Exhibit 10.1

 

 

 

STOCK PURCHASE AGREEMENT

 

 

by and among

 

POSITIVEID CORPORATION,

 

and

 

the SOLE SHAREHOLDER OF

 

E-N-G MOBILE SYSTEMS, INC.

 

Dated as of December 22, 2015

 

 

 

 

 

 

 

STOCK PURCHASE AGREEMENT

 

This STOCK PURCHASE AGREEMENT (this “Agreement”), dated as of December 22, 2015
is entered into between PositiveID Corporation, a Delaware corporation
(“Buyer”), and the sole shareholder of E-N-G Mobile Systems, Inc., a California
close corporation (the “Company”), Dick Glass ( “Seller”).

 

RECITALS

 

WHEREAS, Seller owns six hundred (600) shares of capital stock (the “Shares”) of
the Company, constituting one hundred percent (100%) of the Company’s issued and
outstanding capital stock; and

 

WHEREAS, Seller wishes to sell to Buyer, and Buyer wishes to purchase from
Seller, the Shares, subject to the terms and conditions set forth herein.

 

NOW, THEREFORE, in consideration of the mutual covenants and agreements
hereinafter set forth and for other good and valuable consideration, the receipt
and sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:

 

ARTICLE I

DEFINITIONS

 

The following terms have the meanings specified or referred to in this Article
I:

 

“Action” means any claim, action, demand, suit, audit, assessment, arbitration
or inquiry, or any proceeding, in each case that is by or before any
Governmental Authority or arbitrator.

 

“Acquisition Proposal” has the meaning set forth in Section 5.03(a).

 

“Adjustment Baseline” has the meaning set forth in Section 2.04(a).

 

“Affiliate” of a Person means any other Person that directly or indirectly,
through one or more intermediaries, controls, is controlled by, or is under
common control with, such Person. The term “control” (including the terms
“controlled by” and “under common control with”) means the possession, directly
or indirectly, of the power to direct or cause the direction of the management
and policies of a Person, whether through the ownership of voting securities, by
contract or otherwise.

 

“Agreement” has the meaning set forth in the preamble.

 

“Arbitrator” has the meaning set forth in Section 7.05(c).

 

“Auditor” has the meaning set forth in Section 2.04(b).

 

“Balance Sheet” has the meaning set forth in Section 3.06.

 

“Balance Sheet Date” has the meaning set forth in Section 3.06.

 

“Benefit Plan” has the meaning set forth in Section 3.16.

 

 

 

  

“Business Day” means any day except Saturday, Sunday or any other day on which
commercial banks located in New York, New York are authorized or required by Law
to be closed for business.

 

“Buyer” has the meaning set forth in the preamble.

 

“Buyer Indemnified Parties” has the meaning set forth in Section 7.02.

 

“Closing” has the meaning set forth in Section 2.05.

 

“Closing Balance Sheet” has the meaning set forth in Section 2.04(b).

 

“Closing Date” has the meaning set forth in Section 2.05.

 

“Closing Net Asset Balance” has the meaning set forth in Section 2.04(b).

 

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

 

“Company” has the meaning set forth in the recitals.

 

“Company Intellectual Property” has the meaning set forth in Section 3.11(a).

 

“Company IP Agreements” means all agreements to which the Company is a party or
by which any of them is otherwise bound that relate to Intellectual Property,
including (i) licenses of Intellectual Property to the Company by any other
Person, and (ii) licenses of Intellectual Property by the Company to any other
Person.

 

“Competing Person” has the meaning set forth in Section 5.13.

 

“Competitive Activity” has the meaning set forth in Section  5.13.

 

“Constituent Documents” has the meaning set forth in Section 3.02.

 

“Determination Date” has the meaning set forth in Section 2.04(b).

 

“Direct Claim” has the meaning set forth in Section 7.05(c).

“Direct Claim Dispute Notice” has the meaning set forth in Section 7.05(c).

 

“Direct Claim Dispute Period” has the meaning set forth in Section 7.05(c).

 

“Disclosure Schedules” means the Disclosure Schedules delivered by Seller and
Buyer concurrently with the execution and delivery of this Agreement.

 

“Dollars” or “$” means the lawful currency of the United States.

 

“Earn-Out Payment” has the meaning set forth in Section 2.02(c).

 

“Earn-Out Payments” has the meaning set forth in Section 2.02(c).

 

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“Earn-Out Value” has the meaning set forth in Section 2.02(c).

 

“Effective Time” has the meaning set forth in Section 2.05.

 

“Employees” means those Persons employed by the Company and its Subsidiaries
immediately prior to the Closing.

 

“Encumbrance” means any lien, pledge, mortgage, deed of trust, security
interest, collateral assignment, license (or sublicense), charge, claim,
easement, encroachment, restriction, covenant or other encumbrance or limitation
of any kind, or any filing or agreement to file any financing statement as
debtor under the Uniform Commercial Code or any similar Law.

 

“Environmental Permits” has the meaning set forth in Section 3.15(b).

 

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

 

“ERISA Affiliate” means, with respect to any Person, any trade or business,
whether or not incorporated, which, together with such Person, is treated as a
single employer under section 414 of the Code.

 

“ERISA Affiliate Liabilities” means any liabilities arising out of the status of
the Company an ERISA Affiliate of Seller or any of the Non-Company Affiliates.

 

“Final Closing Net Asset Balance” has the meaning set forth in Section 2.04(b).

 

“Financial Statements” has the meaning set forth in Section 3.06.

 

“GAAP” means United States generally accepted accounting principles in effect
from time to time.

 

“Glass Consulting Agreement” has the meaning set forth in Section 2.03(a).

 

“Governmental Authority” means any federal, state, local or foreign government
or political subdivision thereof, any agency, instrumentality (including any
state-owned or state-controlled enterprise), court, or tribunal of such
government or political subdivision or any non-governmental self-regulatory
agency, commission or authority.

 

“Governmental Order” means any order, writ, judgment, injunction, decree,
stipulation, determination or award entered by or with any Governmental
Authority.

 

“Indebtedness” means and includes, whether or not secured by the assets or
equity of a Person, (i) indebtedness for borrowed money or indebtedness issued
or incurred in substitution or exchange for indebtedness for borrowed money,
(ii) amounts owing as deferred purchase price for property or services,
including all Seller notes and “earn-out” payments, (iii) indebtedness evidenced
by any note, bond, debenture, mortgage or other debt instrument or debt
security, (iv) obligations under any interest rate, currency or other hedging
agreement, (v) all obligations under leases which are required under GAAP to be
recorded as capital leases in respect of which any such Person is liable as
lessee, (vi) obligations under any letters of credit, (vii) guarantees or other
contingent liabilities (including so called take-or-pay or keep-well agreements)
with respect to any liability of any other Person of a type described in clauses
(i) through (vi) above, or (viii) any accrued and unpaid interest or prepayment,
unwind, brokerage or redemption penalties or fees owing by such Person with
respect to any liability of a type described in clauses (i) through (vii) above.

 

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“Indemnified Party” has the meaning set forth in Section 7.01.

 

“Indemnifying Party” has the meaning set forth in Section 7.01.

 

“Insurance Policies” has the meaning set forth in Section 3.12.

 

“Intellectual Property” has the meaning set forth in Section 3.11(a).

 

“IT Systems” means the hardware, Software, data, databases, data communication
lines, network and telecommunications equipment, Internet-related information
technology infrastructure, wide area network and other information technology
equipment owned, leased or licensed by the Company and its Subsidiaries or
otherwise used in the operation of the business.

 

“Law” or “Laws” means any constitution, statute, law, ordinance, regulation,
rule, code, order, judgment, decree, or rule of law of any Governmental
Authority.

 

“Leased Real Property” means all leasehold or subleasehold estates and other
rights to use or occupy any land, buildings, structures, improvements, fixtures
or other interests in real property held by the Company or any of its
Subsidiaries.

 

“Leases” has the meaning set forth in Section 3.10(b).

 

“Losses” or “Loss” means losses, damages, liabilities, costs, claims, fines,
deficiencies, payments or expenses, including reasonable attorneys’ and
accountants’ fees and expenses.

 

“Material Contracts” has the meaning set forth in Section 3.09(a).

 

“Non-Company Affiliate” means any Affiliate of Seller other than the Company and
its Subsidiaries.

 

“OFAC” has the meaning set forth in Section 3.14(d).

 

“Owned Real Property” means, as of the date hereof, all land, together with all
buildings, structures, improvements and fixtures located thereon, and all
easements and other rights and interests appurtenant thereto, owned by the
Company or any of its Subsidiaries.

 

“Permits” means all permits, licenses, franchises, approvals, authorizations,
certifications, consents, or other indicia of authority required to be obtained
from Governmental Authorities to own, construct, operate, sell, inventory,
disburse, or maintain any asset or conduct any business.

 

“Person” means an individual, corporation, partnership, joint venture, limited
liability company, Governmental Authority, unincorporated organization, trust,
association or other entity or Governmental Authority.

 

“Post-Closing Period” means any Tax period beginning after the Closing Date and,
with respect to a Tax period that begins on or before the Closing Date and ends
thereafter, the portion of such Tax period beginning after the Closing Date.

 

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“Purchase Consideration” has the meaning set forth in Section 2.02.

 

“Purchase Note” has the meaning set forth in Section 2.02(b).

 

“Purchase Price” has the meaning set forth in Section 2.02(a).

 
“Representative” means, with respect to any Person, any and all directors,
officers, employees, consultants, advisors, counsel, accountants and other
agents of such Person.

 

“Securities Act” has the meaning set forth in Section 4.03.

 

“Security Agreement” has the meaning set forth in Section 2.03(a).

 

“Seller” has the meaning set forth in the preamble.

 

“Shares” has the meaning set forth in the recitals.

 

“Signed Backlog Schedule” has the meaning set forth in Section 2.02(c).

 

“Software” means computer software programs, including application software,
system software, firmware, middleware and mobile digital applications, including
all source code, object code, and documentation related thereto, in any and all
forms and media.

 

“Subsidiary” means, when used with respect to any Person, any Person, whether
incorporated or unincorporated, (a) a majority of the securities or other equity
interests of which having by their terms ordinary voting power to elect a
majority of the board of directors or others performing similar functions with
respect to such Person is directly or indirectly owned or controlled by such
Person, together with its Subsidiaries and Affiliates, or (b) that, together
with its Subsidiaries and Affiliates, controls the direction or management of,
such Person.

 

“Surviving Provisions” has the meaning set forth in Section 9.02(a).

 

“Tax Return” means any return, declaration, report, claim for refund,
information return or statement or other document filed or required to be filed
with respect to Taxes, including any schedule or attachment thereto, and
including any amendment thereof.

 

“Taxes” means all federal, state, local, foreign and other income, gross
receipts, sales, use, production, ad valorem, transfer, franchise, registration,
profits, license, lease, service, service use, withholding, payroll, employment,
unemployment, estimated, excise, severance, environmental, stamp, occupation,
premium, property (real or personal), escheat, unclaimed property, real property
gains, windfall profits, customs, duties or other taxes, fees, assessments or
charges of any kind whatsoever, together with any interest, additions or
penalties with respect thereto and any interest in respect of such additions or
penalties.

 

“Third-Party Claim” has the meaning set forth in Section 7.05(a).

 

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“Trademarks” has the meaning set forth in Section 3.11(a).

 

“Treasury Regulations” means the regulations prescribed under the Code.

 

“Uncovered Amounts” has the meaning set forth in Section 7.04(c).

 

“WARN Act” means the federal Worker Adjustment and Retraining Notification Act
of 1988, and similar state, local and foreign Laws related to plant closings,
relocations, mass layoffs and employment losses.

 

ARTICLE II

PURCHASE AND SALE

 

Section 2.01 The Shares. Upon the terms and subject to the conditions of this
Agreement, at the Closing (as hereinafter defined) on the Closing Date (as
hereinafter defined) and as of the Effective Time (as hereinafter defined),
Seller shall sell, assign, transfer, convey and deliver to Buyer, and Buyer
shall purchase, acquire and accept from Seller, all right, title and interest in
and to Seller’ Shares, free and clear of Encumbrances.

 

Section 2.02 Consideration. The price to be paid by the Buyer for the Shares
shall be (collectively, the “Purchase Consideration”):

 

(a)                                        Seven Hundred and Fifty Thousand
Dollars ($750,000) in cash (the “Purchase Price”).

 

(b)                                       A convertible promissory note issued
by Buyer to Seller in the amount of $150,000, substantially in the form attached
hereto as Exhibit A and incorporated herein (the “Purchase Note”).

 

(c)                                        Additional earn-out payments may be
earned by Seller (each payment is an “Earn-Out Payment” and collectively, such
payments are the “Earn-Out Payments”). Each Earn-Out Payment, if any, will be
calculated at Five Percent (5%) of the revenue actually recognized and realized
from each of the contracts and purchase orders identified, with an earn-out
value indicated for each on the signed backlog schedule (the “Signed Backlog
Schedule”) subsequent to Closing. For purposes of determining whether any
Earn-Out Payment will be made and the amount of such payment, the term “Signed
Backlog Schedule” means those signed contracts and purchase orders in effect as
of the date of Closing but under which the product is yet to be delivered and
all or a portion of the revenue is yet to be recognized as of Closing as set
forth Schedule 2.02(c). The Earn-Out Payments will be paid in cash within five
business days following the date Buyer recognizes the revenue (including
deposits held) and receives full payment from the applicable contract or
purchase order on the Signed Backlog Schedule. No Earn-Out Payment will be made
(i) prior to January 1, 2016, or (ii) later than March 15, 2017. The Earn-Out
Payments shall be subject to adjustment as described in Section 2.04 and as
otherwise provided for in this Agreement.

 

Section 2.03 Closing Deliverables.

