Confidential Treatment Requested and appropriate disclosure that a certain
portion of the Exhibit has been omitted based upon a request for confidential
treatment. A confidential portion of this document have been redacted and has
been separately filed with the Commission.

 

 

LLC OWNERSHIP INTEREST PURCHASE AGREEMENT

 

This LLC Ownership Interest Purchase Agreement ("Agreement") is made as of
September ___, 2012 by Vystar Corporation, a Georgia corporation ("Vystar" or
"Buyer") and Mary Ailene Miller, an individual resident in _________ County,
_________("Seller") for the consideration and on the terms set forth in this
Agreement

 

RECITALS

 

Seller desires to sell, and Buyer desires to purchase, all of the issued and
outstanding limited liability corporate membership and ownership Interest (the "
Ownership Interest") of SleepHealth, LLC ("Company"), and its subsidiaries and
related companies, including specifically, SleepHealth North Carolina, LLC
(collectively referred to as the "Acquired Companies").

 

AGREEMENT

 

The parties, intending to be legally bound, agree as follows:

 

1. DEFINITIONS

 

For purposes of this Agreement, the following terms have the meanings specified
or referred to in this Section 1:

 

"Acquired Companies"—the Companies and any Subsidiaries or companies under
comment ownership, collectively.

 

"Adjustment Amount"—as defined in Section 2.5.

 

"Applicable Contract"—any Contract (a) under which any Acquired Company has or
may acquire any rights, (b) under which any Acquired Company has or may become
subject to any obligation or liability, or (c) by which any Acquired Company or
any of the assets owned or used by it is or may become bound.

 

"Balance Sheet"—as defined in Section 3.4.

 

"Best Efforts"—the efforts that a prudent Person desirous of achieving a result
would use in similar circumstances to ensure that such result is achieved as
expeditiously as possible [ provided, however, that an obligation to use Best
Efforts under this Agreement does not require the Person subject to that
obligation to take actions that would result in a materially adverse change in
the benefits to such Person of this Agreement and the Contemplated
Transactions].

 

"Breach"—a "Breach" of a representation, warranty, covenant, obligation, or
other provision of this Agreement or any instrument delivered pursuant to this
Agreement will be deemed to have occurred if there is or has been (a) any
inaccuracy in or breach of, or any failure to perform or comply with, such
representation, warranty, covenant, obligation, or other provision, or (b) any
claim (by any Person) or other occurrence or circumstance that is or was
inconsistent with such representation, warranty, covenant, obligation, or other
provision, and the term "Breach" means any such inaccuracy, breach, failure,
claim, occurrence, or circumstance.

 

"Buyer"—as defined in the first paragraph of this Agreement.

 

"Closing"—as defined in Section 2.3.

 

"Closing Date"—the date and time as of which the Closing actually takes place.

 

"Company"—as defined in the Recitals of this Agreement.

 

"Consent"—any approval, consent, ratification, waiver, or other authorization
(including any Governmental Authorization).

 

1

 

 

"Contemplated Transactions"—all of the transactions contemplated by this
Agreement, including:

(a) the sale of the Ownership Interest by Seller to Buyer;

(b) the execution, delivery, and performance of the Promissory Note, the
Noncompetition Agreements, the Seller's Releases, and the Escrow Agreement;

(c) the performance by Buyer and Seller of their respective covenants and
obligations under this Agreement; and

(d) Buyer's acquisition and ownership of the Ownership Interest and exercise of
control over the Acquired

Companies.

 

"Contract"—any agreement, contract, obligation, promise, or undertaking (whether
written or oral and whether express or implied) that is legally binding.

 

"Damages"—as defined in Section 10.2.

 

"Disclosure Letter"—the disclosure letter delivered by Seller to Buyer
concurrently with the execution and delivery of this Agreement.

 

"Encumbrance"—any charge, claim, community property Ownership Interest,
condition, equitable Ownership Interest, lien, option, pledge, security
Ownership Interest, right of first refusal, or restriction of any kind,
including any restriction on use, voting, transfer, receipt of income, or
exercise of any other attribute of ownership.

 

"Environment"—soil, land surface or subsurface strata, surface waters (including
navigable waters, ocean waters, streams, ponds, drainage basins, and wetlands),
groundwaters, drinking water supply, stream sediments, ambient air (including
indoor air), plant and animal life, and any other environmental medium or
natural resource.

 

"Environmental, Health, and Safety Liabilities"—any cost, damages, expense,
liability, obligation, or other responsibility arising from or under
Environmental Law or Occupational Safety and Health Law and consisting of or
relating to:

(a) any environmental, health, or safety matters or conditions (including
on-site or off-site contamination, occupational safety and health, and
regulation of chemical substances or products);

(b) fines, penalties, judgments, awards, settlements, legal or administrative
proceedings, damages, losses, claims, demands and response, investigative,
remedial, or inspection costs and expenses arising under Environmental Law or
Occupational Safety and Health Law;

(c) financial responsibility under Environmental Law or Occupational Safety and
Health Law for cleanup costs or corrective action, including any investigation,
cleanup, removal, containment, or other remediation or response actions
("Cleanup") required by applicable Environmental Law or Occupational Safety and
Health Law (whether or not such Cleanup has been required or

requested by any Governmental Body or any other Person) and for any natural
resource damages; or

(d) any other compliance, corrective, investigative, or remedial measures
required under Environmental Law or Occupational Safety and Health Law.

 

The terms "removal," "remedial," and "response action," include the types of
activities covered by the United States Comprehensive Environmental Response,
Compensation, and Liability Act, 42 U.S.C. § 9601 et seq., as amended
("CERCLA").

 

"Environmental Law" —any Legal Requirement that requires or relates to:

(a) advising appropriate authorities, employees, and the public of intended or
actual releases of pollutants or hazardous substances or materials, violations
of discharge limits, or other prohibitions and of the commencements of
activities, such as resource extraction or construction, that could have
significant impact on the Environment;

(b) preventing or reducing to acceptable levels the release of pollutants or
hazardous substances or materials into the Environment;

 

2

 

 

(c) reducing the quantities, preventing the release, or minimizing the hazardous
characteristics of wastes that are generated;

(d) assuring that products are designed, formulated, packaged, and used so that
they do not present unreasonable risks to human health or the Environment when
used or disposed of;

(e) protecting resources, species, or ecological amenities;

(f) reducing to acceptable levels the risks inherent in the transportation of
hazardous substances, pollutants, oil, or other potentially harmful substances;

(g) cleaning up pollutants that have been released, preventing the threat of
release, or paying the costs of such clean up or prevention; or

(h) making responsible parties pay private parties, or groups of them, for
damages done to their health or the Environment, or permitting self-appointed
representatives of the public interest to recover for injuries done to public
assets.

 

"Facilities"—any real property, leaseholds, or other interests currently or
formerly owned or operated by any Acquired Company and any buildings, plants,
structures, or equipment (including motor vehicles, tank cars, and rolling
stock) currently or formerly owned or operated by any Acquired Company.

 

"GAAP"—generally accepted United States accounting principles, applied on a
basis consistent with the basis on which the Balance Sheet and the other
financial statements referred to in Section 3.4(b) were prepared.

 

"Governmental Authorization"—any approval, consent, license, permit, waiver, or
other authorization issued, granted, given, or otherwise made available by or
under the authority of any Governmental Body or pursuant to any Legal
Requirement.

 

"Governmental Body"—any:

(a) nation, state, county, city, town, village, district, or other jurisdiction
of any nature;

(b) federal, state, local, municipal, foreign, or other government;

(c) governmental or quasi- governmental authority of any nature (including any
governmental agency, branch, department, official, or entity and any court or
other tribunal);

(d) multi- national organization or body; or

(e) body exercising, or entitled to exercise, any administrative, executive,
judicial, legislative,

police, regulatory, or taxing authority or power of any nature.

 

"Hazardous Materials"—any waste or other substance that is listed, defined,
designated, or classified as, or otherwise determined to be, hazardous,
radioactive, or toxic or a pollutant or a contaminant under or pursuant to any
Environmental Law, including any admixture or solution thereof, and specifically
including petroleum and all derivatives thereof or synthetic substitutes
therefor and asbestos or asbestos-containing materials.

 

"Intellectual Property Assets" —as defined in Section 3.22.

 

"Interim Balance Sheet"—as defined in Section 3.4.

 

"IRC"—the Internal Revenue Code of 1986 or any successor law, and regulations
issued by the IRS pursuant to the Internal Revenue Code or any successor law.

 

"IRS"—the United States Internal Revenue Service or any successor agency, and,
to the extent relevant, the United States Department of the Treasury.

 

"Knowledge"—an individual will be deemed to have "Knowledge" of a particular
fact or other matter if:

(a) such individual is actually aware of such fact or other matter; or

(b) a prudent individual could be expected to discover or otherwise become aware
of such fact or other matter in the course of conducting a reasonably
comprehensive investigation concerning

the existence of such fact or other matter.

 

3

 

 

A Person (other than an individual) will be deemed to have "Knowledge" of a
particular fact or other matter if any individual who is serving, or who has at
any time served, as a director, officer, partner, executor, or trustee of such
Person (or in any similar capacity) has, or at any time had, Knowledge of such
fact or other matter.

 

"Legal Requirement"—any federal, state, local, municipal, foreign,
international, multinational, or other administrative order, constitution, law,
ordinance, principle of common law, regulation, statute, or treaty.

 

"Material Adverse Effect" means any change, event, state of facts or effect
(each being an "Effect") that is materially adverse to the business of either of
the Acquired Companies or when aggregated could be to the combined Acquired
Companies or to Buyer upon or after acquisition of the Acquired Companies.

 

"Occupational Safety and Health Law" —any Legal Requirement designed to provide
safe and healthful working conditions and to reduce occupational safety and
health hazards, and any program, whether governmental or private (including
those promulgated or sponsored by industry associations and insurance
companies), designed to provide safe and healthful working conditions.

 

"Order"—any award, decision, injunction, judgment, order, ruling, subpoena, or
verdict entered, issued, made, or rendered by any court, administrative agency,
or other Governmental Body or by any arbitrator.

 

"Ordinary Course of Business"—an action taken by a Person will be deemed to have
been taken in the "Ordinary Course of Business" only if:

(a) such action is consistent with the past practices of such Person and is
taken in the ordinary course of the normal day-to-day operations of such Person;

(b) such action is not required to be authorized by the board of directors of
such Person (or by any Person or group of Persons exercising similar authority)
[and is not required to be specifically authorized by the parent company (if
any) of such Person]; and

(c) such action is similar in nature and magnitude to actions customarily taken,
without any authorization by the board of directors (or by any Person or group
of Persons exercising similar authority), in the ordinary course of the normal
day-to-day operations of other Persons that are in the same line of business as
such Person.

 

"Organizational Documents"—(a) ]\ Operating Agreements and any Articles of
Organization; and (b) any amendment to any of the foregoing.

 

"Ownership Interest” – as defined in the recitals to this Agreement.

 

"Person"—any individual, corporation (including any non-profit corporation),
general or limited partnership, limited liability company, joint venture,
estate, trust, association, organization, labor union, or other entity or
Governmental Body.

 

"Proceeding"—any action, arbitration, audit, hearing, investigation, litigation,
or suit (whether civil, criminal, administrative, investigative, or informal)
commenced, brought, conducted, or heard by or before, or otherwise involving,
any Governmental Body or arbitrator.

 

"Promissory Notes"—as defined in Section 2.4(b)(ii).

 

"Related Person"—with respect to a particular individual:

(a) each other member of such individual's Family;

(b) any Person that is directly or indirectly controlled by such individual or
one or more members of such individual's Family;

(c) any Person in which such individual or members of such individual's Family
hold (individually or in the aggregate) a Material Interest; and

(d) any Person with respect to which such individual or one or more members of
such individual's Family serves as a director, officer, partner, executor, or
trustee (or in a similar capacity).

With respect to a specified Person other than an individual:

 

4

 

 

(a) any Person that directly or indirectly controls, is directly or indirectly
controlled by, or is directly or indirectly under common control with such
specified Person;

(b) any Person that holds a Material Interest in such specified Person;

(c) each Person that serves as a director, officer, partner, manager executor,
or trustee of such specified Person (or in a similar capacity);

(d) any Person in which such specified Person holds a Material Interest;

(e) any Person with respect to which such specified Person serves as a general
partner, manager or a trustee (or in a similar capacity); and

(f) any Related Person of any individual described in clause (b) or (c).

