Exhibit 10.01

 

STOCK PURCHASE AGREEMENT

 

among

 

PAC INDUSTRIES, INC.,

 

FIRST BANKERS TRUST SERVICES, INC.,

 

as the Trustee of the

 

 

PAC INDUSTRIES, INC. EMPLOYEE STOCK OWNERSHIP TRUST

 

KAITLYN A. COSTABILE, PHILIP A. COSTABILE II, CHRISTINA MARIE COSTABILE, EMILY
M. BRADBURY, KARRAH D. DEVLIN, SOMMER COSTABILE AND ROCCO J. COSTABILE,

 

FRANK COSTABILE,

 

as Representative of the Warrant Holders

 

and

 

EVI INDUSTRIES, INC.

 

dated as of

 

January 18, 2019

 

 

 

Table of Contents

  Page ARTICLE I DEFINITIONS 2 ARTICLE II PURCHASE AND SALE 14 Section
2.01   Purchase and Sale 14 Section 2.02   Purchase Price; Estimated Closing
Cash Payment. 14 Section 2.03   Payment of the Estimated Closing Cash Payment 15
Section 2.04   Closing 16 Section 2.05   Adjustment of Closing Cash Payment. 16
Section 2.06   Adjustments for Tax Purposes 19 Section 2.07   Withholding Taxes
19 ARTICLE III REPRESENTATIONS AND WARRANTIES REGARDING THE COMPANY 19 Section
3.01   Organization, Authority and Qualification of the Company. 20 Section
3.02   Capitalization. 20 Section 3.03   Subsidiaries 20 Section 3.04   No
Conflicts; Consents 20 Section 3.05   Financial Statements. 21 Section
3.06   Undisclosed Liabilities 21 Section 3.07   Absence of Certain Changes,
Events and Conditions 22 Section 3.08   Material Contracts. 22 Section
3.09   Real Property; Title to Assets. 23 Section 3.10   Intellectual Property.
23 Section 3.11   Insurance 24 Section 3.12   Legal Proceedings; Governmental
Orders. 24 Section 3.13   Compliance With Laws; Permits. 25 Section
3.14   Environmental Matters 25 Section 3.15   Employee Benefit Matters. 26
Section 3.16   Employment Matters. 30 Section 3.17   Taxes. 31 Section
3.18   Affiliate Transactions. 34 Section 3.19   Bank Accounts 34 Section
3.20   Corruption and Anti-Terrorism. 34

 

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Table of Contents

(continued)

  Page Section 3.21   Material Customers and Material Suppliers. 35 Section
3.22   Accounts Receivable 35 Section 3.23   Brokers 35 ARTICLE IV
REPRESENTATIONS AND WARRANTIES REGARDING Warrant holders 35 Section
4.01   Capacity 36 Section 4.02   No Conflicts; Consents 36 Section
4.03   Warrants 36 Section 4.04   Legal Proceedings 36 ARTICLE V REPRESENTATIONS
AND WARRANTIES REGARDING SELLER AND TRUSTEE 37 Section 5.01   Authorization 37
Section 5.02   No Conflicts; Consents 37 Section 5.03   Ownership 37 Section
5.04   Legal Proceedings 37 Section 5.05   Investigation 38 ARTICLE VI
REPRESENTATIONS AND WARRANTIES REGARDING BUYER 38 Section 6.01   Organization
and Authority of Buyer 38 Section 6.02   No Conflicts; Consents 38 Section
6.03   Brokers 39 Section 6.04   Legal Proceedings 39 Section 6.05   Buyer
Common Stock 39 Section 6.06   SEC Documents 39 Section 6.07   Investment
Intention 39 Section 6.08   Independent Investigation 40 ARTICLE VII COVENANTS
40 Section 7.01   Employees; Benefit Plans. 40 Section 7.02   Public
Announcements 40 Section 7.03   Further Assurances 41 Section 7.04   Transfer
Taxes 41 Section 7.05   338(h)(10) Election. 41 Section 7.06   Purchase Price
Allocation 42

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Table of Contents

(continued)

  Page Section 7.07   Amendments to Plans; Post-Closing Administration. 42
Section 7.08   Conduct of Business 44 Section 7.09   Restrictions on Business 45
Section 7.10   Access, Information and Nondisclosure 47 Section
7.11   Regulatory and Other Approvals 48 Section 7.12   Investigations 48
Section 7.13   No Shop 48 Section 7.14   Release of Liens 49 Section
7.15   Business Relationships 49 Section 7.16   Financing 49 Section
7.17   Termination 49 Section 7.18   Effect of Termination. 50 Section
7.19   Sale of Buyer Common Stock 50 Section 7.20   Warrants 50 Section
7.21   2018 Audited Financial Statements 51 ARTICLE VIII CLOSING CONDITIONS AND
DELIVERABLES 51 Section 8.01   Company Deliveries 51 Section 8.02   Trustee
Deliveries 52 Section 8.03   Buyer Deliveries 53 Section 8.04   Conditions to
Obligations of Seller 53 Section 8.05   Conditions to Obligations of Buyer 54
ARTICLE IX INDEMNIFICATION 55 Section 9.01   Survival 55 Section 9.02   Escrow
55 Section 9.03   Indemnification By Buyer 56 Section 9.04   Certain Limitations
56 Section 9.05   Indemnification Procedures. 57 Section 9.06   Tax Treatment of
Indemnification Payments 59 Section 9.07   Exclusive Remedies 59 Section
9.08   Other Limitations 60 ARTICLE X MISCELLANEOUS 60

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Table of Contents

(continued)

 

  Page Section 10.01   Expenses 60 Section 10.02   Notices 60 Section
10.03   Interpretation 61 Section 10.04   Headings 62 Section
10.05   Severability 62 Section 10.06   Entire Agreement 62 Section
10.07   Successors and Assigns 62 Section 10.08   No Third-Party Beneficiaries
62 Section 10.09   Amendment and Modification; Waiver 62 Section
10.10   Governing Law; Submission to Jurisdiction; Waiver of Jury Trial. 63
Section 10.11   Specific Performance 63 Section 10.12   Counterparts 64 Section
10.13   Disclosure Schedules 64 Section 10.14   Non-recourse 64 Section
10.15   Warrant Holder Representative 64

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STOCK PURCHASE AGREEMENT

This Stock Purchase Agreement (this “Agreement”), dated as of January 18, 2019,
is entered into by and among PAC INDUSTRIES, INC., a Pennsylvania corporation
(the “Company”), the PAC INDUSTRIES, INC. EMPLOYEE STOCK OWNERSHIP TRUST
(“Trust”) acting herein through FIRST BANKERS TRUST SERVICES, INC. (“FBTS” or
“Trustee”), not in an individual or corporate capacity but solely as Trustee of
the Trust established in connection with the PAC INDUSTRIES, INC. EMPLOYEE STOCK
OWNERSHIP PLAN (the “Plan”) (the Plan and the Trust referred to herein
collectively as the “ESOP” or “Seller”), KAITLYN A. COSTABILE, PHILIP A.
COSTABILE II, CHRISTINA MARIE COSTABILE, EMILY M. BRADBURY, KARRAH D. DEVLIN,
SOMMER COSTABILE AND ROCCO J. COSTABILE (each, a “Warrant Holder,” and
collectively, “Warrant Holders”), Frank Costabile, not in an individual capacity
but in his capacity as the representative of the Warrant Holders (the “Warrant
Holder Representative”), and EVI INDUSTRIES, INC., a Delaware corporation
(“Buyer”). The Company, Buyer, Seller and the Warrant Holders are referred to
collectively in this Agreement as the “Parties.”

RECITALS

WHEREAS, the Company established the Plan, a qualified tax-exempt retirement
plan, and its related Trust, effective as of January 1, 2008 (as amended from
time to time, the ESOP);

WHEREAS, the Company (a) sells, distributes, brokers, and supplies new, used and
rebuilt equipment, parts, accessories and supplies and provides installation,
maintenance, service and repairs of commercial, industrial, and vended laundry
equipment, rail and conveyor equipment, steam and hot water boilers and heaters,
and water reuse and recycling systems, (b) designs and plans commercial,
industrial and vended laundry, rail, boiler and water systems, and (c) installs
industrial, commercial and vended laundries, (collectively the “Business”);

WHEREAS, Seller owns three hundred thousand (300,000) shares (the “Shares”) of
common stock, par value $0.01 per share (the “Company Common Stock”), of the
Company;

WHEREAS, Warrant Holders own warrants to purchase an aggregate of 116,965 shares
of Company Common Stock (each a “Warrant” and collectively, the “Warrants”),
each with any exercise price of $3.65 per share;

WHEREAS, Seller wishes to sell to Buyer, and Buyer wishes to purchase from
Seller, the Shares (the “Stock Purchase”), subject to the terms and conditions
set forth herein;

WHEREAS, prior to the Closing, each Warrant Holder shall, in accordance with
Section 2(f) of each Warrant, put such Warrant Holder’s Warrant to the Company
and the Company shall pay the put price for each Warrant by delivering to each
Warrant Holder a promissory note pursuant to Section 2(f)(ii) of each Warrant;

WHEREAS, the Parties (as defined herein) intend that the sale of the Shares by
Seller to Buyer hereunder shall qualify as a “qualified stock purchase” within
the meaning of Section 338(d) of the Internal Revenue Code of 1986, as amended
(the “Code”), and the Parties intend to make a joint election pursuant to
Section 338(h)(10) of the Code with respect to such qualified stock purchase;

 

 

WHEREAS, the Board of Directors of the Company has reviewed the terms and
conditions of the Stock Purchase and has approved the same and has recommended
the Stock Purchase as in the best interests of the sole stockholder of the
Company;

WHEREAS, the Trustee has determined that the Stock Purchase is in the best
interests of the ESOP and the Plan participants and their beneficiaries and that
the Stock Purchase is consistent with the Trustee’s fiduciary duties under Title
I of ERISA (the “ERISA Fiduciary Standards”) to sell the Shares to Buyer;

WHEREAS, the Trustee has relied upon the Fairness Opinion from the Advisor dated
and effective as of the date hereof for the Trustee’s execution of this
Agreement;

WHEREAS, the terms and conditions of the Stock Purchase have been reviewed by
and taken into account by the Advisor in rendering the Fairness Opinion dated as
of the date hereof;

WHEREAS, it is in the best interests of all Parties hereto to execute and
deliver this Agreement.

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

ARTICLE I
DEFINITIONS

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

“338(h)(10) Election” means an election under Section 338(h)(10) of the Code
(and any corresponding election under state, local, and foreign Tax Law) with
respect to the purchase and sale of the Shares hereunder.

“338(h)(10) Election Forms” has the meaning set forth in Section 7.08(a).

“2017 Balance Sheet” has the meaning set forth in Section 3.05(a).

“2017 Balance Sheet Date” has the meaning set forth in Section 3.05(a).

“2018 Audited Financial Statements” has the meaning set forth in Section 7.21

“Accounting Principles” means the same accounting practices, procedures,
policies and methods used and applied by the Company in preparation of the
Financial Statements, all of which are in accordance with GAAP.

“Advisor” means SC&H Tax & Advisory Services, LLC, the independent financial
advisor to the Trustee.

 2

 

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

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

“Allocation Schedule” has the meaning set forth in Section 7.09.

“Anti-Terrorism Laws” has the meaning set forth in Section 3.20(b).

“Audited Financial Statements” has the meaning set forth in Section 3.05(a).

“Bank Accounts” has the meaning set forth in Section 3.19.

“Benefit Plan” has the meaning set forth in Section 3.15(a).

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

“Business Combination” means, with respect to any Person, any merger,
consolidation or combination to which such Person is a party, any sale,
dividend, split or other disposition of capital stock or other equity interests
of such Person or any sale, dividend or other disposition of a material portion
of the assets of such Person.

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

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

“Buyer Benefit Plans” has the meaning set forth in Section 7.01(a).

“Buyer Common Stock” means shares of common stock, par value $0.025 per share,
of Buyer.

“Buyer Indemnified Party” has the meaning set forth in Section 9.02.

“Cap” has the meaning set forth in Section 9.05(b).

“Cash” means cash and cash equivalents of the Company.

“Cash Consideration” means Six Million Four Hundred Thousand Dollars
($6,400,000).

“Closing” has the meaning set forth in Section 2.04.

“Closing Balance Sheet” has the meaning set forth in Section 3.05(a).

 3

 

“Closing Cash” means Cash of the Company as of the Effective Time.

“Closing Cash Payment” has the meaning set forth in Section 2.02(a).

“Closing Date” has the meaning set forth in Section 2.04.

“Closing Indebtedness” means the Indebtedness of the Company as of the Effective
Time, other than Permitted Indebtedness.

“Closing Transaction Expenses” means the Transaction Expenses of the Company,
without giving effect to the Closing.

“Closing Working Capital” has the meaning provided in Schedule 1.01 of the
Disclosure Schedules.

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

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

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

“Company Continuing Employee” has the meaning set forth in Section 7.04(a).

“Company’s 2018 Contribution” has the meaning set forth in Section 7.07(f).

“Contract” means any contract, lease, evidence of Indebtedness, mortgage,
indenture, security agreement or other agreement (whether written or oral).

“Customer Deposits” means customer deposits of the Company as of the Closing
Date calculated in accordance with GAAP.

“Decrease Amount” has the meaning set forth in Section 2.05(c)(i).

“Deductible” has the meaning set forth in Section 9.05(a).

“Direct Claim” has the meaning set forth in Section 9.05(c).

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

“Disputed Amounts” has the meaning set forth in Section 2.05(b)(iii).

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

“Effective Time” has the meaning set forth in Section 2.04.

“Election Date” has the meaning set forth in Section 3.17(a)(iii).

 4

 

“Employees” means those Persons employed by the Company immediately prior to the
Closing, including those on vacation, taking approved time off or on any other
leave of absence or on a disability with the legal or contractual right to
return to employment, as set forth in Section 3.16(c) of the Disclosure
Schedules.

“Environment” or “Environmental” means all air, surface water, groundwater, or
land, including land surface or subsurface, including all fish, wildlife, biota
and all other natural resources.

“Environmental Claim” means any and all administrative or judicial proceedings
pursuant to or relating to any applicable Environmental Law by any Person
relating to any actual or potential (x) violation of or liability under any
Environmental Law, (y) violation of any Environmental Permit, or (z) liability
for any costs or damages related to the presence, Environmental Release, or
threatened Environmental Release into the Environment, of any Hazardous
Substances at any location, including, but not limited to, any off-Site location
to which Hazardous Substances or materials containing Hazardous Substances were
sent for handling.

“Environmental Law” means any and all Laws relating to the Environment.

“Environmental Permit” means any Permit under or in connection with any
Environmental Law.

“Environmental Release” means any spilling, leaking, pumping, pouring, emitting,
emptying, discharging, injecting, escaping, leaching, dumping, or disposing of a
Hazardous Substance into the Environment, except those permitted under
Environmental Law.

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

“ERISA Affiliate” means any trade or business (whether or not incorporated) that
would be treated at the relevant time together with the Company as a “single
employer” within the meaning of Section 414 of the Code.

“ERISA Fiduciary Standards” has the meaning given to it in the Recitals.

“Escrow” means the escrow fund established pursuant to the Escrow Agreement

“Escrow Agent” means Fifth Third Bank, an Ohio banking corporation.

“Escrow Agreement” means the Escrow Agreement in substantially the form attached
hereto as Exhibit A, and as modified by the Parties prior to Closing.

“Escrow Amount” means an amount equal to the ESOP Escrow Amount plus the Warrant
Holders Escrow Amount.

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

 5

 

“ESOP Equity Consideration” means a number of shares of Buyer Common Stock equal
to the quotient of (i) Three Million Nine Hundred Eighty Three Thousand Seven
Hundred Twenty One Dollars ($3,983,721) divided by (ii) the average closing
price per share of Buyer Common Stock on the NYSE American for the thirty (30)
trading days immediately prior to the Closing Date as reported by the NYSE
American.

“ESOP Escrow Amount” means Seven Hundred Nineteen Thousand Four Hundred Eighty
Five Dollars ($719,485).

“ESOP Loan” has the meaning set forth in Section 7.07(f).

“Estimated Closing Cash Payment” has the meaning set forth in Section 2.02(b).

“Estimated Closing Date Statement” has the meaning set forth in Section 2.02(b).

“Excess Adjustment Amount” has the meaning set forth in Section 2.05(c)(i).

“Exchange Act” means the Securities Exchange Act of 1934, as amended, and the
rules and regulations promulgated thereunder.

“Existing Leases” means any lease between the Company and an affiliate of the
Company.

“Facility Leases” means the Facility leases in substantially the form attached
hereto as Exhibits B-1 and B-2, between the Company and PAC LLC.

“Fairness Opinions” means the opinions, in form and substance in accordance with
Section 3(18) of ERISA, prepared by the Advisor, an “independent appraiser”
(within the meaning of Section 401(a)(28)(C) of the Code), and issued to the
Trustee that: (a) the consideration to be received by the ESOP hereunder is not
less than adequate consideration as that term is defined in Section 3(18) of
ERISA and (b) that terms of the Stock Purchase and related transactions, taken
as a whole, are fair to the ESOP from a financial point of view.