 

(a)                Seller Closing Deliverables. At the Closing, Seller shall
deliver or cause to be delivered to Buyer:

 

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i.                     certificates representing the Shares, free and clear of
all Encumbrances, duly endorsed to Buyer or accompanied by duly executed stock
powers;

 

ii.                     an executed consulting agreement in a form satisfactory
to Buyer in its sole and absolute discretion between the Company and Dick Glass
(the “Glass Consulting Agreement”), substantially in the form attached hereto as
Exhibit B and incorporated herein;

 

iii.                     all consents and approvals relating to the Company
and/or the Subsidiaries required to be obtained from the any Governmental
Authority and from third parties under Contracts (as hereinafter defined),
including but not limited to those consents listed and described on Schedule
2.03(a)(iii) hereto;

 

iv.                     except as set forth in Schedule 2.03(a)(iv), the written
release of all Encumbrances (other than Encumbrances for Taxes not yet due and
payable) relating to the assets of the Company or of any Subsidiary or the
Shares, in either case, executed by the holder of or parties to each such Lien,
in form and substance satisfactory to Buyer and its counsel;

 

v.                     an executed security agreement pursuant to which Buyer
agrees that the Shares shall serve as collateral in the event of Buyer’s
non-performance under the Purchase Note (the “Security Agreement”),
substantially in the form attached hereto as Exhibit C incorporated herein;

  

vi.                     evidence that the collector automobiles listed and
described on Schedule 2.03(a)(vi) have been transferred from the Company to
Seller in his individual capacity;

 

vii.                     a certificate of good standing, or equivalent
certificate, for the Company, dated within ten (10) Business Days (as
hereinafter defined) of the Closing Date, issued by the appropriate Government
Authority;

 

viii.                     all share transfer books, minute books and other
corporate records of the Company; and

 

ix.                     a copy, certified by the Secretary of the Company to be
true, complete and correct as of the Closing Date, of the constituent documents
of the Company, and resolutions of the stockholders and board of directors or
other governing body of the Company, authorizing and approving the transactions
contemplated hereby.

 

(b)               Buyer Closing Deliverables. At the Closing, Buyer shall
deliver to Seller or cause to be delivered:

   

i.                     by wire transfer of immediately available funds, the
Purchase Price to the account designated by Seller not less than two Business
Days (as hereinafter defined) prior to the Closing Date;

 

ii.                     an executed Glass Consulting Agreement;

 

iii.                     an executed Purchase Note;

 

iv.                     an executed Security Agreement; and

 

v.                     Secretary Certificate of Buyer and resolution of Board of
Directors approving the transaction.

 

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Section 2.04 Adjustments to the Earn-Out Payment. For purposes of this Section
2.04, the term Earn-Out Payment shall include all Earn-Out Payments.

 

(a)                Adjustment Baseline. The Purchase Price and Earn-Out Payment
Buyer agrees to pay to Seller hereunder was determined and agreed to by the
parties based on Seller’s delivery of a closing audited net asset balance of
$800,000 (the “Adjustment Baseline”).

   

(b)               Post-Closing Adjustments to Earn-Out Payment; Audit Rights;
Agreement upon the Closing Net Asset Balance.

   

i.                As soon as reasonably practicable following the Closing Date,
and in any event within ninety (90) calendar days thereof, Buyer shall deliver
to Seller a (i) balance sheet of the Company as of the Closing Date (the
“Closing Balance Sheet”) and (ii) a calculation of closing audited net asset
balance of the Company prepared by Buyer as of the Closing Date determined using
the Closing Balance Sheet (the “Closing Net Asset Balance”). For purposes of
this Section 2.04, the term “net asset balance” shall mean assets of the Company
minus liabilities of the Company. The Closing Balance Sheet and Closing Net
Asset Balance shall be prepared in accordance with GAAP. Schedule 2.04(b) lists
the fixed assets of the Company. As it relates to fixed assets on the Closing
Net Asset Balance, Buyer and Seller agree that an amount up to $100,000 of asset
value may be added to the net asset balance as determined by an independent
valuation of the Company’s fixed assets. Such independent valuation shall be
conducted at the Seller’s expense by an independent valuation company selected
by Seller, in Seller’s sole discretion.

   

ii.                Upon delivery of the Closing Net Asset Balance, Buyer shall
provide the Seller and its accountants access to the accountants and accounting
records of the Company and shall use its commercially reasonable efforts to
provide the Seller with access to the Buyer’s outside accountants and any and
all working papers prepared by the Company or the Buyer related to the
preparation of the Closing Balance Sheet and calculation of the Closing Net
Asset Balance. If the Seller disagrees with the Closing Balance Sheet and/or the
calculation of the Closing Net Asset Balance, the Seller must notify Buyer of
such disagreement in writing, setting forth in reasonable detail the particulars
of such disagreement, within ninety (90) days after its receipt of the Closing
Balance Sheet and Closing Net Asset Balance. In the event that the Seller does
not provide such a notice of disagreement within such ninety (90) day period,
the Seller shall be deemed to have accepted the Closing Balance Sheet and the
Closing Net Asset Balance delivered by Buyer, which, if not objected to within
the relevant ninety (90) day period, shall then be final, binding and conclusive
for all purposes hereunder. In the event any such notice of disagreement is
timely provided, Buyer and the Seller shall use commercially reasonable efforts
for a period of ninety (90) days (or such longer period as they may mutually
agree) to resolve any disagreements with respect to the preparation of the
Closing Balance Sheet and the calculations of the Closing Net Asset Balance. If,
at the end of such period, they are unable to resolve such disagreements, then
Buyer and the Seller shall mutually select an independent accounting firm of
recognized national standing (the “Auditor”) to act as a referee to resolve any
remaining disagreements. The Auditor shall determine as promptly as practicable,
but in any event within thirty (30) calendar days of the date on which such
dispute is referred to the Auditor, based solely on the terms of this Agreement,
any remaining disputes. Each of the Buyer and the Seller (or their respective
designees) shall be permitted to submit a proposed Closing Balance Sheet and
Closing Net Asset Balance and applicable supporting documentation and to make a
presentation to the Auditor in connection with the resolution of any such
disagreements. The Auditor shall have the right to request any additional
documents, materials, presentations or evidence as it may determine necessary in
its reasonable judgment in making its determination, and each party shall
provide any additional materials at the request of the Auditor. It is the intent
of the parties that the process set forth in this Section and the activities of
the Auditor in connection herewith are not (and should not be considered to be
or treated as) an arbitration proceeding or similar arbitral process and that no
formal arbitration rules should be followed. The fees and expenses of the
Auditor incurred in connection with its review and resolution of any disputes
shall be allocated between Buyer, on one hand, and the Seller, on the other, by
the Auditor in proportion to the extent either of such parties did not prevail
in the aggregate on items in dispute on their respective Closing Balance Sheets
and Closing Net Asset Balances; provided that such fees and expenses shall not
include, so long as a party complies with the procedures of this Section, the
other party’s outside counsel, accounting or other fees. The determination of
the Auditor shall be final, conclusive and binding on the parties. The amounts
of the Closing Net Asset Balance as finally determined in accordance with the
terms of this Section 2.04(b) shall be referred to as the “Final Closing Net
Asset Balance”. The date on which the Final Closing Net Asset Balance is finally
determined in accordance with this Section 2.04(b) is hereinafter referred to
as, the “Determination Date.”

 

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iii.                If the Final Closing Net Asset Balance is higher than the
Adjustment Baseline, then, promptly following the Determination Date, the
Earn-Out Payment next to be due shall be increased by the amount equal to the
amount by which the Final Closing Net Asset Balance exceeds the Adjustment
Baseline (the “Positive Adjustment Amount”). If the Final Closing Net Asset
Balance is lower than the Adjustment Baseline, then, promptly following the
Determination Date the Earn-Out Payment next to be due (the “Earn-Out Payment at
Issue”) shall be reduced by the amount equal to the amount by which the
Adjustment Baseline exceeds the Final Closing Net Asset Balance (the “Negative
Adjustment Amount”). In the event that the Negative Adjustment Amount is more
than the Earn-Out Payment At Issue, Buyer shall reduce any future Earn-Out
Payments due to Seller until the Negative Adjustment Amount has been satisfied
in full. In the event that no Earn-Out Payments are earned by, and due to
Seller, following the Determination Date, (i) if Buyer owes Seller a Positive
Adjustment Amount, Buyer shall pay Seller the Positive Adjustment Amount in cash
within five days following the last date on which a contract or purchase order
listed on the Signed Backlog Schedule is due and payable, provided that such
payment shall not be made later than the end of the taxable year in which the
Positive Adjustment Amount was calculated; and (ii) if Seller owes Buyer a
Negative Adjustment Amount, the amount of the Purchase Note shall be reduced by
the Negative Adjustment Amount.

 

Section 2.05 Closing. The consummation of the transactions contemplated hereby
(the “Closing”) shall take place electronically via: (i) confirmation of wire
delivery of the Purchase Price (as hereinafter defined); and (ii) confirmation
of the exchange of signature pages to this Agreement, at approximately 4:30
p.m., Eastern Daylight Time, on the date the two preceding conditions are
satisfied (the “Closing Date”), effective as of 11:59 p.m. Eastern Daylight Time
on the Closing Date (“Effective Time”).

 

ARTICLE III

REPRESENTATIONS AND WARRANTIES OF SELLER

 

Except as set forth in the Disclosure Schedules, Seller represents and warrants
to Buyer that the statements contained in this Article III are true and correct
as of the date hereof and as of the Closing Date.

 

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Section 3.01 Authority of Seller. Seller has all necessary power and authority
to enter into this Agreement, to carry out his obligations hereunder and to
consummate the transactions contemplated hereby. The execution and delivery by
Seller of this Agreement, the performance by Seller of his obligations hereunder
and the consummation by Seller of the transactions contemplated hereby are duly
authorized. This Agreement has been duly executed and delivered by Seller, and
(assuming due authorization, execution and delivery by Buyer) this Agreement
constitutes a legal, valid and binding obligation of Seller, enforceable against
Seller in accordance with its terms, except as such enforceability may be
limited by bankruptcy, insolvency, reorganization, moratorium or similar Laws
affecting creditors’ rights generally and by general principles of equity.

 

Section 3.02 Organization, Authority and Qualification of the Company. The
Company is a corporation duly organized, validly existing and in good standing
under the Laws of California. The Company has all necessary corporate power and
authority to own, operate or lease the properties and assets now owned, operated
or leased by it and to carry on its business as it is currently conducted. The
Company is duly licensed or qualified to do business and is in good standing in
each jurisdiction in which the properties owned or leased by it or the operation
of its business as currently conducted makes such licensing or qualification
necessary. True and complete copies of the organizational documents (the
“Constituent Documents”) of the Company have been provided to Buyer.

 

Section 3.03 Capitalization.

 

(a)                The authorized capital stock of the Company consists of one
thousand (1,000) shares of common stock, of which six hundred (600) shares are
issued and outstanding and constitute the Shares. The Shares constitute one
hundred percent (100%) of the Company’s issued and outstanding capital stock.
All of the Shares have been duly authorized, are validly issued, fully paid and
non-assessable, were issued in compliance with all rights of first refusal,
preemptive rights and similar rights, and are owned of record and beneficially
by Seller, free and clear of all Encumbrances, other than those Encumbrances
arising from acts of Buyer from and after the Closing Date.

 

(b)               There are no outstanding or authorized options, warrants,
convertible securities or other rights, agreements, arrangements or commitments
of any character relating to the capital stock of, or other interests in, the
Company or obligating Seller, the Company to issue or sell any shares of capital
stock of, or any other interest in, the Company. The Company does not have
outstanding and have not authorized any stock appreciation, phantom stock,
rights of first refusal, preemptive rights, conversion rights, profit
participation or similar rights or equity-linked awards. Except as set forth on
Schedule 3.03(b), there are no voting trusts, stockholder agreements, proxies or
other agreements or understandings in effect with respect to the voting or
transfer of any of the Shares.

 

Section 3.04 Subsidiaries. The Company does not, directly or indirectly, own or
have any interest in any shares or other equity ownership interest in any other
Person.

 

Section 3.05 No Conflicts; Consents. The execution, delivery and performance by
Seller of this Agreement, and the consummation of the transactions contemplated,
do not and will not: (a) conflict with, result in a violation or breach of any
provision of the Constituent Documents of Seller and the Company; (b) assuming
all consents, authorizations, orders, and approvals of Governmental Authorities
are received, result in a violation or breach of any provision of any Law or
Governmental Order applicable to Seller and the Company; or (c) except as set
forth in Section 3.05 of the Disclosure Schedules, require the consent, notice
or other action by any Person under, materially conflict with, result in a
violation or breach of, constitute a default under or result in the acceleration
or termination of any contract of Seller, Material Contract or Permit, except,
with respect to such Seller contracts, where the failure to give notice or
obtain consent would not have a material effect on Seller’s ability to
consummate the transactions contemplated hereby. No material consent, approval,
Permit, Governmental Order, declaration or filing with, or material notice to,
any Governmental Authority is required by or with respect to Seller and the
Company in connection with the execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby, except for such filings as
set forth in Section 3.05 of the Disclosure Schedules.

 

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Section 3.06 Financial Statements. Copies of the Company’s unaudited financial
statements consisting of the balance sheet of the Company as of December 31,
2013 and December 31, 2014 and the related statements of income for the years
then ended and the unaudited financial statements consisting of the balance
sheet of the Company as of November 30, 2015 and the related statement of income
for the period then ended (the “Financial Statements”) are attached hereto as
Section 3.06 of the Disclosure Schedules. The Financial Statements have been
prepared (i) in accordance with GAAP applied on a consistent basis throughout
the periods involved subject to normal and recurring material year-end
adjustments and the absence of notes and (ii) in accordance with the
methodologies used to the prepare the unaudited financial statements of Seller
for the same time periods. The Financial Statements fairly present in all
material respects the financial condition of the Company as of the respective
dates they were prepared and the results of the operations of the Company for
the periods indicated, all in accordance with GAAP consistently applied. The
balance sheet of the Company as of November 30, 2015 is referred to herein as
the “Balance Sheet” and the date thereof as the “Balance Sheet Date.”