 

For purposes of this definition, (a) the "Family" of an individual includes (i)
the individual, (ii) the individual's spouse [and former spouses], (iii) any
other natural person who is related to the individual or the individual's spouse
within the second degree, and (iv) any other natural person who resides with
such individual, and (b) "Material Interest" means direct or indirect beneficial
ownership (as defined in Rule 13d-3 under the Securities Exchange Act of 1934)
of voting securities or other voting interests representing at least 20% of the
outstanding voting power of a Person or equity securities or other equity
interests representing at least 20% of the outstanding equity or equity
interests in a Person..

 

"Representative"—with respect to a particular Person, any director, officer,
employee, agent, consultant, advisor, or other representative of such Person,
including legal counsel, accountants, and financial advisors.

 

"Securities Act"—the Securities Act of 1933 or any successor law, and
regulations and rules issued pursuant to that Act or any successor law.

 

"Seller"—as defined in the first paragraph of this Agreement.

 

"Seller's Release"—as defined in Section 2.4.

 

"Subsidiary"—with respect to any Person (the "Owner"), any corporation or other
Person of which securities or other interests having the power to elect a
majority of that corporation's or other Person's board of directors or similar
governing body, or otherwise having the power to direct the business and
policies of that corporation or other Person (other than securities or other
interests having such power only upon the happening of a contingency that has
not occurred) are held by the Owner or one or more of its Subsidiaries; when
used without reference to a particular Person, "Subsidiary" means a Subsidiary
of the Company.

 

"Tax Return"—any return (including any information return), report, statement,
schedule, notice, form, or other document or information filed with or submitted
to, or required to be filed with or submitted to, any Governmental Body in
connection with the determination, assessment, collection, or payment of any Tax
or in connection with the administration, implementation, or enforcement of or
compliance with any Legal Requirement relating to any Tax.

 

"Threatened"—a claim, Proceeding, dispute, action, or other matter will be
deemed to have been "Threatened" if any demand or statement has been made
(orally or in writing) or any notice has been given (orally or in writing), or
if any other event has occurred or any other circumstances exist, that would
lead a prudent Person to conclude that such a claim, Proceeding, dispute,
action, or other matter is likely to be asserted, commenced, taken, or otherwise
pursued in the future.

5

 

 

2. SALE AND TRANSFER OFOWNERSHIP INTEREST; CLOSING

 

2.1OWNERSHIP INTEREST

Subject to the terms and conditions of this Agreement, at the Closing, Seller
will sell and transfer the Ownership Interest to Buyer, and Buyer will purchase
the Ownership Interest from Seller.

 

2.2 PURCHASE PRICE

The purchase price (the "Purchase Price") for the Ownership Interest will be
$409,930 minus the Adjustment Amount if necessary based upon the Adjustment
Procedure. The Purchase Price shall be paid fifty percent (50%) in cash, or
$204,965 in cash, and fifty percent (50%) in stock, or $204,965 worth in shares
of the Buyer. The Buyer shares shall be priced at $.29/share for a total of
706,776 shares.

 

2.3 CLOSING

The purchase and sale (the "Closing") provided for in this Agreement will take
place at the offices of Buyer at 3235 Satellite Blvd., Bldg 400, Suite 290,
Duluth, GA 30096, at 3 pm (local time) on September 13, 2012, or at such time
and place as the parties may agree.

 

2.4 CLOSING OBLIGATIONS.

At the Closing each party shall deliver to the other party those items set forth
below, which shall operate as conditions precedent to the obligation to close:

(a) Seller will deliver to Buyer:

(i) certificates representing the Ownership Interest, duly endorsed (or if the
Ownership Interest is not certified, an Assignment of Ownership Interest in the
form of Exhibit 2.4(a)(i) for transfer to Buyer;

(ii) release in the form of Exhibit 2.4(a)(ii) executed by Seller (collectively,
"Seller's Release"); and

(iii) a certificate executed by Seller representing and warranting to Buyer that
each of Seller' representations and warranties in this Agreement was accurate in
all respects as of the date of this Agreement and is accurate in all respects as
of the Closing Date as if made on the Closing Date (giving full effect to any
supplements to the Disclosure Letter that were delivered by Seller to Buyer
prior to the Closing Date in accordance with Section 5.5);

 

(b) Buyer will deliver to Seller:

(i) $53,734.50 by bank cashier's or certified check payable to the order of Mary
Ailene Miller, or by wire transfer to accounts specified by Seller;

(ii) a promissory note payable to Seller in the principal amounts of $33,734.50
in the form of Exhibit 2.4(b) (the "Promissory Note");;

(iii) a stock certificate representing 636,098 shares of common stock in the
Company;

(iv) a certificate executed by Buyer to the effect that, except as otherwise
stated in such certificate, each of Buyer's representations and warranties in
this Agreement was accurate in all respects as of the date of this Agreement and
is accurate in all respects as of the Closing Date as if made on the Closing
Date; and

(v) the remaining $97,000 shall be paid by satisfying, in their entirety, the
other debts due (Hibbard, **********, Wells Fargo).

 

2.5 ADJUSTMENT AMOUNT

The Adjustment Amount will be equal to ten percent (10%) of the Purchase Price,
or $40,993. One-half (1/2), or $20,496.50 shall be in held in stock of Buyer and
one-half (1/2) shall be held in cash pending the Adjustment Procedure results.
The Adjustment Amount shall be held back from payment or delivery to Seller
pending application of the Adjustment Procedure described in Section 2.6 below
to determine whether such Adjustment Amount should be paid to Seller in
accordance with the Adjustment Procedure. The Adjustment Amount shall be
reflected in a second promissory note, in the form of Exhibit 2.5. The
Adjustment Amount that is to be paid in Buyer shares shall be priced as of the
Closing Date, but shall not be issued until the Adjustment Procedure results
have determined Buyer is in fact eligible for receiving those shares.

 

**********THIS PORTION OF THIS EXHIBIT HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT

 

6

 

 

2.6 ADJUSTMENT PROCEDURE

In connection with the audit of its 2012 financial statements, Buyer will cause
its certified public accountants, to prepare a calculation of the Acquired
Companies' earnings before interest, taxes, depreciation and amortization
("EBITDA") for the year ended December 3l, 2012. In the event that EBITDA is
equal to or greater than $129,140, the Adjustment Amount shall be paid to Seller
as set forth herein. In the event that EBITDA is less than $129,140, the
Adjustment Amount shall be adjusted downward in a pro rata manner. To eliminate
any uncertainty, if, for example, the EBITDA was 100,000, the Adjustment Amount
would be $100,000 divided by $129,140 times the original Adjustment Amount
($40,993), i.e., $31,743. Any such downward adjustment in the Adjustment Amount
shall be made pro rata from the cash and stock portions of the Adjustment Amount
unless otherwise agreed to by the parties. In the event that the Adjustment
Amount is due and payable to Seller, such Adjustment Amount shall be paid by
Buyer as set forth in the Promissory Note.

 

3. REPRESENTATIONS AND WARRANTIES OF SELLER.

Seller represents and warrants to Buyer as follows:

 

3.1 ORGANIZATION AND GOOD STANDING

(a) Part 3.1 of the Disclosure Letter contains a complete and accurate list for
each Acquired Company of its name, its jurisdiction of incorporation or
formation, other jurisdictions in which it is authorized to do business, and its
capitalization (including the identity of each ownership interest and the amount
or percentage of Ownership Interest held by each). Each Acquired Company is a
limited liability company duly organized, validly existing, and in good standing
under the laws of its jurisdiction of organization, with full corporate power
and authority to conduct its business as it is now being conducted, to own or
use the properties and assets that it purports to own or use, and to perform all
its obligations under Applicable Contracts. Each Acquired Company is duly
qualified to do business as a foreign corporation and is in good standing under
the laws of each state or other jurisdiction in which either the ownership or
use of the properties owned or used by it, or the nature of the activities
conducted by it, requires such qualification.

 

(b) Seller has delivered to Buyer copies of the Organizational Documents of each
Acquired Company, as currently in effect.

 

3.2 AUTHORITY; NO CONFLICT

(a) This Agreement constitutes the legal, valid, and binding obligation of
Seller, enforceable against Seller in accordance with its terms. Upon the
execution and delivery by Seller of the Seller's Release, and the Assignment of
Ownership Interest (collectively, the "Seller' Closing Documents"), the Seller'
Closing Documents will constitute the legal, valid, and binding obligations of
Seller, enforceable against Seller in accordance with their respective terms.
Seller has the absolute and unrestricted right, power, authority, and capacity
to execute and deliver this Agreement and the Seller's Closing Documents and to
perform her obligations under this Agreement and the Seller's Closing Documents.

 

(b) Unless set forth in Part 3.2 of the Disclosure Letter, neither the execution
and delivery of this Agreement nor the consummation or performance of any of the
Contemplated Transactions will, directly or indirectly (with or without notice
or lapse of time):

(i) contravene, conflict with, or result in a violation of (A) any provision of
the Organizational Documents of the Acquired Companies, or (B) any resolution
adopted by the board of directors or the owner members or managers of any
Acquired Company;

(ii) contravene, conflict with, or result in a violation of, or give any
Governmental Body or other Person the right to challenge any of the Contemplated
Transactions or to exercise any remedy or obtain any relief under, any Legal
Requirement or any Order to which any Acquired Company or Seller, or any of the
assets owned or used by any Acquired Company, may be subject;

(iii) contravene, conflict with, or result in a violation of any of the terms or
requirements of, or give any Governmental Body the right to revoke, withdraw,
suspend, cancel, terminate, or modify, any Governmental Authorization that is
held by any Acquired Company or that otherwise relates to the business of, or
any of the assets owned or used by, any Acquired Company;

(iv) cause Buyer or any Acquired Company to become subject to, or to become
liable for the payment of, any Tax;

 

7

 

 

(v) cause any of the assets owned by any Acquired Company to be reassessed or
revalued by any taxing authority or other Governmental Body;

(vi) contravene, conflict with, or result in a violation or breach of any
provision of, or give any Person the right to declare a default or exercise any
remedy under, or to accelerate the maturity or performance of, or to cancel,
terminate, or modify, any Applicable Contract; or

(vii) result in the imposition or creation of any Encumbrance upon or with
respect to any of the assets owned or used by any Acquired Company; or

(viii) any accelerations of any liability owed by any Acquired Company.

 

Unless set forth in Part 3.2 of the Disclosure Letter, neither Seller nor any
Acquired Company is or will be required to give any notice to or obtain any
Consent from any Person in connection with the execution and delivery of this
Agreement or the consummation or performance of any of the Contemplated
Transactions.

 

(c) Seller is acquiring the Promissory Note and/or Stock of Buyer for her own
account and not with a view to their distribution within the meaning of Section
2(11) of the Securities Act.

 

3.3 CAPITALIZATION

The authorized equity securities of the Company consist of one hundred percent
(100%) of the membership and ownership interest of Sleephealth, LLC which are
issued and outstanding to Mary Ailene Miller, which includes all of the issued
and outstanding membership ownership interest of Sleephealth NC, LLC which are
owned by SleepHealth, LLC and which together constitute the Ownership Interest.
Seller is and will be on the Closing Date the record and beneficial owner and
holder of the all of the Ownership Interest, free and clear of all Encumbrances.
With the exception of the Ownership Interest (which are owned by Seller), all of
the outstanding equity securities, ownership and/or other securities of each
Acquired Company are owned of record and beneficially by one or more of the
Acquired Companies, free and clear of all Encumbrances. No legend or other
reference to any purported Encumbrance appears upon any certificate representing
equity securities of any Acquired Company. All of the outstanding equity
securities of each Acquired Company have been duly authorized and validly issued
and are fully paid and nonassessable. There are no Contracts relating to the
issuance, sale, or transfer of any equity securities or other securities of any
Acquired Company. None of the outstanding equity securities or other securities
of any Acquired Company was issued in violation of the Securities Act or any
other Legal Requirement. No Acquired Company owns, or has any Contract to
acquire, any equity securities or other securities of any Person (other than
Acquired Companies) or any direct or indirect equity or ownership interest in
any other business.

