STOCK PURCHASE AGREEMENT

 

by and among

 

LINDA MORASKI,

as Seller,

 

PEOPLESERVE, INC.

and

PEOPLESERVE PRS, INC.,

as the Companies

 

and

 

STAFFING 360 SOLUTIONS, INC.,

as Buyer

 

Dated as of May 17, 2014, 11:59P.M.

 

 

 

 

 

 

STOCK PURCHASE AGREEMENT

 

This STOCK PURCHASE AGREEMENT (this “Agreement”), is made and entered into as of
11:59 P.M., May 17, 2014, by and among Linda Moraski, an individual residing in
the Commonwealth of Massachusetts (“Seller”), PeopleSERVE, Inc., a Massachusetts
corporation (“PS”), PeopleSERVE PRS, Inc. a Massachusetts corporation (“PRS” and
together with PS, the “Companies” and collectively with Seller, the “Seller
Parties”), and Staffing 360 Solutions, Inc., a Nevada corporation (“Buyer”).

 

RECITALS

 

WHEREAS, Seller owns all of the issued and outstanding capital stock of each
Company;

 

WHEREAS, Seller desires to sell and convey to Buyer, and Buyer desires to
purchase from Seller, (i) all of the issued and outstanding capital stock of PS
and (ii) forty-nine percent (49%) of the issued and outstanding capital stock of
PRS, subject to the terms and conditions set forth herein.

 

NOW, THEREFORE, in consideration of the premises and the respective
representations, warranties, covenants and agreements herein contained and for
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the parties hereto hereby agree as follows:

 

ARTICLE I

DEFINITIONS

 

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

 

“Action” means any notice of noncompliance or violation, or any claim, demand,
charge, action, suit, litigation, audit, settlement, complaint, stipulation,
assessment or arbitration, or any request (including any request for
information), inquiry, hearing, proceeding or investigation, by or before any
Governmental Authority.

 

“Adjusted EBITDA” means with respect to any designated period of time for any
Person, the earnings before interest, income Taxes, depreciation and
amortization of such Person for such period, as adjusted by and calculated in
accordance with the methodology set forth on Schedule 1.1(a) hereto.

 

“Affiliate” has the meaning set forth in Rule 12b-2 of the regulations under the
Securities Exchange Act of 1934, as amended.

 

“Ancillary Documents” means each agreement, instrument or document attached
hereto as an Exhibit, including the Note, the Non-Competition Agreement, the
Employment Agreements and the other agreements, certificates and instruments to
be executed or delivered by any of the parties hereto in connection with or
pursuant to this Agreement.

 

“Benefit Plan” means any deferred compensation, executive compensation,
incentive compensation, equity purchase or other equity-based compensation plan,
employment or consulting, severance or termination pay, holiday, vacation or
other bonus plan or practice, hospitalization or other medical, life or other
insurance, supplemental unemployment benefits, profit sharing, pension, or
retirement plan, program, agreement, commitment or arrangement, and each other
employee benefit plan, program, agreement or arrangement, including each
“employee benefit plan” as such term is defined under Section 3(3) of ERISA,
maintained or contributed to or required to be contributed to by a Company for
the benefit of any employee or terminated employee of such Company, or with
respect to which a Company has any liability, whether direct or indirect, actual
or contingent, whether formal or informal, and whether legally binding or not.

 

 

 

 

“Business Day” means any day that is not a Saturday, Sunday or any other day on
which banks are required or authorized by Law to be closed in Boston,
Massachusetts or New York City, New York.

 

“Buyer Common Stock” means shares of the common stock, par value $0.0001 per
share, of Buyer.

 

“Buyer Common Stock Price” means an amount equal to $1.50 per share.

 

“Bylaws” means a company’s bylaws or equivalent document.

 

“Charter” means a company’s articles of incorporation, certificate of
incorporation or equivalent organizational documents.

 

“Closing Accounts Payable” means any accounts payable of either Company as of
the Closing, whether or not such amounts have been invoiced prior to the
Closing, as determined in accordance with GAAP immediately prior to the
consummation of the transactions contemplated by this Agreement.

 

“Closing Accounts Receivable” means any accounts receivable of either Company as
of the Closing, whether or not such amounts have been invoiced prior to the
Closing, as determined in accordance with GAAP immediately prior to the
consummation of the transactions contemplated by this Agreement.

 

“Code” means the Internal Revenue Code of 1986 and any successor statute
thereto, as amended. Reference to a specific section of the Code shall include
such section, any valid regulation promulgated thereunder, and any comparable
provision of any future legislation amending, supplementing or superseding such
section.

 

“Confidential Information” means any information concerning the business and
affairs of either Company that is not generally available to the public,
including know-how, trade secrets, customer lists, details of customer or
consultant contracts, pricing policies, operational methods and marketing plans
or strategies, and any information disclosed to a Company by third parties to
the extent that a Company has an obligation of confidentiality in connection
therewith.

 

“Contract” means any contract, agreement, binding arrangement, commitment or
understanding, bond, note, indenture, mortgage, debt instrument, license (or any
other contract, agreement or binding arrangement concerning Intellectual
Property), franchise, lease or other instrument or obligation of any kind,
written or oral (including any amendments or other modifications thereto).

 

“Contract Loss” means the total direct and indirect costs incurred by the
Companies under a Government Contract exceed the total amount of payments that
have been and will be received by the Companies under such Government Contract.

 

“Copyrights” means all works of authorship, mask works and all copyrights
therein, including all renewals and extensions, copyright registrations and
applications for registration and renewal, and non-registered copyrights.

 

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“Corporate Employee” means any employee of either Company that performs services
for the Companies and is not staffed to customers of either Company to perform
services for such customers.

 

“Disclosure Schedules” means the disclosure schedules to this Agreement dated as
of the date hereof and forming a part of this Agreement.

 

“ERISA” means the Employee Retirement Income Security Act of 1974 and any
successor statute thereto, as amended. Reference to a specific section of ERISA
shall include such section, any valid regulation promulgated thereunder, and any
comparable provision of any future legislation amending, supplementing or
superseding such section.

 

“Exchange Act” means the Securities Exchange Act of 1934, as amended.

 

“FAR” means the Federal Acquisition Regulation and any agency supplement
thereto.

 

“GAAP” means United States generally accepted accounting principles applied on a
consistent basis.

 

“Government Bid” means any bid, offer, proposal, or quotation made or submitted
by the Company prior to the Closing Date which, if accepted or selected for
award, would result in a Government Contract.

 

“Government Contract” means any prime contract, subcontract, teaming agreement
or arrangement, joint venture agreement, basic ordering agreement, blanket
purchase agreement, pricing agreement, letter contract or other similar
arrangement of any kind, between the Company, on the one hand, and (a) any
Governmental Authority, (b) any prime contractor of a Governmental Authority in
its capacity as a prime contractor, or (c) any subcontractor (or lower tier
subcontractor) with respect to any contract of a type described in clauses (a)
or (b) above, on the other hand.

 

“Governmental Authority” means any federal, state, local, foreign or other
governmental, quasi-governmental or administrative body, instrumentality,
department or agency or any court, tribunal, administrative hearing body,
arbitration panel, commission, or other similar dispute-resolving panel or body.
The term “Governmental Authority” includes any Person acting on behalf of a
Governmental Authority.

 

“Indebtedness” means, without duplication, (a) the outstanding principal of, and
accrued and unpaid interest on, all bank or other third party indebtedness for
borrowed money of either Company, including indebtedness under any bank credit
agreement and any other related agreements and all obligations of either Company
evidenced by notes, debentures, bonds or other similar instruments for the
payment of which either Company is responsible or liable, (b) all obligations of
either Company for the reimbursement of any obligor on any line or letter of
credit, banker’s acceptance, guarantee or similar credit transaction, in each
case, that has been drawn or claimed against, (c) all obligations of either
Company issued or assumed for deferred purchase price payments, (d) all
obligations of either Company under leases required to be capitalized in
accordance with GAAP, (e) all interest rate and currency swaps, caps, collars
and similar agreements or hedging devices under which payments are obligated to
be made by either Company, whether periodically or upon the happening of a
contingency, (f) all obligations of either Company secured by a Lien (other than
a Permitted Lien) on any asset of a Company, whether or not such obligation is
assumed by a Company, (g) any premiums, prepayment fees or other penalties,
fees, costs or expenses associated with payment of any Indebtedness and (h) all
obligation described in clauses (a) through (g) above of any other Person which
is directly or indirectly guaranteed by either Company or which either Company
has agreed (contingently or otherwise) to purchase or otherwise acquire or in
respect of which it has otherwise assured a creditor against loss.

 

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“Intellectual Property” means all of the following as they exist in any
jurisdiction throughout the world: (a) Patents; (b) Trademarks; (c) Copyrights;
(d) Trade Secrets; (e) all domain name and domain name registrations, web sites
and web pages and related rights, registrations, items and documentation related
thereto; (f) Software; (g) rights of publicity and privacy, and moral rights,
and (h) all licenses, sublicenses, permissions, and other agreements related to
the preceding property.

 

“IRS” means the U.S. Internal Revenue Service or any successor entity.

 

“Knowledge” means: (i) with respect to each Company, the actual present
knowledge of a particular matter by Seller, and the knowledge that Seller would
reasonably be expected to have if diligently performing her duties as an officer
and director on behalf of such Company; (ii) with respect to Seller shall mean
the actual present knowledge of a particular matter by Seller, without
independent inquiry; and (iii) with respect to Buyer, the actual present
knowledge of a particular matter by any of the directors or executive officers
of Buyer, without independent inquiry.

 

“Law” means any federal, state, local, municipal, foreign or other law, statute,
legislation, principle of common law, ordinance, code, edict, decree,
proclamation, treaty, convention, rule, regulation, directive, requirement,
writ, injunction, settlement, Permit or Order that is or has been issued,
enacted, adopted, passed, approved, promulgated, made, implemented or otherwise
put into effect by or under the authority of any Governmental Authority.

 

“Liabilities” means any and all debts, liabilities and obligations of any nature
whatsoever, whether accrued or fixed, absolute or contingent, mature or
unmatured or determined or determinable, including those arising under any Law,
Action, Order or Contract.

 

“Lien” means any interest (including any security interest), pledge, mortgage,
lien, encumbrance, charge, claim or other right of third parties, including any
spousal interests (community or otherwise), whether created by law or in equity,
including any such restriction on the use, voting, transfer, receipt of income
or other exercise of any attributes of ownership.

 

“Material Adverse Effect” means, with respect to any Seller Party, any event,
fact, condition, change, circumstance, occurrence or effect, which, either
individually or in the aggregate with all other events, facts, conditions,
changes, circumstances, occurrences or effects, (a) has had, or would reasonably
be expected to have, a material adverse effect on the business, properties,
prospects, assets, Liabilities, condition (financial or otherwise), operations,
licenses or other franchises or results of operations of either Company, or
materially diminish the value of the Purchased Stock or (b) does or would
reasonably be expected to materially impair or delay the ability of a Seller
Party to perform their respective obligations under this Agreement and the
Ancillary Documents or to consummate the transactions contemplated hereby and
thereby; provided, however, that with respect to the Companies, a Material
Adverse Effect will not include any adverse effect or change resulting from any
change, circumstance or effect relating to (A) the economy in general, (B)
securities markets, regulatory or political conditions in the United States
(including terrorism or the escalation of any war, whether declared or
undeclared or other hostilities), (C) changes in applicable Laws or GAAP or the
application or interpretation thereof, (D) with respect to each Company, the
industries in which such Company primarily operates and not specifically
relating to such Company or (E) a natural disaster (provided, that in the cases
of clauses (A) through (E), the applicable Company is not disproportionately
affected by such event as compared to other similar companies and businesses in
similar industries and geographic regions as such Company).

 

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“Net Working Capital” means an amount equal to the difference (whether positive
or negative) of (a) the aggregate of the current assets of the Companies as of
the Closing, minus (b) the aggregate of the current liabilities of the Companies
as of the Closing, in each case as determined in accordance with GAAP and
immediately prior to the consummation of the transactions contemplated by this
Agreement; provided, however, that, for purposes of this definition of “Net
Working Capital,” whether or not the following is consistent with GAAP, in each
case without duplication: (i) “current assets” will exclude any deferred or
other Tax assets (including claims for Tax refunds); (ii) “current liabilities”
will include (A) any Indebtedness, unpaid Transaction Expenses and the amount
for any unpaid Transaction Bonuses, including the non-current or long-term
portion thereof, (B) all liabilities for accrued or deferred Taxes and (C)
balance sheet reserves required under GAAP (applied in a manner consistent with
prior practices of the Companies), including reserves for unearned revenue.

 

“OFAC” means the Office of Foreign Assets Control of the U.S. Treasury
Department.

 

“Order” means any order, writ, rule, judgment, injunction, decree, stipulation,
determination or award that is or has been made, entered, rendered or otherwise
put into effect by, with or under the authority of any Governmental Authority.

 

“Ordinary Course of Business” means, with respect to a Person, an action taken
by such Person if (a) such action is recurring in nature, is consistent with the
past practices of the Person and is taken in the ordinary course of the normal
day-to-day operations of the Person; (b) such action is not required to be
authorized by the equity holders of such Person, the board of directors (or
equivalent) of such Person or any committee of the board of directors (or
equivalent) of such Person and does not require any other special authorization
of any nature; and (c) such action is taken in accordance with sound and prudent
business practice. Unless the context or language herein requires otherwise,
each reference to Ordinary Course of Business will be deemed to be a reference
to Ordinary Course of Business of a Company.

 

“Patents” means all patents, patent applications and the inventions, designs and
improvements described and claimed therein, patentable inventions, and other
patent rights (including any divisionals, continuations, continuations-in-part,
substitutions, or reissues thereof, whether or not patents are issued on any
such applications and whether or not any such applications are amended,
modified, withdrawn, or refiled).

 

“Permit” means any federal, state, local, foreign or other third-party permit,
grant, easement, consent, approval, authorization, exemption, license,
franchise, concession, ratification, permission, clearance, confirmation,
endorsement, waiver, certification, designation, rating, registration or
qualification that is or has been issued, granted, given or otherwise made
available by or under the authority of any Governmental Authority or other
Person.

 

“Permitted Exceptions” means bankruptcy, insolvency, reorganization, moratorium
or other similar laws affecting the enforcement of creditors’ rights generally
and general principles of equity (regardless of whether enforceability is
considered in a proceeding at law or in equity).

 

“Permitted Liens” means any (a) statutory Liens of landlords, carriers,
warehousemen, mechanics and materialmen and other similar Liens imposed by Law
in the Ordinary Course of Business for sums not yet due and payable; and (b)
Liens for current taxes not yet due and payable.

 

“Person” shall include any individual, trust, firm, corporation, limited
liability company, partnership, Governmental Authority or other entity or
association, whether acting in an individual, fiduciary or any other capacity.

 

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“Personal Property” means all of the machinery, equipment, tools, vehicles,
furniture, leasehold improvements, office equipment, plant, spare parts, and
other tangible personal property which are owned, used or leased by either
Company and used or useful, or intended for use, in the conduct or operations of
either Company’s business.

 

“PRS Common Stock” means shares of the common stock, no par value per share, of
PRS.

 

“PS Common Stock” means shares of the common stock, no par value per share, of
PS.

 

“Representative” means, as to any Person, such Person’s Affiliates and its and
their managers, directors, officers, employees, agents and advisors (including
financial advisors, counsel and accountants).

 

“SEC” means the United States Securities and Exchange Commission.

 

“Securities Act” means the Securities Act of 1933, as amended.

 

“Software” means all computer software, including all source code, object code,
and documentation related thereto and all software modules, assemblers, applets,
compilers, flow charts or diagrams, tools and databases.

 

“Staffing Employee” means any employee of either Company that is staffed by a
Company to its customers to perform services for such customers.

 

“Subsidiary” means, with respect to any Person, any corporation, partnership,
association or other business entity of which (i) if a corporation, a majority
of the total voting power of shares of stock entitled (without regard to the
occurrence of any contingency) to vote in the election of directors, managers or
trustees thereof is at the time owned or controlled, directly or indirectly, by
that Person or one or more of the other Subsidiaries of that Person or a
combination thereof, or (ii) if a partnership, association or other business
entity, a majority of the partnership or other similar ownership interests
thereof is at the time owned or controlled, directly or indirectly, by that
Person or one or more Subsidiaries of that Person or a combination thereof. For
purposes hereof, a Person or Persons will be deemed to have a majority ownership
interest in a partnership, association or other business entity if such Person
or Persons will be allocated a majority of partnership, association or other
business entity gains or losses or will be or control the managing director,
managing member, general partner or other managing Person of such partnership,
association or other business entity.

 

“Tax” means any federal, state, local or foreign income, gross receipts,
license, payroll, parking, employment, excise, severance, stamp, occupation,
premium, windfall profits, environmental, natural resources, customs duties,
capital stock, franchise, profits, withholding, social security (or similar),
payroll, unemployment, disability, real property, personal property, sales, use,
transfer, registration, value added, alternative or add-on minimum, estimated
tax, or other tax of any kind whatsoever, including any interest, penalty, or
addition thereto, whether disputed or not, including such item for which
Liability arises from the application of Treasury Regulation 1.1502-6, as a
transferee or successor-in-interest, by contract or otherwise, and any Liability
assumed or arising as a result of being, having been, or ceasing to be a member
of any Affiliated Group (as defined in Section 1504(a) of the Code) (or being
included or required to be included in any Tax Return relating thereto) or as a
result of any Tax indemnity, Tax sharing, Tax allocation or similar Contract.

 

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“Tax Return” means any return, report, information return, schedule,
certificate, statement or other document (including any related or supporting
information) filed or required to be filed with a Taxing Authority in connection
with any Tax, or, where none is required to be filed with a Taxing Authority,
the statement or other document issued by a Taxing Authority in connection with
any Tax.

 

“Taxing Authority” means any Governmental Authority responsible for the
imposition or collection of any Tax.

 

“Trademarks” means all trademarks, service marks, trade dress, trade names,
brand names, Internet domain names, designs, logos, or corporate/company names
(including, in each case, the goodwill associated therewith), whether registered
or unregistered, and all registrations and applications for registration and
renewal thereof.

