Exhibit 10.1
EXECUTION COPY
STOCK
PURCHASE
AGREEMENT
by
and
among
VCA ANTECH, INC.,
SNOW MERGER ACQUISITION, INC.,
PET DRX CORPORATION,
and
each of the
PERSONS
LISTED AS SELLERS ON THE SIGNATURE PAGES HERETO
Dated as of June 2, 2010

 

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TABLE OF CONTENTS

              ARTICLE I. DEFINITIONS     1  
 
            ARTICLE II. Purchase and Sale of Equity Interests     12  
Section 2.1.
  Purchase and Sale of Equity Interests     12  
Section 2.2.
  Equity Closing     12  
Section 2.3.
  Closing Statement     12  
Section 2.4.
  Payments and Deliveries at the Equity Closing     13  
Section 2.5.
  Post-Closing Adjustments to the Aggregate Transaction Consideration.     15  
 
            ARTICLE III. REPRESENTATIONS AND WARRANTIES OF PARENT AND BUYER    
16  
Section 3.1.
  Entity Status     16  
Section 3.2.
  Power and Authority; Enforceability     16  
Section 3.3.
  No Violation     17  
Section 3.4.
  Consents     17  
Section 3.5.
  Broker Fees     17  
Section 3.6.
  Sufficient Funds     17  
 
            ARTICLE IV. REPRESENTATIONS AND WARRANTIES OF THE SELLERS     17  
Section 4.1.
  Status of Certain Sellers     17  
Section 4.2.
  Power and Authority; Enforceability     17  
Section 4.3.
  No Violation     18  
Section 4.4.
  Brokers’ Fees     18  
Section 4.5.
  Equity Interests; Seller Information     18  
Section 4.6.
  Litigation     19  
 
            ARTICLE V. REPRESENTATIONS AND WARRANTIES OF THE COMPANY CONCERNING
THE ACQUIRED ENTITIES     19  
Section 5.1.
  Corporate Status     19  
Section 5.2.
  Power and Authority; Enforceability     19  
Section 5.3.
  No Violation     20  
Section 5.4.
  Brokers’ Fees     20  
Section 5.5.
  Capitalization     20  
Section 5.6.
  Company Subsidiaries     21  
Section 5.7.
  Records     21  
Section 5.8.
  SEC Documents     21  
Section 5.9.
  Financial Statements     22  
Section 5.10.
  Liabilities     22  
Section 5.11.
  Subsequent Events     22  
Section 5.12.
  Availability, Title to, and Condition of Assets     26  
Section 5.13.
  Legal Compliance     26  
Section 5.14.
  No Change of Control Provision     27  
Section 5.15.
  Tax Matters     27  
Section 5.16.
  Real Property and Leaseholds     30  
Section 5.17.
  Intellectual Property     32  
Section 5.18.
  Contracts     32  
Section 5.19.
  Litigation     33  

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Section 5.20.
  Labor; Employees     33  
Section 5.21.
  Employee Benefits     34  
Section 5.22.
  Environmental, Health, and Safety Matters     37  
Section 5.23.
  Insurance     37  
Section 5.24.
  Affiliate Transactions     38  
Section 5.25.
  Accounts Receivable and Payable     38  
Section 5.26.
  Disclosure and Internal Controls; Complaints     38  
Section 5.27.
  Full Disclosure     39  
 
            ARTICLE VI. PRE-CLOSING COVENANTS     39  
Section 6.1.
  General     39  
Section 6.2.
  Notices and Consents     39  
Section 6.3.
  Operation of the Company’s Business     40  
Section 6.4.
  Preservation of Business     40  
Section 6.5.
  Full Access; Non-Disclosure     40  
Section 6.6.
  Publicity     41  
Section 6.7.
  Notification     42  
Section 6.8.
  Acquisition Proposals     42  
Section 6.9.
  Tax Matters     42  
Section 6.10.
  Payment of Liabilities     43  
Section 6.11.
  Exercise of Warrants     43  
 
            ARTICLE VII. POST-CLOSING COVENANTS     43  
Section 7.1.
  General     43  
Section 7.2.
  Board of Directors     43  
Section 7.3.
  Litigation Support     44  
Section 7.4.
  Transition     44  
Section 7.5.
  Director & Officer Insurance     44  
Section 7.6.
  Confidentiality     44  
 
            ARTICLE VIII. CLOSING CONDITIONS     45  
Section 8.1.
  General Conditions     45  
Section 8.2.
  Conditions Precedent to Obligation of Parent and Buyer     46  
Section 8.3.
  Conditions Precedent to Obligations of the Company and the Sellers     47  
 
            ARTICLE IX. TERMINATION     48  
Section 9.1.
  Termination of Agreement     48  
Section 9.2.
  Effect of Termination     48  
 
            ARTICLE X. INDEMNIFICATION     49  
Section 10.1.
  Survival of Representations and Warranties     49  
Section 10.2.
  Indemnification Provisions for the Benefit of the Parent Indemnified Parties  
  49  
Section 10.3.
  Indemnification Provisions for Benefit of the Sellers     50  
Section 10.4.
  Indemnification Claim Procedures     50  
Section 10.5.
  Limitations     52  
Section 10.6.
  Calculation of Damages     53  
Section 10.7.
  Purchase Price Adjustment     53  

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Section 10.8.
  Release of Adjusted Holdback Amount     53  
 
            ARTICLE XI. SELLERS’ REPRESENTATIVE     54  
Section 11.1.
  Authorization of the Sellers’ Representative     54  
Section 11.2.
  Compensation; Exculpation; Indemnity     55  
Section 11.3.
  Removal and Replacement of Sellers’ Representative; Successor Sellers’
Representative     55  
Section 11.4.
  Reliance; Limitation as to Parent and the Company     56  
 
            ARTICLE XII. MISCELLANEOUS     56  
Section 12.1.
  Entire Agreement     56  
Section 12.2.
  Successors     57  
Section 12.3.
  Assignments     57  
Section 12.4.
  Notices     57  
Section 12.5.
  Submission to Jurisdiction; Process Agent     58  
Section 12.6.
  Time     58  
Section 12.7.
  Counterparts     58  
Section 12.8.
  Headings     58  
Section 12.9.
  Governing Law     58  
Section 12.10.
  Amendments and Waivers     59  
Section 12.11.
  Severability     59  
Section 12.12.
  Expenses     59  
Section 12.13.
  Construction     59  
Section 12.14.
  Remedies     60  
Section 12.15.
  Electronic Signatures     60  

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Exhibits

     
Exhibit A
  Sample Computation of Adjusted Net Working Capital
 
   
Exhibit B
  Form of Closing Statement
 
   
Exhibit C
  Form of Seller’s Certificate
 
   
Exhibit D
  Form of Company’s Officers’ Certificate
 
   
Exhibit E
  Form of Company’s Secretary’s Certificate
 
   
Exhibit F
  Form of Non-USRPI Certificate
 
   
Exhibit G
  Form of Resignation Letter
 
   
Exhibit H
  Form of Limited Release
 
   
Exhibit I
  Form of Proxy
 
   
Exhibit J
  Form of Parent’s Secretary’s Certificate
 
   
Exhibit K
  Form of Press Release
 
   
Exhibit L
  Form of Redemption Notice

Schedules

     
Schedule A
  List of Sellers and Share Ownership
 
   
Schedule B
  Permitted Encumbrances
 
   
Schedule C
  List of Persons Executing Proxies
 
   
Schedule D
  Management Bonuses
 
   
Schedule E
  Director Nominees
 
   
Schedule F
  Escrowed Shares
 
   
Schedule G
  Exercised Company Options
 
   
Schedule H
  Pre-Closing Actions

      Sellers Disclosure Schedules
 
   
Section 4.5
  Capitalization

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      Company Disclosure Schedules
 
   
Section 5.3
  Required Consents
 
   
Section 5.4
  Brokers’ Fees
 
   
Section 5.5
  Capitalization
 
   
Section 5.6(a)
  Company Subsidiaries
 
   
Section 5.6(b)
  Veterinary Practices Managed by Acquired Entities
 
   
Section 5.8(a)
  SEC Documents
 
   
Section 5.11
  Subsequent Events
 
   
Section 5.13(b)
  Permits
 
   
Section 5.14
  No Change of Control Provisions
 
   
Section 5.15
  Tax Matters
 
   
Section 5.16(a)
  Owned Real Estate/Leased Real Estate/Facility Leases
 
   
Section 5.17(a)
  Intellectual Property
 
   
Section 5.18(a)
  Contracts
 
   
Section 5.19
  Litigation
 
   
Section 5.20(b)
  Employment Contracts
 
   
Section 5.21
  Company Plans
 
   
Section 5.23
  Insurance Policies
 
   
Section 5.24
  Affiliate Transactions

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STOCK PURCHASE AGREEMENT
     THIS STOCK PURCHASE AGREEMENT (this “Agreement”), dated as of June 2, 2010,
is by and among (i) VCA Antech, Inc., a Delaware corporation (“Parent”),
(ii) Snow Merger Acquisition, Inc., a Delaware corporation (“Buyer”), (iii) Pet
DRx Corporation, a Delaware corporation (the “Company”), (iv) Harry L.
Zimmerman, an individual, in his capacity as the Sellers’ Representative
(defined below), and (v) each Person listed as a seller on the signature pages
hereto (individually, “Seller” and collectively, the “Sellers”).
BACKGROUND:
     A. The Sellers collectively own (or have the right to acquire upon the
exercise of Seller Options owned by each Seller) more than 51% of the shares of
Company Common Stock calculated on a fully-diluted basis.
     B. Subject to the terms and conditions set forth herein, Buyer desires to
acquire from the Sellers, and the Sellers desire to sell to Buyer, all of the
Seller Shares (as defined herein) and the Seller Options (as defined herein).
     C. Concurrently with entering into this Agreement, the Company, Parent and
Buyer are executing and delivering a Merger Agreement (the “Merger Agreement”)
pursuant to which the Buyer will merge with and into the Company (the “Merger”),
all in accordance with the terms and conditions of the Merger Agreement.
Immediately following the Merger, the Company will be the surviving corporation
in the Merger, wholly owned by Parent.
     D. The board of directors of the Company has (i) determined that the
transactions contemplated by this Agreement and the Merger Agreement are fair
to, and in the best interests of, the Company and its stockholders, (ii) has
approved and adopted this Agreement and the Merger Agreement and the
Transactions (as defined herein) contemplated hereby and thereby and (iii) has
recommended the approval and adoption of the Merger Agreement and the Merger by
the stockholders of the Company.
     E. Concurrently with the execution of this Agreement, each of the Sellers
has executed a written consent approving the adoption of the Merger Agreement
and the consummation of the Merger and the other Transactions contemplated
therein (the “Stockholder Consent”).
AGREEMENT:
     NOW, THEREFORE, in consideration of the premises and the mutual promises
herein made, and of the representations, warranties, and covenants contained
herein, the receipt and sufficiency of which are hereby acknowledged, the
parties hereto hereby agree as follows:
ARTICLE I.
DEFINITIONS
     “2009 Financial Statements” means the audited consolidated balance sheets
of the Acquired Entities as of December 31, 2009, audited consolidated
statements of income, changes

 

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in stockholders’ equity and cash flows for the Acquired Entities for the fiscal
year ended December 31, 2009, including the notes thereto, with the report
thereon of Singerlewak LLP independent certified public accountants, all as
filed with the SEC as part of the Company’s Annual Report on Form 10-K for the
fiscal year ended December 31, 2009.
     “Acquired Entities” means the Company and each of the Company Subsidiaries.
     “Action” means any action, appeal, petition, plea, charge, complaint,
claim, suit, demand, litigation, arbitration, mediation, hearing, inquiry,
investigation or similar event, occurrence, or proceeding.
     “Adjusted Current Assets” means the net book value of all of the assets of
the Acquired Entities as of 12:01 a.m. (PST) on the Equity Closing Date that
would be classified as “current assets” under GAAP, the net book value of which
shall be determined using the same accounting methods, policies, practices,
principles and procedures with consistent classifications that were used in the
preparation of the 2009 Financial Statements which assets shall include, but not
be limited to, the following: (i) cash (including certificates of deposit) and
cash equivalents (net of any restricted cash), (ii) trade accounts receivable
(net of doubtful accounts); (iii) prepaids, (iv) inventory and (v) other current
assets.
     “Adjusted Current Liabilities” means all of the liabilities of the Acquired
Entities as of 12:01 a.m. (PST) on the Equity Closing Date that would be
classified as “current liabilities” under GAAP, the net book value of which
shall be determined using the same accounting methods, policies, practices,
principles and procedures with consistent classifications that were used in the
preparation of the 2009 Financial Statements, which liabilities shall include,
but not be limited to, the following: (i) accounts payable and other accrued
liabilities; (ii) accrued payroll, accrued vacation and other compensation
expenses (including flexible time off (FTO), bonuses (other than those set forth
on Schedule D, flexible spending accounts (FSA/DECAP), 401(k) withholding,
health insurance reserve, and current payroll tax obligations), (iii) accrued
taxes (including, but not limited to, income, sales and property taxes),
(iv) all Severance Obligations in excess of $2,800,000, (v) the Dispute Letter
Accrual, and (vi) accrued expenses and other current liabilities.
Notwithstanding the foregoing, Adjusted Current Liabilities shall not include
(w) the current portion of any Debt of the Acquired Entities, (x) any accrued
and unpaid interest and any other accrued payment obligations with respect to
Debt included in Company Debt, (y) the Closing Costs, and (z) the Information
Statement Fees.
     “Adjusted Net Working Capital” means Adjusted Current Assets minus Adjusted
Current Liabilities. Attached hereto as Exhibit A is a sample computation of
Adjusted Net Working Capital.
     “Affiliate” or “Affiliated” with respect to any specified Person, means a
Person that, directly or indirectly, through one or more intermediaries,
controls or is controlled by, or is under common control with, such specified
Person.
     “Aggregate Transaction Consideration” means (i) $41,250,000, minus (ii) the
Company Debt, minus (iii) all Closing Costs in excess of $2,000,000, minus
(iv) the Purchase Price Adjustment (if any).

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     “Audit” includes any audit, assessment of Taxes, reassessment of Taxes or
examination by any taxing authority of any Acquired Entity or any related
judicial or administrative proceedings or appeal of such proceedings.
     “Balance Sheet Date” means December 31, 2009.
     “Breach” means (i) any breach, inaccuracy, failure to perform, failure to
comply, conflict with, failure to notify when there is an obligation to provide
notice, default, or violation or (ii) any other act, omission, event, occurrence
or condition the existence of which would (A) permit any Person to accelerate
any obligation or terminate, cancel, or modify any right or obligation or
(B) require the payment of money or other consideration.
     “Business Day” means a day on which banks are ordinarily open for
transaction of normal banking business in Los Angeles, California.
     “Closing Costs” means the sum of (i) the dollar amount of all out-of-pocket
costs, fees and expenses of investment bankers, financial advisors, legal
counsel and accountants incurred or payable by the Acquired Entities in
connection with the negotiation, execution and consummation of the Transactions
through the Equity Closing, plus (ii) the management bonuses set forth on
Schedule D hereto, plus (iii) fifty percent (50%) of the premium for the D&O
Tail Policy. For clarification purposes, if any such fees and expenses incurred
through the Equity Closing are contingent or payable only upon the consummation
of the Merger, such expenses will constitute Closing Costs hereunder
notwithstanding that such fees or expenses may not be accrued under GAAP until
the Merger Closing. Closing Costs shall not include the Information Statement
Fees.
     “Code” means the Internal Revenue Code of 1986, as amended.
     “Commercially Reasonable Best Efforts” means the efforts, time and costs
that a prudent Person desirous of achieving a result would use, expend, or incur
in similar circumstances in an effort to achieve such result as expeditiously as
possible subject to then existing commercial realities.
     “Commitment” means (i) options, warrants, convertible securities,
exchangeable securities, subscription rights, conversion rights, exchange
rights, or other Contracts that could require a Person to issue any of its
Equity Interests or sell any Equity Interests it owns in another Person,
(ii) any other securities convertible into, exchangeable or exercisable for, or
representing the right to subscribe for any Equity Interests of a Person or
owned by a Person, (iii) statutory preemptive rights or preemptive rights
granted under a Person’s Organizational Documents, and (iv) stock appreciation
rights, phantom stock, profit participation, or other similar rights with
respect to a Person.
     “Company Common Stock” means the common stock, par value $0.0001 per share,
of the Company.
     “Company Debt” means the dollar amount of all Debt of the Acquired Entities
outstanding as of the Equity Closing Date, which shall be set forth on the
Closing Statement prepared pursuant to Section 2.3 hereof, including all accrued
and unpaid interest relating thereto

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as of the Equity Closing Date, and any accrued late fees or other payment
obligations with respect thereto and any and all penalties, premiums, or other
breakage costs incurred as a result of payment of the Company Debt on the Equity
Closing Date; provided that the Disputed Earn-Out Notes shall not be deemed
Company Debt for purposes of this Agreement.
     “Company Option” means an option, warrant or other right to purchase shares
of Company Common Stock.
     “Company Subsidiaries” means each of the direct or indirect Subsidiaries of
the Company as set forth on Section 5.6 of the Company Disclosure Schedule.
     “Consent” means any consent, approval, notification, waiver, amendment or
other similar action.
     “Contract” means any contract, agreement, arrangement, commitment, letter
of intent, memorandum of understanding, heads of agreement, promise, obligation,
right, instrument, document, or other similar understanding, whether written or
oral.
     “DGCL” means the General Corporation Law of the State of Delaware as in
effect as of the date hereof.
     “Damages” means all damages, losses, Liabilities, penalties, fines and
expenses actually incurred and paid (including reasonable fees and expenses of
outside attorneys) and Taxes with respect to the foregoing, but in any case
excluding consequential, incidental and punitive damages, losses, lost profits,
and Liabilities.
     “Debt” means indebtedness for borrowed money, including any bank debt or
notes payable (including current portion), capitalized lease obligations, the
deferred purchase price for assets or business acquired (including, without
limitation, the maximum dollar amount due and payable in connection with any
earn-out, escrow, holdback or contingent payment).
     “Deficit Working Capital” means the amount, if any, by which the Adjusted
Net Working Capital of the Company at the Equity Closing is less than the Target
Working Capital.
     “Disputed Earn-Out Notes” means those two (2) Earn-Out Promissory Notes,
dated December 31, 2006, each in the principal amount of $150,000 issued to
Douglas E. Tomblin, DVM and Thomas J. Bernhard, DVM, respectively, that are the
subject of that certain litigation entitled Tomblin vs. XLNT Veterinary Care,
Inc., etc., et. al, Case #37-2009-00067537 (San Diego Superior Court).
     “Encumbrance” means any chose, encumbrance, security interest, lien,
easement, encroachment, covenant, condition, preemptive purchase right or
option, adverse claim or restriction.
     “Environmental, Health, and Safety Requirements” means all Laws concerning
or relating to public health and safety, worker/occupational health and safety,
and pollution or protection of the environment, including those relating to the
presence, use, manufacturing, refining, production, generation, handling,
transportation, treatment, recycling, transfer, storage,

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disposal, distribution, importing, labeling, testing, processing, discharge,
release, threatened release, control, or other action or failure to act
involving cleanup of any hazardous materials, substances or wastes, chemical
substances or mixtures, pesticides, pollutants, contaminants, toxic chemicals,
petroleum products or byproducts, asbestos, polychlorinated biphenyls, noise, or
radiation, each as amended and as now in effect.
     “Equity Interest” means (i) with respect to a corporation, any and all
shares of capital stock, (ii) with respect to a partnership, limited liability
company, trust or similar Person, any and all units, interests or other
partnership/limited liability company interests, and (iii) any other direct
equity ownership or participation in a Person.
     “ERISA” means the Employee Retirement Income Security Act of 1974, as
amended.
     “Escrowed Shares” means those shares of Company Common Stock subject to
that certain Stock Escrow Agreement, dated as of March 22, 2006, by and among
Echo Healthcare Acquisition Corp., the Corporate Stock Transfer, Inc., and those
persons listed on the signature pages thereto and listed on Schedule F attached
hereto.
     “Excess Closing Costs” means the amount, if any, by which the Closing Costs
exceed $2,000,000.
     “Exchange Act” shall mean the Securities Exchange Act of 1934, as amended.
     “Expiration Date” means September 30, 2010.
     “Financial Statements” means audited consolidated balance sheets of the
Acquired Entities as of December 31, 2009 and 2008 and audited consolidated
statements of income, changes in stockholders’ equity and cash flows for the
Acquired Entities for the fiscal years ended December 31, 2009 and 2008,
including the notes thereto, together with the report thereon of Singerlewak LLP
independent certified public accountants.
     “GAAP” means United States generally accepted accounting principles as in
effect as of the date hereof.
     “Governmental Body” means any legislature, agency, bureau, department,
commission, court, political subdivision, tribunal or other instrumentality of
government whether local, state, federal or foreign.
     “Holdback Amount” means cash in the aggregate amount of $750,000.
     “Indemnified Parties” means, individually and as a group, the Parent
Indemnified Parties and Seller Indemnified Parties.
     “Indemnitor” means any Party having any Liability to any Indemnified Party
under this Agreement.
     “Information Statement Fees” means the reasonable fees of outside legal
counsel to the Special Committee of the Board of Directors of the Company
incurred in connection with the

