and
the termination of this Agreement, to vote its Company Stock or execute a
written consent or consents, at every meeting (or in connection with any action
by written consent, including the Stockholder Consent) of the Stockholders at
which such matters are considered and at every adjournment or postponement
thereof (including the Stockholder Consent): (i) in favor of the Merger and this
Agreement and (ii) against (1) any Takeover Proposal, (2) any action, proposal,
transaction or agreement which could reasonably be expected to result in a
breach of any covenant, representation or warranty or any other obligation or
agreement of the Principal Holders or Company under this Agreement or and
(3) any action, proposal, transaction or agreement that could reasonably be
expected to impede, interfere with, delay, discourage, adversely affect or
inhibit the timely consummation of the Merger or the fulfillment of the
conditions under this Agreement or change in any manner the voting rights of any
class of shares of Company (including any amendments to Company’s organizational
documents).

Section 7.7 Employee Matters.

(a) Prior to Closing, Company will take all actions necessary to terminate all
Company Employee Plans listed on Schedule 7.7(a) as of no later than immediately
prior to the Effective Time, including adopting the relevant resolutions to
Company Employee Plans, making contributions to Company Employee Plans for all
payroll periods ending prior to Closing, fully accruing for all other
contribution obligations as current liabilities, and making all benefit payments
in accordance with the terms of the Company Employee Plans and any other
contractual obligations of the Company and Applicable Law.

 

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(b) Company shall accrue liabilities on the Estimated Closing Date Balance Sheet
for the full amount of any vacation, paid time off, bonuses, commissions and
other compensation that have accrued, been earned or become payable or which
relate to periods prior to Closing and would accrue, be earned or become payable
in the future.

(c) Each Person employed by the Company immediately preceding the Effective
Time, including those on vacation, leave of absence, or disability (the “Company
Employees”), will remain employed by the Company in a comparable position on and
immediately after the Effective Time. For the avoidance of doubt, nothing in
this Agreement shall obligate Buyer to continue to employee any Company Employee
(or any other Person) on any certain terms or at all.

(d) Subject to Section 7.7(a), it is currently anticipated that the Company
Employees will continue under the Company’s benefit plans immediately after the
Effective Time. At such time as Buyer elects to make any employee benefit plan
generally available to Buyer employees available to the Company Employees in
lieu of a similar Company Employee Plan, then for purposes of such Buyer
employee benefit plan, (i) each Company Employee shall receive credit for prior
years of service with the Company for all purposes, (ii) each Company Employee
shall be entitled to participate in such Buyer employee benefit plan, except
pension plans under Section 3(2) of ERISA, without the application of any
applicable waiting periods or, to the extent permitted by the terms of the
applicable employee benefit plan, actively at work conditions, and (iii) with
respect to medical plans, unless the transition of the Company’s medical plans
occurs effective at the beginning of a new calendar year, Buyer shall provide
the Company Employees with credit under the Buyer employee benefit plans for
amounts paid towards deductibles, offsets, and maximum out of pocket
requirements under the Company Employee Plans for the year in which such
transition occurs. Buyer shall recognize prior years of service with the Company
for determining each Company Employee’s eligibility to participate and vesting
in a 401(k) plan sponsored and maintained by the Buyer.

(e) This Section 7.7 is not intended to confer any rights on any Holder, or to
confer third-party beneficiary rights on any Person who is not a party to this
Agreement.

Section 7.8 Director and Officer Indemnification. For not less than six
(6) years after the Effective Time, unless otherwise required by Applicable Law,
the governing documents of the Surviving Corporation and its Subsidiaries shall
contain provisions no less favorable to the persons who were officers or
directors of Company or any Company Subsidiary (to the extent such persons were
serving as directors or officers of a Company Subsidiary on Company’s behalf)
(collectively, the “D&O Indemnified Parties”) with respect to the
indemnification of, advancement of expenses for, and exculpation from
liabilities for, acts or omissions by them at any time at or prior to the
Effective Time, than are set forth in Company’s Certificate of Incorporation and
Bylaws, each as amended and in effect on the date of this Agreement. The
Surviving Corporation shall indemnify and advance expenses to the D&O
Indemnified Parties to

 

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the full extent provided by Company Certificate of Incorporation and Bylaw and
shall not amend or otherwise modify such rights in any manner that would
adversely affect the rights of the D&O Indemnified Parties, unless such
modification is required by Applicable Law. All rights of the D&O Indemnified
Parties to indemnification and exculpation from liabilities for acts or
omissions occurring at or prior to the Effective Time as provided in Company
Certificate of Incorporation and Bylaws shall survive the Closing and shall
continue in full force and effect in accordance with their terms. Buyer shall
make proper provision so that the successors and assigns of Buyer shall assume
all of the obligations thereof set forth in this paragraph. The obligations
under this paragraph shall not be terminated or modified in such a manner as to
adversely affect any D&O Indemnified Party without the consent of such Person
(who shall be third party beneficiaries of this paragraph and shall be entitled
to enforce the covenants contained herein).

Section 7.9 Inventory. The Company shall make arrangements prior to Closing to
permit the completion of a product inventory on May 31, 2014.

Section 7.10 Stockholders Agreement. Company and Principal Holders hereby
acknowledge and agree that the Amended and Restated Stockholders’ Agreement of
Company, dated as of June 8, 2011, as amended, will automatically and without
further action terminate at the Effective Time, without any further obligation
or liability on part of Company.

Section 7.11 Further Assurances. If at any time after the Closing any further
action is necessary or desirable to carry out the purposes of this Agreement,
each party will take such further action (including the execution and delivery
of such further instruments and documents) as the other party may reasonably
request, at the sole cost and expense of the requesting party (unless the
requesting party is entitled to indemnification therefor under ARTICLE XI).

ARTICLE VIII

TAX MATTERS

Section 8.1 Certain Tax Matters.

(a) Subject to Section 11.7, the Holders shall satisfy and pay (or cause to be
satisfied and paid) in full, and will indemnify Buyer in respect of, and hold
Buyer harmless against all Taxes with respect to (1) Company with respect to any
Pre-Closing Tax Period, (2) a member of an affiliated, consolidated, combined or
unitary group of which Company (or any predecessor thereto) is or was a member
before Closing to which one or more entities other than Company is or was also a
member, including Taxes pursuant to Treasury Regulation 1.1502-6 or any similar
Applicable Law, and (3) a Person (other than Company) imposed on Company for any
period as a transferee or successor with respect to a transaction occurring on
or before the Closing Date, by Applicable Law, contract or otherwise (all of
such Taxes being the “Pre-Closing Taxes”). Buyer will satisfy (or cause to be
satisfied) in full when due all Tax liabilities with respect to any period that
is not a Pre-Closing Tax Period. Notwithstanding the foregoing, Holders will
only be liable for any Pre-Closing Taxes to the extent that such Taxes exceed
the sum of (A) the amount, if any, of estimated Taxes paid for such Taxes, on or
before the Closing Date plus (B) the amount, if any, accrued for such Taxes in
the final Closing Working Capital.

 

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(b) Company will prepare and timely file (or cause to be prepared and timely
filed) all Tax Returns of Company required to be filed on or before the Closing
Date (after taking into account extensions therefor). Company, in consultation
with Representative, at the Holders’ expense, will prepare and timely file (or
cause to be prepared and timely filed) all Tax Returns for Company for all
periods ending on or prior to the Closing Date which are due after the Closing
Date. Buyer will prepare and timely file (or cause to be prepared and timely
filed) all Straddle Period Tax Returns of Company required to be filed after the
Closing Date (after taking into account extensions therefor). All Tax Returns
prepared pursuant to this Section 8.1(b) will be prepared in accordance with the
past practice of Company (except to the extent otherwise required by Applicable
Law). Company and Representative will deliver such completed, but unfiled, Tax
Returns to Buyer for its review, comment and consent (which consent will not be
unreasonably withheld or delayed) at least 30 days prior to the date targeted by
Company to file such Tax Returns, which date will be no later than the due date
for such Tax Returns (taking into account any permitted extensions). Buyer,
Company and Representative agree to consult with each other and to resolve in
good faith any issue arising as a result of the review of such Tax Returns to
permit the filing of such Tax Returns as promptly as possible. If any Tax Return
(whether original or amended) prepared (or caused to be prepared) by Buyer
relates to any Pre-Closing Tax Period, then such Tax Return will be prepared in
accordance with the past practice of Company (except to the extent otherwise
required by Applicable Law) and Buyer will give to Representative a copy of such
Tax Return as soon as practicable after the preparation, but before the filing,
thereof for Representative’s review and comment. Buyer will make any changes to
such Tax Return that are timely and reasonably requested.

(c) Each party will, and each party will cause its applicable Affiliates to,
cooperate in all reasonable respects with respect to Tax matters and provide one
another with such information as is reasonably requested to enable the
requesting party to complete and file all Tax Returns it may be required to file
(or cause to be filed) with respect to Company, to respond to Tax audits,
inquiries or other Tax Proceedings and to otherwise satisfy Tax requirements.
Such cooperation also will include promptly forwarding copies (to the extent
related thereto) of relevant Tax notices, forms or other communications received
from or sent to any Governmental Entity.

(d) For purposes of this Agreement, the portion of Tax with respect to the
income, property or operations of Company that is attributable to any Straddle
Period will be apportioned between the portion of the Straddle Period that
extends before the Closing Date through the Closing Date (the “Pre-Closing
Straddle Period”) and the portion of the Straddle Period that extends from the
day after the Closing Date to the end of the Straddle Period in accordance with
this Section 8.1(d). The portion of such Tax attributable to the Pre-Closing
Straddle Period will (i) in the case of any Taxes other than Income Taxes, sales
or use taxes, value-added taxes, employment taxes, or withholding taxes, be
deemed to be the amount of such Tax for the entire taxable period multiplied by
a fraction, the numerator of which is the number of days in the Pre-Closing
Straddle Period and denominator of which is the number of days in the Straddle
Period, and (ii) in the case of any Income Taxes, sales or use taxes,
value-added taxes, employment taxes, or withholding taxes, be deemed equal to
the amount that would be payable if the Straddle

 

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Period ended on and included the Closing Date. To the extent that any Tax for a
Straddle Period is based on the greater of a Tax on net income, on the one hand,
and a Tax measured by net worth or some other basis not otherwise measured by
income, on the other hand, the portion of such Tax related to the Pre-Closing
Straddle Period will be determined based on the foregoing and based on the
manner in which the actual Tax liability for the entire Straddle Period is
determined.