 

“Trade Secrets” means any trade secrets, confidential business information,
concepts, ideas, designs, research or development information, processes,
procedures, techniques, technical information, specifications, operating and
maintenance manuals, engineering drawings, methods, know-how, data, mask works,
discoveries, inventions, modifications, extensions, improvements, and other
proprietary rights (whether or not patentable or subject to copyright,
trademark, or trade secret protection).

 

“Transaction Bonuses” means the aggregate of all amounts payable as a result of
the change in control of PS or as a result of the sale of the Purchased PRS
Stock or other similar provisions contained in any agreements binding upon PS or
PRS, including all bonuses and severance payments, retention obligations for
retention agreements entered into in contemplation of a potential change of
control of PS or the sale of the Purchased PRS Stock, termination payments to
consultants or independent contractors and any settlement of any such bonus or
severance payment obligations, obligations related to terminated stock options,
or obligations related to terminated stock appreciation, phantom stock, profit
participation and/or similar rights entered into by either Company at or prior
to the Closing, and including such Company’s share of any withholdings on such
amounts.

 

“Transaction Expenses” means the aggregate of all fees and expenses payable by
any Seller Party in connection with the consummation of the transactions
contemplated hereby (or incurred in connection with the transactions hereunder)
including any of the foregoing payable to legal counsel, accountants, investment
bankers, financial advisors, brokers, finders, or consultants.

 

1.2.         Other Defined Terms. The following capitalized terms, as used in
this Agreement, have the respective meanings given to them in the Section as set
forth below adjacent to such terms:

 

Term   Section AAA   7.4(c) Agreement   Preamble Arbitration Rules   7.4(c)
Audited Statements   2.6(a) Auditor   2.6(a) Bank Account   4.23 Basket   7.6
Benefit Plan   4.18(a) Buyer   Preamble Buyer Closing Statement   2.6(b) Buyer
Indemnified Parties   7.2 Buyer Material Adverse Effect   5.1 Closing   3.1
Closing Date   3.1 Companies   Preamble Current Government Contracts   4.22(a)
Employment Agreements   3.2(g) Estimated Closing Statement   2.5 Estimated
Purchase Price   2.5

 

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Term   Section Final Statement   2.6(d) Financial Statements   4.7(a)
Indemnification Cap   7.6 Indemnitee   7.4(a) Indemnitor   7.4(a) Independent
Expert   2.6(d) IP Licenses   4.12 Leased Premises   4.11 Leases   4.11 Loss  
7.2 Maximum Number of Securities   6.8 Non-Competition Agreement   3.2(f) Note  
2.3(c) Personal Property Leases   4.10 Piggy-Back Registration   6.8 Prohibited
Transfer   6.6 PRS   Preamble PS   Preamble Purchase Price   2.2 Purchase Price
Adjustment Amount   2.6(e) Purchased PRS Stock   2.1 Purchased PS Stock   2.1
Purchased Stock   2.1 Registered IP   4.12 Registration Damages   6.8(d)(i)
Related Person   4.21 Resolution Period   2.6(c) Right of Set-Off   7.6 Seller
Indemnified Parties   7.3 Seller   Preamble Seller Parties   Preamble Selling
Expenses   6.8 Shares   2.3(b) Special Reps   7.1 Survival Date   7.1 Top
Customers   4.24 Top Suppliers   4.24 Transfer Taxes   8.2 WOSB Status   6.7(a)

 

ARTICLE II

PURCHASE AND SALE OF stock

 

2.1.         Purchase of Stock. At the Closing, and on the terms and subject to
all of the conditions of this Agreement, Seller will sell, transfer, assign and
convey to Buyer, and Buyer will purchase and accept from Seller, (i) One Hundred
(100) shares of PS Common Stock, representing one hundred percent (100%) of the
issued and outstanding capital stock of PS (the “Purchased PS Stock”), and (ii)
Four Hundred and Ninety (490) shares PRS Common Stock, representing forty-nine
percent (49%) of the issued and outstanding capital stock of PRS (the “Purchased
PRS Stock” and, together with the Purchased PS Stock, the “Purchased Stock”),
free and clear of any and all Liens.

 

2.2.         Purchase Price. In full payment for the Purchased Stock, Buyer
shall pay to Seller an aggregate purchase price equal to (as each such amount is
finally determined in accordance with this ARTICLE II) the sum of (the “Purchase
Price”): (a) the product of (i) the trailing twelve (12) fiscal month Adjusted
EBITDA of PS as of April 26, 2014, multiplied by (ii) four (4); plus (b) the
product of (i) the trailing twelve (12) fiscal month Adjusted EBITDA of PRS as
of as of April 26, 2014, multiplied by (ii) two (2).

 

2.3.         Payment of Closing Purchase Price. At the Closing, Buyer shall pay
the Purchase Price as follows (with such amounts subject to adjustment after the
Closing based on the Purchase Price Adjustment Amount in accordance with Section
2.6):

 

(a)          Buyer shall pay to Seller by wire transfer in immediately available
funds to such account as designated by Seller in the Estimated Closing Statement
an amount in cash equal to forty percent (40%) of the Estimated Purchase Price.

 

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(b)          Buyer shall pay to Seller by delivery of a number of shares of
Buyer Common Stock equal in total value to twenty-five percent (25%) of the
Estimated Purchase Price, with each such share of Buyer Common Stock valued at
the Buyer Common Stock Price (such shares of Buyer Common Stock, along with any
additional shares of Buyer Common Stock issued after the Closing in connection
with the Purchase Price Adjustment Amount in accordance with Section 2.6(e), the
“Shares”), with such Shares subject to Section 6.6 hereof.

 

(c)          Buyer shall pay the balance of the Estimated Purchase Price to
Seller by delivery of an unsecured promissory note in the form of Exhibit A
hereto (the “Note”) with an initial principal amount equal to thirty-five
percent (35%) of the Estimated Purchase Price.

 

2.4.         Net Working Capital; Other Excluded Assets and Liabilities.

 

(a)          The parties agree that, notwithstanding anything to the contrary
contained herein, Seller shall be entitled to receive from the Companies, and
shall be responsible for, all of the Net Working Capital as of the Closing (as
set forth on the Final Statement), and that the Buyer and the Companies shall
have no right to, or obligations with respect to, the Closing Accounts
Receivable or the Net Working Capital other than as set forth in this Section
2.4(a). From and after the Closing, if either Company receives a payment for a
Closing Account Receivable of such Company, then promptly after receipt of such
payment, such Company shall pay to Seller the amount of such payment less the
amount of any payments made by or behalf of such Company for Closing Accounts
Payable that were not previously used to offset other Closing Accounts
Receivable. Each Company hereby agrees, and Buyer hereby agrees to cause each
Company, to use the proceeds from any and all Closing Accounts Receivable of
such Company only to either satisfy the Closing Accounts Payable of such Company
(including reimbursing Buyer for any Closing Accounts Payable that were
previously paid by Buyer or through money advanced to such Company by Buyer for
purposes of paying the Closing Accounts Payable) or to pay such amounts to
Seller in accordance with this Section 2.4(a). No portion of the Closing
Accounts Receivable shall be used to pay Company liabilities or other
obligations that arise in connection with the business of the Companies after
the Closing. If a Company fails to pay any amount to Seller as required by this
Section 2.4(a), promptly after receipt of written notice from Seller of such
failure to pay, Buyer will pay such amount directly to Seller as a deemed loan
by Buyer to such Company and a payment to Seller on behalf of such Company.

 

(b)          Buyer and each of the Companies each hereby acknowledges and agrees
that neither Company has any rights to (i) the Seller’s automobile, (ii) the
cell phones and cell phone numbers of Seller or any employee of a Company as of
the Closing or (iii) any LinkedIn account or Facebook, Twitter or other social
media account of Seller or any employee of a Company as of the Closing.

 

(c)          Seller hereby agrees that, notwithstanding anything to the contrary
contained herein, Seller shall be solely responsible for, and shall reimburse
the Companies for: (i) any and all ”current liabilities” of the Companies as of
the Closing (as defined in the definition of Net Working Capital), to the extent
that “current assets” of the Companies as of the Closing (as defined in the
definition of Net Working Capital) are insufficient to pay such liabilities; and
(ii) any Losses of either Company (in excess of any reserves on the Audited
Statements) as a result of or in connection with any rate or other adjustments,
including any cost disallowances, with respect to any audits of Government
Contracts conducted by Governmental Authorities related to (A) any period ending
on or before the Closing Date and (B) any periods beginning before but ending
after the Closing Date to the extent any adjustments relate to the portion of
such period on or prior to the Closing Date.

 

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2.5.         Estimated Closing Statement. Prior to the Closing, Seller will have
delivered to Buyer a certificate signed by Seller (the “Estimated Closing
Statement”) and reasonably acceptable to Buyer, setting forth Seller’s good
faith estimate (including all calculations in reasonable detail) based on the
financial statements and books and records of each Company of (i) the Purchase
Price (the “Estimated Purchase Price”), including the calculation of the
Adjusted EBITDA of each Company for the twelve (12) fiscal month period ending
April 26, 2014, and (ii) the Net Working Capital, including the estimated amount
of each of the Closing Accounts Receivable and the Closing Accounts Payable, and
attaching an estimated balance sheet of each Company as of the Closing. The
Estimated Closing Statement shall be prepared applying the definitions of Net
Working Capital and Adjusted EBITDA contained herein.

 

2.6.         Post-Closing Purchase Price Adjustment.

 

(a)          As soon as practicable (but in any event, within sixty (60) days)
after the Closing, (i) Seller will deliver to Buyer an audited income statement,
balance sheet and statement of cash flows for PRS for each of (A) the fiscal
year ending December 28, 2013 and (B) the twelve (12) fiscal month period ending
April 26, 2014, along with an unqualified audit opinion from RBSM LLP or, if
such accounting firm is no longer independent or otherwise does not accept its
engagement, another independent certified public accountant reasonably
acceptable to Buyer and Seller (the “Auditor”), and (ii) Buyer will deliver to
Seller an audited income statement, balance sheet and statement of cash flows
for PS for each of (A) the fiscal year ending December 28, 2013 and (B) the
twelve (12) fiscal month period ending April 26, 2014, along with an unqualified
audit opinion from the Auditor (such financial statements described in clauses
(i) and (ii) above, collectively, the “Audited Statements”). The parties hereby
agree that the Auditor shall audit and prepare the Audited Statements, and that
all costs of the Auditor incurred in connection with the preparation and
delivery of the Audited Statements shall be borne by Buyer. Each of Buyer and
Seller will, and will cause their respective Representatives to, provide the
Auditor with reasonable access to the Companies’ books, records, personnel and
property to the extent reasonably necessary to prepare the Audited Statements.

 

(b)          As soon as practicable (but in any event within sixty (60) days)
after the parties’ delivery of the Audited Statements, Buyer will prepare and
deliver to Seller a certificate (“Buyer Closing Statement”) that sets forth
Buyer’s determination (along with Buyer’s detailed calculation thereof) of (i)
the Purchase Price, including the calculation of the Adjusted EBITDA of each
Company for the twelve (12) fiscal month period ending April 26, 2014 based on
the Audited Statements and (ii) the calculation of the Net Working Capital.
Seller and its Representatives will provide Buyer and its Representatives with
reasonable access to the books and records, personnel and properties and any
other information of PRS or its Subsidiaries, if any, that Buyer reasonably
requests in connection with Buyer’s preparation of the Buyer Closing Statement.

 

(c)          Seller will have forty-five (45) days after its receipt of the
Buyer Closing Statement to review it. To the extent reasonably required to
complete its review of the Buyer Closing Statement, Seller and its
Representatives will be provided with reasonable access to the books, records
and working papers of Buyer and the Companies used to prepare the Buyer Closing
Statement, Buyer’s and the Companies’ finance personnel and any other
information of the Companies that Seller reasonably requests relating to the
determination of Purchase Price, and Buyer and the Companies shall cooperate
with Seller and its Representatives in connection therewith. Seller will deliver
notice to Buyer on or prior to the forty-fifth (45th) day after receipt of the
Buyer Closing Statement specifying in reasonable detail all disputed items and
the basis therefor. If Seller fails to deliver such notice in such forty-five
(45) day period, Seller will have waived its right to contest the Buyer Closing
Statement. If Seller notifies Buyer of any objections to the Buyer Closing
Statement in such 45-day period, Seller and Buyer will, within thirty (30) days
following the date of such notice (the “Resolution Period”), attempt to resolve
their differences and any written resolution by them as to any disputed amount
will be final and binding for all purposes under this Agreement.

 

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(d)          If at the conclusion of the Resolution Period Buyer and Seller have
not reached an agreement on any objections with respect to the Buyer Closing
Statement, then all amounts and issues remaining in dispute will be submitted by
Seller and Buyer to a mutually acceptable independent (i.e., no prior material
business relationship with any party for the prior two (2) years) accounting
firm recognized nationally or in the New York City tri-state region (the
“Independent Expert”) (which appointment will be made no later than five (5)
Business Days after the end of the Resolution Period) (provided, that if the
Independent Expert does not accept its appointment or Buyer and Seller cannot
agree on the Independent Expert, in either case within fifteen (15) days after
the end of the Resolution Period, either Buyer or Seller may require, by written
notice to the other, that the Independent Expert be selected by the New York
City Regional Office of the American Arbitration Association in accordance with
the procedures of the American Arbitration Association). Seller and Buyer agree
to execute, if requested by the Independent Expert, a reasonable engagement
letter with respect to the determination to be made by the Independent Expert.
All fees and expenses relating to the work, if any, to be performed by the
Independent Expert will be borne by (i) Buyer in the proportion that the
aggregate dollar amount of the disputed items submitted to the Independent
Expert by Buyer that are unsuccessfully disputed by Buyer (as finally determined
by the Independent Expert) bears to the aggregate dollar amount of disputed
items submitted by Buyer and Seller, and (ii) Seller in the proportion that the
aggregate dollar amount of the disputed items submitted to the Independent
Expert by Seller that are unsuccessfully disputed by Seller (as finally
determined by the Independent Expert) bears to the aggregate dollar amount of
disputed items submitted by Buyer and Seller. Except as provided in the
preceding sentence, all other costs and expenses incurred by the parties in
connection with resolving any dispute hereunder before the Independent Expert
will be borne by the party incurring such cost and expense. The Independent
Expert will determine only those issues still in dispute at the end of the
Resolution Period and the Independent Expert’s determination will be based
solely upon and consistent with the terms and conditions of this Agreement. The
determination by the Independent Expert will be based solely on the Audited
Financials and the books and records of the Companies and presentations with
respect to such disputed items by Buyer and Seller to the Independent Expert and
not on the Independent Expert’s independent review. Each of Seller and Buyer
will use their reasonable best efforts to make their respective presentations as
promptly as practicable following submission to the Independent Expert of the
disputed items, and each such party will be entitled, as part of its
presentation, to respond to the presentation of the other party and any
questions and requests of the Independent Expert. In deciding any matter, the
Independent Expert (A) will be bound by the provisions of this Section 2.6(d)
and (B) may not assign a value to any item greater than the greatest value for
such item claimed by Buyer or Seller or less than the smallest value for such
item claimed by Buyer or Seller. Seller and Buyer will request that the
Independent Expert’s determination be made within forty-five (45) days after its
engagement, or as soon thereafter as possible. Such determination will be set
forth in a written statement delivered to Seller and Buyer and will be final,
conclusive, non-appealable and binding for all purposes hereunder. The term
“Final Statement” will mean the definitive statement agreed to by Seller and
Buyer in accordance with Section 2.6(c) or the definitive statement resulting
from the determination made by the Independent Expert in accordance with this
Section 2.6(d).

 

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(e)          For purposes of this Agreement, the “Purchase Price Adjustment
Amount” shall mean an amount equal to the finally determined Purchase Price as
shown on the Final Statement minus the amount of the Estimated Purchase Price.
If the Purchase Price Adjustment Amount is a positive amount, then Buyer shall
pay to Seller the Purchase Price Adjustment Amount as follows: (i) Buyer shall
pay to Seller within ten (10) Business Days after the determination of the Final
Statement an amount in cash equal to forty percent (40%) of the Purchase Price
Adjustment Amount by wire transfer in immediately available funds to such
account as designated by Seller in writing; (ii) Buyer shall pay to Seller by
delivering, promptly after the determination of the Final Statement, a number of
Shares equal in total value to twenty-five percent (25%) of the Purchase Price
Adjustment Amount, with each such Share valued at the Buyer Common Stock Price,
with such Shares subject to subject to Section 6.6; and (iii) the remainder of
the Purchase Price Adjustment Amount shall increase the principal amount of the
Note (increasing the Monthly Installments (as defined in the Note) thereunder by
one thirty-sixth (1/36th) of such increase in principal amount, and requiring
Buyer to make a one-time adjustment to pay the difference between the Monthly
Installments paid prior to such date and the Monthly Installments that would
have been paid prior to date using the adjusted Monthly Installment after giving
effect to the increase in principal amount). If the Purchase Price Adjustment
Amount is a negative amount, then Seller shall pay to Buyer the Purchase Price
Adjustment Amount as follows: (i) Seller shall pay to Buyer within ten (10)
Business Days after the determination of the Final Statement an amount in cash
equal to forty percent (40%) of the Purchase Price Adjustment Amount by wire
transfer in immediately available funds to such account(s) as designated by
Buyer in writing; (ii) Seller shall pay by delivery to Buyer of a number of
Shares equal in total value to twenty-five percent (25%) of the Purchase Price
Adjustment Amount, with each such Share valued at the Buyer Common Stock Price;
and (iii) the remainder of the Purchase Price Adjustment Amount shall decrease
the principal amount of the Note (decreasing the Monthly Installments thereunder
by one thirty-sixth (1/36th) of such decrease in principal amount, and requiring
Seller to make a one-time adjustment to pay the difference between the Monthly
Installments paid prior to such date and the Monthly Installments that would
have been paid prior to date using the adjusted Monthly Installment after giving
effect to the decrease in principal amount).