 

3.4 FINANCIAL STATEMENTS

Seller has delivered to Buyer: (a) [unaudited] consolidated balance sheets of
the Acquired Companies as of December 31, 2011.Such financial statements and
notes fairly present the financial condition and the results of operations,
changes in stockholders' equity, and cash flow of the Acquired Companies as at
the respective dates of and for the periods referred to in such financial
statements, all in accordance with GAAP [, subject, in the case of interim
financial statements, to normal recurring year-end adjustments (the effect of
which will not, individually or in the aggregate, be materially adverse) and the
absence of notes (that, if presented, would not differ materially from those
included in the Balance Sheet)]; the financial statements referred to in this
Section 3.4 reflect the consistent application of such accounting principles
throughout the periods involved [, except as disclosed in the notes to such
financial statements]. No financial statements of any Person other than the
Acquired Companies are required by GAAP to be included in the consolidated
financial statements of the Company.

 

3.5 BOOKS AND RECORDS

The books of account, minute books, stock record books, and other records of the
Acquired Companies, all of which have been made available to Buyer, are complete
and correct and have been maintained in accordance with sound business
practices, GAAP and the requirements of Section 13(b)(2) of the Securities
Exchange Act of 1934, as amended (regardless of whether or not the Acquired
Companies are subject to that Section), including the maintenance of an adequate
system of internal controls. The minute books of the Acquired Companies contain
accurate and complete records.

 

8

 

 

3.6 TITLE TO PROPERTIES; ENCUMBRANCES

Part 3.6 of the Disclosure Letter contains a complete and accurate list of all
real property, leaseholds, or other interests therein owned by any Acquired
Company. [Seller have delivered or made available to Buyer copies of the deeds,
leases and other instruments (as recorded) by which the Acquired Companies
acquired such real property and interests, and copies of all title insurance
policies, opinions, abstracts, and surveys in the possession of Seller or the
Acquired Companies and relating to such property or interests.] The Acquired
Companies own all the properties and assets (whether real, personal, or mixed
and whether tangible or intangible) that they purport to own [located in the
facilities owned or operated by the Acquired Companies or reflected as owned in
the books and records of the Acquired Companies], including all of the
properties and assets reflected in the Balance Sheet and the Interim Balance
Sheet (except for assets held under capitalized leases disclosed in Part 3.6 of
the Disclosure Letter and personal property sold or acquired since the date of
the Balance Sheet and the Interim Balance Sheet, as the case may be, in the
Ordinary Course of Business), and all of the properties and assets purchased or
otherwise acquired by the Acquired Companies since the date of the Balance Sheet
(except for personal property acquired and sold since the date of the Balance
Sheet in the Ordinary Course of Business and consistent with past practice) [,
which subsequently purchased or acquired properties and assets (other than
inventory ) are listed in Part 3.6 of the Disclosure Letter]. All material
properties and assets reflected in the Balance Sheet and the Interim Balance
Sheet are free and clear of all Encumbrances and are not, in the case of real
property, subject to any rights of way, building use restrictions, exceptions,
variances, reservations, or limitations of any nature except, with respect to
all such properties and assets, (a) mortgages or security Ownership Interests
shown on the Balance Sheet or the Interim Balance Sheet as securing specified
liabilities or obligations, with respect to which no default (or event that,
with notice or lapse of time or both, would constitute a default) exists, (b)
mortgages or security Ownership Interests incurred in connection with the
purchase of property or assets after the date of the Interim Balance Sheet (such
mortgages and security Ownership Interests being limited to the property or
assets so acquired), with respect to which no default (or event that, with
notice or lapse of time or both, would constitute a default) exists, (c) liens
for current taxes not yet due.

 

3.7 CONDITION AND SUFFICIENCY OF ASSETS

The structures, and equipment of the Acquired Companies are structurally sound,
are in good operating condition and repair, and are adequate for the uses to
which they are being put, and none of such structures, or equipment is in need
of maintenance or repairs except for ordinary, routine maintenance and repairs
that are not material in nature or cost. The structures, and equipment of the
Acquired Companies are sufficient for the continued conduct of the Acquired
Companies' businesses after the Closing in substantially the same manner as
conducted prior to the Closing.

 

3.8 ACCOUNTS RECEIVABLE

All accounts receivable of the Acquired Companies that are reflected on the
Balance Sheet or the Interim Balance Sheet or on the accounting records of the
Acquired Companies as of the Closing Date (collectively, the "Accounts
Receivable") represent or will represent valid obligations arising from sales
actually made or services actually performed in the Ordinary Course of Business.
Unless paid prior to the Closing Date, the Accounts Receivable are or will be as
of the Closing Date current and collectible net of the respective reserves shown
on the Balance Sheet or the Interim Balance Sheet or on the accounting records
of the Acquired Companies as of the Closing Date (which reserves are adequate
and calculated consistent with past practice and, in the case of the reserve as
of the Closing Date, will not represent a greater percentage of the Accounts
Receivable as of the Closing Date than the reserve reflected in the Interim
Balance Sheet represented of the Accounts Receivable reflected therein and will
not represent a material adverse change in the composition of such Accounts
Receivable in terms of aging). Subject to such reserves, each of the Accounts
Receivable either has been or will be collected in full, without any set-off,
within ninety days after the day on which it first becomes due and payable.
There is no contest, claim, or right of set-off, other than returns in the
Ordinary Course of Business, under any Contract with any obligor of an Accounts
Receivable relating to the amount or validity of such Accounts Receivable. Part
3.8 of the Disclosure Letter contains a complete and accurate list of all
Accounts Receivable as of the date of the Interim Balance Sheet, which list sets
forth the aging of such Accounts Receivable.

 

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3.9 INVENTORY

All inventory of the Acquired Companies, whether or not reflected in the Balance
Sheet or the Interim Balance Sheet, consists of a quality and quantity usable or
salable in the Ordinary Course of Business, except for obsolete items and items
of below-standard quality, all of which have been written off or written down to
net realizable value in the Balance Sheet or the Interim Balance Sheet or on the
accounting records of the Acquired Companies as of the Closing Date, as the case
may be. All inventories not written off have been priced at the lower of cost or
market on a first in, first out basis. The quantities of each item of inventory
(whether raw materials, work- in-process, or finished goods) are not excessive,
but are reasonable in the present circumstances of the Acquired Companies.

 

3.10 NO UNDISCLOSED LIABILITIES

Unless set forth in Part 3.10 of the Disclosure Letter, the Acquired Companies
have no liabilities or obligations of any nature (whether known or unknown and
whether absolute, accrued, contingent, or otherwise) except for liabilities or
obligations reflected or reserved against in the Balance Sheet or the Interim
Balance Sheet and current liabilities incurred in the Ordinary Course of
Business since the respective dates thereof.

 

3.11 TAXES

(a) The Acquired Companies have filed or caused to be filed (on a timely basis
since) all Tax Returns that are or were required to be filed by or with respect
to any of them, either separately or as a member of a group of corporations,
pursuant to applicable Legal Requirements. Seller has delivered or made
available to Buyer copies of such, and Part 3.11 of the Disclosure Letter
contains a complete and accurate list of, all such Tax Returns filed since 2009.
The Acquired companies have paid, or made provision for the payment of, all
Taxes that have or may have become due pursuant to those Tax Returns or
otherwise, or pursuant to any assessment received by Seller or any Acquired
Company, except such Taxes, if any, as are listed in Part 3.11 of the Disclosure
Letter and are being contested in good faith and as to which adequate reserves
(determined in accordance with GAAP) have been provided in the Balance Sheet and
the Interim Balance Sheet.

 

(b)There have been no audits nor any deficiencies assessed against the Seller or
an Acquired Company at any time. No Seller or Acquired Company has given or been
requested to give waivers or extensions (or is or would be subject to a waiver
or extension given by any other Person) of any statute of limitations relating
to the payment of Taxes of any Acquired Company or for which any Acquired
Company may be liable.

 

(c) The charges, accruals, and reserves with respect to Taxes on the respective
books of each Acquired Company are adequate (determined in accordance with GAAP)
and are at least equal to that Acquired Company's liability for Taxes. There
exists no proposed tax assessment against any Acquired Company except as
disclosed in the Balance Sheet or in Part 3.11 of the Disclosure Letter. No
consent to the application of Section 341(f)(2) of the IRC has been filed with
respect to any property or assets held, acquired, or to be acquired by any
Acquired Company. All Taxes that any Acquired Company is or was required by
Legal Requirements to withhold or collect have been duly withheld or collected
and, to the extent required, have been paid to the proper

Governmental Body or other Person.

 

(d) All Tax Returns filed by (or that include on a consolidated basis) any
Acquired Company are true, correct, and complete. There is no tax sharing
agreement that will require any payment by any Acquired Company after the date
of this Agreement. [During the consistency period (as defined in Section
338(h)(4) of the IRC with respect to the sale of the Ownership Interest to
Buyer), no Acquired Company or target affiliate (as defined in Section 338(h)(6)
of the IRC with respect to the sale of the Ownership Interest to Buyer) has sold
or will sell any property or assets to Buyer or to any member of the affiliated
group (as defined in Section 338(h)(5) of the IRC) that includes Buyer. Part
3.11 of the Disclosure Letter lists all such target affiliates.]

 

3.12 NO MATERIAL ADVERSE CHANGE

Since the date of the Balance Sheet, there has not been any material adverse
change in the business, operations, properties, prospects, assets, or condition
of any Acquired Company, and no event has occurred or circumstance exists that
may result in such a material adverse change.

 

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3.13 EMPLOYEE BENEFITS

(a) unless described in the Disclosure Letter, Seller warrants and represents
that it has no Company plans, or voluntary employees' beneficiary association
under IRC §501(c)(9), or other Company benefit obligations plans that are (A)
defined benefit Pension Plans (ERISA §3(2)(A), (B) Qualified Plans (IRC
§401(a)), (C) Title IV Plans (ERISA, 29 USC §130 et. seq.), (D) ERISA Plans or
(E) Union agreements or collective bargaining agreements. Further, neither
Seller nor any Acquired Company has Knowledge of any facts or circumstances that
may give rise to any liability of Seller, or any Acquired Company, or Buyer
under any plan or obligation referenced herein.

 

(b) Seller has delivered to Buyer:

(i) all personnel, payroll, and employment manuals and policies;

(ii) all notices that were given by the IRS, or the Department of Labor to any
Acquired Company, or any Company Plan within the four years preceding the date
of this Agreement;

 

(c) Except as set forth in Part 3.13of the Disclosure Letter:

(i) The Acquired Companies have no obligations under any Company plans, or
Company benefit obligations. The Acquired Companies have made appropriate
entries in their financial records and statements for all obligations and
liabilities under such plans and Obligations that have accrued but are not due.
No Seller or Acquired Company has any liability to the IRS for any such plans or
Obligations.

(ii) No Acquired Company provides health or welfare benefits for any retired or
former employee or is obligated to provide health or welfare benefits to any
active employee following such employee's retirement or other termination of
service.

(iii) Each Acquired Company has the right to modify and terminate benefits to
employees, with respect to both retired and active employees.

(iv) The consummation of the Contemplated Transactions will not result in the
payment, vesting, or acceleration of any benefit.

 

3.14 COMPLIANCE WITH LEGAL REQUIREMENTS; GOVERNMENTAL AUTHORIZATIONS

(a) Except as set forth in Part 3.14 of the Disclosure Letter:

(i) each Acquired Company is, and at all times since January 1, 2010 has been in
full compliance with each Legal Requirement that is or was applicable to it or
to the conduct or operation of its business or the ownership or use of any of
its assets;

(ii) no event has occurred or circumstance exists that (with or without notice
or lapse of time) (A) may constitute or result in a violation by any Acquired
Company of, or a failure on the part of any Acquired Company to comply with, any
Legal Requirement, or (B) may give rise to any obligation on the part of any
Acquired Company to undertake, or to bear all or any portion of the cost of, any
remedial action of any nature; and (iii) no Acquired Company has received, at
any time since January 1, 2010any notice or other communication (whether oral or
written) from any governmental Body or any other Person regarding (A) any
actual, alleged, possible, or potential violation of, or failure to comply with,
any Legal Requirement, or (B) any actual, alleged, possible, or potential
obligation on the part of any Acquired Company to undertake, or to bear all or
any portion of the cost of, any remedial action of any nature.