(e) The Holders will pay all Transfer Taxes, and Representative and Buyer will
cooperate in timely making all filings, returns, reports and forms as may be
required to comply with the provisions of Applicable Law relating thereto.

Section 8.2 Cooperation and Records Retention. From time to time, Representative
and Buyer shall provide, and shall cause their respective accountants and other
representatives to provide, to each other on a timely basis, the information
that they or their accountants or other representatives have within their
control and that may be reasonably necessary in connection with the preparation
of any Tax Return or the examination by any taxing authority or other
administrative or judicial proceeding relating to any Tax Return. Buyer shall
retain or cause to be retained, until the applicable statutes of limitations
(including any extensions and carryovers) have expired, copies of all Tax
Returns for all Tax periods beginning before the Closing Date, together with
supporting work schedules and other records or information that may be relevant
to such Tax Returns.

ARTICLE IX

CONDITIONS TO CLOSING

Section 9.1 Conditions to Each Party’s Obligation to Effect the Closing. The
respective obligation of each party to this Agreement to effect the Closing
shall be subject to the satisfaction on or prior to the Closing Date of the
following conditions.

(a) Governmental Approvals. All authorizations, consents, orders, or approvals
of, or declarations or filings with, or expirations of waiting periods imposed
by, any Governmental Entity required to be filed, be obtained or have occurred
prior to the consummation of the Merger shall have been filed, been obtained, or
occurred.

(b) No Orders. No Governmental Entity of competent jurisdiction shall have
enacted, issued, promulgated, enforced, or entered any order, stay, decree,
judgment, injunction (preliminary or permanent), statute, rule, or regulation
that is in effect and that has the effect of making the Merger illegal or
otherwise prohibiting consummation of the Merger.

(c) Stockholder Consent. Company shall have received the Stockholder Consent.

Section 9.2 Additional Conditions to Obligation of Buyer and Merger Sub. The
obligation of Buyer and Merger Sub to effect the Closing shall be subject to the
satisfaction on or prior to the Closing Date of each of the following additional
conditions, any of which may be waived, in writing, exclusively by Buyer.

 

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(a) Representations and Warranties. The representations and warranties of
Principal Holders and Company set forth in this Agreement shall be true and
correct in all material respects as of the Closing Date as though made on and as
of the Closing Date (except to the extent such representation or warranty is
specifically made as of a particular date, in which case such representation or
warranty shall be true and correct in all material respects as of such date);
provided, however, that any such representations or warranties that are
qualified by a Materiality Qualifier shall be true and correct in all respects
to the extent so qualified. Buyer shall have received a certificate signed on
behalf of Company by the Chief Executive Officer of Company certifying the
satisfaction of the condition set forth in this Section 9.2(a).

(b) Performance of Obligations of the Principal Holders and Company. Principal
Holders and Company shall have performed in all material respects all
obligations required to be performed by them under this Agreement at or prior to
Closing, and Buyer shall have received a certificate to such effect signed on
behalf of Company by the Chief Executive Officer of Company.

(c) Absence of Material Adverse Effect. Since the date of this Agreement, there
shall not have occurred any Company Material Adverse Effect, and Buyer shall
have received a certificate to such effect signed on behalf of Company by the
Chief Executive Officer of Company.

(d) Payoff Letters. Company shall have obtained and delivered to Buyer one or
more payoff letters, in form and substance reasonably satisfactory to Buyer,
from Wells Fargo Bank, National Association (as lender under the Credit
Facility), and the holders of any other Indebtedness of Company to be repaid at
the Closing.

(e) Lien Releases. Company shall have caused the termination (or arranged for
the termination upon Closing) of all UCC-1 filings, security agreements,
registrations pledging any interest, or any other Liens on Company Stock or on
any Company property or assets (other than Permitted Liens) and shall have
provided evidence of such termination in a form satisfactory to Buyer.

(f) Termination of Affiliate Agreements. Each of the agreements listed on
Schedule 9.2(f) shall have been terminated as of immediately prior to the
Effective Time with no further liability or obligation of Surviving Corporation.

(g) Dissenting Shares. The number of Dissenting Shares shall constitute less
than 5% of the outstanding shares of Company Stock.

(h) Restrictive Covenant Agreement. Robert H. Tolleson, Jr. shall have entered
into a restrictive covenant agreement in substantially the form attached as
Exhibit F.

(i) SMH Guaranty. The SMH Guaranty shall remain in full force and effect, and
none of the SMH Guarantors shall have repudiated its obligations thereunder.

 

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(j) Delivery of Other Items. Company shall have delivered (or caused to be
delivered) to Buyer each of the other items expressly contemplated to be so
delivered at or prior to the Closing by this Agreement, including the following:

(i) the Paying Agent Agreement (the “Paying Agent Agreement”), substantially in
the form of Exhibit G, duly executed by Company and the Paying Agent;

(ii) good standing certificates, dated within fifteen days before Closing, from
the Secretary of State of the State of Delaware and the comparable authority in
each jurisdiction where Company or any of its Subsidiaries is qualified to do
business, stating that Company and each of its Subsidiaries is in good standing
therein;

(iii) a non-foreign affidavit, dated the Closing Date and executed by an officer
of Company, in form and substance required under the Treasury Regulations issued
pursuant to section 1445 of the Tax Code and otherwise reasonably satisfactory
to Buyer, accurately stating that Company is not a “foreign person” within the
meaning of Section 1445 of the Tax Code;

(iv) a resignation letter from each director and officer of Company, confirming
their removal as of the Effective Time as provided in Section 1.4; and

(v) a certificate of the secretary of Company certifying as to (A) a true,
correct and complete copy of the certificate of incorporation of Company, (B) a
true, correct and complete copy of the bylaws of Company, (C) a true, correct
and complete copy of the resolutions of the Board of Directors of Company
approving this Agreement, the Merger and the other transactions contemplated
hereby, (D) a true, correct and complete copy of the executed Stockholder
Consent, (E) the qualifications and authority of each person signing this
Agreement or any Company Ancillary Document on behalf of Company, (F) the due
mailing of the notices required by Sections 228 and 262 of the DGCL and (G) a
summary of Dissenting Share matters, including the number of Dissenting Shares
as of such date and copies of any notices related thereto received by the
Company.

Section 9.3 Additional Conditions to Obligation of Principal Holders and
Company. The obligation of Principal Holders and Company to effect the Closing
shall be subject to the satisfaction on or prior to the Closing Date of each of
the following additional conditions, either of which may be waived, in writing,
exclusively by Company:

(a) Representations and Warranties. The representations and warranties of Buyer
and Merger Sub set forth in this Agreement shall be true and correct in all
material respects as of the Closing Date as though made on and as of the Closing
Date (except to the extent such representation or warranty is specifically made
as of a particular date, in which case such representation or warranty shall be
true and correct in all material respects as of such date) provided, however,
that any such representations or warranties that are qualified by a Materiality
Qualifier shall be true and correct in all respects to the extent so qualified.
Company shall have received a certificate signed on behalf of Buyer by an
authorized officer of certifying the satisfaction of the condition set forth in
this Section 9.3(a).

 

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(b) Performance of Obligations of Buyer and Merger Sub. Buyer and Merger Sub
shall have performed in all material respects all obligations required to be
performed by them under this Agreement at or prior to the Closing, and Company
shall have received a certificate signed on behalf of Buyer by an authorized
officer of Buyer to such effect.

(c) Delivery of Other Items. Buyer shall have delivered (or caused to be
delivered) to Company each of the other items expressly contemplated to be so
delivered at or prior to Closing by this Agreement, including the following:

(i) the payments contemplated in Section 2.8(e); and

(ii) a counterpart to the Paying Agent Agreement.

ARTICLE X

TERMINATION AND AMENDMENT

Section 10.1 Termination. This Agreement may be terminated at any time prior to
the Closing (with respect to Sections 10.1(b) to (f), by written notice by the
terminating party to the other parties):

(a) by mutual written consent of Buyer and Company;

(b) by either Buyer or Company if the Merger shall not have been consummated by
June 30, 2014 (the “Outside Date”), provided that the right to terminate this
Agreement under this Section 10.1(b) shall not be available to any party whose
breach of a representation, warranty, covenant or obligation under this
Agreement has been a principal cause of or resulted in the failure of the Merger
to occur on or before the Outside Date;

(c) by either Buyer or Company if, notwithstanding such party’s compliance with
Section 7.2(a)(iv), a Governmental Entity of competent jurisdiction shall have
issued a nonappealable final order, decree or ruling or taken any other
nonappealable final action, in each case having the effect of permanently
restraining, enjoining or otherwise prohibiting the Merger;

(d) by Buyer if there has been a breach of or failure to perform any
representation, warranty, covenant or agreement on the part of Principal Holders
or Company set forth in this Agreement, which breach or failure to perform
(i) would cause the conditions set forth in Section 9.2(a) or Section 9.2(b) not
to be satisfied, and (ii) shall not have been cured within 30 days following
receipt by Company of written notice of such breach or failure to perform from
Buyer;

 

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(e) by Company if there has been a breach of or failure to perform any
representation, warranty, covenant or agreement on the part of Buyer or Merger
Sub set forth in this Agreement, which breach or failure to perform (i) would
cause the conditions set forth in Section 9.3(a) or Section 9.3(b) not to be
satisfied, and (ii) shall not have been cured within 30 days following receipt
by Buyer of written notice of such breach or failure to perform from Company; or

(f) by Buyer, if Company has not timely delivered the Stockholder Consent as
contemplated by Section 7.6.

Section 10.2 Effect of Termination. In the event of termination of this
Agreement as provided in Section 11.1, this Agreement shall immediately become
void and there shall be no liability or obligation on the part of Buyer, Merger
Sub, Company, Principal Holders or their respective officers, directors,
stockholders or Affiliates; provided that (a) any such termination shall not
relieve any party from liability for any intentional or willful breach of this
Agreement and (b) the provisions of Section 6.2 (Confidentiality), this
Section 10.2 (Effect of Termination), Section 10.3 (Fees and Expenses) and
ARTICLE XII (Miscellaneous) shall remain in full force and effect and survive
any termination of this Agreement.

Section 10.3 Fees and Expenses. All fees and expenses incurred in connection
with this Agreement and the transactions contemplated hereby shall be paid by
the party incurring such fees and expenses, whether or not the Merger is
consummated.