 

Section 3.07 Undisclosed Liabilities. To the Seller and the Company’s knowledge,
the Company has no liabilities, obligations or commitments of a type required to
be reflected on a balance sheet prepared in accordance with GAAP, except
(a) those which are adequately reflected or specifically reserved against in the
Balance Sheet; (b) those which have been incurred in the ordinary course of
business since the Balance Sheet Date through the Closing Date; (c) ordinary
course executory trade obligations to perform after the date hereof any
contracts entered into on or prior to the date hereof; and (d) which are set
forth in Section 3.07 of the Disclosure Schedules.  

 

Section 3.08 Absence of Certain Changes, Events and Conditions. Except as
expressly contemplated by the Agreement or as set forth on Section 3.08 of the
Disclosure Schedules, from January 1, 2015 until the Closing Date, the Company
has been operated (or Seller has caused the Company to operate) in the ordinary
course of business consistent with past practice in all material respects and
there has not been any:

 

(a) material event, occurrence or development with respect to the business of
the Company;

 

(b) amendment of the Constituent Documents of the Company;

 

(c) adoption or change of any method of accounting or accounting practice of the
Company, except as required by GAAP or applicable Law or as disclosed in the
notes to the Financial Statements;

 

 11 

 

  

(d) incurrence, assumption or guarantee of any Indebtedness in an aggregate
amount exceeding $10,000, except unsecured current trade obligations and
liabilities incurred in the ordinary course of business;

 

(e) creation or other incurrence of any Encumbrance on any material asset of the
Company;

 

(f) adoption, amendment or modification of any Benefit Plan, except as required
under applicable Law, the terms of any Material Contract or the terms of the
individual Benefit Plan; (ii) grant or increase of any compensation (including
any retention or change in control bonus), benefits or severance or termination
pay to any current or former employee, officer, director or independent
contractor of the Company, (iii) acceleration of the vesting or payment of, or
funding or in any other way securing the payment, compensation or benefits
under, any Benefit Plan, or (iv) hiring or termination of any Employee with an
annual base salary or base wages exceeding $50,000;

 

(g) acquisition by merger or consolidation with, or by purchase of a substantial
portion of the assets or stock of, or by any other manner, any business or any
Person or any division thereof for consideration in excess of $10,000; 

 

(h) adoption of any plan of merger, consolidation, reorganization, liquidation
or dissolution or filing of a petition in bankruptcy under any provisions of
federal or state bankruptcy Law or consent to the filing of any bankruptcy
petition against it under any similar Law;

 

(i) incident of damage, destruction or loss of any property or assets owned by
the Company or used in the operation of their businesses, whether or not covered
by insurance, having a replacement cost or fair market value in excess of
$10,000;

 

(j) (i) making, change or revocation of any Tax election; (ii) settlement or
compromise of any claim or liability with respect to Taxes relating to the
Company; (iii) closing agreement entered into relating to Taxes; (iv) amended
Tax Return filing; (v) surrender of any right to claim a refund of Taxes;
(vii) incurrence of any liability for Taxes outside the ordinary course of
business; (viii) failure to pay any Tax that was due and payable (including any
estimated tax payments); (ix) preparation or filing of any Tax Return in a
manner inconsistent with past practice; or (x) consent to any extension or
waiver of the limitation period applicable to any Tax claim or assessment
relating to the Company; or

 

(k) any agreement to do any of the foregoing.

 

Section 3.09 Material Contracts.

 

(a) Section 3.09(a) of the Disclosure Schedules lists each of the following
contracts and other agreements, whether written or oral, to which the Company is
a party (collectively, including any Leases, the “Material Contracts”):

 

(i) each agreement involving aggregate consideration in excess of $10,000 and
either (x) requiring performance by any party more than one year from the date
hereof or (y) which cannot be cancelled by Seller or the Company, as applicable,
without more than 30 days’ notice;

 

(ii) all agreements that relate to the acquisition or disposition of any stock
or assets of any other Person or any real property (whether by merger, sale of
stock, sale of assets or otherwise), in each case involving consideration in
excess of $10,000;

 

 12 

 

  

(iii) (a) except for agreements relating to unsecured trade payables incurred in
the ordinary course of business, all agreements relating to Indebtedness
(including, without limitation, guarantees) or the placing of an Encumbrance on
any asset of the Company, in each case having an outstanding principal amount in
excess of $10,000 and (b) any intercompany loans or similar Indebtedness between
the Company and the Seller;

 

(iv) all agreements between or among the Company on the one hand and Seller or
any Affiliate of Seller (other than the Company) on the other hand, in each case
involving consideration in excess of $10,000;

 

(v) all collective bargaining agreements or agreements with any labor
organization, union or association;

 

(vi) all agreements concerning Benefit Plans;

 

(vii) all Company IP Agreements (excluding any agreements for commercially
available off-the-shelf Software that is not the subject of a negotiated
agreement or customized for the Company, and in each case for which the
aggregate amounts paid or payable to or by the Company are less than $10,000);

 

(viii) all contracts and agreements that (A) limit in any respect the ability of
the Company to compete in any line of business or with any Person or in any
geographic area or during any period of time or (B) contain exclusivity, minimum
purchase or supply commitments involving purchases of more than $10,000 per
year, most-favored-nation, non-solicitation or similar obligations or
restrictions binding on the Company or that would be binding on Buyer or any of
its Affiliates after the Closing; and

 

(ix) all settlement, conciliation or similar agreements with any Governmental
Authority or pursuant to which the Company is obligated to satisfy any
obligation after the date of this Agreement;

 

(x) all agreements under which the Company has advanced or loaned, or agreed to
advance or loan, any Person (other than the Company) any amount in excess of
$10,000; and

 

(xi) all distribution, supply, manufacturing, joint venture, partnership, or
similar agreements or arrangements.

 

(b) Except as set forth on Section 3.09(b) of the Disclosure Schedules, each
Material Contract is in full force and effect and is a valid and binding
agreement of the Company, as applicable, and neither the Company, Seller nor any
other party thereto is in breach of, or default under the terms of, or has
provided or received any notice of any intention to terminate, any such Material
Contract.

 

(c) Seller has provided to Buyer a fully executed, true, correct and complete
copy of each of the Material Contracts, including any amendments thereto.

 

Section 3.10 Title to Assets; Property.

 

(a) The Company does not have any Owned Real Property. The Company has good and
valid title to, or a valid leasehold interest in, all Leased Real Property,
tangible personal property and other assets held by the Company as of the
Closing Date. The Leased Real Property identified in Section 3.10(b) of the
Disclosure Schedules comprises all of the real property used or intended to be
used in, or otherwise related to, the Company. All such properties and assets
(including leasehold interests) are free and clear of Encumbrances.

 

 13 

 

  

(b) Section 3.10(b) of the Disclosure Schedules lists: (i) the street address of
each parcel of Leased Real Property, and (iii) as of the date hereof and as of
the Closing Date, all leases, subleases, licenses, concessions and other
agreements pursuant to which the Company holds any Leased Real Property
(collectively, “Leases”), including the identification of the lessee and lessor
thereunder. Except as set forth on Section 3.10(b) of the Disclosure Schedules,
the Company is not a sublessor under any Lease.

 

Section 3.11 Intellectual Property.

 

(a) “Intellectual Property” means any and all of the following in any
jurisdiction throughout the world: (i) trademarks, service marks, trade dress,
including all applications and registrations and the goodwill connected with the
use of and symbolized by the foregoing (the “Trademarks”), (ii) copyrights,
including all applications and registrations related to the foregoing,
(iii) trade secrets and confidential know-how, (iv) patents and patent
applications, including all reissues, divisions, renewals, extensions,
provisionals, continuations and continuations-in-part, (v) internet domain name
registrations and URLs, and (vi) all other intellectual or industrial property
and related and equivalent proprietary rights, interests and protections.
Intellectual Property used by the Company or with respect to the business of the
Company shall hereinafter be referred to as the “Company Intellectual Property”.

 

(b) Section 3.11(b) of the Disclosure Schedules lists all Intellectual Property
owned by: (i) the Company; or (ii) the Seller as it relates to the Company, that
is registered or subject to a pending application and that is material to the
conduct of its business as currently conducted. Seller and the Company each have
taken commercially reasonable measures to establish Company Intellectual
Property listed on Schedule 3.11(b) as subsisting, valid and enforceable and,
except as set forth in Section 3.11(b) of the Disclosure Schedules, the Company
is the owner of all Company Intellectual Property on Section 3.11(b) of the
Disclosure Schedules.

 

(c) None of the Seller or the Company has granted any exclusive license to the
Company Intellectual Property to any other Person. Except as set forth in
Section 3.11(c) of the Disclosure Schedules and to the best of the Seller’s and
the Company’s knowledge: (i) the Company Intellectual Property as used by the
Company, and the Company’s conduct of its business as currently conducted, do
not infringe, misappropriate or otherwise violate the Intellectual Property of
any Person; and (ii) no Person is infringing, misappropriating or otherwise
violating any Company Intellectual Property in any way that would have an
adverse effect on the business of the Company as currently conducted.

 

(d) The Seller and the Company, as the case may be, each have made reasonable
efforts to establish the validity and enforceability of the Company Intellectual
Property under any applicable Law. The Seller and the Company, as the case may
be, each have taken efforts reasonable under the circumstances to maintain the
secrecy of all confidential Intellectual Property used in the business as
currently conducted, including, without limitation, having policies that require
each employee and consultant and any other person with access to trade secrets
within the Company Intellectual Property to maintain the confidentiality thereof
and there has not been any breach by any such persons of such policy.

 

(e) The Company has employed commercially reasonable efforts to establish and
maintain IT Systems (i) in good repair and operating condition, and that are
adequate and suitable for the purposes for which they are being used or held for
use, and (ii) that conform to their related documentation. The Seller and the
Company, as the case may be, have complied with all Laws, privacy policies and
contractual obligations to which the Company is subject concerning the Company
Intellectual Property, the collection, dissemination, storage, or use of
sensitive data, including consumer credit information and protected health
information.

 

 14 

 

  

Section 3.12 Insurance. The Company, for the past 3 years, has maintained
insurance coverage by valid and currently effective insurance policies or
binders of insurance (including bonds, general liability insurance, product
liability and workers’ compensation insurance) (collectively, the “Insurance
Policies”), issued in favor of the Company by insurance companies, in such types
and amounts and covering such risks as Seller believes are consistent with
customary practices and standards of companies engaged in businesses and
operations similar to those of the Company. Section 3.12 of the Disclosure
Schedules lists each Insurance Policy, including any bonds. There is no claim by
or with respect to the Company pending under any Insurance Policy as to which
coverage has been questioned, denied or disputed by the underwriter of such
Insurance Policy. The Insurance Policies and the coverage provided thereunder
comply with all requirements of applicable Law and all requirements set forth in
any Material Contracts and Insurance Policies to which Seller or the Company, as
applicable, is a party that require Seller or the Company to carry insurance for
the benefit of any other Person. The insurance policies and bonds described in
Section 3.12 of the Disclosure Schedules are in full force and effect, all
premiums with respect thereto covering all periods up to and including the
Closing Date have been paid to the extent due and payable, and no written notice
of cancellation or termination has been received with respect to any such policy
or bond. The Company is covered by insurance in scope and amount customary and
reasonable for the business in which it is engaged. The Insurance Policies
currently in effect and which shall continue to be in effect through Closing are
occurrence-based policies.

 

Section 3.13 Legal Proceedings; Governmental Orders.

 

(a) Except as set forth in Section 3.13(a) of the Disclosure Schedules, to the
best of the Seller’s and the Company’s knowledge, there are (i) no Actions
pending or threatened against or by the Company affecting any of its properties,
assets or Intellectual Property (or against the Intellectual Property of the
Seller that relates to the business of the Company), (ii) as of the date hereof
and as of the Closing Date, no Actions or investigations pending or threatened
against or by any of Seller or the Company that challenge or seek to prevent,
enjoin or otherwise delay the transactions contemplated by this Agreement and
(iii) no investigations pending against the Company, which, in each case, would
reasonably be expected to be, individually or in the aggregate, materially
adverse to the Company, taken as a whole.

 

(b) Except as set forth in Section 3.13(b) of the Disclosure Schedules, to the
best of the Seller’s and the Company’s knowledge, there are no outstanding
Governmental Orders and no unsatisfied judgments, penalties or awards against or
affecting the Company or any of their properties or assets, which would
reasonably be expected to be, individually or in the aggregate, materially
adverse to the Company, taken as a whole.

 

Section 3.14 Compliance With Laws; Permits.

 

(a) Except as set forth in Section 3.14(a) of the Disclosure Schedules, (i) each
of the Company and its officers, directors and employees is and has been at all
times since December 31, 2014 in compliance in all material respects with all
Laws applicable to the Company or to which its business, products, properties or
assets are subject, (ii) no claim has been made or filed against the Company
alleging a violation of any such Laws, and (iii)  the Company has not received
notice of any such violations. Seller agrees and acknowledges that the
representations set forth in the immediately preceding sentence are true as it
relates to Seller’s responsibilities, duties and roles with respect to the
Company.

 

 15 

 

  

(b) All material Permits required for each of the Company to conduct its
business have been obtained by it and are valid and in full force and effect.

 

(c) The Company, Seller and any officer or director or agent acting on behalf of
any of them, has not (i) been or is designated on any list of any U.S.
Governmental Authority related to customs and international trade Laws,
including the United States Office of Foreign Assets Control’s (“OFAC”)
Specially Designated Nationals and Blocked Persons List, U.S. Department of
Commerce’s Denied Persons List, the Commerce Entity List, and the U.S.
Department of State’s Debarred List or (ii) participated in any transaction
involving such a Person or any country subject to U.S. sanctions administered by
OFAC.

 

Section 3.15 Environmental Matters.

 

(a) All Leased Real Property is currently, and at all times during Seller’s or
the Company’s ownership and/or operation of its business has been, in full
compliance with all applicable environmental Laws. At all times during the
Company’s occupancy and/or operation of the Leased Real Property, there has not
been, or is not now occurring, any Release of any hazardous material or any
contamination on, under or from the Leased Real Property. Except as disclosed in
Section 3.15 of the Disclosure Schedules, at all times prior to Company’s
occupancy and/or operation of the Leased Real Property, there did not occur any
release of any hazardous material or any contamination on, under or from the
Leased Real Property.