 

ARTICLE III

CLOSING AND CLOSING CONDITIONS

 

3.1.         Closing. The closing of the transactions contemplated by this
Agreement (the “Closing”) will take place simultaneously with the execution and
delivery of this Agreement at the offices of Ellenoff, Grossman & Schole LLP,
1345 Avenue of the Americas, New York, NY 10105, commencing at 10:00 am (New
York City time). By mutual agreement of the parties the Closing may take place
by conference call and facsimile (or other electronic transmission of signature
pages) with exchange of original signatures by overnight mail. The date on which
the Closing actually occurs will be referred to as the “Closing Date”. The
parties agree that to the extent permitted by applicable Law and GAAP, the
Closing will be deemed effective as of 11:59 p.m. (New York City time) on the
Closing Date.

 

3.2.         Closing Deliveries by Seller. At or prior to the Closing, Seller
will deliver or cause to be delivered to Buyer the following, each in form and
substance reasonably acceptable to Buyer:

 

(a)          certificates representing the Purchased Stock, duly endorsed or
accompanied by stock powers duly executed and in a form acceptable to Buyer
necessary to transfer the Purchased Stock to Buyer on the books of each of the
Companies;

 

(b)          the books and records of PS, including the stock book, stock
ledger, minute book and corporate seal;

 

(c)          the required notices, consents, Permits, waivers or other approvals
listed in Schedule 3.2(c) (or written waivers thereof), and all such notices,
consents, Permits, waivers and other approvals will be in full force and effect
and not be subject to the satisfaction of any condition that has not been
satisfied or waived;

 

(d)          release and extinguishment of all (i) Indebtedness of the Companies
and (ii) Liens on any of the assets of the Companies, and documentation
evidencing the same;

 

(e)          the Note, duly executed by Seller;

 

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(f)          the Non-Competition and Non-Solicitation Agreement by and between
Buyer and Seller in the form attached as Exhibit B hereto (the “Non-Competition
Agreement”), duly executed by Seller;

 

(g)          the employment agreements by and between Seller and each Company,
in the forms attached as Exhibit C hereto (the “Employment Agreements”), duly
executed by Seller;

 

(h)          an opinion of Seller’s counsel, substantially in the form of
Exhibit D hereto;

 

(i)          copies of (A) the Charter of each Company certified as of a date no
earlier than thirty (30) days prior to the Closing Date by the Secretary of
State of the Commonwealth of Massachusetts and (B) good standing certificates
for each Company certified as of a date no earlier than March 17, 2014 from the
Secretary of State of the Commonwealth of Massachusetts and from the proper
state official in each other jurisdiction in which such Company is qualified to
do business as a foreign corporation as of the Closing;

 

(j)          a certificate from each Company’s secretary certifying to (A)
copies of such Company’s Charter and Bylaws as in effect as of the Closing, (B)
the resolutions of each Company’s board of directors and stockholders
authorizing the execution, delivery and performance of this Agreement and each
of the Ancillary Documents to which it is a party or by which it is bound, and
the consummation of each of the transactions contemplated hereby and thereby,
and (C) the incumbency of officers authorized to execute this Agreement or any
Ancillary Document to which such Company is or is required to be a party or by
which such Company is or is required to be bound;

 

(k)          an affidavit of non-foreign status of Seller dated as of the
Closing Date in form and substance required under Section 1445 of the Code such
that Buyer is exempt from withholding any portion of the Purchase Price that
might otherwise be required by Section 1445 of the Code;

 

(l)          an IRS Form W-9, completed by Seller;

 

(m)          the Estimated Closing Statement in accordance with Section 2.5;

 

(n)          suitable documentation to add additional employees of Buyer or its
Affiliates as signatories to the Bank Accounts of PS set forth on Schedule 4.23,
as prescribed by Buyer;

 

(o)          one or more CD-ROMs or alternatively portable “thumb drives,” in
PC-readable format, that contain readable, working Adobe or other (i.e.,
Microsoft Office) portable document format files that set forth all of the
documents made available or provided to Buyer prior to the Closing in response
to Buyer’s due diligence requests; and

 

(p)          evidence of the termination of each contract or arrangement set
forth on Schedule 3.2(p) in each case effective at or prior to the Closing.

 

3.3.         Closing Deliveries by Buyer. At or prior to the Closing, Buyer will
deliver or cause to be delivered to Seller the following, each in form and
substance reasonably acceptable to Seller:

 

(a)          evidence of the payment of the cash portion of the Purchase Price
in immediately available funds as required by Section 2.3(a);

 

(b)          certificates representing the Shares required at the Closing by
Section 2.3(b) hereof, or evidence reasonably satisfactory to Seller’s counsel
that the Shares have been duly issued to Seller and that Seller is reflected as
the owner thereof on the books and records of Buyer as required by Section
2.3(b) hereof;

 

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(c)          the Note duly executed by Buyer;

 

(d)          the Non-Competition Agreement duly executed by Buyer; and

 

(e)          the Employment Agreements duly executed by each Company thereto.

 

ARTICLE IV

REPRESENTATIONS AND WARRANTIES OF SELLER

 

Seller represents and warrants to Buyer the statements contained in this ARTICLE
IV, and the information in the Disclosure Schedules referenced therein, are true
and correct as of the Closing Date, except to the extent that a representation
and warranty contained in this ARTICLE IV expressly states that such
representation and warranty is current as of an earlier date and then such
statements contained in this ARTICLE IV are true and correct as of such earlier
date:

 

4.1.         Organization and Qualification. Each Company is a corporation duly
organized, validly existing and in good standing under the laws of the
jurisdiction in which it was organized and has full corporate power and
authority to own the assets owned by it and conduct its business as and where it
is being conducted by it. Except as set forth on Schedule 4.1, each Company is
duly licensed or qualified to do business, and is in good standing as a foreign
corporation, in all jurisdictions in which its assets or the operation of its
business makes such licensing or qualification necessary, all of which
jurisdictions are listed on Schedule 4.1. Each Company has all requisite
corporate power and authority to own, lease or use, as the case may be, its
properties and business as currently owned and used. During the past five (5)
years, neither Company has been known by or used any corporate, fictitious or
other name in the conduct of such Company’s business or in connection with the
use or operation of its assets. Schedule 4.1 lists all current directors and
officers of each Company, showing each such Person’s name and positions.

 

4.2.         Authorization and Binding Effect; Corporate Documentation. Each
Seller Party has full power and authority to enter into this Agreement and the
Ancillary Documents to which it is a party and to consummate the transactions
contemplated hereby and thereby and to perform its obligations hereunder and
thereunder. The execution and delivery of this Agreement and the Ancillary
Documents and the consummation of the transactions contemplated hereby and
thereby have been duly authorized by all necessary corporate action on the part
of each Company, including requisite board of directors and shareholder approval
of each Company. Each of this Agreement and each Ancillary Document to which a
Seller Party is a party has been duly executed and delivered by each such Seller
Party and constitutes a legal, valid and binding obligation of such Seller
Party, enforceable against such Seller Party in accordance with its terms,
except as the enforceability thereof may be limited by the Permitted Exceptions.
The copies of the Charter of each Company and all amendments thereto, and the
Bylaws of each Company, as amended to date, copies of which have heretofore been
delivered to Buyer, are true, complete and correct copies of the Charter and
Bylaws of each Company, as amended through and in effect on the date hereof. The
minute books and records of the corporate proceedings of each Company, copies of
all of which have been provided to Buyer, are true, correct and complete in all
material respects.

 

4.3.         Title to the Purchased Stock. Seller owns good, valid and
marketable title to the Purchased Stock, free and clear of any and all Liens and
upon delivery of the Purchased Stock to Buyer on the Closing Date in accordance
with this Agreement and upon Buyer’s payment of the Closing Purchase Price in
accordance with Section 2.3, the entire legal and beneficial interest in the
Purchased Stock and good, valid and marketable title to the Purchased Stock,
free and clear of all Liens (other than those imposed by applicable securities
Laws), will pass to Buyer.

 

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4.4.         Capitalization. The authorized capital stock of (i) PS consists of
200,000 shares of PS Common Stock, 100 of which are issued and outstanding and
(i) PRS consists of 275,000 shares of PRS Common Stock, 1,000 of which are
issued and outstanding. Prior to giving effect to the transaction contemplated
by this Agreement, Seller is the beneficial and record owner of all of the
issued and outstanding shares of capital stock of each of Company. The Purchased
Stock to be delivered by Seller to Buyer constitutes all outstanding shares of
capital stock of PS, and forty-nine percent (49%) of the issued and outstanding
shares of capital stock of PRS. All of the issued and outstanding capital stock
of each Company (i) has been duly and validly issued, (ii) is fully paid and
nonassessable and (iii) was not issued in violation of any preemptive rights or
rights of first refusal or first offer. There are no issued or outstanding
options, warrants or other rights to subscribe for or purchase any capital stock
or other equity interests of either Company or securities convertible into or
exchangeable for, or that otherwise confer on the holder any right to acquire
any equity securities of either Company, or preemptive rights or rights of first
refusal or first offer with respect to the equity securities of either Company,
nor are there any Contracts, commitments, understandings, arrangements or
restrictions to which a Seller Party is a party or bound relating to any equity
securities of either Company, whether or not outstanding. There are no
outstanding or authorized stock appreciation, phantom stock or similar rights
with respect to either Company, nor are there any voting trusts, proxies,
shareholder agreements or any other agreements or understandings with respect to
the voting of the equity securities of either Company. All of the equity
securities of each Company have been granted, offered, sold and issued in
compliance with all applicable foreign, state and federal securities Laws.

 

4.5.         Subsidiaries. Neither Company owns, and since their respective
formation has not owned, directly or indirectly, any Subsidiaries or equity
securities or other ownership interests in any other Person. Notwithstanding
anything to the contrary contained in this Agreement, and without limiting any
other remedies of Buyer Indemnified Parties hereunder, in the event of the
breach of any representation or warranty in this Section 4.5, any reference in
this Agreement or any Ancillary Document to a Company shall include any such
Subsidiary to the extent reasonably applicable.

 

4.6.         Non-Contravention. Except as set forth on Schedule 4.6, neither the
execution, delivery and performance of this Agreement or any Ancillary Documents
by any Seller Party, nor the consummation of the transactions contemplated
hereby or thereby, will (a) violate or conflict with, any provision of the
Charter or Bylaws of a Company, (b) violate or conflict with any Law or Order to
which a Seller Party, its assets or the Purchased Stock are bound or subject,
(c) with or without giving notice or the lapse of time or both, breach or
conflict with, constitute or create a default under, or give rise to any right
of termination, cancellation or acceleration of any obligation or result in a
loss of a material benefit under, or give rise to any obligation of a Seller
Party to make any payment under, or to the increased, additional, accelerated or
guaranteed rights or entitlements of any Person under, any of the terms,
conditions or provisions of any Contract, agreement, or other commitment to
which a Seller Party is a party or by which a Seller Party, its assets or the
Purchased Stock may be bound, (d) result in the imposition of a Lien (other than
a Permitted Lien) on any Purchased Stock or any assets of either Company or (e)
require any filing with, or Permit, consent or approval of, or the giving of any
notice to, any Governmental Authority or other Person.

 

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4.7.         Financial Statements.

 

(a)          The Buyer acknowledges and understands that the Companies maintain
their financial information and create their financial statements with the use
of the “Quickbooks” software program, and that such financial statements have
not been prepared in accordance with GAAP. Attached as Schedule 4.7(a) are true
and correct copies of (i) the unaudited balance sheet, income statement,
statement of stockholder’s equity and statement of cash flows for each Company
as of and for the fiscal years ended December 28, 2013 and December 30, 2012,
and (ii) the unaudited balance sheet of each Company as of April 26, 2014 and
the related unaudited income statement and statement of cash flows for the four
fiscal month period then ended (such financial statements described in clauses
(i) and (ii), collectively, the “Financial Statements”). The Financial
Statements were prepared in accordance with the books and records of each
Company, are true, correct and complete in all material respects, and present
fairly and accurately in all material respects the financial condition and
results of operations of each Company as of the respective dates thereof and for
the periods specified therein. The Financial Statements have been prepared on an
accrual basis and, except for any changes to the default accounting principles
in the “Quickbooks” software program from prior years, in accordance with
accounting principles consistently applied throughout and among the periods
indicated.

 

(b)          Each Company maintains accurate books and records reflecting its
assets and Liabilities and maintains proper and adequate internal accounting
controls that provide reasonable assurance that (i) such Company does not
maintain any off-the-book accounts and that such Company’s assets are used only
in accordance with such Company’s management directives, (ii) transactions are
executed with management’s authorization, (iii) transactions are recorded as
necessary to permit preparation of the financial statements of such Company and
to maintain accountability for such Company’s assets, (iv) access to such
Company’s assets is permitted only in accordance with management’s
authorization, (v) the reporting of such Company’s assets is compared with
existing assets at regular intervals and verified for actual amounts and (vi)
accounts, notes and other receivables and inventory are recorded accurately, and
proper and adequate procedures are implemented to effect the collection of
accounts, notes and other receivables on a current and timely basis.

 

(c)          All of the financial books and records of the Companies are
complete and accurate in all material respects and have been maintained in the
ordinary course consistent with past practice and in accordance with applicable
Laws.

 

(d)          Neither Company has any Liabilities except (i) Liabilities of such
Company that are accrued and reflected on the balance sheet of such Company as
of December 28, 2013, (ii) Liabilities that are listed on Schedule 4.7(d), (iii)
immaterial Liabilities that have arisen in the Ordinary Course of Business
(other than liabilities for breach of any Contract or violation of any Law)
since December 28, 2013 and (iv) obligations to be performed after the date
hereof under any Contracts which are disclosed on Schedule 4.10, 4.11, 4.16(a)
or 4.22(a).

 

4.8.         Absence of Changes. Except as set forth on Schedule 4.8, since
December 28, 2013: (a) each Company has conducted its business only in the
Ordinary Course of Business, and (b) there has not been any change in or
development with respect to either Company’s business, operations, condition
(financial or otherwise), results of operations, prospects, assets or
Liabilities, except for changes and developments which have not had, and are not
likely to have to have a Material Adverse Effect.

 

4.9.         Title to and Sufficiency of Assets. Except as set forth on Schedule
4.9, each Company has good and marketable title to all of its assets, free and
clear of all Liens other than Permitted Liens. The assets of each Company
constitute all of the assets, rights and properties that are used in the
operation of such Company’s business as it is now conducted and presently
proposed to be conducted or that are used or held by such Company for use in the
operation of such Company’s business, and taken together, are adequate and
sufficient for the operation of such Company’s business as currently conducted
and as presently proposed to be conducted. Immediately following the Closing,
all of the assets of each Company will be owned, leased or available for use by
such Company on terms and conditions substantially identical to those under
which, immediately prior to the Closing, such Company owns, leases, uses or
holds available for use such assets; provided, that neither Company owns (i)
Seller’s car, (ii) the cell phones and cell phone numbers of any shareholder or
employee of either Company or (iii) any LinkedIn, Facebook, Twitter or other
social media account of any shareholder or employee of either Company.

 

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4.10.       Personal Property. All items of Personal Property of each Company
with a book value or fair market value of greater than Ten Thousand Dollars
($10,000) are set forth on Schedule 4.10. All such items of Personal Property
are in good operating condition and repair (reasonable wear and tear excepted
consistent with the age of such items), and are suitable for their intended use
in such Company’s business. Schedule 4.10 contains an accurate and complete list
and description of leases in respect of the Personal Property (collectively, the
“Personal Property Leases”). The Personal Property Leases are valid, binding and
enforceable in accordance with their terms, subject to Permitted Exceptions, and
are in full force and effect. With respect to the Personal Property Leases,
there are no existing defaults under the applicable lease by a Company or, to
the Knowledge of the Companies, any other party thereto, and no event of default
on the part of a Company or, to the Knowledge of the Companies, on the part of
any other party thereto has occurred which (whether with or without notice,
lapse of time or the happening or occurrence of any other event) would
constitute a default thereunder. Seller has delivered to Buyer true and correct
copies of the Personal Property Leases (along with any amendments thereto).

 

4.11.       Real Property. Schedule 4.11 contains a complete and accurate list
of all premises leased or subleased or otherwise used or occupied by either
Company for the operation of such Company’s business (the “Leased Premises”),
and of all leases, lease guarantees, agreements and documents related thereto,
including all amendments, terminations and modifications thereof (collectively,
the “Leases”), as well as the current annual rent and term under each Lease.
Seller has provided to Buyer a true and complete copy of each of the Leases, and
in the case of any oral Lease, a written summary of the material terms of such
Lease. The Leases are valid, binding and enforceable in accordance with their
terms, subject to Permitted Exceptions, and are in full force and effect. No
event has occurred which (whether with or without notice, lapse of time or both
or the happening or occurrence of any other event) would constitute a default on
the part of a Company under any Lease. Neither Company has any Knowledge of the
occurrence of any event which (whether with or without notice, lapse of time or
both or the happening or occurrence of any other event) would constitute a
default by any other party under any Lease, and neither Company has received
notice of any such condition. Neither Company has waived any rights under any
Lease which would be in effect at or after the Closing. The Companies are in
quiet possession of the Leased Premises. All leasehold improvements and fixtures
located on the Leased Premises are, to the Knowledge of the Companies, (i)
structurally sound with no material defects, (ii) in good operating condition
and repair, subject to ordinary wear and tear, (iii) not in need of maintenance
or repair except for ordinary routine maintenance and repair, (iv) in conformity
in all material respects with all applicable Laws relating thereto currently in
effect and (v) are located entirely on the Leased Premises. Neither Company has
ever owned any real property or any interest in real property (other than the
leasehold interests in the Leases).