Section 10.4 Amendment. This Agreement may be amended by the parties hereto, by
action taken or authorized by their respective Boards of Directors, at any time
before or after approval of the matters presented in connection with the Merger
by the stockholders of any party, but, after any such approval, no amendment
shall be made which by Applicable Law requires further approval by such
stockholders without such further approval. In any event, subject to
Section 2.8(f), this Agreement may not be amended except by an instrument in
writing signed on behalf of each of the parties hereto (which, in the case of
Principal Holders, may be done on their behalf by Representative).

Section 10.5 Extension; Waiver. At any time prior to the Effective Time, to the
extent permitted by the DGCL and subject to any requisite approval of the boards
of directors of Merger Sub or Company, the parties hereto may (a) extend the
time for the performance of any of the obligations or other acts of the other
parties hereto, (b) waive any inaccuracies in the representations and warranties
contained herein or in any document delivered pursuant hereto, and (c) waive
compliance with any of the agreements or conditions contained herein. Any
agreement on the part of a party hereto to any such extension or waiver shall be
valid only if set forth in a written instrument signed on behalf of such party.
Such extension or waiver shall not be deemed to apply to any time for
performance, inaccuracy in any representation or warranty, or noncompliance with
any agreement or condition, as the case may be, other than that which is
specified in the extension or waiver. The failure of any party to this Agreement
to assert any of its rights under this Agreement or otherwise shall not
constitute a waiver of such rights. Any extension or waiver granted by Principal
Holders may be executed and delivered on their behalf by Representative.

 

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ARTICLE XI

INDEMNIFICATION

Section 11.1 Indemnification by the Holders. Subject to the terms and conditions
of this ARTICLE XI, from and after the Closing, the Holders shall (in accordance
with Section 11.7) indemnify and defend Buyer, Surviving Corporation, or any
employee, officer, director, stockholder, agent or Affiliate of Buyer and
Surviving Corporation (the “Buyer Indemnified Parties”) in respect of, and hold
Buyer Indemnified Parties harmless against, any and all liabilities, damages,
losses, claims, demands, fines, fees, interest, penalties, assessments, costs,
and expenses, including reasonable attorneys’ fees and expenses (collectively,
“Damages”), incurred or suffered by a Buyer Indemnified Party resulting from,
related to, or arising out of:

(a) any breach of a representation or warranty of Company or Holders contained
in this Agreement or in any certificate or Transmittal Letter delivered pursuant
hereto;

(b) any failure by Principal Holders or, at or prior to the Closing, Company to
perform any covenant or agreement contained in this Agreement;

(c) Pre-Closing Taxes;

(d) Dissenting Shares;

(e) the failure or alleged failure of Company (or the Representative after the
Closing) to allocate the Merger Consideration (including the Closing Merger
Consideration, any Holder Adjustment Amount, any Representative Fund Remainder,
and any Earn-out Payment) among the Holders in accordance with Applicable Law,
Company’s Certificate of Incorporation, and the terms of Company Securities;

(f) any Closing Indebtedness, Closing Date Transaction Expense or Change in
Control Payments, the amount of which was not otherwise deducted from the Merger
Consideration in accordance with Section 2.1; or

(g) the applicability or alleged applicability of Specified Contract B to, or
with respect to the costs or expenses of, Buyer Parent or any of its
Subsidiaries (other than solely with respect to Company in the Ordinary Course
of Business); provided, however, the obligation set forth in this
Section 11.1(g) is expressly conditioned on the following:

(i) Buyer Parent and its Subsidiaries (other than the Company) do not engage the
vendor in Specified Contract B to provide the same or similar services to Buyer
Parent and/or its Subsidiaries (other than the Company);

(ii) Buyer Parent and its Subsidiaries (other than the Company) do not share
with such vendor or provide access to such vendor its payment process agreements
and payment processing costs statements as otherwise contemplated in the
Specified Contract B; and

 

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(iii) that such Damages do not relate to the intentional use by Buyer Parent or
its Subsidiaries (other than Company) of such vendor’s confidential information;
provided, further, vendor’s confidential information shall not include any
information to the extent that such information (x) is or becomes generally
available to the public, (y) is lawfully available to Buyer Parent or its
Subsidiaries (other than the Company) on a non-confidential basis, or (z) was
independently developed by Buyer Parent or its Subsidiaries without use of or
reference to the vendor’s confidential information.

Section 11.2 Indemnification by Buyer. Subject to the terms and conditions of
this ARTICLE XI, from and after the Closing, Buyer shall indemnify and defend
the Holders, or any employee, officer, director, stockholder, agent or Affiliate
of the Holders (the “Holder Indemnified Parties”), in respect of, and hold the
Holders harmless against, any and all Damages incurred or suffered by the
Holders resulting from, related to, or arising out of:

(a) any breach of a representation or warranty of Buyer contained in this
Agreement or in any certificate delivered pursuant hereto; or

(b) any failure by Buyer or, after the Closing, the Surviving Corporation to
perform any covenant or agreement contained in this Agreement.

Section 11.3 Claims for Indemnification.

(a) Procedure for Claims. A Person entitled to indemnification under this
ARTICLE XI (an “Indemnified Party”) wishing to assert a claim for
indemnification under this ARTICLE XI (a “Claim”) shall deliver to the Person
from whom indemnification is sought (the “Indemnifying Party”) a written notice
(a “Claim Notice”) that (i) states in reasonable detail the facts constituting
the basis for the Damages claimed, (ii) states the amount (the “Claim Amount”)
of any Damages claimed by the Indemnified Party, to the extent then known,
(iii) states that the Indemnified Party is entitled to indemnification under
this ARTICLE XI, and (iv) includes a demand for payment in the amount of such
Damages. The failure to give such Claim Notice will not relieve the Indemnifying
Party of any liability hereunder, except to the extent that the Indemnifying
Party demonstrates that it was prejudiced thereby. Within 15 days after delivery
of a Claim Notice, the Indemnifying Party shall deliver to the Indemnified Party
a written response in which the Indemnifying Party shall (A) agree that the
Indemnified Party is entitled to receive all of the Claim Amount, (B) agree that
the Indemnified Party is entitled to receive part, but not all, of the Claim
Amount (the “Agreed Amount”), or (C) contest that the Indemnified Party is
entitled to receive any of the Claim Amount. If the Indemnifying Party in such
response contests the payment of all or part of the Claim Amount, the
Indemnifying Party and the Indemnified Party shall use good faith efforts to
resolve such dispute. If such dispute is not resolved within 30 days following
the delivery by the Indemnifying Party of such response (the “Resolution
Period”), the Indemnifying Party and the Indemnified Party shall each have the
right to submit such dispute to a court of competent jurisdiction in accordance
with the provisions of Section 12.10.

 

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(b) Third-Party Claims. All claims for indemnification made under this ARTICLE
XI resulting from, related to, or arising out of a third-party claim shall be
subject to the following additional procedures and provisions. An Indemnified
Party shall give prompt written notification to the Indemnifying Party of the
commencement of any action, suit, or proceeding relating to a third-party claim
for which indemnification may be sought or, if earlier, upon the assertion of
any such claim or demand by a third party. The failure to give such notification
will not relieve the Indemnifying Party of any liability hereunder, except to
the extent that the Indemnifying Party demonstrates that it was prejudiced
thereby. Such notification shall (i) state in reasonable detail (to the extent
known by the Indemnified Party) the facts constituting the basis for such
third-party claim, (ii) state that the Indemnified Party is entitled to
Indemnification under this ARTICLE XI, and (iii) state the amount of the Damages
being claimed. Within 30 days after delivery of such notification, the
Indemnifying Party may, upon written notice thereof to the Indemnified Party,
assume control of the defense of such action, suit, proceeding, or claim with
counsel reasonably satisfactory to the Indemnified Party; provided that the
Indemnifying Party may not assume control of the defense of any action, suit,
proceeding, or claim that seeks non-monetary relief, criminal penalties, or
damages in excess of any Cap applicable thereto. If the Indemnifying Party does
not assume control of such defense, the Indemnified Party shall control such
defense at the Indemnifying Party’s expense. The party not controlling such
defense may participate therein at its own expense; provided that if the
Indemnifying Party assumes control of such defense and the Indemnified Party
reasonably concludes, based on advice from counsel, that the Indemnifying Party
and the Indemnified Party have a conflict of interests that would not permit
representation by one counsel with respect to such action, suit, proceeding, or
claim, the reasonable fees and expenses of counsel to the Indemnified Party
solely in connection therewith shall be considered Damages for purposes of this
Agreement; provided, however, that in no event shall the Indemnifying Party be
responsible for the fees and expenses of more than one additional counsel for
all Indemnified Parties. The party controlling such defense shall (A) keep the
other party advised of the status of such action, suit, proceeding, or claim and
the defense thereof, (B) provide the other party with reasonable access to all
relevant information and documentation relating to the claim and the prosecution
or defense thereof, and (C) consider recommendations made by the other party
with respect thereto. The Indemnified Party shall not agree to any settlement of
such action, suit, proceeding or claim without the prior written consent of the
Indemnifying Party. The Indemnifying Party shall not agree to any settlement of
such action, suit, proceeding or claim that does not include a complete release
of the Indemnified Party from all liability with respect thereto or that imposes
any liability or obligation on the Indemnified Party without the prior written
consent of the Indemnified Party (such consent not to be unreasonably withheld,
conditioned or delayed in the case of a settlement where the only such liability
or obligation of the Indemnified Party is the payment of monetary Damages for
which the Indemnifying Party is responsible hereunder).

(c) All indemnity payments made under this Agreement shall be treated by the
parties as an adjustment to the Merger Consideration for Tax purposes, unless
otherwise required by Applicable Law.

 

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Section 11.4 Survival.

(a) The representations and warranties of Principal Holders, Company and Buyer
set forth in this Agreement (other than Fundamental Representations) shall
survive the Closing and the consummation of the transactions contemplated hereby
and continue until the date eighteen months after the Closing Date, at which
time they shall expire.

(b) Notwithstanding anything to the contrary in this Agreement, all Fundamental
Representations shall survive the Closing and the consummation of the
transactions contemplated hereby and continue until the date that is 60 days
following the expiration of the applicable statute of limitations with respect
to the underlying subject matter thereof.

(c) The covenants and agreements of the parties set forth in this Agreement will
remain in full force and effect in accordance with their terms; provided,
however, that any claim for breach of a covenant or agreement that by its terms
was to be performed prior to the Closing shall expire on the date eighteen
months after the Closing.