 

(b) Seller or the Company has obtained and maintained in full force and effect,
all Permits and other authorizations required, if any, by any applicable
environmental Laws necessary to conduct the activities and business of Seller as
currently conducted, and to occupy or operate the Leased Real Property
(collectively the “Environmental Permits”). Seller and the Company have
conducted the activities and business of the Company in compliance in all
material respects with all terms and conditions of any Environmental Permits.
Seller or the Company, as applicable, has filed all reports and notifications
required to be filed under applicable environmental Laws and Environmental
Permits.

 

Section 3.16 Employee Benefit Matters.

 

(a) Except as disclosed in Schedule 3.16(a) of the Disclosure Schedules, the
Company has not adopted, established, maintained or contributed to any benefit,
retirement, employment, consulting, incentive, bonus, stock option, restricted
stock, stock appreciation right, phantom equity, change in control, retention,
deferred compensation, severance, vacation, paid time off, welfare,
post-employment health and welfare and other material compensation or benefit
agreement, plan, policy, program or arrangement, whether oral or in writing,
(i) covering one or more Employees, former employees of the Company, or the
beneficiaries or dependents of any such Persons (each, a “Benefit Plan”).
Section 3.16(a) of the Disclosure Schedules lists all Benefit Plans.

  

(b) Except as disclosed in Schedule 3.16(b) of the Disclosure Schedules, no
Benefit Plan: (i) is subject to the minimum funding standards of Section 302 of
ERISA or Section 412 of the Code; (ii) is subject to Sections 401(a) or 501(a)
of the Code, or (iii) is a “multiple employer plan” or a “multi-employer plan”
(as those terms are defined in ERISA). Each of Seller and the Company has no
liability with respect to any plan subject to ERISA.

 

 16 

 

  

(c) Seller has delivered or caused to be delivered to Buyer true and complete
copies of: (i) the most recent determination letter, opinion or advisory letter
received by the Company from the Internal Revenue Service regarding any Benefit
Plans which the Company maintains or to which it contributes and any amendment
to any Benefit Plan made subsequent to any Benefit Plan amendments covered by
any such determination letter; (ii) the three (3) most recent Form 5500s for the
Benefit Plans; (iii) the most recently prepared actuarial valuation reports, if
applicable; (iv) all current plan documents, texts, amendments, trust
instruments and other agreements adopted or entered into in connection with each
of the Benefit Plans; (v) all insurance and annuity contracts related to any
Benefit Plan; and (vi) the most recent summary plan descriptions and any
summaries of material modifications, each as applicable, for the Benefit Plans.
Since the date the documents were supplied to Buyer, no plan amendments have
been adopted, no changes to the documents have been made, and no such amendments
or changes shall be adopted or made prior to the Closing Date.

 

(d) To the extent required (either as a matter of law or to obtain the intended
tax treatment and tax benefits), all Benefit Plans comply in all material
respects with the requirements of all applicable Laws, including without
limitation ERISA and the Code. With respect to the Benefit Plans, (i) Seller and
the Company have performed all material obligations required to be performed by
it under any Benefit Plan and applicable Law, and, to the knowledge of Seller,
is not in default under or in violation of the terms of any Benefit Plan and
(ii) all required contributions which are due have been made and a proper
accrual has been made for all contributions due in the current fiscal year. Each
Benefit Plan that is intended to be qualified under Section 401(a) of the Code
has received a determination or opinion letter from the Internal Revenue Service
that it is so qualified and each related trust that is intended to be exempt
from federal income taxation under Section 501(a) of the Code has received a
determination or opinion letter from the Internal Revenue Service that it is so
exempt and, to the knowledge of the Seller, no fact or event has occurred since
the date of such letter or letters from the Internal Revenue Service that could
reasonably be expected to affect adversely the qualified status of any such
Benefit Plan or the exempt status of any such trust.

 

(e) Except as set forth in Section 3.16(e) of the Disclosure Schedules, there is
no pending or threatened Action relating to a Benefit Plan or, to the knowledge
of Seller, any fiduciary of any of the Benefit Plans.

 

(f) Seller and the Company have not maintained or been obligated to maintain, or
have actual or potential liability for, a Benefit Plan providing group health,
dental, vision, life insurance or other welfare benefits to employees following
retirement or other separation from service (or to any spouse or dependent of
such employees), except to the extent required under COBRA or state law, as
applicable.

 

(g) Except as set forth in Section 3.16(g) of the Disclosure Schedules, no
Benefit Plan exists that could: (i) result in the payment to any Employee,
director or consultant of any money or other property; or (ii) accelerate the
vesting of or provide any additional rights or benefits (including funding of
compensation or benefits through a trust or otherwise) to any Employee, director
or consultant, in each case as a result of the execution of this Agreement, as a
result of the consummation of the transactions contemplated by this Agreement.

 

(h) Each Benefit Plan can be amended, terminated or otherwise discontinued after
the Closing in accordance with its terms, without material liabilities to Buyer,
the Company or any of their Affiliates other than ordinary administrative
expenses typically incurred in a termination event.

 

 17 

 

  

(i) The Company does not have any ERISA Affiliates or ERISA Affiliate
Liabilities.

 

Section 3.17 Employment Matters.

 

(a) Except as set forth in Section 3.17(a) of the Disclosure Schedules, the
Company is not a party to, or bound by, any collective bargaining or other
agreement with any labor organization, works council, trade union or other
employee representative body, and no such employee representative body
represents or purports to represent any employees of the Company. Except as set
forth in Section 3.17(a) of the Disclosure Schedules, there has not been any
threat of, any strike, slowdown, work stoppage, lockout, concerted refusal to
work overtime or other similar labor activity or dispute affecting the Company
or with respect to any Employees.

 

(b) To the best of Seller’s and the Company’s knowledge, the Company is in
compliance with all applicable Laws pertaining to employment and employment
practices, terms and conditions to the extent they relate to Employees. Except
as set forth in Section 3.17(b) of the Disclosure Schedules, there are no
Actions against the Company pending or threatened to be brought or filed in
connection with the employment of any current or former employee of the Company,
including, without limitation, any claim relating to unfair labor practices,
employment discrimination, harassment, retaliation, equal pay, withholding
taxes, wages and hours, breaks, independent contractor or employee status,
exempt or non-exempt status, or any other employment related matter arising
under applicable Laws . All employees who primarily perform services for the
Company’s business are employed by the Company.

 

(c) The Company has not implemented any employee layoffs or plant closures that
constitutes a mass layoff or plant closure under the WARN Act, and no such
events are currently contemplated, planned or announced.

 

(d) The Company has at all times properly classified the Company’s Employees as
employees and as exempt or non-exempt for overtime pay, and have properly
classified each of the independent contractors providing services to the Company
as independent contractors, as applicable, and have treated each person
classified by them consistently with such status.

 

Section 3.18 Taxes. Except as set forth in Section 3.18 of the Disclosure
Schedules:

 

(a) All Tax Returns required to be filed (taking into account any valid
extensions) by or with respect to the income, assets, payroll or other similar
assets, attributes or activities of the Company have been filed whether required
to be filed by the Company or any other person. Such Tax Returns are true,
complete and correct in all material respects. The Company is not currently the
beneficiary of any extension of time within which to file any material Tax
Return other than extensions of time to file Tax Returns obtained in the
ordinary course of business. All Taxes due and owing by the Company have been
paid or accrued.

 

(b) No extensions or waivers of statutes of limitations have been given or
requested with respect to any Taxes of the Company that are currently in effect.

 

(c) There is no Action by any taxing authority against the Company and no such
Action has been threatened in writing.

 

 18 

 

  

(d) All Taxes which the Company is obligated to withhold from amounts owing to
any Employee, creditor or other party have been withheld and paid.

 

(e) No entity classification election or change in entity classification
election has been made under Treasury Regulations Section 301.7701-3 with
respect to the Company s for U.S. federal income Tax purposes.

 

(f) The Company has not, within the last five (5) years, been a party to any
transaction treated by the parties thereto as one to which Section 355 or
Section 361 of the Code applies. The Company is not a party to any agreement,
contract, arrangement or plan that has resulted or could result, separately or
in the aggregate, in the payment of any “excess parachute payment” within the
meaning of Section 280G of the Code (or any analogous or similar provision of
Law). The Company will not be required to reduce any of their Tax attributes by
reason of the application of Treasury Regulation Section 1.1502-36 to the
transactions contemplated by this Agreement. Each contract, arrangement or
Benefit Plan of any member of the Company that is a “nonqualified deferred
compensation plan” (as defined for purposes of Section 409A(d)(1) of the Code)
is in documentary and operational compliance with Section 409A of the Code and
the applicable guidance issued thereunder in all respects. The Company has no
indemnity obligation for any Taxes imposed under Section 4999 or 409A of the
Code.

 

(g) The Company is not subject to Tax in any country other than its country of
incorporation or formation by virtue of (i) having a permanent establishment or
other place of business or (ii) having a source of income, in each case, in such
other country. The method of allocating income and deductions among the Company
and any parties treated as related or under common control with Company complies
with the principles set forth in Code Section 482 and Treasury Regulations
promulgated thereunder (and any similar provisions of state, local or non-U.S.
law) and any other applicable laws on transfer pricing, and the Company has
maintained all applicable records with respect to transfer required to avoid the
imposition of penalties under all applicable transfer pricing laws.

 

(h) There are no liens for Taxes on the assets of the Company other than for
Taxes not yet due and payable.

 

(i) The Company (i) will not be required to include any material item of income
in, or exclude any material item of deduction from, taxable income for any
Post-Closing Period as a result of (A) any change in method of accounting
relating to the manner in which an item was reported on or prior to the Closing,
(B) installment sale or open transaction disposition, intercompany transaction
made or excess loss account arising on or prior to the Closing, (C) prepaid
amount received or revenue deferred on or prior to the Closing, or (D) any
election under Section 108(i) of the Code (or any similar provision of state,
local or foreign Law) in respect of any transaction occurring prior to the
Closing, (ii) has not received or applied for a Tax ruling or entered into a
closing agreement as described in Section 7121 of the Code on or prior to the
Closing, (iii) is not or has not been a member of any affiliated, consolidated,
combined or unitary group for purposes of filing Tax Returns (other than a group
the common parent of which was Seller) or (iv) has no liability for the Taxes of
any Person (other than Seller or any of its Subsidiaries), including as a
transferee or successor, by contract, operation of law including Treasury
Regulation Section 1.1502-6, or otherwise or pursuant to any Tax sharing,
indemnity or other contractual agreements, other than customary indemnification
obligations contained in commercial agreements not principally related to Taxes
(such as credit or other commercial lending agreements, employment agreements,
or other arrangements with landlords, lessors, customers and vendors). No
“listed transaction” within the meaning of Treasury Regulations
Section 1.6011-4(b)(2) has been undertaken that involves the Company or any of
its Subsidiaries.

 

 19 

 

  

Section 3.19 Brokers. No broker, finder or investment banker is entitled to any
brokerage, finder’s or other fee or commission in connection with the
transactions contemplated by this Agreement based upon arrangements made by or
on behalf of Seller or the Company.

 

Section 3.20 Books and Records.  The minute books and stock record books of the
Company, all of which have been made available to Buyer, are complete and
correct and have been maintained in accordance with sound business practices.
The minute books of the Company contain accurate and complete records of all
meetings, and actions taken by written consent of, the stockholders, the board
of directors and any committees of the board of directors of the Company, and no
meeting, or action taken by written consent, of any such stockholders, board of
directors or committee has been held for which minutes have not been prepared
and are not contained in such minute books. At the Closing, all of those books
and records will be in the possession of the Company.

 

Section 3.21 Anti-Corruption. The Company has not and none of the Company’s
respective officers, directors, employees, agents, or other individuals or
entities acting for or on behalf of the Company has, (i) used any funds for
contributions, gifts, entertainment, or other payments related to political
activity or (ii) made any payment to any government official, in each case in
violation of the United States Foreign Corrupt Practices Act of 1977 (as
amended), the U.K. Bribery Act of 2010 or any similar Law.

 

Section 3.22 Customers and Suppliers. Except as provided on Section 3.22 of the
Disclosure Schedules, to the best of the Seller’s and the Company’s knowledge,
there exists no condition or state of facts or circumstances involving any
customers, suppliers, distributors or sales representatives of the Company that
Seller can reasonably foresee could have an adverse impact on the Company after
the Closing Date. Except as provided on Section 3.22 of the Disclosure
Schedules, as of the date hereof and as of the Closing Date, no customer,
distributor or supplier has provided the Company with notice of its intention to
cease doing business with Seller or to materially decrease the amount of
business it is presently doing with the Company. Except as provided on
Section 3.22 of the Disclosure Schedules, to the best of the Seller’s and the
Company’s knowledge, Seller has no reason to believe that any such Person would
do so as a result of the consummation of this transaction. Without limiting the
foregoing, no such customer, distributor or supplier has given the Company
notice that it is subject to any bankruptcy, insolvency or similar proceeding
and no such proceeding by any other party is pending or threatened nor has any
act or omission occurred that makes such proceeding likely.

 

Section 3.23 Indebtedness. Except as provided in Section 3.06 or Section 3.23 of
the Disclosure Schedules, the Company does not have any Indebtedness and the
Seller does not have any Indebtedness in connection with the Company. Buyer will
not acquire any Indebtedness of, or relating to, the Company, as a result of the
transactions contemplated by this Agreement.

 

Section 3.24 Sufficiency of Assets. {intentionally omitted}

 

Section 3.25 Full Disclosure. Each Section of the Disclosure Schedules and other
document attached, listed or referenced in a Section of the Disclosure Schedules
delivered by or on behalf of Seller to Buyer in connection with this Agreement
is complete and accurate. The representations, warranties, assurances or
statements of the Seller and the Company contained herein (including the
Disclosure Schedules attached hereto), to the best of the Seller’s and the
Company’s knowledge, do not contain any untrue statement of a material fact or,
omit a material fact required to be stated therein or necessary to make the
statements made, in light of the circumstances under which such statements were
made, not materially false or misleading. There are no facts or occurrences of
any event or transaction, to the best of the Seller’s and the Company’s
knowledge, that have not been disclosed to Buyer in writing and which could
reasonably be expected to have an adverse impact on the condition of the
Company, the assets of the Company or the business of the Company.