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preparation and filing of the Information Statement, as well as responding to
any issues, questions and inquiries raised or initiated by the SEC through the
date that the Information Statement is mailed to the Company’s shareholders in
an amount estimated to be $150,000 and which shall not exceed $200,000.
     “Intellectual Property” means (i) any and all patents, copyrights,
trademarks, trade names, service marks, service names, domain names, know-how,
processes, trade secrets and inventions, and (ii) any and all rights, licenses,
liens, security interests, charges, encumbrances, equities, and other claims
that any Person may have to claim ownership, authorship or invention, to use, to
object to or prevent the modification of, to withdraw from circulation, or
control the publication or distribution of any trademarks, service marks,
patents, copyrights, or trade secrets.
     “In-the-Money Company Option” means each Company Option that has an
exercise price less than the quotient obtained by dividing (i) the Aggregate
Transaction Consideration by (ii) the sum of (x) the number of shares of Company
Common Stock issued and outstanding immediately prior to the Equity Closing
(excluding any shares of Company Common Stock held as treasury shares), and
(y) the number of shares of Company Common Stock issuable upon exercise of all
Company Options issued and outstanding immediately prior to the Equity Closing
determined pursuant to an iterative process beginning with all Company Options
issued and outstanding immediately prior to the Equity Closing and continuing
through successive iterations that exclude those Company Options with the then
highest exercise price per share that is greater than the result obtained
pursuant to clauses (i) and (ii) above in the immediately preceding iteration
until such time as the exercise price per share with respect to each remaining
outstanding Company Options is less than the result obtained pursuant to clauses
(i) and (ii) above in the immediately preceding iteration.
     “IRS” means the United States Internal Revenue Service.
     “Knowledge” — an individual will be deemed to have “Knowledge” of a
particular fact or other matter if such individual is actually aware of such
fact or other matter. With respect to the Company “Knowledge” means the
Knowledge of Gene Burleson, Steve Ettinger, David Reed, George Villasana and
Harry Zimmerman.
     “Law” means any applicable statute, rule, regulation, administrative
requirement, code or ordinance of any Governmental Body, each as amended and now
in effect.
     “Liability” or “Liable” means any liability or obligation, whether known or
unknown, asserted or unasserted, direct or indirect, matured or unmatured,
absolute or contingent, accrued or unaccrued, latent or patent, liquidated or
unliquidated, or due or to become due.
     “Material Adverse Change (or Effect)” means any change or effect (any such
item, an “Effect”) on the business, financial condition or results of operations
of a Person which Effect, individually or in the aggregate, is or could
reasonably be expected to be materially adverse to such business, financial
condition or results of operations or on the ability of such Person to
consummate the Equity Purchase, the Merger and the other Transactions without
material delay; provided, however, that in no event shall any of the following
be deemed, either alone or in combination, to constitute, nor shall any of the
following be taken into account in determining

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whether there has been a Material Adverse Change (or Effect): (i) any Effect
that results from a delisting of the Company Common Stock from the Nasdaq Stock
Market, (ii) any Effect that results from changes in general economic conditions
or changes in securities markets in general, including any changes in interest
rates, (iii) any Effect that results from general changes in the veterinary
industry, (iv) any Effect related to the public announcement or the pendency or
consummation of the Transactions, (v) any Effect that results from any action
taken at the specific request of the other Party to this Agreement, (vi) any
Effect that results from natural disasters, acts of war, sabotage or terrorism,
military actions or the escalation thereof, or (vii) any Effect resulting from
any actual or proposed change in applicable law or regulation applicable to a
Party or any of its Subsidiaries; except in the case of clauses (ii), (iii),
(vi) and (vii), for any Effect that has a significantly disproportionate adverse
impact on such Party and its Subsidiaries, taken as a whole, compared to other
companies of similar size operating in the principal industries in which such
Party and its Subsidiaries operate or (b) when used with reference to the
Company, Sellers, Parent or Buyer, as the case may be, any Effect that is
materially adverse to the ability of the Company, Sellers, Parent or Buyer to
perform their respective obligations under this Agreement.
     “Merger Closing” means the date of the closing of the Merger in accordance
with the terms of the Merger Agreement.
     “Ordinary Course of Business” means the ordinary course of business
consistent with past custom and practice (including with respect to quantity,
quality and frequency) of the relevant Person and its Subsidiaries.
     “Organizational Documents” means the articles of incorporation, certificate
of incorporation, charter, bylaws, articles of formation, regulations, operating
agreement, certificate of limited partnership, partnership agreement, and all
other similar documents, instruments or certificates executed, adopted, or filed
in connection with the creation, formation, or organization of a Person,
including any amendments thereto.
     “Parent Indemnified Parties” means Parent, Buyer, and the Company
(post-Equity Closing), and their officers, directors, managers, employees,
agents, and Representatives.
     “Parties” means the Parent, Buyer, the Company and the Sellers.
     “Permit” means any permit, license, certificate, approval, consent, notice,
waiver, franchise, registration, filing, accreditation, entitlement, or other
similar authorization required by any Law or Governmental Body.
     “Permitted Encumbrances” means (i) Encumbrances disclosed in Schedule B to
the Company Disclosure Schedule, (ii) liens for Taxes, assessments, governmental
charges or levies or mechanics’ and other statutory liens which are not yet
delinquent or can be paid without penalty or are being contested in good faith
and by appropriate proceedings in respect thereof and for which an appropriate
reserve has been established in accordance with GAAP, (iii) imperfections of
title which are immaterial in amount relative to the property affected and which
do not materially interfere with the present use of the property subject thereto
or affected thereby, and (iv) restrictions on transfer generally arising under
federal and state securities Laws.

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     “Per Option Purchase Price” means (i) with respect to each In-the-Money
Company Option, for each share of Company Common Stock issuable upon exercise of
such In-the-Money Company Option, the Per Share Purchase Price less the per
share exercise price payable upon exercise of such In-the-Money Company Option
and (ii) with respect to each Company Option that is not an In-the-Money Company
Option, $0.0001 for all such Company Options held by a Seller.
     “Per Share Holdback Amount” means (i) $750,000 divided by (ii) the
aggregate number of Seller Shares held by the Sellers immediately prior to the
Equity Closing as reflected on Schedule A hereto.
     “Per Share Purchase Price” means (i) the Aggregate Transaction
Consideration plus the aggregate consideration paid or payable upon exercise of
all issued and outstanding In-the-Money Company Options, divided by (ii) the sum
of the number of shares of Company Common Stock issued and outstanding
immediately prior to the Equity Closing plus the aggregate number of shares of
Company Common Stock issuable upon exercise of all In-the-Money Company Options
issued and outstanding immediately prior to the Equity Closing.
     “Person” means any individual, partnership, limited liability company,
corporation, association, joint stock company, trust, entity, joint venture,
labor organization, unincorporated organization, or Governmental Body.
     “Purchase Price Adjustment” means the amount of the Deficit Working
Capital, if any.
     “Representatives” means Persons acting on behalf of another Person,
including such Person’s officers, directors, employees, representatives, agents,
independent accountants, investment bankers and counsel.
     “SEC” means the United States Securities and Exchange Commission.
     “Securities Act” means the Securities Act of 1933, as amended.
     “Seller Shares” means shares of Company Common Stock owned by a Seller,
other than the Escrowed Shares.
     “Seller Options” means Company Options owned by a Seller.
     “Seller Indemnified Parties” means the Sellers and their respective
officers, directors, managers, employees, agents, and Representatives.
     “Severance Obligations” means all severance and other similar payments
(including without limitation, COBRA benefits), paid or payable to employees of
the Acquired Entities in connection with the consummation of the Transactions,
and including all Taxes paid or payable relating thereto.
     “Special Committee” means the committee of the Company’s Board of Directors
that will be established immediately after the Equity Closing pursuant to
Section 7.2, the member or

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members of which will consist of each member of the Company’s Board of Directors
who is an Independent Director.
     “Subsidiary” means, with respect to any Person: (i) any corporation of
which more than ten percent (10%) of the total voting power of all classes of
the Equity Interests entitled (without regard to the occurrence of any
contingency) to vote in the election of directors is owned by such Person
directly or through one or more other Subsidiaries of such Person and (ii) any
Person other than a corporation of which at least ten percent (10%) of the
Equity Interests (however designated) entitled (without regard to the occurrence
of any contingency) to vote in the election of the governing body, partners,
managers or others that will control the management of such entity are owned by
such Person directly or through one or more other Subsidiaries of such Person.
     “Target Working Capital” means negative $750,000.
     “Tax” means (i) any federal, state, local, or foreign income, gross
receipts, license, payroll, employment, excise, severance, stamp, occupation,
premium, windfall profits, environmental, customs, ad valorem, duties, capital
stock, franchise, profits, withholding, social security, unemployment,
disability, real property, personal property, sales, use, transfer,
registration, value added, alternative or add-on minimum, estimated, or other
tax of any kind whatsoever, including any interest, penalty, or addition
thereto, whether disputed or not, including any obligations to indemnify or
otherwise assume or succeed to the Tax liability of any other Person, and
(ii) any obligations under any Contracts with respect to any Tax described in
clause (i) above.
     “Tax Return” means any return, form, declaration, report, claim for refund,
or information return or statement relating to Taxes required to be filed with
any Governmental Body, including any schedule or attachment thereto, and
including any amendment thereof.
     “Termination Date” means the date on which this Agreement is terminated
pursuant to Section 9.1.
     “Threatened” means a (i) written demand or statement has been made or a
written notice has been given, or (ii) an oral demand or statement made
subsequent to January 1, 2009, asserting a claim for damages, losses, and/or
expenses involving an amount in excess of $50,000, as to which such oral demand
or statement, the underlying issues providing the basis for such claim have not
been fully and finally resolved.
     “Transaction Documents” means this Agreement, the Merger Agreement, the
Limited Releases, the Proxies and each of the other documents, instruments and
agreements to be executed, delivered, and performed in connection herewith and
therewith, together with any exhibits or schedules constituting a part thereof.
     “Transactions” means all of the transactions contemplated by the
Transaction Documents, including: (i) the sale of the Seller Shares and Seller
Options to Buyer and Buyer’s delivery of the Per Share Purchase Price therefor;
(ii) the Merger; (iii) the execution, delivery, and performance of all of the
documents, instruments and agreements to be executed, delivered, and performed
in connection herewith and therewith; and (iv) the performance by Parent, Buyer,

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the Sellers and the Company of their respective covenants and obligations (pre-
and post-closing, as applicable) under the Transaction Documents.
     “Veterinary Hospitals” means the veterinary hospitals and clinics owned and
operated by the Acquired Entities.
     The following additional terms are defined in the sections of the Agreement
set forth across from such terms as set below:

      Defined Term   Location of Definition
 
   
Adjusted Holdback Amount
  Section 2.5(c)
Agreement
  Preamble
Acquisition Proposal
  Section 6.8(b)
Buyer
  Preamble
Closing Statement
  Section 2.3(a)
Company
  Preamble
Company Disclosure Schedule
  ARTICLE V
Company Plans
  Section 5.21(a)
Company SEC Documents
  Section 5.8(a)
Confidentiality Agreement
  Section 6.5(b)
Confidential Information
  Section 7.6(a)
Definitive Post Closing Statement
  Section 2.5(b)
Dispute Letter
  Section 5.19 of the Company Disclosure Schedule
Dispute Letter Accrual
  Section 5.19 of the Company Disclosure Schedule
D&O Tail Policy
  Section 7.5
Equity Closing
  Section 2.2
Equity Closing Date
  Section 2.2
Equity Purchase
  Section 2.1
ERISA Affiliate
  Section 5.21(e)
Facility Lease
  Section 5.16(c)
Indemnification Claim
  Section 10.4(a)
Independent Accountants
  Section 2.5(b)
Independent Directors
  Section 7.2
Information Statement
  Section 8.2(g)
Leased Real Estate
  Section 5.16(a)
Limited Releases
  Section 2.4(a)(viii)
Merger
  Recitals
Merger Agreement
  Recitals
Objection Notice
  Section 2.5(b)
Officer’s Certificate
  Section 10.8(a)
Owned Real Estate
  Section 5.16(a)
Parent
  Preamble
Payment Statement
  Section 2.3(b)
Prepayment Notes
  Section 8.2(e)(i)

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      Defined Term   Location of Definition
 
   
Post Closing Statement
  Section 2.5(a)
Preferred Stock
  Section 5.5
Proxy
  Section 2.4(a)(ix)
Redemption Notices
  Section 6.2(d)
Sellers’ Representative
  Section 11.1(a)
Sellers
  Preamble
Sellers Disclosure Schedule
  ARTICLE IV
Stockholder Consent
  Recitals
Warrant Shares
  Section 6.11

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ARTICLE II.
Purchase and Sale of Equity Interests
     Section 2.1. Purchase and Sale of Equity Interests. On the terms and
subject to the conditions set forth in this Agreement, Buyer agrees to purchase
from the Sellers, and the Sellers agree to sell to Buyer, all of the Seller
Shares for the Per Share Purchase Price and all of the Seller Options for the
Per Option Purchase Price (the “Equity Purchase”).
     Section 2.2. Equity Closing. The closing of the Equity Purchase (the
“Equity Closing”) will take place at the offices of Akin Gump Strauss Hauer &
Feld LLP, Century Tower Plaza, 2029 Century Park East, Suite 2400, Los Angeles,
California, commencing at 9:00 a.m., local time, on the 1st day of the month
following the satisfaction or waiver of all conditions to the obligations of the
Parties to consummate the Equity Purchase (other than conditions with respect to
actions the respective Parties will satisfy at the Equity Closing itself), or
such other date (following the satisfaction or waiver of all conditions to the
obligations of the Parties to consummate the Equity Purchase) as Parent may
determine in its sole discretion, or such other date as the Parties may mutually
determine (the “Equity Closing Date”).
     Section 2.3. Closing Statement.
               (a) At least ten (10) days prior to the expected Equity Closing
Date, the Company shall prepare and deliver to Parent a written statement, dated
as of the date of delivery, setting forth the Company’s good faith estimate of
the Company Debt, the Closing Costs, and the Purchase Price Adjustment as of the
Equity Closing Date, prepared in reasonable detail as requested by Parent (the
“Closing Statement”) in the form of Exhibit B. The Closing Statement shall be
subject to review by Parent and Parent shall give notice of any exceptions
regarding the Closing Statement no later than two (2) days prior to the Equity
Closing Date and in the absence of any such notice the Closing Statement as
delivered by the Company shall be conclusive and binding upon the Parties for
purposes of the Equity Closing. Parent and the Company shall negotiate in good
faith to resolve any exceptions Parent may have to the Closing Statement, but in
the absence of such agreement the Closing Statement, as modified by Parent,
shall be conclusive and binding upon the Parties for purposes of the Equity
Closing unless the difference between the Closing Statement submitted by the
Company and the Closing Statement as modified by Parent is greater than $25,000,
in which case the mid-point between the two positions shall be used for purposes
of the Equity Closing. In reviewing the Closing Statement, Parent shall have the
right to discuss such matters with the Company and its Representatives and to
review the work papers, schedules, memoranda, and other documents, including
third party payoff schedules the Company and its Representatives prepared or
reviewed in determining each of the items set forth on the Closing Statement.
               (b) At least five (5) days prior to the expected Equity Closing
Date, the Company shall prepare and deliver to Parent a written statement, dated
as of the date of delivery, setting forth the Company’s good faith estimate,
based on the Closing Statement used for purposes of the Equity Closing, of the
amount to be paid to each Seller on the Equity Closing Date pursuant to Section
2.4(b)(i), prepared in reasonable detail as requested by Parent (the “Payment
Statement”). The Payment Statement shall be subject to review by Parent and
Parent shall give notice of any exceptions regarding the Payment Statement no
later than two (2) days

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prior to the Equity Closing Date and in the absence of any such notice the
Payment Statement as delivered by the Company shall be conclusive and binding
upon the Parties for purposes of the Equity Closing. Parent and the Company
shall negotiate in good faith to resolve any exceptions Parent may have to the
Payment Statement but, in the absence of such agreement, the Payment Statement
as modified by Parent shall be conclusive and binding upon the Parties for
purposes of the Equity Closing.
     Section 2.4. Payments and Deliveries at the Equity Closing. On the Equity
Closing Date:
               (a) The Sellers and the Company will deliver to Parent and Buyer:
                    (i) (A) Certificates, stock powers, or other appropriate
instruments of transfer representing the Seller Shares, duly endorsed (or
accompanied by duly executed assignments) for transfer to Buyer, and an
agreement executed by the Company and each Seller holding Seller Options
cancelling the Seller Options held by such Seller; and (B) a stock certificate
issued in the name of Buyer representing the Seller Shares, including the
Warrant Shares.
                    (ii) A certificate, substantially in the form of Exhibit C,
duly executed by each Seller, as to whether each condition to be satisfied by
each Seller specified in Section 8.1 and Section 8.2 has been satisfied as of
the Equity Closing Date.
                    (iii) An officer’s certificate, substantially in the form of
Exhibit D, duly executed on the Company’s behalf, as to whether each condition
to be satisfied by the Company specified in Section 8.1 and Section 8.2 has been
satisfied as of the Equity Closing Date.
                    (iv) A secretary’s certificate, substantially in the form of
Exhibit E, duly executed on the Company’s behalf.
                    (v) A certification, substantially in the form of Exhibit F,
duly executed on the Company’s behalf, that satisfies the requirements of
Treasury Regulation Section 1.1445-2(c)(3) and any similar certifications
required under state law to avoid state law withholding requirements for foreign
entities.
                    (vi) A certification (in form and substance reasonably
satisfactory to Parent) that satisfies the requirements of Treasury
Regulation Section 1.1445-2(b)(2), duly executed by each of the Sellers.
                    (vii) Letters of resignation, substantially in the form of
Exhibit G, duly executed by each officer and director of the Acquired Entities
(other than any person to be designated as an Independent Director of the
Company subsequent to the Equity Closing Date), such resignation to be effective
as of the Equity Closing Date.
                    (viii) A limited release (“Limited Release”) in the form of
Exhibit H, duly executed by each of the Sellers.

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                    (ix) A proxy (“Proxy”) in the form of Exhibit I, duly
executed by each of the Sellers listed on Schedule C, relating to the Escrowed
Shares owned of record by each such Seller.
                    (x) (A) Except as provided in Section 2.4(a)(x) of the
Company Disclosure Schedule, releases executed by the holder or holders of
Encumbrances (other than Permitted Encumbrances) on any assets of the Acquired
Entities irrevocably releasing such Encumbrances and filed copies of any
appropriate Uniform Commercial Code termination statements and/or other
applicable release documents with respect to such Encumbrances, (B) with respect
to all Company Debt (other than the Disputed Earn-Out Notes), payoff letters
from the holder or holders of such Company Debt evidencing such holder’s or
holders’ agreement that such Company Debt would be fully satisfied and, to the
extent such Debt is secured Debt, to fully release any Encumbrances secured
pursuant thereto (either by authorizing the filing of appropriate Uniform
Commercial Code termination statements and/or other appropriate release
documents or agreeing to file such statements and/or documents), if such holder
or holders receives funds in the specific amount set forth in such letters and
(C) with respect to any other Debt outstanding as of the Equity Closing Date,
other than Company Debt or the Disputed Earn-Out Notes, the existence or amount
of which is disputed by the Company, payoff letters from the holder or holders
of such Debt evidencing such holder’s or holders’ agreement that such Debt would
be fully satisfied and, to the extent such Debt is secured Debt, to fully
release any Encumbrances secured pursuant thereto (either by authorizing the
filing of appropriate Uniform Commercial Code termination statements and/or
other appropriate release documents or agreeing to file such statements and/or
documents) if such holder or holders receive funds in the amounts specified in
such letters, in each instance on terms reasonably satisfactory to Parent and
Buyer.
               (b) Parent will deliver:
                    (i) (A) To each Seller the Per Share Purchase Price less the
Per Share Holdback Amount for each Seller Share owned by such Seller, and (B) to
each Seller, the Per Option Purchase Price in exchange for the cancellation of
each Seller Option owned by such Seller. Parent shall make all payments pursuant
to this Section 2.4(b)(i) by check, unless the aggregate amount payable to a
Seller is in excess of $100,000, and such Seller not later than two (2) Business
Days prior to the Equity Closing Date delivers to Parent a request for payment
via wire transfer of immediately available funds together with all necessary
wire transfer instructions.
                    (ii) To the Sellers’ and the Company, a secretary’s
certificate, substantially in the form of Exhibit J, duly executed on Parent’s
behalf.
               (c) Buyer shall pay the amount of Company Debt, reflected on the
Closing Statement, for which the Company has delivered, to Parent and Buyer, a
payoff letter executed by the holder of such Company Debt pursuant to
Section 2.4(a)(x).
               (d) The Parties shall also deliver to each other any agreements,
closing certificates and other documents and instruments required to be
delivered pursuant to this Agreement.