(d) If an indemnification claim is properly asserted under this ARTICLE XI prior
to the end of the applicable survival period, then the related representation,
warranty, covenant or agreement shall continue to survive until, but only for
the purpose of, the resolution of such claim.

Section 11.5 Limitations and Other Terms.

(a) Notwithstanding anything to the contrary herein, but subject to this
Section 11.5(a), (i) the aggregate liability of the Holders for Damages under
Section 11.1(a) shall not exceed an amount equal to $6,000,000 (the “Cap”);
(ii) the Holders shall not be liable under Section 11.1(a) unless and until the
aggregate Damages for all claims under Section 11.1(a) exceed an amount equal to
$200,000 (the “Deductible”), at which time the Holders shall be liable only for
Damages in excess of the Deductible; (iii) the rights to indemnification for
Damages resulting from breaches of the Fundamental Representations or any other
claim pursuant to Section 11.1 shall not exceed, in the aggregate, the aggregate
Merger Consideration actually received by the Holders (the “Total Cap”);(iv) no
individual Holder shall be liable under this Agreement or any Transmittal Letter
for any amount in excess of the amount of the Merger Consideration actually
received by such Holder and (v) the aggregate liability of the Holders for
Damages under Section 11.1(g) shall not exceed an amount equal to $250,000. The
limitations in the foregoing clauses (i) and (ii) shall not apply to a claim
arising out of a breach of a Fundamental Representation or any representation
that was fraudulently made. The limitations in the foregoing clauses (iii) and
(iv) shall not apply in the case of fraud with respect to any Holder who either
committed or had actual knowledge of such fraud (whether committed by any
Holder, Company, any of its officers or employees or Representative).

 

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(b) Notwithstanding anything to the contrary herein, (i) the aggregate liability
of Buyer and Surviving Corporation for Damages under Section 11.2(a) shall not
exceed an amount equal to the Cap, and (ii) Buyer and Surviving Corporation
shall not be liable under Section 11.2(a) unless and until the aggregate Damages
for all claims under such section equal or exceed the Deductible, at which time
Buyer and Surviving Corporation shall be liable only for Damages in excess of
the Deductible; provided, however, that the limitations set forth in this
Section 11.5(b) shall not apply to a claim arising out of a breach of a
Fundamental Representation or any representation that was fraudulently made;
provided further, that except in the case of fraud, the rights to
indemnification for Damages resulting from breaches of the Fundamental
Representations or any other claim pursuant to Section 11.2 shall not exceed, in
the aggregate, the Total Cap.

(c) For purposes of this ARTICLE XI, the representations and warranties of each
party in this Agreement (other than Section 4.6, Section 4.8, and
Section 4.14(a)) and in any certificate delivered pursuant hereto shall be
deemed not to include any Materiality Qualifiers.

(d) No right or obligation under this ARTICLE XI will be waived or otherwise
affected by any knowledge (of any form or type) of Buyer or by any
investigation, due diligence, or verification by or on behalf of Buyer. All
representations, warranties, covenants, and agreements herein will be deemed
material and relied upon by each party, and none will be waived by any failure
to pursue any action or by consummation of the transactions contemplated herein.

(e) Except as they relate to a third party claim, none of the parties shall be
liable to the other, whether in contract, tort or otherwise, for any punitive or
exemplary or other similar type of damages that in any way arise out of, or
relate to, or are a consequence of, its performance or nonperformance under this
Agreement.

(f) All Damages under this Agreement shall be determined without duplication of
recovery by reason of the state of facts giving rise to such Damages
constituting a breach of more than one representation, warranty, covenant or
agreement. The Buyer Indemnified Parties shall not be entitled to
indemnification with respect to any Damages to the extent that such Damages are
actually reflected in Closing Working Capital or Closing Indebtedness.

(g) The amount of any Damages incurred or suffered by any Indemnified Party
shall be calculated after giving effect to any amounts, including third-party
insurance proceeds, actually recovered by the Indemnified Party (or any of its
Affiliates) from any other third Person in respect of such Damages, net of any
costs or expenses incurred by the Indemnified Party to secure such proceeds or
recoveries (including the effect of any increase in insurance premiums). Subject
to the rights of the Indemnifying Party in Section 11.5(h), the Indemnified
Party shall not be obligated to seek any such proceeds or recoveries. If any
such benefits or recoveries are received by an Indemnified Party (or any of its
controlled Affiliates) with respect to any Damages after an Indemnifying Party
has made an indemnity payment to the Indemnified Party with respect to such
Damages, the Indemnified Party (or such Affiliate) shall pay the Indemnifying
Party the amount of such benefits or recoveries (up to the amount of the
Indemnifying Party’s indemnity payment).

 

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(h) Upon making any payment to an Indemnified Party in respect of any Damages,
the Indemnifying Party will, to the extent of such payment, be subrogated to all
rights of the Indemnified Party (and its Affiliates) against any third Person
(including the Indemnified Party’s rights to insurance proceeds or recoveries in
the manner described in Section 11.5(g)) in respect of the Damages to which the
payment relates. Such Indemnified Party (and its Affiliates) and such
Indemnifying Party will execute upon request all instruments reasonably
necessary to evidence or further perfect such subrogation rights.

(i) After the Closing, except with respect to claims for equitable relief and
except with respect to claims of fraud of any party hereto, the rights of the
Indemnified Parties under this ARTICLE XI shall be the sole and exclusive
remedies and rights of the Indemnified Parties and their respective Affiliates
with respect to any and all claims arising under, out of, or related to this
Agreement or relating to the transactions contemplated hereby.

(j) For purposes of this ARTICLE XI, any references to the Indemnifying Party
(except provisions relating to an obligation to make any payments) shall be
deemed to refer to Representative when the Holders are the Indemnifying Parties,
and references to the Indemnified Party shall be deemed to refer to
Representative when the Holders are the Indemnified Parties. Representative
shall have full power and authority on behalf of each Holder to take any and all
actions on behalf of, execute any and all instruments on behalf of, and execute
or waive any and all rights of, the Holders under this ARTICLE XI.

Section 11.6 Set-Off; Recourse to Earn-Out Payment. Buyer and Surviving
Corporation will have the right to set off and retain any Undisputed
Indemnification Amount owed by Holders hereunder, including pursuant to
Section 2.9, ARTICLE VIII, or this ARTICLE XI, against any amount payable by
Buyer or Merger Sub to such Holder, including the Earn-Out Payment. The exercise
of or failure to exercise such right of set off will not constitute an election
of remedies or limit in any manner the enforcement of any other remedy that may
be available to Buyer or Merger Sub. Notwithstanding the foregoing, in the event
that any portion of the Earn-out Payment has been accrued but not yet paid (e.g.
following the achievement of the Performance Objective for any Earn-Out Period,
but prior to the payment of the Earn-Out Payment), Buyer and Surviving
Corporation shall, prior to seeking recourse directly against any Holder, be
required to set off any Undisputed Indemnification Amount against the Earn-out
Payment. “Undisputed Indemnification Amount” shall mean any Damages payable from
any Holder to any Buyer Indemnified Party as evidenced by (i) a judgment or
order from a court of competent jurisdiction (which judgment or order is final
and either non-appealable or the deadline to make appeal therefrom shall have
passed) or (ii) a written acknowledgement executed by such Holder (or
Representative in its capacity as such). In addition, Buyer and the Surviving
Corporation may suspend payment of any Earn-Out Payment due and payable to the
extent (but only the extent) of any outstanding Claims until final resolution of
such Claims. Upon final resolution of such Claims, Buyer shall promptly pay such
suspended Earn-Out Payment (less any Undisputed Indemnification Amount).

 

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Section 11.7 Nature of Holders’ Obligations.

(a) Joint and Several Liability. Subject to the limitations of Section 11.5(a)
(to the extent applicable), each Joint Indemnification Holder is jointly and
severally liable for any amount due from the Holders with respect to (i) the
payment of any portion of the Final Adjustment Amount required to be paid by the
Holders pursuant to clause (ii)(B) of Section 2.9(d) and (ii) the
indemnification obligations of the Holders set forth in Section 11.1. For
greater clarity, this means that each Joint Indemnification Holder is liable to
Buyer and Surviving Corporation for the entirety of such obligations without
regard to such Joint Indemnification Holder’s Pro Rata Share. Notwithstanding
anything in this Agreement to the contrary, and without limiting their several
obligations, in no event shall any Joint Indemnification Holder (or the Joint
Indemnification Holders collectively) be subject to further joint liability with
respect to any obligations or liabilities of the Holders once the Buyer
Indemnified Parties have actually recovered $6,000,000 (the “Joint
Indemnification Cap”) from the Holders under Section 2.9(d) and Section 11.1.
Once the Joint Indemnification Cap has been met, each Joint Indemnification
Holder shall thereafter be deemed a Several Indemnification Holder with respect
to all amounts payable in excess of the Joint Indemnification Cap.

(b) Several Liability. Subject to the limitations of Section 11.5(a) (to the
extent applicable), each Several Indemnification Holder is liable, severally and
not jointly, for its Pro Rata Share of any amount due from the Holders with
respect to (i) the payment of any portion of the Final Adjustment Amount
required to be paid by the Holders pursuant to clause (ii)(B) of Section 2.9(d)
and (ii) the indemnification obligations of the Holders set forth in
Section 11.1; provided, however, the foregoing limitations to do not limit a
Several Indemnification Holder’s liability for any Damages resulting from,
related to or arising out of any breach of a representation or warranty
specifically related to such Several Indemnification Holder or the failure of
such Several Indemnification Holder to perform any covenant or agreement
specifically relating to it or in the case of fraud.

(c) Contribution Among Holders. Subject to the terms of the Contribution
Agreement, if any Holder is obligated to pay money in satisfaction of a claim
with respect to (i) the payment of any portion of the Final Adjustment Amount
required to be paid by the Holders pursuant to clause (ii)(B) of Section 2.9(d)
or (ii) the indemnification obligations of the Holders set forth in
Section 11.1, and the allocation of such payment among Holders does not reflect
a pro rata allocation of the payment among the Holders (based on each Holder’s
Pro Rata Share), then any Holder who paid less than such Holder’s Pro Rata Share
shall contribute immediately available funds to each Holder who paid more than
such Holder’s Pro Rata Share such that after the contributory payments have been
made, each Holder shall have paid such Holder’s Pro Rata Share. This
Section 11.7(c) and the Contribution Agreement contain agreements by and among
Holders only; and neither Buyer nor Surviving Corporation will have any right or
liability in connection with this Section 11.7(c).