 

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ARTICLE IV

REPRESENTATIONS AND WARRANTIES OF BUYER

 

Except as set forth in the Disclosure Schedules, Buyer represents and warrants
to Seller that the statements contained in this Article IV are true and correct
as of the date hereof and as of the Closing Date.

 

Section 4.01 Organization and Authority of Buyer. Buyer is a corporation duly
organized, validly existing and in good standing under the Laws of the state of
Delaware. Buyer has all necessary corporate power and authority to enter into
this Agreement, to carry out its obligations hereunder and to consummate the
transactions contemplated hereby. The execution and delivery by Buyer of this
Agreement, the performance by Buyer of its obligations hereunder and the
consummation by Buyer of the transactions contemplated hereby have been duly
authorized by all requisite corporate action on the part of Buyer. This
Agreement has been duly executed and delivered by Buyer, and (assuming due
authorization, execution and delivery by Seller) this Agreement constitutes a
legal, valid and binding obligation of Buyer, enforceable against Buyer in
accordance with its terms, except as such enforceability may be limited by
bankruptcy, insolvency, reorganization, moratorium or similar Laws affecting
creditors’ rights generally and by general principles of equity.

 

Section 4.02 No Conflicts; Consents. The execution, delivery and performance by
Buyer of this Agreement, and the consummation of the transactions contemplated
hereby, do not and will not: (a) result in a violation or breach of any
provision of the charter documents of Buyer; (b) assuming all consents,
authorizations, and approvals of Governmental Authorities are received pursuant
to Section 5.08, result in a violation or breach of any provision of any Law or
Governmental Order applicable to Buyer; or (c) except as set forth in
Section 4.02 of the Disclosure Schedules, require the consent, notice or other
action by any Person under, conflict with, result in a violation or breach of,
constitute a default under or result in the acceleration of any agreement to
which Buyer is a party, except in the cases of clauses (b) and (c), where the
violation, breach, conflict, default, acceleration or failure to give notice or
obtain consent would not have a material adverse effect on Buyer’s ability to
consummate the transactions contemplated hereby. No consent, approval, Permit,
Governmental Order, declaration or filing with, or notice to, any Governmental
Authority is required by or with respect to Buyer in connection with the
execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby, except for such filings as set forth in
Section 4.02 of the Disclosure Schedules and such consents, approvals, Permits,
Governmental Orders, declarations, filings or notices which would not have a
material adverse effect on Buyer’s ability to consummate the transactions
contemplated hereby.

 

Section 4.03 Investment Purpose. Buyer is acquiring the Shares solely for its
own account for investment purposes and not with a view to, or for offer or sale
in connection with, any distribution thereof. Buyer acknowledges that the Shares
are not registered under the Securities Act of 1933, as amended (the “Securities
Act”), or any state securities laws, and that the Shares may not be transferred
or sold except pursuant to the registration provisions of the Securities Act or
pursuant to an applicable exemption therefrom and subject to state securities
laws and regulations, as applicable. Buyer is able to bear the economic risk of
holding the Shares for an indefinite period (including total loss of its
investment), and has sufficient knowledge and experience in financial and
business matters so as to be capable of evaluating the merits and risk of its
investment.

 

 21 

 

  

Section 4.04 Brokers. No broker, finder or investment banker is entitled to any
brokerage, finder’s or other fee or commission in connection with the
transactions contemplated by this Agreement based upon arrangements made by or
on behalf of Buyer.

 

Section 4.06 Legal Proceedings. Except as set forth in Section 4.06 of the
Disclosure Schedules, as of the date hereof and as of the Closing Date, there
are no Actions or investigations pending or, to Buyer’s knowledge, threatened
against or by Buyer or any Subsidiary of Buyer that challenge or seek to
prevent, enjoin or otherwise delay the transactions contemplated by this
Agreement.

 

ARTICLE V

COVENANTS

  

Section 5.01 Conduct of Business Prior to the Closing. From the date hereof
until the Closing, except as otherwise provided in this Agreement or consented
to in writing by Buyer (which consent shall not be unreasonably withheld or
delayed), Seller shall, and shall cause the Company to (x) conduct the business
of the Company in the ordinary course of business consistent with past practice;
and (y) use commercially reasonable efforts to maintain and preserve intact the
current organization, business and franchise of the Company and to preserve the
rights, franchises, goodwill and relationships of its employees, customers,
lenders, suppliers, regulators and others having business relationships with the
Company. Without limiting the foregoing, from the date hereof until the Closing
Date, Seller shall use commercially reasonable efforts to:

 

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

 

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

 

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

 

(d) cause the Company to continue in full force and effect without modification
all Insurance Policies, except as required by applicable Law;

 

(e) cause the Company to defend and protect its properties and assets, including
any Company Intellectual Property, from infringement or usurpation;

 

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

 

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

 

 22 

 

  

(h) cause the Company to comply in all material respects with all applicable
Laws; and

 

(i) cause the Company not to take or permit any action that would cause any of
the changes, events or conditions described in Section 3.08 to occur.

 

Section 5.02 Access to Information. From the date hereof until the Closing,
Seller shall, and shall cause the Company to: (a) afford Buyer and its
Representatives reasonable access to and the right to inspect all of the Leased
Real Property, properties, assets, premises, books and records, contracts,
agreements and other documents and data and, with Seller’s prior written consent
(not to be unreasonably withheld, conditioned or delayed) officers, directors,
employees, customers and other business relations, related to the Company;
(b) furnish Buyer and its Representatives with such financial, operating and
other data and information related to the Company as Buyer or any of its
Representatives may reasonably request; and (c) instruct the Representatives of
Seller and the Company to cooperate with Buyer in its investigation of the
Company; provided, however, that any such investigation shall be conducted
during normal business hours upon reasonable advance notice to Seller, under the
supervision of Seller’s personnel and in such a manner as not to materially
interfere with the normal operations of the Company. All requests by Buyer for
access pursuant to this Section 5.02 shall be submitted or directed exclusively
to such individuals as Seller may designate in writing from time to time.
Notwithstanding anything to the contrary in this Agreement, neither Seller nor
the Company shall be required to disclose any information to Buyer if such
disclosure would: (x) cause material competitive harm to Seller, the Company,
and their respective businesses if the transactions contemplated by this
Agreement are not consummated; (y) jeopardize any attorney-client or other legal
privilege; or (z) contravene any applicable Law. Prior to the Closing, without
the prior written consent of Seller, not to be unreasonably withheld,
conditioned or delayed, Buyer shall not contact any suppliers to, or customers
of, the Company. Prior to Closing, Buyer shall have no right to perform invasive
or subsurface investigations of the Leased Real Property without the prior
written consent of Seller.

 

Section 5.03 No Solicitation of Other Bids. From the date hereof until the
Closing, Seller agrees as follows:

 

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

 

(b) In addition to the other obligations under this Section 5.03, Seller shall
promptly (and in any event within three (3) Business Days after receipt thereof
by Seller or its Representatives) advise Buyer orally and in writing of any
Acquisition Proposal, any request for information with respect to any
Acquisition Proposal, or any inquiry with respect to or which could reasonably
be expected to result in an Acquisition Proposal, the material terms and
conditions of such request, Acquisition Proposal or inquiry, and the identity of
the Person making the same.

 

 23 

 

  

(c) Seller agrees that the rights and remedies for noncompliance with this
Section 5.03 shall include having such provision specifically enforced by any
court having equity jurisdiction, it being acknowledged and agreed that any such
breach or threatened breach shall cause irreparable injury to Buyer and that
money damages would not provide an adequate remedy to Buyer.

Section 5.04 Notice of Certain Events.  

 

(a)   From the date hereof until the Closing, Seller shall promptly notify Buyer
in writing of:

 

(i) any fact, circumstance, event or action the existence, occurrence or taking
of which (A) has had, or could reasonably be expected to have, individually or
in the aggregate, a material adverse effect, (B) has resulted in, or could
reasonably be expected to result in, any representation or warranty made by
Seller hereunder not being materially true and correct or (C) has resulted in,
or could reasonably be expected to result in, the failure of any of the
conditions set forth in Section 6.02 to be satisfied;

 

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

 

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

 

(iv) any Actions commenced or, to threatened against, relating to or involving
or otherwise affecting Seller or the Company that, if pending on the date of
this Agreement, would have been required to have been disclosed pursuant to
Section 3.13 or that relates to the consummation of the transactions
contemplated by this Agreement.

 

(b)   Buyer’s receipt of information pursuant to this Section 5.04 shall not
operate as a waiver or otherwise affect any representation, warranty or
agreement given or made by Seller in this Agreement (including Section 7.02 and
Section 9.01(b)) and shall not be deemed to amend or supplement the Disclosure
Schedules.

 

Section 5.05 {Intentionally Omitted}

 

Section 5.06 Insurance.

 

(a) Seller or the Company, as the case may be, shall continue to carry the
Insurance Policies through the Closing, and Seller shall not amend or modify the
Insurance Policies or allow any breach, default or cancellation (other than
expiration and replacement of policies in the ordinary course of business
consistent with past practices) of such Insurance Policies to occur or exist.
Except as otherwise provided by this Section 5.06, Buyer acknowledges that from
and after the Closing none of Buyer nor the Company shall have coverage under
any of Seller’s insurance policies. Seller acknowledges and agrees that with
respects to acts, omissions, events or circumstances relating to the Company
that occurred or existed prior to the Closing that are covered by Insurance
Policies that are occurrence-based policies or claims known or reported to
insurers covered by Insurance Policies that are claims-made policies under which
policies any of the Company is an insured on or prior to Closing, the Buyer and
the Company may make claims under such policies subject to the terms and
conditions of such policies and this Agreement. Prior to the Closing, Seller
shall use its commercially reasonable efforts to cause the Company to make
claims or seek coverage under the Insurance Policies for any covered claims
incurred prior to Closing. For the avoidance of doubt, Seller shall remain
responsible, without recourse to the Company or Buyer, for the deductible or
self-insured retention amount for any pre-close insurance claims (regardless of
when the claim is presented) covered under any Seller insurance policy.

 

 24 

 

 
(b) In the event Buyer or the Company or any of their respective successors or
assigns (i) consolidates with or merges into any other Person and shall not be
the continuing or surviving corporation or entity in such consolidation or
merger or (ii) transfers all or substantially all of its properties and assets
to any Person, then, and in either such case, proper provision shall be made so
that the successors and assigns of Buyer, the Company, or the Company’s
Subsidiaries, as the case may be, shall assume all of the obligations set forth
in this Section 5.06.

 

Section 5.07 Non-Disclosure; Confidentiality. Buyer and Seller acknowledge and
agree that the Non-Disclosure Agreement entered into by and between Buyer and
Seller remains in full force and effect and shall continue in full force and
effect. Notwithstanding the terms of the Non-Disclosure Agreement, until the two
(2) year anniversary of the Closing Date: (i) Seller shall, and shall cause its
respective controlled Affiliates and Representatives to, maintain in confidence
any proprietary and confidential written, oral or other information relating to
the Company related to Seller’s ownership of the Company prior to the Closing
and (ii) Buyer shall, and shall cause its controlled Affiliates and
Representatives to, maintain in confidence any written, oral or other
information of or relating to Seller (other than information relating to the
Company) related to Buyer’s ownership of the Company from and after the Closing,
except, in each case, to the extent that the applicable party is required to
disclose such information by judicial or administrative process or pursuant to
applicable Law or such information can be shown to have been in the public
domain through no fault of the applicable party.

 

Section 5.08 Governmental Approvals and Other Third-party Consents.

 

(a) Each party hereto shall, as promptly as possible, use its reasonable best
efforts to obtain, or cause to be obtained, all consents, authorizations, orders
and approvals from all Governmental Authorities that may be or become necessary
for its execution and delivery of this Agreement and the performance of its
obligations pursuant to this Agreement. Each party shall cooperate fully with
the other party and its Representatives and Affiliates in promptly seeking to
obtain all such consents, authorizations, orders and approvals. Each party
hereto agrees not take any action that is reasonably likely to have the effect
of delaying, impairing or impeding the receipt of any required consents,
authorizations, orders and approvals.

 

(b) Seller shall use its reasonable best efforts to give all notices to, and
obtain all consents from, all third parties that are described in Section 3.05
of the Disclosure Schedules. Buyer shall use its reasonable best efforts to give
all notices to, and obtain all consents from, all third parties that are
described in Section 4.02 of the Disclosure Schedules; provided, however, that
Seller shall not be obligated to pay any consideration therefor to any third
party from whom consent or approval is requested.

 

 25 

 

  

Section 5.09 Books and Records.

 

(a) In order to facilitate the resolution of any claims made against or incurred
by Seller prior to the Closing, or for any other reasonable purpose, for a
period of three years after the Closing, Buyer shall:

 

(i) retain the books and records (including personnel files) of the Company
relating to periods prior to the Closing in a manner reasonably consistent with
the prior practices of the Company; and

 

(ii) upon reasonable notice, afford the Representatives of Seller reasonable
access (including the right to make, at Seller’s expense, photocopies), during
normal business hours, to such books and records.

 

(b) In order to facilitate the resolution of any claims made by or against or
incurred by Buyer or the Company after the Closing, or for any other reasonable
purpose, for a period of three years following the Closing, Seller shall:

 

(i) retain the books and records (including personnel files) of Seller which
relate to the Company and their operations for periods prior to the Closing; and

 

(ii) upon reasonable notice, afford the Representatives of Buyer or the Company
reasonable access (including the right to make, at Buyer’s expense,
photocopies), during normal business hours, to such books and records.

 

(c) Neither Buyer nor Seller shall be obligated to provide the other party with
access to any books or records (including personnel files) pursuant to this
Section 5.09 where such access would (x) jeopardize any attorney-client
privilege; or (y) contravene any applicable Law.

 

Section 5.10 Closing Conditions. From the date hereof until the Closing, each
party hereto shall, and Seller shall cause the Company to, use commercially
reasonable efforts to take such actions as are necessary to expeditiously
satisfy the closing conditions set forth in Articles II and VI hereof that are
for the benefit of the other party.