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     Section 2.5. Post-Closing Adjustments to the Aggregate Transaction
Consideration.
               (a) Delivery of Post Closing Statement. Parent will prepare and
deliver to the Sellers’ Representative a statement (the “Post Closing
Statement”) setting forth the computation of (i) Company Debt outstanding as of
the Equity Closing Date, (ii) Closing Costs, (iii) Purchase Price Adjustment as
of the Equity Closing Date, and (iv) the Severance Obligations, within (x) sixty
(60) days following the Equity Closing Date if the Equity Closing Date occurs on
the first day of a month, and (y) sixty (60) days following the last day of the
month in which the Equity Closing Date occurs if the Equity Closing Date occurs
on any day other than the first day of the month.
               (b) Objection. In reviewing the Post Closing Statement, the
Sellers’ Representative shall have the right to discuss such matters with Parent
and to review the work papers, schedules, memoranda, and other documents Parent
prepared or caused to be prepared, or reviewed in determining each of the items
set forth on the Post Closing Statement. Unless the Sellers’ Representative
delivers to Parent, within ten (10) Business Days of receipt of the Post Closing
Statement, written notice (an “Objection Notice”) describing its exceptions to
the Post Closing Statement, the Post Closing Statement will be conclusive and
binding on the Parties (the “Definitive Post Closing Statement”). If the
Sellers’ Representative submits an Objection Notice within the period set forth
herein, then (i) for ten (10) Business Days after receipt of the Objection
Notice, Parent and the Sellers’ Representative shall use their Commercially
Reasonable Best Efforts to agree on the Definitive Post Closing Statement, and
(ii) lacking such agreement, the Post Closing Statement will be referred to
Deloitte & Touche, LLP (the “Independent Accountants”), to resolve the issues in
dispute. The Independent Accountants’ services and authority to make a
determination shall be limited in scope to the disputed issues and the amounts
identified in the Objection Notice. The Independent Accountants shall apply the
provisions of this Section 2.5 to the disputed issues, and shall have no
authority or power to alter, modify, amend, add to or subtract from any term or
provision of this Agreement. The Parties shall instruct the Independent
Accountants to render its decision within thirty (30) days of the engagement,
which determination shall be set forth in a written statement delivered to
Parent and the Sellers’ Representative and shall be conclusive and binding upon
the parties for all purposes under this Agreement. The Independent Accountants
shall allocate its costs and expenses between Parent and the Sellers based upon
the percentage of the disputed amounts submitted to the Independent Accountants
that is ultimately awarded to the Sellers, on the one hand, or Parent, on the
other hand, such that the Sellers shall bear a percentage of such costs and
expenses equal to the percentage of the disputed amount awarded to Parent (with
any costs and expenses payable by the Sellers to be retained by Parent from the
Holdback Amount) and Parent shall bear a percentage of such costs and expenses
equal to the percentage of the disputed amount awarded to the Sellers. The
determination of the Independent Accountants shall be final, binding and
conclusive for all purposes hereunder.
               (c) Payment of Adjustment. Within five (5) Business Days after
delivery of the Definitive Post Closing Statement:
                    (i) Subject to the provisions of Section 2.5(b) hereof,
Parent shall deduct from the Holdback Amount and retain for its own account the
aggregate of (x) the

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amount, if any, by which the Company Debt reflected on the Definitive Post
Closing Statement exceeded the Company Debt included on the Closing Statement,
(y) the amount, if any, by which the Excess Closing Costs reflected on the
Definitive Post Closing Statement exceeded the Excess Closing Costs included on
the Closing Statement and (z) the amount, if any, by which the Purchase Price
Adjustment reflected on the Definitive Post Closing Statement exceeded the
Purchase Price Adjustment included on the Closing Statement; and
                    (ii) Parent shall increase the Holdback Amount by the
aggregate of (y) the amount, if any, by which the Excess Closing Costs included
on the Closing Statement exceeded the Excess Closing Costs reflected on the
Definitive Post Closing Statement, and (z) the amount, if any, by which the
Purchase Price Adjustment included on the Closing Statement exceeded the
Purchase Price Adjustment reflected on the Definitive Post Closing Statement.
Any positive and negative adjustments described in clauses (i) and (ii) above
shall be netted against one another to result in a single deduction, or
addition, as the case may be, to the Holdback Amount. The Holdback Amount as
adjusted after the application of the foregoing provisions is hereinafter
referred to as the “Adjusted Holdback Amount”.
ARTICLE III.
REPRESENTATIONS AND WARRANTIES
OF PARENT AND BUYER
     Parent and Buyer represent and warrant to the Sellers as follows:
     Section 3.1. Entity Status. Each of Parent and Buyer is an entity duly
created, formed or organized, validly existing and in good standing under the
Laws of the jurisdiction of its creation, formation or organization.
     Section 3.2. Power and Authority; Enforceability. Parent and Buyer have the
corporate power and authority to execute and deliver this Agreement and each
other Transaction Document to which they are a party, and to perform and
consummate the Transactions. Parent and Buyer have taken all action necessary to
authorize the execution and delivery of each other Transaction Document to which
they are a party, the performance of Parent’s and Buyer’s obligations
thereunder, and the consummation of the Transactions. This Agreement and each
other Transaction Document has been duly authorized, executed and delivered by
Parent or Buyer, if Parent or Buyer is a party thereto, and constitutes the
legal, valid, and binding obligation of Parent or Buyer, if a party thereto,
enforceable against Parent or Buyer, if a party thereto, in accordance with its
terms, in each case subject to applicable bankruptcy, insolvency and similar
laws affecting the enforceability of creditors’ rights generally, general
principles of equity, the discretion of courts in granting equitable remedies
and matters of public policy.

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     Section 3.3. No Violation. The execution and the delivery of the
Transaction Documents to which Parent or Buyer is a party and the performance
and consummation of the Transactions by Parent or Buyer do not and will not
(with or without the passage of time or the giving of notice) (i) Breach any Law
to which Parent or Buyer is subject or any provision of Parent’s or Buyer’s
Organizational Documents, (ii) Breach in any material respect any material
Contract to which Parent or Buyer is a party or by which Parent or Buyer is
bound, (iii) require any Consent, except (A) any SEC and other filings required
to be made by Parent or Buyer and (B) any notifications or filings to any
relevant state or federal regulatory agencies, (iv) Breach any resolution
adopted by the board of directors or the stockholders of Parent or Buyer, or
(v) give any Governmental Body or other Person the right to challenge any of the
Transactions or to exercise any remedy or obtain any relief under any Law to
which Parent or Buyer may be subject.
     Section 3.4. Consents. No Consent of or filing with any Governmental Body
or other Person is required in connection with the execution or performance of
this Agreement or the other Transaction Documents by Parent or Buyer or the
consummation by Parent or Buyer of the Transactions except for such Consents or
filings which have been obtained as of the date hereof or as to which the
failure to obtain or make would not adversely affect Parent’s or Buyer’s ability
to consummate the Transactions in any material respect.
     Section 3.5. Broker Fees. Parent has no Liability to pay any compensation
to any broker, finder, or agent with respect to the Transactions for which the
Company could become directly or indirectly Liable.
     Section 3.6. Sufficient Funds. As of (i) the date hereof, (ii) the Equity
Closing Date, and (iii) the Merger Closing Date, Buyer has and will have
sufficient funds to consummate the Transactions.
ARTICLE IV.
REPRESENTATIONS AND WARRANTIES
OF THE SELLERS
     Except as is provided in the disclosure letter delivered at or prior to the
execution of this Agreement by the Sellers (the “Sellers Disclosure Schedule”),
each Seller, solely as to itself, represents and warrants, severally and not
jointly, to Parent and Buyer as follows:
     Section 4.1. Status of Certain Sellers. Each Seller that is an entity is
duly created, formed or organized, validly existing and in good standing under
the laws of the jurisdiction of its creation, formation or organization. There
is no pending or Threatened Action for the dissolution, liquidation, insolvency,
or rehabilitation of any Seller.
     Section 4.2. Power and Authority; Enforceability. Each Seller that is an
entity has the entity power and authority to execute and deliver this Agreement
and each other Transaction Document to which such Seller is a party, and to
perform and consummate the Transactions. Each Seller that is an individual has
the requisite competence and authority to execute and deliver this Agreement and
each other Transaction Document to which such Seller is a party, and to perform
and to consummate the Transactions. Each Seller has taken all action necessary
to

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authorize the execution and delivery of this Agreement and each other
Transaction Document to which it is a party, the performance of such Seller’s
obligations thereunder, and the consummation of the Transactions. This Agreement
and each other Transaction Document has been duly authorized, executed and
delivered by each Seller, if such Seller is a party thereto, and constitutes the
legal, valid and binding obligation of each Seller that is a party thereto,
enforceable against such Seller in accordance with its terms, in each case
subject to applicable bankruptcy, insolvency and similar laws affecting the
enforceability of creditors’ rights generally, general principles of equity, the
discretion of courts in granting equitable remedies and matters of public
policy.
     Section 4.3. No Violation. The execution and the delivery of the
Transaction Documents to which each Seller is a party and the performance and
consummation of the Transactions by each such Seller will not (i) Breach any Law
to which such Seller is subject, and in respect of any Seller that is an entity,
any provision of such Seller’s Organizational Documents, (ii) Breach in any
material respect any material Contract to which such Seller is a party or by
which such Seller is bound, (iii) require any Consent, except (A) any SEC and
other filings required to be made by such Seller, and (B) any notifications or
filings to any relevant state or federal regulatory agencies, (iv) give any
Governmental Body or other Person the right to challenge any of the Transactions
or to exercise any remedy or obtain any relief under any Law to which such
Seller may be subject, or (v) result in the imposition or creation of any
Encumbrance, other than restrictions on transfer generally arising under federal
and state securities Laws, upon or with respect to the Seller Shares or the
Seller Options.
     Section 4.4. Brokers’ Fees. The Sellers have no Liability to pay any
brokers’ or finders’ fee or any other commission or similar fee or other
compensation to any broker, finder, or agent with respect to the Transactions
for which Parent, Buyer or any Acquired Entity could become directly or
indirectly Liable.
     Section 4.5. Equity Interests; Seller Information. Each Seller holds of
record and beneficially owns the number of shares of Company Common Stock and
Company Options set forth next to such Seller’s name in Schedule A, free and
clear of any Encumbrances (other than any restrictions under the Securities Act
and state securities laws). With respect to each Seller, Schedule A also sets
forth the exercise price of each Company Option held by such Seller, the
address, state of residence, and federal tax identification number (or social
security number, as applicable) of such Seller as of the date hereof. No Seller
is a party to any (i) Contract that requires such Seller to sell, transfer, or
otherwise dispose of the shares of Company Common Stock or Company Options held
by such Seller (other than this Agreement) or (ii) except as set forth in
Section 4.5 of the Sellers Disclosure Schedule, other Contract with respect to
any Equity Interests of the Company. Except with respect to the Escrowed Shares,
at the Equity Closing, upon delivery by Parent to the Sellers of the Per Share
Purchase Price in accordance with Section 2.4(b)(i), each Seller will transfer
its entire right, title and interest in and to all shares of Company Common
Stock and Company Options held of record or beneficially owned by such Seller to
Buyer and Buyer shall acquire valid and marketable title to the Sellers’ Shares
owned by each Seller, free and clear of any Encumbrances (other than any
restrictions under the Securities Act and state securities laws).

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     Section 4.6. Litigation. No Seller is a party to, the subject of, or
Threatened to be made a party to or the subject of any Action, relating to, in
connection with, or challenging, any of the Transactions.
ARTICLE V.
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
CONCERNING THE ACQUIRED ENTITIES
     Except as is provided in the disclosure letter delivered at or prior to the
execution of this Agreement by the Company (the “Company Disclosure Schedule”),
the Company represents and warrants to Parent and Buyer as follows:
     Section 5.1. Corporate Status. Each Acquired Entity is an entity duly
created, formed or organized, validly existing, and in good standing under the
Laws of the jurisdiction of its creation, formation, or organization. Except as
set forth in Section 5.1 of the Company Disclosure Schedule, each Acquired
Entity is duly authorized to conduct its business and is in good standing under
the laws of each jurisdiction where such qualification is required. Each
Acquired Entity has the requisite power and authority necessary to own or lease
its properties and to carry on its businesses as currently conducted.
     Section 5.2. Power and Authority; Enforceability. The Company has the
corporate power and authority to execute and deliver this Agreement, the Merger
Agreement, and each other Transaction Document to which it is a party and to
perform and consummate the Merger and the Transactions. The Company has taken
all action necessary to authorize the execution and delivery of this Agreement,
the Merger Agreement and each other Transaction Document to which it is a party,
the performance of its obligations hereunder and thereunder, and the
consummation of the Transactions. Without limiting the generality of the
foregoing, the board of directors of the Company, at a meeting duly called and
held, unanimously adopted resolutions (a) determining that the Merger is fair
and in the best interests of the Company, the stockholders of the Company and
the holders of Company Options, (b) approving and declaring advisable this
Agreement, the Merger Agreement and the Transaction Documents to which the
Company is a party, the Merger and the Transactions, (c) directing that the
Merger Agreement and the Merger be submitted to the Company’s stockholders for
their adoption and approval, and (d) recommending that the Company’s
stockholders vote or provide a written consent in favor of the adoption of the
Merger Agreement and the approval of the Merger and the consummation of the
Transactions. In connection with obtaining the Stockholder Consent, the Company
did not, and did not request that any Person, engage in a solicitation (as such
term is defined in the Exchange Act) and the Company complied with all
applicable state Law relating to obtaining the Stockholder Consent. The
Stockholder Consent is the only vote or approval of the holders of any class or
series of capital stock of the Company and any Acquired Entity which is
necessary to adopt the Merger Agreement, and approve and consummate the Merger
and the Transactions. This Agreement, the Merger Agreement, and each other
Transaction Document to which the Company is a party has been duly authorized,
executed and delivered by the Company, and constitutes the legal, valid and
binding obligation of the Company, if a party thereto, and is enforceable
against the Company in accordance with its terms, in each case subject to
applicable bankruptcy, insolvency and similar laws affecting the enforceability
of creditors’ rights generally,

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general principles of equity, the discretion of courts in granting equitable
remedies and matters of public policy.
     Section 5.3. No Violation. The execution and the delivery by the Company of
this Agreement, the Merger Agreement, and the Transaction Documents to which the
Company is a party and the performance of the Company’s obligations thereunder,
and consummation of the Transactions by the Company will not (a) Breach any Law
to which any Acquired Entity is subject or any provision of the Organizational
Documents of any Acquired Entity, (b) Breach any Contract identified on
Section 5.18(a) of the Company Disclosure Schedule, or Permit listed on
Section 5.13(b) of the Company Disclosure Schedule, (c) other than as set forth
on Section 5.3 of the Company Disclosure Schedule, require any Consent,
(d) Breach any resolution adopted by the board of directors or the stockholders
of the Company, (e) give any Governmental Body or other Person the right to
challenge any of the Transactions or to exercise any remedy or obtain any relief
under any Law to which the Acquired Entities may be subject, or (f) result in
the imposition or creation of any Encumbrance upon or with respect to any of
assets of the Acquired Entities.
     Section 5.4. Brokers’ Fees. Except as set forth in Section 5.4 of the
Company Disclosure Schedule, the Acquired Entities do not have any Liability to
pay any brokers or finder’s fee or any other commission or similar fee or other
compensation to any broker, finder, or agent with respect to the Transactions
for which the Parent, Buyer or the Acquired Entities could become directly or
indirectly Liable.
     Section 5.5. Capitalization.
               (a) The authorized capital stock of the Company consists of
90,000,000 shares of Company Common Stock, par value $0.0001 per share, and
10,000,000 shares of the Company’s preferred stock, par value $0.0001 per share
(the “Preferred Stock”). As of the close of business on the date of this
Agreement, (i) 23,753,460 shares of Company Common Stock were issued and
outstanding, (ii) no shares of Preferred Stock were issued and outstanding, and
(iii) 1,361,574 shares of Company Common Stock were held as treasury shares. As
of the close of business on the date of this Agreement there were (A) 2,349,013
shares of Company Common Stock authorized and reserved for future issuance under
any Company Plans, (B) 17,589,147 shares of Company Common Stock authorized and
reserved for issuance upon conversion of convertible notes, and (C) 19,578,275
shares of Company Common Stock authorized and reserved for issuance upon
exercise of Company Options. No Equity Interests or Commitments have been
issued, reserved for issuance or are outstanding, other than or pursuant to the
Company Options and convertible notes referred to above that are outstanding as
of the date of this Agreement. Except as set forth on Section 5.5(a) of the
Company Disclosure Schedule, there are no Contracts with respect to the voting
or transfer of the Company’s Equity Interests. Other than as set forth on
Section 5.5(a) of the Company Disclosure Schedule, no Commitments exist or are
authorized with respect to the Equity Interests of the Company and no
Commitments will arise in connection with the Transactions.
               (b) Upon consummation of the Equity Closing and assuming that the
Company will have redeemed all warrants to purchase shares of Company Common
Stock with an exercise price of $0.10 per share outstanding as of the Equity
Closing, Buyer shall own of

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record and beneficially, at least 51.0% of the Company Common Stock calculated
on a fully-diluted basis.
     Section 5.6. Company Subsidiaries. Section 5.6 of the Company Disclosure
Schedule lists the Company Subsidiaries and for each Company Subsidiary, (i) its
name and jurisdiction of organization and each jurisdiction in which it is
qualified to do business, and (ii) the number of authorized Equity Interests of
each class of its Equity Interests, (iii) the number of issued and outstanding
Equity Interests of each class of its Equity Interests, the names of the holders
thereof, and the number of Equity Interests held by each such holder, and
(iv) the number of Equity Interests held in treasury. All of the issued and
outstanding Equity Interests of each Company Subsidiary have been duly
authorized and are validly issued, fully paid, and nonassessable. Except as set
forth on Section 5.6 of the Company Disclosure Schedule, the Acquired Entities
hold of record and own beneficially, and will on the Equity Closing Date be the
record and beneficial owners and holders of, all of the outstanding Equity
Interests of the Company Subsidiaries, free and clear of any Encumbrances (other
than restrictions under the Securities Act and state securities Laws). No
Commitments to issue Equity Interests of any Company Subsidiary exist or are
authorized. Neither the Company nor any Company Subsidiary controls, directly or
indirectly, or has any direct or indirect Equity Interest, in any Person that is
not a Company Subsidiary.
     Section 5.7. Records. The copies of the Acquired Entities’ Organizational
Documents that were provided to the Parent are accurate and complete and reflect
all amendments made through the date hereof. The Acquired Entities’ minute books
and other records of the Acquired Entities made available to Parent for review
were correct and complete as of the date of such review in all material
respects, no further entries have been made through the date of this Agreement,
such minute books and records contain the true signatures of the persons
purporting to have signed them, and such minute books and records contain an
accurate record of all actions of the stockholders, directors, members,
managers, or other such representatives of the Acquired Entities taken by
written consent, at a meeting, or otherwise in all cases since January 1, 2008.
      Section 5.8. SEC Documents.
          (a) The Company has filed all forms, documents, schedules,
certifications, prospectuses, reports, and registration, proxy and other
statements, required to be filed or furnished by it with or to the SEC since
December 31, 2007 pursuant to the requirements of the Securities Act, the
Exchange Act, or the Sarbanes-Oxley Act, as the case may be, and the applicable
rules and regulations promulgated thereunder (the “Company SEC Documents”),
which term shall include such documents filed during such period on a voluntary
basis on Form 8-K, and in each case including exhibits and schedules thereto and
documents incorporated by reference therein. None of the Company Subsidiaries is
required to file periodic reports with the SEC pursuant to the Exchange Act. As
of their respective effective dates (in the case of Company SEC Documents that
are registration statements filed pursuant to the requirements of the Securities
Act), and as of their respective filing dates with the SEC (in the case of all
other Company SEC Documents), or in each case, if amended prior to the date
hereof, as of the date of the last such amendment, the Company SEC Documents
complied in all material respects, and all documents filed by the Company
between the date of this Agreement and the date of the Equity Closing shall
comply in all material respects, with the requirements of the Securities Act,

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the Exchange Act or the Sarbanes-Oxley Act, as the case may be, and the
applicable rules and regulations promulgated thereunder, and none of the Company
SEC Documents at the time they were filed or, if amended, as of the date of such
amendment contained, or if filed after the date hereof will contain, any untrue
statement of a material fact or omitted to state any material fact required to
be stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, or are to be made, not misleading. The
Company has made available to Parent a complete and correct copy of any material
amendments or modifications which, to the Company’s Knowledge, are required to
be filed with the SEC, but have not yet been filed with the SEC, with respect to
(i) agreements which previously have been filed by the Company with the SEC
pursuant to the Securities Act or the Exchange Act and (ii) the Company SEC
Documents filed prior to the date hereof. As of the date of this Agreement,
there are no outstanding or unresolved comments received from the SEC staff with
respect to the Company SEC Documents.
          (b) The consolidated financial statements (as restated prior to the
date hereof, if applicable, and including all related notes and schedules) of
the Company included in the Company SEC Documents fairly present in all material
respects the consolidated financial position of the Company and its consolidated
subsidiaries as at the respective dates thereof and their consolidated results
of operations and consolidated cash flows for the respective periods then ended
(subject, in the case of the unaudited statements, to normal year-end audit
adjustments and to any other adjustments described therein including the notes
thereto) in conformity with GAAP (except, in the case of the unaudited
statements, as permitted by the rules related to Quarterly Reports on Form 10-Q
promulgated under the Exchange Act) applied on a consistent basis during the
periods involved (except as may be indicated therein or in the notes thereto).
     Section 5.9. Financial Statements. The Financial Statements (i) have been
prepared in accordance with GAAP consistently applied throughout the periods
covered thereby, (ii) present fairly the financial condition and results of
operation of the Acquired Entities, changes in stockholders’ equity and cash
flows of the Acquired Entities, as of the respective dates of and for the
periods referred to in the Financial Statements, (iii) are correct and complete
in all material respects, and (iv) are consistent with the books and records of
the Acquired Entities. Since the Balance Sheet Date, none of the Acquired
Entities has effected any change in any method of accounting or accounting
practice, except for only such change required pursuant to GAAP.
     Section 5.10. Liabilities. The Acquired Entities do not have any
Liabilities, whether or not required by GAAP to be reflected or reserved against
on a balance sheet, other than (a) Liabilities provided for or reserved against
in the Financial Statements, (b) or Liabilities incurred in the Ordinary Course
of Business since the Balance Sheet Date. None of the Liabilities described
above relates to or has arisen out of a breach of contract, breach of warranty,
tort or infringement by or against any Acquired Entity or any Action involving
any Acquired Entity.
     Section 5.11. Subsequent Events. Except as set forth in Section 5.11 of the
Company Disclosure Schedule, since the Balance Sheet Date, the Acquired Entities
have operated in the Ordinary Course of Business and there have been no events,
series of events or the lack of

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occurrence thereof which, singularly or in the aggregate could reasonably be
expected to have a Material Adverse Effect on the Acquired Entities taken as a
whole. Without limiting the foregoing, since the Balance Sheet Date, none of the
following have occurred:
               (a) There has been no amendment, alteration or modification in
the terms of any currently outstanding Equity Interests of any Acquired Entity
or any securities convertible into or exchangeable for such Equity Interests,
including without limitation any reduction in the exercise or conversion price
of any such rights or securities, any change to the vesting or acceleration
terms of any such rights or securities, or any change to terms relating to the
grant of any such rights or securities;
               (b) Except as set forth in Section 5.11(b) of the Company
Disclosure Schedule, no Acquired Entity has issued, sold, or otherwise disposed
of any of its Equity Interests;
               (c) There has not been any material closure, shut down, merger or
elimination of any of the Veterinary Hospitals, offices, facilities or any other
change in the character of the Company, or the properties or assets of the
Acquired Entities;
               (d) No Acquired Entity has experienced any material damage,
destruction or loss with respect to any of its properties or assets, whether or
not covered by insurance;
               (e) No Acquired Entity has suffered any taking or seizure of all
or any part of its properties or assets by condemnation or eminent domain;
               (f) Except as set forth in Section 5.11(f) of the Company
Disclosure Schedule, no Acquired Entity has sold, leased, transferred, or
assigned any assets material to the business of such Acquired Entity;
               (g) No Acquired Entity has cancelled, compromised, waived or
released any Action (or series of related Actions) either involving more than
$15,000 or outside the Ordinary Course of Business;
               (h) No Acquired Entity has granted any Contracts or any rights
under or with respect to any Intellectual Property, except in the Ordinary
Course of Business;
               (i) Except as set forth in Section 5.11(i) of the Company
Disclosure Schedule, no Acquired Entity has entered into any Contract (or series
of related Contracts) either involving more than $15,000 or outside the Ordinary
Course of Business, without the prior approval in writing of Parent;
               (j) Except as set forth in Section 5.11(j) of the Company
Disclosure Schedule, no Acquired Entity has made or committed to make any
capital expenditure (or series of related capital expenditures) involving more
than $15,000 individually, $100,000 in the aggregate, or outside the Ordinary
Course of Business.