 

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4.12.       Intellectual Property. Schedule 4.12 sets forth: (i) all U.S. and
foreign registrations of Intellectual Property (and applications therefor) owned
or licensed by either Company or otherwise used or held for use by either
Company in which a Company is the owner, applicant or assignee (“Registered
IP”); (ii) all material unregistered Intellectual Property owned or purported to
be owned by either Company; and (iii) all licenses, sublicenses and other
agreements or permissions (“IP Licenses”) (other than shrink wrap licenses or
other similar licenses for commercial off-the-shelf software with an annual
license fee of $2,000 or less (which are not required to be listed, but are “IP
Licenses” as that term is used herein)), under which either Company is a
licensee or otherwise is authorized to use or practice any Intellectual
Property. Each Company owns, free and clear of all Liens (other than Permitted
Liens), has valid and enforceable rights in, and has the unrestricted right to
use, sell, license, transfer or assign, all Intellectual Property currently
used, licensed or held for use by such Company, and previously used or licensed
by such Company (except for the Intellectual Property that is the subject of the
IP Licenses). All Registered IP is valid and in force and owned exclusively by
the applicable Company without obligation to pay royalties, licensing fees or
other fees, or otherwise account to any other Person with respect to such
Registered IP. Neither Company has licensed or sublicensed out any of its owned
or licensed Intellectual Property. Each Company has a valid and enforceable
license to use all Intellectual Property that is the subject of the IP Licenses.
Each Company has performed all obligations imposed on it in the IP Licenses, has
made all payments required to date, and is not, nor, to the Knowledge of the
Companies, is any other party thereto, in breach or default thereunder, nor to
the Knowledge of the Companies has any event occurred that with notice or lapse
of time or both would constitute a default thereunder. The continued use by a
Company of the Intellectual Property that is the subject of the IP Licenses in
the same manner that it is currently being used is not restricted by any
applicable license of the Companies. Except as set forth on Schedule 4.12,
neither Company is party to any Contract that requires such Company to assign to
any Person all of its rights in any Intellectual Property developed by a Company
under such Contract. Neither Company has received any written or, to the
Knowledge of the Companies, oral notice or claim asserting or suggesting that
any infringement, misappropriation, violation, dilution or unauthorized use of
the Intellectual Property of any other Person is or may be occurring or has or
may have occurred, as a consequence of the business activities of the Companies,
nor to the Knowledge of the Companies is there a reasonable basis therefor. To
the Knowledge of the Companies, neither Company is currently infringing,
misappropriating or violating, or has in the past infringed, misappropriated or
violated, any Intellectual Property of any other Person. To the Knowledge of the
Companies, no other Person is infringing upon, has misappropriated or is
otherwise violating any Intellectual Property of either Company. To the
Knowledge of the Companies, no Person has obtained unauthorized access to third
party information and data in either Company’s possession, nor has there been
any other compromise of the security, confidentiality or integrity of such
information or data. To the Knowledge of the Companies, there has been no
violation of the either Company’s policies or practices related to protection of
such Company’s Intellectual Property or any confidentiality or nondisclosure
Contract relating to the Intellectual Property owned by either Company.

 

4.13.       Compliance with Laws. Each Company is in compliance with, and has
complied, in all material respects with all Laws and Orders applicable to such
Company, its assets, employees or business or the Purchased Stock. None of the
operation, activity, conduct and transactions of either Company or the
ownership, operation, use or possession of their respective assets or the
employment of their respective employees materially conflicts with the rights of
any other Person or materially violates, or with or without the giving of notice
or passage of time, or both, will materially violate, conflict with or result in
a material default, right to accelerate or loss of rights under, any terms or
provisions of any Lien, Contract or any Law or Order to which either Company is
a party or by which either Company or its assets, business or employees or the
Purchased Stock may be bound or affected. Neither Company has received any
written or, to the Knowledge of the Companies, oral notice of any actual or
alleged violation or non-compliance with applicable Laws.

 

4.14.       Permits. Each Company owns or possesses all right, title and
interest in all Permits required to own its assets and conduct its business as
now being conducted and as presently proposed to be conducted. All Permits of
each Company are listed on Schedule 4.14 and, to the Knowledge of the Companies,
are valid and in full force and effect, and the Companies are in compliance in
all material respects with the terms and conditions of all Permits. No loss,
revocation, cancellation, suspension, termination or expiration of any Permit is
pending or, to the Knowledge of the Companies, threatened other than expiration
or termination in accordance with the terms thereof. Neither Company has
received any written or, to the Knowledge of the Companies, oral notice from any
Governmental Authority of any actual or alleged violation or non-compliance
regarding any such Permit.

 

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4.15.       Litigation. Except as described on Schedule 4.15, there is no (a)
Action of any nature pending or, to the Knowledge of the Companies, threatened,
nor to the Knowledge of the Companies is there any reasonable basis for any
Action to be made, or (b) Order pending now or rendered by a Governmental
Authority in the past seven (7) years, in either case (a) or (b) by or against
either Company, any of their respective current or former directors, officers or
equity holders (provided, that any litigation involving the directors, officers
or equity holders of a Company must be related to such Company’s business or
assets or the Purchased Stock), such Company’s business or assets or the
Purchased Stock. The items listed on Schedule 4.15, (i) are fully covered under
the insurance policies of the Company subject thereto and (ii) if finally
determined adverse to the Company subject thereto, will not have, either
individually or in the aggregate, a Material Adverse Effect. During the past
five (5) years, none of the Companies’ current or former officers, senior
management or directors have been charged with, indicted for, arrested for, or
convicted of any felony or any crime involving fraud.

 

4.16.       Contracts.

 

(a)          Schedule 4.16(a) contains a complete, current and correct list of
all of the following types of Contracts to which a Company is a party, by which
any of its properties or assets are bound, or under which a Company otherwise
has material obligations, with each such responsive Contract identified by each
corresponding category (i) – (viii) below: (i) the largest ten Contracts with
customers (by dollar amounts received for the 2013 fiscal year), (ii) the
largest ten Contracts with suppliers (by dollar amount expenditures for the 2013
fiscal year); (iii) any Contract with any of its officers, directors, employees,
consultants or Affiliates (other than at-will employment arrangements with
Corporate Employees and placement arrangements with Staffing Employees, in each
case, entered into the Ordinary Course of Business), including all
non-competition, severance, and indemnification agreements; (iv) any
partnership, joint venture, profit-sharing or similar agreement entered into
with any Person; (v) all Contracts relating to any merger, consolidation or
other business combination with any other Person or the acquisition or
disposition of any other entity or its business or material assets or the sale
of a Company, its business or material assets outside of the Ordinary Course of
Business; (vi) any loan agreement, agreement of indebtedness, credit, note,
security agreement, guarantee, mortgage, indenture or other document relating to
Indebtedness, borrowing of money or extension of credit by or to a Company in
excess of $50,000; (vii) any material settlement agreement entered into within
three (3) years prior to the date of this Agreement or under which a Company has
outstanding obligations (other than customary obligations of confidentiality);
and (viii) any other Contract that is material to a Company and outside of the
Ordinary Course of Business. All of each Company’s oral Contracts that are
responsive to the categories listed above are identified in the Disclosure
Schedules. True and correct copies of all the Companies’ material Contracts
(including any amendments, modifications or supplements thereto) have been
provided to Buyer.

 

(b)          Except as set forth on Schedule 4.16(b), neither Company is a party
to or bound by any Contract containing any covenant (i) limiting in any respect
the right of such Company or its Affiliates to engage in any line of business,
to make use of any of its Intellectual Property or compete with any Person in
any line of business or in any geographic region, (ii) imposing non-solicitation
restrictions on such Company or its Affiliates, (iii) granting to the other
party any exclusivity or similar provisions or rights, including any covenant by
such Company that includes an organizational conflict of interest prohibition,
restriction, representation, warranty or notice provision or any other
restriction on future contracting, (iv) providing “most favored customers” or
other preferential pricing terms for the services of such Company or its
Affiliates, or (v) otherwise limiting or restricting the right of such Company
to sell or distribute any Intellectual Property of such Company or to purchase
or otherwise obtain any software or Intellectual Property license.

 

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(c)          All of the Companies’ material Contracts are in full force and
effect, and are valid, binding, and enforceable in accordance with their terms,
subject to performance by the other party or parties to such Contract, except as
the enforceability thereof may be limited by the Permitted Exceptions. There
exists no breach, default or violation on the part of a Company or, to the
Knowledge of the Companies, on the part of any other party to any such Contract
nor has a Company received written or, to the Knowledge of the Companies, oral
notice of any breach, default or violation. Neither Company has received written
or, to the Knowledge of the Companies, oral notice of an intention by any party
to any such Contract that provides for a continuing obligation by any party
thereto on the date hereof to terminate such Contract or amend the terms
thereof, other than modifications in the Ordinary Course of Business that do not
materially and adversely affect the Companies. To the Knowledge of the
Companies, no event has occurred which either entitles, or would, with notice or
lapse of time or both, entitle any party to any such Contract to declare breach,
default or violation under any such Contract or to accelerate, or which does
accelerate, the maturity of any Indebtedness of a Company under any such
Contract. To the Knowledge of the Companies, there is no reason to believe that
any Contract with a customer will not remain in effect after the Closing through
the remainder of its term or continue to generate substantially the same revenue
after the Closing through the remainder of its term as it currently generates,
subject to any actions taken by or at the request of Buyer after the Closing.

 

4.17.       Tax Matters. Except as set forth on Schedule 4.17: (i) each Company
has timely filed all Tax Returns required to have been filed by it; (ii) all
such Tax Returns are accurate and complete in all material respects; (iii) each
Company has paid all Taxes owed by it which were due and payable (whether or not
shown on any Tax Return); (iv) each Company has complied in all material
respects with all applicable Laws relating to Tax; (v) neither Company is
currently the beneficiary of any extension of time within which to file any Tax
Return; (vi) there is no current Claim against a Company in writing by a
Governmental Authority in a jurisdiction where such Company does not file Tax
Returns that such Company is or may be subject to taxation by that jurisdiction;
(vii) there are no pending or ongoing audits of a Company’s Tax Returns by a
Governmental Authority; (viii) neither Company has requested or received any
ruling from, or signed any binding agreement with, any Governmental Authority,
that would apply to any Tax periods ending after the Closing Date; (ix) there
are no Liens on any of the assets of a Company that arose in connection with any
failure (or alleged failure) to pay any Tax; (x) no unpaid Tax deficiency has
been asserted in writing against or with respect to a Company by any
Governmental Authority which Tax remains unpaid; (xi) each Company has collected
or withheld all Taxes currently required to be collected or withheld by it, and
all such Taxes have been paid to the appropriate Governmental Authorities or set
aside in appropriate accounts for future payment when due; (xii) neither Company
has granted or is subject to, any waiver of the period of limitations for the
assessment of Tax for any currently open taxable period; (xiii) neither Company
nor any of their respective former, current or future equity holders is required
to include in income any amount for an adjustment pursuant to Section 481 of the
Code or the Regulations thereunder; (xiv) neither Company is a party to any Tax
allocation or sharing agreement; (xv) neither Company (A) has been a member of
an Affiliated Group filing a consolidated federal income Tax Return or (B) has
any liability for the Taxes of any Person under Regulations Section 1.1502-6 (or
any similar provision of state, local or foreign Law), as a transferee or
successor, by contract or otherwise; (xvi) there is no Contract or Benefit Plan
covering any Person that, individually or collectively, could give rise to the
payment of any amount that would not be deductible by the Company by reason of
Section 280G or Section 162(m) of the Code, and no arrangement exists pursuant
to which a Company or Buyer will be required to “gross up” or otherwise
compensate any Person because of the imposition of any excise tax on a payment
to such Person; (xvii) neither Company has been a beneficiary of or participated
in any “reportable transaction” within the meaning of Regulations Section
1.6011-4(b)(1) that was, is, or to the Knowledge of the Companies will ever be,
required to be disclosed under Regulations Section 1.6011-4; (xviii) no Tax
Return filed by or on behalf of a Company has contained a disclosure statement
under Section 6662 of the Code (or any similar provision of Law), and no Tax
Return has been filed by or on behalf of a Company with respect to which the
preparer of such Tax Return advised consideration of inclusion of such a
disclosure, which disclosure was not made; (xix) neither Company has taken any
action not in accordance with past practice that would have the effect of
deferring a measure of Tax from a period (or portion thereof) ending on or
before the Closing Date to a period (or portion thereof) beginning after the
Closing Date; (xx) neither Company has deferred income or Tax liability arising
out of any transaction, including any (A) disposition of any property in a
transaction accounted for under the installment method pursuant to Section 453
of the Code, (B) use of the long-term contract method of accounting, or (C)
receipt of any prepaid amount for goods or services on or before the Closing
Date; (xxi) neither Company has a “permanent establishment” in any foreign
country, as defined in any applicable Tax treaty or convention between the
United States of America and such foreign country, or has otherwise taken steps
or conducted business operations that have materially exposed, or will
materially expose, it to the taxing jurisdiction of a foreign country; (xxii)
each Company is materially in compliance with the terms and conditions of any
applicable Tax exemptions, Tax agreements or Tax orders of any Taxing Authority
to which it may be subject or which it may have claimed, and the transactions
contemplated by this Agreement will not have any material and adverse effect on
such compliance; (xxiii) neither Company (A) is a party to any joint venture,
partnership or other agreement or arrangement which is treated or required to be
treated as a partnership for federal income Tax purposes, and (B) owns any
interest in an entity that either is treated or required to be treated as an
entity disregarded as separate from its owner for federal Tax purposes or is an
entity as to which an election pursuant to Regulations Section 301.7701-3 has
been made; (xxiv) no written power of attorney which is currently in force has
been granted by or with respect to a Company with respect to any matter relating
to Taxes; (xxv) Seller is not a “foreign person” for purposes of Section 1445 of
the Code; (xxvi) neither Company has been a United States real property holding
corporation within the meaning of Section 897(c) of the Code during the
applicable period specified in Section 897(c)(1)(A)(ii) of the Code; (xxvii)
each Company uses the accrual method of accounting for income Tax purposes;
(xxviii) each Company has been a validly electing S corporation within the
meaning of Sections 1361 and 1362 of the Code at all times during such Company’s
existence; and (xxix) neither Company has any potential Liability for any Tax
under Section 1374 of the Code.

 

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4.18.       Employee Benefit Plans.

 

(a)          Set forth on Schedule 4.18(a) is a true and complete list of each
Benefit Plan. With respect to each Benefit Plan: (i) such Benefit Plan has been
operated, administered and enforced in accordance with its terms and in
compliance with, and such Benefit Plan complies with, all applicable Laws,
including ERISA and the Code (including Section 409A thereof), in all material
respects; (ii) no breach of fiduciary duty has occurred; (iii) no Action is
pending, or to the Knowledge of the Companies, threatened (other than routine
claims for benefits arising in the ordinary course of administration); (iv) no
prohibited transaction, as defined in Section 406 of ERISA or Section 4975 of
the Code, has occurred, excluding transactions effected pursuant to a statutory
or administration exemption; and (v) all contributions and premiums due through
the Closing Date have been made as required under ERISA or have been fully
accrued on the Financial Statements. To the Knowledge of the Companies, all
Benefit Plans can be terminated at any time as of or after the Closing Date
without resulting in any liability to either Company, Buyer or their respective
Affiliates for any additional contributions, penalties, premiums, fees, fines,
excise taxes or any other charges or liabilities.

 

(b)          Each Benefit Plan which is intended to be “qualified” within the
meaning of Section 401(a) of the Code (i) has been determined by the IRS to be
so qualified (or is based on a prototype plan which has received a favorable
opinion letter) during the period from its adoption to the date of this
Agreement and (ii) its related trust has been determined to be exempt from
taxation under Section 501(a) of the Code or the applicable Company has
requested an initial favorable IRS determination of qualification and/or
exemption within the period permitted by applicable Law. To the Knowledge of the
Companies, no fact exists which could adversely affect the qualified status of
such Benefit Plans or the exempt status of such trusts.

 

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(c)          With respect to each Benefit Plan which covers any current or
former officer, director, consultant or employee (or beneficiary thereof) of a
Company, Seller has provided to Buyer accurate and complete copies, if
applicable, of: (i) all Benefit Plan texts and agreements and related trust
agreements or annuity contracts (including any amendments, modifications or
supplements thereto); (ii) all employee communications (including all summary
plan descriptions and material modifications thereto); (iii) the three (3) most
recent Forms 5500, if applicable, and annual report, including all schedules
thereto; (iv) the most recent annual and periodic accounting of plan assets; (v)
the three (3) most recent nondiscrimination testing reports; (vi) the most
recent determination letter received from the IRS; (vii) the most recent
actuarial valuation; and (viii) all communications with any Governmental
Authority.

 

(d)          No Benefit Plan is a “defined benefit plan” (as defined in Section
414(j) of the Code), a “multiemployer plan” (as defined in Section 3(37) of
ERISA) or a “multiple employer plan” (as described in Section 413(c) of the
Code) or is otherwise subject to Title IV of ERISA or Section 412 of the Code,
and neither Company has incurred any Liability or otherwise has any outstanding
liability under Title IV of ERISA and, to the Knowledge of the Companies, no
condition presently exists that is expected to cause such liability to be
incurred. Neither Company currently maintains or contributes to, or has ever
maintained or contributed to or in any way directly or indirectly had any
Liability (whether contingent or otherwise) with respect to any “multiemployer
plan,” within the meaning of Section 3(37) or 4001(a)(3) of ERISA. Neither
Company is or has in the past been a member of a “controlled group” for purposes
of Section 414(b), (c), (m) or (o) of the Code, nor does either Company have any
Liability with respect to any collectively-bargained for plans, whether or not
subject to the provisions of ERISA. Neither Company currently maintains or has
ever never maintained, or is required currently or has ever been required to
contribute to or otherwise participate in, a multiple employer welfare
arrangement or voluntary employees’ beneficiary association as defined in
Section 501(c)(9) of the Code.

 

(e)          With respect to each Benefit Plan which is a “welfare plan” (as
described in Section 3(1) of ERISA): (i) no such plan provides medical or death
benefits with respect to any current or former employee of a Company beyond
their termination of employment (other than coverage mandated by Law, which is
paid solely by such employees); and (ii) there are no reserves, assets, surplus
or prepaid premiums under any such plan. Except to the extent required by
Section 4980B of the Code or similar state Law, neither Company provides health
or welfare benefits to any former or retired employee or is obligated to provide
such benefits to any active employee following such employee’s retirement or
other termination of employment or service.