 

Section 5.11 Public Announcements. Following the date hereof, Seller
acknowledges that Buyer may have business reasons to, or be required by
applicable Law, the rules or regulations of the SEC, or the stock exchange
requirements to make a public release or announcement concerning the
transactions contemplated hereby and Seller agrees that Buyer may disclose such
information as it reasonably deems necessary and appropriate to satisfy such
business needs or requirements.

 

Section 5.12 Further Assurances. Following the Closing, each of the parties
hereto shall, and shall cause their respective Affiliates to, execute and
deliver such additional documents, instruments, conveyances and assurances, and
take such further actions as may be reasonably required to carry out the
provisions hereof and give effect to the transactions contemplated by this
Agreement.

 

Section 5.13 Non-Competition. Seller agrees that for the period from the Closing
Date until the three (3) year anniversary of the Closing Date, Seller shall not
directly or indirectly, engage in a business competitive to the Company anywhere
in the world (each, a “Competitive Activity”); provided that the foregoing shall
not prohibit Seller from owning up to an aggregate of five percent of the
outstanding shares of any class of capital stock of any Person that engages in
any Competitive Activity (a “Competing Person”) so long as Seller does not have
any participation in the management of such Competing Person.

 

 26 

 

  

Section 5.14 Non-Solicitation. Seller agrees that from and after the date of
this Agreement until the three (3) year anniversary of the Closing Date, he
shall not, directly or indirectly, solicit for employment or hire any Person who
is at any time from the date of this Agreement to the Closing Date employed by
the Company; provided, however, that the foregoing shall not apply (i) to
solicitations made by job opportunity advertisements and headhunter searches
directed to the general public rather than targeting any employees of Buyer or
any of its Subsidiaries (including the Company) or (ii) with respect to any
employee who has been terminated by Buyer by the Company after the Closing.

 

ARTICLE VI

CONDITIONS TO CLOSING

 

Section 6.01 Conditions to Obligations of All Parties. The obligations of each
party to consummate the transactions contemplated by this Agreement shall be
fulfilled, at or prior to the Closing, unless a Governmental Authority shall
have enacted, issued, promulgated, enforced or entered any Governmental Order
which is in effect and has the effect of making the transactions contemplated by
this Agreement illegal, otherwise restraining, enjoining or prohibiting
consummation of such transactions or causing any of the transactions
contemplated hereunder to be rescinded following completion thereof.

 

Section 6.02 Conditions to Obligations of Buyer. The obligations of Buyer to
consummate the transactions contemplated by this Agreement shall be subject to
the fulfillment or Buyer’s waiver, at or prior to the Closing, of each of the
following conditions:

 

(a) Each of the representations of Seller (without giving effect to any
“material,” “material adverse effect” or similar materiality qualifications
therein) shall be true and correct in all material respects as of the date
hereof and as of the Closing Date, as if made anew at and as of the Closing
Date, except with respect to representations and warranties which speak as to an
earlier date, which representations and warranties shall be true and correct at
and as of such date.

 

(b) Seller shall have duly performed and complied with all agreements, covenants
and conditions required by this Agreement to be performed or complied with by it
prior to or on the Closing Date.

 

(c) Buyer shall have received a certificate, dated the Closing Date and signed
by a duly authorized officer of Seller, that each of the conditions set forth in
Section 6.02(a) and Section 6.02(b) have been satisfied.

 

(d) No event, occurrence, fact, condition or change has occurred that that,
individually or in the aggregate, has had or would reasonably be expected to
have an adverse impact on the Company.

 

Section 6.03 Conditions to Obligations of Seller. The obligations of Seller to
consummate the transactions contemplated by this Agreement shall be subject to
the fulfillment or Seller’s waiver, at or prior to the Closing, of each of the
following conditions:

 

(a) (i) Each of the representations of Buyer (without giving effect to any
“material,” “material adverse effect” or similar materiality qualifications
therein) shall be true and correct in all material respects as of the date
hereof and as of the Closing Date, as if made anew at and as of the Closing
Date, except with respect to representations and warranties which speak as to an
earlier date, which representations and warranties shall be true and correct in
all material respects at and as of such date.

 

 27 

 

  

(b) Buyer shall have duly performed and complied in all material respects with
all agreements, covenants and conditions required by this Agreement to be
performed or complied with by it prior to or on the Closing Date.

 

(c) Seller shall have received a certificate, dated the Closing Date and signed
by a duly authorized officer of Buyer, that each of the conditions set forth in
Section 6.03(a) and Section 6.03(b) have been satisfied.

 

Section 6.04 Frustration of Closing Conditions. Neither party may rely on the
failure of any condition set forth in this Article VI to be satisfied if such
failure was caused by such party’s failure to perform any of its obligations
under this Agreement.

 

ARTICLE VII

INDEMNIFICATION

 

Section 7.01 Survival.

 

(a) The party making a claim under this Article VII is referred to as the
“Indemnified Party” and the party against whom such claims are asserted under
this Article VII is referred to as the “Indemnifying Party”. Subject to the
limitations and other provisions of this Agreement, all representations and
warranties contained herein or in any certificate delivered pursuant hereto and
covenants or other agreements contained in this Agreement to the extent required
to be performed prior to Closing shall survive the Closing and, except as
otherwise set forth in this Article VII, shall remain in full force and effect
until the date that is twenty four (24) months from the Closing Date. Each of
the covenants or other agreements contained in this Agreement which by their
terms contemplate performance at or after the Closing shall survive the Closing
for the period contemplated by their terms. Notwithstanding the foregoing, any
claims asserted in good faith with reasonable specificity (to the extent known
at such time) and in writing by notice from the Indemnified Party to the
Indemnifying Party prior to the expiration date of the survival period shall not
thereafter be barred by the expiration of the survival period and such claims
shall survive until finally resolved. The parties hereby agree and acknowledge
that, except as otherwise set forth in this Article VII, the survival period set
forth in this Section 7.01 is a contractual statute of limitations and any claim
brought by any party pursuant to this Article VII must be brought or filed prior
to the expiration of the survival period.

 

(b) Notwithstanding Section 7.01(a) above, (i) Section 3.18 and any other
representations, warranties or covenants made by Seller or the Company with
respect to Taxes, or the costs related to the preparation and filing thereof,
shall survive until the expiration of the applicable statute of limitations
(accounting for any extensions) and (ii) Seller shall be subject to its
obligations under Section 7.02(d) until the expiration of the applicable statute
of limitations (accounting for any extensions).

 

Section 7.02 Indemnification By Seller. Subject to the other terms and
conditions of this Article VII, Seller shall indemnify Buyer, its Affiliates,
and any of their respective officers, directors, employees, or agents
(collectively, the “Buyer Indemnified Parties”) against, and shall hold the
Buyer Indemnified Parties harmless from and against any and all Losses of,
incurred or sustained by, or imposed upon, the Buyer Indemnified Parties based
upon, arising out of, relating to, with respect to or by reason of:

 

(a) any inaccuracy in or breach of any of the representations or warranties of
Seller contained in this Agreement or in any certificate delivered pursuant to
this Agreement to which Seller is a party;

 

 28 

 

  

(b) any breach, non-fulfillment of or failure to observe any covenant, agreement
or obligation to be performed by Seller pursuant to this Agreement;

 

(c) any actual fraud committed by Seller, the Company or any of their Affiliates
in connection with the transactions contemplated by this Agreement; or

 

(d) any liability or Losses for Taxes of the Company, or the costs related to
the preparation and filing thereof, relating to periods on or prior to the
Closing Date.

 

Section 7.03 Indemnification By Buyer. Subject to the other terms and conditions
of this Article VII, Buyer shall indemnify Seller, the Company, its Affiliates
and any of their respective officers, directors, employees, and agents
(collectively, the “Seller Indemnified Parties”) against, and shall hold the
Seller Indemnified Parties harmless from and against, any and all Losses of,
incurred or sustained by, or imposed upon, the Seller Indemnified Parties based
upon, arising out of, relating to, with respect to or by reason of:

 

(a) any inaccuracy in or breach of any of the representations or warranties of
Buyer contained in this Agreement or in any certificate delivered pursuant to
this Agreement to which Buyer is a party;

 

(b) any breach, non-fulfillment of or failure to observe any covenant, agreement
or obligation to be performed by Buyer pursuant to this Agreement; or

 

(c) any actual fraud committed by Buyer, the Company or any of their Affiliates
in connection with the transactions contemplated by this Agreement.

Section 7.04 Certain Limitations. The indemnification provided in Section 7.02
and Section 7.03 shall be subject to the following limitations:

 

(a) Payments by an Indemnifying Party pursuant to Section 7.02 or 7.03 in
respect of any Loss shall be reduced by an amount equal to the net amount of any
insurance proceeds or any indemnity, contribution or other similar payment
received by the Indemnified Party in respect of any such Loss. The Indemnified
Party shall (i) use its commercially reasonable efforts to recover under
insurance policies or indemnity, contribution or other similar agreements for
any Losses and (ii) to the extent the Indemnified Party is unable to recover
amounts under clause (i) sufficient to cover any Losses (such amounts, the
“Uncovered Amounts”), upon the written request of the Indemnifying Party, assign
to the Indemnifying Party the right to recover the Uncovered Amounts under such
insurance policies or indemnity, contribution, or other similar agreements and
use commercially reasonable efforts to cooperate with the Indemnifying Party’s
claims thereunder.

 

(b) In no event shall any Indemnifying Party be liable to any Indemnified Party
for any punitive damages, except if and to the extent any such damages are
recovered against an Indemnified Party pursuant to a Third-Party Claim.

 

(c) Each Indemnified Party shall take, and cause its Affiliates to take, to the
extent required by Law, all commercially reasonable steps to mitigate any Loss
upon becoming aware of any event or circumstance that would be reasonably
expected to, or does, give rise thereto.

 

(d) The parties agree that for purposes of (i) determining whether there has
been a breach of or inaccuracy in any representation or warranty subject to
indemnification pursuant to this Article VII and (ii) calculating the amount of
Losses with respect thereto, such representations and warranties alleged to have
been breached shall be construed as if any qualification or limitation with
respect to materiality, whether by reference to the terms “material,” “in all
material respects,” “in any material respect” or “material adverse effect” or
words of similar import, were omitted from the text of such representations and
warranties.

 

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(e) Notwithstanding any contrary provision of this Agreement, Seller shall not
have any obligation under this Article VII unless and until the aggregate amount
of Losses so incurred for which Buyer Indemnified Parties are entitled to be
indemnified under this Article VII exceeds an amount equal to $25,000 (the
"Basket Amount") whereupon Seller shall be liable to indemnify the Buyer
Indemnified Parties for all amounts of Losses over such Basket Amount. In no
event shall any Indemnifying Party be liable to any Indemnified Party for any
Losses in excess of the aggregate Purchaser Consideration.

 

Section 7.05 Indemnification Procedures.

 

(a) Third-Party Claims. If any Indemnified Party receives notice of the
assertion or commencement of any Action made or brought by any Person who is not
a party to this Agreement or an Affiliate of a party to this Agreement (a
“Third-Party Claim”) against such Indemnified Party with respect to which the
Indemnifying Party is obligated to provide indemnification under this Agreement,
the Indemnified Party shall give the Indemnifying Party prompt written notice
thereof. The failure to give such prompt written notice shall not, however,
relieve the Indemnifying Party of its indemnification obligations, except and
only to the extent that the Indemnifying Party forfeits rights or defenses or is
otherwise prejudiced by reason of such failure. Such notice by the Indemnified
Party shall, to the extent reasonably practicable, describe the Third-Party
Claim in specific detail, shall include copies of all material written evidence
thereof and shall indicate the estimated amount of the Loss that has been or may
be sustained by the Indemnified Party. The Indemnifying Party shall have the
right to participate in or, by giving written notice to the Indemnified Party
within 10 Business Days of the notice described in the previous clause, to
assume the defense of any Third-Party Claim at the Indemnifying Party’s expense
and by the Indemnifying Party’s own counsel, and the Indemnified Party shall
cooperate in good faith in such defense. If the Indemnified Party shall have
determined in good faith that (a) an actual or likely conflict of interest makes
representation of the Indemnifying Party and the Indemnified Party by the same
counsel inappropriate, (b) that there may be available to the Indemnified Party
one or more defenses or counterclaims that are inconsistent with one or more of
those that may be available to the Indemnifying Party in respect of such
Third-Party Claim or (c) the conduct of the defense or any proposed settlement
of such Third-Party Claim would reasonably be expected to affect adversely the
Indemnified Party’s Tax liability, the Indemnified Party shall have the right,
upon notice to Indemnifying Party, to engage separate counsel and to control the
defense of such Third-Party Claim with respect to such matters, and the
reasonable fees and expenses of such separate counsel shall be borne by the
Indemnifying Party. In the event that the Indemnifying Party assumes the defense
of any Third-Party Claim, subject to Section 7.05(b), it shall have the right to
take such action as it deems necessary to avoid, dispute, defend, appeal or make
counterclaims pertaining to any such Third-Party Claim in the name and on behalf
of the Indemnified Party with the Indemnified Party’s prior written consent. The
Indemnified Party shall have the right, at its own cost and expense, to
participate in the defense of any Third-Party Claim with counsel selected by it
subject to the Indemnifying Party’s right to control the defense thereof. If the
Indemnifying Party elects not to pay, settle, or defend such Third-Party Claim,
the Indemnified Party may, subject to Section 7.05(b), pay, settle, or defend
such Third-Party Claim and seek indemnification for any and all Losses based
upon, arising from or relating to such Third-Party Claim. Seller and Buyer shall
cooperate with each other in all reasonable respects in connection with the
defense of any Third-Party Claim, including making available (subject to the
provisions of Section 5.09) records relating to such Third-Party Claim and
furnishing, without expense (other than reimbursement of actual out-of-pocket
expenses) to the defending party, management employees of the non-defending
party as may be reasonably necessary for the preparation of the defense of such
Third-Party Claim. Notwithstanding the foregoing, the Indemnifying Party shall
not be entitled to control or consent to the defense or settlement of (and shall
pay the reasonable fees and expenses of counsel retained by the Indemnified
Party with respect to), and the Indemnified Party shall be entitled to have
control over the defense or settlement of, any Third-Party Claim that (i) seeks
non-monetary relief (except where non-monetary relief is merely incidental to a
primary claim or claims for monetary damages), (ii) involves criminal or
quasi-criminal allegations, (iii) involves a claim with a Governmental Authority
or a key customer, key supplier or regulator of the Indemnified Party, (iv) as
to which the Indemnified Party reasonably believes an adverse determination
would result in Losses that would exceed the limitation on the right of the
Indemnified Party to recovery contained in this Article VII or (v) if in the
reasonable opinion of counsel to the Indemnified Party the Indemnifying Party
has conflicting or adverse interests or is also a party and joint representation
would be inappropriate or there may be legal defenses available to the
Indemnified Party or the Indemnified Party that are different from or additional
to those available to the Indemnifying Party.