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               (k) Except as set forth in Section 5.11(k) of the Company
Disclosure Schedule, no Acquired Entity has paid or committed to pay any bonus
or granted any increase in the base compensation (i) of any director or officer
of the Company, or (ii) outside of the Ordinary Course of Business, of any of
its other employees;
               (l) Except as set forth in Section 5.11(l) of the Company
Disclosure Schedule, no Acquired Entity has entered into any employment (other
than at-will employment arrangements terminable without the payment of any
severance or other non-statutory obligation), collective bargaining, or similar
Contract or modified the terms of any such existing Contract;
               (m) No Acquired Entity has made any other change in employment
terms (i) of any director or officer of the Company, or (ii) outside of the
Ordinary Course of Business, of any of its other employees;
               (n) Except as set forth in Section 5.11(n) of the Company
Disclosure Schedule, no Acquired Entity has made any loan to, or entered into
any other transaction with, any of its directors, officers, or employees;
               (o) No Acquired Entity has adopted, amended, modified, terminated
or increased the payments, or benefits under, any Company Plan;
               (p) No Acquired Entity has entered into, terminated or received
notice of termination of (i) any license, distributorship, dealer, sales
representative, joint venture, credit or similar Contract to which such Acquired
Entity is a party that is material to the business of such Acquired Entity, or
(ii) any Contract or transaction involving a total remaining commitment by such
Acquired Entity of at least $15,000;
               (q) Except as set forth in Section 5.11(q) of the Company
Disclosure Schedule, no Acquired Entity has received written notification or
other written communication from any landlord, insurance company, material
customer or material supplier of an intention to discontinue or change in a
material respect the terms of its relationship with such Acquired Entity and, to
the Knowledge of the Company, no such Person has Threatened to discontinue or
change in a material respect the terms of its relationship with such Acquired
Entity;
               (r) No Encumbrance, other than Permitted Encumbrances, has been
imposed on any of the material assets of any Acquired Entity;
               (s) Except as set forth in Section 5.11(s) of the Company
Disclosure Schedule, there has not been any material change in accounting
methods used by the Company, except for any such change required because of a
concurrent change in GAAP;
               (t) No Acquired Entity has made any capital investment in, any
loan to, or any acquisition of the securities or assets of, any Person involving
more than $15,000 singularly, $100,000 in the aggregate, or outside the Ordinary
Course of Business;
               (u) Except as set forth in Section 5.11(u) of the Company
Disclosure Schedule, no Acquired Entity has issued any note, bond, or other debt
security or created,

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incurred, assumed, or guaranteed any Liability for borrowed money either
involving more than $10,000 singularly or $50,000 in the aggregate;
               (v) No Acquired Entity has waived any right, forgiven any debt or
released any claim relating to the business of any Acquired Entity;
               (w) Except as set forth in Section 5.11(w) of the Company
Disclosure Schedule, and except in the Ordinary Course of Business, there has
not been any amendment or termination of any Contract set forth in
Section 5.18(a) of the Company Disclosure Schedule or any waiver, release or
assignment of any material rights or claims thereunder;
               (x) There has not been any failure to operate, maintain, repair
or otherwise preserve the real property or the personal property owned or leased
by any Acquired Entity consistent with past practice and in compliance in all
material respects with all applicable Laws and requirements of all applicable
Contracts;
               (y) Except as set forth in Section 5.11(y) of the Company
Disclosure Schedule, no Acquired Entity has delayed or postponed payment for
more than ninety (90) days to any vendor with respect to any accounts payables
or other liabilities owing to such vendor either involving more than $10,000
(individually or in the aggregate) or outside the Ordinary Course of Business;
               (z) There has been no change in the manner of collection of the
accounts receivable;
               (aa) No Acquired Entity has made or revoked any material tax
election, except as required by applicable Law.
               (bb) There has been no amendment, modification or change (or
authorization thereof) to the Organizational Documents of any Acquired Entity;
               (cc) Except as set forth in Section 5.11(cc) of the Company
Disclosure Schedule, no Acquired Entity has made any payment on any Debt prior
to the date such payment was due;
               (dd) Except as set forth in Section 5.11(dd) of the Company
Disclosure Schedule, no Acquired Entity has changed, or permitted any change, in
the operating hours or any Veterinary Hospital or the hours to be worked by any
veterinarian at any Veterinary Hospital
               (ee) No Acquired Entity has failed to maintain any of the Permits
required by it to operate in the Ordinary Course of Business
               (ff) Except as set forth in Section 5.11(ff) of the Company
Disclosure Schedule, there has not been any amendment, termination or expiration
of any Facility Lease or any waiver, release or assignment of any material
rights or claims thereunder; and
               (gg) No Acquired Entity has committed to any of the foregoing.

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     Section 5.12. Availability, Title to, and Condition of Assets.
               (a) Subject to the Permitted Encumbrances, the Acquired Entities
have good and indefeasible title to, or a valid leasehold interest in, all
buildings, machinery, equipment, land and other tangible assets that are used by
the Acquired Entities (i) including all buildings, machinery, equipment, land
and other tangible assets that are reflected on the Financial Statements, or
acquired after the Balance Sheet Date, and (ii) including all assets used by the
Acquired Entities except for assets which are immaterial to the conduct of the
Acquired Entities’ business. Upon the consummation of the Transactions, the
Acquired Entities will retain the right to use, and a valid leasehold interest
in, all the assets used in the Acquired Entities’ business consisting of
leasehold interests, subject to the terms of such leasehold interests.
               (b) All buildings, machinery, equipment, land and other tangible
assets used by the Acquired Entities, whether owned or leased, have been
maintained in accordance with normal industry practice, consistent with past
practice and in compliance in all material respects with all applicable Laws and
requirements of all applicable Contracts, are in good repair and operating
condition (subject to normal wear and tear), and are suitable for the purposes
for which they are presently used. All such buildings, machinery, equipment, and
other tangible assets are (i) in the possession of the Acquired Entities and
(ii) to the extent owned by the Acquired Entities are, or to the extent leased
or otherwise utilized pursuant to Contract such leases or Contract are, free and
clear of all Encumbrances, other than Permitted Encumbrances.
     Section 5.13. Legal Compliance.
               (a) The Acquired Entities have complied in all material respects
with all applicable Laws in connection with the operation of their respective
businesses, and no Action is pending or, to the Knowledge of the Company
Threatened against any Acquired Entity alleging any failure to so comply.
               (b) Section 5.13(b) of the Company Disclosure Schedule lists all
Drug Enforcement Agency licenses, premise permits and veterinary licenses
required for the operation of the respective businesses of the Company and the
Company Subsidiaries as presently conducted. The Company and the Company
Subsidiaries possess all Permits material to the operation of their respective
businesses as presently conducted, all such Permits are in full force and effect
and no suspension or cancellation is, to the Knowledge of the Company
Threatened. To the Knowledge of the Company, no event has occurred or
circumstance exists that (with or without notice or lapse of time) constitutes
or will result in a violation by the Company or any Company Subsidiary of, or a
failure on the part of the Company or any Company Subsidiary to comply in any
material respect with, any applicable Law with respect to their respective
businesses. Each Permit listed or required to be listed in Section 5.13(b) of
the Company Disclosure Schedule is valid and in full force and effect. Except as
set forth in Section 5.13(b) of the Company Disclosure Schedule:
                    (i) The Company and each Company Subsidiary is, and at all
times since January 1, 2009 has been, in full compliance with all of the terms
and requirements of each Permit identified or required to be listed in
Section 5.13(b) of the Company Disclosure Schedule;

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                    (ii) No event has occurred or circumstance exists that may
(with or without notice or lapse of time) (A) constitute or result in a
violation of or a failure to comply with any material term or requirement of any
Permit listed or required to be listed in Section 5.13(b) of the Company
Disclosure Schedule or (B) result in the revocation, withdrawal, suspension,
cancellation or termination of, or any modification to, any Permit listed or
required to be listed in Section 5.13(b) of the Company Disclosure Schedule;
                    (iii) Since January 1, 2009 neither the Company nor any
Company Subsidiary has received any written notice or other communication from
any Governmental Body or any other Person regarding (A) any actual or alleged
violation of or failure to comply with any material term or requirement of any
Permit or (B) any actual or proposed revocation, withdrawal, suspension,
cancellation, termination of or modification to any Permit; and
                    (iv) All applications required to have been filed for the
renewal of the Permits listed or required to be listed in Section 5.13(b) of the
Company Disclosure Schedule have been duly filed on a timely basis with the
appropriate Governmental Bodies, and all other filings required to have been
made with respect to such Permits have been duly made on a timely basis with the
appropriate Governmental Bodies.
     Section 5.14. No Change of Control Provision. Except as set forth in
Section 5.14 of the Company Disclosure Schedule, no Acquired Entity is a party
or subject to any Contract which would require the making of any payment, other
than payment of the Per Share Purchase Price as contemplated by this Agreement,
to any employee of any Acquired Entity or to any other Person as a result of the
consummation of the Transactions, and no employee of any Acquired Entity will
accrue additional benefits, severance or accelerated rights to payment of
benefits as a result of the consummation of the Transactions (either alone or
combined with any other event or transaction), excluding, in each case, any
payment or accrual of benefits or severance triggered solely by a termination of
an employee without cause by the Company without giving effect to the
consummation of the Transactions.
     Section 5.15. Tax Matters.
               (a) Except as set forth on Section 5.15(a) of the Company
Disclosure Schedule, with respect to all Tax Returns that are required to be
filed by or with respect to each Acquired Entity:
                    (i) such Tax Returns have been duly and timely filed and all
such Tax Returns are true, complete and correct in all material respects;
                    (ii) all material Taxes have been paid in full or where
payment is not yet due reserved in the Financial Statements in accordance with
GAAP; and
                    (iii) all material deficiencies asserted or assessments made
as a result of any examinations of any Acquired Entity have been paid in full
other than those being contested in good faith by appropriate proceedings and
for which adequate reserves have been established and reflected in the Financial
Statements in accordance with GAAP.

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               (b) Section 5.15(b) of the Company Disclosure Schedule contains a
list of all federal or state income and franchise Tax Returns and all material
local and foreign Tax Returns filed with respect to the Company with regard to
any Tax imposed on the Company for taxable periods ending on or after January 1,
2007.
               (c) Except as set forth on Section 5.15(c) of the Company
Disclosure Schedule, no Acquired Entity currently is the beneficiary of any
extension of time within which to file any Tax Return.
               (d) To the Knowledge of the Company, no taxing authority has a
basis upon which to assess any additional Taxes for any period for which Tax
Returns have been filed.
               (e) There is no material Encumbrances for Taxes upon any Acquired
Entity’s assets and properties other than Permitted Encumbrances.
               (f) Each Acquired Entity has withheld and paid over to the
appropriate taxing authority all Taxes which it is required to withhold from
amounts paid or owing to any employee, holders of Equity Interests or other
third party.
               (g) No Audit in respect of any Tax Liability is pending with
respect to any Tax Liability shown on a Tax return filed by any Acquired Entity.
No information related to Tax matters has been requested by any foreign,
federal, state, or local taxing authority, nor has any such tax authority
notified any Acquired Entity of its intent to open an Audit or other review. To
the Knowledge of the Company, there are no material unresolved claims asserted
by any taxing authority concerning the Acquired Entities’ Tax Liabilities.
               (h) No Acquired Entity has made any payments, is obligated to
make any payments or is a party to an agreement that could obligate it to make
any payments that would not be deductible under Code Section 280G or Code
Section 162(m), or any corresponding provision of state, local or foreign Tax
law.
               (i) Since January 1, 2008, no claim has been made to any Acquired
Entity by any taxing authority in a jurisdiction where such Acquired Entity does
not file a Tax Return that any Acquired Entity may be subject to Taxes assessed
by such jurisdiction.
               (j) No Acquired Entity has requested nor received an adverse
ruling from any taxing authority or signed a closing or other agreement with any
taxing authority.
               (k) No Acquired Entity has been granted any extension or waiver
of the statute of limitations period applicable to any Tax Return or within
which any Tax may be assessed or collected by any taxing authority, which period
(after giving effect to such extension or waiver) has not yet expired.
               (l) The applicable statute of limitations for the assessment of
Taxes for taxable periods ending before December 31, 2001 has expired and no
Acquired Entity has waived or agreed to the extension of the applicable statute
of limitations.

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               (m) No Acquired Entity is a party to, or bound by, nor has any
obligation under, any Tax sharing agreement, Tax indemnification agreement or
similar contract or arrangement. All such Tax sharing agreements, Tax
indemnification agreements or similar Contracts or arrangements have been or
will be cancelled effective as of the Equity Closing Date.
               (n) No Acquired Entity has distributed the stock of another
Person, or has not had its stock distributed by another Person, in a transaction
that was purported or intended to be governed in whole or in part by
Sections 355 or 361 of the Code.
               (o) No Acquired Entity has participated in any “reportable
transaction” as defined in Section 6707A of the Code or Treasury
Regulation Section 1.6011-4 (or any predecessor provision).
               (p) Except as set forth on Section 5.15(p) of the Company
Disclosure Schedule, no Acquired Entity has been a member of an affiliated,
consolidated, combined or unitary group or participated in any other arrangement
whereby any income, revenues, receipts, gain or loss was determined or taken
into account for Tax purposes with reference to or in conjunction with any
income, revenues, receipts, gain, loss, asset or liability of any other Person
other than a group of which the Company was the parent. No Acquired Entity has
liability for the Taxes of any Person (other than an Acquired Entity) under
Treasury Regulation Section 1.1502-6 (or any similar provision of state, local
or foreign Law), as a transferee or successor, by contract, or otherwise.
               (q) No Acquired Entity is or has been a United States real
property holding company as defined in Section 897(c)(2) of the Code.
               (r) No Acquired Entity has unpaid Tax liabilities with respect to
the income, property and operations of the Acquired Entities, except for Tax
liabilities (i) reflected in the Financial Statements or (ii) that have arisen
after the date of the Financial Statements in the Ordinary Course of Business
and in a manner consistent with prior periods.
               (s) No Acquired Entity will be required to include any item of
income in, or exclude any item of deduction from, taxable income for any period
ending on or after the Equity Closing Date (i) under Section 481 of the Code (or
any similar provisions of state, local or foreign Law) as a result of change in
method of accounting for a Pre-Closing Tax Period, (ii) pursuant to the
provisions of any agreement entered into with any Taxing Authority or pursuant
to a “closing agreement” as defined in Section 7121 of the Code (or any similar
provisions of state, local or foreign Law) executed on or prior to the Equity
Closing Date, (iii) the installment method of accounting, the completed contract
method of accounting or the cash method of accounting with respect to a
transaction that occurred prior to the Equity Closing Date, (iv) any prepaid
amount received on or prior to the Equity Closing Date, (v) under Section 1502
(or any corresponding or similar provision of state, local or foreign Tax law)
with respect to an intercompany transaction or excess loss account or (vi) under
Section 108(i) of the Code as a result of the discharge of any Debt on or prior
to the Equity Closing Date.
               (t) Each Acquired Entity has previously delivered or made
available to Parent complete and accurate copies of each of: (i) all Audit
reports, letter rulings, technical

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advice memoranda and similar documents issued by a taxing authority relating to
the federal, state, local or foreign Taxes due from or with respect to such
Acquired Entity, (ii) the federal income Tax Returns, and those state, local and
foreign income Tax Returns filed by such Acquired Entity, and (iii) any closing
agreement entered into by such Acquired Entity with any taxing authority in each
case existing as of the Equity Closing Date and relating to periods subsequent
to January 1, 2007. The Company shall and shall cause each Company Subsidiary to
deliver to Parent all materials with respect to the foregoing for all matters
arising after the Equity Closing Date.
     Section 5.16. Real Property and Leaseholds.
               (a) Section 5.16(a) of the Company Disclosure Schedule sets forth
a true, correct and complete list of (i) each parcel of real property owned by
any Acquired Entity in fee simple (the “Owned Real Estate”) and (ii) each parcel
of real property in which any Acquired Entity has a leasehold interest, as
tenant (the “Leased Real Estate”). The Owned Real Estate and the Leased Real
Estate constitute all real properties used or occupied by the Acquired Entities
in conducting their business.
               (b) With respect to the Owned Real Estate required to be listed
in Section 5.16(a) of the Company Disclosure Schedule:
                    (i) the identified owner has good, marketable, and
indefeasible fee simple title to the Owned Real Estate, free and clear of any
Encumbrance except for Permitted Encumbrances;
                    (ii) Section 5.16(a) of the Company Disclosure Schedule
contains accurate and complete copies of all title reports and title policies
any Acquired Entity has obtained with respect to the Owned Real Estate;
                    (iii) there are no pending or Threatened Actions (or any
basis therefor) relating to the property or other matters affecting adversely
the current use, occupancy, or value thereof;
                    (iv) the legal description for the Owned Real Estate
contained in the deed thereof describes such Owned Real Estate fully and
adequately, all the buildings and improvements thereon are located within the
boundary lines of the described parcels of land, are not in violation of
applicable setback requirements or zoning Laws, and do not encroach on or
violate any easement or Encumbrance which may burden the land, and the land does
not serve any adjoining property for any purpose inconsistent with the use of
the land, and the property is not located within any flood plain or subject to
any similar type restriction for which any Permits necessary to use it have not
been obtained;
                    (v) there are no Contracts granting to any Person the right
of use or occupancy of any portion of the Owned Real Estate;
                    (vi) there are no Contracts to purchase the Owned Real
Estate, or any portion thereof, or interest therein;