 

4.19.       Employees and Labor Matters.

 

(a)          Schedule 4.19(a) sets forth a complete and accurate list of all
Corporate Employees of either Company as of the Closing Date showing for each as
of that date (i) the employee’s name, employer, job title or description,
location, salary level (including any bonus, commission, deferred compensation
or other remuneration payable (other than any such arrangements under which
payments are at the discretion of the Company)), (ii) any bonus, commission or
other remuneration other than salary paid during such Company’s fiscal year
ending December 28, 2013 and (iii) any wages, salary, bonus, commission or other
compensation due and owing to each employee for the 2014 fiscal year. Except as
set forth on Schedule 4.19(a), no Corporate Employee is a party to a written
employment agreement or contract with a Company and each is employed “at will”.
Each such employee has entered into the applicable Company’s standard form of
employee non-disclosure, inventions and restrictive covenants agreement with the
employing Company, copies of which have been provided to Buyer.

 

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(b)          Schedule 4.19(b) contains a list of all independent contractors
(including consultants) and Staffing Employees currently engaged by either
Company, along with the position, date of retention and rate of remuneration,
most recent increase (or decrease) in remuneration and amount thereof, for each
such Person. All of such independent contractors and Staffing Employees are a
party to a written agreement or contract with the engaging Company. Except as
set forth on Schedule 4.19(b), each such independent contractor and Staffing
Employee has entered into customary covenants regarding confidentiality,
non-competition and assignment of inventions and copyrights in such Person’s
agreement with the engaging Company, copies of which have been provided to
Buyer. For the purposes of applicable Law, including the Code, all independent
contractors who are currently, or within the last six (6) years have been,
engaged by a Company are bona fide independent contractors and not employees of
such Company. Except as set forth on Schedule 4.19(b), each independent
contractor and Staffing Employee is terminable on fewer than thirty (30) days
notice, without any obligation of a Company to pay severance or a termination
fee.

 

(c)          Neither Company is a party to any collective bargaining agreement
or other Contract with any group of employees or any labor organization or other
Representative of any of employees of a Company, and neither Company has
Knowledge of any activities or proceedings of any labor union or other party to
organize or represent any employees of either Company. Except as set forth on
Schedule 4.19(c): (i) each Company is in compliance in all material respects
with all employment Contracts and all applicable Laws and Orders respecting
employment and employment practices, terms and conditions of employment and
wages and hours, including any respecting employment discrimination and
occupational safety and health requirements, and are not engaged in any unfair
labor practice; (ii) there is no labor strike, dispute, slowdown or stoppage
actually pending or, to the Knowledge of the Companies, threatened against or
directly affecting either Company; (iii) neither Company has experienced any
work stoppage or other labor difficulty; (iv) neither Company is delinquent in
payments to any of their respective employees for any wages, salaries,
commissions, bonuses or other direct compensation for any services performed by
them or amounts required to be reimbursed to such employees; (v) there are no
pending or, to the Knowledge of Companies, threatened unfair or discriminatory
employment practice charges pending before the Equal Employment Opportunity
Commission, or any comparable foreign, state or local Governmental Authority;
(vi) there are no wrongful discharge claims nor any other type of Actions
brought by or on behalf of any past or present employees of either Company
pending or, to the Knowledge of Companies, threatened against a Company; and
(vii) upon termination of the employment of any employee, neither Company nor
Buyer will by reason of anything done prior to the Closing be liable to any of
said employees for vacation pay, severance pay, wrongful termination damages or
any other payments (other any obligations of a Company to pay accrued vacation
pay and accrued sick pay to its terminated employees). Each Company has complied
in all material respects with all applicable Laws and Orders relating to the
payment and withholding of Taxes and has timely withheld from employee wages and
paid over to the proper Governmental Authorities all amounts required to be so
withheld and paid over for all periods under all such Laws and Orders.

 

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4.20.       Insurance. Each Company has maintained over the past three (3) years
and now maintains insurance in amounts sufficient for its business, operations
and assets and in such amounts and covering such risks as are usually carried by
companies engaged in similar businesses and owning similar properties in the
same general areas in which such Company operates. Schedule 4.20 lists all
insurance policies (by policy number, insurer, location of property insured,
annual premium, premium payment dates, expiration date, type (i.e., “claims
made” or an “occurrences” policy), amount and scope of coverage) held by each
Company relating to either Company or the business, assets, properties,
directors, officers or employees of either Company, copies of which have been
provided to Buyer. To the Knowledge of the Companies, each such insurance policy
(i) is legal, valid, binding, enforceable and in full force and effect as of the
Closing and (ii) will continue to be legal, valid, binding, enforceable, and in
full force and effect on identical terms immediately following the Closing.
Neither Company is in default with respect to its obligations under any
insurance policy, nor has either Company ever been denied insurance coverage for
any reason. Neither Company has any self-insurance or co-insurance programs. In
the three (3) year period ending on the date hereof, neither Company has
received any written or, to the Knowledge of the Companies, oral notice from, or
on behalf of, any insurance carrier relating to or involving any adverse change
or any change other than in the Ordinary Course of Business, in the conditions
of insurance, any refusal to issue an insurance policy or non-renewal of a
policy, or requiring or suggesting material alteration of any of the Companies’
assets, purchase of additional equipment or material modification of any of the
Companies’ methods of doing business. Neither Company has made any claim against
an insurance policy as to which the insurer is denying coverage. Schedule 4.20
identifies each individual insurance claim made by a Company since January 1,
2009. Each Company has reported to its insurers all Actions and pending
circumstances that would reasonably be expected to result in an Action, except
where such failure to report such an Action would not be reasonably likely to be
material to such Company. To the Knowledge of the Companies, no event has
occurred, and no condition or circumstance exists, that would reasonably be
expected to (with or without notice or lapse of time) give rise to or serve as a
basis for the denial of any such insurance claim.

 

4.21.       Transactions with Related Persons. Except as set forth on Schedule
4.21, none of Seller nor any of its Affiliates, nor any officer, director,
manager, employee, trustee or beneficiary of a Company or any Affiliate of a
Seller, nor any immediate family member of any of the foregoing (whether
directly or indirectly through an Affiliate of such Person) (each of the
foregoing, a “Related Person”) is presently, or in the past three (3) years has
been, a party to any transaction with a Company, including any Contract or other
arrangement (a) providing for the furnishing of services by (other than as
officers, directors or employees of such Company), (b) providing for the rental
of real or personal property from or (c) otherwise requiring payments to (other
than for services or expenses as directors, officers or employees of such
Company in the Ordinary Course of Business) any Related Person or any Person in
which any Related Person has an interest as an owner, officer, manager,
director, trustee or partner or in which any Related Person has any direct or
indirect interest. Except as set forth on Schedule 4.21, neither Company has any
outstanding Contract or other arrangement or commitment with any Related Person,
and no Related Person owns any real or personal property, or right, tangible or
intangible (including Intellectual Property) which is used in a Company’s
business. The Companies’ assets do not include any receivable or other
obligation from a Related Person, and the Liabilities of the Companies do not
include any payable or other obligation or commitment to any Related Person.
Schedule 4.21 specifically identifies all Contracts, arrangements or commitments
set forth on such Schedule 4.21 that cannot be terminated upon sixty (60) days
notice by the Company party thereto without cost or penalty.

 

4.22.       Government Contracts.

 

(a)          Schedule 4.22(a) lists all Government Contracts for which final
payment or a final release has not yet been received, regardless of whether the
period of performance has ended (collectively, the “Current Government
Contracts”).

 

(b)          Schedule 4.22(b) lists all Government Bids, including task or
delivery order bids under a Company’s or other Persons’ current Government
Contracts submitted by a Company and for which no award has been made. Seller
has made available to Buyer true and complete copies of all Current Government
Contracts and all Government Bids and provided access to Buyer to true and
correct copies of all material documentation related thereto requested in
writing by Buyer.

 

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(c)          With respect to any Government Contracts, there is no (i) pending
investigation or audit by any Governmental Authority, including any
administrative, civil or criminal investigation, (ii) suspension or debarment
proceeding (or equivalent proceeding) pending against a Company or any of its
Affiliates (as defined in FAR 9.403), (iii) written request by a Governmental
Authority for a contract price adjustment based on a cost item that has been
questioned or proposed for disallowance by an authorized contracting officer (or
other applicable Governmental Authority) or a claim of defective pricing in
excess of $25,000, (iv) dispute between a Company and a Governmental Authority
which, since December 31, 2008, has resulted in a government contracting
officer’s final decision where the amount in controversy exceeds or is expected
to exceed $25,000, or (v) any written claim or request for equitable adjustment
by a Company against a Governmental Authority in excess of $25,000.

 

(d)          Each Company has complied in all material respects with all
statutory and regulatory requirements where and to the extent applicable,
including the Service Contract Act, the Contract Disputes Act, the Procurement
Integrity Act, the Federal Procurement and Administrative Services Act, the FAR
and Cost Accounting Standards and any similar applicable state or local Laws,
where and as applicable to each of the Government Contracts and Government Bids.
The representations, certifications, and warranties made by each Company with
respect to the Government Contracts or Government Bids were accurate in all
material respects as of their effective date, and each Company has complied in
all material respects with all such representations, certifications and
warranties. No Government Contract has been terminated for default, breach,
cause or other failure to perform. Neither Company has received any adverse or
negative past performance evaluations or ratings within the past three (3)
years. Each Company has complied in all material respects with all terms and
conditions of each Government Contract, including all FAR, state or local Law or
agency supplement clauses identified or incorporated by reference therein. No
termination for default or convenience notice, cure notice, or show cause notice
has been issued by any Governmental Authority, prime contractor or higher-tier
subcontractor to a Company. Neither Company, nor any of their respective
directors, officers or employees is, or for the last five (5) years has been,
debarred or, to the Knowledge of the Companies, proposed for debarment,
suspended from or otherwise declared non-responsible or ineligible for
participation in the award of contracts with any Governmental Authority. To the
Knowledge of the Companies, in the past six (6) years, neither Company has
engaged in any activity that gave rise to an Organizational Conflict of Interest
(as defined in FAR 9.501 or applicable agency FAR supplements or the Government
Contracts or any comparable applicable state or local Law). Each Company
possesses all facility and personnel security clearances and Permits necessary
for the execution and performance of its obligations under the Government
Contracts.

 

(e)          As of the date hereof, neither Company has any outstanding
Government Bids that, if accepted or awarded, are expected to result in a
Contract Loss to the Companies, and neither Company is a party to any Current
Government Contract that is expected to result in a Contract Loss to the
Companies.

 

(f)          Neither Company, nor any of their respective directors or officers,
nor, to the Knowledge of the Companies, any other Representative acting on
behalf of a Company, is currently identified on the specially designated
nationals or other blocked person list or otherwise currently subject to any
U.S. sanctions administered by OFAC, and in the last six (6) fiscal years
neither Company has, directly or indirectly, used any funds, or loaned,
contributed or otherwise made available such funds to any Subsidiary, joint
venture partner or other Person, in connection with any sales or operations in
any country sanctioned by OFAC or for the purpose of financing the activities of
any Person currently subject to, or otherwise in violation of, any U.S.
sanctions administered by OFAC. Neither Company, and, to the Knowledge of the
Companies, none of their respective Representatives acting on their behalf, has
(i) used any funds for unlawful contributions, gifts, entertainment or other
unlawful expenses related to political activity, (ii) made any unlawful payment
or offered anything of value to foreign or domestic government officials or
employees or to foreign or domestic political parties or campaigns, (iii) made
any other unlawful payment, or (iv) violated any applicable money laundering or
anti-terrorism law or regulation, nor have any of them otherwise taken any
action which would reasonably cause a Company to be in violation of the Foreign
Corrupt Practices Act of 1977, as amended, or any applicable Law of similar
effect.

 

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4.23.       Bank Accounts. Schedule 4.23 lists the names and locations of all
banks and other financial institutions with which a Company maintains an account
(or at which an account is maintained to which a Company has access as to which
deposits are made on behalf of a Company) (each, a “Bank Account”), in each case
listing the type of Bank Account, the Bank Account number therefor, and the
names of all Persons authorized to draw thereupon or have access thereto and
lists the locations of all safe deposit boxes used by a Company.

 

4.24.       Suppliers and Customers; Products. Schedule 4.24 lists, by dollar
volume paid for each of the fiscal years 2012 and 2013, the ten (10) largest
suppliers of goods or services (the “Top Suppliers”) and the ten (10) largest
customers of each Company (the “Top Customers”). The relationships of each
Company with such suppliers and customers are good commercial working
relationships and (i) no Top Supplier or Top Customer within the last twelve
(12) months has threatened in writing to cancel or otherwise terminate, or, to
the Knowledge of the Companies, intends to cancel or otherwise terminate, any
relationships of such Person with a Company, (ii) no Top Supplier or Top
Customer has during the last twelve (12) months decreased materially or, to the
Knowledge of the Companies, (A) threatened to stop, decrease or limit
materially, (B) intends to modify materially its relationships with a Company or
(C) intends to stop, decrease or limit materially its products or services to a
Company or its usage or purchase of the products or services of a Company, (iii)
no Top Supplier or Top Customer has notified either Company in writing that it
intends to refuse to pay any amount due to a Company or seek to exercise any
remedy against a Company, (iv) neither Company has within the past year been
engaged in any material dispute with any Top Supplier or Top Customer and (v) no
Top Customer has notified either Company in writing that it desires or intends
to change the material terms of such Contract or change the type of Contract by
which such customer purchases good and/or services from a Company. Each Company
provides services and has never sold, licensed or distributed any product to any
Person.

 

4.25.       Investment Intent. Seller is acquiring the Shares for its own
account and not with a view to its distribution within the meaning of Section
2(11) of the Securities Act, and the rules and regulations issued pursuant
thereto. Seller is an “accredited investor” within the meaning of Rule 501 under
the Securities Act. Seller understands that the Shares have not been registered
under the Securities Act and cannot be sold unless subsequently registered under
the Securities Act or an exemption from such registration is available.

 

4.26.       Disclosure. No representations or warranties by any Seller Party in
this Agreement or any Ancillary Documents contains any untrue statement of
material fact or omits to state, when read in conjunction with all of the
information contained in this Agreement (including the Disclosure Schedules) and
the Ancillary Documents, any fact necessary in order to make the statements
herein or therein not materially misleading.

 

4.27.       No Brokers. No Seller Party, nor any of their respective
Representatives on their behalf, has employed any broker, finder or investment
banker or incurred any liability for any brokerage fees, commissions, finders’
fees or similar fees in connection with the transactions contemplated by this
Agreement.

 

4.28.       No Other Representations and Warranties. Except for the
representations and warranties contained in this Agreement or the Ancillary
Documents, Seller and the Companies make no express or implied representation or
warranty.

 

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ARTICLE V

REPRESENTATIONS AND WARRANTIES OF BUYER

 

Buyer represents and warrants to Seller the following matters as of the Closing
Date:

 

5.1.         Organization and Qualification. Buyer is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Nevada. Buyer is duly qualified or licensed to do business as a foreign
corporation and is in good standing in each jurisdiction where such
qualification or license is required, except where the failure to be so
qualified or be so licensed would not have a material adverse affect on (i)
Buyer or its financial condition or business or (ii) the ability of Buyer to
consummate the transactions contemplated by, and discharge its obligations
under, this Agreement and the Ancillary Documents to which Buyer is a party (a
“Buyer Material Adverse Effect”).

 

5.2.         Authorization. Buyer has full corporate power and authority to
enter into this Agreement and the Ancillary Documents to which it is a party and
to consummate the transactions contemplated hereby and thereby. The execution
and delivery of this Agreement and the Ancillary Documents to which Buyer is a
party and the consummation of the transactions contemplated hereby and thereby
have been duly authorized by all necessary corporate action on the part of
Buyer. This Agreement has been duly executed and delivered by Buyer. This
Agreement and each Ancillary Document to which Buyer is a party constitutes a
legal, valid and binding obligation of Buyer, enforceable against Buyer in
accordance with its terms, except as the enforceability thereof may be limited
by the Permitted Exceptions.

 

5.3.         Non-Contravention. Neither the execution and delivery of this
Agreement or any Ancillary Document by Buyer, nor the consummation of the
transactions contemplated hereby or thereby, will violate or conflict with or
(with or without notice or the passage of time or both) constitute a breach or
default under (a) any provision of the Charter or Bylaws of Buyer, (b) any Law
or Order to which Buyer or any of its business or assets are bound or subject
(including the Securities Act or the Exchange Act) or (c) any Contract or Permit
to which Buyer is a party or by which Buyer or any of its properties may be
bound or affected, other than, in the cases of clauses (a) through (c), such
violations and conflicts which would not reasonably be expected to have a Buyer
Material Adverse Effect. Buyer is in compliance with all Contracts, Permits and
Laws applicable to it and its business, including the Securities Act and the
Exchange Act, except for such non-compliance which would not reasonably be
expected to have a Buyer Material Adverse Effect.

 

5.4.         The Shares. When issued by Buyer to Seller in accordance with the
terms of this Agreement, the Shares will be (a) issued free and clear of all
Liens except (i) those imposed by applicable securities Laws, (ii) the rights of
Buyer and the other Buyer Indemnified Parties under this Agreement (including
under ARTICLE VII and Section 2.6(e)), (iii) those incurred by Seller or its
Affiliates and (iv) as set forth in Section 6.6, and (b) validly and duly issued
and fully paid and non-assessable. All consents, approvals or authorizations of
any of Buyer’s existing shareholders or creditors or the SEC, in any case, that
are required to be obtained by Buyer in connection with the issuance of the
Shares to Seller hereunder have been obtained.

 

5.5.         No Brokers. Neither Buyer nor any of its Representatives on behalf
of Buyer has employed any broker, finder or investment banker or incurred any
liability for any brokerage fees, commissions, finders’ fees or similar fees in
connection with the transactions contemplated by this Agreement.

 

5.6.         Litigation. There is no Action pending or, to the Knowledge of
Buyer, threatened, nor any Order of any Governmental Authority is outstanding,
against or involving Buyer or any of its officers, directors, stockholders,
properties, assets or businesses, whether at law or in equity, before or by any
Governmental Authority, which would reasonably be expected to have a Buyer
Material Adverse Effect.

 

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5.7.         Investment Intent. Buyer is acquiring the Purchased Stock for its
own account and not with a view to its distribution within the meaning of
Section 2(11) of the Securities Act, and the rules and regulations issued
pursuant thereto. Buyer is an “accredited investor” within the meaning of Rule
501 under the Securities Act and was not organized for the specific purpose of
acquiring the Purchased Stock. Buyer understands that the Purchased Stock has
not been registered under the Securities Act and cannot be sold unless
subsequently registered under the Securities Act or an exemption from such
registration is available.