 

(b) Part 3.14 of the Disclosure Letter contains a complete and accurate list of
each Governmental Authorization that is held by any Acquired Company or that
otherwise relates to the business of, or to any of the assets owned or used by,
any Acquired Company. Each Governmental Authorization listed or required to be
listed in Part 3.14 of the Disclosure Letter is valid and in full force and
effect. Unless set forth in Part 3.14 of the Disclosure Letter:

(i) each Acquired Company is, and at all times since January 1, 2010 has been,
in full compliance with all of the terms and requirements of each Governmental
Authorization identified or required to be identified in Part 3.14 of the
Disclosure Letter;

(ii) no event has occurred or circumstance exists that may (with or without
notice or lapse of time) (A) constitute or result directly or indirectly in a
violation of or a failure to comply with any term or requirement of any
Governmental Authorization listed or required to be listed in Part 3.14 of the
Disclosure Letter, or (B) result directly or indirectly in the revocation,
withdrawal, suspension, cancellation, or termination of, or any modification to,
any Governmental Authorization listed or required to be listed in Part 3.14 of
the Disclosure Letter;

 

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(iii) no Acquired Company has received, at any time since January 1, 2010 any
notice or other communication (whether oral or written) from any Governmental
Body or any other Person regarding (A) any actual, proposed, alleged, possible,
or potential violation of or failure to comply with any requirement of any
Governmental Authorization, or (B) any actual, proposed, possible, or potential
revocation, withdrawal, suspension, cancellation, termination of, or
modification to any Governmental Authorization; and

(iv) all applications required to have been filed for the renewal of the
Governmental Authorizations listed or required to be listed in Part 3.14 of the
Disclosure Letter have been duly filed on a timely basis with the appropriate
Governmental Bodies, and all other filings required to have been made with
respect to such Governmental Authorizations have been duly made on a timely
basis with the appropriate Governmental Bodies.

 

The Governmental Authorizations listed in Part 3.14 of the Disclosure Letter
collectively constitute all of the Governmental Authorizations necessary to
permit the Acquired Companies to lawfully conduct and operate their businesses
in the manner they currently conduct and operate such businesses and to permit
the Acquired Companies to own and use their assets in the manner in which they
currently own and use such assets.

 

3.15 LEGAL PROCEEDINGS; ORDERS

(a) Except as set forth in Part 3.15 of the Disclosure Letter, there is no
pending Proceeding:

(i) that has been commenced by or against any Acquired Company or that otherwise
relates to or may affect the business of, or any of the assets owned or used by,
any Acquired Company; or

(ii) that challenges, or that may have the effect of preventing, delaying,
making illegal, or otherwise interfering with, any of the Contemplated
Transactions.

 

To the Knowledge of Seller and the Acquired Companies, (1) no such Proceeding
has been Threatened, and (2) no event has occurred or circumstance exists that
may give rise to or serve as a basis for the commencement of any such
Proceeding. If any such Proceeding existed, as evidenced by the Disclosure
Letter Section 3.15, Seller has delivered to Buyer copies of all pleadings,
correspondence, and other documents relating to each and such will not have a
material adverse effect on the business, operations, assets, condition, or
prospects of any Acquired Company.

 

(b) Except as set forth in Part 3.15 of the Disclosure Letter there is no Order
to which any of the Acquired Companies, or any of the assets owned or used by
any Acquired Company, is subject or otherwise relates to the business of or any
of the assets owned or used by any Acquired Company and includes no officer,
director, agent, or employee of any Acquired Company is subject to any Order
that prohibits such officer, director, agent, or employee from engaging in or
continuing any conduct, activity, or practice relating to the business of any
Acquired Company.

 

3.16 ABSENCE OF CERTAIN CHANGES AND EVENTS

Unless set forth in Part 3.16 of the Disclosure Letter, since the date of the
Balance Sheet, the Acquired Companies have conducted their businesses only in
the Ordinary Course of Business and there has not been any:

 

(a) change in any Acquired Company's authorized or issued ownership or
membership interest; grant of any ownership or membership interest or right to
purchase such ownership or membership interest of any Acquired Company; issuance
of any security convertible into such ownership or membership interest; grant of
any registration rights; purchase, redemption, retirement, or other acquisition
by any Acquired Company of any ownership or membership interest of any; or
declaration or payment of any dividend or other distribution or payment in
respect of any such membership or ownership interest;

 

(b) amendment to the Organizational Documents of any Acquired Company;

 

(c) payment or increase by any Acquired Company of any bonuses, salaries, or
other compensation to any stockholder, director, officer, or (except in the
Ordinary Course of Business) employee or entry into any employment, severance,
or similar Contract with any director, officer, or employee;

 

(d) adoption of, or increase in the payments to or benefits for or with any
employees of any Acquired Company;

 

12

 

 

(e) damage to or destruction or loss of any asset or property of any Acquired
Company, whether or not covered by insurance, materially and adversely affecting
the properties, assets, business, financial condition, or prospects of the
Acquired Companies, taken as a whole;

 

(f) entry into, termination of, or receipt of notice of termination of (i) any
license, distributorship, dealer, sales representative, joint venture, credit,
or similar agreement, or (ii) any Contract or transaction with any Acquired
Company;

 

(g) sale (other than sales of inventory in the Ordinary Course of Business),
lease, or other disposition of any asset or property of any Acquired Company or
mortgage, pledge, or imposition of any lien or other encumbrance on any material
asset or property of any Acquired Company, including the sale, lease, or other
disposition of any of the Intellectual Property Assets;

 

(h) cancellation or waiver of any claims or rights for any Acquired Company;

 

(i) material change in the accounting methods used by any Acquired Company; or

 

(j) agreement, whether oral or written, by any Acquired Company to do any of the
foregoing.

 

(k) any event occurrence, development or state of circumstances or facts which,
individually or in the aggregate, has had or could reasonably be expected to
have a Material Adverse Effect on either Seller, either of the Acquired
Companies or Buyer.

 

3.17 CONTRACTS; NO DEFAULTS

(a) Part 3.17(a) of the Disclosure Letter contains a complete and accurate list,
and Seller have delivered to Buyer true and complete copies, of:

(i) each Applicable Contract that involves performance of services or delivery
of goods or materials by or to one or more Acquired Companies of an amount or
value in excess of $ 5,000 (except for the Management Contracts which have been
provided to Buyer and not included on the Disclosure Letter);

(ii) each Applicable Contract that was not entered into in the Ordinary Course
of Business and that involves expenditures or receipts of one or more Acquired
Companies in excess of $1,000;

(iii) each lease, rental or occupancy agreement, license, installment and
conditional sale agreement, and other Applicable Contract affecting the
ownership of, leasing of, title to, use of, or any leasehold or other interest
in, any real or personal property (except personal property leases and
installment and conditional sales agreements having a value per item or
aggregate payments of less than $1,000 and with terms of less than one year);

(iv) each licensing agreement or other Applicable Contract with respect to
patents, trademarks, copyrights, or other intellectual property, including
agreements with current or former employees, consultants, or contractors
regarding the appropriation or the non-disclosure of any of the Intellectual
Property Assets;

(v) any Applicable Contract to or with any labor union or other employee
representative of a group of employees;

(vi) each joint venture, partnership, and other Applicable Contract (however
named) involving a sharing of profits, losses, costs, or liabilities by any
Acquired Company with any other Person;

(vii) each Applicable Contract containing covenants that in any way purport to
restrict the business activity of any Acquired Company or any Affiliate of an
Acquired Company or limit the freedom of any Acquired Company or any Affiliate
of an Acquired Company to engage in any line of business or to compete with any
Person;

(viii) each Applicable Contract providing for payments to or by any Person based
on sales, purchases, or profits, other than direct payments for goods;

(ix) each power of attorney that is currently effective and outstanding;

(x) each Applicable Contract entered into other than in the Ordinary Course of
Business that contains or provides for an express undertaking by any Acquired
Company to be responsible for consequential damages;

(xi) each Applicable Contract for capital expenditures in excess of $1,000;
(xiii) each written warranty, guaranty, and or other similar undertaking with
respect to contractual performance extended by any Acquired Company other than
in the Ordinary Course of Business; and

(xii) each amendment, supplement, and modification (whether oral or written) in
respect of any of the foregoing.

 

13

 

 

(b) Unless set forth in Part 3.17(b) of the Disclosure Letter:

(i) Seller (and no Related Person of Seller) has not entered into any
arrangement that provides for current or future acquisition rights nor being
subject to any obligation or liability that relates to the business of, or any
of the assets owned or used by, any Acquired Company; and

(ii) to the Knowledge of Seller and the Acquired Companies, no officer,
director, agent, employee, consultant, or contractor of any Acquired Company is
bound by any Contract that purports to limit the ability of such officer,
director, agent, employee, consultant, or contractor to (A) engage in or
continue any conduct, activity, or practice relating to the business of any
Acquired Company, or (B) assign to any Acquired Company or to any other Person
any rights to any invention, improvement, or discovery.

 

(c) Unless set forth in Part 3.17(c) of the Disclosure Letter, each Contract
identified or required to be identified in Part 3.17(a) of the Disclosure Letter
is in full force and effect and is valid and enforceable in accordance with its
terms.

 

(d) Except as set forth in Part 3.17(d) of the Disclosure Letter:

(i) each Acquired Company, and any other Person with any obligation or liability
under any Contract, is and at all times since January 1, 2010 has been, in full
compliance with all applicable terms and requirements of each Contract under
which such Acquired Company has or had any obligation or liability or by which
such Acquired Company or any of the assets owned or used by such Acquired
Company is or was bound;

(ii) no event has occurred or circumstance exists that (with or without notice
or lapse of time) may contravene, conflict with, or result in a violation or
breach of, or give any Acquired Company or other Person the right to delcare a
default or exercise any remedy under, or to accelerate the maturity or
performance of, or to cancel, terminate, or modify, any Applicable Contract; and
(iv) no Acquired Company has given to or received from any other Person, at any
time since January 1, 2010, any notice or other communication (whether oral or
written) regarding any actual, alleged, possible, or potential violation or
breach of, or default under, any Contract.

 

(e) There are no renegotiations of, attempts to renegotiate, or outstanding
rights to renegotiate any material amounts paid or payable to any Acquired
Company under current or completed Contracts with any Person and no such Person
has made written demand for such renegotiation.

 

3.18 INSURANCE

(a) Seller have delivered to Buyer:

(i) true and complete copies of all policies of insurance to which any Acquired
Company is a party or under which any Acquired Company, or any director of any
Acquired Company, is or has been covered at any time within the two (2) years
preceding the date of this Agreement;

(ii) true and complete copies of all pending applications for policies of
insurance; and

(iii) any statement by the auditor of any Acquired Company's financial
statements with regard to the adequacy of such entity's coverage or of the
reserves for claims.

 

(b) Unless identified in Part 3.18(b) of the Disclosure Letter, none of the
following exist on behalf of or relating to any of the Acquired Companies:

(i) any self- insurance arrangement by or affecting any Acquired Company,
including any reserves established thereunder;

(ii) any contract or arrangement, other than a policy of insurance, for the
transfer or sharing of any risk by any Acquired Company; and

(iii) any obligation of the Acquired Companies to third parties with respect to
insurance (including such obligations under leases and service agreements) other
than the broker and/or insurer listed on the policy under which such coverage is
provided.

 

(c) Part 3.18(c) of the Disclosure Letter sets forth, by year, for the current
policy year and each of the two (2) preceding policy years:

(i) a summary of the loss experience under each policy;

 

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(ii) a statement describing each claim under an insurance policy for an amount
in excess of $5,000, which sets forth:

(A) the name of the claimant;

(B) a description of the policy by insurer, type of insurance, and period of
coverage; and

(C) the amount and a brief description of the claim; and

(iii) a statement describing the loss experience for all claims that were self-
insured, including the number and aggregate cost of such claims.

 

(d) Except as set forth on Part 3.18(d) of the Disclosure Letter:

(i) All policies to which any Acquired Company is a party or that provide
coverage to either

Seller, any Acquired Company, or any director or officer of an Acquired Company:

(A) are valid, outstanding, and enforceable;

(B) are issued by an insurer that is financially sound and reputable;

(C) taken together, provide adequate insurance coverage for the assets and the
operations of the Acquired Companies [for all risks normally insured against by
a Person carrying on the same business or businesses as the Acquired Companies]
[for all risks to which the Acquired Companies are normally exposed];

(D) are sufficient for compliance with all Legal Requirements and Contracts to
which any Acquired Company is a party or by which any of them is bound;

(E) will continue in full force and effect following the consummation of the
Contemplated Transactions; and

(F) do not provide for any retrospective premium adjustment or other
experienced-based liability on the part of any Acquired Company.

(ii) No Seller or Acquired Company has received (A) any refusal of coverage or
any notice that a defense will be afforded with reservation of rights, or (B)
any notice of cancellation or any other indication that any insurance policy is
no longer in full force or effect or will not be renewed or that the issuer of
any policy is not willing or able to perform its obligations thereunder.