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

“Final Closing Cash Payment” means the Closing Cash Payment, as finally
determined in accordance with Section 2.05.

“Final Closing Date Statement” has the meaning set forth in Section 2.05(a).

“Financial Statements” has the meaning set forth in Section 3.05(a).

“Fundamental Representations” means the representations and warranties contained
in Section 3.01 (Organization, Authority and Qualification of the Company);
Section 3.02 (Capitalization); Section 3.03 (Subsidiaries); Section 3.04 (No
Conflicts; Consents); Section 3.14 (Environmental Matters); Section 3.15
(Employee Benefit Matters); Section 3.17 (Tax Matters); Section 3.23 (Brokers);
Section 4.01 (Authorization), Section 4.02 (No Conflicts; Consents), 4.03
(Warrants), Section 5.01 (Authorization); Section 5.02 (No Conflicts; Consents);
Section

 6

 

5.03 (Ownership); Section 6.01 (Organization and Authority of Buyer); Section
6.02 (No Conflicts; Consents); Section 6.03 (Brokers); and Section 6.05 (Buyer
Common Stock).

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

“Governmental Authority” means any federal, state, local or foreign government
or political subdivision thereof, or any agency or instrumentality of such
government or political subdivision, or any self-regulated organization or other
non-governmental regulatory authority or quasi-governmental authority (to the
extent that the rules, regulations or orders of such organization or authority
have the force of Law), or any arbitrator, court or tribunal of competent
jurisdiction.

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

“Hazardous Substance” means perchloroethylene, petroleum, petroleum hydrocarbons
or petroleum products, petroleum by-products, radioactive materials, asbestos or
asbestos-containing materials, gasoline, diesel fuel, pesticides, radon, urea
formaldehyde, lead or lead-containing materials, polychlorinated biphenyls; and
any other chemicals, materials, substances or wastes in any amount or
concentration which are now included in the definition of “hazardous
substances,” “hazardous materials,” “hazardous wastes,” “extremely hazardous
wastes,” “restricted hazardous wastes,” “toxic substances,” “toxic pollutants,”
“pollutants,” “regulated substances,” “solid wastes,” or “contaminants” or words
of similar import, under any Environmental Law, in each case to the extent in
excess of amounts or concentrations permitted by applicable Environmental Law.

“Immediate Family Member” of any Person, means, any child, stepchild, parent,
stepparent, spouse, sibling, mother-in-law, father-in-law, son-in-law,
daughter-in-law, brother-in-law, or sister-in-law of such security holder, and
any person (other than a tenant or employee) sharing the household of such
Person.

“Income Tax Returns” means any Tax Return with respect to any Income Tax.
“Increase Amount” has the meaning set forth in Section 2.05(c)(ii).

“Income Taxes” means any United States federal, state, local or non-U.S. Tax
that, in whole or in part, is based on, measured by or calculated by reference
to income, profits, receipts or gains.

“Increase Amount” has the meaning set forth in Section 2.05(c)(i).

“Indebtedness” of any Person means, without duplication, all obligations of such
Person (i) means as of any date: either (a) any Liability of such Person (i) for
borrowed money, (ii) under any reimbursement obligation relating to a letter of
credit, bankers’ acceptance, note purchase facility or similar instruments,
(iii) evidenced by a bond, note, debenture or similar instrument (including a
purchase money obligation), (iv) for the payment of money relating to any lease
that is required to be classified as a capitalized lease obligation in
accordance with GAAP, (v) for all or any part of the deferred purchase price of
property or services, including

 7

 

any “earnout” or similar payments or any non-compete payments, (b) any Liability
of others described in the preceding clause (a) that such Person has guaranteed,
that is recourse to such Person or any of its assets or that is otherwise its
legal Liability or that is secured in whole or in part by the assets of such
Person. For purposes of this Agreement, “Indebtedness” includes (A) any and all
accrued interest, success fees, prepayment premiums, make whole premiums or
penalties and fees or expenses actually incurred (including attorneys’ fees)
with respect to the prepayment of any Indebtedness, (B) all “cut” but uncashed
checks issued by the Company that are outstanding as of the Closing Date, (C)
cash, book or bank account overdrafts, including negative balance cash accounts
and (D) any and all amounts owed by the Company to any of its respective
Affiliates, including Seller or any of its Affiliates.

“Indemnified Party” has the meaning set forth in Section 9.05.

“Indemnifying Party” has the meaning set forth in Section 9.05.

“Independent Accountant” has the meaning set forth in Section 2.05(c)(iii).

“Intellectual Property” means (a) all trademarks, service marks, trade names,
trade dress, product names and slogans both registered and unregistered, and any
common law rights and good will appurtenant thereto, and all applications and
registrations thereof; (b) all copyrights in copyrightable works and all other
ownership rights in any works of authorship, any derivations thereof and all
moral rights appurtenant thereto and all applications and registrations thereof;
(c) all registered, reserved and unregistered domain names, uniform resource
locators and keywords; (d) all computer and electronic data, documentation and
software, including both source and object code, computer and database
applications and operating programs; (e) all rights relating to the use of any
name, image or likeness of any Person or the portrayal of a Person, either
individually or together with others; (f) all trade secrets and confidential
business, technical and proprietary information, including ideas, research
notes, development notes, know-how, residuals, formulas, business methods and
techniques, supplier lists, and marketing, financial and pricing data; (g) the
right to sue both in equity and for past, present and future damages of any or
all of the foregoing; (h) all existing copies and tangible embodiments of any or
all of the foregoing, in whatever form or medium; (i) all right, title and
interest (free and clear) in and to the Company’s website(s), including without
limitation, the framework and infrastructure of such website(s), the layout
design and the “look and feel” thereof, all related software, source code and
object code, all CGI, HTML, XML or other coding, all scripts and applets, all
web graphics and data, all navigational buttons, all server configurations, and
any and all attendant intellectual property rights therein; and (j) all other
intellectual property rights relating to any or all of the foregoing including
any renewals, continuations or extensions thereof.

“Interim Balance Sheet” has the meaning set forth in Section 3.05(a).

“Interim Balance Sheet Date” has the meaning set forth in Section 3.05(a).

“Interim Financial Statements” has the meaning set forth in Section 3.05(a).

 8

 

“Key Employee” means each of Frank Costabile, Rocco Costabile, Joseph Leo and
Curt Smith.

“Knowledge of the Company or Company’s Knowledge” or any other similar knowledge
qualification, means the actual knowledge of Key Employees, and such knowledge
that such individuals would reasonably be expected to have in the normal course
of exercising his duties based on applicable title or position.

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

“Liability” and “Liabilities” means any and all debts, liabilities, commitments
and obligations, whether direct or indirect, fixed, contingent or absolute,
matured or unmatured, liquidated or unliquidated, accrued or not accrued, due or
to become due, known or unknown, asserted or not asserted, ascertained or
ascertainable.

“Lien” means any claim, lien, charge, mortgage, pledge, hypothecation,
assessment, security interest, lease, lien (statutory or other), option, levy,
charge, economic interest, right of use, conditional sale Contract, title
retention Contract, or other encumbrance of any kind whatsoever, or other
Contract to give any of the foregoing.

“Losses” means losses, damages, liabilities, claims, awards, judgments, costs or
expenses, including reasonable attorneys’ fees.

“Material Adverse Effect” means (a) with respect to the Company, the assets of
the Company, or liabilities (including contingent liabilities), (i) a change in
(or effect on) the condition (financial or otherwise), properties, assets of the
Company or liabilities (including contingent liabilities), rights, obligations,
system of internal controls, operations, operating results, business or
prospects (including, without limitation, the Company’s equipment sales pipeline
and equipment sales backlog), which change (or effect) is materially adverse to
the financial condition, properties, assets or liabilities, rights, obligations,
system of internal controls, operations, operating results, business or
prospects (including, without limitation, the Company’s equipment sales pipeline
and equipment sales backlog) of the Company; or (ii) a material adverse effect
on the ability of the Company or Seller to consummate the transactions
contemplated hereby, and (b) with respect to Buyer, a material adverse effect on
its ability to consummate the transactions contemplated hereby; provided,
however, that with respect to the Company, “Material Adverse Effect” shall not
include any event, occurrence, fact, condition or change, directly or
indirectly, arising out of or attributable to: (i) general economic or political
conditions; (ii) conditions generally affecting the industries in which the
Company operates; (iii) any changes in financial or securities markets in
general; (iv) acts of war (whether or not declared), armed hostilities or
terrorism, or the escalation or worsening thereof; (v) any action required or
permitted by this Agreement; (vi) any changes in applicable Laws or accounting
rules, including GAAP; or (vii) the public announcement, pendency or completion
of the transactions contemplated by this Agreement; provided further, however,
that any event, occurrence, fact, condition or change referred to in clauses (i)
through (iv) immediately above shall be taken into account in determining
whether a Material Adverse Effect has occurred or

 9

 

could reasonably be expected to occur to the extent that such event, occurrence,
fact, condition or change has a disproportionate effect on the Company compared
to other participants in the industries in which the Company conducts its
Business.

“Material Contracts” has the meaning set forth in Section 3.08(a).

“Material Customer” has the meaning set forth in Section 3.21(a).

“Material Supplier” has the meaning set forth in Section 3.21(b).

“Minimum Cash Amount” means cash in an amount equal to Customer Deposits.

“Non-Competition Agreements” means the Non-Competition Agreements in
substantially the form attached hereto as Exhibit C, between the Company and
each of the Key Employees, and Warrant Holders.

“Nondisclosure Agreement” has the meaning set forth in Section 7.10.

“Organizational Documents” means, with respect to any Person that is not a
natural person, the organizational documents of such Person, as amended to the
date in question. The term Organizational Documents includes articles or
certificates of incorporation, by-laws, stockholders agreements, certificates or
articles of formation, operating agreements, limited partnership agreements,
joint venture agreements, and other similar documents pertaining to the
governance and organization of the Person in question (including those
pertaining to any trust).

“Owned Intellectual Property” has the meaning set forth in Section 3.1(b).

“Parties” shall mean collectively, Buyer, Seller and the Company.

“Party” shall mean any of Buyer, Seller or the Company.

“Patriot Act” has the meaning set forth in Section 3.20(b).

“Permits” means all permits, licenses, franchises, approvals, authorizations,
and consents required to be obtained from Governmental Authorities.

“Permitted Indebtedness” means that certain Promissory Note, dated February 1,
2017, issued by the Company to East Coast Equipment Service, provided that the
outstanding principal amount of such Promissory Note at the Effective Time does
not exceed $200,000.

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

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

“PPCA” has the meaning set forth in Section 3.15(k).

“Pre-Closing Period” has the meaning set forth in Section 7.08.

 10

 

“Pre-Closing Taxes” means (i) any Taxes of the Company for all taxable periods
ending on or before the Closing Date and the portion through the end of the
Closing Date for any taxable period that includes (but does not end on) the
Closing Date, (ii) any Taxes of Seller with respect to matters contemplated in
clause (i), (iii) Taxes arising out of the transactions contemplated by this
Agreement, (iv) any Tax imposed under Section 1374 of the Code, (v) any Taxes
arising out of any failure of the Company to be a valid S corporation within the
meaning of Section 1361 of the Code at any time since the Election Date for
federal, state or local income Tax purposes in all jurisdictions in which the
Company has been obligated to file income Tax Returns, (vi) any Taxes arising
out of an invalid or ineffective 338(h)(10) Election or an inability to make a
338(h)(10) Election (in each case, other than those Taxes directly resulting
from an action or inaction by Buyer), (vii) any amount required to be paid by
the Company under an indemnification agreement (other than this Agreement) or on
a transferee or successor liability theory, in respect of any Taxes of any
Person, which indemnification agreement or application of transferee or
successor liability theory relates to an acquisition, disposition or similar
transaction occurring on or prior to the Closing Date, and (viii) any Taxes of
any Person under Treasury Regulations section 1.1502-6 (or any similar provision
of state, local, or foreign law) with respect to any Tax period or portion
thereof ending on or prior to the Closing Date.

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

“Put Notice” has the meaning set forth in Section 7.20.

“Qualified Benefit Plan” has the meaning set forth in Section 3.15(b).

“Recovery” has the meaning set forth in Section 9.09.

“Release” means any actual or threatened release, spilling, leaking, pumping,
pouring, emitting, emptying, discharging, injecting, escaping, leaching,
dumping, abandonment, disposing or allowing to escape or migrate into or through
the environment (including, without limitation, ambient air (indoor or outdoor),
surface water, groundwater, land surface or subsurface strata or within any
building, structure, facility or fixture).

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

“Resolution Period” has the meaning set forth in Section 2.05(b)(ii).

“Review Period” has the meaning set forth in Section 2.05(b)(i).

“Sale Notice” has the meaning set forth in Section 7.20

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

“SEC Documents” means all forms, proxy statements, registration statements,
reports, schedules, and other documents filed, or required to be filed, by Buyer
or any of its subsidiaries with the SEC pursuant to the federal Securities Laws.

 11

 

“Securities Act” means the Securities Act of 1933, as amended, and the rules and
regulations promulgated thereunder and any successor Laws.

“Securities Laws” means the Securities Act and the Exchange Act and the rules
and regulations promulgated thereunder.

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

“Seller Indemnified Party” has the meaning set forth in Section 9.04.

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

“Site” means any of the real properties currently or previously owned, leased,
used or operated by the Company, including, without limitation, all soil,
subsoil, surface waters, and ground water thereat.

“Statement of Objections” has the meaning set forth in Section 2.05(b)(ii).

“Stock Purchase” has the meaning set forth in the recitals.

“Stockholders Agreement” means the Stockholder Agreement in substantially the
form attached hereto as Exhibit D, between the Company and each of the Key
Employees, and Warrant Holders.

“Target Working Capital” means a range between Three Million One Hundred
Thousand Dollars ($3,100,000) (the “Minimum Target Working Capital”) and Four
Million Two Hundred Fifty Thousand Dollars ($4,250,000) (the “Maximum Target
Working Capital”).

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

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

“Third-Party Claim” has the meaning set forth in Section 9.06(a).

“Transaction Documents” means this Agreement, the Escrow Agreement, the
Non-Competition Agreements, the Stockholders Agreement, and the Facility Leases.

 12

 

“Transaction Expenses” means (i) all of the fees, expenses and other payments
incurred by the Company, Warrant Holders, Warrant Holder Representative, or
Trustee on behalf of the ESOP or Seller in connection with the transactions
contemplated by this Agreement (on their own behalf and/or on behalf of Trustee
or Seller), (ii) all fees and expenses of legal, accounting and financial
advisors, the Trustee, the Advisor, data room providers, and other advisors of
Seller, Trustee, the Company or the Warrant Holders, (iii) one-half of the fees
and expenses of the Escrow Agent under the Escrow Agreement, and (iv) all fees,
expenses and other payments of the Company, Warrant Holders, Trustee on behalf
of the ESOP or Seller including, without limitation, change of control sale
bonuses or payments, phantom equity, deferred compensation, severance payments
to any current or former employee, director or independent contractor of the
Company, but not including ordinary and usual expenses in connection with
maintenance of the ESOP as an employee benefit plan, that the Company, Trustee
on behalf of the ESOP, or Seller are obligated to pay at or after Closing (plus
the employer portion of any employment, payroll, and/or any other Taxes
thereon), in each case to the extent payable from the general assets of the
Company and not paid in full prior to the Closing.

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

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

“Uncollected Accounts Receivable” has the meaning set forth in Section 2.05(d).

“Volume Submitter Plan” has the meaning set forth in Revenue Procedure 2015–36,
Internal Revenue Bulletin, 2015-27.

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

“Warrant” or “Warrants” means has the meaning set forth in the preamble.

“Warrant Holders” has the meaning set forth in the preamble.

“Warrant Holders Equity Consideration” means a number of shares of Buyer Common
Stock equal to the quotient of (i) Two Million Two Hundred Sixty Six Thousand
Two Hundred Seventy Nine Dollars ($2,266,279) divided by (ii) the average
closing price per share of Buyer Common Stock on the NYSE American for the
thirty (30) trading days immediately prior to the Closing Date as reported by
the NYSE American.

“Warrant Holders Escrow Amount” means Two Hundred Eighty Thousand Five Hundred
Fifteen Dollars ($280,515).

“Warrant Holders Notes” means the notes to be issued by the Company to the
Warrant Holders upon exercise by the Warrant Holders of the of the Put Option
under the Warrants.

“Warrant Holders Payment” has the meaning set forth in Section 2.03(e).

“Warrant Holder Representative” has the meaning set forth in the preamble.

 

 13

 

ARTICLE II
PURCHASE AND SALE

Section 2.01        Purchase and Sale. Subject to the terms and conditions set
forth herein, at the Closing, Seller shall sell to Buyer, and Buyer shall
purchase from Seller, the Shares, free and clear of all Liens for the
consideration specified in Section 2.02.

Section 2.02        Purchase Price; Estimated Closing Cash Payment.