 

5.8.         Company Employees. As of the Closing Date, Buyer does not currently
have any present intent to terminate the employment of any employees of PS or to
change their compensation and benefits such that their compensation and benefits
in the aggregate would be worse than their current compensation and benefits in
the aggregate (for the avoidance of doubt, this Section 5.8 shall not be deemed
to guaranty employment to any employee of PS at any time after the Closing,
change their employment from being “at-will” or otherwise restrict Buyer or PS
from changing the compensation or benefits provided to PS employees after the
Closing).

 

5.9.         No Other Representations and Warranties. Except for the
representations and warranties contained in this Agreement or the Ancillary
Documents, Buyer makes no express or implied representation or warranty.

 

ARTICLE VI

OTHER AGREEMENTS

 

6.1.         Further Assurances. In the event that at any time after the Closing
any further action is reasonably necessary to carry out the purposes of this
Agreement, each of the parties will take such further action (including the
execution and delivery of such further instruments and documents) as the other
parties reasonably may request, at the sole cost and expense of the requesting
party (unless otherwise specified herein or unless such requesting party is
entitled to indemnification therefor under ARTICLE VII in which case, the costs
and expense will be borne by the parties as set forth in ARTICLE VII). Seller
acknowledges and agrees that from and after the Closing, Buyer will be entitled
to possession of, and Seller will provide to Buyer, all documents, books,
records (including Tax records), agreements, corporate minute books and
financial data of any sort relating to PS.

 

6.2.         Confidentiality. Seller shall, and shall cause its Representatives
to: (a) treat and hold in strict confidence any Confidential Information, and,
except as set forth in this Section 6.2, will not use for any purpose, nor
directly or indirectly disclose, distribute, publish, disseminate or otherwise
make available to any third party any of the Confidential Information without
Buyer’s prior written consent; (b) in the event that Seller becomes legally
compelled to disclose any Confidential Information, to provide Buyer with prompt
written notice of such requirement so that Buyer or an Affiliate thereof may
seek a protective order or other remedy or waive compliance with this
Section 6.2; (c) in the event that such protective order or other remedy is not
obtained, or Buyer waives compliance with this Section 6.2, to furnish only that
portion of such Confidential Information which is legally required to be
provided as advised in writing by outside counsel and to exercise their
commercially reasonable efforts to obtain assurances that confidential treatment
will be accorded such Confidential Information; and (d) to promptly furnish to
Buyer any and all copies (in whatever form or medium) of all such Confidential
Information and to destroy any and all additional copies of such Confidential
Information and any analyses, compilations, studies or other documents prepared,
in whole or in part, on the basis thereof; provided, however, that Confidential
Information shall not include any information which, at the time of disclosure,
is generally available publicly, or which becomes public after disclosure
through no fault of the Seller or its Representatives, and was not disclosed in
breach of this Agreement by Seller or its Representatives. For any Confidential
Information of PRS, Buyer shall have the same obligations with respect to such
information as Seller has to Confidential Information under clauses (a) through
(c) of this Section 6.2; except that Buyer may disclosure such information as it
may be required to disclose by applicable Law (including any SEC position) or
securities listing or trading requirement.

 

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6.3.         Publicity. Neither Seller nor Buyer shall, and each shall cause
their respective Representatives not to, disclose, make or issue, any statement
or announcement concerning this Agreement or the Ancillary Documents or the
transactions contemplated hereby or thereby (including the terms, conditions,
status or other facts with respect thereto) to any third parties (other than its
Representatives who need to know such information in connection with carrying
out or facilitating the transactions contemplated hereby) without the prior
written consent of the other party (such consent not to be unreasonably
withheld, delayed or conditioned), except (i) in the case of Seller, as required
by applicable Law after conferring with Buyer concerning the timing and content
of such required disclosure, and (ii) in the case of Buyer, as may be required
of Buyer or its Affiliates by applicable Law (including any SEC position) or
securities listing or trading requirement.

 

6.4.         Litigation Support. Following the Closing, in the event that and
for so long as any party is actively contesting or defending against any third
party or Governmental Authority Action in connection with any fact, situation,
circumstance, status, condition, activity, practice, plan, occurrence, event,
incident, action, failure to act or transaction that existing on or prior to the
Closing Date involving either Company, each of the other parties will (i)
reasonably cooperate with the contesting or defending party and its counsel in
the contest or defense, (ii) make available its personnel at reasonable times
and upon reasonable notice and (iii) provide (A) such testimony and (B) access
to its non-privileged books and records as may be reasonably requested in
connection with the contest or defense, at the sole cost and expense of the
contesting or defending party (unless such contesting or defending party is
entitled to indemnification therefor under ARTICLE VII in which case, the costs
and expense will be borne by the parties as set forth in ARTICLE VII).

 

6.5.         Release and Covenant Not to Sue. Effective as of the Closing,
Seller hereby releases and discharges each Company from and against any and all
Actions, obligations, agreements, debts and Liabilities whatsoever, whether
known or unknown, both at law and in equity, which Seller now has, has ever had
or may hereafter have against such Company arising on or prior to the Closing
Date or on account of or arising out of any matter occurring on or prior to the
Closing Date, including any rights to indemnification or reimbursement from the
Company, whether pursuant to its Charter or Bylaws, Contract or otherwise, and
whether or not relating to claims pending on, or asserted after, the Closing
Date. From and after the Closing, Seller hereby irrevocably covenants to refrain
from, directly or indirectly, asserting any Action, or commencing or causing to
be commenced, any Action of any kind against the Company or its Affiliates,
based upon any matter purported to be released hereby. Notwithstanding anything
herein to the contrary, the releases and restrictions set forth herein shall not
apply to any claims Seller may have against any party pursuant to the terms and
conditions of this Agreement or any Ancillary Document or (ii) any claims
relating to periods prior to the Closing to the extent covered by the Company’s
directors and officers liability insurance that is in place prior to the Closing
(and for the avoidance of doubt, not any policies of the Company or Buyer at or
after the Closing.

 

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6.6.         Lock-Up. Except as expressly contemplated by Sections 2.6(e), 7.6
and 7.7, and solely to the extent that any other shareholders of Buyer are
subject to similar restrictions, Seller hereby agrees not to, without the prior
written consent of Buyer, during the period commencing from the Closing and
ending on the earlier of (x) the one (1) year anniversary of the Closing and (y)
the consummation of a liquidation, merger, share exchange or other similar
transaction following the Closing that results in all of Buyer’s shareholders
having the right to exchange their equity holdings in Buyer for cash, securities
or other property: (i) lend, offer, pledge, hypothecate, encumber, donate,
assign, sell, contract to sell, sell any option or contract to purchase,
purchase any option or contract to sell, grant any option, right or warrant to
purchase, or otherwise transfer or dispose of, directly or indirectly, any
Shares; (ii) enter into any swap or other arrangement that transfers to another,
in whole or in part, any of the economic consequences of ownership of the
Shares; or (iii) publicly disclose the intention to do any of the foregoing;
whether any such transaction described in clauses (i), (ii) or (iii) above is to
be settled by delivery of the Shares or other securities, in cash or otherwise
(any of the foregoing described in clauses (i), (ii), or (iii), a “Prohibited
Transfer”). Seller further agrees to execute such agreements as may be
reasonably requested by Buyer, in form and substance reasonably satisfactory to
Seller, that are consistent with the foregoing or that are necessary to give
further effect thereto. If any Prohibited Transfer is made or attempted contrary
to the provisions of this Section 6.6, such purported Prohibited Transfer shall
be null and void ab initio, and Buyer shall refuse to recognize any such
purported transferee of the Shares as one of its equity holders for any purpose.
In order to enforce this Section 6.6, Buyer may impose stop-transfer
instructions with respect to the Shares until the end of the restriction period
described in the first sentence of this Section 6.6.

 

6.7.         PRS Arrangements.

 

(a)          At any time after the Closing, at the request of Buyer, Seller and
PRS will promptly negotiate in good faith and enter into a stockholders
agreement with Buyer to provide Buyer with minority protection rights with
respect to Buyer’s equity interest in PRS that are consistent with the terms and
conditions set forth on Schedule 6.7(a) hereto. Notwithstanding the foregoing,
so long as PRS is intended to maintain its qualification as a Women-Owned Small
Business under the U.S. Small Business Administration rules and regulations for
purposes of contracting with the U.S. federal government, as well as any
qualification for a similar preferential status under state and local Laws for
purposes of contracting with state and local Government Authorities in the
states and localities where PRS conducts business (such preferential status for
federal, state and local government contracting, “WOSB Status”), the rights and
obligations of Buyer, Seller and PRS under such stockholders agreement shall be
subject to, and comply with, the requirements necessary to maintain the WOSB
Status of PRS (and, if any time PRS is not intended to maintain its WOSB Status,
Seller and PRS will amend such stockholders agreement to comply with the first
sentence of this Section 6.7(a)).

 

(b)          At any time after the Closing, at the request of Buyer, PRS will
promptly negotiate in good faith and enter into one or more subcontracting,
management services or similar agreements between PRS and PS pursuant to which
PS will provide to PRS services for a fee to be agreed upon by the parties in
good faith that are consistent with the terms and conditions set forth on
Schedule 6.7(a) hereto. Notwithstanding the foregoing, so long as PRS is
intended to maintain its WOSB Status, the rights and obligations of PS and PRS
under such agreement(s), including the type and amount of services to be
provided thereunder, shall be subject to, and comply with, the requirements
necessary to maintain the WOSB Status of PRS (and, if any time PRS is not
intended to maintain its WOSB Status, PRS will amend such agreement(s) to comply
with the first sentence of this Section 6.7(b)).

 

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6.8.         Piggy-Back Registration Rights.

 

(a)          If Buyer proposes to file a registration statement under the
Securities Act with respect to an offering of Buyer Common Stock or other Buyer
equity securities, or securities or other obligations exercisable or
exchangeable for, or convertible into, Buyer equity securities, by Buyer for its
own account and/or for security holders of Buyer for their account, other than a
registration statement (i) filed solely in connection with an offering of
securities to directors, employees or independent contractors of Buyer pursuant
to any stock incentive or other benefit plan, (ii) filed on Form S-4 or S-8 or
any successor to such forms, (iii) for an exchange offer or offering of
securities solely to Buyer’s existing security holders, (iv) for a dividend
reinvestment plan, or (v) solely in connection with a merger, share capital
exchange, asset acquisition, share purchase, reorganization, amalgamation,
subsequent liquidation, or other similar business transaction that results in
all of Buyer’s shareholders, including Seller, having the right to exchange
their common stock for cash, securities or other property of a non-capital
raising bona fide business transaction, then Buyer shall (x) give written notice
of such proposed filing to Seller as soon as practicable but in no event less
than ten (10) days before the anticipated filing date, which notice shall
describe the amount and type of securities to be included in such offering, the
intended method(s) of distribution, and the name of the proposed managing
underwriter or underwriters, if any, of the offering, and (y) offer to Seller in
such notice the opportunity to register the sale of such number of the Shares as
Seller may request in writing within ten (10) days following receipt by Seller
of such notice (a “Piggy-Back Registration”). Buyer shall include in such
registration statement such Shares that are requested by Seller to be included
therein within ten (10) days after the receipt by Seller of any such notice on
the same terms and conditions as any shares of Buyer Common Stock that are
included in such registration statement by other shareholders of Buyer
exercising piggy-back registration rights in existence as of the date of this
Agreement with respect to such shares of Buyer Common Stock. If at any time
after giving written notice of its intention to register any securities and
prior to the effective date of the registration statement filed in connection
with such registration, Buyer shall determine for any reason not to register or
to delay registration of such securities, Buyer may, at its election, give
written notice of such determination to Seller, and (x) in the case of a
determination not to register, shall be relieved of its obligation to register
any of Seller’s Shares in connection with such registration, and (y) in the case
of a determination to delay registering, shall be permitted to delay registering
any of Seller’s Shares for the same period as the delay in registering such
other securities. If the offering pursuant to a Piggy-Back Registration is to be
an underwritten offering, then Seller must permit the sale or other disposition
of Seller’s Shares in accordance with the intended method(s) of distribution
thereof, and shall enter into an underwriting agreement in customary form with
the underwriter or underwriters selected for such Piggy-Back Registration and
Seller shall be responsible for any fees or commissions due to such underwriters
in connection with the sale of Seller’s Shares (“Selling Expenses”). If (x) the
managing underwriter or underwriters for a Piggy-Back Registration that is to be
an underwritten offering advises Buyer in writing that the dollar amount or
number of securities which Buyer, on behalf of itself and/or its security
holders who have a contractual right to register their shares, desires to sell
exceeds the maximum dollar amount or maximum number of securities that can be
sold in such offering without adversely affecting the proposed offering price,
timing, distribution method or probability of success of such offering or (y)
the SEC determines that the dollar amount or number of securities to be
registered under the registration statement exceeds the maximum dollar amount or
number that may be registered under such registration statement in accordance
with applicable Law (including any SEC rules, regulations, policies or
positions) (such maximum dollar amount or maximum number of securities, as
applicable, in either of clauses (x) or (y) above, the “Maximum Number of
Securities”), then Buyer shall include in any such offering only the Maximum
Number of Securities allocated as follows: (A) first, the securities that Buyer
desires to sell; (B) then, the number of securities required to be included in
such offering, if any, by other security holders of Buyer exercising any demand
registration rights that such Persons have pursuant to written contractual
arrangements with Buyer; and (C) finally, the securities of Persons exercising
piggy-back registration rights pursuant to written contractual arrangements with
Buyer, including Seller pursuant to this Section 6.8, pro-rata among all such
security holders exercising piggy-back registration rights. Seller may elect to
withdraw Seller’s request for inclusion of Seller’s Shares in any Piggy-Back
Registration by giving written notice to Buyer of such request to withdraw prior
to the effectiveness of the registration statement. Buyer, whether based on its
own determination or as the result of a withdrawal by Persons making a demand
pursuant to written contractual obligations, may withdraw a registration
statement at any time prior to the effectiveness of the registration statement.
All expenses other than Selling Expenses incurred in connection with
registrations, filings or qualifications in any registration under this Section
6.8, including all registration, filing, and qualification fees, printers’ and
accounting fees and fees and disbursements of counsel for Buyer shall be borne
and paid by Buyer.

 

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(b)          The right of Seller to request inclusion of any of Seller’s Shares
in any registration pursuant this Section 6.8 shall terminate with respect to
such Shares upon the earliest to occur of: (i) such time as when such Shares can
be sold under Rule 144 promulgated under the Securities Act or another similar
exemption under the Securities Act; and (ii) after such time as such Shares have
been registered under an effective registration statement. Further, Buyer has
the right to exclude any of Seller’s Shares from any registration statement in
the event Buyer is contractually obligated to exclude such securities. In the
event that the registration statement covers securities being sold by Buyer on
its own behalf, Buyer or the underwriter shall have a right to require Seller to
agree to a lock-up period of up to six (6) months from the date of effectiveness
of the registration statement as a condition to registering Seller’s Shares.

 

(c)          In connection with any registration statement for which Seller has
elected to exercise its Piggy-Back Registration rights pursuant to this Section
6.8, Seller agrees to (i) cooperate with Buyer in connection with the
preparation of such registration statement as it pertains to Seller or Seller’s
Shares, (ii) respond within three (3) Business Days to any written request by
Buyer to provide or verify information regarding Seller or the Shares being
registered on behalf of Seller (including the proposed manner of sale) that may
be required to be included in such registration statement and related prospectus
pursuant to the rules and regulations of the Securities and Exchange Commission,
and (iii) provide in a timely manner information regarding the proposed
distribution by Seller of the Shares for which Seller has exercised her
Piggy-Back Registration rights and such other information as may be requested by
Buyer from time to time in connection with the preparation of and for inclusion
in such registration statement and related prospectus.

 

(d)          So long as at the time of the filing of such registration statement
Seller is not an executive officer or director of Buyer, if any Shares of Seller
are included a registration statement:

 

(i)          To the extent permitted by applicable Law, Buyer will indemnify and
hold harmless Seller from and against any and all loss, damage, claim or
liability (joint or several) to which Seller may become subject under the
Securities Act, the Exchange Act, or other federal or state securities law,
insofar as such loss, damage, claim or liability (or any action in respect
thereof) arises out of or is based upon: (A) any untrue statement or alleged
untrue statement of a material fact contained in such registration statement;
(B) any omission or alleged omission to state in such registration statement a
material fact required to be stated therein, or necessary to make the statements
therein not misleading; or (C) any violation by Buyer (or any of its
Representatives) of the Securities Act, the Exchange Act, any state securities
Law (collectively, “Registration Damages”); and Buyer will pay to Seller any
legal or other expenses reasonably incurred by Seller in connection with
investigating or defending any claim or proceeding from which Registration
Damages may result, as such expenses are incurred; provided, however, that the
foregoing indemnity shall not apply to the extent that any such Registration
Damages arise out of, result from or are based upon information provided in
writing by Seller expressly for use in such registration statement or actions or
omissions made by Buyer or its Representatives in reliance upon and in
conformity with information furnished in writing by or on behalf of Seller
expressly for use in connection with such registration statement; provided,
further, that Buyer shall not be responsible to indemnify for any amounts paid
in settlement of any claim or proceeding if such settlement is effected without
the consent of Buyer, which consent shall not be unreasonably withheld, delayed
or conditioned.

 

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(ii)         To the extent permitted by applicable Law, Seller will indemnify
and hold harmless Buyer, its Representatives (including any underwriter under
the Securities Act), any other security holder of Buyer selling securities in
such registration statement and any controlling person (as defined in the
Securities Act) of any such Persons from and against any and all Registration
Damages, in each case only to the extent that such Registration Damages arise
out of, result from or are based upon information provided in writing by Seller
expressly for use in such registration statement or actions or omissions made by
Buyer or its Representatives in reliance upon and in conformity with information
furnished in writing by or on behalf of Seller expressly for use in connection
with such registration statement; and Seller will pay to Buyer and each other
aforementioned indemnified Person any legal or other expenses reasonably
incurred thereby in connection with investigating or defending any claim or
proceeding from which Registration Damages may result, as such expenses are
incurred; provided, that, except in the case of fraud or willful misconduct by
Seller, Seller shall not be responsible to indemnify for any amounts paid in
settlement of any claim or proceeding if such settlement is effected without the
consent of Seller, which consent shall not be unreasonably withheld, delayed or
conditioned.