 

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ARTICLE XII

MISCELLANEOUS

Section 12.1 Notices. All notices and other communications hereunder shall be in
writing and shall be deemed duly delivered (i) four Business Days after being
sent by registered or certified mail, with return receipt requested postage
prepaid, (ii) one Business Day after being sent for next Business Day delivery
via a reputable nationwide overnight courier service, with delivery confirmation
requested and fees prepaid, (iii) on the date of receipt (or, the first Business
Day following such receipt if the date of such receipt is not a Business Day) of
transmission by electronic mail or facsimile, so long as a courtesy copy is sent
as provided in clauses (i) or (ii) no later than the next Business Day, or
(iv) the date such notice is actually received by the party for whom it is
intended (or, the first Business Day following such receipt if the date of such
receipt is not a Business Day) in the case of any other means of transmission
(including personal delivery, messenger service or ordinary mail), in each case
to the intended recipient as set forth below:

 

  (a) if to Buyer, Merger Sub or Surviving Corporation:

c/o United Stationers Inc.

One Parkway North Boulevard

Suite 100

Deerfield, Illinois 60015-2559

Attn:     Senior Vice President, General Counsel and Secretary

Fax:      847-627-7087

Tel:      847-627-2087

Email:   eblanchard@ussco.com

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

Faegre Baker Daniels LLP

2200 Wells Fargo Center

90 South Seventh Street

Minneapolis, Minnesota 55402-3924

Attn:     Michael A. Stanchfield

Fax:     (612) 766-1600

Tel:     (612) 766-7764

Email:   Mike.Stanchfield@FaegreBD.com

 

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  (b) if to Company prior to the Merger:

CPO Commerce, Inc.

120 West Bellevue Drive

Suite 300

Pasadena, CA 91105-2579

Attn:   Rob Tolleson

Fax:    (626) 208-1827

Tel:     (626) 585-3600

Email:  rtolleson@cpocommerce.com

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

Alston & Bird LLP

One Atlantic Center

1201 West Peachtree Street

Atlanta, Georgia 30309-3424

Attn:    J. Mark Ray

Fax:    (404) 881-7739

Tel:     (404) 253-8293

Email:  mark.ray@alston.com

 

  (c) if to Representative or Principal Holders generally:

Capstar Capital, LLC

1703 West Fifth Street, Suite 800

Austin, Texas 78703

Attn:    Robert Hicks

Fax:    (512) 340-7805

Tel:    (512) 340-7808

Email:  rhicks@capstarpartners.com

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

Alston & Bird LLP

One Atlantic Center

1201 West Peachtree Street

Atlanta, GA 30309-3424

Attn:    J. Mark Ray

Fax:    (404) 881-7739

Tel:    (404) 253-8293

Email:  mark.ray@alston.com

 

  (d) if to a particular Principal Holder, as set forth on Schedule A.

 

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Any party to this Agreement may change the address to which notices and other
communications hereunder are to be delivered by giving the other parties to this
Agreement notice in the manner herein set forth.

Section 12.2 Entire Agreement. Subject to Section 6.2(a), this Agreement
(including the Schedules and Exhibits hereto and the documents and instruments
referred to herein that are to be delivered at the Closing) constitutes the
entire agreement among the parties to this Agreement and supersedes any prior
understandings, agreements or representations by or among the parties hereto, or
any of them, written or oral, with respect to the subject matter hereof.

Section 12.3 No Third-Party Beneficiaries. Except as provided in ARTICLE XI,
Section 7.8 and Section 12.14, this Agreement is not intended, and shall not be
deemed, to confer any rights or remedies upon any Person other than the parties
hereto and their respective successors and permitted assigns or to otherwise
create any third-party beneficiary hereto.

Section 12.4 Assignment. Neither this Agreement nor any of the rights, interests
or obligations under this Agreement may be assigned or delegated, in whole or in
part, by operation of law or otherwise by any of the parties hereto without the
prior written consent of the other parties, and any such assignment without such
prior written consent shall be null and void. Subject to the preceding sentence,
this Agreement shall be binding upon, inure to the benefit of, and be
enforceable by, the parties hereto and their respective successors and permitted
assigns.

Section 12.5 Severability. Any term or provision of this Agreement that is
invalid or unenforceable in any situation in any jurisdiction shall not affect
the validity or enforceability of the remaining terms and provisions hereof or
the validity or enforceability of the offending term or provision in any other
situation or in any other jurisdiction. If the final judgment of a court of
competent jurisdiction declares that any term or provision hereof is invalid or
unenforceable, the parties hereto agree that the court making such determination
shall have the power to limit the term or provision, to delete specific words or
phrases, or to replace any invalid or unenforceable term or provision with a
term or provision that is valid and enforceable and that comes closest to
expressing the intention of the invalid or unenforceable term or provision, and
this Agreement shall be enforceable as so modified. In the event such court does
not exercise the power granted to it in the prior sentence, the parties hereto
agree to replace such invalid or unenforceable term or provision with a valid
and enforceable term or provision that will achieve, to the extent possible, the
economic, business and other purposes of such invalid or unenforceable term.

Section 12.6 Counterparts and Signature. This Agreement may be executed in two
or more counterparts, each of which shall be deemed an original but all of which
together shall be considered one and the same agreement and shall become
effective when counterparts have been signed by each of the parties hereto and
delivered to the other parties, it being understood that all parties need not
sign the same counterpart. The exchange of copies of this Agreement and the
signature pages by facsimile transmission or other electronic means shall
constitute effective execution and delivery of this Agreement as to the parties
and may be used in lieu of the original Agreement for all purposes. Signatures
of the parties transmitted by facsimile or other electronic means shall be
deemed to be their original signatures for all purposes. This Agreement is a
contract under seal under Delaware law and the word “SEAL” next to each party’s
signature has the same effect as if such party’s seal were affixed hereto. For
the avoidance of doubt, no defect relating to the authorization, execution and
delivery of this Agreement by any Principal Holder will affect the validity or
enforceability of this Agreement with respect to Company, Representative and the
other Principal Holders.

 

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Section 12.7 Interpretation. When reference is made in this Agreement to an
Article or a Section, such reference shall be to an Article or Section of this
Agreement, unless otherwise indicated. The table of contents, table of defined
terms and headings contained in this Agreement are for convenience of reference
only and shall not affect in any way the meaning or interpretation of this
Agreement. The language used in this Agreement shall be deemed to be the
language chosen by the parties hereto to express their mutual intent, and no
rule of strict construction shall be applied against any party. Whenever the
context may require, any pronouns used in this Agreement shall include the
corresponding masculine, feminine or neuter forms, and the singular form of
nouns and pronouns shall include the plural, and vice versa. Any reference to
any federal, state, local or foreign statute or law shall be deemed also to
refer to such law as amended and all rules and regulations promulgated
thereunder, unless the context requires otherwise. Whenever the words “include,”
“includes” or “including” are used in this Agreement, they shall be deemed to be
followed by the words “without limitation.” The word “or” shall not be
exclusive. No summary of this Agreement prepared by any party shall affect the
meaning or interpretation of this Agreement.

Section 12.8 Governing Law. This Agreement and any controversy related to,
arising out of, caused by, or resulting from this Agreement shall be governed by
and construed in accordance with the internal laws of the State of Delaware
without giving effect to any choice or conflict of law provision or rule
(whether of the State of Delaware or any other jurisdiction) that would cause
the application of laws of any jurisdictions other than those of the State of
Delaware.

Section 12.9 Remedies. Except as otherwise provided herein, any and all remedies
herein expressly conferred upon a party will be deemed cumulative with and not
exclusive of any other remedy conferred hereby, or by law or equity upon such
party, and the exercise by a party of any one remedy will not preclude the
exercise of any other remedy. The parties hereto agree that irreparable damage
would occur in the event that any of the provisions of this Agreement were not
performed in accordance with their specific terms or were otherwise breached. It
is accordingly agreed that the parties shall be entitled to an injunction or
injunctions to prevent breaches of this Agreement and to enforce specifically
the terms and provisions of this Agreement, this being in addition to any other
remedy to which they are entitled at law or in equity.

Section 12.10 Submission to Jurisdiction. Each of the parties to this Agreement
(a) consents to submit itself to the personal jurisdiction of the Delaware Court
of Chancery in any action or proceeding arising out of or relating to this
Agreement or any of the transactions contemplated by this Agreement, (b) agrees
that all claims in respect of such action or proceeding may be heard and
determined in any such court, (c) agrees that it shall not attempt to deny or
defeat such personal jurisdiction by motion or other request for leave from any
such court, and (d) agrees not to bring any action or proceeding arising out of
or relating to this Agreement or any of the transactions contemplated by this
Agreement in any other court. Each of the parties hereto waives any defense of
inconvenient forum to the maintenance of any action or proceeding so brought and
waives any bond, surety or other security that might be required of

 

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any other party with respect thereto. Any party hereto may make service on
another party by sending or delivering a copy of the process to the party to be
served at the address and in the manner provided for the giving of notices in
Section 12.1. Nothing in this Section 12.10, however, shall affect the right of
any party to serve legal process in any other manner permitted by Applicable
Law.

Section 12.11 Company Disclosure Letter. Company Disclosure Letter shall be
arranged in Sections corresponding to the numbered Sections contained in ARTICLE
III and ARTICLE IV, and the disclosure in any Section shall qualify (a) the
corresponding Section in ARTICLE III and ARTICLE IV, and (b) the other Sections
in ARTICLE III and ARTICLE IV, only to the extent that it is reasonably apparent
on the face of such disclosure that it also qualifies or applies to such other
Sections. The inclusion of any information in Company Disclosure Letter, or in
any update thereto, shall not be deemed to be an admission or acknowledgment, in
and of itself, that such information is required by the terms hereof to be
disclosed, is material, has resulted in or would result in a Company Material
Adverse Effect, or is outside the Ordinary Course of Business.

Section 12.12 Waiver of Jury Trial. Each party hereby irrevocably waives all
right to trial by jury in any action, proceeding or counterclaim (whether based
on contract, tort or otherwise) arising out of or relating to this Agreement or
the actions of the parties hereto in the negotiation, administration,
performance and enforcement hereof.

Section 12.13 Performance of Merger Sub. Buyer will cause Merger Sub, and
following the Effective Time, the Surviving Corporation, to perform its
obligations under this Agreement.