(a)                Purchase Price. The aggregate purchase price for the Shares
shall be an amount equal to TWELVE MILLION EIGHT HUNDRED FIFTY THOUSAND DOLLARS
($12,850,000) (the “Purchase Price”). Buyer shall (1) at the Closing, deliver to
Seller the ESOP Equity Consideration, and (2) at the times and in the manner and
amounts set forth in Section 2.03 and Section 2.05 hereof, pay to Seller an
amount equal to the following (the “Closing Cash Payment”):

(1)               the Cash Consideration:

(2)               plus the amount, if any, by which the Closing Working Capital
exceeds the Maximum Target Working Capital (for the avoidance of doubt, if the
Closing Working Capital is within the range of Target Working Capital, the
adjustment provided pursuant to this Section 2.02(a)(2) shall be zero);

(3)               minus the amount, if any, by which the Minimum Target Working
Capital exceeds the Closing Working Capital (for the avoidance of doubt, if the
Closing Working Capital is within the range of Target Working Capital, the
adjustment provided pursuant to this Section 2.02(a)(3) shall be zero);

(4)               minus, the amount, if any, by which the Minimum Cash Amount
exceeds the Closing Cash;

(5)               minus the amount of Closing Indebtedness, including with
limitation, the cash portion of the Warrant Holders Payment; and

(6)               minus the amount of Closing Transaction Expenses (not
otherwise accounted for in the calculation of the Target Working Capital).

Notwithstanding the foregoing, any amounts in excess of the Cash Consideration
shall be allocated and paid 71.95% to the ESOP and 28.05% to the Warrant
Holders.

(b)               Estimated Closing Cash Payment. No later than ten (10)
Business Days prior to the Closing Date, Buyer shall prepare and deliver to the
Company and Seller a statement in accordance with the Accounting Principles and
in the form attached hereto as Exhibit E (the “Estimated Closing Date
Statement”) setting forth Buyer’s good faith estimates of the Closing Cash
(together with evidence thereof satisfactory to Buyer and Seller), the Closing
Indebtedness, the Closing Transaction Expenses, the Closing Working Capital, and
the calculation of the

 14

 

estimated Closing Cash Payment, as determined in accordance with Section 2.02(a)
(the “Estimated Closing Cash Payment”). The Company shall permit Buyer, Seller,
Warrant Holder Representative and their respective Representatives to have
access to the books, personnel, records and other documents (including work
papers) pertaining to or used in connection with the preparation of the
Estimated Closing Date Statement.

Section 2.03        Payment of the Estimated Closing Cash Payment. At the
Closing, Buyer shall deliver the Estimated Closing Cash Payment as follows:

(a)                Consideration. The Estimated Closing Cash Payment, less the
ESOP Escrow Amount, by wire transfer of immediately available funds to an
account of Seller designated in writing by Seller to Buyer no later than three
(3) Business Days prior to the Closing Date.

(b)               Escrow Amount. An amount equal to the ESOP Escrow Amount and
the Warrant Holders Escrow Amount (which amount will be deducted from the
Warrant Holders Payment) by wire transfer of immediately available funds to an
account of the Escrow Agent designated in writing by Escrow Agent to Buyer no
later than three (3) Business Days prior to the Closing Date. The Escrow Amount
will be held and disbursed by the Escrow Agent in accordance with the terms of
this Agreement and the Escrow Agreement. Pursuant to the Escrow Agreement, on
the date that is twelve (12) months following the Closing Date, the Escrow Agent
shall distribute, in immediately available funds to accounts designated by
Seller and Warrant Holder Representative, the then remaining balance of the
Escrow Amount less the aggregate amount of any then-pending claims for
indemnification by Buyer under ARTICLE IX, plus accrued interest (if any) on
such amount to be distributed. Upon resolution of any such then-pending claim
for indemnification by Buyer under ARTICLE IX, all amounts relating to any such
then-pending claim for indemnification, together with any accrued interest
thereon, shall be released to Seller and Warrant Holder Representative, on the
one hand, or Buyer, on the other hand, by the Escrow Agent in accordance with
the resolution of such claim.

(c)                Indebtedness. No later than five (5) Business Days prior to
the Closing Date, the Company shall deliver to Buyer and Seller, from each
holder of Closing Indebtedness (other than the holders of the Warrant Holders
Notes which payoff letter shall be delivered in accordance with Section
2.03(e)), a payoff letter, in form and substance satisfactory to Buyer, and wire
instructions indicating the amount required to discharge in full such Closing
Indebtedness (other than the Warrant Holders Notes which indebtedness shall be
discharged in accordance with Section 2.03(e)) as of such estimated Closing Date
for the transactions contemplated by this Agreement plus a per diem amount for
any days that the Closing Date occurs after such estimated Closing Date. On
behalf of the Company Buyer will cause payment to be delivered to such holder in
respect of such Closing Indebtedness (other than the Warrant Holders Notes which
shall be paid in accordance with Section 2.03(e)) on the Closing Date.

(d)               Transaction Expenses. No later than two (2) Business Days
prior to the Closing Date, the Company shall deliver to Buyer and Seller, for
each Person owed Closing Transaction Expenses, a payoff letter or invoice, in
form and substance satisfactory to Buyer, and wire instructions indicating the
amount required to discharge in full the Closing Transaction Expenses owed to
that Person as of the mutually agreed estimated Closing Date. On behalf of the
Company Buyer will cause payment to be delivered to such Persons in respect of
such Closing Transaction Expenses on the Closing Date in the amount reflected in
the applicable payoff letter or invoice for each such Person. The Parties
acknowledge that the Closing

 15

 

Transaction Expenses are obligations of the Company and nothing in this
Agreement shall be deemed to make them obligations of Buyer. Payment of such
Closing Transaction Expenses by Buyer on behalf of the Company on the Closing
Date is being made for convenience only.

(e)                Warrant Holders Notes. No later than ten (10) Business Days
prior to the Closing Date, the Company shall deliver to Buyer, from the holders
of Warrant Holders Notes, a payoff letter, in form and substance satisfactory to
Buyer indicating the amount required to discharge in full the Warrant Holders
Notes held by the Warrant Holders (collectively the “Warrant Holders Payment”)
as of such estimated Closing Date. On behalf of the Company, Buyer will cause
payment to be delivered to the Warrant Holder Representative in respect of all
Warrant Holders Notes an amount equal to the Warrant Holders Payment, which
Warrant Holders Payment shall consist of (i) Six Hundred Twenty Two Thousand
Fifty Seven Dollars and Thirty Four Cents ($622,057.34), less the Warrant
Holders Escrow Amount, by wire transfer of immediately available funds to an
account of Seller designated in writing by Warrant Holder Representative no
later than three (3) Business Days prior to the Closing Date, and (ii) the
Warrant Holders Equity Consideration.

Section 2.04        Closing. The purchase and sale of the Shares contemplated
hereby shall take place at a closing (the “Closing”) to be held at the offices
of Troutman Sanders LLP, 875 Third Avenue, New York, New York 10022, counsel to
Buyer, at 10:00 a.m., local time, within three (3) Business Days after the
satisfaction or waiver, in writing, of all conditions to Closing set forth in
this Agreement, or at such other date, time or place as may be agreed to in
writing by the Parties hereto (the “Closing Date”). At the joint written
election of the Parties, the Closing may also take place by either electronic or
physical delivery of documents in escrow to Troutman Sanders LLP rather than
meeting in one place to accomplish the same. The Closing shall be deemed to take
place at 12:01 a.m. on the Closing Date (the “Effective Time”).

Section 2.05        Adjustment of Closing Cash Payment.

(a)                Final Closing Date Statement. Within one hundred and twenty
days (120) days after the Closing Date, Buyer shall prepare and deliver to
Seller a statement (the “Final Closing Date Statement”) setting forth its
calculations of the (i) Closing Cash, (ii) Closing Indebtedness, (iii) Closing
Transaction Expenses, (iv) Closing Working Capital, and (v) Final Closing Cash
Payment. The Final Closing Date Statement will be prepared consistent with the
Accounting Principles and shall be in the form attached hereto as Exhibit F.

(b)               Examination and Review.

(i)                 Examination. After receipt of the Final Closing Date
Statement, Seller and Warrant Holder Representative shall have thirty (30) days
(the “Review Period”) to review the Final Closing Date Statement. During the
Review Period, Buyer shall grant Seller, Warrant Holder Representative, and
their respective Representatives reasonable access to the books, records and
work papers of the Company for the purpose of reviewing the Final Closing Date
Statement and to prepare a Statement of Objections (defined below), provided,
that such access shall be in a manner that does not interfere in any material
respect with the normal business

 16

 

operations of Buyer or the Company and shall be requested by Seller and the
Warrant Holder Representative at reasonable times and upon reasonable notice.

(ii)               Objection. On or prior to the last day of the Review Period,
Seller and Warrant Holder Representative may object to the Final Closing Date
Statement by delivering to Buyer a written statement setting forth Seller’s and
Warrant Holder Representative’s objections in reasonable detail, indicating each
disputed item or amount and the basis for and Seller’s and Warrant Holder
Representative’s disagreement therewith (the “Statement of Objections”). If
Seller and Warrant Holder Representative fail to deliver the Statement of
Objections before the expiration of the Review Period, the Final Closing Date
Statement and the calculations contained therein shall be deemed to have been
accepted by Seller and Warrant Holder Representative and shall be final and
binding. In addition, all items not expressly disputed in a timely Statement of
Objections shall be deemed to have been accepted by Seller and Warrant Holder
Representative and shall be final and binding. If Seller and Warrant Holder
Representative deliver the Statement of Objections before the expiration of the
Review Period, Buyer, on the one hand, and Seller and Warrant Holder
Representative, on the other hand, shall negotiate in good faith to resolve such
objections within thirty (30) days after the delivery of the Statement of
Objections (the “Resolution Period”), and, if the same are so resolved within
the Resolution Period, the Final Closing Date Statement and the calculations
contained therein, in each case with such changes as may have been previously
agreed in writing by Buyer, on the one hand, and Seller and Warrant Holder
Representative, on the other hand, shall be final and binding and shall not be
subject to judicial review.

(iii)             Resolution of Disputes. If Seller and Warrant Holder
Representative, on the one hand, and Buyer, on the other hand, fail to reach an
agreement with respect to all of the matters set forth in the Statement of
Objections before expiration of the Resolution Period, then any amounts
remaining in dispute (“Disputed Amounts”) shall be submitted for resolution to
an independent, nationally recognized accounting firm (the “Independent
Accountant”) who, acting as experts and not arbitrators, shall resolve the
Disputed Amounts only and make any adjustments to the Final Closing Date
Statement and the calculations contained therein. The Independent Accountant
shall be a firm with no business ties to any of Warrant Holder Representative,
Warrant Holders, Seller, Company or Buyer, or any of their respective
Affiliates, within the past three (3) years, and shall be mutually agreed to and
selected by Seller and Warrant Holder Representative, on the one hand, and
Buyer, on the other hand. The Parties hereto agree that all adjustments shall be
made without regard to materiality and that the items set forth on the Final
Closing Date Statement shall be determined in accordance with the definitions
and provisions of this Agreement. The Independent Accountant shall only decide
the specific items under dispute by the Parties and their decision for each
Disputed Amount must be within the range of values assigned to each such item in
the Final Closing Date Statement and the Statement of Objections, respectively.
Each of Buyer, on the one hand, and Seller and Warrant Holder Representative, on
the other hand, shall be afforded the opportunity to present to the Independent
Accountant any materials related to the determination and to discuss the
determination with the Independent Accountant; provided, however, that each such
party will provide the other with copies of any materials provided to the
Independent Accountant.

(iv)             Fees of the Independent Accountant. The fees and expenses of
the Independent Accountant shall be paid based upon the percentage that the
amount actually

 17

 

contested but not awarded to Warrant Holder Representative and Seller, on the
one hand, or Buyer on the other hand, respectively, bears to the aggregate
amount actually contested by Seller and Warrant Holder Representative, on the
one hand, and Buyer, on the other hand, as determined by the Independent
Accountant. For example, if Buyer claims that the Closing Working Capital is
$1,000,000, and Seller and Warrant Holder Representative claim that the Closing
Working Capital is $1,500,000, and the Independent Accountant determines that
the Closing Working Capital is $1,200,000, then the costs and expenses of the
Independent Accountant will be allocated 60% (i.e., 300,000 ÷ 500,000) to Seller
and Warrant Holder Representative and 40% (i.e., 200,000 ÷ 500,000) to Buyer. If
Seller and Warrant Holder Representative are obligated to pay the Independent
Accountant any fee pursuant to this Section 2.05(b), then such fee shall only be
payable on behalf of Seller and Warrant Holder Representative from the Escrow
Amount.

(v)               Determination by Independent Accountant. Buyer, on the one
hand, and Seller and Warrant Holder Representative, on the other hand, shall use
their commercially reasonable efforts to cause the Independent Accountant to
make its determination as soon as practicable within thirty (30) days (or such
other time as the Parties hereto shall agree in writing) after their engagement,
and their resolution of the Disputed Amounts; provided, however, that any delay
on the part of the Independent Accountant in its determination shall not
invalidate such determination or deprive the Independent Accountant of
jurisdiction to resolve disputes submitted to it. The Independent Accountant’s
adjustments to the Final Closing Date Statement and the calculations contained
therein shall be conclusive and binding upon the Parties hereto and shall not be
subject to judicial review.

(c)                Adjustment Payment. Upon final determination of the Final
Closing Cash Payment, whether by Seller’s and Warrant Holder Representative’s
failure to object to the Final Closing Date Statement within the thirty (30) day
period provided above, by mutual agreement of Seller and Warrant Holder
Representative, on the one hand, and Buyer, on the other hand or by
determination of the Independent Accountant, the Purchase Price will be adjusted
as follows:

(i)                 If the Final Closing Cash Payment is less than the Estimated
Closing Cash Payment (the amount by which the Final Closing Cash Payment is less
than the Estimated Closing Cash Payment will be referred to herein as the
“Decrease Amount”), but such Decrease Amount is less than the Escrow Amount,
then, within five (5) Business Days of the final determination of the Final
Closing Cash Payment pursuant to this Section 2.05, Buyer, Warrant Holder
Representative and Seller will jointly instruct the Escrow Agent to pay the
Decrease Amount (less any amounts to be paid to the Independent Accountant and
allocable to Seller pursuant to Section 2.05(b), if any) to Buyer, by wire
transfer of immediately available funds to the account designated in writing by
Buyer. If the Decrease Amount exceeds the Escrow Amount, then Buyer, Warrant
Holder Representative and Seller shall jointly instruct the Escrow Agent to pay
Buyer the entire Escrow Amount (less any amounts to be paid to the Independent
Accountant and allocable to Seller pursuant to Section 2.05(b), if any), by wire
transfer of immediately available funds to the account designated in writing by
Buyer, Seller and Warrant Holder Representative. For the avoidance of doubt,
Seller and Warrant Holders shall have no liability under the preceding sentence
beyond the portion of the Escrow Amount then-remaining in the Escrow, and
Buyer’s sole and exclusive remedy for any adjustment to the Purchase Price

 18

 

made pursuant to Section 2.05 shall be the portion of the Escrow Amount
then-remaining in the Escrow.

(ii)               If the Final Closing Cash Payment is greater than the
Estimated Closing Cash Payment (the amount by which the Final Closing Cash
Payment is greater than the Estimated Closing Cash Payment will be referred to
herein as the “Increase Amount”), then, within five (5) Business Days of the
final determination of the Final Closing Cash Payment pursuant to this Section
2.05, Buyer will pay (or cause the Company to pay) to Seller 71.95% of the
Increase Amount and to Warrant Holders Representative 28.05% of the Increase
Amount (but less any amounts to be paid to the Independent Accountant and
allocable to Seller and Warrant Holders Representative pursuant to Section
2.05(b), if any), in each case by wire transfer of immediately available funds
to the accounts designated in writing by Seller and Warrant Holder
Representative.

(iii)             If the Final Closing Cash Payment is equal to the Estimated
Closing Cash Payment, then, within five (5) Business Days of the final
determination of the Final Closing Cash Payment pursuant to this Section 2.05,
Buyer, Warrant Holder Representative and Seller shall jointly instruct the
Escrow Agent to pay to the Independent Accountant any amounts to be paid to the
Independent Accountant and allocable to Seller and Warrant Holder Representative
pursuant to Section 2.05(b)), if any, by wire transfer of immediately available
funds to the account designated in writing by the Independent Account.

Section 2.06        Adjustments for Tax Purposes. Any payments made pursuant to
Section 2.05 shall be treated as an adjustment to the Purchase Price by the
Parties for Tax purposes, unless otherwise required by Law.