(iii) The Acquired Companies have paid all premiums due, and have otherwise
performed all of their respective obligations, under each policy to which any
Acquired Company is a party or that provides coverage to any Acquired Company or
director thereof.

(iv) The Acquired Companies have given notice to the insurer of all claims that
may be insured thereby.

 

3.19 ENVIRONMENTAL MATTERS

Except as set forth in part 3.19 of the Disclosure Letter:

(a) Each Acquired Company is, and at all times has been, in full compliance
with, and has not been and is not in violation of or liable under, any
Environmental Law. No Seller or Acquired Company has any basis to expect, nor
has any of them or any other Person for whose conduct they are or may be held to
be responsible received, any actual or Threatened order, notice, or other
communication from (i) any Governmental Body or private citizen acting in the
public interest, or (ii) the current or prior owner or operator of any
Facilities, of any actual or potential violation or failure to comply with any
Environmental Law, or of any actual or Threatened obligation to undertake or
bear the cost of any Environmental, Health, and Safety Liabilities with respect
to any of the Facilities or any other properties or assets (whether real,
personal, or mixed) in which Seller or any Acquired Company has had an interest,
or with respect to any property or Facility at or to which Hazardous Materials
were generated, manufactured, refined, transferred, imported, used, or processed
by Seller, any Acquired Company, or any other Person for whose conduct they are
or may be held responsible, or from which Hazardous Materials have been
transported, treated, stored, handled, transferred, disposed, recycled, or
received.

 

(b) There are no pending or, to the Knowledge of Seller and the Acquired
Companies, Threatened claims, Encumbrances, citations, directives, inquiries,
notices, warnings or other communications or other restrictions of any nature,
resulting from any Environmental, Health, and Safety Liabilities or arising
under or pursuant to any Environmental Law, with respect to or affecting any of
the Facilities or any other properties and assets (whether real, personal, or
mixed) in which Seller or any Acquired Company has or had an interest.

 

(c) There are no Hazardous Materials present on or in the Environment at the
Facilities.

 

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3.20 EMPLOYEES

(a) Seller warrants that it has provided Buyer with a complete and accurate list
of the following information for each employee or director of the Acquired
Companies, including each employee on leave of absence or layoff status:
employer; name; job title; current compensation paid or payable ; vacation
accrued; and any service credited for purposes of vesting and eligibility to
participate under any Acquired Company's other benefits including cash bonus
and/or stock/unit options or ownership severance pay, insurance, medical,
welfare, or vacation plan..

 

(b) No employee or director of any Acquired Company is a party to, or is
otherwise bound by, any agreement or arrangement, including any confidentiality,
noncompetition, or proprietary rights agreement, between such employee or
director and any other Person ("Proprietary Rights Agreement") that in any way
adversely affects or will affect (i) the performance of his duties as an
employee or director of the Acquired Companies, or (ii) the ability of any
Acquired Company to conduct its business, including any Proprietary Rights
Agreement with Seller or the Acquired Companies by any such employee or
director. To Seller' Knowledge, no director, officer, or other key employee of
any Acquired Company intends to terminate his employment with such Acquired
Company.

 

(c) Unless set forth in Part 3.20 of the Disclosure Letter, no Acquired Company
has any retired employee or director of the Acquired Companies, or their
dependents, receiving benefits or scheduled to receive benefits in the future,
retiree medical insurance coverage, retiree life insurance coverage, or other
benefit.

 

3.21 LABOR RELATIONS; COMPLIANCE

Since January 1, 2010, no Acquired Company has been or is a party to any
collective bargaining or other labor Contract.

 

3.22 INTELLECTUAL PROPERTY

(a) Intellectual Property Assets—The term "Intellectual Property Assets"
includes:

(i) the name SleepHealth, all fictional business names, trading names,
registered and unregistered trademarks, service marks, and applications
(collectively, "Marks");

(ii) all patents, patent applications, and inventions and discoveries that may
be patentable (collectively, "Patents");

(iii) all copyrights in both published works and unpublished works
(collectively, "Copyrights"); (iv) all rights in mask works (collectively,
"Rights in Mask Works"); and

(v) all know- how, trade secrets, confidential information, customer lists,
software, technical information, data, process technology, plans, drawings, and
blue prints (collectively, "Trade Secrets"); owned, used, or licensed by any
Acquired Company as licensee or licensor.

 

(b) Agreements—There are no royalties paid or received by the Acquired
Companies, of all Contracts relating to the Intellectual Property Assets to
which any Acquired Company is a party or by which any Acquired Company is bound.

 

(c) Know-How Necessary for the Business

(i) The Intellectual Property Assets are all those necessary for the operation
of the Acquired Companies' businesses as they are currently conducted . One or
more of the Acquired Companies is the owner of all right, title, and interest in
and to each of the Intellectual Property Assets, free and clear of all liens,
security interests, charges, encumbrances, equities, and other adverse claims,
and has the right to use without payment to a third party all of the
Intellectual Property Assets.

(ii) Except as set forth in Part 3.22(c) of the Disclosure Letter, all former
and current employees of each Acquired Company have executed written Contracts
with one or more of the Acquired Companies that assign to one or more of the
Acquired Companies all rights to any inventions, improvements, discoveries, or
information relating to the business of any Acquired Company if any exist. No
employee of any Acquired Company has entered into any Contract that restricts or
limits in any way the scope or type of work in which the employee may be engaged
or requires the employee to transfer, assign, or disclose information concerning
his work to anyone other than one or more of the Acquired Companies.

 

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(d) Patents

(i) None of the Acquired Companies has any Patents.

(ii) None of the products manufactured and sold, nor any process or know-how
used, by any Acquired Company infringes or is alleged to infringe any patent or
other proprietary right of any other Person.

 

(e) Trademarks

(i) Part 3.22(e) of Disclosure Letter contains a complete and accurate list and
summary description of all Marks. One or more of the Acquired Companies is the
owner of all right, title, and interest in and to each of the Marks, free and
clear of all liens, security interests, charges, encumbrances, equities, and
other adverse claims.

(ii) Although none of the Acquired Companies' Marks have been registered with
the United States Patent and Trademark Office ("USPTO"), Seller and no officer,
director or employee of an Acquired Company is aware of any violation or
infringement of any other Person by using the Marks of the Acquired Company, and
such Marks are not involved in any opposition, invalidation, or cancellation
and, to Seller's Knowledge, no such action is Threatened with respect to any of
the Marks, and Seller and Acquired Companies are currently in compliance with
all formal legal requirements and obligations of the USPTO.

 

(f) Copyrights

(i) Neither Seller nor any of the Acquired Companies maintain any copyrighted
material , and no Copyright is infringed or, to Seller' Knowledge, has been
challenged or threatened in any way. None of the subject matter of any of the
Copyrights infringes or is alleged to infringe any copyright of any third party
or is a derivative work based on the work of a third party.

 

(g) Trade Secrets

(i) With respect to each Trade Secret, the documentation relating to such Trade
Secret is current, accurate, and sufficient in detail and content to identify
and explain it and to allow its full and proper use without reliance on the
knowledge or memory of any individual.

(ii) Seller and the Acquired Companies have taken all reasonable precautions to
protect the secrecy, confidentiality, and value of their Trade Secrets.

(iii) One or more of the Acquired Companies has good title and an absolute (but
not necessarily exclusive) right to use the Trade Secrets. The Trade Secrets are
not part of the public knowledge or literature, and, to Seller' Knowledge, have
not been used, divulged, or appropriated either for the benefit of any Person
(other than one or more of the Acquired Companies) or to the detriment of the
Acquired Companies. No Trade Secret is subject to any adverse claim or has been
challenged or threatened in any way.

 

3.23 CERTAIN PAYMENTS

Since January 1, 2009 no Acquired Company or director, officer, agent, or
employee of any Acquired Company, or [to Seller' Knowledge] any other Person
associated with or acting for or on behalf of any Acquired Company, has directly
or indirectly (a) made any contribution, gift, bribe, rebate, payoff, influence
payment, kickback, or other payment to any Person, private or public, regardless
of form, whether in money, property, or services (i) to obtain favorable
treatment in securing business, (ii) to pay for favorable treatment for business
secured, (iii) to obtain special concessions or for special concessions already
obtained, for or in respect of any Acquired Company or any Affiliate of an
Acquired Company, or (iv) in violation of any Legal Requirement, (b) established
or maintained any fund or asset that has not been recorded in the books and
records of the Acquired Companies.

 

3.24 DISCLOSURE

(a) No representation or warranty of Seller in this Agreement and no statement
in the Disclosure Letter omits to state a material fact necessary to make the
statements herein or therein, in light of the circumstances in which they were
made, not misleading.

 

(b) No notice given pursuant to Section 5.5 will contain any untrue statement or
omit to state a material fact necessary to make the statements therein or in
this Agreement, in light of the circumstances in which they were made, not
misleading.

 

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(c) There is no fact known to either Seller that has specific application to
either Seller or any Acquired Company (other than general economic or industry
conditions) and that materially adversely affects [or, as far as either Seller
can reasonably foresee, materially threatens,] the assets, business, prospects,
financial condition, or results of operations of the Acquired Companies (on a
consolidated basis) that has not been set forth in this Agreement or the
Disclosure Letter.

 

3.25 RELATIONSHIPS WITH RELATED PERSONS

No Seller or any Related Person of Seller or of any Acquired Company has, or
since [the first day of the next to last completed fiscal year of the Acquired
Companies] has had, any interest in any property (whether real, personal, or
mixed and whether tangible or intangible), used in or pertaining to the Acquired
Companies' businesses. No Seller or any Related Person of Seller or of any
Acquired Company is, or since [the first day of the next to last completed
fiscal year of the Acquired Companies] has owned (of record or as a beneficial
owner) an equity interest or any other financial or profit interest in, a Person
that has (i) had business dealings or a material financial interest in any
transaction with any Acquired Company [other than business dealings or
transactions conducted in the Ordinary Course of Business with the Acquired
Companies at substantially prevailing market prices and on substantially
prevailing market terms], or (ii) engaged in competition with any Acquired
Company with respect to any line of the products or services of such Acquired
Company (a "Competing Business") in any market presently served by such Acquired
Company [except for less than one percent of the outstanding capital stock of
any Competing Business that is publicly traded on any recognized exchange or in
the over-the- counter market]. Except as set forth in Part 3.25 of the
Disclosure Letter, no Seller or any Related Person of Seller or of any Acquired
Company is a party to any Contract with, or has any claim or right against, any
Acquired Company.

 

3.26 BROKERS OR FINDERS

Seller and their agents have incurred no obligation or liability, contingent or
otherwise, for brokerage or finders' fees or agents' commissions or other
similar payment in connection with this Agreement.

 

4. REPRESENTATIONS AND WARRANTIES OF BUYER. Buyer represents and warrants to
Seller as follows:

 

4.1 ORGANIZATION AND GOOD STANDING

Buyer is a corporation duly organized, validly existing, and in good standing
under the laws of the State of Georgia.

 

4.2 AUTHORITY; NO CONFLICT

(a) This Agreement constitutes the legal, valid, and binding obligation of
Buyer, enforceable against Buyer in accordance with its terms. Upon the
execution and delivery by Buyer of the Promissory Notes and the Buyer stock
certificates (collectively, the "Buyer's Closing Documents"), the Buyer's
Closing Documents will constitute the legal, valid, and binding obligations of
Buyer, enforceable against Buyer in accordance with their respective terms.
Buyer has the absolute and unrestricted right, power, and authority to execute
and deliver this Agreement and the Buyer's Closing Documents and to perform its
obligations under this Agreement and the Buyer's Closing Documents, including
without limitation to issue stock and stock options in Vystar Corporation to
Mary Ailene Miller as part of the consideration paid under this Agreement. Buyer
is further authorized to ensure that no future encumbrances will be made against
the assets of Sleephealth, LLC unless secondary to Seller in order to secure the
Promissory Notes hereunder.

 

(b) Except as set forth in Schedule 4.2, neither the execution and delivery of
this Agreement by Buyer nor the consummation or performance of any of the
Contemplated Transactions by Buyer will give any Person the right to prevent,
delay, or otherwise interfere with any of the Contemplated Transactions pursuant
to:

(i) any provision of Buyer's Organizational Documents;

(ii) any resolution adopted by the board of directors of Buyer;

(iii) any Legal Requirement or Order to which Buyer may be subject; or

(iv) any Contract to which Buyer is a party or by which Buyer may be bound.