 

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(b) Settlement of Third-Party Claims. Notwithstanding any other provision of
this Agreement, the Indemnifying Party shall not enter into settlement of any
Third-Party Claim without the prior written consent of the Indemnified Party
(which consent shall not be unreasonably withheld, conditioned or delayed),
unless such settlement (i) does not provide for any relief other than the
payment of monetary damages, (ii) provides for the complete and unconditional
release of each Indemnified Party from all liabilities and obligations in
connection with such Third-Party Claim, (iii) does not result in a finding or
admission of any violation of Law, breach of contract or similar
acknowledgement, and (iv) the Indemnifying Party shall pay or cause to be paid
all amounts arising out of such settlement concurrently with the effectiveness
of such settlement. If the Indemnified Party has assumed the defense pursuant to
Section 7.05(b), it shall not agree to any settlement without the written
consent of the Indemnifying Party (which consent shall not be unreasonably
withheld, conditioned or delayed). If the parties are unable to amicably resolve
any dispute regarding a Third Party Claim then the disputed matters shall be
submitted for resolution to an arbitrator in accordance with Section 7.05(c)(ii)
below.

 

(c) Direct Claims. Any claim by an Indemnified Party on account of a Loss which
does not result from a Third-Party Claim (a “Direct Claim”) shall be asserted by
the Indemnified Party giving the Indemnifying Party prompt written notice
thereof. The failure to give such prompt written notice shall not, however,
relieve the Indemnifying Party of its indemnification obligations, except and
only to the extent that the Indemnifying Party forfeits rights or defenses or is
otherwise prejudiced by reason of such failure. Such notice by the Indemnified
Party shall, to the extent practicable, describe the Direct Claim in specific
detail, shall include copies of all material written evidence thereof and shall
indicate the estimated amount of the Loss that has been or may be sustained by
the Indemnified Party. The Indemnifying Party shall have 30 days after its
receipt of such notice to respond in writing to such Direct Claim. During such
30-day period, the Indemnified Party shall reasonably cooperate to allow the
Indemnifying Party and its professional advisors to investigate the matter or
circumstance alleged to give rise to the Direct Claim, and whether and to what
extent any amount is payable in respect of the Direct Claim, and the Indemnified
Party shall assist the Indemnifying Party’s investigation by giving such
information and assistance (including access to the Company’s premises and
personnel and the right to examine and copy any accounts, documents or records)
as the Indemnifying Party or any of its professional advisors may reasonably
request.

 

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(i) If the Indemnifying Party does not notify the Indemnified Party during such
30-day period following its receipt of such notice (the “Direct Claim Dispute
Period”) that the Indemnifying Party disputes its liability to the Indemnified
Party under this Article VII, or the amount thereof, the claim specified by the
Indemnified Party in such notice shall be conclusively deemed a liability of the
Indemnifying Party under this Article VII, and the Indemnifying Party shall pay
the amount of such loss to the Indemnified Party on demand or, in the case of
any notice in which the amount of the claim (or any portion of the claim) is
estimated, on such later date when the amount of such claim (or such portion of
such claim) becomes finally determined. If the Indemnifying Party disputes its
liability for a Direct Claim, it shall tender written notice of its dispute of
Direct Claim (the “Direct Claim Dispute Notice”) to the Indemnified Party within
the Direct Claim Dispute Period. The parties shall meet within fifteen (15)
Business Days of the date of tender of the Direct Claim Dispute Notice in an
attempt to resolve liability for the Direct Claim.

 

(ii) If the parties are unable to amicably resolve any dispute regarding a
Direct Claim within fifteen (15) Business Days following their initial meeting
after tender of the Direct Claim Dispute Notice then the disputed matters shall
be submitted for resolution to an arbitrator (the “Arbitrator”) as may be
mutually acceptable to Indemnifying Party and Indemnified Party. The Arbitrator
shall consider the disputed matters and issue a written determination with
respect to the disputed matters, which shall be final and binding on the
parties. The parties shall cooperate reasonably with each other and each other’s
representatives to enable the Arbitrator to render a decision as promptly as
possible. The fees and disbursements of the Arbitrator shall be borne by the
non-prevailing party. Any arbitration under this Agreement shall be administered
in accordance with the provisions the Commercial Arbitration Rules of the
American Arbitration Association. All proceedings shall be held in San
Francisco, Alameda or Contra Costa, California. For the purpose of clarity, the
role of the Arbitrator shall be to resolve whether the party seeking
indemnification is entitled to same under the terms of this Agreement, and not
to determine the extent of the liability of the Indemnifying Party to the
Indemnified Party.

 

Section 7.06 Amount of Indemnification. The amount of indemnification to which
an Indemnified Party shall be entitled under this Article VII shall be
determined: (a) by the written agreement between the Indemnified Party and the
Indemnifying Party; (b) by a final judgment or decree of any court of competent
jurisdiction; or (c) by any other means to which the Indemnified Party and the
Indemnifying Party shall agree. The judgment or decree of a court shall be
deemed final when the time for appeal, if any, shall have expired and no appeal
shall have been taken or when all appeals taken shall have been finally
determined. For purposes of this Article VII, any inaccuracy in or breach of any
representation or warranty shall be determined without regard to any
materiality, material adverse effect or other similar qualification contained in
or otherwise applicable to such representation or warranty.

 

Section 7.07 Payment. With respect to Third Party Claims for which
indemnification is payable hereunder, Indemnifying Party will pay Indemnified
Party promptly after (i) the entry of judgment against the Indemnified Party and
the expiration of any applicable appeal period; (ii) the entry of a
non-appealable judgment or final appellate decision against the Indemnified
Party; or (iii) the execution of any agreement settling any Third Party Claim as
contemplated in Section 7.05(b). Notwithstanding the foregoing, expenses of the
Indemnified Party for which the Indemnifying Party is responsible will be
reimbursed by the Indemnifying Party, upon presentation of reasonably detailed
invoices for such expenses. With respect to any Direct Claims for which
indemnification is payable, Indemnifying Party will promptly pay Indemnified
Party (i) if the Indemnifying Party fails to dispute the Direct Claim, in the
amount of the Direct Claim, or (ii) in accordance with the resolution of a
dispute regarding a Direct Claim.

 

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Section 7.08 Right of Setoff. Upon notice to Seller, Buyer may set off any
amount to which it or any of its Affiliates, including the Company may be
entitled under this Article VII, against any amounts payable to Seller pursuant
to this Agreement, including the Purchase Price and Earn-Out Payments, following
a final resolution reached by mutual agreement of the parties.

 

Section 7.09 Tax Treatment of Indemnification Payments. All indemnification
payments made under this Agreement shall be treated by the parties as an
adjustment to the Purchase Price for Tax purposes, unless otherwise required by
Law.

 

Section 7.10 Exclusive Remedies. Subject to Section 5.13, Section 5.14 and
Section 10.13, the parties acknowledge and agree that their sole and exclusive
remedy with respect to any and all claims (other than claims arising from fraud,
criminal activity or willful misconduct on the part of a party hereto in
connection with the transactions contemplated by this Agreement) for any breach
of any representation, warranty, covenant, agreement or obligation set forth
herein or otherwise relating to the subject matter of this Agreement, shall be
pursuant to the indemnification provisions set forth in Article VII. In
furtherance of the foregoing, each party hereby waives, to the fullest extent
permitted under Law, any and all rights, claims and causes of action for any
breach of any representation, warranty, covenant, agreement or obligation set
forth herein or otherwise relating to the subject matter of this Agreement it
may have against the other parties hereto and their Affiliates and each of their
respective Representatives arising under or based upon any Law, except pursuant
to the indemnification provisions set forth in Article VII. Nothing in this
Section 7.10 shall limit any Person’s right to seek and obtain any equitable
relief to which any Person shall be entitled or to seek any remedy on account of
any party’s fraudulent, criminal or intentional misconduct.

 

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ARTICLE VIII

CERTAIN TAX MATTERS

 

Section 8.01 Tax Returns. Seller shall prepare on behalf of the Company and
timely file, or cause to be prepared and timely filed, all income Tax Returns of
or with respect to the Company for Tax periods ending on or prior to the Closing
Date. Seller shall determine the manner in which any items of income, gain,
deduction, loss or credit arising out of the income, properties and operations
of the Company shall be reported or disclosed in such Tax Returns; provided,
however, that all such Tax Returns shall be prepared in accordance with most
recent past practice, except to the extent otherwise required by applicable Law.
The federal and state income Tax Returns of the Company shall be prepared by
Seller on the basis that the Company’s taxable year will end at the end of the
day on the Closing Date in accordance with the applicable Treasury Regulations.
If needed, Buyer, at the Seller’s expense, shall cause the Company to furnish
Tax information to Seller for use and inclusion in Seller’s federal and state
income Tax Returns for Tax periods ending on or prior to the Closing Date.
Seller shall timely pay all Taxes shown as due on such Tax Returns. If required
under applicable Law, for all taxable periods ending on or before the Closing
Date, Seller shall cause the Company, to the extent consistent with past custom
and practice, to join in the consolidated income Tax Returns of Seller and its
Affiliates. Seller is responsible for any costs incurred by Seller (or Buyer
with respect to the furnishing of information to Seller) in connection with the
preparation and filing of such Tax Returns and if applicable, shall take all
necessary action to promptly reimburse Buyer for such costs.

 

ARTICLE IX

TERMINATION

 

Section 9.01 Termination. Notwithstanding any other provision of this Agreement
to the contrary, this Agreement may be terminated at any time prior to the
Closing:

 

(a) by the mutual written consent of Seller and Buyer;

 

(b) by Buyer by written notice to Seller if:

 

(i) Buyer is not then in material breach of any provision of this Agreement and
there has been a breach, inaccuracy in or failure to perform any representation,
warranty, covenant or agreement made by Seller pursuant to this Agreement that
would give rise to the failure of any of the conditions specified in Articles II
or VI and such breach, inaccuracy or failure is not cured within 30 days after
receipt of written notice thereof from Buyer;

 

(ii) any of the conditions set forth in Articles II or VI shall not have been
fulfilled unless such failure shall be due to the failure of Buyer to perform or
comply with any of the covenants, agreements or conditions hereof to be
performed or complied with by it prior to the Closing; or

 

(c) by Buyer or Seller by written notice to the other in the event that:

 

(i) there shall be any Law that makes consummation of the transactions
contemplated by this Agreement illegal or otherwise prohibited; or

 

 34 

 

  

(ii) any Governmental Authority has issued or entered a Governmental Order
restraining, enjoining or otherwise prohibiting the consummation of the
transactions contemplated by this Agreement, and such Governmental Order has
become final and non-appealable.

 

(d) by Seller by written notice to Buyer if::

 

(i) Seller is not then in material breach of any provision of this Agreement and
there has been a breach, inaccuracy in or failure to perform any representation,
warranty, covenant or agreement made by Buyer pursuant to this Agreement that
would give rise to the failure of any of the conditions specified in Articles II
or VI and such breach, inaccuracy or failure is not cured within 30 days after
receipt of written notice thereof from Seller;

 

(ii) any of the conditions set forth in Articles II or VI shall not have been
fulfilled unless such failure shall be due to the failure of Seller to perform
or comply with any of the covenants, agreements or conditions hereof to be
performed or complied with by it prior to the Closing; or

 

(e) by Seller or Buyer, if any condition set forth in Articles II or VI becomes
incapable of fulfillment through no fault of the party seeking termination and
is not waived by the party seeking termination.

 

Section 9.02 Effect of Termination. In the event of the termination of this
Agreement in accordance with this Article IX, this Agreement shall forthwith
become void and have no further force or effect and there shall be no liability
on the part of any party hereto, except as set forth in this Section 9.02.

 

(a) The provisions of Sections 5.07, 5.11 and Article VII (collectively, the
“Surviving Provisions”), and any other Section or Article of this Agreement
referenced in the Surviving Provisions which is required to survive in order to
give appropriate effect to the Surviving Provisions, shall in each case survive
any termination of this Agreement.

 

(b) Seller shall not be released from any Losses resulting from any material
breach of this Agreement prior to such termination.

 

(c) Nothing in this Section 9.02 shall be deemed to release either party from
any liability for actual fraud.

 

ARTICLE X

MISCELLANEOUS

 

Section 10.01 Expenses. Except as otherwise expressly provided herein, all costs
and expenses, including, without limitation, fees and disbursements of counsel,
financial advisors and accountants, incurred in connection with this Agreement
and the transactions contemplated hereby shall be paid by the party incurring
such costs and expenses, whether or not the Closing shall have occurred.

 

Section 10.02 Notices. All notices, requests, consents, claims, demands, waivers
and other communications hereunder shall be in writing and shall be deemed to
have been given: (a) when delivered by hand (with written confirmation of
receipt); (b) when received by the addressee if sent by a nationally recognized
overnight courier (receipt requested); (c) on the date sent by facsimile or
e-mail of a PDF document (with confirmation of transmission) if sent during
normal business hours of the recipient, and on the next Business Day if sent
after normal business hours of the recipient; or (d) on the third day after the
date mailed, by certified or registered mail, return receipt requested, postage
prepaid. Such communications must be sent to the respective parties at the
following addresses (or at such other address for a party as shall be specified
in a notice given in accordance with this Section 10.02):

 

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If to Seller:

  

Dick A. Glass

President

E-N-G Mobile Systems, Inc.