Section 2.07        Withholding Taxes. The Company, Buyer, its Affiliates, and
Escrow Agent shall be entitled to deduct and withhold from the amounts otherwise
payable by it pursuant to this Agreement to any Person such amounts as it
reasonably determines it is required to deduct and withhold with respect to the
making of such payment for Taxes, and to collect any necessary forms relating to
Taxes, including Forms W-8 or W-9, as applicable, or any similar information,
from Seller and other recipients of payments hereunder. The party seeking to
withhold under this Section 2.07 shall provide written notice of any such
required withholding no later than five (5) Business Days prior to the Closing
Date and shall use commercially reasonable efforts to reduce or eliminate any
such withholding. To the extent such amounts are so withheld and/or paid over to
or deposited with the relevant Governmental Authority by the Company, Buyer, its
Affiliates, or Escrow Agent, such withheld amounts shall be treated for all
purposes of this Agreement as having been paid to such Person in respect to
which such deduction and withholding was made.

ARTICLE III
REPRESENTATIONS AND WARRANTIES REGARDING THE COMPANY

The Company represents and warrants to Buyer that, except as provided in a
schedule to this Agreement, the statements contained in this ARTICLE III are
true, correct and complete as of the date hereof.

 19

 

Section 3.01        Organization, Authority and Qualification of the Company.

(a)                The Company is a corporation, duly organized, validly
existing and in good standing under the Laws of the Commonwealth of Pennsylvania
and has all necessary corporate power and authority to own, operate or lease the
properties and assets now owned, operated or leased by it and to carry on its
business as it is currently conducted. The Company is duly qualified, licensed
or admitted to do business and is in good standing in the States of
Pennsylvania, Maryland, Delaware, New Jersey, Virginia, and West Virginia, which
are the only jurisdictions in which the Company is required to be qualified,
licensed or admitted to do business.

(b)               The execution and delivery by the Company of this Agreement
and the Transaction Documents, the performance by the Company of its obligations
hereunder and thereunder, and the consummation by the Company of the
transactions contemplated hereby and thereby have been duly authorized by all
requisite corporate action on the part of the Company. This Agreement and each
other Transaction Document have been duly executed and delivered by the Company,
and (assuming due authorization, execution and delivery by Seller and Buyer)
this Agreement and the other Transaction Documents constitute legal, valid and
binding obligations of the Company, enforceable against the Company in
accordance with their terms, except as such enforceability may be limited by
ERISA or bankruptcy, insolvency, reorganization, moratorium or similar Laws
affecting creditors’ rights generally and by general principles of equity
(regardless of whether enforcement is sought in a proceeding at law or in
equity).

Section 3.02        Capitalization.

(a)                Section 3.02(a) of the Disclosure Schedules sets forth a
complete and correct list of the authorized and issued capital stock of the
Company. Such capital stock includes all of the issued and outstanding capital
stock of the Company. Such capital stock has been duly authorized and validly
issued, is fully paid and non-assessable and was not issued in violation of, and
is not subject to, any preemptive rights or other similar rights of any Person.
Except as set forth on Section 3.02(b) of the Disclosure Schedules, there are no
outstanding or authorized options, warrants, convertible securities or other
rights, agreements, arrangements or commitments of any character relating to the
capital stock of the Company or obligating Seller or the Company to issue or
sell any shares of capital stock of, or any other interest in, the Company.
Except as set forth on Section 3.02(c) of the Disclosure Schedules, the Company
does not have outstanding or authorized any stock appreciation, phantom stock,
profit participation or similar rights. There are no voting trusts, stockholder
agreements, proxies or other agreements or understandings in effect with respect
to the voting or transfer of any of the Shares.

Section 3.03        Subsidiaries. The Company does not own, directly or
indirectly (or possesses any options or other rights to acquire), any direct or
indirect ownership interests in any business, corporation, partnership, limited
liability company, association, joint venture, trust, or other entity.

Section 3.04        No Conflicts; Consents. The execution, delivery and
performance by Seller and the Company of this Agreement and the other
Transaction Documents, and the consummation of the transactions contemplated
hereby, do not and will not: (a) result in a

 20

 

violation or breach of any provision of the Organizational Documents of the
Company; (b) result in a material violation or breach of any provision of any
Law or Governmental Order applicable to the Company or any of its respective
assets; or (c) except as set forth in Section 3.04 of the Disclosure Schedules,
require the consent, notice or other action by any Person under, conflict with,
result in a violation or breach of, constitute a default under or result in the
acceleration of any supplier agreement, distributor agreement, note, bond,
mortgage, indenture, deed of trust, lease, agreement or contract to which the
Company is party or by which any of its properties or assets are bound. No
consent, approval, Permit, Governmental Order, declaration or filing with, or
notice to, any Governmental Authority is required by or with respect to the
Company in connection with the execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby.

Section 3.05        Financial Statements.

(a)                Section 3.05(a) of the Disclosure Schedules contains copies
of the Company’s (i) audited consolidated financial statements consisting of the
consolidated balance sheet of the Company as at December 31, 2017 and the
related consolidated statements of income, stockholders’ equity and cash flows
for the year then ended (the “Audited Financial Statements”), (ii) unaudited
consolidated financial statements consisting of the balance sheet of the Company
as at September 30, 2018, and the related consolidated statements of income and
cash flow for the three and nine month period then ended, and (ii) unaudited
consolidated financial statements consisting of the balance sheet of the Company
as at November 30, 2018, and the related consolidated statements of income for
the eleven month period then ended (collectively (ii) and (iii), the “Interim
Financial Statements”). No later than ten (10) Business Days prior to the
Closing Date, the Company shall deliver to Buyer a balance sheet of the Company
as of the Closing Date (the “Closing Balance Sheet”) (all of the documents
identified under this Section 3.05(a) collectively, the “Financial Statements”).

(b)               The Financial Statements have been prepared in accordance with
the Accounting Principles applied on a consistent basis throughout the period
involved, subject, in the case of the Interim Financial Statements, to normal
and recurring year-end adjustments (the effect of which will not be material)
and the absence of notes (that, if presented, would not differ materially from
those presented in the Audited Financial Statements). The Financial Statements
fairly present in all material respects the financial condition of the Company
as of the respective dates they were prepared and the results of the operations
of the Company for the periods indicated. The consolidated balance sheet of the
Company as of December 31, 2017, is referred to herein as the “2017 Balance
Sheet” and the date thereof as the “2017 Balance Sheet Date” and the
consolidated balance sheet of the Company as of November 30, 2018, is referred
to herein as the “Interim Balance Sheet” and the date thereof as the “Interim
Balance Sheet Date”.

Section 3.06        Undisclosed Liabilities. Except as set forth on Section 3.06
of the Disclosure Schedules, the Company does not have any obligations or
liabilities which are material individually or in the aggregate (whether
accrued, absolute, contingent, unliquidated or otherwise, whether due or to
become due and regardless of when and by whom asserted) at or as of the Closing
Date, except (i) liabilities reflected on the Interim Balance Sheet and (ii)
liabilities and obligations which have arisen after the Interim Balance Sheet
Date in the ordinary course of business and which are not material individually
or in the aggregate.

 21

 

Section 3.07        Absence of Certain Changes, Events and Conditions. Except as
set forth on Section 3.07 of the Disclosure Schedules, since the 2017 Balance
Sheet Date.

(a)                the Company has been operated in the ordinary course
consistent with past practice and there has not been any Material Adverse Effect
with respect to the Company or any event or development that, individually or
together with any or all other such events, could reasonably be expected to
result in a Material Adverse Effect with respect to the Company;

(b)               there has not been any material loss, damage or destruction
to, or any material interruption in the use of, any of the assets of the Company
used in, or held for use in, the operation of the business of the Company
(whether or not covered by insurance);

(c)                the Company has have not taken any action that would be
prohibited by the terms of Sections 7.08 and 7.09 if proposed to be taken after
the date of this Agreement.

(d)               the Company has not (i) granted bonuses, whether monetary or
otherwise, or increased wages, salary, bonus opportunities, severance, pension
or other compensation or benefits in respect of any current or former employees,
officers, directors, independent contractors or consultants of the Company or
their spouses, dependents or beneficiaries other than as required by Law or as
provided for in any existing written agreements as of the date hereof; (ii)
changed terms of employment or service for any such person or (iii) taken any
action to increase the amount of or accelerate the vesting, funding or payment
of any compensation or benefits to any such Person;

(e)                the Company has not adopted, modified or terminated any (i)
employment, severance, retention, change in control or other compensation or
benefit agreement, plan or arrangement with any current or former employees,
officers, directors, independent contractors or consultants of the Company or
their spouses, dependents or beneficiaries, or (ii) other than as required by
Law, Benefit Plan or any plan or arrangement that would constitute a Benefit
Plan if in existence on the date hereof; and

(f)                the Company has not issued, sold or otherwise disposed of any
of its capital stock, or granted any options, warrants, or other rights to
purchase or acquire (including upon conversion, exchange or exercise) any of its
capital stock, or granted any stock appreciation rights, phantom stock, profit
participation or similar rights.

Section 3.08        Material Contracts.

(a)                Section 3.08(a) of the Disclosure Schedules lists each
agreement of the Company involving the payment of estimated aggregate
consideration in excess of $50,000 in the 12 months ended December 31, 2018 or
requiring performance by any party more than one year from the date hereof,
which cannot be cancelled by the Company without penalty or without more than
ninety (90) days’ notice.

(b)               Each Material Contract is in full force and effect and
constitutes a legal, valid and binding agreement of, enforceable in accordance
with its terms against, the Company as a party thereto and, to the Knowledge of
the Company, the other party thereto. Neither the Company nor, to the Knowledge
of the Company, any other party to any Material Contract, is in violation

 22

 

or breach of or default under any such Material Contract (or, with notice or
lapse of time or both, would be in violation or breach of or default under any
such Material Contract). The Company has not received any notice (whether
written or oral) from any other party to any Material Contract to the
termination or non-renewal of such Material Contract, whether as a result of the
consummation of the transactions contemplated hereunder.

Section 3.09        Real Property; Title to Assets.

(a)                The Company will not own any real property at Closing. All
real property leased for a period greater than one (1) month by the Company is
listed on Section 3.09(a) of the Disclosure Schedules (collectively, the “Leased
Real Property”). The Company (i) has a valid and enforceable leasehold interest
with respect to each item of Leased Real Property leased by it, subject to no
Liens, and (ii) is in possession of and has quiet enjoyment of each item of
Leased Real Property leased by it. None of the Leased Real Property is subject
to any sublease of all or any portion thereof and no Person other than the
Company has any right to occupy any of the Leased Real Property. The Company is
not required to and does not pay any real estate taxes on the Leased Real
Property except as additional rent under the terms of the lease. The Leased Real
Property is adequate for the current needs of the Company and the anticipated
needs of the Company. All of the leasehold improvements at the Leased Real
Property are adequate for the current needs of the Company and are in good
condition. There is no pending or, to the Knowledge of the Company, proposed,
anticipated or contemplated, annexation, condemnation, eminent domain or similar
proceeding, or any zoning or tax or assessment proceeding affecting, or that may
affect, all or any portion of the Leased Real Property.

(b)               All tangible personal property owned by the Company is free
and clear of all Liens, other than Liens disclosed on Section 3.09(b) of the
Disclosure Schedules. is in, in all material respects, good working order and
condition, ordinary wear and tear excepted. The tangible personal property has
been maintained in accordance with reasonably prudent standards. The Company is
in possession of and has good title to, or has valid leasehold interests in or
valid rights under a Contract to use, all tangible personal property used in the
conduct of the Business including, but not limited to, all tangible personal
property reflected on the 2017 Balance Sheet and tangible personal property
acquired since the 2017 Balance Sheet Date, in each case other than tangible
personal property disposed of since such date in the ordinary course of the
Company’s business consistent with past practice.

Section 3.10        Intellectual Property.

(a)                Other than commercially available off-the-shelf software,
Section 3.10(a) of the Disclosure Schedules sets forth all Intellectual Property
that is licensed by the Company and used in the conduct of the Company’s
Business (the “Licensed Intellectual Property”) and the names of the licensors
of such Licensed Intellectual Property. Except as set forth in Section 3.10(a)
of the Disclosure Schedules, the Company has no obligation to compensate any
Person for the license of any Licensed Intellectual Property. The Company has
not granted to any Person any license, option or other rights to use any of the
Licensed Intellectual Property, whether or not requiring the payment of
royalties. No license for any Licensed Intellectual Property will terminate by
reason of the execution, delivery and performance of this Agreement or any
Transaction Document or the consummation of the transactions contemplated hereby
and

 23

 

thereby. The Company has such rights to use the Licensed Intellectual Property,
free and clear of all Liens, as are necessary in connection with the conduct of
the business of the Company in the ordinary course consistent with past
practice.

(b)               Section 3.10(b) of the Disclosure Schedules sets forth (i) all
material Intellectual Property owned by the Company and used in the conduct of
the business of the Company (the “Owned Intellectual Property”) and (ii) the
Company’s existing registrations, and applications for registration, for or with
respect to any of the Owned Intellectual Property. The Company has taken
reasonable steps to maintain its confidential information. To the Knowledge of
the Company, the use by the Company of its Owned Intellectual Property does not
infringe upon or otherwise violate the rights of any other Person in or to such
Owned Intellectual Property. The Company has not granted to any Person any
license, option or other rights to use any Owned Intellectual Property, whether
or not requiring the payment of royalties.

(c)                Except as set forth on Section 3.10(c) of the Disclosure
Schedules, there are no pending or, to the Knowledge of the Company, threatened
actions, suits, claims, investigations or other legal proceedings pending (i)
relating to the Company’s use of any Licensed Intellectual Property or Owned
Intellectual Property or (ii) claiming that such Person has any ownership of,
right to use or other rights with respect to any Licensed Intellectual Property
or Owned Intellectual Property. The Licensed Intellectual Property and the Owned
Intellectual Property constitute all of the Intellectual Property necessary for
the conduct of the business of the Company in the ordinary course consistent
with past practice.

Section 3.11        Insurance. Section 3.11 of the Disclosure Schedules contains
a true and complete list of all liability, property, workers’ compensation,
automobile, directors’ and officers’ liability and other insurance policies
currently in effect that insure the business of the Company or the operations or
employees of the Company, or affect or relate to the ownership, use or operation
of any of the assets of the Company (including the names and addresses of the
insured party thereunder and the insurers, the expiration dates thereof, the
annual premiums and payment terms thereof, the amounts of coverage and
deductibles thereunder, a brief description of the interests insured thereby and
a copy of a detail loss history report issued by the insurer with respect to the
prior six (6) year period). The insurance policies listed on Section 3.11 of the
Disclosure Schedules are sufficient for compliance in all material respects with
all applicable Laws and Contracts to which the Company is a party or by which it
is bound. The Company has not has received notice (whether written or oral) that
any insurer under any policy referred to in this Section 3.11 is denying
liability with respect to a claim thereunder or defending under a reservation of
rights clause. Section 3.11 of the Disclosure Schedules lists each claim filed
by the Company under any of the foregoing policies during the period covered by
the loss runs referred to above and the results of each of such claims.

Section 3.12        Legal Proceedings; Governmental Orders.

(a)                Except as set forth in Section 3.12(a) of the Disclosure
Schedules, (i) there are no actions, suits, claims, investigations or other
legal proceedings pending or, to the Company’s Knowledge, threatened against or
by the Company affecting any of its properties or assets, and (ii) to the
Company’s Knowledge, no event has occurred or circumstances exist that may give

 24

 

rise to, or serve as a basis for, any such action, suit, claim, investigation or
other legal proceeding.

(b)               Except as set forth in Section 3.12(b) of the Disclosure
Schedules, there are no outstanding Governmental Orders and no unsatisfied
judgments, penalties or awards against or affecting the Company or any of its
properties or assets. To the Company’s Knowledge, no officer, director, or key
employee of the Company is subject to any Governmental Order that prohibits such
Person from engaging in or continuing any conduct, activity or practice related
to the business of the Company.

Section 3.13        Compliance With Laws; Permits.

(a)                Except as set forth in Section 3.13(a) of the Disclosure
Schedules, the Company is, and has been during the prior four (4) years, in
compliance with all Laws applicable to the Company, its Business, properties or
assets. The Company has not received during the prior four (4) years any written
notice or other communication from any Governmental Authority regarding any
actual, alleged, possible or potential violation of, or failure to comply with,
any applicable Laws. The Company is not subject to any audits, examinations or,
to the Company’s Knowledge, investigations by any Governmental Authority.

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

Section 3.14        Environmental Matters. Except as would not have a Material
Adverse Effect with respect to the Company, (i) the Company is in compliance
with all Environmental Laws, has all required Environmental Permits and is in
compliance with the terms thereof; (ii) no Site is a treatment, storage or
disposal facility, as defined in and regulated under the Resource Conservation
and Recovery Act, 42 U.S.C. § 6901 et seq., is on or ever was listed or is
proposed for listing on the National Priorities List pursuant to the
Comprehensive Environmental Response, Compensation and Liability Act, 42 U.S.C.
§ 9601 et seq., or on any similar state list of sites requiring investigation or
cleanup; (iii) there are no pending or outstanding corrective actions by any
Governmental Authority for the investigation, remediation or cleanup of any Site
for which the Company will be liable; (iv) prior to or during the Company’s
operations on of the Site, there has been no Environmental Release of a
Hazardous Substance at, from, in, to, on or under any Site and no Hazardous
Substances are present in, on, about or migrating to or from any Site for which
the Company will be liable; (v) there are no past, pending, or, to the Knowledge
of the Company, threatened Environmental Claims against the Company; (vi)
neither the Company nor any predecessor thereof has transported or arranged for
the treatment of any Hazardous Substance to any Site location; (vii) there are
no (A) underground storage tanks, (B) polychlorinated biphenyl containing
equipment, or (C) asbestos containing material, on any Site for which the
Company will be liable; and (viii) there have been no environmental
investigations conducted by or on behalf of, the Company with respect to any
Site or any treatment of any Hazardous Substance on any Site.