 

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Except as set forth in Schedule 4.2, Buyer is not and will not be required to
obtain any Consent from any Person in connection with the execution and delivery
of this Agreement or the consummation or performance of any of the Contemplated
Transactions.

 

4.3 INVESTMENT INTENT

Buyer is acquiring the Ownership Interest for its own account and not with a
view to their distribution within the meaning of Section 2(11) of the Securities
Act.

 

4.4 CERTAIN PROCEEDINGS

There is no pending Proceeding that has been commenced against Buyer and that
challenges, or may have the effect of preventing, delaying, making illegal, or
otherwise interfering with, any of the Contemplated Transactions. To Buyer's
Knowledge, no such Proceeding has been Threatened.

 

4.5 BROKERS OR FINDERS

Buyer and its officers and agents have incurred no obligation or liability,
contingent or otherwise, for brokerage or finders' fees or agents' commissions
or other similar payment in connection with this Agreement and will indemnify
and hold Seller harmless from any such payment alleged to be due by or through
Buyer as a result of the action of Buyer or its officers or agents.

 

4.6. SEC REPORTS

The Buyer has filed with or furnished to the SEC all reports, schedules, forms,
statements, prospectuses, registration statements and other documents required
to be filed or furnished by the Buyer since January 1, 2010 (together with any
exhibits and schedules thereto or incorporated by reference therein and other
information incorporated therein, an “SEC Report”, and collectively, the “Buyer
SEC Reports”), all of which were prepared in all material respects in accordance
with the applicable requirements of the Exchange Act, the Securities Act and the
rules and regulations promulgated thereunder (the “Securities Laws”).  As of
their respective dates (or, if amended prior to the date of this Agreement, as
of the respective dates of such amendments), the Buyer SEC Reports (i) complied,
and each Buyer SEC Report filed subsequent to the date hereof will comply, as to
form in all material respects with the applicable requirements of the Securities
Laws and (ii) did not, and each Buyer SEC Report filed subsequent to the date
hereof will not, contain any untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary to make the
statements made therein, in the light of the circumstances under which they were
made, not misleading.   Each of the consolidated balance sheets included in or
incorporated by reference into the Buyer SEC Reports (including the related
notes and schedules) fairly presents in all material respects the consolidated
financial position of the Buyer and the Buyer Subsidiaries as of its date and
each of the consolidated statements of income, retained earnings and cash flows
of the Buyer included in or incorporated by reference into the Buyer SEC Reports
(including any related notes and schedules) fairly presents in all material
respects the results of operations, retained earnings or cash flows, as the case
may be, of the Buyer for the periods set forth therein, in each case in
accordance with GAAP consistently applied during the periods involved, except as
may be noted therein and except, in the case of the unaudited statements, as
permitted by Form 10-Q pursuant to Sections 13 or 15(d) of the Exchange Act and
for normal year-end audit adjustments which would not be material in amount or
effect.

 

4.7 PAYMENT OF ONGOING LIABILITY. Buyer shall make regular monthly payments on
the Wells Fargo line of credit of Company with an account ending in 0622. Buyer
shall make no modifications of the Account without Seller's approval, including
without limitation any renewal or extension thereof. Buyer shall make no
withdrawals against said account and shall pay the account in full according to
its terms and conditions. Upon fulfillment of its obligation to pay the account
in full, Buyer shall close the account. Buyer shall indemnify and hold harmless
Seller from any claim arising out of Buyer's failure to obey the terms of the
account including without limitation reasonable attorney’s fees in defending any
action brought against Seller as personal guarantor of the account as a result
of Buyer's failure to pay or otherwise abide by the terms of said line of
credit. Buyer’s obligations hereunder shall survive closing.

 

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5. COVENANTS OF SELLER PRIOR TO CLOSING DATE

 

5.1 ACCESS AND INVESTIGATION

Between the date of this Agreement and the Closing Date, Seller will, and will
cause each Acquired Company and its Representatives to, (a) afford Buyer and its
Representatives and prospective lenders and their Representatives (collectively,
"Buyer's Advisors") full and free access to each Acquired Company's personnel,
properties (including subsurface testing), contracts, books and records, and
other documents and data, (b) furnish Buyer and Buyer's Advisors with copies of
all such contracts, books and records, and other existing documents and data as
Buyer may reasonably request, and (c) furnish Buyer and Buyer's Advisors with
such additional financial, operating, and other data and information as Buyer
may reasonably request.

 

5.2 OPERATION OF THE BUSINESSES OF THE ACQUIRED COMPANIES

Between the date of this Agreement and the Closing Date, Seller will, and will
cause each

Acquired Company to:

(a) conduct the business of such Acquired Company only in the Ordinary Course of
Business;

 

(b) use their Best Efforts to preserve intact the current business organization
of such Acquired Company, keep available the services of the current officers,
employees, and agents of such Acquired Company, and maintain the relations and
good will with suppliers, customers, landlords, creditors, employees, agents,
and others having business relationships with such Acquired Company;

 

(c) confer with Buyer concerning operational matters of a material nature; and

 

(d) otherwise report periodically to Buyer concerning the status of the
business, operations, and finances of such Acquired Company.

 

5.3 NEGATIVE COVENANT

Except as otherwise expressly permitted by this Agreement, between the date of
this Agreement and the Closing Date, Seller will not, and will cause each
Acquired Company not to, without the prior consent of Buyer, take any
affirmative action, or fail to take any reasonable action within their or its
control, as a result of which any of the changes or events listed in Section
3.16 is likely to occur.

 

5.4 REQUIRED APPROVALS

As promptly as practicable after the date of this Agreement, Seller will, and
will cause each Acquired Company to, make all filings required by Legal
Requirements to be made by them in order to consummate the Contemplated
Transactions (including all filings under the HSR Act). Between the date of this
Agreement and the Closing Date, Seller will, and will cause each Acquired
Company to, (a) cooperate with Buyer with respect to all filings that Buyer
elects to make or is required by Legal Requirements to make in connection with
the Contemplated Transactions, and (b) cooperate with Buyer in obtaining all
consents identified in Schedule 4.2 (including taking all actions requested by
Buyer to cause early termination of any applicable waiting period under the HSR
Act).

 

5.5 NOTIFICATION

Between the date of this Agreement and the Closing Date, each Seller will
promptly notify Buyer in writing if such Seller or any Acquired Company becomes
aware of any fact or condition that causes or constitutes a Breach of any of
Seller' representations and warranties as of the date of this Agreement, or if
such Seller or any Acquired Company becomes aware of the occurrence after the
date of this Agreement of any fact or condition that would (except as expressly
contemplated by this Agreement) cause or constitute a Breach of any such
representation or warranty had such representation or warranty been made as of
the time of occurrence or discovery of such fact or condition. Should any such
fact or condition require any change in the Disclosure Letter if the Disclosure
Letter were dated the date of the occurrence or discovery of any such fact or
condition, Seller will promptly deliver to Buyer a supplement to the Disclosure
Letter specifying such change. During the same period, each Seller will promptly
notify Buyer of the occurrence of any Breach of any covenant of Seller in this
Section 5 or of the occurrence of any event that may make the satisfaction of
the conditions in Section 7 impossible or unlikely.

 

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5.6 PAYMENT OF INDEBTEDNESS BY RELATED PERSONS

Except as expressly provided in this Agreement , Seller will cause all
indebtedness owed to an Acquired Company by either Seller or any Related Person
of either Seller to be paid in full prior to Closing

 

5.7 NO NEGOTIATION

Until such time, if any, as this Agreement is terminated pursuant to Section 9,
Seller will not, and will cause each Acquired Company and each of their
Representatives not to, directly or indirectly solicit, initiate, or encourage
any inquiries or proposals from, discuss or negotiate with, provide any
non-public information to, or consider the merits of any unsolicited inquiries
or proposals from, any Person (other than Buyer) relating to any transaction
involving the sale of the business or assets (other than in the Ordinary Course
of Business) of any Acquired Company, or any of the capital stock of any
Acquired Company, or any merger, consolidation, business combination, or similar
transaction involving any Acquired Company.

 

5.8 BEST EFFORTS

Between the date of this Agreement and the Closing Date, Seller will use their
Best Efforts to cause the conditions in Sections 7 and 8 to be satisfied.

 

6. COVENANTS OF BUYER PRIOR TO CLOSING DATE

 

6.1 APPROVALS OF GOVERNMENTAL BODIES

As promptly as practicable after the date of this Agreement, Buyer will, and
will cause each of its Related Persons to, make all filings required by Legal
Requirements to be made by them to consummate the Contemplated Transactions
(including all filings under the HSR Act). Between the date of this Agreement
and the Closing Date, Buyer will, and will cause each Related Person to,
cooperate with Seller with respect to all filings that Seller are required by
Legal Requirements to make in connection with the Contemplated Transactions, and
(ii) cooperate with Seller in obtaining all consents identified in Part 3.2 of
the Disclosure Letter; provided that this Agreement will not require Buyer to
dispose of or make any change in any portion of its business or to incur any
other burden to obtain a Governmental Authorization.

 

6.2 BEST EFFORTS

Except as set forth in the proviso to Section 6.1, between the date of this
Agreement and the Closing Date, Buyer will use its Best Efforts to cause the
conditions in Sections 7 and 8 to be satisfied.

 

7. CONDITIONS PRECEDENT TO BUYER'S OBLIGATION TO CLOSE

Buyer's obligation to purchase the Ownership Interest and to take the other
actions required to be taken by

Buyer at the Closing is subject to the satisfaction, at or prior to the Closing,
of each of the following conditions (any of which may be waived by Buyer, in
whole or in part):

 

7.1 ACCURACY OF REPRESENTATIONS

(a) All of Seller' representations and warranties in this Agreement (considered
collectively), and each of these representations and warranties (considered
individually), must have been accurate in all material respects as of the date
of this Agreement, and must be accurate in all material respects as of the
Closing Date as if made on the Closing Date..

 

(b) Each of Seller's representations and warranties in Sections 3.3, 3.4, 3.12,
and 3.24 must have been accurate in all respects as of the date of this
Agreement, and must be accurate in all respects as of the Closing Date as if
made on the Closing Date, without giving effect to any supplement to the
Disclosure Letter.

 

7.2 SELLER'S PERFORMANCE

(a) All of the covenants and obligations that Seller are required to perform or
to comply with pursuant to this Agreement at or prior to the Closing (considered
collectively), and each of these covenants and obligations (considered
individually), must have been duly performed and complied with in all material
respects.

 

(b) Each document required to be delivered pursuant to Section 2.4 must have
been delivered, and each of the other covenants and obligations in Sections 5.4
and 5.8 must have been performed and complied with in all respects.

 

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7.3 CONSENTS

Each of the Consents identified in Part 3.2 of the Disclosure Letter, and each
Consent identified in Schedule 4.2, must have been obtained and must be in full
force and effect.

 

7.4 ADDITIONAL DOCUMENTS. Such other documents as Buyer may reasonably request
for the purpose of (i) enabling its counsel to provide the opinion referred to
in Section 8.4(a), (ii) evidencing the accuracy of any of Seller'
representations and warranties, (iii) evidencing the performance by either
Seller of, or the compliance by either Seller with, any covenant or obligation
required to be performed or complied with by such Seller, (iv) evidencing the
satisfaction of any condition referred to in this Section 7, or (v) otherwise
facilitating the consummation or performance of any of the Contemplated
Transactions.

 

7.5 NO PROCEEDINGS

Since the date of this Agreement, there must not have been commenced or
Threatened against Buyer, or against any Person affiliated with Buyer, any
Proceeding (a) involving any challenge to, or seeking damages or other relief in
connection with, any of the Contemplated Transactions, or (b) that may have the
effect of preventing, delaying, making illegal, or otherwise interfering with
any of the Contemplated Transactions.

 

7.6 NO CLAIM REGARDING OWNERSHIP INTEREST OR SALE PROCEEDS

There must not have been made or Threatened by any Person any claim asserting
that such Person (a) is the holder or the beneficial owner of, or has the right
to acquire or to obtain beneficial ownership of, any stock or membership of, or
any other voting, equity, or ownership interest in, any of the Acquired
Companies, or (b) is entitled to all or any portion of the Purchase Price
payable for the Ownership Interest.

 

7.7 NO PROHIBITION

Neither the consummation nor the performance of any of the Contemplated
Transactions will, directly or indirectly (with or without notice or lapse of
time), materially contravene, or conflict with, or result in a material
violation of, or cause Buyer or any Person affiliated with Buyer to suffer any
material adverse consequence under, (a) any applicable Legal Requirement or
Order, or (b) any Legal Requirement or Order that has been published,
introduced, or otherwise [formally] proposed by or before any Governmental Body.