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                    (vii) there are no Persons (other than the Acquired
Entities) in possession of the Owned Real Estate, other than tenants under any
leases disclosed in Section 5.16(a) of the Company Disclosure Schedule;
                    (viii) all facilities located on the Owned Real Estate are
supplied with utilities and other services necessary for the operation of the
Acquired Entities’ business, including gas, electricity, water, telephone,
sanitary sewer or septic system, and storm sewer or other on-site storm water
management system, all of which services are adequate in accordance with all
applicable Laws and are provided via public roads or via permanent, irrevocable,
appurtenant easements benefiting the Owned Real Estate; and
                    (ix) the Owned Real Estate abuts on and has direct vehicular
access to a public road, or has access to a public road via a permanent,
irrevocable, appurtenant easement benefiting the Owned Real Estate, and access
to the property is provided by paved public right-of-way with adequate curb cuts
available.
               (c) With respect to the Leased Real Estate required to be listed
in Section 5.16(a) of the Company Disclosure Schedule and except as set forth in
Section 5.16(a) of the Company Disclosure Schedule:
                    (i) the Company has delivered or made available to Parent
true, correct and complete copies of each lease, license and other documents and
amendments thereto by which the Acquired Entities occupy each parcel of Leased
Real Estate (each set of such documents is referred to herein as a “Facility
Lease”). Section 5.16(a) of the Disclosure Schedule sets forth a true and
correct description of each Facility Lease and for each Facility Lease sets
forth (i) the start date, (ii) the expiration date, (iii) the remaining renewal
terms and (iv) the lease or other payments due and payable as of the date of
this Agreement under each Facility Lease, including, without limitation, any
base rents and additional rents (i.e., operating expenses, parking costs, option
rent, percentage rent);
                    (ii) to the Knowledge of the Company, all fees, tenant
improvement allowances and other landlord concessions under each Facility Lease
have been paid or performed in full;
                    (iii) none of the Facility Leases prohibit the use of the
Leased Real Estate for the purposes each is currently used for, including, as
applicable, veterinary services and, to the Knowledge of the Company, no
circumstances exist that would now or in the future limit such uses of any
Leased Real Estate;
                    (iv) all facilities located on the Leased Real Estate are
supplied with utilities and other services necessary for the operation of the
Acquired Entities’ business, including gas, electricity, water, telephone,
sanitary sewer or septic system, and storm sewer or other on-site storm water
management system, all of which services are adequate in accordance with all
applicable Laws and are provided via public roads or via permanent, irrevocable,
appurtenant easements benefiting the Leased Real Estate;

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                    (v) no Acquired Entity has granted to any Person any right,
option, right of first offer or right of first refusal to lease, sublease, use
or occupy all or part of any Leased Real Estate;
                    (vi) no commission or other payment is due any real estate
broker by any Acquired Entity in connection with the leasing of any of the
Leased Real Estate, and there are no agreements, oral or written, under which
any real estate broker is entitled to any future payment or commission by any
Acquired Entity in connection with the leasing of the Leased Real Estate to such
Acquired Entity; and
                    (vii) no Acquired Entity has pledged, encumbered or
hypothecated its right, title or interest in or to any Facility Lease or any
Leased Real Estate other than Permitted Encumbrances.
     Section 5.17. Intellectual Property.
               (a) The Acquired Entities own or have the right to use pursuant
to an enforceable Contract all Intellectual Property necessary to operate the
Acquired Entities’ business as currently conducted. Each item of Intellectual
Property that the Acquired Entities owned or used immediately prior to the
Equity Closing will be owned or available for use by the Acquired Entities on
identical terms and conditions immediately subsequent to the Equity Closing.
Section 5.17(a) of the Company Disclosure Schedule sets forth a complete list of
all Intellectual Property that are material to the operation of the Acquired
Entities’ business.
               (b) To the Knowledge of the Company, the conduct by the Acquired
Entities of the Acquired Entities’ business does not infringe upon,
misappropriate or conflict in any material respect with any Intellectual
Property right of any Person, and there are no pending or, to the Knowledge of
the Company, Threatened claims alleging that the conduct of the Acquired
Entities’ business infringes upon, misappropriates or conflicts in any material
respect with the Intellectual Property rights of any Person (including any claim
that the Acquired Entities shall license or refrain from using any other
Person’s Intellectual Property).
     Section 5.18. Contracts.
               (a) Section 5.18(a) of the Company Disclosure Schedule lists:
                    (i) each Facility Lease;
                    (ii) each capital lease, note payable, or other contract for
borrowed money to which any Acquired Entity is a party or is otherwise bound ;
                    (iii) Contracts to which any Acquired Entity is a party or
is otherwise bound not made in the Ordinary Course of Business;
                    (iv) each joint venture, partnership, management and other
Contract to which any Acquired Entity is a party, or is otherwise bound that
involves a sharing of profits, losses, costs or Liabilities by such Acquired
Entity with any other Person;

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                    (v) each Contract to which any Acquired Entity is a party,
or is otherwise bound, providing for payments to any Person (other than any
Acquired Entity) based on sales, purchases or profits other than Contracts or
commitments that can or in reasonable probability will be completed within
thirty (30) days of the Equity Closing Date or can be terminated within such
thirty (30) day period without payment of a penalty in excess of $25,000;
                    (vi) all Contracts entered into by any Acquired Entity that
provide for an aggregate payment from such Acquired Entity in excess of $50,000
in any contract year other than Contracts or commitments that can or in
reasonable probability will be completed within thirty (30) days of the Equity
Closing Date or can be terminated within such thirty (30) day period without
payment of a penalty in excess of $15,000;
                    (vii) any Contract concerning confidentiality or
non-competition that is in effect as of the date of the Agreement; and
                    (viii) each contract with a veterinarian for the performance
of services to the Acquired Entities.
               (b) With respect to each Contract set forth on Section 5.18(a) of
the Company Disclosure Schedule, (i) the Contract is enforceable and in full
force and effect, and has not been terminated, canceled, amended or modified,
(ii) the Contract will continue to be enforceable following the consummation of
the Transactions without modification to the terms thereof, (iii) no Acquired
Entity is in Breach of such Contract and the Company has no Knowledge of any
Breach by any other party thereto, and (iv) no party to the Contract has
repudiated any provision of the Contract. To the Knowledge of the Company, there
are no renegotiations of, attempts to renegotiate or outstanding rights to
renegotiate any amounts paid or payable to any Acquired Entity under current or
completed Contracts set forth in Section 5.18(a) of the Company Disclosure
Schedule with any Person having the contractual or statutory right to demand or
require such renegotiation and no such Person has made written demand for such
renegotiation. The Company has delivered or made available to Parent true,
correct and complete copies of each Contract set forth in Section 5.18(a) of the
Company Disclosure Schedule and all amendments and supplements thereto.
     Section 5.19. Litigation.
               (a) Except as set forth in Section 5.19 of the Company Disclosure
Schedule, no Acquired Entity is (i) subject to any outstanding order, writ,
injunction, judgment or decree of any Governmental Body or (ii) a party to, the
subject of, or is to the Knowledge of the Company, Threatened to be made a party
to or the subject of any Action.
               (b) To the Knowledge of the Company, no event has occurred or
circumstance exists that is reasonably likely to give rise to or serve as a
basis for the commencement of any such Action.
     Section 5.20. Labor; Employees.
               (a) No Acquired Entity is a party to or bound by any collective
bargaining contract, nor has any it experienced any strikes, grievances, claims
of unfair labor

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practices, or other collective bargaining disputes, nor to the Knowledge of the
Company, have any been Threatened. To the Knowledge of the Company, no Acquired
Entity has committed any unfair labor practice (as determined under Law). To the
Knowledge of the Company no organizational effort is currently being made or
Threatened by or on behalf of any labor union with respect to any Acquired
Entity’s employees. There is not pending and no Acquired Entity has been, to the
Knowledge of the Company, Threatened with, an investigation or proceeding under
any Law or order which prohibits discrimination, retaliation or harassment of
employees or which requires affirmative action regarding employment with respect
to any Acquired Entity’s employees.
               (b) Section 5.20(b) of the Company Disclosure Schedule contains
an accurate list of (i) all employment Contracts between each Acquired Entity
and the employees of such Acquired Entity, other than Contracts which are
terminable at will without any payment becoming due as a result of such
termination other than (x) severance payments pursuant to the Acquired Entities’
employment policies applicable to all similarly situated employees, and
(y) payments that are required by Law, and (ii) a list of all employee handbooks
and/or manuals relating to the Acquired Entities’ employees, true and complete
copies of which have been made available to Parent.
               (c) Since January 1, 2008, the Acquired Entities have operated in
material compliance with the applicable provisions of the WARN Act or other
similar Laws of any jurisdiction in connection with any obligations with respect
to persons employed by the Acquired Entities that arise prior to and including
the Equity Closing Date.
     Section 5.21. Employee Benefits.
               (a) Section 5.21 of the Company Disclosure Schedule lists all
plans and other arrangements that currently are in effect which provide
compensation or benefits to current or former officers, directors, consultants,
employees or leased employees of any Acquired Entity, including, without
limitation, all “employee benefit plans” as defined in Section 3(3) of ERISA,
and all bonus, stock option, stock purchase, incentive, phantom stock, deferred
compensation, supplemental retirement, insurance, severance and other similar
fringe or employee benefit plans, and all employment, consulting or executive
compensation agreements covering any current or former officer, director,
employee or consultant of any Acquired Entity or the beneficiaries or dependents
of any such current or former officer, director, employee or consultant
(collectively, the “Company Plans”). No Acquired Entity maintains any deferred
compensation which is currently in effect. No Acquired Entity has any liability
with respect to any plan or arrangement of the type described in the preceding
sentence other than the Company Plans.
               (b) The Company has delivered to Buyer and Parent with respect to
each Company Plan true and complete copies of: (i) the most recent documents
constituting the Company Plan and all amendments thereto, (ii) any related trust
agreement or other funding instrument currently in effect and all other material
Contracts currently in effect with respect to such Company Plan, (iii) the
currently effective summary plan description and any subsequent summary of
material modifications and any other currently effective material written
communication (or a written description of any material oral communications) by
an Acquired

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Entity to its employees generally concerning the extent of the benefits
provided, (iv) the three most recent annual reports (Form 5500 Series) including
all relevant schedules (as applicable), (v) the most recent IRS determination or
opinion letter for each Company Plan that is intended to be a qualified plan
under Section 401(a) of the Code, (vi) the most recent audited financial
statements for each funded Company Plan, and (vii) all written correspondence
for the last three years with any Governmental Body regarding the administration
or operation of the Company Plan.
               (c) Except as disclosed on Section 5.21(c) of the Company
Disclosure Schedule, each Company Plan complies with and has been maintained,
operated and administered in compliance with its terms and any related documents
or Contracts and in compliance with all applicable Laws.
               (d) No individual who has performed services for any Acquired
Entity has been improperly excluded from participation in any Company Plan.
               (e) Neither the Company nor any member of the same controlled
group of businesses as the Company within the meaning of Section 4001(a) (14) of
ERISA (an “ERISA Affiliate”) is or ever was a sponsor or obligated to contribute
to, or has any liability (whether contingent or otherwise) with respect to, any
plan that is or has been covered by Title IV of ERISA or Section 412 of the
Code, any “multiemployer plan” as defined in Section 3(37) of ERISA, any
“multiple employer plan” within the meaning of Section 210(a) of ERISA or
Section 413(c) of the Code, a “multiple employer welfare arrangement” as defined
in Section 3(40) of ERISA, funded by a voluntary employees’ beneficiary
association within the meaning of Section 501(c)(9) of the Code, or a “pension
plan” as defined in Section 3(2) of ERISA that is not intended to be qualified
under Section 401(a) of the Code.
               (f) Each Company Plan that is required to comply with the
provisions of Part 6 of Subtitle B of Title I of ERISA and Code Section 4980B,
and the provisions of Part 7 of Subtitle B of Title I of ERISA and Code
Section 4980D, has complied in all material respects with such provisions.
               (g) Except as set forth on Section 5.21(g) of the Company
Disclosure Schedule, no Acquired Entity has any obligation to provide or make
available any post-employment or post-service benefit under any Company Plan
that is a “welfare plan” as defined in Section 3(1) of ERISA for any current or
former officer, director, consultant, employee or leased employee (or their
respective beneficiaries) of any Acquired Entity, except as may be required by
Part 6 of Subtitle B of Title I of ERISA and Section 4980B of the Code, and at
the sole expense of such individual. There are no reserves, assets, surpluses or
prepaid premiums with respect to any Company Plan that is a “welfare plan” as
defined in Section 3(1) of ERISA.
               (h) Except as set forth on Section 5.21(h) of the Company
Disclosure Schedule, no Acquired Entity or ERISA Affiliate has failed to make
any material contributions or to pay any material amounts due and owing as
required by the terms of any Company Plan. All unpaid liabilities or expenses of
any Acquired Entity in respect of any Company Plan (including workers’
compensation) have been properly accrued on such Acquired Entity’s most recent
financial statements in compliance with GAAP.

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               (i) Each Company Plan that is intended to be a qualified plan
under Section 401(a) of the Code and has received a favorable determination
letter (if such plan is an individually designed plan) or favorable opinion
letter (if such plan is a prototype plan) from the IRS to the effect that the
Company Plan satisfies the requirements of Section 401(a) of the Code as to its
form and that its related trust is exempt from taxation under Section 501(a) of
the Code as to its form and nothing has occurred that could reasonably be
expected to cause the loss of such qualification or exemption or the imposition
of any material liability, penalty or tax under ERISA, the Code or other
applicable Law.
               (j) No amounts payable under the Company Plans will fail to be
deductible for federal income tax purposes by virtue of Sections 162(m) or 280G
of the Code.
               (k) Except as set forth in Section 5.21(k) of the Company
Disclosure Schedule, other than routine claims for benefits under the Company
Plans, there are no pending or Threatened or, to the Knowledge of the Company,
contemplated disputes, Actions, Encumbrances, audits or controversies involving
the Company Plans or the fiduciaries, administrators or trustees of any of the
Company Plans or the Acquired Entities or any ERISA Affiliate either as the
employer or sponsor under any Company Plan, with any Governmental Body, any
participant in or beneficiary of any Company Plan or any other Person
whomsoever. Except as set forth in Section 5.21(k) of the Company Disclosure
Schedule, neither the Company nor any other Acquired Entity has Knowledge of any
reasonable basis for any such dispute, Action, Encumbrance or controversy.
               (l) None of the Company Plans has any material unfunded
liabilities not reflected on the Financial Statements on the Balance Sheet Date.
               (m) No Acquired Entity or ERISA Affiliate has engaged in a
“listed transaction” as defined in Treas. Reg. §1.6011-4(b)(2).
               (n) Except as set forth on Section 5.21(n) of the Company
Disclosure Schedule, there have been no “prohibited transactions” within the
meaning of Section 406 of ERISA or of Section 4975 of the Code, or breaches of
any duty imposed by ERISA on “fiduciaries” as defined in Section 3(21) of ERISA,
with respect to any Company Plan that could result in any liability or excise
tax under ERISA or the Code being imposed on any Acquired Entity.
               (o) All assets attributable to any Company Plan have been held in
trust unless a statutory or an administrative exemption to the trust
requirements of Section 403(a) of ERISA applies.
               (p) Each Company Plan that is a “nonqualified deferred
compensation plan,” as defined in Section 409A(d)(1) of the Code, and any award
thereunder, in each case that is subject to Section 409A of the Code, has been
operated in compliance with Section 409A of the Code since January 1, 2005, and
has complied in documentation since January 1, 2009. No Company Plan that would
be such a nonqualified deferred compensation plan but for the effective date
provisions applicable to Section 409A of the Code, as set forth in Section
885(d) of the American Jobs Creation Act of 2004, has been “materially modified”
within the meaning of

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Section 1.409A-6(a)(4) of the Treasury Regulations after October 3, 2004, in a
manner that would cause it not to comply with Section 409A of the Code.
               (q) Except as set forth in Section 5.21(q) of the Company
Disclosure Schedule, no current or former officer, director, employee, leased
employee or consultant (or their respective beneficiaries) has or will obtain a
right to receive a gross-up payment from any Acquired Entity with respect to any
taxes that may be imposed upon such individual under Section 409A of the Code,
Section 4999 of the Code or otherwise.
               (r) No Acquired Entity has any plan or Contract, whether legally
binding or not, to create any additional employee benefit or compensation plans,
policies or arrangements or, except as may be required by Law, to modify any
Company Plan.
               (s) Except as set forth in Section 5.21(s) of the Company
Disclosure Schedule, the Company has reserved all rights necessary to amend or
terminate each of the Company Plans without the consent of any other Person.
               (t) No Company Plan covers any current or former officers,
directors, employees, leased employees or consultants agents (or their
respective beneficiaries) of an Acquired Entity outside of the United States.
     Section 5.22. Environmental, Health, and Safety Matters. The Acquired
Entities are in compliance in all material respects with all Environmental,
Health, and Safety Requirements in connection with the ownership, use,
maintenance or operation of the Acquired Entities’ assets. There are no Actions
pending or, to the Knowledge of the Company, Threatened by any Person claiming
that any properties or assets used in the Acquired Entities’ business are not,
or that the Acquired Entities’ business has not been conducted, in compliance in
all material respects with all Environmental, Health and Safety Requirements.
     Section 5.23. Insurance. Section 5.23 of the Company Disclosure Schedule
sets forth a true and accurate list of each insurance policy currently
maintained by or at the expense of or for the direct or indirect benefit of the
Acquired Entities and, with respect to each such insurance policy: (i) the name
of the insurance carrier that issued such policy and the policy number of such
policy; (ii) whether such policy is a “claims made” or “occurrences” policy; and
(iii) a description of the coverage provided by such policy. All such summaries
are true and correct in all material respects and each policy described therein
is valid, enforceable, and in full force and effect. Since the Balance Sheet
Date, no Acquired Entity has received any notice or other communication
regarding any actual or possible (a) cancellation or invalidation of any such
insurance policy, (b) refusal of any coverage or rejection of any material claim
under any such insurance policy, or (c) material adjustment in the amount of the
premiums payable with respect to any such insurance policy. Except as set forth
on Section 5.23 of the Company Disclosure Schedule, there are no pending claims
under or based upon any of the insurance policies of the Acquired Entities
listed on Section 5.23 of the Company Disclosure Schedule.

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     Section 5.24. Affiliate Transactions. Except as set forth in Section 5.24
of the Company Disclosure Schedule:
               (a) no current officer, director, or Affiliate of any Acquired
Entity has any direct or indirect interest of any nature in any Acquired Entity,
other than Company Common Stock and Company Options;
               (b) no current or former officer, director or Affiliate of any
Acquired Entity is indebted to any Acquired Entity;
               (c) no current officer, director, or Affiliate of any Acquired
Entity is a party to, or to the Knowledge of the Company, has had, at any time
since January 1, 2008 any direct or indirect financial interest in, any Contract
to which any Acquired Entity is a party;
               (d) to the Knowledge of the Company, no current officer, director
or Affiliate of any Acquired Entity is competing, directly or indirectly, with
any Acquired Entity in any market served by any Acquired Entity; and
               (e) no current officer, director or Affiliate of any Acquired
Entity has or has asserted any claim or right against any Acquired Entity that
is unresolved.
     Section 5.25. Accounts Receivable and Payable.
               (a) All of the accounts receivable of the Acquired Entities as
reflected in the 2009 Financial Statements and any additional accounts
receivable of the Company recorded in the books and records of the Acquired
Entities thereafter are, and as of the Equity Closing Date will be (in each case
if not previously paid), accounts receivable that arose in the Ordinary Course
of Business and represent bona fide claims of the Acquired Entities against
debtors for sales, services performed or other charges arising on or before the
date hereof and all goods delivered and services performed which gave rise to
said accounts were delivered or performed in accordance with the applicable
orders, contracts or customer requirements in all material respects. To the
Knowledge of the Company, the accounts receivable are subject to no defenses,
counterclaims or rights of set-off.
               (b) The accounts payable of the Acquired Entities reflected on
the 2009 Financial Statements represented valid obligations arising from
purchases actually made in bona fide arms’ length transactions entered into in
the Ordinary Course of Business.
     Section 5.26. Disclosure and Internal Controls; Complaints.
               (a) Disclosure and Internal Controls. The Company (i) has
established and maintained disclosure controls and procedures and internal
control over financial reporting (as such terms are defined in paragraphs
(e) and (f), respectively, of Rule 13a-15 under the Exchange Act) as required by
Rule 13a-15 under the Exchange Act, and (ii) has disclosed, based on its most
recent evaluations, to its outside auditors and the audit committee of the board
of directors of the Company, (A) all significant deficiencies and material
weaknesses in the design or operation of internal controls over financial
reporting (as defined in Rule 13a-15(f) of the Exchange Act) which are
reasonably likely to adversely affect the Company’s ability to record,

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process, summarize and report financial data and (B) any fraud, whether or not
material, that involves management or other employees who have a significant
role in the Company’s internal controls over financial reporting.
               (b) Complaints. Since the Balance Sheet Date, no Acquired Entity
nor, to the Knowledge of the Company, any director, officer, employee, auditor,
accountant or outside corporate or securities legal counsel of any Acquired
Entity, has received or otherwise had or obtained knowledge of any complaint,
allegation, assertion, or claim, whether made in writing or made orally to any
director, executive officer, or inside legal counsel or, to the Knowledge of the
Company, outside legal counsel to the Acquired Entities, regarding the
accounting or auditing practices, procedures, methodologies, or methods of
Acquired Entities or its respective internal accounting controls, including any
complaint, allegation, assertion, or claim that any of the Acquired Entities has
engaged in questionable accounting or auditing practices.
     Section 5.27. Full Disclosure. To the Knowledge of the Company, all written
information provided to the Parent or its Representatives by on or behalf of the
Acquired Entities or any of their Representatives do not contain any untrue
statement or omit to state a material fact necessary to make any statement
contained therein, in light of the circumstances in which it was made, not
misleading.
ARTICLE VI.
PRE-CLOSING COVENANTS
     The Parties agree as follows with respect to the period between the
execution of this Agreement and the earlier of the Equity Closing and the
Termination Date, unless otherwise stated:
     Section 6.1. General. Each Party will use its Commercially Reasonable Best
Efforts to take all actions and to do all things necessary, proper or advisable
to consummate, make effective, and comply with all of the terms of this
Agreement and the Transactions including satisfaction of all of the conditions
to Equity Closing for which it is responsible or otherwise controls as set forth
in ARTICLE VIII.
     Section 6.2. Notices and Consents.
               (a) The Company will, and will cause each Company Subsidiary, to
give any notices to third parties, and will use its Commercially Reasonable Best
Efforts to obtain any third party Consents listed on Section 5.3(c) of the
Company Disclosure Schedule or that Parent reasonably requests. The Company will
and will cause each Company Subsidiary to give any notices to, make any filings
with, and use its Commercially Reasonable Best Efforts to obtain any Consents of
Governmental Bodies, if any, required pursuant to any applicable Law in
connection with the Transactions including in connection with the matters
referred to in Section 5.3(c) of the Company Disclosure Schedule. Parent shall
reasonably cooperate with the Company in obtaining such third-party Consents,
which cooperation shall include, without limitation, making available to the
Company on a timely basis information concerning Parent and Buyer that is
reasonably necessary or otherwise required to be furnished in connection with