Section 12.14 Waiver of Conflict; Disposition of Attorney-Client Privilege.

(a) In any dispute or proceeding arising under or in connection with this
Agreement, any or all of the Holders shall have the right, at their election, to
retain the firm of Alston & Bird LLP to represent them in such matter, and
Buyer, for itself and for its successors and assigns, hereby irrevocably waives,
and shall cause the Surviving Corporation and the Surviving Corporation’s
Subsidiaries to waive, any objection and consent to any such representation in
any such matter notwithstanding Alston & Bird LLP’s representation of Company
prior to the Closing. The foregoing waiver shall not apply in the event that
Buyer engages Alston & Bird LLP to provide legal services to the Surviving
Corporation or any of the Surviving Corporation’s Subsidiaries after the Closing
Date.

(b) Buyer, for itself and its successors and assigns, hereby irrevocably
acknowledges and agrees that all communications among Company (prior to the
Closing), the Holders and their counsel, including Alston & Bird LLP, made in
connection with the negotiation, preparation, execution, delivery and closing
under, or any dispute or proceeding arising under or in connection with, this
Agreement or any other agreement contemplated hereby, or any matter relating to
any of the foregoing, are privileged communications among Company, the Holders
and such counsel and after the Closing, the privilege shall remain within the
exclusive control of the Holders. In

 

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addition, if the Merger is consummated, all of Company’s privileged records
related to such transactions will become property of (and be controlled by) the
Representative, and the Surviving Corporation shall not be entitled to copies of
such records (it being understood that the Surviving Corporation shall have no
obligation to expunge such records). Notwithstanding the foregoing, the Holders
and the Representative shall use reasonable efforts to protect such privilege
with respect to third parties and shall not waive or compromise such privilege
without the express consent of Buyer. The parties acknowledge that such
privileged information may also be subject to the “common interest” or “joint
defense” privilege.

(c) Alston & Bird LLP is an intended beneficiary of this Section 12.14 and is
entitled to enforce this provision.

ARTICLE XIII

DEFINITIONS

Section 13.1 Certain Defined Terms. As used in this Agreement, the following
terms have the following meanings:

(a) “Affiliate” means with respect to any party, any Person who is an
“affiliate” of that party within the meaning of Rule 405 promulgated under the
Securities Act.

(b) “Business Day” means any day other than (i) a Saturday or Sunday or (ii) a
day on which banking institutions located in Chicago, Illinois or Pasadena,
California are permitted or required by law, executive order, or governmental
decree to remain closed.

(c) “Buyer Material Adverse Effect” means any material adverse effect on the
ability of Buyer or Merger Sub to consummate the Merger.

(d) “Buyer Parent” means United Stationers Inc., a Delaware corporation and the
publicly traded parent company of Buyer and Merger Sub.

(e) “Change in Control Payment” means any commission, settlement, bonus, or
other similar payment payable by Company to any member of management, other
employees of Company, or any other Person that is compensatory in nature and
that is accelerated or triggered upon the consummation of the Merger or other
transactions contemplated hereby.

(f) “Closing Cash” means the sum of all cash and cash equivalents held by
Company (including marketable securities and short term investments but
excluding checks and other instruments that are subsequently dishonored), in
each case, measured as of 11:59 p.m. Pacific Time on the Closing Date (provided
that for purposes hereof, changes to Closing Cash as a result of actions taken
by Company or Buyer subsequent to the Effective Time outside the Ordinary Course
of Business shall be disregarded). Closing Cash shall include the aggregate
exercise price received by Company prior to Closing for all Company Options and
Company Warrants exercised immediately prior to or otherwise in connection with
the Closing (but excluding, for the avoidance of doubt, outstanding checks and
the exercise price of Company Options and Company Warrants cancelled at the
Effective Time pursuant to Section 2.3 and Section 2.3(a)).

 

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(g) “Closing Date Transaction Expenses” means all fees, costs, and expenses
incurred by or on behalf of Company in connection with this Agreement and the
transactions contemplated hereby, including legal, accounting, and investment
banking fees, that remain unpaid immediately prior to the Closing (including the
fees of the Paying Agent).

(h) “Closing Indebtedness” means the sum of (i) all Indebtedness of Company as
of immediately prior to the Effective Time and (ii) all prepayment premiums or
penalties, and fees and expenses related to such Indebtedness (including any
prepayment premiums payable as a result of the consummation of the transactions
contemplated by this Agreement) as of immediately prior to the Effective Time.

(i) “Closing Working Capital” means (a) the sum of net receivables (trade
receivables and vendor program receivables less allowance for sales returns),
merchandise inventories, and prepaid expenses and other current assets; less
(b) the sum of accounts payable (including Credit Card Debt and outstanding
checks) and current accrued expenses and other liabilities, all as of 11:59 p.m.
Pacific Time on the Closing Date (provided that for purposes hereof, changes to
Closing Working Capital as a result of actions taken by Company or Buyer
subsequent to the Effective Time outside the Ordinary Course of Business (or
arising by virtue of Buyer’s ownership of the Company) shall be disregarded);
all as such terms (other than “Credit Card Documents” and “outstanding checks”)
are used in Company’s audited balance sheet as of February 1, 2014 and in
accordance with the Balance Sheet Principles and, subject to the Balance Sheet
Principles, GAAP consistently applied with past practices used in preparing such
balance sheet. The calculation of Closing Working Capital shall be consistent
with the computation and presentation of working capital on Schedule B. For
purposes of clarity, Closing Working Capital shall not include any Closing Cash
or any Closing Indebtedness but shall include outstanding checks for the
exercise price of Company Options and Company Warrants exercised immediately
prior to or otherwise in connection with the Closing (to the extent not included
in the calculation of Closing Cash) so long as such checks are not subsequently
dishonored and shall also include the employer portion of any payroll Taxes that
are incurred in connection with the payments to be made with respect to the
Company Options as set forth in Section 2.3(b).

(j) “Common Stock Closing Per Share Merger Consideration” means the amount of
the Closing Merger Consideration for each share of Company Common Stock, as set
forth on the Allocation Certificate.

(k) “Company Common Stock” means each share of Company’s common stock, par value
$0.001 per share.

 

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(l) “Company Employee Plan” means any “employee pension benefit plan” (as
defined in Section 3(2) of ERISA), any “employee welfare benefit plan” (as
defined in Section 3(1) of ERISA), and any other written or oral plan, agreement
or arrangement involving direct or indirect compensation (but excluding the
payment of regular salary and wages), including insurance coverage, severance,
retention incentives, flexible spending accounts, medical, dental, vision,
prescription drug, transportation, disability, paid time off, vacation, holiday,
sick leave, educational assistance, adoption assistance, or fringe benefits,
deferred compensation, bonuses, stock options, stock purchase, phantom stock,
stock appreciation or other equity based awards, or other forms of incentive
compensation or post-retirement compensation and all unexpired severance
agreements, in each case (i) for the benefit of, or relating to, any current or
former employee, director or officer (or dependent) of Company or its ERISA
Affiliates, (ii) maintained, contributed to, or agreed to by Company or its
ERISA Affiliates or (iii) with respect to which Company or any of its ERISA
Affiliates is under any obligation to contribute or has liability, whether
current or contingent.

(m) “Company Material Adverse Effect” means any material adverse change, event,
circumstance, occurrence, fact, or development with respect to, or that has or
could reasonably be expected to have a material adverse effect on, (i) the
business, condition (financial or otherwise), assets, properties, liabilities,
operations, or results of operations of Company and its Subsidiaries, taken as a
whole, or (ii) the ability of Company or any Principal Holder to consummate the
transactions contemplated hereby; provided, however, that notwithstanding the
foregoing, Company Material Adverse Effect shall not include any change, event,
development, effect, occurrence, fact, or circumstance resulting from, arising
out of, or related to (A) changes in, or generally affecting, the industry in
which Company participates, (B) changes in general economic, financial, credit
market, political, or social conditions; (C) the announcement or consummation of
this Agreement or the transactions contemplated hereby, (D) the taking of any
action or any omission required to comply with the terms of this Agreement or at
the other parties’ request or with the other parties’ consent; (E) any change in
accounting requirements or principles or any change in Applicable Laws or the
interpretation thereof; (F) earthquakes, hurricanes, floods, or other natural
disasters; or (G) hostilities, acts of war, sabotage, or terrorism, or military
actions, unless in case of clauses (A), (B) and (E), such change, event,
development, effect, occurrence, fact, or circumstance has a disproportionate
effect on Company and its Subsidiaries, taken as a whole, compared to other
participants in the industries in which Company conducts its business.

(n) “Company Options” means each option to acquire Company Stock, including all
options issued under the Company Stock Plans or otherwise.

(o) “Company Preferred Stock” means each share of Company’s preferred stock, par
value $0.001 per share.

(p) “Company Securities” means, collectively, Company Stock, Company Options and
Company Warrants.

(q) “Company Software” means software applications developed by or on behalf of
Company, including related documentation but excluding Third Party Software and
third party Open Source Software.

 

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(r) “Company Stock” means, collectively, Company Common Stock and Company
Preferred Stock.

(s) “Company Stock Plans” means (i) Company’s 2003 Long-Term Incentive Plan and
(ii) Company’s 2006 Long-Term Incentive Plan, each as amended.

(t) “Company Warrants” means each warrant to acquire Company Stock.

(u) “Company’s Knowledge” means, with respect to any fact or matter in question,
the actual knowledge of the Chief Executive Officer and Chief Operating Officer
of Company and the knowledge they would reasonably be expected to have after
making a reasonable inquiry.

(v) “Credit Card Debt” means amounts outstanding under Company’s commercial card
facility.

(w) “Credit Facility” means Company’s revolving line of credit with Wells Fargo
Bank, National Association.

(x) “DGCL” means the Delaware General Corporation Law.

(y) “Environmental Claim” means any written claim, demand, suit, action,
proceeding, order, investigation or notice by any Person alleging any potential
liability (including potential liability for investigatory costs, risk
assessment costs, cleanup costs, removal costs, remedial costs, operation and
maintenance costs, governmental response costs, natural resource damages, or
penalties) arising out of, based on, or resulting from (i) noncompliance or
alleged noncompliance with any Environmental Law or permit, (ii) injury or
damage (or alleged injury or damage) arising from exposure to Hazardous
Substances, or (iii) the presence, Release or threatened Release into the
environment, of any Hazardous Substance at or from any location, whether or not
owned, leased, operated or otherwise used by Company.