 

8. CONDITIONS PRECEDENT TO SELLER'S OBLIGATION TO CLOSE

 

Seller's obligation to sell the Ownership Interest and to take the other actions
required to be taken by Seller at the Closing is subject to the satisfaction, at
or prior to the Closing, of each of the following conditions (any of which may
be waived by Seller, in whole or in part):

 

8.1 ACCURACY OF REPRESENTATIONS

All of Buyer's representations and warranties in this Agreement (considered
collectively), and each of these representations and warranties (considered
individually), must have been accurate in all material respects as of the date
of this Agreement and must be accurate in all material respects as of the
Closing Date as if made on the Closing Date.

 

8.2 BUYER'S PERFORMANCE

(a) All of the covenants and obligations that Buyer is required to perform or to
comply with pursuant to this Agreement at or prior to the Closing (considered
collectively), and each of these covenants and obligations (considered
individually), must have been performed and complied with in all material
respects.

 

(b) Buyer must have delivered each of the documents required to be delivered by
Buyer pursuant to Section 2.4 and must have made the cash payments required to
be made by Buyer pursuant to Sections 2.4(b)(i) and 2.4(b)(ii).

 

8.3 CONSENTS

Each of the Consents identified in Part 3.2 of the Disclosure Letter must have
been obtained and must be in full force and effect.

 

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8.4 ADDITIONAL DOCUMENTS

Buyer must have caused such other documents as Seller may reasonably request for
the purpose of (i) enabling the ir counsel to provide the opinion referred to in
Section 7.4(a), (ii) evidencing the accuracy of any representation or warranty
of Buyer, (iii) evidencing the performance by Buyer of, or the compliance by
Buyer with, any covenant or obligation required to be performed or complied with
by Buyer, (ii) evidencing the satisfaction of any condition referred to in this
Section 8, or (v) otherwise facilitating the consummation of any of the
Contemplated Transactions.

 

8.5 NO INJUNCTION

There must not be in effect any Legal Requirement or any injunction or other
Order that (a) prohibits the sale of the Ownership Interest by Seller to Buyer,
and (b) has been adopted or issued, or has otherwise become effective, since the
date of this Agreement.

 

9. TERMINATION

 

9.1 TERMINATION EVENTS

This Agreement may, by notice given prior to or at the Closing, be terminated:

 

(a) by either Buyer or Seller if a material Breach of any provision of this
Agreement has been committed by the other party and such Breach has not been
waived;

 

(b) (i) by Buyer if any of the conditions in Section 7 has not been satisfied as
of the Closing Date or if satisfaction of such a condition is or becomes
impossible (other than through the failure of Buyer to comply with its
obligations under this Agreement) and Buyer has not waived such condition on or
before the Closing Date; or (ii) by Seller, if any of the conditions in Section
8 has not been satisfied of the Closing Date or if satisfaction of such a
condition is or becomes impossible (other than through the failure of Seller to
comply with their obligations under this Agreement) and Seller have not waived
such condition on or before the Closing Date;

 

(c) by mutual consent of Buyer and Seller; or

 

(d) by either Buyer or Seller if the Closing has not occurred (other than
through the failure of any party seeking to terminate this Agreement to comply
fully with its obligations under this Agreement) on or before November 1, 2012,
or such later date as the parties may agree upon.

 

9.2 EFFECT OF TERMINATION

Each party's right of termination under Section 9.1 is in addition to any other
rights it may have under this Agreement or otherwise, and the exercise of a
right of termination will not be an election of remedies. If this Agreement is
terminated pursuant to Section 9.1, all further obligations of the parties under
this Agreement will terminate, except that the obligations in Sections 11.1 and
11.3 will survive; provided, however, that if this Agreement is terminated by a
party because of the Breach of the Agreement by the other party or because one
or more of the conditions to the terminating party's obligations under this
Agreement is not satisfied as a result of the other party's failure to comply
with its obligations under this Agreement, the terminating party's right to
pursue all legal remedies will survive such termination unimpaired.

 

10. INDEMNIFICATION; REMEDIES

 

10.1 SURVIVAL; RIGHT TO INDEMNIFICATION NOT AFFECTED BY KNOWLEDGE

All representations, warranties, covenants, and obligations in this Agreement,
the Disclosure Letter, the supplements to the Disclosure Letter, the certificate
delivered pursuant to Section 2.4(a)(v), and any other certificate or document
delivered pursuant to this Agreement will survive the Closing. The right to
indemnification, payment of Damages or other remedy based on such
representations, warranties, covenants, and obligations will not be affected by
any investigation conducted with respect to, or any Knowledge acquired (or
capable of being acquired) at any time, whether before or after the execution
and delivery of this Agreement or the Closing Date, with respect to the accuracy
or inaccuracy of or compliance with, any such representation, warranty,
covenant, or obligation. The waiver of any condition based on the accuracy of
any representation or warranty, or on the performance of or compliance with any
covenant or obligation, will not affect the right to indemnification, payment of
Damages, or other remedy based on such representations, warranties, covenants,
and obligations.

 

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10.2 INDEMNIFICATION AND PAYMENT OF DAMAGES BY SELLER

Seller, jointly and severally, will indemnify and hold harmless Buyer, the
Acquired Companies, and their respective Representatives, stockholders,
controlling persons, and affiliates (collectively, the "Indemnified Persons")
for, and will pay to the Indemnified Persons the amount of, any loss, liability,
claim, damage (including incidental and consequential damages), expense
(including costs of investigation and defense and reasonable attorne ys' fees)
or diminution of value, whether or not involving a third-party claim
(collectively, "Damages"), arising, directly or indirectly, from or in
connection with:

 

(a) any Breach of any representation or warranty made by Seller in this
Agreement (without giving effect to any supplement to the Disclosure Letter),
the Disclosure Letter, the supplements to the Disclosure Letter, or any other
certificate or document delivered by Seller pursuant to this Agreement;

 

(b) any Breach of any representation or warranty made by Seller in this
Agreement as if such representation or warranty were made on and as of the
Closing Date without giving effect to any supplement to the Disclosure Letter,
other than any such Breach that is disclosed in a supplement to the Disclosure
Letter and is expressly identified in the certificate delivered pursuant to
Section 2.4(a)(v) as having caused the condition specified in Section 7.1 not to
be satisfied;

 

(c) any Breach by either Seller of any covenant or obligation of such Seller in
this Agreement; (d) any product shipped or manufactured by, or any services
provided by, any Acquired Company prior to the Closing Date;

 

(e) any matter disclosed in the Disclosure Letter; or

 

(f) any claim by any Person for brokerage or finder's fees or commissions or
similar payments based upon any agreement or understanding alleged to have been
made by any such Person with either Seller or any Acquired Company (or any
Person acting on their behalf) in connection with any of the Contemplated
Transactions.

 

The remedies provided in this Section 10.2 will not be exclusive of or limit any
other remedies that may be available to Buyer or the other Indemnified Persons.

 

10.3 INDEMNIFICATION AND PAYMENT OF DAMAGES BY SELLER— ENVIRONMENTAL MATTERS

 

Seller, jointly and severally, will indemnify and hold harmless Buyer, the
Acquired Companies, and the other Indemnified Persons for, and will pay to
Buyer, the Acquired Companies, and the other Indemnified Persons the amount of,
any Damages (including costs of cleanup, containment, or other remediation)
arising, directly or indirectly, from or in connection with:

 

(a) any Environmental, Health, and Safety or Hazardous Materials Liabilities
arising out of or relating to the ownership, operation, or condition at any time
on or prior to the Closing Date of the Facilities or any other properties and
assets (whether real, personal, or mixed and whether tangible or intangible) in
which Seller or any Acquired Company has or had an interest, or any bodily
injury (including illness, disability, and death, and regardless of when any
such bodily injury occurred, was incurred, or manifested itself), personal
injury, property damage (including trespass, nuisance, wrongful eviction, and
deprivation of the use of real property), or other damage of or to any Person,
including any employee or former employee of Seller or any Acquired Company or
any other Person for whose conduct they are or may be held responsible

 

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10.4 INDEMNIFICATION AND PAYMENT OF DAMAGES BY BUYER

Buyer will indemnify and hold harmless Seller, and will pay to Seller the amount
of any Damages arising, directly or indirectly, from or in connection with (a)
any Breach of any representation or warranty made by Buyer in this Agreement or
in any certificate delivered by Buyer pursuant to this Agreement, (b) any Breach
by Buyer of any covenant or obligation of Buyer in this Agreement, or (c) any
claim by any Person for brokerage or finder's fees or commissions or similar
payments based upon any agreement or understanding alleged to have been made by
such Person with Buyer (or any Person acting on its behalf) in connection with
any of the Contemplated Transactions.

 

10.5 TIME LIMITATIONS

If the Closing occurs, Seller will have no liability (for indemnification or
otherwise) with respect to any representation or warranty, or covenant or
obligation to be performed and complied with prior to the Closing Date, other
than those in Sections 3.3, 3.11, 3.13, and 3.19, unless on or before two (2)
years post Closing Date Buyer notifies Seller of a claim specifying the factual
basis of that claim in reasonable detail to the extent then known by Buyer; a
claim with respect to Section 3.3, 3.11, 3.13, or 3.19 or a claim for
indemnification or reimbursement not based upon any representation or warranty
or any covenant or obligation to be performed and complied with prior to the
Closing Date, may be made at any time. If the Closing occurs, Buyer will have no
liability (for indemnification or otherwise) with respect to any representation
or warranty, or covenant or obligation to be performed and complied with prior
to the closing Date, unless on or before two (2) years post the Closing Date and
Seller notifies Buyer of a claim specifying the factual basis of that claim in
reasonable detail to the extent then known by Seller.

 

10.6 RIGHT OF SET-OFF

Upon notice to Seller specifying in reasonable detail the basis for such
set-off, Buyer may set off any amount to which it may be entitled under this
Section 10 against amounts otherwise payable under the Promissory Note or may
give notice of a Claim in such amount that may be taken out of any payment owed
from the Adjustment Amount. The exercise of such right of set-off by Buyer in
good faith, whether or not ultimately determined to be justified, will not
constitute an event of default under the Promissory Note or any instrument
securing a Promissory Note. Neither the exercise of nor the failure to exercise
such right of set-off or to give a notice of a Claim to set-off against the
Adjustment Amount will constitute an election of remedies or limit Buyer in any
manner in the enforcement of any other remedies that may be available to it.

 

10.7 PROCEDURE FOR INDEMNIFICATION—THIRD PARTY CLAIMS

(a) Promptly after receipt by an indemnified party under this Section 10 of
notice of the commencement of any Proceeding against it, such indemnified party
will, if a claim is to be made against an indemnifying party under such Section,
give notice to the indemnifying party of the commencement of such claim, but the
failure to notify the indemnifying party will not relieve the indemnifying party
of any liability that it may have to any indemnified party, except to the extent
that the indemnifying party demonstrates that the defense of such action is
prejudiced by the indemnifying party's failure to give such notice.

 

(b) If any Proceeding referred to in this Section 10 is brought against an
indemnified party and it gives notice to the indemnifying party of the
commencement of such Proceeding, the indemnifying party will, unless the claim
involves Taxes, be entitled to participate in such Proceeding and, to the extent
that it wishes (unless (i) the indemnifying party is also a party to such
Proceeding and the indemnified party determines in good faith that joint
representation would be inappropriate, or (ii) the indemnifying party fails to
provide reasonable assurance to the indemnified party of its financial capacity
to defend such Proceeding and provide indemnification with respect to such
Proceeding), to assume the defense of such Proceeding with counsel satisfactory
to the indemnified party and, after notice from the indemnifying party to the
indemnified party of its election to assume the defense of such Proceeding, the
indemnifying party will not, as long as it diligently conducts such defense, be
liable to the indemnified party under this Section 10 for any fees of other
counsel or any other expenses with respect to the defense of such Proceeding, in
each case subsequently incurred by the indemnified party in connection with the
defense of such Proceeding, other than reasonable costs of investigation. If the
indemnifying party assumes the defense of a Proceeding, (i) it will be
conclusively established for purposes of this Agreement that the claims made in
that Proceeding are within the scope of and subject to indemnification; (ii) no
compromise or settlement of such claims may be effected by the indemnifying
party without the indemnified party's consent unless (A) there is no finding or
admission of any violation of Legal Requirements or any violation of the rights
of any Person and no effect on any other claims that may be made against the
indemnified party, and (B) the sole relief provided is monetary damages that are
paid in full by the indemnifying party; and (iii) the indemnified party will
have no liability with respect to any compromise or settlement of such claims
effected without its consent. If notice is given to an indemnifying party of the
commencement of any Proceeding and the indemnifying party does not, within ten
days after the indemnified party's notice is given, give notice to the
indemnified party of its election to assume the defense of such Proceeding, the
indemnifying party will be bound by any determination made in such Proceeding or
any compromise or settlement effected by the indemnified party.