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obtaining any such Consents; provided, notwithstanding anything contained in
this Section 6.2(a) or this Agreement to the contrary, neither Parent nor Buyer
shall be obligated to provide any material non-public information to the
Company, or to any Person, or be required to make public disclosure of any
material non-public information.
               (b) Each Party will cooperate and use its Commercially Reasonable
Best Efforts to agree jointly on a method to overcome any objections by any
Governmental Body to the Transactions.
               (c) Nothing in this Section 6.2 will require that (i) Parent or
its Affiliates divest, sell, or hold separately any of its assets or properties,
or (ii) Parent, its Affiliates, or the Company (the determination with respect
to which Parent will make) take any actions that could materially adversely
affect the normal and regular operations of Parent, its Affiliates, or the
Company after the Equity Closing.
               (d) The Company shall use its Commercially Reasonable Best
Efforts to deliver, within three (3) Business Days of the date of this
Agreement, a redemption notice, in the form of Exhibit L, to all holders of
outstanding warrants to purchase shares of Company Common Stock with an exercise
price of $0.10 per share (the “Redemption Notices”).
               (e) The Company will, and will cause each Company Subsidiary, to
use its Commercially Reasonable Best Efforts to give the notices, make the
filings and payments, and take such other actions as described in Schedule H.
     Section 6.3. Operation of the Company’s Business. Without the prior written
consent of Parent, which consent shall not be unreasonably withheld, conditioned
or delayed, the Company shall not, and shall cause each Company Subsidiary not
to, engage in any practice, take any action, or enter into any transaction
outside the Ordinary Course of Business or engage in any practice, take any
action, or enter into any transaction of the sort described in Section 5.11, or
settle any pending or Threatened Action. Subject to compliance with applicable
Law, from the date hereof until the earlier to occur of the Equity Closing or
the Termination Date, the Company will confer on a regular and frequent basis
with one or more designated Representatives of Parent to report on operational
matters and the general status of the Acquired Entities’ ongoing business and
will promptly provide to Parent or its designated Representatives copies of all
filings any Acquired Entity makes with any Governmental Body during such period.
     Section 6.4. Preservation of Business. The Company will, and will cause
each Company Subsidiary, to use its Commercially Reasonable Best Efforts to keep
its business and properties substantially intact, including its present
operations, physical facilities, Permits, Facility Leases and working
conditions, and relationships and goodwill with lessors, licensors, suppliers,
customers, and employees.
     Section 6.5. Full Access; Non-Disclosure.
               (a) The Company will, and will cause each Company Subsidiary, to
(a) permit Representatives of Parent (including financing providers) to have
full access at all reasonable times, and in a manner so as not to unreasonably
interfere with the normal business operations of the Company, to all premises,
properties, personnel, books, records, Permits,

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Contracts, and documents and all financial, operating and any other data
pertaining to the Acquired Entities, including for the avoidance of doubt, the
right to have Representatives of Parent present on a daily basis at the
Company’s corporate offices, provided that such Representatives’ activities are
consistent with the foregoing provisions; (b) furnish copies of all such books,
records, Permits, Contracts and documents and all financial, operating and other
data, and other information as Parent may reasonably request; and (c) otherwise
cooperate and assist, to the extent reasonably requested by Parent, with
Parent’s investigation of the properties, assets and financial condition of the
Acquired Entities. In addition, Parent shall have the right to have the Owned
Real Estate, Leased Real Estate and tangible personal property of any Acquired
Entity inspected by Parent at Parent’s sole cost and expense, for purposes of
determining the physical condition and legal characteristics of the Owned Real
Estate, Leased Real Estate and such tangible personal property. No investigation
pursuant to this Section 6.5(a) will affect any representations or warranties
made herein or the conditions to the Parties’ obligations to consummate the
Transactions. If this Agreement is terminated or expires, Parent shall reimburse
the Company for the reasonable and necessary costs actually paid to repair any
damage to property directly caused by any Representative of Parent during the
course of any on-site investigation of the properties of the Company.
               (b) Prior to the Equity Closing, except as may be required by
Law, stock exchange or otherwise contemplated herein or in the Confidentiality
Agreement (defined below) any information provided to Parent or its
Representatives pursuant to this Agreement shall be held by Parent and its
Representatives in accordance with, and shall be subject to the terms of, the
Confidentiality Agreement dated as of January 5, 2010 by and between Parent and
the Company (the “Confidentiality Agreement”).
     Section 6.6. Publicity. Upon execution of this Agreement, Parent and the
Company shall issue the press release attached hereto as Exhibit K, which press
release has been mutually agreed to by Parent, the Company and the Sellers’
Representative. The Company and the Sellers shall afford Parent a reasonable
opportunity to review, comment on and discuss with the Company and the Sellers,
as applicable, (i) any press release, filing with any regulatory agencies, or
other written public announcement or statement to be issued by the Company, or
(ii) any press release, filing with any regulatory agencies, or other written
public announcement or statement to be issued by any Seller relating to the
Transactions, and the Company and the Sellers shall make such changes reasonably
requested by Parent; provided, however, that in no event will the Company or any
Seller be required to delay any filing or announcement required to be made by
any applicable Law beyond the relevant due date for such filing or announcement.
Parent and the Company shall cooperate with each other to mutually determine in
good faith the means by which the Company’s employees, customers and suppliers
will be informed of the Transactions.

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     Section 6.7. Notification. The Company will give prompt written notice to
Parent of any development occurring after the date of this Agreement, or any
item about which such Person did not have Knowledge on the date of this
Agreement, which causes or reasonably could be expected to cause a Breach of any
of the representations and warranties in ARTICLE V or any covenant set forth in
this ARTICLE VI. Parent will give prompt written notice to the Company of any
development occurring after the date of this Agreement, or any item about which
Parent did not have Knowledge on the date of this Agreement, which causes or
reasonably could be expected to cause a Breach of any of the representations and
warranties in ARTICLE III or any covenant set forth in this ARTICLE VI. No
disclosure by any Party pursuant to this Section 6.7 will be deemed to amend or
supplement the Company Disclosure Schedules or to prevent or cure any
misrepresentation or Breach of any representation, warranty, or covenant.
     Section 6.8. Acquisition Proposals.
               (a) None of the Sellers or the Acquired Entities shall, nor shall
any of the foregoing authorize or permit any Representative of, the Sellers or
any Acquired Entity to, (i) directly or indirectly solicit or initiate the
submission of, any Acquisition Proposal (as defined below), (ii) enter into any
agreement with respect to any Acquisition Proposal or (iii) directly or
indirectly participate in any discussions or negotiations regarding, or furnish
to any person any information with respect to, or take any other action to
facilitate any inquiries or the making of any proposal that constitutes, or may
reasonably be expected to lead to, any Acquisition Proposal.
               (b) For purposes of this Agreement: “Acquisition Proposal” means
any offer or proposal (other than an offer or proposal by Parent or an Affiliate
of Parent) for (i) a merger, acquisition consolidation, purchase or similar
transaction involving any equity security of the Company or (ii) the acquisition
(other than an acquisition by Parent or an Affiliate of Parent) of all or
substantially all of the assets of the Company.
     Section 6.9. Tax Matters.
               (a) Tax Matters. Without the prior written consent of Parent,
which consent shall not be unreasonably withheld, conditioned or delayed,
neither the Company nor any of its Subsidiaries, shall make or change any Tax
election, change any annual Tax accounting period, adopt or change any method of
Tax accounting, file any amended Tax Return, enter into any closing agreement,
settle any Tax claim or assessment, surrender any right to claim a Tax refund,
consent to the extension or wavier of the limitations period applicable to any
Tax claim or assessment, or take or omit to take any other action if such action
or omission would have the effect of materially increasing the Tax Liability of
any Acquired Entity, Parent, or Buyer.
               (b) Certain Taxes and Fees. All transfer, documentary, sales,
use, stamp, registration and other such Taxes, and all conveyance fees,
recording charges and other fees and charges (including penalties and interest)
incurred in connection with consummation of the transactions contemplated by
this Agreement shall by paid by the Sellers when due, and the Sellers will, at
their own expenses, file all necessary Tax Returns and other documentation with
respect to all such Taxes, fees and charges, and, if required by applicable law,
Parent will, and

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will cause the Company, to join in the execution of any such tax returns and
other documentation.
     Section 6.10. Payment of Liabilities. From the date hereof until the Equity
Closing Date, the Company shall, and shall cause each of the Company
Subsidiaries to, pay or otherwise satisfy the Liabilities arising in the
Ordinary Course of Business in a manner consistent with past custom and
practice.
     Section 6.11. Exercise of Warrants. Each Seller hereby agrees, without
taking any further action, that immediately prior to the Equity Closing each
Seller shall be deemed to have exercised, on a cashless basis at the Per Share
Purchase Price, that number of warrants to purchase shares of Company Common
Stock with an exercise price of $0.10 per share set forth next to such Seller’s
name on Schedule G attached hereto (the “Warrant Shares”), to the extent not
previously exercised.
ARTICLE VII.
POST-CLOSING COVENANTS
     Section 7.1. General. In case at any time after the Equity Closing any
further action is necessary or desirable to carry out the purposes of this
Agreement, each Seller will take such further action (including executing and
delivering such further instruments and documents) as Parent or Buyer reasonably
may request, all at the Parent’s or Buyer’s sole cost and expense (unless Parent
or Buyer is entitled to indemnification therefor under ARTICLE X). After the
Equity Closing, Buyer will be entitled to possession of all documents, books,
records, agreements, and financial data of any sort relating to the Acquired
Entities.
     Section 7.2. Board of Directors. Immediately following the Equity Closing,
the remaining directors of the Company shall take all necessary or desirable
action to appoint those persons identified on Schedule E to the Company’s board
of directors. Following the Equity Closing Date and prior to the closing of the
Merger, Parent shall be entitled to designate, at its option, upon notice to the
Company the members of the Board of Directors, provided that until earlier of
the Merger Closing and the termination or expiration of the Merger Agreement,
the Company’s Board of Directors shall have at least two directors who are not
officers, directors, or employees of Parent (the “Independent Directors”). To
the fullest extent permitted by applicable law, the Company shall take all
actions requested by Parent which are reasonably necessary to effect the
election of any such designee or designees, including the inclusion in the
Information Statement, or a separate mailing, of the information required by
Section 14(f) of the Exchange Act and Rule 14f-1 promulgated thereunder, and the
making of such mailing as part of the Information Statement or otherwise, as
requested by Parent (provided that Parent shall have provided to the Company on
a timely basis all information required to be included with respect to Parent’s
designees to the Board of Directors). Following the election or appointment of
Parent’s designees pursuant to this Section 7.2 and prior to the Merger Closing,
any amendment, or waiver of any term or condition, of this Agreement, the Merger
Agreement or any other Transaction Document to which the Company is a party, or
any termination of this Agreement or the Merger Agreement by the Company, any
extension by the Company of the time for the performance of any of the
obligations or other acts of Parent or Buyer or waiver or assertion of any of
the Company’s rights hereunder or thereunder, or any other consents or actions
by the

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Board of Directors with respect to this Agreement or the Merger Agreement, will
require, and will require only, the concurrence of the Independent Directors,
except to the extent that applicable law requires that such action be acted upon
by the full Board of Directors, in which case such action will require the
concurrence of the Independent Directors, and no other action by the Company
shall be required for purposes of this Agreement or the Merger Agreement. The
Independent Directors shall be constituted as a Special Committee of the
Company’s Board of Directors on the Equity Closing Date.
     Section 7.3. Litigation Support. So long as any Party actively is
contesting or defending against any Action in connection with (a) the
Transactions or (b) any fact, situation, circumstance, status, condition,
activity, practice, plan, occurrence, event, incident, action, failure to act,
or transaction on or prior to the Equity Closing Date involving any Acquired
Entity, each other Party will cooperate with such Party and such Party’s counsel
in the contest or defense, make available their personnel, and provide such
testimony and access to their books and records as will be necessary in
connection with the contest or defense, at the sole cost and expense of the
contesting or defending Party (unless the contesting or defending Party or one
of its Affiliates is entitled to indemnification therefor under ARTICLE X).
     Section 7.4. Transition. No Seller will take any action that is designed or
intended to have the effect of discouraging any lessor, licensor, customer,
supplier, or other business associate of any of the Acquired Entities from
maintaining its existing business relationships with the Acquired Entities after
the Equity Closing on the same terms as it maintained with the Acquired Entities
prior to the Equity Closing. Each Seller will, and will cause its Affiliates to,
refer all customer, supplier, and other inquiries relating to the businesses of
the Acquired Entities to Parent, or an Affiliate thereof.
     Section 7.5. Director & Officer Insurance. Subject to commercial
availability, Parent will purchase a six (6) year run-off director and officer
liability insurance policy, effective as of the Equity Closing, for the benefit
of the directors and officers of the Company prior to the Equity Closing Date
(the “D&O Tail Policy”). The D&O Tail Policy will provide substantially the same
coverage and amounts and contain terms and conditions as the Company’s current
directors and officers insurance policy and which are in the aggregate
substantially no less advantageous with respect to claims arising from or
related to acts or omissions prior to the Equity Closing Date by the directors
and officers of the Company in their capacities as such.
     Section 7.6. Confidentiality.
               (a) From and after the Equity Closing Date through the second
(2nd) anniversary of the Equity Closing Date, the Sellers shall not and shall
cause their Representatives not to, directly or indirectly, disclose, reveal,
divulge or communicate to any Person other than authorized officers, directors
and employees of Parent or Buyer or use or otherwise exploit for its own benefit
or for the benefit of anyone other than Parent or Buyer, any Confidential
Information (as defined below). The Sellers shall not have any obligation to
keep confidential (or cause its Representatives or Affiliates to keep
confidential) any Confidential Information if and to the extent disclosure
thereof is specifically required by applicable Law; provided, however, that in
the event disclosure is required by applicable Law, the Sellers shall, to the
extent reasonably possible, provide Parent and Buyer with prompt notice of such
requirement prior to

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making any disclosure so that Parent or Buyer may seek an appropriate protective
order. For purposes of this Section 7.6, “Confidential Information” means any
information with respect to the Acquired Entities including methods of
operation, customer lists, products, prices, fees, costs, technology,
inventions, trade secrets, know-how, software, marketing methods, plans,
personnel, suppliers, competitors, markets or other specialized information or
proprietary matters. “Confidential Information” does not include, and there
shall be no obligation hereunder with respect to, information that (i) is or
becomes available to the public other than as a result of a disclosure by the
Sellers in violation of this Agreement, or (ii) is or becomes available to the
Sellers on a non-confidential basis from a source other than the Acquired
Entities or any of its Representatives, provided that such Sellers did not know,
or have reason to believe, after reasonable inquiry, that such source was
subject to an obligation not to disclose such information.
               (b) The covenants and undertakings contained in this Section 7.6
relate to matters which are of a special, unique and extraordinary character and
a violation of any of the terms of this Section 7.6 will cause irreparable
injury to Parent and Buyer, the amount of which will be impossible to estimate
or determine and which cannot be adequately compensated. Accordingly, the remedy
at law for any breach of this Section 7.6 will be inadequate. Therefore, Parent
and Buyer will be entitled to a temporary or permanent injunction, restraining
order or other equitable relief from any court of competent jurisdiction in the
event of any breach of this Section 7.6 without the necessity of proving actual
damage or posting any bond whatsoever. The rights and remedies provided by this
Section 7.6 are cumulative and in addition to any other rights and remedies
which Parent and Buyer may have hereunder or at law or in equity.
ARTICLE VIII.
CLOSING CONDITIONS
     Section 8.1. General Conditions. The obligations of the Parties to effect
the Equity Closing shall be subject to the satisfaction of the following
conditions unless waived in writing by Parent, the Sellers’ Representative and
the Company:
               (a) No Injunction. No Law or order, injunction, judgment, decree,
ruling, assessment, or award shall have been enacted, entered, issued or
promulgated by any Governmental Body (and be in effect) which prohibits the
consummation of the Equity Purchase or any of the other Transactions.
               (b) Legal Proceedings. No Governmental Body shall have initiated
proceedings to restrain or prohibit the Equity Purchase or any of the other
Transactions or force rescission, unless such Governmental Body shall have
withdrawn and abandoned any such proceedings prior to the time which otherwise
would have been the Equity Closing Date and there shall not have been any Law or
order which would require the divestiture by the Company of a material portion
of the assets of the Company used in the Company’s Business, taken as a whole,
or impose any material limitation on the ability of the Company to conduct the
Company’s Business, taken as a whole, following the Equity Closing.

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               (c) Regulatory Approval. All regulatory approvals or waivers
required to consummate the Transactions shall have been obtained and shall
remain in full force and effect and all statutory waiting periods in respect
thereof shall have expired, and no such approvals or waivers shall contain any
conditions, restrictions or requirements which would reduce the benefits of the
Transactions to Parent in any material respect.
     Section 8.2. Conditions Precedent to Obligation of Parent and Buyer.
Parent’s and Buyer’s obligation to consummate the Equity Closing is subject to
the satisfaction on or prior to the Equity Closing Date of each condition
precedent listed below, any of which may be waived in writing by Parent and/or
Buyer.
               (a) Accuracy of the Sellers Representations and Warranties. All
representations and warranties of the Sellers set forth in ARTICLE IV, shall
have been accurate and complete in all respects on the date when made and on the
Equity Closing Date (unless the representations and warranties address matters
as of a particular date, in which case they shall remain accurate and complete
in all respects as of such date) with the same effect as if made on and as of
the Equity Closing Date, without giving effect to any supplements to the Sellers
Disclosure Schedule.
               (b) Accuracy of Representations and Warranties of the Company.
All representations and warranties of the Company set forth in ARTICLE V shall
have been accurate and complete in all material respects on the date when made
and on the Equity Closing Date (unless the representations and warranties
address matters as of a particular date, in which case they shall remain
accurate and complete in all material respects as of such date and except with
respect to any provisions including the word “material” or words of similar
import, with respect to which such representations and warranties shall have
been accurate and complete in all respects) with the same effect as if made on
and as of the Equity Closing Date, without giving effect to any supplements to
the Company Disclosure Schedule.
               (c) Compliance with Obligations. The Sellers and the Company
shall have performed and complied with all of their covenants and obligations
under the Transaction Documents to be performed or complied with at or prior to
the Equity Closing (singularly and in the aggregate).
               (d) No Material Adverse Effect. Since the Balance Sheet date
there shall have been no event, series of events or the lack of occurrence
thereof which, singularly or in the aggregate, could reasonably be expected to
have a Material Adverse Effect on the Acquired Entities taken as a whole.
               (e) Consents.
                    (i) The Company shall have obtained a written consent to the
consummation of the Transactions from each of the parties identified in
Section 5.3 of the Company Disclosure Schedule, other than with respect to each
note payable identified in Section 5.3 that requires Consent for prepayment
thereof (the “Prepayment Notes”); and
                    (ii) The Company shall have obtained a written consent from
the holder of each Prepayment Note to the prepayment of each Prepayment Note,
other than with

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respect to a maximum aggregate amount of Prepayment Notes, including all accrued
and unpaid interest relating thereto as of the Equity Closing Date, and any
accrued late fees or other payment obligations with respect thereto, not to
exceed $1,000,000 as of the Equity Closing Date.
                    (f) Transaction Documents. Each of the Sellers and the
Company shall have duly executed or caused the execution of the Transaction
Documents to which it is a party, and delivered each of the documents and
instruments required to be delivered by it pursuant to Section 2.4(a).
                    (g) Information Statement. An information statement (the
“Information Statement”), in form and substance reasonably satisfactory to
Parent, that complies in all material respects with the requirements of the
Exchange Act (and the rules and regulations promulgated thereunder) and the
DGCL, relating to the written consent of the stockholders of the Company
approving the adoption of the Merger Agreement and the consummation of the
Merger and the other Transactions, shall have been prepared and delivered to
Parent.
                    (h) Payoff Letters. The payoff letters shall have been
delivered to Parent in accordance with Section 2.4(a)(ix); provided, however
that notwithstanding the foregoing the Company shall not be deemed in Breach of
this condition to Closing if it does not obtain a payoff letter from the holders
of Prepayment Notes from whom the Company does not obtain a consent as
specifically permitted and in accordance with Section 8.2(e)(ii) hereof.
                    (i) Pre-Closing Actions. The Company shall have given the
notices, made the filings and payments, and taken such other actions as
described in Schedule H.
     Section 8.3. Conditions Precedent to Obligations of the Company and the
Sellers. The obligation of the Company and the Sellers to consummate the
Transactions contemplated to occur in connection with the Equity Closing is
subject to the satisfaction on or prior to the Equity Closing Date of each
condition precedent listed below, any of which may be waived by the Company and
the Sellers’ Representative.
                    (a) Accuracy of Representations and Warranties. All
representations and warranties of Parent and Buyer set forth in ARTICLE III,
shall have been accurate and complete in all respects on the date when made and
on the Equity Closing Date (unless the representations and warranties address
matters as of a particular date, in which case they shall remain accurate and
complete in all respects as of such date) with the same effect as if made on and
as of the Equity Closing Date, without giving effect to any supplements to the
Parent Disclosure Schedule.
                    (b) Compliance with Obligations. Parent and Buyer shall have
performed and complied with all of its covenants and obligations under the
Transaction Documents to be performed or complied with at or prior to Equity
Closing (singularly and in the aggregate).
                    (c) Transaction Documents. Parent and Buyer shall have duly
executed and delivered each of the documents and instruments required to be
delivered by it pursuant to Section 2.4(b).