(z) “Environmental Law” means any law, regulation, order, decree or permit
requirement of any Governmental Entity relating to: (i) the protection,
investigation or restoration of the environment, human health and safety, or
natural resources, (ii) the handling, use, storage, treatment, transport,
disposal, release or threatened release of any Hazardous Substance or
(iii) noise, odor or wetlands protection.

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

(bb) “ERISA Affiliate” of Company means any other entity which, together with
Company, would be treated as a single employer under Tax Code Section 414.

(cc) “Fundamental Representations” means (i) with respect to Principal Holders,
those representations and warranties set forth in Section 3.1 (Company Stock),
Section 3.2(a) (Authority), and Section 3.5 (Brokers and Finders); (ii) with
respect to Company, those representations and warranties set forth in
Section 4.3 (Capitalization), Section 4.5(a) (Authority), Section 4.9 (Taxes),
and Section 4.26 (Brokers and Finders); and (iii) with respect to Buyer, those
representations and warranties set forth in Section 5.2(a) (Authority) and
Section 5.5 (Brokers and Finders).

 

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(dd) “Hazardous Substance” means (i) any substance that is regulated or which
falls within the definition of a “hazardous substance,” “hazardous waste” or
“hazardous material” pursuant to any Environmental Law, or (ii) any petroleum
product or by-product, asbestos-containing material, polychlorinated biphenyls,
radioactive materials or radon.

(ee) “Holdback Amount” means $500,000.

(ff) “Holder” means (i) each Stockholder, (ii) each holder of any Company
Options outstanding immediately before the Effective Time, and (iii) each holder
of any Company Warrants outstanding immediately before the Effective Time.

(gg) “Indebtedness” means, without duplication, (i) all obligations for borrowed
money (including all sums due on early termination and repayment or redemption
calculated to the Closing Date) or extensions of credit (including under bank
overdrafts and advances but excluding Credit Card Debt and outstanding checks)
(ii) all obligations evidenced by bonds, debentures, notes, or other similar
instruments (including all sums due on early termination and repayment or
redemption calculated to the Closing Date), (iii) all obligations, contingent or
otherwise, directly or indirectly guaranteeing any obligations of any other
Person, (iv) all obligations to reimburse the issuer in respect of amounts
outstanding under letters of credit or under performance or surety bonds, or
other similar obligations, (v) all obligations in respect of bankers’
acceptances and under reverse repurchase agreements, (vi) all obligations of the
type referred to in clause (i) through (v) above of others secured by a Lien on
any asset of Company, and (vii) all accrued interest related to any of the
foregoing.

(hh) “IRS” means the Internal Revenue Service.

(ii) “Joint Indemnification Holders” means (i) Capstar Capital LLC, (ii) Robert
H. Tolleson, Jr., and (iii) SMH CPO Commerce, LLC.

(jj) “Lien” means, with respect to any property or asset, all pledges, liens,
mortgages, charges, encumbrances, hypothecations, options, rights of first
refusal, rights of first offer and security interests of any kind or nature
whatsoever.

(kk) “Materiality Qualifier” means a qualification to a representation or
warranty by use of “material,” “materially,” “in all material respects,” or
other variations of the word “material” or by a reference regarding the
occurrence or non-occurrence or possible occurrence or non-occurrence of a
Company Material Adverse Effect or Buyer Material Adverse Effect, as applicable.

(ll) “Neutral Auditor” means PricewaterhouseCoopers LLP or an alternative
financial expert from a nationally recognized independent public accounting firm
jointly selected by Buyer and Representative.

 

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(mm) “Open Source Software” means any software (other than Company Software)
distributed under any license that requires that any other software incorporated
into, derived from, or distributed with such software (i) be disclosed,
distributed or made available in source code form or (ii) be licensed for the
purposes of preparing derivative works.

(nn) “Ordinary Course of Business” means the ordinary course of conduct of the
business of Company, which is consistent in nature, scope and magnitude
(including with respect to quantity and frequency) with past practices of
Company and is taken in the ordinary course of the normal, day-to-day
operations.

(oo) “Preferred Stock Closing Per Share Merger Consideration” means, for any
series of Company Preferred Stock, the amount of the Closing Merger
Consideration for each share of such series of Company Preferred Stock, as set
forth on the Allocation Certificate. Such amount shall include all accrued
interest and other amounts payable with respect to the Company Preferred Stock

(pp) “Permitted Lien” means (i) statutory Liens for current Taxes not yet due
and payable or that are being contested in good faith by appropriate proceedings
(provided appropriate reserves have been made in respect thereof); (ii) Liens
for deposits or pledges made in connection with, or to secure payment of,
workers’ compensation, unemployment insurance, or similar programs mandated by
Applicable Law; (iii) Liens, whether statutory or common law, that are not yet
due and payable and were incurred in the Ordinary Course of Business, in favor
of carriers, warehousemen, mechanics, and materialmen, to secure claims for
labor, materials, or supplies, and other like liens; and (iv) generally
applicable restrictions on the transfer of securities imposed by state or
federal securities laws.

(qq) “Person” means any natural individual, corporation, partnership, limited
liability company, joint venture, association, bank, trust company, trust or
other entity, whether or not a legal entity, or any Governmental Entity.

(rr) “Pre-Closing Tax Period” means (i) any Tax period ending on or before the
Closing Date and (ii) any Pre-Closing Straddle Period.

(ss) “Pro Rata Share” means the pro rata percentage of each Holder set forth on
the Allocation Certificate.

(tt) “Release” means any release, spill, emission, leaking, pumping, pouring,
dumping, emitting, emptying, escaping, injection, deposit, disposal, discharge,
dispersal, leaching or migration into the indoor or outdoor environment,
including the uncontrolled presence or the movement of Hazardous Substances
through the ambient air, soil, subsurface water, groundwater, wetlands, lands or
subsurface strata, directly or indirectly into the environment.

(uu) “Representative Payment” means a portion of the Merger Consideration equal
to $1,100,000, which will be delivered by Buyer to Representative (on behalf of
the Holders), in cash by wire transfer of immediately available funds to the
bank account designated by Representative by written notice to Buyer at least
three Business Days before the Closing Date.

 

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(vv) “Securities Act” means the Securities Act of 1933.

(ww) “Several Indemnification Holders” means the Holders other than the Joint
Indemnification Holders.

(xx) “SMH Guarantors” means each of (i) Don Sanders, (ii) Don Weir, (iii) Julie
Ellen Weir, (iv) Don V. Weir, as trustee of the Sanders 1998 Children’s Trust
dated December 1, 1997, (v) Kathy Sanders and (vi) Chip Davis.

(yy) “Software” means software applications used by Company, including Open
Source Software, Company Software and Third Party Software.

(zz) “Stockholder” means each holder of any shares of Company Stock immediately
before the Effective Time.

(aaa) “Straddle Period” means any complete Tax period of Company relating to any
Tax that includes but does not end on the Closing Date.

(bbb) “Subsidiary” means any corporation, partnership, trust, limited liability
company or other non-corporate business enterprise in which such party (or
another Subsidiary of such party) holds stock or other ownership interests
representing (i) more that 50% of the voting power of all outstanding stock or
ownership interests of such entity or (ii) the right to receive more than 50% of
the net assets of such entity available for distribution to the holders of
outstanding stock or ownership interests upon a liquidation or dissolution of
such entity.

(ccc) “Tax” or “Taxes” means all federal, territorial, state, provincial, local
or foreign government taxes, levies, assessments, duties, imposts or other like
assessments (including estimated taxes), including income, profits, gross
receipts, transfer, excise, property, sales, use, value-added, ad valorem,
excise, capital, wage, employment, payroll, withholding, Social Security,
Medicare, severance, occupation, import, custom, duties, stamp, documentary,
mortgage, alternative, add-on minimum, environmental, escheat, abandoned
property, franchise or other governmental taxes or obligations, imposed by any
Governmental Entity, including any interest, penalties or fines applicable or
related thereto.

(ddd) “Tax Code” means the Internal Revenue Code of 1986.

(eee) “Tax Return” means collectively: (i) all reports, declarations, filings,
questionnaires, estimates, returns, information statements and similar documents
relating to, or required to be filed in respect of any Taxes, including any
amendments thereof; and (ii) any statements, returns, reports, or similar
documents required to be filed pursuant to Part III of Subchapter A of Chapter
61 of the Tax Code or pursuant to any similar income, excise or other Tax
provision of any Applicable Law, including any amendments thereof; and the term
“Tax Return” means any one of the foregoing Tax Returns.

 

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(fff) “Third Party Software” means software applications owned by a third party
and licensed to Company pursuant to an Inbound License.

(ggg) “Working Capital Deficiency” means the amount (if any) by which the
Closing Working Capital is less than the Working Capital Target.

(hhh) “Working Capital Excess” means the amount (if any) by which the Closing
Working Capital is greater than the Working Capital Target.

(iii) “Working Capital Target” means $250,000.