 25

 

Section 3.15        Employee Benefit Matters.

(a)                Section 3.15(a) of the Disclosure Schedules contains a
correct and complete list of each benefit, retirement, employee stock ownership,
employment, consulting, compensation, incentive, bonus, stock option, restricted
stock, stock appreciation right, phantom equity, change in control, severance,
vacation, paid time off, group health, life insurance, disability, welfare,
fringe-benefit and other material benefit agreement, plan, policy and program,
whether or not reduced to writing, funded or otherwise, including without
limitation any “employee benefit plan” within the meaning of Section 3(3) of
ERISA, whether or not subject to ERISA, that is maintained, sponsored,
contributed to, or required to be contributed to by the Company, for the benefit
of any current or former director, officer, employee or independent contractor
of the Company or any spouse, dependent or beneficiary of any such Person, or
under which the Company has any liability, contingent or otherwise, including as
the result of any ERISA Affiliate, by reason of partnership, guaranty or
indemnity or with respect to any previously-terminated benefit agreement, plan,
policy or program (as listed on Section 3.15(a) of the Disclosure Schedules,
each, a “Benefit Plan”).

(b)               Except as set forth in Section 3.15(b) of the Disclosure
Schedules, each Benefit Plan and related trust has been established, maintained
and administered in accordance with, and complies with, in all material
respects, all applicable Laws (including ERISA, the Code and applicable local
Laws) and has been administered consistent with its terms and all written
representations made by officers and human resources personnel of the Company to
the current and former employees, directors, officers, consultants and
independent contractors of the Company and their spouses, dependents and
beneficiaries. Each Benefit Plan that is intended to be qualified under Section
401(a) of the Code (a “Qualified Benefit Plan”) is so qualified and has received
a favorable determination letter from the Internal Revenue Service, or with
respect to a Volume Submitter Plan, can rely on an advisory letter from the
Internal Revenue Service to the Volume Submitter Plan sponsor, to the effect
that the current form of such Qualified Benefit Plan is so qualified and that
the plan and the trust related thereto are exempt from federal income Taxes
under Sections 401(a) and 501(a), respectively, of the Code, and nothing has
occurred that could reasonably be expected to cause the revocation of such
determination letter from the Internal Revenue Service or the unavailability of
reliance on such determination or advisory letter from the Internal Revenue
Service. Except as set forth in Section 3.15(b) of the Disclosure Schedules, all
benefits, contributions and premiums required by and due under the terms of each
Benefit Plan or applicable Law have been timely paid in accordance with the
terms of such Benefit Plan and the terms of all applicable Laws, and all
benefits, contributions and premiums required by but not yet due under the terms
of each Benefit Plan or applicable Law are properly accrued on the Financial
Statements and Interim Balance Sheet as required by GAAP or applicable Law.
There are no outstanding defaults or violations by any party to any Benefit
Plan. Neither the Company nor any other party has been in breach of any
fiduciary obligation with respect to any Benefit Plan or the trusts or other
funding media relating thereto. With respect to each Benefit Plan, no events
have occurred or are reasonably expected to occur that have resulted in or would
subject the Company to a Tax under Sections 4971 or 4975 of the Code or Section
406 of ERISA or the assets of the Company to a lien under Section 430(k) of the
Code or Section 303(k) of ERISA.

 26

 

(c)                No Benefit Plan: (i) is subject to the minimum funding
standards of Section 302 of ERISA or Section 412 of the Code or subject to Title
IV of ERISA; (ii) is a “multiemployer plan” (as defined in Section 3(37) of
ERISA); (iii) is a multiple employer plan within the meaning of Sections 4063 or
4064 of ERISA; or (iv) is a multiple employer welfare arrangement within the
meaning of Section 3(40) of ERISA, and neither the Company nor any ERISA
Affiliate has or has ever had any liability with respect to any such type of
Benefit Plan. The Company: (i) has not withdrawn from, or previously terminated,
any pension plan or multiemployer plan under circumstances resulting (or
expected to result) in a liability to the Pension Benefit Guaranty Corporation
or such pension plan or multiemployer plan; or (ii) has not engaged in any
transaction which would give rise to a liability of the Company or Buyer or any
of its Affiliates under Section 4069 or Section 4212(c) of ERISA.

(d)               Other than as required under Section 4980B of the Code or
other applicable Law, with respect to which the recipient pays the full premium
for such continuation coverage, no Benefit Plan provides benefits or coverage in
the nature of health, life, disability or other welfare insurance or benefits
following retirement or other termination of employment or service. Nothing has
occurred with respect to any Benefit Plan that has subjected or could reasonably
be expected to subject the Company or any of its ERISA Affiliates or, with
respect to any period on or after the Closing Date, Buyer or any of its
Affiliates, to a penalty under Section 502 of ERISA or to Tax or penalty under
Section 4975, 4980B or 4980H of the Code.

(e)                Except as set forth in Section 3.15(e) of the Disclosure
Schedules: (i) there is no pending or, to the Company’s Knowledge, threatened
action relating to a Benefit Plan (other than for benefit claims in the ordinary
course pursuant to the express terms of the applicable Benefit Plan); and (ii)
no Benefit Plan is currently or has within the six years prior to the date
hereof been the subject of an examination or audit by a Governmental Authority
or an application or filing under any correction or similar program of any
Governmental Authority. The Company has not incurred, and no facts exist which
reasonably could be expected to result in, any liability, tax, fee or penalty to
the Company with respect to any Benefit Plan under any applicable Law including
without limitation the Code or ERISA (other than to pay premiums, contributions
or benefits in the ordinary course consistent with the terms of such plans).

(f)                Except as set forth in Section 3.15(f) of the Disclosure
Schedules, no Benefit Plan exists that could: (i) result in the payment to any
current or former director, officer, employee or independent contractor of the
Company or any spouse, dependent or beneficiary of any such Person of any money
or other property, except as a result of any plan termination of any Benefit
Plan specifically provided for in this Agreement; (ii) accelerate the vesting or
time of payment of or provide any additional rights or benefits (including an
increase in or funding of compensation or benefits through a trust or otherwise)
to any current or former director, officer, employee or independent contractor
of the Company or any spouse, dependent or beneficiary of any such Person,
except as a result of any plan termination of any Benefit Plan specifically
provided for in this Agreement; or (iii) limit or restrict the ability of Buyer
or its Affiliates to merge, amend or terminate any Benefit Plan, in each case,
as a result of the execution of this Agreement and/or the consummation of the
transactions that are the subject of this Agreement (either alone or in
connection with any concurrent or subsequent event). Neither the execution of
this Agreement nor the consummation of the transactions contemplated hereby
(either alone or in connection

 27

 

with any concurrent or subsequent event) will result in “excess parachute
payments” within the meaning of Section 280G(b) of the Code.

(g)               Each Person who is classified by the Company as an employee or
independent contractor has been properly classified as such for all purposes,
including for Taxes and for purposes of participation in and accrual of benefits
under any Benefit Plan. There exists no condition or set of circumstances that
could subject the Company or any Benefit Plan to any liability, tax, penalty or
fee under ERISA, the Code or any applicable Law relating to the failure to
properly classify any service provider of the Company as an “employee” or
“independent contractor” for any purpose whatsoever.

(h)               Each Benefit Plan that is subject to Section 409A of the Code
has been maintained in form and operated in compliance with the operational and
documentary requirements of Section 409A of the Code and has been administered
in compliance with its terms. The Company has no obligation to gross up,
reimburse or otherwise indemnify any Person for any Taxes that might be incurred
as the result of Sections 280G, 409A or 4999 of the Code.

(i)                 Without limiting the foregoing, the ESOP has been
administered according to its terms and has been established, maintained and
administered in accordance in all material respects with the Code, ERISA and
other applicable Laws, including, but not limited to, the requirements of
Sections 401(a), 409 and 4975 of the Code and the regulations promulgated
thereunder. The ESOP constitutes an “employee stock ownership plan” (as such
term is defined in Section 4975(e)(7) of the Code and Section 407(d)(6) of
ERISA). Except as disclosed in Section 3.15(i) of the Disclosure Schedules, no
corrections to the administration of the ESOP have been made or are required,
and there are no voluntary correction requests in process with the U.S.
Department of Labor, the IRS or any other Governmental Authority. All
allocations of the Shares and payments to participants of amounts in exchange
for the Shares, if any, have been made in accordance with the terms of the ESOP,
including the requirement that any allocation or sale or exchange of the Shares
be made at a fair market value determined by an independent appraiser. No sale
(or purchase) of the Shares by the ESOP to the Company or to any other
disqualified person (within the meaning of Section 4975 of the Code) or
party-in-interest (within the meaning of ERISA) has constituted a non-exempt
prohibited transaction under Section 4975 of the Code or under ERISA; and each
sale (or purchase) of the Shares by or to the ESOP has been made, with respect
to any sale, for no less than (or, with respect to any purchase, no more than)
adequate consideration (as that term is defined in Section 3(18) of ERISA). No
sale (or purchase) of the Shares has, or will, result in an imposition of
penalties upon the Company or the ESOP under Section 4978 of the Code or Section
4979A of the Code. There is not currently in effect any “verified written
statement” signed by the Company or any predecessor in connection with any sale
of the Shares to the ESOP under a Section 1042 transaction (within the meaning
of Section 1042 of the Code). With respect to the ESOP, (i) allocations to
participants were made in accordance with Section 409(b) of the Code, to the
extent applicable under Section 409(a) of the Code; (ii) all the Company
contributions to the ESOP were deductible under Section 404 of the Code for the
year made; (iii) the voting requirements of the ESOP and Section 409(e) of the
Code and the valuation requirements of Section 408(e) of ERISA have always been
complied with and (iv) no allocations were ever made in violation of Sections
409(n) or 409(p) of the Code. Neither the Trustee nor any participant or
beneficiary had or has any right to vote on the transactions contemplated by
this Agreement, or any portion thereof, under the terms of the

 28

 

ESOP or applicable Law. Except as set forth in Section 3.15(i) of the Disclosure
Schedules, there are no current legal proceedings or, to the Knowledge of the
Company, any threatened legal proceedings against the ESOP, any fiduciaries
(within the meaning of ERISA) of the ESOP (with respect to their fiduciary
duties to the ESOP), or the Company or Seller in connection with its
administration of the ESOP by current or former participants or beneficiaries,
the U.S. Department of Labor or the IRS, and neither the U.S. Department of
Labor nor the IRS is auditing or investigating the ESOP or has made inquiries
about the form, establishment or administration of the ESOP or any transaction
in which the ESOP engaged during the last five (5) full calendar years. Except
as disclosed in Section 3.15(i) of the Disclosure Schedules, no fiduciary
(within the meaning of ERISA) of the ESOP is indemnified by, or has any rights
to indemnity from, the Company or the ESOP for any fiduciary liability he, she
or it may incur or may have incurred as a fiduciary of the ESOP. The Company has
fully complied with all of its obligations under the ESOP and under ERISA and
the Code with respect to the ESOP.

(j)                 Each Benefit Plan that is an “employee pension benefit plan”
within the meaning of Section 3(2) of ERISA and not a Qualified Benefit Plan is
exempt from Parts 2, 3 and 4 of Title I of ERISA as an unfunded plan that is
maintained primarily for the purpose of providing deferred compensation for a
select group of management or highly compensated employees pursuant to Sections
201(2), 301(a)(3) and 401(a)(1) of ERISA. Except as set forth in Schedule
3.15(j), no assets of the Company are allocated to or held by a “rabbi trust” or
similar funding vehicle.

(k)               All Benefit Plans that are group health plans have been
operated and administered in compliance with the Patient Protection and
Affordable Care Act (“PPACA”), the Health Care and Education Reconciliation Act
of 2010 and all applicable regulations and guidance thereunder. To the extent
any Benefit Plan is intended to be grandfathered under the terms of PPACA, the
Company has complied with the applicable provisions of PPACA, the Code, ERISA
and applicable Laws in all material respects, and the Company has not taken, or
failed to take, any action which would cause such Benefit Plan to lose such
grandfathered status.

(l)                 The Company has delivered to Buyer accurate and complete
copies of all documents setting forth the terms of each Benefit Plan, including,
if applicable, (i) any amendments thereto and all related trust documents; (ii)
the three most recent annual reports thereto (Forms 5500 and all schedules and
financial statements attached thereto); (iii) the most recent summary plan
description together with any summaries of material modifications; (iv) all
material contracts relating to each Benefit Plan, including administrative and
service agreements and insurance contracts; (v) the most recent IRS
determination letter or opinion letter issued with respect to any Qualified
Benefit Plan, (vi) all material written materials provided to employees
regarding benefits under any Benefit Plans that could result in liability to the
Company, (vii) all correspondence related to any audit, investigation, review or
request for information from any Governmental Authority relating to any Benefit
Plan in the prior five (5) years; (viii) all coverage, discrimination and
related testing with respect to each Benefit Plan within the last three years,
and (ix) the most recent appraisal of the Company prepared by the Company’s
financial advisor in connection with the transactions contemplated by this
Agreement.

(m)             The Company has the right under the terms of each Benefit Plan
and under applicable Law to amend, revise, merge or terminate such plan (or its
participation in such plan)

 29

 

at any time exclusively and unilaterally by action of the Company, and no
additional expenses, costs, contributions or funding would be required to
properly effect such termination.

(n)               Neither the Company nor any of its directors, officers or
executives has made any commitment (written or oral, binding or otherwise) to
adopt or establish any new Benefit Plan or to modify or amend any Benefit Plan.

(o)               The ESOP constitutes an “employee stock ownership plan” (as
such term is defined in Section 4975(e)(7) of the Code and Section 407(d)(6) of
ERISA. Assuming (i) the consideration to be received by the ESOP hereunder will
be no less than adequate consideration (within the meaning of ERISA Section
3(18), (ii) the delivery of the Fairness Opinions to the Trustee and (iii) the
Buyer was a “disqualified person” and a “party in interest” under the Code and
ERISA, respectively, the execution, delivery and performance by the Trustee on
behalf of Seller of this Agreement and the other Transaction Documents to which
Seller is a party, and the consummation of the transactions contemplated hereby
and thereby, do not and will not (assuming the passage of time or the giving of
notice or both) constitute a non-exempt “prohibited transaction” as defined in
Code Section 4975 or ERISA Section 406 (and after the application of the
exemptions under Code Section 4975(d)(13) and ERISA Section 408(e),
respectively).

Section 3.16        Employment Matters.

(a)                Except as set forth in Section 3.16(a) of the Disclosure
Schedules, the Company is not a party to, or bound by (and for the prior two (2)
years have not been a party to or bound by), any collective bargaining or other
agreement with a labor organization representing any of their Employees. To the
Knowledge of the Company, no union organizing campaign or activity is in
progress with respect to any Employees and no question concerning representation
exists respecting such Employees. Except as set forth in Section 3.16(a) of the
Disclosure Schedules, during the prior two (2) years there has not been, nor, to
the Company’s Knowledge, has there been any threat of, any strike, slowdown,
work stoppage, lockout, concerted refusal to work overtime or other similar
labor activity or dispute affecting the Company.

(b)               The Company is now and for the prior four (4) years have been
in compliance in all material respects with all applicable Laws pertaining to
employment and employment practices to the extent they relate to Employees of
(or applicants for employment with) the Company, including but not limited to
Laws relating to labor relations, employment discrimination, harassment and
retaliation, reasonable accommodations, immigration, wages and hours, safety and
health, workers’ compensation and leaves of absence. Every U.S.-based employee
of the Company is authorized to work in the United States. Except as set forth
in Section 3.16(b) of the Disclosure Schedules, there are no actions, suits,
claims, investigations or other legal proceedings against the Company pending,
or to the Company’s Knowledge, threatened to be brought or filed, by or with any
Governmental Authority or arbitrator in connection with the employment of any
current or former employee of the Company, including, without limitation, any
claim relating to unfair labor practices, employment discrimination, harassment,
retaliation, equal pay, wage and hour, immigration or any other employment
related matter arising under applicable Laws.