 

(iii)        The indemnification procedures set forth in Section 7.4 shall apply
to any indemnification claim under this Section 6.8 (with any reference in
Section 7.4 referring to any provision of ARTICLE VII referring to this Section
6.8 instead).

 

ARTICLE VII

INDEMNIFICATION

 

7.1.         Survival. All representations and warranties of Seller and Buyer
contained in this Agreement (including all schedules and exhibits hereto and all
certificates, documents, instruments and undertakings furnished pursuant to this
Agreement) shall survive the Closing through and until the eighteen (18) month
anniversary of the Closing Date; provided, however, that (i) the representations
and warranties contained in Sections 4.17 (Tax Matters) and 4.18 (Employee
Benefits Plans) shall survive until thirty (30) days after the expiration of the
applicable statute of limitations, (ii) the representations and warranties made
in Section 4.22 (Government Contracts) will survive until the third (3rd)
anniversary of the Closing Date and (iii) the representations and warranties
contained in Sections 4.1 (Organization and Qualification), 4.2 (Authorization
and Binding Effect; Corporate Documentation), 4.3 (Title to the Purchased
Stock); 4.4 (Capitalization), 4.27 (No Brokers), 5.1 (Organization and
Qualification), 5.2 (Authorization) and 5.5 (No Brokers) shall survive until the
fifth (5th) anniversary of the Closing Date (such representations and warranties
in clauses (i) through (iii), collectively, the “Special Reps”). For purposes of
this Agreement, the “Survival Date” with respect to any representation or
warranty shall mean the date when such representation or warranty shall survive
in accordance with the preceding sentence. If written notice of a claim for
breach of any representation or warranty has been given on or before the
applicable Survival Date for such representation or warranty, then the relevant
representations and warranties shall survive as to such claim, until the claim
has been finally resolved. All covenants, obligations and agreements of the
parties contained in this Agreement (including all schedules and exhibits hereto
and all certificates, documents, instruments and undertakings furnished pursuant
to this Agreement), including any indemnification obligations, shall survive the
Closing and continue until fully performed in accordance with their terms. For
the avoidance of doubt, a claim for indemnification under any subsection of
Section 7.2 other than clauses (a) or (b) may be made at any time.

 

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7.2.         Indemnification by Seller. Except as otherwise limited by this
ARTICLE VII, Seller shall indemnify, defend and hold harmless Buyer and its
Representatives and any assignee or successor thereof (collectively, the “Buyer
Indemnified Parties”) from and against, and pay or reimburse the Buyer
Indemnified Parties for, any and all losses, Actions, Orders, Liabilities,
damages (including consequential damages), diminution in value, Taxes, interest,
penalties, Liens, amounts paid in settlement, costs and expenses (including
reasonable expenses of investigation and court costs and reasonable attorneys’
fees and expenses), (any of the foregoing, a “Loss”) suffered or incurred by, or
imposed upon, any Buyer Indemnified Party arising in whole or in part out of or
resulting directly or indirectly from: (a) any inaccuracy in or breach of any
representation or warranty made by a Seller Party in this Agreement (including
all schedules and exhibits hereto) or any Ancillary Document; (b) any
non-fulfillment or breach of any unwaived covenant, obligation or agreement made
by or on behalf of Seller, PRS or, at or prior to the Closing, PS contained in
this Agreement (including all schedules and exhibits hereto) or any Ancillary
Document; (c) any and all Liabilities for (i) Taxes in connection with or
arising out of either Company’s assets, employees (including pursuant to Section
409A of the Code), securities, activities or business on or prior to the Closing
Date (determined with respect to taxable periods that begin before and end after
the Closing Date in accordance with the allocation provisions of Section 8.1(c))
in excess of the amount of Taxes reflected as a current liability in the
computation of the Net Working Capital in the Final Statement or (ii) fifty
percent (50%) of any Transfer Taxes; or (d) any Action by Person(s) who were
holders of equity securities of either Company, including stock options,
warrants, convertible debt or other convertible securities or other rights to
acquire equity securities of either Company, prior to the Closing arising out of
the sale, purchase, termination, cancellation, expiration, redemption or
conversion of any such securities.

 

7.3.         Indemnification by Buyer. Except as otherwise limited by this
ARTICLE VII, Buyer shall indemnify, defend and hold harmless Seller and its
Representatives, heirs, legal representatives and any assignee or successor
thereof (collectively, the “Seller Indemnified Parties”) from and against, and
pay or reimburse the Seller Indemnified Parties for, any and all Losses,
suffered or incurred by, or imposed upon, any Seller Indemnified Party arising
in whole or in part out of or resulting directly or indirectly from: (a) any
inaccuracy in or breach of any representation or warranty made by Buyer in this
Agreement (including all schedules and exhibits hereto) or any Ancillary
Document; or (b) any non-fulfillment or breach of any unwaived covenant,
obligation or agreement made by or on behalf of Buyer or, after the Closing, PS
contained in this Agreement (including all schedules and exhibits hereto) or any
Ancillary Document.

 

7.4.         Indemnification Procedures.

 

(a)          For the purposes of this Agreement, (i) the term “Indemnitee” shall
refer to the Person or Persons indemnified, or entitled, or claiming to be
entitled, to be indemnified, pursuant to the provisions of Section 7.2 or 7.3,
as the case may be, and (ii) the term “Indemnitor” shall refer to the Person
having the actual or alleged obligation to indemnify pursuant to such
provisions.

 

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(b)          In the case of any claim for indemnification under this Agreement
arising from a claim of a third party (including any Governmental Authority), an
Indemnitee must give prompt written notice and, subject to the following
sentence, in no case later than thirty (30) days after the Indemnitee’s receipt
of notice of such claim, to the Indemnitor of any claim of which such Indemnitee
has knowledge and as to which it may request indemnification hereunder. The
failure to give such notice will not, however, relieve an Indemnitor of its
indemnification obligations except to the extent that the Indemnitor is actually
harmed thereby. The Indemnitor will have the right to defend and to direct the
defense against any such claim in its name and at its expense, and with counsel
selected by the Indemnitor unless: (i) the Indemnitor fails to acknowledge fully
its obligations to the Indemnitee within fifteen (15) days after receiving
notice of such third party claim or contests, in whole or in part, its
indemnification obligations therefor; (ii) if the Indemnitor is Buyer, the
applicable third party claimant is a Governmental Authority or a then-current
customer of Buyer, either Company or any of their respective Affiliates; (iii)
if the Indemnitor is Buyer, an adverse judgment with respect to the claim will
establish a precedent materially adverse to the continuing business interests of
Buyer, either Company or their respective Affiliates; (iv) there is a conflict
of interest between the Indemnitee and the Indemnitor in the conduct of such
defense; (v) the applicable third party alleges claims of fraud, willful
misconduct or intentional misrepresentation; or (vi) such claim is criminal in
nature, could reasonably be expected to lead to criminal proceedings, or seeks
an injunction or other equitable relief against the Indemnitee. If the
Indemnitor elects, and is entitled, to compromise or defend such claim, it will
within fifteen (15) days (or sooner, if the nature of the claim so requires)
notify the Indemnitee of its intent to do so, and the Indemnitee will, at the
request and expense of the Indemnitor, cooperate in the defense of such claim.
If the Indemnitor elects not to, or is not entitled under this Section 7.4(b)
to, compromise or defend such claim, fails to notify the Indemnitee of its
election as herein provided or refuses to acknowledge or contests its obligation
to indemnify under this Agreement, the Indemnitee may pay, compromise or defend
such claim. Notwithstanding anything to the contrary contained herein, the
Indemnitor will have no indemnification obligations with respect to any such
claim which has been or will be settled by the Indemnitee without the prior
written consent of the Indemnitor (which consent will not be unreasonably
withheld, delayed or conditioned); provided, however, that notwithstanding the
foregoing, the Indemnitee will not be required to refrain from paying any claim
which has matured by a court judgment or decree, unless an appeal is duly taken
therefrom and exercise thereof has been stayed, nor will it be required to
refrain from paying any claim where the delay in paying such claim would result
in the foreclosure of a Lien upon any of the property or assets then held by the
Indemnitee or where any delay in payment would cause the Indemnitee material
economic loss. The Indemnitor’s right to direct the defense will include the
right to compromise or enter into an agreement settling any claim by a third
party; provided that no such compromise or settlement will obligate the
Indemnitee to agree to any settlement that requires the taking or restriction of
any action (including the payment of money and competition restrictions) by the
Indemnitee (other than the delivery of a release for such claim and customary
confidentiality obligations), except with the prior written consent of the
Indemnitee (such consent to be withheld, conditioned or delayed only for a good
faith reason). Notwithstanding the Indemnitor’s right to compromise or settle in
accordance with the immediately preceding sentence, the Indemnitor may not
settle or compromise any claim over the objection of the Indemnitee; provided,
however, that consent by the Indemnitee to settlement or compromise will not be
unreasonably withheld, delayed or conditioned. The Indemnitee will have the
right to participate in the defense of any claim with counsel selected by it
subject to the Indemnitor’s right to direct the defense. The fees and
disbursements of such counsel will be at the expense of the Indemnitee;
provided, however, that, in the case of any claim which seeks injunctive or
other equitable relief against the Indemnitee, the fees and disbursements of
such counsel will be at the expense of the Indemnitor.

 

(c)          Any indemnification claim that does not arise from a third party
claim must be asserted by a written notice to the Indemnitor setting forth with
reasonable specificity the amount claimed and the underlying facts supporting
such claim to the extent then known by the Indemnitee. The Indemnitor will have
a period of thirty (30) days after receipt of such notice within which to accept
or dispute such claim by providing written notice to the Indemnitee. Any
disputes that the parties are not mutually able to resolve within fifteen (15)
days after the Indemnitor has provided written notice of its dispute of such
claim (or the end of such thirty (30) day period, whichever is earlier), shall
be immediately referred to and finally resolved by arbitration in New York, New
York, in accordance with the Expedited Procedures of the Commercial Arbitration
Rules (the “Arbitration Rules”) of the American Arbitration Association (“AAA”)
in force at such time, and judgment on the award rendered by the arbitrator may
be entered in any court having jurisdiction thereof. The arbitration shall be
conducted by one arbitrator nominated by the AAA promptly (but in any event
within three (3) Business Days) after the submission of the dispute to the AAA
and reasonably acceptable to each party. The arbitrator shall accept his or her
appointment and begin the arbitration process promptly (but in any event within
three (3) Business Days) after his or her nomination and acceptance by the
parties. The arbitrator shall decide the Expedited Dispute in accordance with
the substantive law of the State of New York and otherwise in accordance with
the terms of this Agreement. To the extent that the Arbitration Rules and this
Agreement are in conflict, the terms of this Agreement shall control. The
arbitration proceedings shall be streamlined and efficient; time is of the
essence. Each party shall submit a proposal for resolution of the dispute to the
arbitrator within ten (10) Business Days after confirmation of the appointment
of the arbitrator. The arbitrator shall have the power to order any party to do,
or to refrain from doing, anything consistent with this Agreement and applicable
Law, including to perform its contractual obligation(s); provided, that the
arbitrator shall be limited to ordering pursuant to the foregoing power (and,
for the avoidance of doubt, shall order) the relevant party to comply with only
one or the other of the proposals. The arbitrator’s award shall be in writing
and shall include a reasonable explanation of the arbitrator’s reason(s) for
selecting one or the other proposal. This agreement to arbitrate shall be
specifically enforceable and following the Closing shall be the sole and
exclusive remedy of the Indemnitee for any indemnification claim that does not
arise from a third party claim.

 

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7.5.         Exclusive Remedy. From and after the Closing, this ARTICLE VII and
Section 6.8(d) shall constitute the sole and exclusive remedy for each of the
parties to this Agreement against any other party to this Agreement with respect
to any and all breaches or alleged breaches of any agreement, covenant,
representation or warranty made by such party in this Agreement, except for (i)
claims based in whole or in part upon fraud, willful misconduct or intentional
misrepresentation or (ii) any equitable remedies, including the right to an
injunction or specific performance, to which they may be entitled.

 

7.6.         General Indemnification Provisions. The amount of any Losses
suffered or incurred by any Indemnitee shall be reduced by the amount of any
insurance proceeds or other cash receipts paid to the Indemnitee or any
Affiliate thereof as a reimbursement with respect to such Losses (and no right
of subrogation shall accrue to any insurer hereunder, except to the extent that
such waiver of subrogation would prejudice any applicable insurance coverage),
including any indemnification received by the Indemnitee or such Affiliate from
an unrelated party with respect to such Losses, net of the costs of collection
and any related anticipated future increases in insurance premiums resulting
from such Loss or insurance payment. No investigation by Buyer or Seller or
their respective Representatives or knowledge by Buyer or Seller or their
respective Representatives of a breach of a representation or warranty of the
other party shall affect such other party’s representations and warranties or
the recourse available to such first party or any other Indemnitee of such first
party under any provision of this Agreement (including ARTICLE VII) with respect
thereto. Notwithstanding anything in this Agreement to the contrary, for
purposes of application of the indemnification provisions of this ARTICLE VII:
(i) no Indemnitor shall be liable for an indemnification claim made under clause
(a) of Section 7.2 or Section 7.3, as the case may be, unless and until the
Losses of the Buyer Indemnified Parties, collectively, under clause (a) of
Section 7.2 or the Seller Indemnified Parties, collectively, under clause (a) of
Section 7.3, as applicable, exceed an aggregate amount equal to $25,000 (the
“Basket”), in which case the applicable Indemnitor shall be obligated to the
Indemnitee(s) for the amount of all Losses of the Indemnitee(s) (including the
first dollar of Losses of the Buyer Indemnified Parties or the Seller
Indemnified Parties, as applicable, required to reach the Basket); provided,
however, that the Basket shall not apply to any claims for breaches of any
Special Reps; and (ii) no Indemnitor shall be liable for an indemnification
claim made under Section 7.2 or Section 7.3, as the case may be, to the extent
that Losses of the Buyer Indemnified Parties, collectively, under Section 7.2 or
the Seller Indemnified Parties, collectively, under Section 7.3, as applicable,
exceed an amount equal to the total of the cash portion of the Purchase Price
paid in accordance with Section 2.3(a) (as adjusted based on any adjustment
after the Closing to the cash portion of the Purchase Price under Section 2.6),
plus any obligations under the Note paid as of the date of such claim (the
“Indemnification Cap”); provided, that with respect to any claims for breaches
of any Special Reps, the Indemnification Cap shall be an amount equal to the
Purchase Price. Any indemnification based on claims by a Buyer Indemnified Party
which are finally established to be due and payable, shall be paid (i) first by
applying such amounts against any obligations under the Note, then (ii) by
returning the number of Shares necessary to satisfy such claim (valuing such
Shares at the Buyer Common Stock Price) (clause (ii) together with clause (i) is
hereinafter referred to as the “Right of Set-Off”) and then (iii) in cash. The
amount of any Loss arising from the breach of any representation, warranty,
covenant, obligation or agreement contained in this Agreement shall be the
entire amount of any Loss actually incurred by the respective Indemnitee as a
result of such breach and not just that portion of the Loss that exceeds the
relevant level of materiality, if any. Seller will not have any right to seek
contribution from either Company or Buyer with respect to all or any part of
Seller’s indemnification obligations under this ARTICLE VII. Buyer will not be
required to make any claim against either Company in respect of any
representation, warranty, covenant or any other obligation of either Company to
Buyer hereunder or under any Ancillary Document to which such Company is a
party, and may solely seek action against Seller. Unless otherwise required by
applicable Law, all indemnification payments will constitute adjustments to the
Purchase Price for all Tax purposes, and no party may take any position
inconsistent with such characterization.

 

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7.7.         Timing of Payment; Right to Set-Off. Any indemnification obligation
of an Indemnitor under this ARTICLE VII which results in an out of pocket
payment after applying the Right of Set-Off will be paid within three (3)
Business Days after the final determination of such obligation in accordance
with Section 7.4. Without limiting any of the foregoing or any other rights of
Buyer under this Agreement or any Ancillary Document or at law or equity, in the
event that Seller fails or refuses to promptly indemnify a Buyer Indemnified
Party as provided herein or otherwise fails or refuses to make any payments
required under any Ancillary Document, in either case where it is finally
established that Seller is obligated to provide such indemnification or make
such payment, the applicable Buyer Indemnified Party shall, in its sole
discretion, be entitled to claim a portion of the Shares then owned by Seller up
to an amount equal in value (based on the Buyer Common Stock Price) to the
amount owed by Seller. In the event that Seller fails to promptly transfer any
such Shares pursuant to this Section 7.7 or fails to transfer any Shares as
required by Sections 7.6 or 2.6(e), Buyer shall be and hereby is authorized as
the attorney-in-fact for Seller to transfer such Shares to the proper recipient
thereof as required by this Section 7.7 or Section 2.6(e) or 7.6, as applicable,
and may transfer such Shares and cancel the stock certificates for such Shares
on its books and records and issue new stock certificates to such transferee and
may instruct its agents and any exchanges on which shares of Buyer Common Stock
are listed or traded to do the same.

 

ARTICLE VIII

TAX MATTERS

 

8.1.         Tax Returns.

 

(a)          Seller will prepare or cause to be prepared and file or cause to be
filed all Tax Returns for the Companies for all periods ending on or prior to
the Closing Date which are required to be filed after the Closing Date, and
Buyer will reasonably cooperate with Seller to enable Seller to do so. Any Tax
Returns filed pursuant hereto must be consistent with the prior Tax Returns of
the Companies unless otherwise required by applicable Laws. No later than twenty
(20) days prior to filing, Seller will deliver to Buyer all such Tax Returns and
any related work papers and will permit Buyer to review and comment on each such
Tax Return and will make such revisions to such Tax Returns as are reasonably
requested by Buyer. Seller will timely pay to the appropriate Taxing Authority
any Taxes of the Company with respect to such periods to the extent such Taxes
were not included as a liability in the calculation of Net Working Capital
included in the Final Statement.