 

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(c) Notwithstanding the foregoing, if an indemnified party determines in good
faith that there is a reasonable probability that a Proceeding may adversely
affect it or its affiliates other than as a result of monetary damages for which
it would be entitled to indemnification under this Agreement, the indemnified
party may, by notice to the indemnifying party, assume the exclusive right to
defend, compromise, or settle such Proceeding, but the indemnifying party will
not be bound by any determination of a Proceeding so defended or any compromise
or settlement effected without its consent (which may not be unreasonably
withheld).

 

(d) Seller hereby consents to the non-exclusive jurisdiction of any court in
which a Proceeding is brought against any Indemnified Person for purposes of any
claim that an Indemnified Person may have under this Agreement with respect to
such Proceeding or the matters alleged therein, and agree that process may be
served on Seller with respect to such a claim anywhere in the world.

 

10.8 PROCEDURE FOR INDEMNIFICATION—OTHER CLAIMS

A claim for indemnification for any matter not involving a third-party claim may
be asserted by notice to the party from whom indemnification is sought.

 

11. NON-COMPETE AND NON-SOLICITATION.

 

11.1Non-Compete.

 

(a) Seller agrees that for a period commencing on the Closing Date and
terminating on the fifth (5th) anniversary of the Closing Date, Seller will not
engage, directly or indirectly, in a Competing Business anywhere in the
Territory. The foregoing restrictions are reasonable and appropriate, do not
exceed the protection necessary to secure the goodwill purchased, and do not
place undue hardship on Seller.

 

(b) The remedy at law for any breach of the foregoing will be inadequate and
Buyer, in addition to any other relief available to it, shall be entitled to
temporary and permanent injunctive relief without the necessity of proving
actual damages. If any provisions of any restrictive covenant contained herein,
should be deemed to exceed the limitations allowed by applicable law, then such
provision shall be reformed to provide the maximum limitations permitted.

 

11.2Non-Solicitation

Seller agrees that for a period of four (4) years from and after the Closing
Date she shall not, and shall not cause any third party to, without the prior
written consent of Buyer, directly or indirectly:

 

(a), solicit to hire (or cause or seek to cause to leave the employ of or
retention by Buyer or any of its Subsidiaries) (i) any employee or contractor of
Buyer and the Company and its subsidiaries, or (ii) any person employed or
retained by Buyer or any of its Subsidiaries who became known to or was
identified to Seller or any of its Subsidiaries in connection with the
transactions contemplated by this Agreement or during Seller's engagement by
Buyer after the Closing Date, unless, in the case of clause (i) or (ii) above,
such person ceased to be an employee or contractor of Buyer and/or its
Subsidiaries at least six (6) months prior to such action by Seller or any third
party induced by Seller; or

 

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(b) solicit, divert, attempt to solicit or divert any customer or prospective
customer of Company known to Seller at the time or Closing or obtained at any
time during this four (4) year non-solicitation period for any reason .

 

For purposes of this Section 11, a "Competing Business" shall mean any company,
person or group of persons providing services in sleep health, including but not
limited to services involving providing diagnostic tests in clinical settings,
selling equipment and supplies relating to sleep health, providing consulting
services with respect to sleep health, sleep health operations and/or operating
a sleep health clinical or consulting services. "Territory" shall mean the
United States.

 

12. GENERAL PROVISIONS

 

12.1 EXPENSES

Except as otherwise expressly provided in this Agreement, each party to this
Agreement will bear its respective expenses incurred in connection with the
preparation, execution, and performance of this Agreement and the Contemplated
Transactions, including all fees and expenses of agents, representatives,
counsel, and accountants. Seller will cause the Acquired Companies not to incur
any out-of-pocket expenses in connection with this Agreement [except for
professional fees not in excess of $5,000. In the event of termination of this
Agreement, the obligation of each party to pay its own expenses will be subject
to any rights of such party arising from a breach of this Agreement by another
party.

 

12.2 PUBLIC ANNOUNCEMENTS

Any public announcement or similar publicity with respect to this Agreement or
the Contemplated Transactions will be issued, if at all, at such time and in
such manner as Buyer determines. Unless consented to by Buyer in advance or
required by Legal Requirements, prior to the Closing Seller shall, and shall
cause the Acquired Companies to, keep this Agreement strictly confidential and
may not make any disclosure of this Agreement to any Person. Seller and Buyer
will consult with each other concerning the means by which the Acquired
Companies' employees, customers, and suppliers and others having dealings with
the Acquired Companies will be informed of the Contemplated Transactions, and
Buyer will have the right to be present for any such communication.

 

12.3 CONFIDENTIALITY

Between the date of this Agreement and the Closing Date, Buyer and Seller will
maintain in confidence, and will cause the directors, officers, employees,
agents, and advisors of Buyer and the Acquired Companies to maintain in
confidence, and not use to the detriment of another party or an Acquired Company
any[written, oral, or other information obtained in confidence from another
party or an Acquired Company in connection with this Agreement or the
Contemplated Transactions, unless (a) such information is already known to such
party or to others not bound by a duty of confidentiality or such information
becomes publicly available through no fault of such party, (b) the use of such
information is necessary or appropriate in making any filing or obtaining any
consent or approval required for the consummation of the Contemplated
Transactions, or (c) the furnishing or use of such information is required by or
necessary or appropriate in connection with legal proceedings.

 

If the Contemplated Transactions are not consummated, each party will return or
destroy as much of such written information as the other party may reasonably
request. Whether or not the Closing takes place, Sellers waive, and will upon
Buyer's request cause the Acquired Companies to waive, any cause of action,
right, or claim arising out of the access of Buyer or its representatives to any
trade secrets or other confidential information of the Acquired Companies except
for the intentional competitive misuse by Buyer of such trade secrets or
confidential information.

 

12.4 NOTICES

All notices, consents, waivers, and other communications under this Agreement
must be in writing and will be deemed to have been duly given when (a) delivered
by hand (with written confirmation of receipt), (b) sent by telefacsimile and
email with confirmations of delivery and/or receipt, provided that a copy is
mailed by registered mail, return receipt requested, or (c) when received by the
addressee, if sent by a nationally recognized overnight delivery service
(receipt requested), in each case to the appropriate addresses and telecopier
numbers set forth below (or to such other addresses and telecopier numbers as a
party may designate by notice to the other parties):

 

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Seller:

 

Attention: Ailene Miller

 

Email: amiller@sleephealthier.com

 

with a copy to: Christopher P. Berney

                260 Peachtree St., NW, Suite 401

                Atlanta, Georgia 30303

 

Email: cberney@cpblegal.com

Facsimile: 404-659-3274

 

Buyer: Vystar Corporation

 

Attention: William Doyle

 

Email:    wdoyle@vytex.com

 

Facsimile No.: 770-965-0162

 

with a copy to:

 

Attention: Dawn Ely, Esq.

 

Email:    dely@vytex.com

               3235 Satellite Blvd,

               Bldg 400, Suite 290

               Duluth, GA 30096

 

Facsimile No.: 1.866.360.7228

 

12.5 JURISDICTION; SERVICE OF PROCESS

Any action or proceeding seeking to enforce any provision of, or based on any
right arising out of, this Agreement may be brought against any of the parties
in the courts of the State of Georgia, County of Gwinnett, or if it has or can
acquire jurisdiction, in the United States District Court in that county, and
each of the parties consents to the jurisdiction of such courts (and of the
appropriate appellate courts) in any such action or proceeding and waives any
objection to venue laid therein. Process in any action or proceeding referred to
in the preceding sentence may be served on any party anywhere in the world.

 

12.6 FURTHER ASSURANCES

The parties agree (a) to furnish upon request to each other such further
information, (b) to execute and deliver to each other such other documents, and
(c) to do such other acts and things, all as the other party may reasonably
request for the purpose of carrying out the intent of this Agreement and the
documents referred to in this Agreement.

 

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12.7 WAIVER

The rights and remedies of the parties to this Agreement are cumulative and not
alternative. Neither the failure nor any delay by any party in exercising any
right, power, or privilege under this Agreement or the documents referred to in
this Agreement will operate as a waiver of such right, power, or privilege, and
no single or partial exercise of any such right, power, or privilege will
preclude any other or further exercise of such right, power, or privilege or the
exercise of any other right, power, or privilege. To the maximum extent
permitted by applicable law, (a) no claim or right arising out of this Agreement
or the documents referred to in this Agreement can be discharged by one party,
in whole or in part, by a waiver or renunciation of the claim or right unless in
writing signed by the other party; (b) no waiver that may be given by a party
will be applicable except in the specific instance for which it is given; and
(c) no notice to or demand on one party will be deemed to be a waiver of any
obligation of such party or of the right of the party giving such notice or
demand to take further action without notice or demand as provided in this
Agreement or the documents referred to in this Agreement.

 

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12.8 ENTIRE AGREEMENT AND MODIFICATION

This Agreement supersedes all prior agreements between the parties with respect
to its subject matter (including any Letter of Intent between the parties), and
constitutes (along with the documents referred to in this Agreement) a complete
and exclusive statement of the terms of the agreement between the parties with
respect to its subject matter. This Agreement may not be amended except by a
written agreement executed by both parties.

 

12.9 DISCLOSURE LETTER

(a) The disclosures in the Disclosure Letter, and those in any Supplement
thereto, must relate only to the representations and warranties in the Section
of the Agreement to which they expressly relate and not to any other
representation or warranty in this Agreement.

(b) In the event of any inconsistency between the statements in the body of this
Agreement and those in the Disclosure Letter (other than an exception expressly
set forth as such in the Disclosure Letter with respect to a specifically
identified representation or warranty), the statements in the body of this
Agreement will control.

 

12.10 ASSIGNMENTS, SUCCESSORS, AND NO THIRD-PARTY RIGHTS

Neither party may assign any of its rights under this Agreement without the
prior consent of the other parties[, which will not be unreasonably withheld,]
except that Buyer may assign any of its rights under this Agreement to any
Subsidiary of Buyer. Subject to the preceding sentence, this Agreement will
apply to, be binding in all respects upon, and inure to the benefit of the
successors and permitted assigns of the parties. Nothing expressed or referred
to in this Agreement will be construed to give any Person other than the parties
to this Agreement any legal or equitable right, remedy, or claim under or with
respect to this Agreement or any provision of this Agreement. This Agreement and
all of its provisions and conditions are for the sole and exclusive benefit of
the parties to this Agreement and their successors and assigns.

 

12.11 SEVERABILITY

If any provision of this Agreement is held invalid or unenforceable by any court
of competent jurisdiction, the other provisions of this Agreement will remain in
full force and effect. Any provision of this Agreement held invalid or
unenforceable only in part or degree will remain in full force and effect to the
extent not held invalid or unenforceable.

 

12.12 SECTION HEADINGS, CONSTRUCTION

The headings of Sections in this Agreement are provided for convenience only and
will not affect its construction or interpretation. All references to "Section"
or "Sections" refer to the corresponding Section or Sections of this Agreement.
All words used in this Agreement will be construed to be of such gender or
number as the circumstances require. Unless otherwise expressly provided, the
word "including" does not limit the preceding words or terms.

 

12.13 TIME OF ESSENCE

With regard to all dates and time periods set forth or referred to in this
Agreement, time is of the essence.

 

12.14 GOVERNING LAW

This Agreement will be governed by the laws of the State of Georgia without
regard to conflicts principles.

 

12.15 COUNTERPARTS

This Agreement may be executed in one or more counterparts, each of which will
be deemed to be an original copy of this Agreement and all of which, when taken
together, will be deemed to constitute one and the same agreement.

 

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

 

Buyer:  Vystar Corporation   Seller: Mary Ailene Miller           By:     By:  
  Signature     Signature           Name:   William R. Doyle   Name:      
Printed Name     Printed Name           Title: President & CEO   Title:
Individual & Sole Owner SleepHealth, LLC           Date:     Date:  

 

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