 30

 

(c)                Section 3.16(c) of the Disclosure Schedules contains a list
of each Employee of the Company, as well as such Employee’s (i) name, (ii) job
title, (iii) location of employment, (iv) annual base compensation or regular
hourly rate of pay, (v) commission structure or bonus opportunity, (vi) status
as exempt or non-exempt under the Fair Labor Standards Act, (vii) status as
full-time, part-time, and/or temporary, (viii) hire date, (ix) current or
anticipated leave status (if applicable, and excluding any scheduled vacation or
paid time off to be taken in the ordinary course of business), (x) total
compensation paid for the prior calendar year, (xi) accrued and unused vacation
or other paid time off, and (xii) a description of any other accrued and unpaid
compensation. Except as set forth in Section 3.16(c) of the Disclosure
Schedules, no offer of employment has been made by the Company that remains
outstanding and has not yet been accepted, or which has been accepted but where
the employment has not yet started. To the Knowledge of the Company, none of the
Employees has indicated to the Company that he or she intends to resign, retire
or terminate his or her employment with the Company. The Company have the right
to terminate the employment of each of their Employees at will and to terminate
the engagement of any of their independent contractors without incurring any
penalty or liability.

(d)               The Company has correctly classified each Employee as exempt
or nonexempt under the Fair Labor Standards Act and similar state Laws. All
independent contractors providing services to the Company have been properly
classified as independent contractors for purposes of federal and applicable
state Laws, including but not limited to Laws concerning Taxes and the Company
has not received any notice from any Governmental Authority disputing such
classification.

(e)                Except as set forth in Section 3.16(e) of the Disclosure
Schedules, all compensation, including wages, commissions and bonuses payable to
current or former employees, independent contractors or consultants for services
performed on or prior to the date hereof and the Closing Date, has been paid in
full or is included in the Closing Working Capital as a current liability and
there are no outstanding agreements, understandings or commitments of the
Company with respect to any compensation, commissions or bonuses.

Section 3.17        Taxes.

(a)                Except as set forth in Section 3.17 of the Disclosure
Schedules:

(i)                 All Tax Returns required to be filed by or on behalf of
Seller and the Company have been properly prepared and duly and timely filed
(taking into account any valid extensions). All such Tax Returns are true,
complete and correct in all respects. All Taxes due and owing (whether or not
shown or required to be shown on any Tax Return) by the Company have been fully
and timely paid. No claim has ever been made by a Governmental Authority in a
jurisdiction where the Company does not file Tax Returns that it is or may be
subject to taxation by that jurisdiction which has not been resolved.

(ii)               There are no Liens for unpaid Taxes on any assets of any of
the Company (except for statutory liens for Taxes not yet due and payable). The
Company has withheld and paid all Taxes required by applicable Law to have been
withheld in connection with amounts paid or owing to any Person and has complied
with all information reporting and recordkeeping requirements with respect
thereto. The unpaid Taxes of the Company did not, as of the dates of

 31

 

the Financial Statements, exceed the reserve for Tax liability (excluding any
reserve for deferred Taxes established to reflect timing differences between
book and Tax income) set forth on the face of the balance sheets (rather than in
any notes thereto) contained in the Financial Statements. Since the Interim
Balance Sheet Date, the Company as not has incurred any liability for Taxes
outside the ordinary course of business.

(iii)             The Company has made an election under Section 1362(a) of the
Code to be an “S corporation,” as defined in Section 1361(a)(1) (and any
comparable provision of state and local Tax Law in jurisdictions in which such
election was available), and all persons who were shareholders of the Company on
the day on which such election was made validly consented to such election. Such
election became effective as of the effective date of the election, January 1,
1992 (“Election Date”) and has remained in effect properly and continuously from
the Election Date to and including the Closing Date. No actions have been taken
and no omissions have occurred which would cause such election to terminate or
to be revoked at any time prior to the Closing Date. Since the Election Date,
(A) all the shareholders of the Company have been eligible shareholders under
Section 1361 of the Code and the Treasury Regulations thereunder, and (B) the
Company has had only a single class of stock within the meaning of Section 1361
of the Code and the Treasury Regulations thereunder.

(iv)             Reserved.

(v)               The Company shall not be liable for any Tax under Section 1374
of the Code in connection with the deemed sale of the Company’s assets caused by
the Section 338(h)(10) Election. The Company has not, in the past five (5)
years: (A) acquired assets from another corporation in a transaction in which
the Company’s Tax basis for the acquired assets was determined, in whole or in
part, by reference to the Tax basis of the acquired assets (or any other
property) in the hands of the transferor or (B) acquired the stock of any
corporation that is a qualified subchapter S subsidiary within the meaning of
Section 1361(b)(3)(B) of the Code.

(vi)             The Company has never been a party to or a partner in any joint
venture, partnership or other arrangement or contract that is treated as a
partnership for Tax purposes. The Company does not own equity of any other
entity.

(vii)           There are no ongoing actions, suits, claims, investigations or
other legal proceedings by any taxing authority against the Company. No notice
of deficiency, proposed assessment or adjustment with respect to any Tax or Tax
Return of the Company has been received by the Company. There are no Tax audits,
claims, inquiries or other administrative proceedings, discussions or court
proceedings presently pending or threatened with regard to any Tax or Tax Return
against the Company. The Company has not agreed to any extension or waiver of
the statute of limitation applicable to any Tax or Tax Return, or agreed to any
extension of time with respect to a Tax assessment or deficiency.

(viii)         The Company has delivered or made available to Buyer (A) complete
and correct copies of all federal income Tax Returns relating to the Company for
the last three (3) years, and (B) complete and correct copies of all private
letter rulings, revenue agent reports, information document requests, notices of
proposed deficiencies, deficiency notices, protests, petitions, closing
agreements, settlement agreements, pending ruling requests and any similar

 32

 

documents submitted by, received by, or agreed to by or on behalf of the
Company, or shareholder to the extent related to the Company’s qualification as
an S corporation, relating to Taxes for the prior three (3) years

(ix)             The Company is not a party to any Tax allocation, Tax sharing,
Tax indemnification or similar agreement under which the Company could be liable
for the Taxes of any other Person. The Company does not have any liability for
the Taxes of any Person (other than the Company) under Treasury Regulation
Section 1.1502-6 (or any substantially similar provision of state, local or
non-U.S. Tax Law), or as a transferee or successor, or by contract, or
otherwise. The Company has not been (A) a member of an Affiliated group filing a
consolidated federal income Tax Return or (B) included in any “consolidated”,
“unitary” or “combined” Tax Return provided for under the Laws of the United
States, any state thereof, or any non-U.S. jurisdiction.

(x)               The Company will not be required to include any item of income
in, or exclude any item or deduction from, taxable income for any Tax period or
portion thereof ending after the Closing Date as a result of: (A) any change in
a method of accounting under Section 481 of the Code (or any comparable
provision of state, local or foreign Tax Laws), or use of an improper method of
accounting, for a Tax period ending on or prior to the Closing Date; (B) an
installment sale or open transaction occurring on or prior to the Closing Date;
(C) deferred revenue or any prepaid amount received on or before the Closing
Date; (D) any closing agreement under Section 7121 of the Code, or similar
provision of state, local or foreign Law; or (E) any election under Section
108(i) of the Code.

(xi)             The Company is not a party to any contract, arrangement or plan
that has resulted or could result, separately or in the aggregate, in the
payment of (A) any “excess parachute payment” within the meaning of Section 280G
of the Code (or any corresponding provision of state, local, or non-U.S. Tax
Law) or (B) any amount that will not be fully deductible as a result of Section
162(m) of the Code (or any corresponding provision of state, local, or non-U.S.
Tax Law).

(xii)           The Company is not a “United States real property holding
corporation” within the meaning of Section 897(c)(2) of the Code. The Company
has not had a permanent establishment (within the meaning of an applicable Tax
treaty) or otherwise had an office or fixed place of business in a country other
than the United States.

(xiii)         None of the assets of the Company is (i) “tax-exempt use
property” within the meaning of Section 168(h) of the Code or (ii) directly or
indirectly secures any debt the interest of which is exempt from Tax under
Section 103(a) of the Code.

(xiv)         The Company has not constituted a “distributing corporation” or a
“controlled corporation” under Section 355 (or any similar provision of
applicable state, local or non-U.S. Law) in any distribution in the last two
years or pursuant to a plan or series of related transactions (within the
meaning of Section 355(e) or similar Law) with any transaction contemplated by
this Agreement.

 33

 

(xv)           The Company has not “participated” in or has any filing
obligation with respect to a “reportable transaction” within the meaning of
Section 6707A(c)(1) and Treasury Regulation Section 1.6011-4(b) and all
positions taken with respect to the Company that could give rise to a
“substantial understatement of income tax” within the meaning of Section 6662 of
the Code have been disclosed on the Tax Returns of the Company.

(b)               The Company has not requested or is the subject of or bound by
any private letter ruling, technical advice memorandum, closing agreement or
similar ruling, memorandum or agreement with any Governmental Authority with
respect to Taxes, nor is any such request outstanding. There is no outstanding
power of attorney authorizing anyone to act on behalf of the Company in
connection with any Tax, Return or proceeding relating to any Tax.

Section 3.18        Affiliate Transactions.

(a)                Except as set forth in Section 3.18(a) of the Disclosure
Schedules, neither the Company nor any of its Affiliates or Immediate Family
Members, and no manager, member, officer, director or employee of the Company
nor any Affiliate of any such Person is presently, or has been, in the past
three (3) years, a party to any transaction or contract with the Company (other
than compensation for services as managers, officers, directors or employees of
the Company, reimbursement for reasonable business expenses or payment of
dividends or distributions in the ordinary course consistent with past
practice), including, without limitation, any written or oral Contract (i)
providing for the furnishing of services or assets by, (ii) providing for the
rental of real or personal property from, or (iii) otherwise requiring payments
to, or on behalf of, any such Person or Affiliate thereof. Since the Interim
Balance Sheet Date, there has been no dividend, distribution or payment of any
kind whatsoever by the Company to Seller or any of their Affiliates.

(b)               Except as set forth on Section 3.18(b) of the Disclosure
Schedules, none of the or any of their Immediate Family Members: (i) has any
direct or indirect financial interest in any Person with whom the Company has
consummated or entered into any Material Contract; (ii) owns, directly or
indirectly, in whole or in part, or has any other interest in, any tangible or
intangible property that is necessary for the conduct of the business of the
Company; or (iii) has any contractual or financial relationship or arrangement
with, or otherwise receives or has the right to receive any payments from, any
Person with whom the Company has consummated or entered into any Material
Contract.

Section 3.19        Bank Accounts. Section 3.19 of the Disclosure Schedules sets
forth a complete and correct list showing all banks in which the Company
maintains a bank account or safe deposit box (collectively, the “Bank
Accounts”), together with, as to each Bank Account, the account number, and the
names of all signatories thereon.

Section 3.20        Corruption and Anti-Terrorism.

(a)                None of the Company or any of its Affiliates, officers,
directors, employees, agents or any other person authorized to act on behalf of
the Company, has (i) used any of the funds of the Company for unlawful
contributions, payments, gifts or entertainment, or made any unlawful
expenditures relating to political activity, to governmental officials or
others, or

 34

 

established or maintained any unlawful or unrecorded funds, in each case, in
violation of Section 30A of the Securities Exchange Act of 1934 (Foreign Corrupt
Practices Act of 1977 (15 USC §78dd-1)), or any other foreign, provincial,
federal or state Laws or (ii) accepted or received for or on behalf of the
Company any unlawful contributions, payments, expenditures or gifts.

(b)               The Company is and has been in compliance with all Laws
relating to anti-money laundering or anti-terrorism, including the Uniting and
Strengthening America by Providing Appropriate Tools Required to Intercept and
Obstruct Terrorism Act of 2001, H.R. 3162, Public Law 107-56 (commonly known as
the “Patriot Act”) and Executive Order Number 13224 on Terrorism Financing,
effective September 24, 2001 and regulations promulgated pursuant thereto
(collectively with the Patriot Act and any other antiterrorism Laws,
“Anti-Terrorism Laws”). The Company is not a Person with whom Buyer is
restricted from doing business under any of the Anti-Terrorism Laws, including
Persons named on the Office of Foreign Asset Control Specially Designated
Nationals and Blocked Persons List.

Section 3.21        Material Customers and Material Suppliers.

(a)                Section 3.21(b) of the Disclosure Schedules sets forth the
names and dollar amounts of the ten (10) largest customers (based on revenue) of
the Company for the twelve (12) month period ended December 31, 2018. The
Company has not received any written notice, and does not otherwise have any
Knowledge that any such customer intends to cancel, modify or otherwise change
its relationship with the Company in any material manner.

(b)               Section 3.21(a) of the Disclosure Schedules sets forth the
names and dollar amounts of each of the ten (10) largest suppliers (based on
expenditures) of the Company for the twelve (12) month period ended December 31,
2018. The Company has not received any written notice, and does not otherwise
have any Knowledge that any such supplier intends to cancel, modify or otherwise
change its relationship with the Company in any material manner.

Section 3.22        Accounts Receivable. Each Account Receivable: (i) arose from
bona fide transactions in the ordinary course of the Company’s business and are
payable on ordinary trade terms, (ii) are legal, valid and binding obligations
of the respective debtors enforceable in accordance with their terms except to
the extent that enforcement may be limited by applicable bankruptcy, insolvency
or similar laws, (iii) are not subject to any valid set-off or counterclaim, and
(iv) to the Knowledge of the Company, it has the right to collect the accounts
receivable in the ordinary course of the Business consistent with past practices
in the aggregate recorded amounts thereof.

Section 3.23        Brokers. No broker, finder or investment banker is entitled
to any brokerage, finder’s or other fee or commission in connection with the
transactions contemplated by this Agreement based upon arrangements made by or
on behalf of Seller and no brokerage, finder’s or other fee or commission in
connection with the transactions contemplated by this Agreement based upon
arrangements made by or on behalf of Seller shall be paid by the Trust.

ARTICLE IV
REPRESENTATIONS AND WARRANTIES REGARDING Warrant holders

 35

 

Each Warrant Holder, as to himself or herself and for no other Warrant Holders,
represents and warrants to Buyer that the statements contained in this ARTICLE
IV are true, correct and complete as of the date hereof.

Section 4.01        Capacity. Such Warrant Holder has requisite legal capacity
to enter into this Agreement and the other Transaction Documents to which such
Warrant Holder is a Party. This Agreement and each other Transaction Document to
which such Warrant Holder is a Party have been duly executed and delivered by
such Warrant Holder, and (assuming due authorization, execution and delivery by
the Company, Seller and Buyer) this Agreement and the other Transaction
Documents to which such Warrant Holder is a party constitute legal, valid and
binding obligations of such Warrant Holder, enforceable against such Warrant
Holder in accordance with their terms, except as such enforceability may be
limited by ERISA or bankruptcy, insolvency, reorganization, moratorium or
similar Laws affecting creditors’ rights generally and by general principles of
equity (regardless of whether enforcement is sought in a proceeding at law or in
equity).

Section 4.02        No Conflicts; Consents. The execution, delivery and
performance by such Warrant Holder of this Agreement and the other Transaction
Documents to which such Warrant Holder is a party, and the consummation of the
transactions contemplated hereby and thereby, do not and will not (assuming the
passage of time or the giving of notice or both): (a) result in a material
violation or breach of any provision of any Law or Governmental Order applicable
to such Warrant Holder or any of his or her assets; (b) result in the imposition
or creation of a Lien upon or with respect to such Warrant Holder’s Warrant, or
(c) except as set forth in Section 4.02 of the Disclosure Schedules, require the
consent, notice or other action by any Person under, conflict with, result in a
violation or breach of, constitute a default under or result in the acceleration
of any supplier agreement, distributor agreement, note, bond, mortgage,
indenture, deed of trust, lease, agreement or contract to which such Warrant
Holder is party or by which any of his or her properties or assets are bound. No
consent, approval, Permit, Governmental Order, declaration or filing with, or
notice to, any Governmental Authority is required by or with respect to such
Warrant Holder in connection with the execution and delivery of this Agreement
and the consummation of the transactions contemplated hereby.

Section 4.03        Warrants. Such Warrant Holder holds of record and owns
beneficially the Warrants set forth on Section 4.03 of the Disclosure Schedules
listed opposite such Warrant Holder’s name, free and clear of any restrictions
on transfer (other than any restrictions under the Securities Act and state
securities laws), Taxes, Liens, options, warrants, purchase rights, contracts,
commitments, equities, claims, and demands. Such Warrant Holder is not a party
to any option, warrant, purchase right, or other contract or commitment (other
than this Agreement) that could require such Warrant Holder to sell, transfer,
or otherwise dispose of any capital stock of the Company. Such Warrant Holder is
not a party to any voting trust, proxy, or other agreement or understanding with
respect to the voting of any capital stock of the Company.

Section 4.04        Legal Proceedings. Except as set forth in Section 4.04 of
the Disclosure Schedules, there are no actions, suits, claims, investigations or
other legal proceedings pending or to such Warrant Holder’s knowledge,
threatened against or by such Warrant Holder that challenge or seek to prevent,
enjoin or otherwise delay the transactions contemplated by this

 36

 

Agreement or the other Transaction Documents to which such Warrant Holder is
party and the consummation of the transactions contemplated hereby or thereby.

ARTICLE V
REPRESENTATIONS AND WARRANTIES REGARDING SELLER AND TRUSTEE

Trustee, not in an individual or corporate capacity but solely as Trustee of the
Trust represents and warrants to Buyer that the statements contained in this
ARTICLE V are true, correct and complete as of the date hereof.