 

(b)          To the extent that any Tax Returns of PRS relate to any Tax periods
which begin before the Closing Date and end after the Closing Date, PRS will
prepare or cause to be prepared in a manner consistent with the prior Tax
Returns of PRS unless otherwise required by applicable Laws and file or cause to
be filed any such Tax Returns. PRS will permit Buyer to review and comment on
each such Tax Return described in the preceding sentence at least twenty (20)
days prior to filing such Tax Returns and will make such revisions to such Tax
Returns as are reasonably requested by Buyer unless otherwise required by
applicable Law. To the extent that any Tax Returns of PS relate to any Tax
periods which begin before the Closing Date and end after the Closing Date, PS
will prepare or cause to be prepared in a manner consistent with the prior Tax
Returns of PS unless otherwise required by applicable Laws and file or cause to
be filed any such Tax Returns. PS will permit Seller to review and comment on
each such Tax Return described in the preceding sentence at least twenty (20)
days prior to filing such Tax Returns and will make such revisions to such Tax
Returns as are reasonably requested by Seller unless otherwise required by
applicable Law.

 

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(c)          For purposes of this Agreement, in the case of any Taxes that are
imposed on a periodic basis and are payable for a taxable period that includes
but does not end on the Closing Date, the portion of such Tax which relates to
the portion of such taxable period ending on the Closing Date will (i) in the
case of any Taxes other than Taxes based upon or related to income or receipts,
be deemed to be the amount of such Tax for the entire taxable period multiplied
by a fraction (A) the numerator of which is the number of days in the taxable
period ending on the Closing Date and (B) the denominator of which is the number
of days in the entire taxable period, and (ii) in the case of any Tax based upon
or related to income or receipts be deemed equal to the amount which would be
payable if the relevant taxable period ended on the Closing Date. Any credits
relating to a taxable period that begins before and ends after the Closing Date
will be taken into account as though the relevant taxable period ended on the
Closing Date. All determinations necessary to give effect to the foregoing
allocations will be made in a manner consistent with GAAP and the prior practice
of the applicable Company unless otherwise required by applicable Law.

 

8.2.         Transfer Taxes. All Taxes imposed in connection with the transfer
of the Purchased Stock (“Transfer Taxes”), whether such Taxes are assessed
initially against Buyer, Seller or any of their respective Affiliates, shall be
borne and paid equally by Seller and Buyer.

 

ARTICLE IX

GENERAL PROVISIONS

 

9.1.         Expenses. Except as otherwise expressly set forth elsewhere in this
Agreement, Buyer will bear its own legal and other fees and expenses incurred in
connection with its negotiating, executing and performing this Agreement,
including any related broker’s or finder’s fees, and the Seller Parties will
bear their respective legal and other fees and expenses incurred in connection
with their negotiating, executing and performing this Agreement, including any
related broker’s or finder’s fees, for periods on or before the Closing Date.
Seller agrees that the fees and expenses of the Seller Parties for periods on or
before the Closing Date will be paid by Seller. Each of Seller and PRS will bear
its own legal and other fees and expenses incurred in connection with this
Agreement after the Closing, subject to the provisions of this Agreement.

 

9.2.         Notices. Any notice, request, instruction or other document to be
given hereunder by a party hereto shall be in writing and shall be deemed to
have been given, (i) when received if given in person or by courier or a courier
service, (ii) on the date of transmission if sent by facsimile or email (with
affirmative confirmation of receipt, and provided, that the party providing
notice shall within two (2) Business Days provide notice by another method under
this Section 9.2) or (iii) three (3) Business Days after being deposited in the
U.S. mail, certified or registered mail, postage prepaid:

 

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If to Seller, PRS or, prior to the Closing, PS, to:

 

Linda Moraski

c/o PeopleSERVE PRS, Inc.

643 VFW Parkway

Chestnut Hill, MA  02467-3656

Facsimile No.:  (617) 363-0091

Telephone No.:  617-553-5201

Email:  lmoraski@gmail.com

 

 

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

 

Sassoon & Cymrot, LLP

84 State Street, 8th Floor

Boston, MA 02109

Attn:  Lauren A. Puglia, Esq.

Facsimile No.:  (617) 720-0366

Telephone No.:  (617) 720-0099 Ext. 115

Email:  LPuglia@sassooncymrot.com

 

If to Buyer or, after the Closing, PS, to:

 

Staffing 360 Solutions, Inc.

641 Lexington Avenue, Suite 1526

New York, New York 10022

Attention:   A.J. Cervantes

Facsimile No.:  (212) 297-0200

Telephone No.:  (954) 634-6410

 

 

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

 

Ellenoff Grossman & Schole LLP

1345 Avenue of the Americas, 11th Floor

New York, New York  10105

Attention:  Barry Grossman, Esq.

Facsimile No.:  (212) 370-7889

Telephone No.:  (212) 370-1300

 

or to such other individual or address as a party hereto may designate for
itself by notice given as herein provided.

 

9.3.         Interpretation. The table of contents and the headings and
subheadings of this Agreement are for reference and convenience purposes only
and in no way modify, interpret or construe the meaning of specific provisions
of the Agreement. In this Agreement, unless the context otherwise requires: (i)
whenever required by the context, any pronoun used in this Agreement shall
include the corresponding masculine, feminine or neuter forms, and the singular
form of nouns, pronouns and verbs shall include the plural and vice versa; (ii)
reference to any Person includes such Person’s successors and assigns but, if
applicable, only if such successors and assigns are permitted by this Agreement,
and reference to a Person in a particular capacity excludes such Person in any
other capacity; (iii) any accounting term used and not otherwise defined in this
Agreement or any Ancillary Document has the meaning assigned to such term in
accordance with GAAP; (iv) “including” (and with correlative meaning “include”)
means including without limiting the generality of any description preceding or
succeeding such term and shall be deemed in each case to be followed by the
words “without limitation”; (v) the words “herein,” “hereto,” and “hereby” and
other words of similar import in this Agreement shall be deemed in each case to
refer to this Agreement as a whole and not to any particular Section or other
subdivision of this Agreement; (vi) the word “if” and other words of similar
import when used herein shall be deemed in each case to be followed by the
phrase “and only if”; (vii) the term “or” means “and/or”; (viii) reference to
any statute includes any rules and regulations promulgated thereunder; (ix) any
agreement, instrument, insurance policy, Law or Order defined or referred to
herein or in any agreement or instrument that is referred to herein means such
agreement, instrument, insurance policy, Law or Order as from time to time
amended, modified or supplemented, including (in the case of agreements or
instruments) by waiver or consent and (in the case of statutes, regulations,
rules or orders) by succession of comparable successor statutes, regulations,
rules or orders and references to all attachments thereto and instruments
incorporated therein; and (x) except as otherwise indicated, all references in
this Agreement to the words “Section,” “Schedule” and “Exhibit” are intended to
refer to Sections, Schedules and Exhibits to this Agreement.

 

9.4.         Seller Not Authorized to Act on Behalf of Buyer. In the event that
Seller becomes a director, officer, employee or other authorized agent of Buyer
or its Affiliates (including, after the Closing, PS), Seller shall have no
authority, express or implied, to act or make any determination on behalf of
Buyer or its Affiliates in connection with this Agreement or any Ancillary
Document or the consummation of the transactions contemplated hereby and thereby
or any dispute or Action with respect thereto.

 

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9.5.         Severability. In case any one or more of the provisions contained
in this Agreement should be held invalid, illegal or unenforceable in any
respect, the validity, legality, and enforceability of the remaining provisions
will not in any way be affected or impaired. Any illegal or unenforceable term
will be deemed to be void and of no force and effect only to the minimum extent
necessary to bring such term within the provisions of applicable Law and such
term, as so modified, and the balance of this Agreement will then be fully
enforceable. The parties will substitute for any invalid, illegal or
unenforceable provision a suitable and equitable provision that carries out, so
far as may be valid, legal and enforceable, the intent and purpose of such
invalid, illegal or unenforceable provision.

 

9.6.         Assignment. This Agreement may not be assigned by any party without
the prior written consent of the other parties hereto; provided, however, that
after the Closing, Buyer may assign its rights and benefits hereunder (i) to any
Affiliate of Buyer (provided, that (A) Buyer also assigns each Ancillary
Document to which it is a party to such Affiliate, (B) Buyer shall remain
primarily responsible for its obligations hereunder and under each such
Ancillary Document and (C) the assignee expressly assumes the obligations of
Buyer hereunder and under each such Ancillary Document) or (ii) to any Person
acquiring all or substantially all of the assets of Buyer and its Subsidiaries
taken as a whole or all or a majority of the outstanding equity securities of
Buyer (whether by stock purchase, merger, consolidation or otherwise) (provided,
that (A) Buyer also assigns each Ancillary Document to which it is a party to
such Person and (B) the assignee expressly assumes the obligations of Buyer
hereunder and under each such Ancillary Document). 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 each party
hereto.

 

9.7.         No Third-Party Beneficiaries. Except for the indemnification rights
of the Buyer Indemnified Parties and Seller Indemnified Parties set forth
herein, this Agreement is for the sole benefit of the parties hereto and their
heirs, legal representatives, successors and permitted assigns and nothing
herein expressed or implied shall give or be construed to give to any Person,
other than the parties hereto and such heirs, legal representatives, successors
and permitted assigns, any legal or equitable rights hereunder.

 

9.8.         Amendment; Waiver. This Agreement may not be amended or modified
except by an instrument in writing signed by each of the parties hereto.
Notwithstanding anything to the contrary contained herein: (a) the failure of
any party at any time to require performance by the other of any provision of
this Agreement will not affect such party’s right thereafter to enforce the
same; (b) no waiver by any party of any default by any other party will be valid
unless in writing and acknowledged by an authorized representative of the
non-defaulting party, and no such waiver will be taken or held to be a waiver by
such party of any other preceding or subsequent default; and (c) no extension of
time granted by any party for the performance of any obligation or act by any
other party will be deemed to be an extension of time for the performance of any
other obligation or act hereunder.

 

9.9.         Remedies. Except as specifically set forth in this Agreement, any
party having any rights under any provision of this Agreement will have all
rights and remedies set forth in this Agreement and all rights and remedies
which such party may have been granted at any time under any other contract or
agreement and all of the rights which such party may have under any applicable
Law. Except as specifically set forth in this Agreement, any such party will be
entitled to (a) enforce such rights specifically, without posting a bond or
other security or proving that monetary damages would be inadequate (including
Buyer’s right to equitable relief, including injunction and specific
enforcement, in the event of any breach of Sections 6.2, 6.5, 6.6 or 6.7
hereof), (b) to recover damages by reason of a breach of any provision of this
Agreement and (c) to exercise all other rights granted by applicable Law. The
exercise of any remedy by a party will not preclude the exercise of any other
remedy by such party.

 

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9.10.       Mutual Drafting. The parties acknowledge and agree that: (a) this
Agreement and the Ancillary Documents are the result of negotiations between the
parties and will not be deemed or construed as having been drafted by any one
party; (b) each party and its counsel have reviewed and negotiated the terms and
provisions of this Agreement (including any, Exhibits and Schedules attached
hereto) and the Ancillary Documents and have contributed to their revision; and
(c) the rule of construction to the effect that any ambiguities are resolved
against the drafting party will not be employed in the interpretation of this
Agreement or the Ancillary Documents.

 

9.11.       Governing Law; Consent to Jurisdiction; Waiver of Jury Trial . This
Agreement shall be governed by, and construed in accordance with, the laws of
the State of New York (without giving effect to its choice of law principles).
Subject to Sections 2.6(d) and 7.4(c), for purposes of any Action arising out of
or in connection with this Agreement, the Ancillary Documents or any transaction
contemplated hereby or thereby, each of the parties hereto (a) irrevocably
submits to the exclusive jurisdiction and venue of any state or federal court
located within New York County, State of New York, (b) agrees that service of
any process, summons, notice or document by U.S. registered mail to such party’s
respective address set forth in Section 9.2 shall be effective service of
process for any Action with respect to any matters to which it has submitted to
jurisdiction in this Section 9.11, and (c) waives and covenants not to assert or
plead, by way of motion, as a defense or otherwise, in any such Action, any
claim that it is not subject personally to the jurisdiction of such court, that
the Action is brought in an inconvenient forum, that the venue of the Action is
improper or that this Agreement or the Ancillary Document, as applicable, or the
subject matter hereof or thereof may not be enforced in or by such court, and
hereby agrees not to challenge such jurisdiction or venue by reason of any
offsets or counterclaims in any such Action. The parties hereto hereby
knowingly, voluntarily and intentionally waive the right any may have to a trial
by jury in respect to any litigation based hereon, or arising out of, under, or
in connection with this Agreement and any agreement contemplated to be executed
in connection herewith, or any course of conduct, course of dealing, statements
(whether verbal or written) or actions of any party in connection with such
agreements.

 

9.12.       Counterparts. This Agreement may be executed in one or more
counterparts, and by the different parties hereto in separate counterparts, each
of which when executed shall be deemed to be an original but all of which taken
together shall constitute one and the same agreement. A photocopy, faxed,
scanned and/or emailed copy of this Agreement or any Ancillary Document or any
signature page to this Agreement or any Ancillary Document, shall have the same
validity and enforceability as an originally signed copy.

 

9.13.       Entire Agreement. This Agreement (including the Exhibits and
Schedules hereto, which are hereby incorporated herein by reference and deemed
part of this Agreement), together with the Ancillary Documents constitute the
entire agreement among the parties hereto with respect to the subject matter
hereof and supersede all prior agreements and undertakings, both written and
oral, with respect to the subject matter hereof.

 

[Remainder of Page Intentionally Left Blank; Signatures Appear on Following
Page]

 

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IN WITNESS WHEREOF, the parties hereto have caused this Stock Purchase Agreement
to be duly executed and delivered as of the date first written above.

 

  Seller:       /s/Linda Moraski   Linda Moraski       The Companies:      
PEOPLESERVE, INC.           By: /s/Linda Moraski     Name: Linda Moraski    
Title: President and Chief Executive Officer           PEOPLESERVE PRS, INC.    
      By: /s/Linda Moraski     Name: Linda Moraski     Title: President and
Chief Executive Officer           Buyer:       STAFFING 360 SOLUTIONS, INC.    
      By: /s/Alfonso J. Cervantes     Name: Alfonso J. Cervantes     Title: Vice
Chairman and President

 

[Signature Page to Stock Purchase Agreement]

 

 

 

 

TABLE OF CONTENTS:

 

I. DEFINITIONS 1     1.1. Certain Defined Terms 1 1.2. Other Defined Terms 7    
II. PURCHASE AND SALE OF STOCK 8     2.1. Purchase of Stock 8 2.2. Purchase
Price 8 2.3. Payment of Closing Purchase Price 8 2.4. Net Working Capital; Other
Excluded Assets and Liabilities 9 2.5. Estimated Closing Statement 10 2.6.
Post-Closing Purchase Price Adjustment 10     III. CLOSING AND CLOSING
CONDITIONS 12     3.1. Closing 12 3.2. Closing Deliveries by Seller 12 3.3.
Closing Deliveries by Buyer 13     IV. REPRESENTATIONS AND WARRANTIES OF SELLER
14     4.1. Organization and Qualification 14 4.2. Authorization and Binding
Effect; Corporate Documentation 14 4.3. Title to the Purchased Stock 14 4.4.
Capitalization 15 4.5. Subsidiaries 15 4.6. Non-Contravention 15 4.7. Financial
Statements 16 4.8. Absence of Changes 16 4.9. Title to and Sufficiency of Assets
16 4.10. Personal Property 17 4.11. Real Property 17 4.12. Intellectual Property
18 4.13. Compliance with Laws 18 4.14. Permits 18 4.15. Litigation 19 4.16.
Contracts 19 4.17. Tax Matters 20 4.18. Employee Benefit Plans 21 4.19.
Employees and Labor Matters 22 4.20. Insurance 24 4.21. Transactions with
Related Persons 24 4.22. Government Contracts 24 4.23. Bank Accounts 26 4.24.
Suppliers and Customers; Products 26 4.25. Investment Intent 26 4.26. Disclosure
26 4.27. No Brokers 26 4.28. No Other Representations and Warranties 26     V.
REPRESENTATIONS AND WARRANTIES OF BUYER 27     5.1. Organization and
Qualification 27 5.2. Authorization 27 5.3. Non-Contravention 27 5.4. The Shares
27 5.5. No Brokers 27 5.6. Litigation 27

 

 

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5.7. Investment Intent 28 5.8. Company Employees 28 5.8. No Other
Representations and Warranties 28     VI. OTHER AGREEMENTS 28     6.1. Further
Assurances 28 6.2. Confidentiality 28 6.3. Publicity 29 6.4. Litigation Support
29 6.5. Release and Covenant Not to Sue 29 6.6. Lock-Up 30 6.7. PRS Arrangements
30 6.8. Piggy-Back Registration Rights 31     VII. INDEMNIFICATION 33     7.1.
Survival 33 7.2. Indemnification By Seller 34 7.3. Indemnification By Buyer 34
7.4. Indemnification Procedures 34 7.5. Exclusive Remedy 36 7.6. General
Indemnification Provisions 36 7.7. Timing of Payment; Right to Set-Off 37    
VIII. TAX MATTERS 37     8.1. Tax Returns 37 8.2. Transfer Taxes 38     IX.
GENERAL PROVISIONS 38     9.1. Expenses 38 9.2. Notices 38 9.3. Interpretation
39 9.4. Seller Not Authorized to Act on Behalf of Buyer 39 9.5. Severability 40
9.6. Assignment 40 9.7. No Third-Party Beneficiaries 40 9.8. Amendment; Waiver
40 9.9. Remedies 40 9.10. Mutual Drafting 41 9.11. Governing Law; Consent to
Jurisdiction; Waiver of Jury Trial 41 9.12. Counterparts 41 9.13. Entire
Agreement 41

 

EXHIBITS:

 

A Form of Note B Form of Non-Competition Agreement C Form of Employment
Agreements D Form of Legal Opinion

 

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