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                    (d) D&O Tail Policy. Parent shall have purchased the D&O
Tail Policy to be effective on the Equity Closing Date.
ARTICLE IX.
TERMINATION
     Section 9.1. Termination of Agreement. The Parties may terminate this
Agreement upon written notice thereof to each of the other Parties hereto and
the Transactions may be abandoned at any time prior to the Equity Closing Date,
as provided below:
               (a) by the mutual written consent of Parent and the Sellers; or
               (b) by Parent if the Merger Agreement has been terminated or
expired or if any Action seeking to prohibit, restrain, invalidate, or collect
Damages as a result of, the consummation of the Equity Purchase, the Merger or
the other Transactions, is pending; or
               (c) by either the Sellers on the one hand, or Parent, on the
other hand, if the Transactions are not consummated on or before the Expiration
Date, provided, however, that the right to terminate this Agreement pursuant to
this Section 9.1(c) shall not be available to any Party if the failure to
consummate the Transactions on or before the Expiration Date resulted from such
Party’s Breach of any representation, warranty, agreement or obligation under
any Transaction Document; or
               (d) by Parent if any of the conditions provided for in
Section 8.1 or Section 8.2 of this Agreement has not been satisfied on or before
the Expiration Date or shall have become incapable of satisfaction or
fulfillment on or before the Expiration Date (other than as a result of a Breach
of this Agreement by Parent) and Parent has not waived such conditions; or
               (e) by the Sellers if any of the conditions provided for in
Section 8.1 or Section 8.3 of this Agreement has not been satisfied on or before
the Expiration Date or shall have become incapable of satisfaction or
fulfillment on or before the Expiration Date (other than as a result of a Breach
of this Agreement by the Sellers or the Company) and the Sellers have not waived
such conditions; or
               (f) by Parent, if (i) the board of directors of the Company
(A) withdraws, modifies or changes its recommendation of this Agreement, the
Merger Agreement or the Merger in a manner adverse to Parent or shall have
resolved pursuant to valid board action to do any of the foregoing, or (B) shall
have recommended to the stockholders of the Company any Acquisition Proposal or
resolved by valid board action to do so; or (ii) the Transactions shall not have
been consummated prior to the Expiration Date and (A) a third party shall have
made or caused to be made an Acquisition Proposal or (B) any “group” (as defined
in Section 13(d)(3) of the Exchange Act) or Person (including the Company or any
of its Affiliates), other than Parent or any of its Affiliates, shall have
become the beneficial owner of more than fifty percent (50%) of the outstanding
shares of the Company Common Stock.
     Section 9.2. Effect of Termination. Except for the obligations under this
ARTICLE IX and ARTICLE XII, if this Agreement is terminated under Section 9.1,
then all further

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obligations of the Parties under this Agreement will terminate. Except as
otherwise set forth herein, such termination shall be without liability of any
Party to any other Party; provided, however that notwithstanding the foregoing,
such termination shall not relieve any Party of Liability for any Breach of this
Agreement which occurs prior to termination. If any Party hereto terminates this
Agreement pursuant to Section 9.1(d) or Section 9.1(e), which right of
termination arises as a result of a Breach of any representation, warranty or
covenant, then the rights of the non-Breaching Party(ies) to pursue all legal
remedies for Damages such Party(ies) suffer will survive such termination
unimpaired and no election of remedies will have been deemed to have been made.
ARTICLE X.
INDEMNIFICATION
     Section 10.1. Survival of Representations and Warranties.
               (a) Each representation and warranty of the Sellers contained in
ARTICLE IV, in any of the Transaction Documents, or any certificate related to
such representations and warranties shall survive the Equity Closing and will
continue in full force and effect in perpetuity.
               (b) Each representation and warranty of the Company contained in
ARTICLE V or in any of the Transaction Documents, and any certificate related to
such representations and warranties will survive the Equity Closing and will
continue in full force and effect until the first to occur of (i) the Merger
Closing, or (ii) 11:59 p.m. Los Angeles time on the one hundred and twentieth
(120th) day following the Equity Closing.
               (c) Each representation and warranty of Parent and Buyer
contained herein, and any certificate related to such representations and
warranties will survive the Equity Closing and will continue in full force and
effect in perpetuity.
     Section 10.2. Indemnification Provisions for the Benefit of the Parent
Indemnified Parties.
               (a) Indemnification by the Sellers Regarding the Acquired
Entities. Subject to the provisions of Section 10.5 and Section 10.6, each
Seller shall, jointly and severally, indemnify and hold the Parent Indemnified
Parties harmless, from and pay any and all Damages directly or indirectly
resulting from, relating to, arising out of, or attributable to any one of the
following:
                    (i) Any Breach of any representation or warranty of the
Acquired Entities in this Agreement or any Transaction Document as if such
representation or warranty were made on and as of the Equity Closing Date
(except for representations and warranties made as of a specified date, which
shall be deemed to have been made only as of such specified date) without giving
effect to any supplement to the Company Disclosure Schedule; and
                    (ii) Any Breach by the Acquired Entities of any covenant or
obligation of the Acquired Entities in this Agreement or the Transaction
Documents;

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                    (iii) Any failure to give the notices, make the filings and
payments, and take such other actions as described in Schedule H.
               (b) Indemnification by each Seller. Subject to the provisions of
Section 10.5 and Section 10.6, each Seller shall, severally and not jointly,
indemnify and hold the Parent Indemnified Parties harmless, from and pay any and
all Damages directly or indirectly resulting from, relating to, arising out of,
or attributable to any one of the following:
                    (i) Any Breach of any representation or warranty such Seller
has made in ARTICLE IV, the certificate provided pursuant to Section 2.4(a)(ii),
or any Transaction Document, as if such representation or warranty were made on
and as of the Equity Closing Date (except for representations and warranties
made as of a specified date, which shall be deemed to have been made only as of
such specified date); and
                    (ii) Any Breach by such Seller of any covenant or obligation
of such Seller in this Agreement or the Transaction Documents.
     Section 10.3. Indemnification Provisions for Benefit of the Sellers. Parent
will indemnify and hold the Seller Indemnified Parties harmless, from and pay
any and all Damages directly resulting from, relating to, or arising out of
(i) the Transactions (which shall not include, without limitation,
indemnification with respect to any transactions entered into by any Seller
relating to the Company prior to the date hereof), and (ii) the operation and
ownership of, or conditions first occurring with respect to, any Acquired Entity
after 11:59 p.m. on the Equity Closing Date. Notwithstanding the foregoing,
Parent will not indemnify the Seller Indemnified Parties for Damages directly or
indirectly resulting from, relating to, arising out of, or attributable to
events or circumstances existing, or claims made or Threatened, prior to the
Equity Closing Date of which the Company or any Seller had Knowledge at the time
of the Equity Closing unless such events, circumstances or claims were disclosed
to Parent in the Sellers Disclosure Schedule or the Company Disclosure Schedule
or a supplement thereto.
     Section 10.4. Indemnification Claim Procedures.
               (a) If any third party notifies any Indemnified Party with
respect to the commencement of any Action that may give rise to a claim for
indemnification against any Indemnitor under this ARTICLE X (an “Indemnification
Claim”), then the Indemnified Party will promptly give notice to the Indemnitor.
Failure to notify the Indemnitor will not relieve the Indemnitor of any
Liability that it may have to the Indemnified Party, except to the extent the
defense of such Action is materially and irrevocably prejudiced by the
Indemnified Party’s failure to give such notice.
               (b) An Indemnitor will have the right to defend against an
Indemnification Claim, with counsel of its choice reasonably satisfactory to the
Indemnified Party if (i) within fifteen (15) days following the receipt of
notice of the Indemnification Claim the Indemnitor notifies the Indemnified
Party in writing that the Indemnitor will indemnify the Indemnified Party from
and against the entirety of any Damages the Indemnified Party may suffer
resulting from, relating to, arising out of, or attributable to the
Indemnification Claim, (ii) the Indemnitor provides the Indemnified Party with
evidence reasonably acceptable to the

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Indemnified Party that the Indemnitor will have the financial resources to
defend against the Indemnification Claim and pay, in cash, all Damages the
Indemnified Party may suffer resulting from, relating to, arising out of, or
attributable to the Indemnification Claim, (iii) the Indemnification Claim
involves only money Damages and does not seek an injunction or other equitable
relief, (iv) settlement of, or an adverse judgment with respect to, the
Indemnification Claim is not in the good faith judgment of the Indemnified Party
likely to establish a precedential custom or practice materially adverse to the
continuing business interests of the Indemnified Party, and (v) the Indemnitor
actively and diligently conducts the defense of the Indemnification Claim.
Subject to Section 10.5, the Indemnitor will be liable for the reasonable fees
and expenses of counsel employed by the Indemnified Party for any period during
which the Indemnitor has not assumed the defense thereof (other than during any
period in which the Indemnified Party will have failed to give notice of the
Indemnification Claim as provided above).
               (c) So long as the Indemnitor is conducting the defense of the
Indemnification Claim in accordance with Section 10.4(b), (i) the Indemnified
Party may retain separate co-counsel at its sole cost and expense and
participate in the defense of the Indemnification Claim, (ii) the Indemnified
Party will not consent to the entry of any order with respect to the
Indemnification Claim without the prior written Consent of the Indemnitor (not
to be withheld unreasonably), and (iii) the Indemnitor will not Consent to the
entry of any order with respect to the Indemnification Claim without the prior
written Consent of the Indemnified Party (not to be unreasonably withheld,
conditioned or delayed provided that it will not be deemed to be unreasonable
for an Indemnified Party to withhold its Consent (A) with respect to any finding
of or admission (1) of any Breach of any Law, order or Permit, (2) of any
violation of the rights of any Person, or (3) which Indemnified Party believes
could have a material adverse effect on any other Actions to which the
Indemnified Party or its Affiliates are a party or to which Indemnified Party
has a good faith belief it may become a party, or (B) if any portion of such
order would not remain sealed).
               (d) Notwithstanding the foregoing, if an Indemnified Party
determines in good faith that there is a reasonable probability that an
Indemnification Claim may adversely affect it or its Affiliates other than as a
result of monetary Damages for which it would be entitled to indemnification
under this Agreement, the Indemnified Party may, by notice to the Indemnitor,
assume the exclusive right to defend, compromise or settle such Indemnification
Claim, but the Indemnitor will not be bound by any determination of any
Indemnification Claim so defended for the purposes of this Agreement or any
compromise or settlement effected without its Consent (which may not be
unreasonably withheld, conditioned or delayed).
               (e) Each Party hereby consents to the non-exclusive jurisdiction
of any Governmental Body, arbitrator, or mediator in which an Action is brought
against any Indemnified Party for purposes of any Indemnification Claim that an
Indemnified Party may have under this Agreement with respect to such Action or
the matters alleged therein, and agrees that process may be served on such Party
with respect to such claim anywhere in the world.

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     Section 10.5. Limitations.
               (a) Notwithstanding anything to the contrary contained herein,
the Company and the Sellers shall not have any Liability under
Section 10.2(a)(i) (other than in respect of claims relating to (i) Breaches of
Section 5.5, and (ii) the failure by the Company to give the notices, make the
filings and payments, and take such other actions as described in Schedule H,
which for the avoidance of doubt shall not be subject to the limitations of this
Section 10.5(a)) unless the aggregate of all Damages relating thereto for which
the Sellers would, but for this proviso, be liable exceeds on a cumulative basis
an amount equal to $250,000; upon which the Company and the Sellers shall be
Liable for the full extent of cumulative Damages, relating back to and including
the first dollar of all Damages so claimed.
               (b) Notwithstanding anything to the contrary contained herein,
the Sellers shall have no Liability (i) under Section 10.2(a) (other than for
Breaches of Section 5.5(b)) in excess of $750,000 less the amount of any
adjustment made pursuant to Section 2.5(c)(i), and (ii) under Section 10.2(a)
for Breaches of Section 5.5(b)) in excess of the amounts paid or payable to such
Seller pursuant to this Agreement for any Sellers Shares or Seller Options owned
by such Seller, and the indemnification obligations of the Sellers set forth in
Section 10.2(a) shall constitute the sole and exclusive remedy of Parent against
the Sellers for any claim or cause of action arising out of or in connection
with the matters identified in Section 10.2(a)(i) and Section 10.2(a)(ii) absent
actual fraud or willful Breach. For the avoidance of doubt, any amounts credited
to the Holdback Amount pursuant to Section 2.5(c)(ii) that cause the Adjusted
Holdback Amount to exceed $750,000 shall not be available to satisfy any
Indemnification Claims that may be asserted pursuant to this ARTICLE X.
               (c) Notwithstanding anything to the contrary contained herein, no
Seller shall have any Liability (i) under Section 10.2(b)(i) (other than for
Breaches of Section 4.5) in excess of the amounts paid or payable to such Seller
pursuant to this Agreement for any Sellers Shares or Seller Options owned by
such Seller, and (ii) under Section 10.2(b)(i) for Breaches of Section 4.5 in
excess of the amounts paid or payable to such Seller pursuant to this Agreement
for any Sellers Shares or Seller Options owned by such Seller, plus amounts paid
or payable to such Seller with respect to any Company Debt pursuant to this
Agreement, and the indemnification obligations of the Sellers set forth in
Section 10.2(b) shall constitute the sole and exclusive remedy of Parent against
the Sellers for any claim or cause of action arising out of or in connection
with the matters identified in Section 10.2(b)(i) and Section 10.2(b)(ii) absent
actual fraud or willful Breach by any such Seller.
               (d) For purposes of this ARTICLE X, once a determination has been
made that a specific breach of a representation, warranty, covenant or agreement
has occurred for purposes of the indemnification obligations hereunder, the
calculation of Damages with respect to such specific breach shall be made
without regard to any limitation or qualification as to materiality set forth in
such representation, warranty, covenant or agreement.
               (e) Neither the exercise of, nor failure to exercise, its rights
under this Section 10.2 or Section 10.3, as applicable, by a Party will
constitute an election of remedies or limit a Party in any manner in the
enforcement of any other remedies available to such Party.

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     Section 10.6. Calculation of Damages. The calculation of damages under, or
related to the Transactions contemplated by this Agreement, shall in all cases
be determined taking into account the purposes of the Transactions to acquire
one hundred percent (100%) of the Equity Interests of the Company. No Party
shall be entitled to assert or pursue a claim for Damages if such Damages have
been accounted for in the Definitive Post Closing Statement.
     Section 10.7. Purchase Price Adjustment. The Parties acknowledge that it is
intended that payments for indemnification made pursuant to this ARTICLE X will
be treated as adjustments to the Final Purchase Price and the Parties agree
that, unless otherwise required by law, neither they nor any of their respective
Affiliates will take any position in a filing for U.S. federal, state or local
income Tax purposes that is inconsistent with this intention.
     Section 10.8. Release of Adjusted Holdback Amount.
               (a) Distributions Relating to Indemnification Claims. If any
Parent Indemnified Party has a claim for indemnity under Section 10.2(a) or
Section 10.2(b), Parent may deliver a certificate (an “Officer’s Certificate”)
to the Sellers’ Representative, stating that one of more of the Parent
Indemnified Parties or any of their respective successors or assigns has paid,
properly accrued, or reasonably anticipates that it will have to pay or accrue
Damages in an amount specified in such Officer’s Certificate, with the basis for
such claim set forth in reasonable detail. If within five (5) Business Days
after delivery to the Sellers’ Representative of a copy of an Officer’s
Certificate, Parent has not received written notice from the Sellers’
Representative that the Sellers’ Representative disputes in good faith the claim
set forth in such Officer’s Certificate, with the basis for such dispute set
forth in reasonable detail, Parent shall deduct from the Adjusted Holdback
Amount and retain for its own account an amount equal to the amount of Damages
set forth in the applicable Officer’s Certificate.
               (b) Distribution Upon Termination of the Representations and
Warranties. On that date which is two (2) Business Days following the
termination of the Company’s representations and warranties contained in ARTICLE
V, as provided above, Parent shall, or shall cause the Buyer to, distribute the
remaining portion of the Adjusted Holdback Amount as of such date minus any
amounts claimed due and owing to a Parent Indemnified Party as certified to the
Sellers’ Representative in an Officer’s Certificate, on or prior to the date of
termination, minus any amounts for which the Sellers’ Representative is entitled
to reimbursement pursuant to Section 11.2(c) as certified to Parent in a
certificate delivered by the Sellers’ Representative (which amounts (to the
extent available) will be promptly delivered to the Sellers’ Representative
following the termination of the Company’s representations and warranties
contained in ARTICLE V), to the Sellers (pro rata based on the number of Seller
Shares they each held immediately prior to the Equity Closing) together with
interest accrued thereon from the Equity Closing Date until the second (2nd)
Business Day prior to the date of payment at an annual rate equal to 0.10%. For
purposes of clarification, to the extent the funds in the Holdback Account are
less than the amounts claimed due and owing to a Parent Indemnified Party as
certified to the Sellers’ Representative in one or more Officer’s Certificates,
Parent shall be entitled to retain all of the funds in the Holdback Amount until
such Indemnification Claims have been definitively and finally resolved and only
in the event that there remain funds in the Holdback Account in excess of the
amounts claimed due and owing to a Parent Indemnified Party, as certified to the
Sellers’ Representative in one or more Officer’s

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Certificates, shall Parent be required to distribute such excess funds from the
Holdback Amount to the Seller’s Representative in full satisfaction of Parent’s
obligations pursuant to this Section 10.8(b). With respect to any
Indemnification Claim asserted against an individual Seller pursuant to
Section 10.2(b), the amount of any such claim shall be deducted from the amount
otherwise distributable to such Seller.
ARTICLE XI.
SELLERS’ REPRESENTATIVE.
     Section 11.1. Authorization of the Sellers’ Representative.
               (a) Harry Zimmerman (the “Sellers’ Representative”) (and each
successor appointed in accordance with Section 11.3) hereby is appointed,
authorized, and empowered to act, on behalf of each Seller, in connection with,
and to facilitate the consummation of, the Transactions and in connection with
the activities to be performed on the Sellers’ behalf under this Agreement, for
the purposes and with the powers and authority set forth in this
Section 11.1(a), which will include the power and authority:
                    (i) to execute and deliver such Consents in connection with
this Agreement and the Transactions as the Sellers’ Representative, in its
reasonable discretion, may deem necessary or desirable to give effect to the
purposes and intentions of this Agreement;
                    (ii) as the Sellers’ Representative, to enforce and protect
the Sellers’ rights and interests arising out of or under or in any manner
relating to this Agreement (including in connection with any claims related to
the Transactions) and, in connection therewith, to (A) assert any claim or
institute any Action, (B) investigate, defend, contest or litigate any Action,
initiated by any Parent Indemnified Party, or any other Person, against the
Sellers and/or the Holdback Amount, and receive process on behalf of each Seller
in any such Action and compromise or settle on such terms as the Sellers’
Representative will determine to be appropriate, give receipts, releases and
discharges on behalf of all or any Sellers with respect to any such Action,
(C) file any proofs, debts, claims and petitions as the Sellers’ Representative
may deem advisable or necessary, (D) settle or compromise any claims related to
the Transactions, (E) assume, on each Seller’s behalf, the defense of any claims
related to the Transactions, and (F) file and prosecute appeals from any
decision, judgment or award rendered in any of the foregoing Actions, it being
understood that the Sellers’ Representative will not have any obligation to take
any such actions, and will not have Liability for any failure to take any such
action;
                    (iii) to enforce payment of the Holdback Amount on the
Sellers’ behalf, in the Sellers’ Representative’s name or, if the Sellers’
Representative so elects, upon at least fifteen (15) days’ prior written notice
to the Sellers and in the absence of written instructions to the contrary, in
the names of one or more Sellers;
                    (iv) to refrain from enforcing any right of any Seller
and/or of the Sellers’ Representative arising out of or under or in any manner
relating to this Agreement;
                    (v) to make, execute, acknowledge and deliver all such other
Contracts, guarantees, orders, receipts, endorsements, notices, requests,
instructions, certificates,

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stock powers, letters and other writings, and, in general, to do any and all
things and to take any and all action that the Sellers’ Representative, in its
sole and absolute discretion, may consider necessary or proper or convenient in
connection with or to carry out the activities described in Section 11.1(a)(i)
through Section 11.1(a)(iv) and the Transactions.
               (b) The grant of authority provided for in this Section 11.1:
(i) is coupled with an interest and is being granted, in part, as an inducement
to the Company and Parent to enter into this Agreement, and will be irrevocable
and survive the death, incompetency, bankruptcy or liquidation of any Seller and
will be binding on any successor thereto; (ii) subject to Section 11.3, may be
exercised by the Sellers’ Representative acting by signing as Sellers’
Representative of any Seller; and (iii) will survive any distribution of the
Holdback Amount.
     Section 11.2. Compensation; Exculpation; Indemnity.
               (a) The Sellers’ Representative will not be entitled to any fee,
commission or other compensation for the performance of its service hereunder
but will be entitled to reimbursement for any of its out-of-pocket expenses
incurred as Sellers’ Representative pursuant to the undertaking provided by each
Seller in Section 11.2(c).
               (b) In dealing with this Agreement and any instruments,
agreements or documents relating thereto, and in exercising or failing to
exercise all or any of the powers conferred upon the Sellers’ Representative
hereunder or thereunder, (i) the Sellers’ Representative will not assume any,
and will incur no, Liability whatsoever to any Seller because of any error in
judgment or other act or omission performed or omitted hereunder or in
connection with this Agreement, and (ii) the Sellers’ Representative will be
entitled to rely on the advice of counsel, public accountants or other
independent experts experienced in the matter at issue, and any error in
judgment or other act or omission of the Sellers’ Representative pursuant to
such advice will not subject the Sellers’ Representative to Liability to any
Seller, the Company, Parent, or any other Person.
               (c) The Sellers’ Representative will be indemnified by the
Sellers, jointly and severally, from and against any and all claims, demands,
liabilities, costs and expenses (including, without limitation, reasonable
attorneys’ fees), arising from or related to any acts undertaken (and any
omissions to act) in his capacity as the Sellers’ Representative, except to the
extent attributable to the Sellers’ Representative’s willful misconduct. Each
Seller, by the execution and delivery of this Agreement, agrees (i) to reimburse
the Sellers’ Representative for any and all fees, costs and expenses incurred by
the Sellers’ Representative promptly following submission by the Sellers’
Representative of appropriate documentation substantiating the amount thereof
and (ii) as among themselves, to bear their pro rata share of any such fees,
costs and expenses of the Sellers’ Representative based on the number of Seller
Shares they held immediately prior to the Equity Closing Date. For the avoidance
of doubt, any claims by the Sellers’ Representative for indemnification may be
asserted by the Sellers’ Representative against any individual Seller who shall
then seek reimbursement for all other Sellers as contemplated in this
Section 11.2.
     Section 11.3. Removal and Replacement of Sellers’ Representative; Successor
Sellers’ Representative.