Section 5.01        Authorization. The Trustee is qualified to serve as Trustee,
has been duly appointed as Trustee of the ESOP and has all requisite power and
authority, for itself and on behalf of the Trust, to execute, deliver and
perform the obligations of Seller under this Agreement and the other Transaction
Documents to which Seller is a party. This Agreement and the other Transaction
Documents to which Seller is a party and all transactions contemplated hereby
and thereby have been duly and validly authorized and approved by all necessary
actions on the part of Seller. This Agreement and the other Transaction
Documents to which Seller is a party have been duly executed and delivered by
the Trustee, on behalf of the ESOP, and constitute the legal, valid and binding
obligation of the ESOP enforceable in accordance with their respective terms,
subject to ERISA and bankruptcy, insolvency, reorganization and other similar
Laws affecting creditors’ rights generally and subject, as to enforceability, to
general equitable principles (regardless of whether enforcement is sought in a
proceeding in equity or at law).

Section 5.02        No Conflicts; Consents. The execution, delivery and
performance by the ESOP, Seller and Trustee of this Agreement and the other
Transaction Documents to which Seller is a party, and the consummation of the
transactions contemplated hereby and thereby, do not and will not (assuming the
passage of time or the giving of notice or both): (a) result in a violation or
breach of any provision of the ESOP or the organizational documents of the ESOP;
(b) result in a violation or breach of any provision of any Law or Governmental
Order applicable to the ESOP or any agreement to which the ESOP is a party; (c)
result in a violation or breach of any judgment, decree, ruling or court order
applicable to the ESOP; (d) except as set forth in Section 5.02 of the
Disclosure Schedules, require the consent, notice or other action by any Person
under, conflict with, result in a violation or breach of, constitute a default
under or result in the acceleration or termination of any right under any
agreement to which the ESOP is a party. No consent, approval, Permit,
Governmental Order, declaration or filing with, or notice to, any Governmental
Authority is required by or with respect to the ESOP or the Trust, in connection
with the execution and delivery of this Agreement or the Transaction Documents
to which they are party and the consummation of the transactions contemplated
hereby or thereby.

Section 5.03        Ownership. Except as set forth in Section 5.03 of the
Disclosure Schedules, all of the Shares are owned of record by Seller free and
clear of all Liens. Immediately upon consummation of the transactions
contemplated by this Agreement, Buyer shall own all of the Shares, free and
clear of all Liens.

Section 5.04        Legal Proceedings. Except as set forth in Section 5.04 of
the Disclosure Schedules, there are no actions, suits, claims, investigations or
other legal proceedings pending

 37

 

or to Trustee’s knowledge (which shall include such knowledge that Trustee would
reasonably be expected to have in the normal course of exercising his/her/its
duties as Trustee), threatened against or by Seller or the Trustee that
challenge or seek to prevent, enjoin or otherwise delay the transactions
contemplated by this Agreement or the other Transaction Documents to which they
are party and the consummation of the transactions contemplated hereby or
thereby.

Section 5.05        Investigation. The Trustee acknowledges that the Trustee and
the Advisor, acting on behalf of Seller, have had access to the business records
and documents of the Company and have made such investigations and due diligence
of the Company as each such Person has requested.

ARTICLE VI
REPRESENTATIONS AND WARRANTIES REGARDING BUYER

Buyer represents and warrants to Seller that, except as provided in a schedule
to this Agreement, the statements contained in this ARTICLE VI are true and
correct as of the date hereof.

Section 6.01        Organization and Authority of Buyer. Buyer is a corporation
duly organized, validly existing and in good standing under the Laws of the
state of Delaware. Buyer has all necessary corporate power and authority to
enter into this Agreement and the other Transaction Documents to which it is a
party, to carry out its obligations hereunder and thereunder and to consummate
the transactions contemplated hereby and thereby. The execution and delivery by
Buyer of this Agreement and the other Transaction Documents to which it is a
party, the performance by Buyer of its obligations hereunder and thereunder and
the consummation by Buyer of the transactions contemplated hereby and thereby
have been duly authorized by all requisite corporate action on the part of
Buyer. This Agreement and the other Transaction Documents to which Buyer is a
party have been duly executed and delivered by Buyer, and assuming due
authorization, execution and delivery by Seller, the Company and the Warrant
Holders of this Agreement and the other Transaction Documents to which Buyer is
a party, constitute a legal, valid and binding obligation of Buyer, enforceable
against Buyer in accordance with their terms, except as such enforceability may
be limited by bankruptcy, insolvency, reorganization, moratorium or similar Laws
affecting creditors’ rights generally and by general principles of equity
(regardless of whether enforcement is sought in a proceeding at law or in
equity).

Section 6.02        No Conflicts; Consents. Except as set forth in Section 6.02
of the Disclosure Schedules, the execution, delivery and performance by Buyer of
this Agreement, and the consummation of the transactions contemplated hereby, do
not and will not: (a) result in a violation or breach of any provision of the
certificate of incorporation and bylaws of Buyer; (b) result in a violation or
breach of any provision of any Law or Governmental Order applicable to Buyer; or
(c) require the consent, notice or other action by any Person under, conflict
with, result in a violation or breach of, constitute a default under or result
in the acceleration of any agreement to which Buyer is a party, except in the
cases of clauses (b) and (c), where the violation, breach, conflict, default,
acceleration or failure to give notice would not have a Material Adverse Effect
on Buyer. No consent, approval, Permit, Governmental Order, declaration or
filing with, or notice to, any Governmental Authority is required by or with

 38

 

respect to Buyer in connection with the execution and delivery of this Agreement
and the consummation of the transactions contemplated hereby, except for such
consents, approvals, Permits, Governmental Orders, declarations, filings or
notices which would not have a Material Adverse Effect on Buyer.

Section 6.03        Brokers. No broker, finder or investment banker is entitled
to any brokerage, finder’s or other fee or commission in connection with the
transactions contemplated by this Agreement based upon arrangements made by or
on behalf of Buyer and no brokerage, finder’s or other fee or commission in
connection with the transactions contemplated by this Agreement based upon
arrangements made by or on behalf of Buyer is payable by Buyer.

Section 6.04        Legal Proceedings. There are no actions, suits, claims,
investigations or other legal proceedings pending or, to Buyer’s knowledge,
threatened against Buyer or any Affiliate of Buyer that challenge or seek to
prevent, enjoin or otherwise delay the transactions contemplated by this
Agreement.

Section 6.05        Buyer Common Stock. The ESOP Equity Consideration and the
Warrant Holders Equity Consideration has been duly authorized, and upon
consummation of the transactions contemplated by this Agreement, will be validly
issued, fully paid and nonassessable.

Section 6.06        SEC Documents. Buyer has filed all required SEC Documents
required to be filed by it with the SEC since July 1, 2017. As of their
respective dates, the SEC Documents (a) were prepared in accordance and complied
in all material respects with the requirements of the Securities Laws applicable
to such SEC Documents, and (b) did not at the time they were filed (or if
amended or superseded by a filing prior to the date of this Agreement then on
the date of such filing) contain any untrue statement of a material fact or omit
to state a material fact required to be stated therein or necessary in order to
make the statements therein, in the light of the circumstances under which they
were made, not misleading. None of the Company’s subsidiaries is required to
file any forms, reports or other documents with the SEC. There have been no
material adverse developments in the business of Buyer and its subsidiaries
since the respective dates of such SEC Documents that are required to be
disclosed pursuant to the Exchange Act that have not been disclosed. Any audited
or unaudited financial statements and any notes thereto or schedules included in
the SEC Documents (i) complied as to form in all material respects with
applicable accounting requirements and with the published rules and regulations
of the SEC with respect thereto, (ii) were prepared in accordance with GAAP
applied on a consistent basis during the periods involved (except as may be
indicated in the notes thereto or, in the case of unaudited statements, as
permitted by applicable Securities Laws) and (iii) fairly present (subject in
the case of unaudited statements to normal, recurring and year-end audit
adjustments) in all material respects the consolidated financial position of
Buyer and its subsidiaries as of the dates thereof and the consolidated results
of their operations and cash flows for the periods then ended.

Section 6.07        Investment Intention. Buyer is purchasing the Shares for its
own account with the present intention of holding such securities for investment
purposes and not with a view to or for sale in connection with any public
distribution of such securities in

 39

 

violation of any applicable Laws, including any Securities Laws. Buyer is an
“accredited investor” as defined in Regulation D promulgated under the
Securities Act.

Section 6.08        Independent Investigation. Buyer has conducted its own
independent investigation, review and analysis of the business, results of
operations, prospects, condition (financial or otherwise) and assets of the
Company, and acknowledges that it has been provided adequate access to the
personnel, properties, assets, premises, books and records, and other documents
and data of the Company for such purpose. Buyer acknowledges and agrees that:
(a) in making its decision to enter into this Agreement and to consummate the
transactions contemplated hereby, Buyer has relied solely upon its own
investigation and the express representations and warranties of the Company set
forth in Article III (including the related portions of the Disclosure
Schedules) and Seller and the Trustee set forth in Article IV (including the
related portions of the Disclosure Schedules); and (b) none of the Company,
Seller, the Trustee or any other Person makes or has made any representation or
warranty as to the Company, Seller or the Trustee or this Agreement, except as
expressly set forth in Article III or Article IV (including the related portions
of the Disclosure Schedules).

ARTICLE VII
COVENANTS

Section 7.01        Employees; Benefit Plans.

(a)                With respect to any employee benefit plan maintained by Buyer
or its Affiliates (collectively, “Buyer Benefit Plans”) in which any Employee
who remains employed immediately after the Closing (“Company Continuing
Employee”) will participate effective as of or after the Closing, Buyer shall
recognize all service of the Company Continuing Employees with the Company, as
the case may be, as if such service were with Buyer and its Affiliates, for
vesting and eligibility purposes in any Buyer Benefit Plan in which such Company
Continuing Employees may be eligible to participate after the Closing Date;
provided, however, such service shall not be recognized to the extent that (x)
such recognition would result in a duplication of benefits, (y) such service was
not recognized under the corresponding Benefit Plan, or (z) such recognition
applies to any Buyer Benefit Plan that is a defined benefit plan (qualified or
otherwise).

(b)               This Section 7.01 shall be binding upon and inure solely to
the benefit of each of the Parties to this Agreement, and nothing in this
Section 7.01, express or implied, shall confer upon any other Person any rights
or remedies of any nature whatsoever under or by reason of this Section 7.01.
Nothing contained herein, express or implied, shall be construed to establish,
amend or modify any benefit plan, program, agreement or arrangement. The Parties
hereto acknowledge and agree that the terms set forth in this Section 7.01 shall
not create any right in any Employee or any other Person to any continued
employment with the Company, Buyer or any of their respective Affiliates or
compensation or benefits of any nature or kind whatsoever.

Section 7.02        Public Announcements. Unless otherwise required by
applicable Law or stock exchange requirements (based upon the reasonable advice
of counsel), no Party to this Agreement shall make any public announcements in
respect of this Agreement or the transactions contemplated hereby or otherwise
communicate with any news media without the

 40

 

prior written consent of the other party (which consent shall not be
unreasonably withheld or delayed), and the Parties shall cooperate as to the
timing and contents of any such announcement.

Section 7.03        Further Assurances. Following the Closing, each of the
Parties hereto shall, and shall cause their respective Affiliates to, execute
and deliver such additional documents, instruments, conveyances and assurances,
and take such further actions as may be reasonably required to carry out the
provisions hereof and give effect to the transactions contemplated by this
Agreement and the other Transaction Documents.

Section 7.04        Transfer Taxes; Tax Refunds.

(a)                All transfer, documentary, sales, use, stamp, registration,
value added and other such Taxes and fees (including any penalties and interest)
incurred in connection with this Agreement (including any real property transfer
Tax and any other similar Tax) shall be borne by Seller. Seller shall, at its
own expense, timely file any Tax Return or other document with respect to such
Taxes or fees (and Buyer shall cooperate with respect thereto as necessary).

(b)               All refunds of Taxes relating to the Company with respect to
any Pre-Closing Period will be for the account of Seller. To the extent the
Company receives any such refund after the Closing Date, Buyer shall, or shall
cause the Company to, pay the amount of such refund to Seller within five (5)
Business Days of receipt.

Section 7.05        338(h)(10) Election.

(a)                Trustee, on behalf of Seller and Buyer shall join in timely
making (or causing to be timely made) the Section 338(h)(10) Election. Buyer
shall prepare and file, or cause to be prepared and filed, all forms or
documents as are required by applicable Law for an effective 338(h)(10)
Election, including, but not limited to IRS Form 8023, which forms and documents
shall be prepared substantially in compliance with the Allocation Schedule as
defined below and in accordance with the rules set forth therein (the
“338(h)(10) Election Forms”). In this regard, Seller will provide to Buyer at or
prior to the Closing two (2) originally executed IRS Forms 8023 (together with
any schedules or attachments thereto) consenting to the making of the 338(h)(10)
Election, to be held in escrow by Buyer’s counsel pending the Closing. Trustee,
on behalf of Seller shall at all times cooperate with Buyer in the making of the
338(h)(10) Election and executing such 338(h)(10) Election Forms.

(b)               The Company and Buyer shall file all Tax Returns in a manner
consistent with the 338(h)(10) Election and will not take any position contrary
thereto unless required to do so by applicable Laws.

(c)                Seller shall not revoke the Company’s election to be taxed
as, or take or allow any action (other than the transactions contemplated by
this Agreement) that would result in the termination of the Company’s status as,
a validly existing S corporation with the meanings of Code Section 1361, the
Treasury Regulations promulgated thereunder or any analogous or similar
provision of state or local Law.

 41

 

Section 7.06        Purchase Price Allocation. Buyer and the Company shall file
all Income Tax Returns for their respective tax years in which the Closing
occurs in a manner that reflects an allocation of the Purchase Price and other
items of consideration under the Code and Treasury Regulations promulgated
thereunder in accordance with the schedule prepared by Buyer (the “Allocation
Schedule”). Buyer and the Company agree (i) that the Allocation Schedule shall
be prepared in accordance with Code Sections 338 and 1060, as applicable, and
the Treasury Regulations promulgated thereunder, (ii) to prepare and timely file
all Tax Returns, including, but not limited to Internal Revenue Service Form
Forms 8594 and, if applicable, 8883, (and all supplements thereto) in a manner
consistent with the Allocation Schedule, and (iii) in the course of any
examination, audit or other proceeding with respect to any Tax Return or Tax,
will take no position, and cause its Affiliates to take no position,
inconsistent with the Allocation Schedule for Tax purposes, unless required by
applicable Law. The Parties will revise the Allocation Schedule in accordance
with the principles set forth herein to the extent necessary to reflect any
post-Closing payment or adjustment made pursuant to or in connection with this
Agreement. The Parties will not otherwise revise the Allocation Schedule for Tax
purposes, unless required by applicable Law.

Section 7.07        Amendments to Plans; Post-Closing Administration.

(a)                The Company shall adopt board resolutions and Benefit Plan
amendments, to the extent necessary, effective as of and subject to the
consummation of the Closing, providing for the termination of any Benefit Plan
(other than the ESOP) that Buyer directs the Company to so terminate prior to
the Closing. The form and substance of any resolutions, plan amendments,
documents or notices required to effect any such termination shall be subject to
review and approval of Buyer in advance of execution and performance. The
termination and payout of any such plan that is subject to Section 409A of the
Code shall be consummated consistent with the rules under Section 409A of the
Code.

(b)               The Company shall adopt board resolutions and Plan amendments
effective as of or prior to the Closing, subject to the consummation of the
Closing, providing for (i) freeze and suspension of eligibility, entry and
further benefit accruals under the ESOP effective as of the Closing, such that
no further employees will become eligible under the ESOP and no further
contributions shall be made to the ESOP, in each case after the Closing; (ii)
100% vesting of all participants and all eligible beneficiaries in all benefits
under the ESOP; and (iii) such other amendments as Buyer may direct and as
agreed to by the Company, such agreement not to be unreasonably withheld or
delayed. The form and substance of any resolutions, plan amendments, documents
or notices required to effect any of the foregoing shall be subject to review
and approval of Buyer in advance of execution and performance. All costs and
expenses of the foregoing with respect to actions to be taken shall be a
Transaction Expense of the Company.