Section 13.2 Additional Defined Terms. The following terms shall have the
meanings set forth in the sections of this Agreement indicated below:

 

Defined Term

  

Section

“Achievement Percentage”    Section 2.10(a) “Agreed Amount”    Section 11.3(a)
“Agreement”    Preamble “Allocation Certificate”    Section 2.8(c)
“Anti-Corruption Laws”    Section 4.21(c) “Applicable Laws”    Section 4.21(a)
“Book-Entry Share”    Section 2.5(b) “Business”    Recitals “Buyer”    Preamble
“Buyer Indemnified Parties”    Section 11.1 “Cap”    Section 11.5(a)
“Certificate of Merger”    Section 1.1 “Claim”    Section 11.3(a) “Claim Amount”
   Section 11.3(a) “Claim Notice”    Section 11.3(a) “Closing”    Section 1.2
“Closing Certificate”    Section 2.8(b) “Closing Date Balance Sheet”    Section
2.9(a) “Closing Date”    Section 1.2 “Closing Merger Consideration”    Section
2.1 “Closing Option Payments”    Section 2.5(b)(iii) “COBRA”    Section 4.20(l)
“Common Stock Per Share Merger Consideration”    Section 2.2(a)(iii) “Company”
   Preamble “Company Ancillary Document”    Section 4.5(a) “Company Balance
Sheet”    Section 4.6 “Company Disclosure Letter”    ARTICLE III “Company
Employees”    Section 1.2(c) “Company Financial Statements”    Section 4.6
“Company IP”        Section 4.12(a)

 

Agreement and Plan of Merger    Page 81

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Defined Term

  

Section

“Company Material Contracts”    Section 4.14(a) “Company Registered IP”   
Section 4.12(a) “Company-Owned IP”    Section 4.12(b) “Confidentiality
Agreement”    Section 6.2(a) “Contribution Agreement”    Section 2.7(b)
“Damages”    Section 11.1 “Deductible”    Section 11.5(a) “DGCL”    Recitals
“D&O Indemnified Parties”    Section 7.8 “Dissenting Shares”    Section 2.6(a)
“Earn-Out Amount”    Section 2.10(a) “Earn-Out Objection Notice”    Section
2.10(b) “Earn-Out Payment Date”    Section 2.10(c) “Earn-Out Payment”    Section
2.10(a) “Earn-Out Period”    Section 2.10(a) “Earn-Out Schedule”    Section
2.10(b) “Effective Time”    Section 1.1 “Estimated Change in Control Payments”
   Section 2.8(b)(vi) “Estimated Closing Cash”    Section 2.8(b)(ii) “Estimated
Closing Date Balance Sheet”    Section 2.8(b)(i) “Estimated Closing Date
Transaction Expenses”    Section 2.8(b)(iv) “Estimated Closing Indebtedness”   
Section 2.8(b)(v) “Estimated Working Capital Deficiency”    Section 2.8(b)(iii)
“Estimated Working Capital Excess”    Section 2.8(b)(iii) “Exchange Fund”   
Section 2.5(a) “Final Adjustment Amount”    Section 2.9(a) “Final Closing Merger
Consideration”    Section 2.9(a) “GAAP”    Section 4.6 “Governmental Entity”   
Section 3.2(c) “Governmental Permits”    Section 4.21(b) “Holder Adjustment
Amount”    Section 2.9(d) “Holder Indemnified Party”    Section 11.2 “Inbound
Licenses”    Section 4.12(b) “Indemnified Party”    Section 11.3(a)
“Indemnifying Party”    Section 11.3(a) “Intellectual Property Agreements”   
Section 4.12(b) “Intellectual Property”    Section 4.12(a) “Inventory”   
Section 4.11(a) “IT Assets”    Section 4.13(g) “Joint Indemnification Cap”   
Section 11.7(a) “Leased Real Property”    Section 4.10(c) “Majority Holders”   
Section 2.7(c) “Material Business Partner”        Section 4.15(a)

 

Agreement and Plan of Merger    Page 82

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Defined Term

  

Section

“Merger”    Recitals “Merger Consideration”    Section 2.1 “Merger Sub”   
Preamble “Objection Notice”    Section 2.9(b) “Option Payments”    Section 2.3
“Organizational Documents”    Section 4.2 “Outbound License”    Section 4.12(b)
“Outside Date”    Section 10.1(b) “Paying Agent”    Section 2.5(a) “Paying
Agent”    Section 9.2(j)(i) “Performance Objective”    Section 2.10(a) “Period
Target Amount”    Section 2.10(a) “Pre-Closing Period”    Section 6.1
“Pre-Closing Straddle Period”    Section 8.1(d) “Pre-Closing Taxes”    Section
8.1(a) “Preferred Stock Per Share Merger Consideration”    Section 2.2(a)(ii)
“Principal Holders”    Preamble “Principal Holder Ancillary Document”    Section
3.2(a) “Privacy Statement”    Section 4.12(g) “Real Property Lease”    Section
4.10(c) “Representative”    Preamble “Representative Fund”    Section 2.7(f)
“Representative Fund Remainder”    Section 2.7(f) “Resolution Period”    Section
11.3(a) “Sales Revenue”    Section 2.10(a) “SLAs”    Section 4.13(i) “SMH
Guaranty”    Recitals “Specified Contract A”    Section 4.24(a) “Specified
Contract B”    Section 4.24(b) “Stock Certificate”    Section 2.5(b)
“Stockholder Consent”    Recitals “Subsequent Transaction”    Section 2.10(f)
“Surviving Corporation”    Section 1.3 “Takeover Proposal”    Section 7.4
“Target Amount”    Section 2.10(a) “Total Cap”    Section 11.5(a) “Transmittal
Letter”    Section 2.5(b)(i) “Undisputed Indemnification Amount”    Section 11.6
“Warrant Certificate”    Section 2.5(b)(i) “Warrant Payments”    Section 2.3(a)
“Warranty Obligations”    Section 4.18(a)

 

Agreement and Plan of Merger    Page 83

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[Remainder of Page Intentionally Left Blank.]

 

Agreement and Plan of Merger    Page 84

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The parties have caused this Agreement and Plan of Merger to be signed and
sealed as of the date first written above.

 

BUYER:

 

UNITED STATIONERS SUPPLY CO. (SEAL)

By:   /s/ Paul C. Phipps  

Name: Paul C. Phipps

Title: President and Chief Executive Officer

MERGER SUB:

 

SW ACQUISITION CORP. (SEAL)

By:   /s/ Paul C. Phipps  

Name: Paul C. Phipps

Title: Director

[Signature Page to Agreement and Plan of Merger]

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

The parties have caused this Agreement and Plan of Merger to be signed and
sealed as of the date first written above.

 

COMPANY:

 

CPO COMMERCE, INC. (SEAL)

By:

  /s/ Robert H. Tolleson, Jr.  

Robert H. Tolleson, Jr.

Chief Executive Officer

REPRESENTATIVE:

 

CAPSTAR CAPITAL, LLC (SEAL)

By:

  /s/ Robert S. Hicks, Jr.  

Name: Robert S. Hicks, Jr.

Title: Manager

 

Agreement and Plan of Merger    Exhibits

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

CAPSTAR CAPITAL, LLC By:   /s/ Robert S. Hicks, Jr. (SEAL)   Name: Robert S.
Hicks, Jr.   Title: Manager By:   /s/ Robert H. Tolleson, Jr. (Seal)   Name:
Robert H. Tolleson, Jr.   Address: 120 W. Belleview   Pasadena, CA 91105 SMH CPO
COMMERCE, LLC By:   /s/ Charles L. Davis (Seal)   Name: Charles L. Davis  
Title: Manager   600 Travis   Suite 5900   Houston, TX 77002 ANDERSCHOF
INVESTMENT, LLP By:   /s/ Brian Anderson (Seal)   Name: Brian Anderson   Title:
  Address: CIRCADIAN GROUP LLC By:   /s/ Michael B. Dowdle (Seal)   Name:
Michael B. Dowdle   Title: Managing Partner   Address: 10 Wieuca Trace  
Atlanta, GA 30342 By:   /s/ William P. Adams, Jr. (Seal)   Name: William P.
Adams, Jr.   Address: 4323 Beechwood Ln.   Dallas, TX 75220 By:   /s/ John Long,
Jr. (Seal)   Name: John Long, Jr.   Address: 115 Paseo Encinal   San Antonio, TX
78212 By:   /s/ Robert S. Hicks, Jr. (Seal)   Name: Robert S. Hicks, Jr.  
Address: 1703 West Fifth St.   Suite 800   Austin, TX 78703 By:   /s/ Emmeline
De Mouy Tolleson (Seal)   Name: Emmeline De Mouy Tolleson   Address: 120 W.
Belleview Dr.   Pasadena, CA 91105

 

Agreement and Plan of Merger    Exhibits

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

By:   /s/ Henry Davenport Tolleson (Seal)   Name: Henry Davenport Tolleson  
Address: 120 W. Belleview Dr.   Pasadena, CA 91105 By:   /s/ Ridley Herrin
Tolleson (Seal)   Name: Ridley Herrin Tolleson   Address: 120 W. Belleview Dr.  
Pasadena, CA 91105 By:   /s/ Brian Carroll (Seal)   Name: Brian Carroll  
Address: 6372 Swallowbrook Ct.   Loveland, OH 45140 By:   /s/ Steven Chamberlain
(Seal)   Name: Steven Chamberlain   Address: 4488 Club Drive   Atlanta, GA 30319
By:   /s/ Alfred Means, III (Seal)   Name: Alfred Means, III   Address: 1189
West Brookhaven Dr.   Atlanta, GA 30319 By:   /s/ Matthew Tolleson (Seal)  
Name: Matthew Tolleson   Address: 241 Camden Road NE   Atlanta, GA 30309 By:  
/s/ Lawton W. Hawkins (Seal)   Name: Lawton W. Hawkins   Address: 35 Park Lane
NE   Atlanta, GA 30309 By:   /s/ Kevin Dowdle (Seal)   Name: Kevin Dowdle  
Address: 1834 N. Sedgwick   Chicago, IL 60614 By:   /s/ Wyatt Thomas Johnson
(Seal)   Name: Tom Johnson   Address: 3280 Ricman Road   Atlanta, GA 30327

 

Agreement and Plan of Merger    Exhibits

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

IVERSON MEANS, LLC By:   /s/ Alfred I. Means, Jr. (Seal)   Name: Alfred I Means,
Jr.   Title: Managing/Member   Address: 700 Park Regency Place   Apt 2402  
Atlanta, GA 30326 By:   /s/ Rodney M. Cook, Jr. (Seal)   Name: Rodney M. Cook,
Jr.   Address: 3855 Randall Mill Rd.   Atlanta, GA 30327 By:   /s/ Lynn Frank
(Seal)   Name: Lynn Frank   Address: By:   /s/ Edward McNabola (Seal)   Name:
Edward McNabola   Address: 1517 W. Grace   Chicago, IL 60613 By:   /s/ Denis
Dowdle (Seal)   Name: Denis Dowdle   Address: 1338 Commonwealth Avenue   Newton,
MA 02465 By:   /s/ Alex Broeker (Seal)   Name: Alex Broeker   Address: 704
Meriden Lane   Austin TX 78703 By:   /s/ Shawn Dinwiddie (Seal)   Name: Shawn
Dinwiddie   Address: 11524 Lafitte Ln   Austin, TX 78739 RYAN PATMAN MEANS
CHILDREN TRUST By:   /s/ Joshua C. Cobb (Seal)   Name: Joshua C. Cobb   Title:
Trustee   Address: 5040 Roswell Road   Atlanta, GA 30342 By:   /s/ Gabrey Means
(Seal)   Name: Gabrey Means as Custodian for Lilian Croft Means   Address: 1443
5th Avenue   San Francisco, CA 94122

 

Agreement and Plan of Merger    Exhibits