Tel (925) 798-4060, (800) 662-4522

Cell: (925) 980-6434

Fax (925) 798-0152

E-Mail daglass@e-n-g.com

 

With a copy to (which shall not constitute notice:

 

John F. Gardner, Esq.
Donahue Fitzgerald LLP
1646 N. California Blvd.
Ste. 250
Walnut Creek, CA  94596
Tel:  925.746.7770
Fax: 925.746.7776

 

If to Buyer:

PositiveID Corporation
1690 S Congress Ave, Suite 201
Delray Beach, FL  33445
Telephone: 561-805-8009
bcaragol@psidcorp.com
Attention: William J. Caragol, Chief Executive Officer

 

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

Szaferman, Lakind, Blumstein & Blader, P.C.

101 Grovers Mill Rd., Suite 200

Lawrenceville, NJ 08648

Telephone: 609-275-0400

gjaclin@szaferman.com
Attention: Gregg Jaclin

  

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Section 10.03 Interpretation. For purposes of this Agreement: (a) the words
“include,” “includes” and “including” shall be deemed to be followed by the
words “without limitation”; (b) the words “either,” “or,” “neither,” “nor” and
“any” are not exclusive; (c) the words “herein,” “hereof,” “hereby,” “hereto”
and “hereunder” refer to this Agreement as a whole; and (d) the words
“delivered,” “provided to” and “made available” mean that the referenced
document or other material was given to Buyer and its Representatives such that
Buyer and its Representatives have actual or virtual possession of such document
or other material. Unless the context otherwise requires, references herein:
(x) to Articles, Sections, and Disclosure Schedules mean the Articles and
Sections of, and Disclosure Schedules attached to, this Agreement; (y) to an
agreement, instrument or other document means such agreement, instrument or
other document as amended, supplemented and modified as of the date hereof or
the Closing Date to the extent permitted by the provisions thereof and to the
extent made available to Buyer; and (z) to a Law means such Law as amended from
time to time and includes any successor legislation thereto and all rules and
regulations promulgated thereunder. The parties hereto have participated jointly
in the negotiation and drafting of this Agreement. If an ambiguity or question
of intent or interpretation arises, then this Agreement shall be construed
without regard to any presumption or rule requiring construction or
interpretation against the party drafting an instrument or causing any
instrument to be drafted. The Disclosure Schedules referred to herein shall be
construed with, and as an integral part of, this Agreement to the same extent as
if they were set forth verbatim herein.

 

Section 10.04 Schedules. The Disclosure Schedules contain: (i) information
required to be disclosed pursuant to Section 2.03; and (ii) information required
to be disclosed, and certain exceptions to, the representations and warranties
in Article III and Article IV. Matters set forth in the Disclosure Schedules are
not necessarily limited to matters required by the Agreement to be reflected in
the Disclosure Schedules. Such additional matters are set forth for
informational purposes, and the Disclosure Schedules may not necessarily include
other matters of a similar nature. Nothing in this Agreement or in the
Disclosure Schedules constitutes an admission that any information disclosed,
set forth or incorporated by reference in the Disclosure Schedules or in this
Agreement is material or constitutes a Material Adverse Effect. No disclosure in
the Disclosure Schedules relating to any possible breach or violation of any
contract, Permit or Law will be construed as an admission or indication that any
such breach or violation exists or has actually occurred.

 

Section 10.05 Headings. The headings in this Agreement are for reference only
and shall not affect the interpretation of this Agreement.

 

Section 10.06 Severability. If any term or provision of this Agreement is
invalid, illegal or unenforceable in any jurisdiction, such invalidity,
illegality or unenforceability shall not affect any other term or provision of
this Agreement or invalidate or render unenforceable such term or provision in
any other jurisdiction. Upon such determination that any term or other provision
is invalid, illegal or unenforceable, the parties hereto shall negotiate in good
faith to modify this Agreement so as to effect the original intent of the
parties as closely as possible in order that the transactions contemplated
hereby be consummated as originally contemplated to the greatest extent
possible.

 

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Section 10.07 Entire Agreement. This Agreement and the Disclosure Schedules
attached hereto and the other documents delivered by the parties hereto in
connection herewith constitute the sole and entire agreement of the parties to
this Agreement with respect to the subject matter contained herein and therein,
and supersede all prior and contemporaneous representations, warranties,
understandings and agreements, both written and oral, with respect to such
subject matter. Each party acknowledges that the other party has not, and the
representatives, agents, accountants, and attorneys of the other party have not,
made any promise, representation, or warranty, express or implied, except for
the promises, representations, and warranties expressly provided herein and in
the Disclosure Schedules attached hereto and the other documents delivered by
the parties hereto in connection herewith, concerning the subject matter hereof
or thereof to induce it to execute this Agreement, and each party acknowledges
that it has not executed or authorized the execution of this Agreement in
reliance upon any such promise, representation, or warranty not contained herein
or therein.

 

Section 10.08 Successors and Assigns. This Agreement shall be binding upon and
shall inure to the benefit of the parties hereto and their respective successors
and permitted assigns. No assignment shall relieve the assigning party of any of
its obligations hereunder. Notwithstanding the foregoing, Buyer’s rights,
interests, and obligations hereunder may be assigned to any purchaser of all or
any portion of the assets or equity interests of Buyer, or as a matter of law to
the surviving entity of any merger of Buyer.

 

Section 10.09 No Third-Party Beneficiaries. Except as provided in Section 5.07,
Article VII, this Section 10.09 and Section 10.10, this Agreement is for the
sole benefit of the parties hereto and their respective successors and permitted
assigns and nothing herein, express or implied, is intended to or shall confer
upon any other Person or entity any legal or equitable right, benefit, remedy,
obligation, liability or cause of action of any nature whatsoever under or by
reason of this Agreement.

 

Section 10.10 Cooperation. Seller and Buyer each agree to cooperate, and to
cause the Company to cooperate, with each other and use, and shall cause their
respective Affiliates and Representatives and the Company to use, their
respective reasonable best efforts to take or cause to be taken all actions, and
do or cause to be done all things, necessary, proper or advisable on its part
under this Agreement and applicable Laws to consummate this transaction or to
take any action required after the Closing as promptly as reasonably practicable
(it being understood that nothing contained in this Agreement shall require
Buyer to reach any agreements or understandings in connection with obtaining any
consents, approvals, permits or authorizations ), including (i) preparing and
filing as promptly as reasonably practicable all documentation to effect all
necessary notices, reports and other filings; (ii) obtaining as promptly as
reasonably practicable all consents, registrations, approvals, permits and
authorizations necessary or advisable to be obtained from any third party and/or
any Governmental Authority; (iii) furnishing all information required for any
application or other filing to be made pursuant to any applicable Laws;
(iv) keeping the other parties informed in all material respects of any material
communication received by such party from, or given by such party to, any
Governmental Authority and of any material communication received or given in
connection with any proceeding by a private party, in each case relating to this
transaction; and (v) defending against any lawsuits or other legal proceedings,
whether judicial or administrative, challenging this Agreement or the
consummation of this transaction. Without limiting the foregoing, Seller and
Buyer shall not, and shall cause the Company not to, knowingly take any action,
or knowingly fail to take any action that would reasonably be likely to
materially delay or interfere with the parties’ ability to consummate this
transaction or take any action required after the Closing.

 

Section 10.11 Amendment and Modification; Waiver. This Agreement may only be
amended, modified or supplemented by an agreement in writing signed by each
party hereto. No waiver by any party of any of the provisions hereof shall be
effective unless explicitly set forth in writing and signed by the party so
waiving. No waiver by any party shall operate or be construed as a waiver in
respect of any failure, breach or default not expressly identified by such
written waiver, whether of a similar or different character, and whether
occurring before or after that waiver. No failure to exercise, or delay in
exercising, any right, remedy, power or privilege arising from this Agreement
shall operate or be construed as a waiver thereof; nor shall any single or
partial exercise of any right, remedy, power or privilege hereunder preclude any
other or further exercise thereof or the exercise of any other right, remedy,
power or privilege.

 

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Section 10.12 Governing Law; Submission to Jurisdiction; Waiver of Jury Trial.

 

(a) This Agreement shall be governed by and construed in accordance with the
internal Laws of the State of California without giving effect to any choice or
conflict of law provision or rule (whether of the State of California or any
other jurisdiction).

 

(b) ANY LEGAL SUIT, ACTION OR PROCEEDING ARISING OUT OF OR BASED UPON THIS
AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY MAY BE INSTITUTED IN THE
FEDERAL COURTS OF THE UNITED STATES OF AMERICA OR THE COURTS OF THE STATE OF
CALIFORNIA IN EACH CASE LOCATED IN THE COUNTY OF CONTRA COSTA, AND EACH PARTY
IRREVOCABLY SUBMITS TO THE EXCLUSIVE JURISDICTION OF SUCH COURTS IN ANY SUCH
SUIT, ACTION OR PROCEEDING. SERVICE OF PROCESS, SUMMONS, NOTICE OR OTHER
DOCUMENT BY MAIL TO SUCH PARTY’S ADDRESS SET FORTH HEREIN SHALL BE EFFECTIVE
SERVICE OF PROCESS FOR ANY SUIT, ACTION OR OTHER PROCEEDING BROUGHT IN ANY SUCH
COURT. THE PARTIES IRREVOCABLY AND UNCONDITIONALLY WAIVE ANY OBJECTION TO THE
LAYING OF VENUE OF ANY SUIT, ACTION OR ANY PROCEEDING IN SUCH COURTS AND
IRREVOCABLY WAIVE AND AGREE NOT TO PLEAD OR CLAIM IN ANY SUCH COURT THAT ANY
SUCH SUIT, ACTION OR PROCEEDING BROUGHT IN ANY SUCH COURT HAS BEEN BROUGHT IN AN
INCONVENIENT FORUM.

 

(c) EACH PARTY ACKNOWLEDGES AND AGREES THAT ANY CONTROVERSY WHICH MAY ARISE
UNDER THIS AGREEMENT IS LIKELY TO INVOLVE COMPLICATED AND DIFFICULT ISSUES AND,
THEREFORE, EACH SUCH PARTY IRREVOCABLY AND UNCONDITIONALLY WAIVES TO THE FULLEST
EXTENT PERMITTED BY APPLICABLE LAW ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN
RESPECT OF ANY LEGAL ACTION ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE
TRANSACTIONS CONTEMPLATED HEREBY. EACH PARTY AGREES THAT ANY OF THEM MAY FILE A
COPY OF THIS SECTION 10.12(C) WITH ANY COURT OR OTHER TRIBUNAL AS WRITTEN
EVIDENCE OF THE KNOWING, VOLUNTARY AND BARGAINED-FOR AGREEMENT AMONG THE PARTIES
IRREVOCABLY TO WAIVE TRIAL BY JURY. EACH PARTY TO THIS AGREEMENT CERTIFIES AND
ACKNOWLEDGES THAT (A) NO REPRESENTATIVE OF ANY OTHER PARTY HAS REPRESENTED,
EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT SEEK TO ENFORCE THE
FOREGOING WAIVER IN THE EVENT OF A LEGAL ACTION, (B) SUCH PARTY HAS CONSIDERED
THE IMPLICATIONS OF THIS WAIVER, (C) SUCH PARTY MAKES THIS WAIVER VOLUNTARILY,
AND (D) SUCH PARTY HAS BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER
THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION 10.12(C).

 

 39 

 

  

Section 10.13 Attorneys Fees. If either party commences an action or proceeding
against the other party arising out of or in connection with this Agreement, or
institutes any proceeding in a bankruptcy or similar court which has
jurisdiction over the other party, or any or all of its property or assets, the
prevailing party in such action or proceeding and in any appeal in connection
therewith shall be entitled to have and recover from the unsuccessful party
actual attorneys' fees paid or incurred in good faith, court costs, expenses
(including without limitation experts' fees) and other costs of investigation
and preparation. If such prevailing party recovers a judgment in any such
action, proceeding, or appeal, such actual attorneys' fees paid or incurred in
good faith, court costs, and expenses (including without limitation experts'
fees) shall be included in and as a part of such judgment. "Prevailing Party"
within the meaning of this Section includes, without limitation, the party who
recovered a greater relief in the action or proceeding on the Agreement as well
as a party who agrees to dismiss an action or proceeding on the other party's
payment of the sums allegedly due or performance of the covenants allegedly
defaulted, or who obtains substantially the relief sought by it.

 

Section 10.14 Specific Performance. The Seller acknowledges that irreparable
damage would occur for Buyer if any provision of this Agreement were not
performed in accordance with the terms hereof and that Buyer shall be entitled
to specific performance of the terms hereof, in addition to any other remedy to
which they are entitled at law or in equity or injunctive relief, without the
necessity of proof that any other remedy at law is inadequate.

 

Section 10.15 Counterparts. This Agreement may be executed in counterparts, each
of which shall be deemed an original, but all of which together shall be deemed
to be one and the same agreement. A signed copy of this Agreement delivered by
facsimile, e-mail or other means of electronic transmission shall be deemed to
have the same legal effect as delivery of an original signed copy of this
Agreement.

 

[Signature Page Follows]

 

 40 

 

  

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
as of the date first written above by their respective officers thereunto duly
authorized.

 

  DICK GLASS, IN HIS INDIVIDUAL CAPACITY AS SOLE SHAREHOLDER OF E-N-G MOBILE
SYSTEMS, INC.               By: /s/ Dick Glass   Name: Dick Glass, in his
individual capacity as Sole Shareholder of E-N-G Mobile Systems, Inc.

 

 

[Seller Signature Page to Stock Purchase Agreement]

 

 

 

  

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
as of the date first written above by their respective officers thereunto duly
authorized.

 

  POSITIVEID CORPORATION               By: /s/ William J. Caragol   Name:
William J. Caragol   Title: Chief Executive Officer

 

 

[Buyer Signature Page to the Stock Purchase Agreement]