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               (a) If the Sellers’ Representative or his heir or personal
representative, as the case may be, advise the Sellers that the Sellers’
Representative is unavailable to perform its duties hereunder, within three
(3) Business Days of notice of such advice, a Sellers’ Representative, who shall
be a Seller, will be appointed by the affirmative vote of those Sellers who
held, as of immediately prior to the Equity Closing, a majority of the Seller
Shares and Seller Options as of the Equity Closing.
               (b) Any Sellers’ Representative may be removed at any time by a
written notice, delivered by the Sellers who held, as of immediately prior to
the Equity Closing, a majority of the Seller Shares and Seller Options, to the
Sellers’ Representative, the other Sellers, and Parent. No Sellers’
Representative may be removed until the Sellers who held, as of immediately
prior to the Equity Closing, a majority of the Seller Shares and Seller Options
have replaced such Sellers’ Representative by written notice delivered to the
Sellers and Parent.
               (c) If any successor Sellers’ Representative is appointed under
Section 11.3(a) or Section 11.3(b), such appointment will be effective upon
delivery of written notice thereof, executed by the Sellers who held, as of
immediately prior to the Equity Closing, a majority of the Seller Shares and
Seller Options, to each of the Sellers’ Representative, the other Sellers and
Parent. Any successor Sellers’ Representative will have all of the authority and
responsibilities conferred upon or delegated to a Sellers’ Representative
pursuant to this Section 11.3.
     Section 11.4. Reliance; Limitation as to Parent and the Company.
               (a) Parent and the Company may conclusively and absolutely rely,
without inquiry, and until the receipt of written notice of a change of the
Sellers’ Representative under Section 11.3, may continue to rely, without
inquiry, upon the action of the Sellers’ Representative as the action of each
Seller in all matters referred to in Section 11.1(a); provided, however, that if
Parent is given written notice of the appointment of a successor Sellers’
Representative under Section 11.3, Parent, the Company, and the Sellers will be
obligated to recognize, and will only be able to so rely upon the action of,
such successor Sellers’ Representative as the Sellers’ Representative for all
purposes under this Agreement.
               (b) Except as set forth in this Section 11.4, nothing in this
ARTICLE XI creates any enforceable obligations between Parent or the Company, on
the one hand, and the Sellers, on the other hand.
ARTICLE XII.
MISCELLANEOUS
     Section 12.1. Entire Agreement. The Transaction Documents, together with
the exhibits and schedules hereto and the certificates, documents, instruments
and writings that are delivered pursuant hereto, constitute the entire agreement
and understanding of the Parties in respect of the subject matter contemplated
thereby and supersede all prior understandings, agreements, or representations
by or among the Parties, written or oral, to the extent they relate in any way
to the subject matter thereof or the Transactions. Except as (i) expressly

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contemplated by ARTICLE IX and (ii) the Sellers’ Representative as contemplated
by ARTICLE XI, there are no third party beneficiaries having rights under or
with respect to this Agreement.
     Section 12.2. Successors. All of the terms, agreements, covenants,
representations, warranties, and conditions of this Agreement are binding upon,
and inure to the benefit of and are enforceable by, the Parties and their
respective successors.
     Section 12.3. Assignments. No Party may assign either this Agreement or any
of its rights, interests, or obligations hereunder without the prior written
approval of Parent and the Sellers who held, as of immediately prior to the
Equity Closing, a majority of the Seller Shares and Seller Options; provided,
however, that Parent may (a) assign any or all of its rights and interests
hereunder to one or more of its Affiliates and (b) designate one or more of its
Affiliates to perform its obligations hereunder (in any or all of which cases
Parent nonetheless will remain responsible for the performance of all of its
obligations hereunder).
     Section 12.4. Notices. All notices, requests, demands, claims and other
communications hereunder will be in writing. Any notice, request, demand, claim
or other communication hereunder will be deemed duly given if (and then three
(3) Business Days after) it is sent by registered or certified mail, return
receipt requested, postage prepaid, and addressed to the intended recipient as
set forth below:
If to Parent, Buyer and after Equity Closing to the Company:
VCA Antech, Inc.
12401 West Olympic Boulevard
Los Angeles, California 90064-1022
Attn: Chief Financial Officer
Tel: (310) 571-6505
Fax: (310) 571-6905
Copy to (which will not constitute notice):
Akin Gump Strauss Hauer & Feld LLP
Century Tower Plaza, 2029 Century Park East, Suite 2400
Los Angeles, CA 90067
Attn: Frank Reddick
Tel: (310) 229-1000
Fax: (310) 229-1001
If to the Company (prior to Equity Closing):
Pet DRx Corporation
215 Centerview Drive, Suite 360
Brentwood, Tennessee
Attn: Chief Executive Officer
Tel: (615) 369-1914
Fax: (404) 365-0107

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Copy to (which will not constitute notice):
Bryan Cave LLP
1201 W. Peachtree Street, 14th Floor
Atlanta, Georgia 30309-3488
Attn: Rick Miller
Tel: (404) 572-6787
Fax: (404) 420-0787
If to Sellers’ Representative the address set forth in Section 12.4 of the
Company Disclosure Schedule.
Any Party may send any notice, request, demand, claim, or other communication
hereunder to the intended recipient at the address set forth above using any
other means (including personal delivery, expedited courier, messenger service,
telecopy, telex, ordinary mail, or electronic mail), but no such notice,
request, demand, claim, or other communication will be deemed to have been duly
given unless and until it actually is received by the intended recipient. Any
Party may change the address to which notices, requests, demands, claims, and
other communications hereunder are to be delivered by giving the other Parties
notice in the manner herein set forth.
     Section 12.5. Submission to Jurisdiction; Process Agent. Each Party submits
to the jurisdiction of any federal or state court located in Delaware, in any
Action arising out of or relating to this Agreement and agrees that all claims
in respect of the Action may be heard and determined in any such court. Each
Party also agrees not to bring any Action arising out of or relating to this
Agreement in any other court. Each Party agrees that a final judgment in any
Action so brought will be conclusive and may be enforced by Action on the
judgment or in any other manner provided at Law or in equity. Each Party waives
any defense of inconvenient forum to the maintenance of any Action so brought
and waives any bond, surety, or other security that might be required of any
other Party with respect thereto. Process in any such action, suit or proceeding
may be served on any party anywhere in the world, whether within or without the
jurisdiction of any such court.
     Section 12.6. Time. Time is of the essence in the performance of this
Agreement.
     Section 12.7. Counterparts. This Agreement may be executed in two or more
counterparts, each of which will be deemed an original but all of which together
will constitute one and the same instrument.
     Section 12.8. Headings. The article and section headings contained in this
Agreement are inserted for convenience only and will not affect in any way the
meaning or interpretation of this Agreement.
     Section 12.9. Governing Law. This Agreement and the performance of the
Transactions and obligations of the Parties hereunder will be governed by and
construed in accordance with the laws of the State of Delaware, without giving
effect to any choice of Law principles.

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     Section 12.10. Amendments and Waivers. No amendment, modification,
replacement, termination or cancellation of any provision of this Agreement will
be valid, unless the same will be in writing and signed by Parent, the Company
and the Sellers’ Representative. Neither any failure nor any delay by any Party
in exercising any right, power or privilege under the Transaction Documents will
operate as a waiver of such right, power or privilege, and no single or partial
exercise of any such right, power or privilege will preclude any other or
further exercise of such right, power or privilege or the exercise of any other
right, power or privilege. To the maximum extent permitted by applicable law,
(a) no claim or right arising out of this Agreement or any of the Transaction
Documents can be discharged by one Party, in whole or in part, by a waiver or
renunciation of the claim or right unless in writing signed by the other Party;
(b) no waiver that may be given by a Party will be applicable except in the
specific instance for which it is given; and (c) no notice to or demand on one
Party will be deemed to be a waiver of any obligation of that Party or of the
right of the Party giving such notice or demand to take further action without
notice or demand as provided in the Transaction Documents.
     Section 12.11. Severability. The provisions of this Agreement will be
deemed severable and the invalidity or unenforceability of any provision will
not affect the validity or enforceability of the other provisions hereof;
provided that if any provision of this Agreement, as applied to any Party or to
any circumstance, is adjudged by a Governmental Body, arbitrator or mediator not
to be enforceable in accordance with its terms, the Parties agree that the
Governmental Body, arbitrator, or mediator making such determination will have
the power to modify the provision in a manner consistent with its overall
objectives such that it is enforceable, and/or to delete specific words or
phrases, and in its reduced or revised form, such provision will then be
enforceable and will be enforced.
     Section 12.12. Expenses. Except as otherwise expressly provided in this
Agreement, each Party will bear its own costs and expenses incurred in
connection with the preparation, execution and performance of this Agreement and
the Transactions including all fees and expenses of agents, Representatives,
financial advisors, legal counsel and accountants.
     Section 12.13. Construction. The Parties have participated jointly in the
negotiation and drafting of this Agreement. If an ambiguity or question of
intent or interpretation arises, this Agreement will be construed as if drafted
jointly by the Parties and no presumption or burden of proof will arise favoring
or disfavoring any Party because of the authorship of any provision of this
Agreement. Any reference to any federal, state, local, or foreign Law will be
deemed also to refer to such Law as amended and all rules and regulations
promulgated thereunder, unless the context requires otherwise. The words
“include,” “includes,” and “including” will be deemed to be followed by “without
limitation” unless preceded by a negative predicate. Pronouns in masculine,
feminine, and neuter genders will be construed to include any other gender, and
words in the singular form shall be construed to include the plural and vice
versa, unless the context otherwise requires. The words “this Agreement,”
“herein,” “hereof,” “hereby,” “hereunder,” and words of similar import refer to
this Agreement as a whole and not to any particular subdivision unless expressly
so limited. The Parties intend that each representation, warranty, and covenant
contained herein will have independent significance. If any Party has Breached
any representation, warranty, or covenant contained herein in any respect, the
fact that there exists another representation, warranty or covenant relating to
the same subject matter (regardless of the relative levels of specificity) which
the Party has not Breached will not detract

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from or mitigate the fact that the Party is in Breach of the first
representation, warranty, or covenant.
     Section 12.14. Remedies. Except as expressly provided herein, the rights,
obligations and remedies created by this Agreement are cumulative and in
addition to any other rights, obligations, or remedies otherwise available at
Law or in equity. Except as expressly provided herein, nothing herein will be
considered an election of remedies.
     Section 12.15. Electronic Signatures.
               (a) Notwithstanding the Electronic Signatures in Global and
National Commerce Act (15 U.S.C. Sec. 7001 et. seq.), the Uniform Electronic
Transactions Act, or any other Law relating to or enabling the creation,
execution, delivery, or recordation of any contract or signature by electronic
means, and notwithstanding any course of conduct engaged in by the Parties, no
Party will be deemed to have executed a Transaction Document or other document
contemplated thereby (including any amendment or other change thereto) unless
and until such Party shall have executed such Transaction Document or other
document on paper by a handwritten original signature or any other symbol
executed or adopted by a Party with current intention to authenticate such
Transaction Document or such other document contemplated.
               (b) Delivery of a copy of a Transaction Document or such other
document bearing an original signature by facsimile transmission (whether
directly from one facsimile device to another by means of a dial-up connection
or whether mediated by the worldwide web), by electronic mail in “portable
document format” (“.pdf”) form, or by any other electronic means intended to
preserve the original graphic and pictorial appearance of a document, will have
the same effect as physical delivery of the paper document bearing the original
signature. “Originally signed” or “original signature” means or refers to a
signature that has not been mechanically or electronically reproduced.
[SIGNATURE PAGE FOLLOWS]

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

            PARENT:

PET DRX CORPORATION
      By:   /s/ Gene E. Burleson        Name:   Gene E. Burleson        Title:  
Chief Executive Officer        BUYER:

SNOW MERGER ACQUISITION, INC.
      By:   /s/ Robert L. Antin        Name:   Robert L. Antin        Title:  
President & CEO        COMPANY:

VCA ANTECH, INC.
      By:   /s/ Robert L. Antin        Name:   Robert L. Antin        Title:  
President & CEO        SELLERS’ REPRESENTATIVE:
      /s/ Harry L. Zimmerman   HARRY L. ZIMMERMAN   

Signature page to Stock Purchase Agreement

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SELLERS:
Camden Partners Strategic Fund III, L.P.

         
By:
  Camden Partners Strategic III, LLC    
Its:
  General Partner    
 
       
By:
  Camden Partners Strategic Manager, LLC    
Its:
  Managing Member    
 
       
By:
  /s/ Richard M. Johnston    
 
 
 
Richard M. Johnston    
 
  Managing Member    
 
        Camden Partners Strategic Fund III-A, L.P.
 
       
By:
  Camden Partners Strategic III, LLC    
Its:
  General Partner    
 
       
By:
  Camden Partners Strategic Manager, LLC    
Its:
  Managing Member    
 
       
By:
  /s/ Richard M. Johnston    
 
 
 
Richard M. Johnston    
 
  Managing Member    

Signature page to Stock Purchase Agreement

 

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                  SELLERS:    
 
                Galen Partners IV, L.P.    
 
           
 
  By:   /s/ Bruce F. Wesson    
 
  Name:  
 
Bruce F. Wesson    
 
  Title:   Managing Director    

Signature page to Stock Purchase Agreement

 

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                  SELLERS:
 
                Galen Partners International IV, L.P.
 
           
 
  By:   /s/ Bruce F. Wesson    
 
  Name:  
 
Bruce F. Wesson    
 
  Title:   Managing Director    

Signature page to Stock Purchase Agreement

 

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                  SELLERS:
 
                Galen Employee Fund IV, L.P.
 
           
 
  By:   /s/ Bruce F. Wesson    
 
  Name:  
 
Bruce F. Wesson    
 
  Title:   Managing Director    

Signature page to Stock Purchase Agreement

 

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                  SELLERS:
 
                Chicago Investments, Inc.
 
           
 
  By:   /s/ Joshua S. Kanter    
 
  Name:  
 
Joshua S. Kanter    
 
  Title:   President    

Signature page to Stock Purchase Agreement

 

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                  SELLERS:
 
                CIBC Trust Company (Bahamas) Limited
     As Trustee
 
           
 
  By:   /s/ Linda G. Williams/Helen M. Carroll    
 
  Name:  
 
Linda G. Williams/Helen M. Carroll    
 
  Title:   Authorised Signatories    

Signature page to Stock Purchase Agreement

 

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                  SELLERS:    
 
                Kanter Family Foundation    
 
           
 
  By:   /s/ Joel Kanter    
 
  Name:  
 
Joel Kanter    
 
  Title:   President    

Signature page to Stock Purchase Agreement

 

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                  SELLERS:    
 
                Windy City, Inc.    
 
           
 
  By:   /s/ Joel Kanter    
 
  Name:  
 
Joel Kanter    
 
  Title:   President    

Signature page to Stock Purchase Agreement

 

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                  SELLERS:    
 
                Knott Partners L.P.    
 
           
 
  By:   /s/ David M. Knott    
 
  Name:  
 
David M. Knott    
 
  Title:   Investment Advisor    

Signature page to Stock Purchase Agreement

 

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                  SELLERS:    
 
                Knott Partners Offshore Master Fund L.P.    
 
           
 
  By:   /s/ David M. Knott    
 
  Name:  
 
David M. Knott    
 
  Title:   Investment Advisor    

Signature page to Stock Purchase Agreement

 

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            SELLERS:

Finderne LLC
      By:   /s/ David M. Knott       Name:   David M. Knott      Title:  
Investment Advisor     

Signature page to Stock Purchase Agreement

 

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            SELLERS:

Good Steward Trading Co. S.P.C.
      By:   /s/ David M. Knott       Name:   David M. Knott      Title:  
Investment Advisor   

Signature page to Stock Purchase Agreement

 

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            SELLERS:

Mulsanne Partners, L.P.
      By:   /s/ David M. Knott       Name:   David M. Knott      Title:  
Investment Advisor   

Signature page to Stock Purchase Agreement

 

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            SELLERS:

Knott Partners Offshore (SRI) Fund Limited
      By:   /s/ David M. Knott       Name:   David M. Knott      Title:  
Investment Advisor   

Signature page to Stock Purchase Agreement

 

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            SELLERS:

Shoshone Partners, L.P.
      By:   /s/ David M. Knott       Name:   David M. Knott      Title:  
Investment Advisor   

Signature page to Stock Purchase Agreement

 

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            SELLERS:

Commonfund Hedged Equity Co.
      By:   /s/ David M. Knott       Name:   David M. Knott      Title:  
Investment Advisor   

Signature page to Stock Purchase Agreement

 

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            SELLERS:

Wynnefield Partners Small Cap Value LP
      By:   /s/ Nelson Obus       Name:   Nelson Obus      Title:   Managing
Member   

Signature page to Stock Purchase Agreement

 

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            SELLERS:

Wynnefield Partners Small Cap Value LP I
      By:   /s/ Nelson Obus       Name:   Nelson Obus      Title:   Managing
Member   

Signature page to Stock Purchase Agreement

 

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            SELLERS:

Wynnefield Partners Small Cap Value Offshore
Fund, Ltd.
      By:   /s/ Nelson Obus       Name:   Nelson Obus      Title:   President   

Signature page to Stock Purchase Agreement

 

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            SELLERS:

St. Cloud Capital Partners, L.P.
      By:   /s/ Robert Lautz       Name:   Robert Lautz      Title:   Managing
Director     

Signature page to Stock Purchase Agreement

 

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                  SELLERS:    
 
                KFT Limited Partnership    
 
           
 
  By:   Joshua Trust, General Partner    
 
           
 
  By:   /s/ Solomon A. Weisgal    
 
  Name:  
 
Solomon A. Weisgal    
 
  Title:   Trustee    

Signature page to Stock Purchase Agreement

 

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                  SELLERS:    
 
                MPW Trust    
 
           
 
  By:   /s/ Solomon A. Weisgal    
 
  Name:  
 
Solomon A. Weisgal    
 
  Title:   Trustee    

Signature page to Stock Purchase Agreement

 

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            SELLERS:
      By:   /s/ Gene E. Burleson         Gene Burleson             

Signature page to Stock Purchase Agreement

 

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            SELLERS:
      By:   /s/ Harry Zimmerman         Harry Zimmerman             

Signature page to Stock Purchase Agreement

 

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            SELLERS:
      By:   /s/ Stephen Ettinger         Stephen Ettinger             

Signature page to Stock Purchase Agreement

 

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            SELLERS:
      By:   /s/ David Reed         David Reed             

Signature page to Stock Purchase Agreement

 

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            SELLERS:
      By:   /s/ Richard Martin         Richard Martin             

Signature page to Stock Purchase Agreement

 

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            SELLERS:
      By:   /s/ Zubeen Shroff         Zubeen Shroff             

Signature page to Stock Purchase Agreement

 

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            SELLERS:
      By:   /s/ Joel Kanter         Joel Kanter             

Signature page to Stock Purchase Agreement