(c)                The Company then shall adopt board resolutions and a Plan
amendment, no later than six (6) months after the Closing, providing for (i)
termination of the ESOP as of the six (6) month anniversary of the Closing, (ii)
submission to the Internal Revenue Service of an application for an IRS
determination letter that the ESOP is qualified as of the termination of the
ESOP, as soon as administratively practicable thereafter, and (iii) distribution
of ESOP accounts consistent with the terms of the Plan as follows: (i) one-third
(1/3) of each ESOP participant’s account in the form of one-third (1/3) of the
cash and cash equivalents and one-third (1/3) of the

 42

 

number of shares of Buyer Common Stock then held in the ESOP account, as soon as
administratively practicable after the six (6)-month anniversary of the Closing;
and (ii) the remainder of each ESOP participant’s account, as soon as
administratively practicable after receipt from the Internal Revenue Service of
a favorable IRS determination letter on the tax-qualified status of the ESOP;
provided, however, if a favorable IRS determination letter on the tax-qualified
status of the ESOP is not received by the nine (9)-month anniversary of the
Closing, the Company shall cause the distribution of one-half (1/2) of each ESOP
participant’s remaining ESOP account in the form of one-half (1/2) of the cash
and cash equivalents and one-half (1/2) of the number of shares of Buyer Common
Stock then held in the ESOP account, as soon as administratively practicable
after the nine (9)-month anniversary of the Closing, and, if a favorable IRS
determination letter on the tax-qualified status of the ESOP is not received by
the twelve (12)-month anniversary of the Closing, the Company shall cause the
distribution of the remaining shares of Buyer Common Stock then held in the ESOP
account, as soon as administratively practicable after the twelve (12)-month
anniversary of the Closing, with the remainder of the ESOP participant’s ESOP
account to be held and distributed as soon as administratively practicable after
receipt from the Internal Revenue Service of a favorable IRS determination
letter on the tax-qualified status of the ESOP. After distribution of the shares
of Buyer Common Stock, the ESOP participants or the accounts to which the shares
of the ESOP participant’s Buyer Common Stock were distributed may elect to sell
any shares of Buyer Common Stock received to the extent permitted by law and any
legal lock-up restrictions and securities requirements. Nothing herein however
shall prohibit the ESOP from adjusting ESOP accounts or making such corrections,
or recouping or requiring the repayment of any amounts previously distributed
from the ESOP, as required to maintain the tax-qualified status of the ESOP
and/or obtain from the Internal Revenue Service a favorable IRS determination
letter on the tax-qualified status of the ESOP at the time of termination. All
costs and expenses of the foregoing with respect to the actions to be taken
shall be at the sole cost and expense of Buyer (and not considered a Transaction
Expense of the Company). Buyer agrees to cause the Company to make, in a timely
manner, all amendments to the ESOP as may be reasonably required by the IRS as a
condition of a favorable determination letter in connection with the IRS
determination letter submission on the tax-qualified status of the ESOP as of
termination. Buyer shall cause the Company to keep the Trustee apprised of the
status of the IRS determination letter submission and to provide notice to the
Trustee within ten (10) Business Days of receipt any communications with, and
inquiries or requests for information from, the IRS in connection with the
matters described in this section or otherwise with respect to the ESOP, the
Department of Labor, any participant or any other person, including a copy of
the IRS favorable determination letter.

(d)               The Company shall take such actions and adopt such amendments
as may reasonably be necessary to maintain the tax-qualified status of the ESOP
and the tax exempt status of the related trust under the Code until the
termination of the ESOP, distribution of plan assets and related administration
are completed.

(e)                Should First Bankers Trust Services, Inc. cease to serve as
the trustee of the ESOP, Buyer agrees to cause the Company to appoint as the
successor trustee an institutional fiduciary to serve in the capacity as trustee
of the ESOP, to the extent an institutional fiduciary is reasonably available
and willing to serve, and to cause the Company to promptly notify First

 43

 

Bankers Trust Services, Inc. of any proposed termination of First Bankers Trust
Services, Inc. as trustee of the ESOP.

(f)                Prior to the Closing, the Company will make a contribution to
the ESOP (the “Company’s 2018 Contribution”) for the plan year ending December
31, 2018 in an amount equal to the maximum amount allowable under Code Section
404 to be used to pay accrued interest and principal on the outstanding loan
balance under that certain ESOP Loan Agreement, dated as of July 16, 2009, by
and between the Trust and the Company (the “ESOP Loan”). Shares released from
the ESOP’s unallocated company stock suspense account by reason of the Company’s
2018 Contribution will be allocated to the accounts of eligible participants in
accordance with the terms of the Plan. Effective as of the Closing, the Company
and the ESOP will settle the ESOP Loan as follows: (i) the ESOP will return
shares held in its unallocated company stock suspense account having a fair
market value equal to the outstanding principal due on the ESOP Loan (after the
Company’s 2018 Contribution and payment of all accrued interest), and (ii) the
remaining shares, if any, held in the ESOP’s unallocated company stock suspense
account will be allocated to participants and beneficiaries as of the loan
settlement date proportionately based on their Company stock account balances
under the ESOP at such time (determined after the allocation of shares triggered
by the Company’s 2018 Contribution), and (iii) there will be no ESOP Loan
outstanding as of the Closing.

Section 7.08        Conduct of Business. Except as expressly contemplated by
this Agreement, as set forth in Section 7.08 of the Disclosure Schedules, or as
Buyer may otherwise consent in writing, at all times from the date of this
Agreement until the earlier to occur of the Closing or the valid termination of
this Agreement in accordance with the terms hereof, the Company shall (the
“Pre-Closing Period”):

(a)                operate the Company’s Business in the usual, regular, and
ordinary course consistent with past practice;

(b)               take all reasonable steps to preserve and protect the assets
of the Company in good working order and condition, ordinary wear and tear
excepted;

(c)                comply with all requirements of Law, Permits, and material
contractual obligations applicable to the operation of the Company’s business;

(d)               use commercially reasonable efforts to preserve intact the
Business of the Company, keep available the services of the Company’s officers,
employees, and agents and maintain the Company’s current relations and good will
with suppliers, customers, licensors, landlords, creditors, employees, agents,
and others having business relationships with the Company, including by promptly
paying all amounts owing to such Persons as and when such amounts are due (other
than amounts being disputed in good faith);

(e)                continue in full force and effect all insurance coverage
pertaining to the business of the Company or its assets that are in effect as of
the date of this Agreement or obtain substantially equivalent policies;

 44

 

(f)                confer with Buyer prior to implementing business operational
decisions that materially impact the business of the Company, and report
periodically to Buyer concerning the status of the business of the Company; and

(g)               maintain the books and records of the Company in the ordinary
course of business consistent with past practice.

Section 7.09        Restrictions on Business. Except as expressly contemplated
by this Agreement, Sections 7.08 or 7.09 of the Disclosure Schedules, or as
Buyer may otherwise consent in writing, such consent not to be unreasonably
withheld, at all times during the Pre-Closing Period, the Company shall not:

(a)                amend any of its Organizational Documents;

(b)               authorize for issuance, issue, sell, deliver or agree or
commit to issue, sell or deliver (whether through the issuance or granting of
options, warrants, commitments, subscriptions, rights to purchase or otherwise)
any shares of capital stock, or any other securities or other ownership
interests of the Company;

(c)                split, combine or reclassify any shares of capital stock or
other ownership interests, or declare, set aside or pay any dividend or other
distribution to any member, or otherwise in respect of its capital stock or
other ownership interests or redeem or otherwise acquire any of its securities
or other ownership interests;

(d)               (A) incur or assume any Indebtedness, other than (i) trade
payables incurred in the ordinary course of the business of the Company
consistent with past practice (but in any event not any Indebtedness to Seller
or any of their Affiliates) and (ii) the Warrant Holders Notes; (B) assume,
guarantee, endorse (except for checks or other negotiable instruments in the
ordinary course of business) or otherwise become liable or responsible (whether
directly, contingently or otherwise) for any obligations of any other Person; or
(C) make any loans, advances or capital contributions to, or investments in, any
other Person;

(e)                adopt, modify or terminate any (i) employment, severance,
retention, change in control or other compensation or benefit agreement, plan or
arrangement with any current or former employees, officers, directors,
independent contractors or consultants of the Company, or (ii) other than as
required by Law, any Benefit Plan or any plan or arrangement that would
constitute a Benefit Plan if in existence on the date hereof;

(f)                except in the ordinary course of business consistent with
past practices of the Company and not in excess of $35,000 (individually or
cumulative), acquire, sell, lease, transfer or dispose of any properties or
assets of the Company or enter into any other commitment or transaction that is
material to the Company;

(g)               modify, other than in an immaterial manner, any policy or
procedure with respect to the collection of receivables;

 45

 

(h)               pay, discharge or satisfy before it is due any material claim
or liability of the Company or fail to pay any such item in a timely manner, in
each case except in accordance with the Company’s prior practices;

(i)                 cancel any debts or waive any claims or rights of material
value;

(j)                 except to the extent required by Law, change any accounting
principle or method or make any election for purposes of foreign, federal, state
or local income Taxes;

(k)               take or suffer any action that would result in (A) the
creation, or consent to the imposition, of any Lien on any of the properties or
assets of the Company or (B) the cancellation, termination, lapse or non-renewal
of any insurance policy (unless such policy is replaced with comparable
insurance);

(l)                 except in the ordinary course of business consistent with
past practices of the Company and not in excess of $35,000 (individually or
cumulative), make or incur any expenditure, lease or commitment for additions to
property or equipment or other tangible assets;

(m)             enter into any contract restricting in any material respect the
operation of the Business;

(n)               make or change any material Tax election, adopt or change any
Tax accounting method, enter into any closing agreement, settle or compromise
any Tax claim or assessment, file any amended Tax Return, any material Tax
Return, or any claim for Tax refund, or extend or waive the limitation period
applicable to any Tax claim or assessment, in each case to the extent that it
would affect the assets or business of the Company after the Closing;

(o)               (i) grant any bonuses, whether monetary or otherwise, or
increase wages, salary, severance, pension or other compensation or benefits in
respect of any current or former employees, officers, directors, independent
contractors or consultants of the Company or their spouses, dependents or
beneficiaries except (1) in the ordinary course of business consistent with past
practices of the Companies and so long as not in excess of $35,000 (individually
or cumulative), (2) as required by Law or (3) as provided for in any existing
written agreements as of the date hereof; (ii) change the terms of employment or
service for any such person; or (iii) take any action to increase the amount of
or accelerate the vesting, funding or payment of any compensation or benefits to
any such person;

(p)               grant any severance, change-in-control, or similar pay
benefits (in cash or otherwise) to any current or former employee, officer,
director, independent contractor or consultant of the Company or their spouses,
dependents, or beneficiaries;

(q)               establish, amend or terminate any Benefit Plan, except as
required by applicable Law or as specifically provided in this Agreement;

(r)                 adopt a plan of complete or partial liquidation,
dissolution, restructuring, recapitalization, or other reorganization;

 46

 

(s)                except in the ordinary course of business consistent with
past practice, take or omit to take any action that has or would reasonably be
expected to have the effect of accelerating sales to customers or revenues of
the business of the Company to pre-Closing periods that would otherwise be
expected to take place or be incurred in post-Closing periods;

(t)                 fail to make any capital expenditures or commitment
therefore as set forth in Section 7.09(s) of the Disclosure Schedules or make
any capital expenditures or commitments not otherwise set forth in Section
7.09(s) of the Disclosure Schedules;

(u)               commence any actions, suits, claims, investigations or other
legal proceedings relating to the Company other than (i) for the routine
collection of amounts owed, or (ii) in such cases where the failure to commence
litigation could have a Material Adverse Effect, provided that the Company shall
consult with Buyer prior to filing such litigation;

(v)               except in the ordinary course of business consistent with past
practices of the Company and so long as not in excess of $35,000 (individually
or cumulative), enter into any contract of any kind with any third party, which
contract continues after the Closing Date and cannot be terminated by the
Company on not more than 30 days’ notice without any liability on the part of
the Company;

(w)             except in the ordinary course of business consistent with past
practice of the Company, amend, waive, surrender or terminate or agree to the
amendment, waiver, surrender or termination of any contract or any Permit;

(x)               except in the ordinary course of Business consistent with past
practice, exercise any right or option under or extend or renew any contract;

(y)               enter into or engage in any transaction with the officer,
directors, or employee of the Company, any of any of their family members or any
Affiliate thereof other than any transaction that is described on Section
3.18(a) and Section 3.18(b) of the Disclosure Schedules or is a Facility Lease;

(z)                except in the ordinary course of business consistent with
past practices of the Company and so long as not in excess of $35,000
(individually or cumulative), sell, lease, license, transfer, or otherwise
dispose of any assets of the Company;

(aa)            except in the ordinary course of business consistent with past
practices of the Company, sell any inventory of the Company; or

(bb)           enter into any contract to do, or take, or agree in writing or
otherwise to take or consent to, any of the foregoing actions.

Section 7.10        Access, Information and Nondisclosure. During the
Pre-Closing Period, during normal business hours, Company shall, upon reasonable
advanced notice, afford to Buyer and its representatives (which shall include
Buyer’s Affiliates, lenders, counsel, accountants, and other representatives),
reasonable access to the offices, properties, books, contracts, commitments,
records, vendor information, and customer information of Company, insofar as the
same relate to the Company’s business and does not unreasonably interfere with
the conduct

 47

 

of business of the Company, and shall make available to such persons such
information (including financial and operating data) concerning the Company as
they reasonably may request. Requests for such information shall be discreetly
coordinated with Company’s designated representatives, and Company shall use its
commercially reasonable efforts to assist Buyer and its representatives in their
examination; the Company shall not be obligated to respond to any requests
herein that are disruptive in any material respect to the Company’s business
(for the avoidance of any doubt, requests included on the due diligence
checklist provided to the Company prior to the execution of this Agreement shall
not be considered disruptive). The Parties acknowledge that Company and Buyer
have entered into a Mutual Nondisclosure Agreement, dated September 11, 2015
(the “Nondisclosure Agreement”), the terms of which are hereby incorporated by
this reference, and Buyer confirms that Buyer will comply with their respective
obligations thereunder and Buyer shall cause its representatives to comply with
such obligations as if such representatives were a party to such Nondisclosure
Agreement.

Section 7.11        Regulatory and Other Approvals. Each of Buyer, Seller and
the Company shall take all commercially reasonable steps necessary or desirable,
and proceed diligently and in good faith and use all commercially reasonable
efforts, as promptly as practicable to: (i) obtain all consents and approvals
of, make all filings with and give all notices to each Governmental Authority or
any other Person that are required to be obtained, made or given by Buyer,
Seller or the Company, as the case may be, including but not limited to all of
the consents and approvals listed in Sections 3.02, 4.02, 5.02 and 6.02 of the
Disclosure Schedules in order to consummate the transactions contemplated by
this Agreement and the Transaction Documents, including but not limited to in
compliance with all applicable Laws and all contracts, and (ii) satisfy each
other condition to the obligations of the Parties contained in this Agreement.

Section 7.12        Investigations. During the Pre-Closing Period, the Company
shall, and shall cause all of the officers, directors, employees, agents,
accountants and counsel or other agents and Representatives of the Company to,
(i) promptly afford the Representatives of Buyer, during normal business hours,
access to (A) the offices, books, Contracts and records of the Company and any
records concerning the Company maintained and accumulated by it and its
Representatives, and (B) those Representatives of the Company who have knowledge
relating to the Business, and (ii) promptly furnish to Buyer and Representatives
of Buyer such additional financial and operating data and other information
regarding the Company or the Business (including, without limitation, any
contracts or Permits in effect as of the date hereof and any contracts or
Permits being negotiated or entered into between the date hereof and the Closing
Date), properties and goodwill as Buyer from time to time reasonably request.
All such investigations by Buyer and its Representatives shall be performed at
such times and locations as are reasonably mutually agreed to by the Parties and
shall be performed upon reasonable prior written notice to the Company and in a
manner that shall not be disruptive to the operations of the Business.

Section 7.13        No Shop. During the Pre-Closing Period, Seller and the
Company shall not, and Company shall not permit any of their respective
directors, officers, brokers, employees or Affiliates (or authorize or permit
any investment banker, financial advisor, attorney, accountant or other Person
retained by or acting for or on behalf of Seller, the Company or any such
Affiliate) to, take, directly or indirectly, any action to initiate, assist,
solicit, receive,

 48

 

participate, negotiate, encourage (including, without limitation, by way of
furnishing non-public information) or accept any offer or inquiry from any
Person (a) to engage in any Business Combination with Seller or the Company, (b)
to reach any agreement or understanding (whether or not such agreement or
understanding is absolute, revocable, contingent or conditional) for, or to
engage in any discussions or negotiations with respect to, or otherwise attempt
to consummate, any Business Combination with Seller or the Company or (c) to
furnish or cause to be furnished any information with respect to the Company to
any Person (other than as contemplated by Section 7.10) which Seller, the
Company or any such Affiliate knows or has reason to believe is in the process
of considering any Business Combination with regard to the Company. Seller and
the Company shall immediately terminate (in writing, with a copy to Buyer) any
and all discussions or negotiations of any type described in the first sentence
of this Section 7.13. If, during the Pre-Closing Period, Seller or the Company
receives or becomes aware that any of Seller, the Company or any Affiliate
thereof (or any such Person acting for or on their behalf) has received from any
Person (other than Buyer) any offer, inquiry or informational request referred
to in the first sentence of this Section 7.13, the Company shall promptly advise
such Person, by written notice, of the terms of this Section 7.13 and shall
promptly, orally and in writing, advise Buyer of such offer, inquiry or request
and deliver a copy of such notice to Buyer. The restrictions on the activities
provided in this Section 7.13 shall terminate upon any termination of this
Agreement.

Section 7.14        Release of Liens. At the Closing, the Company shall cause
all Liens on any Contract to which the Company is a party or on the assets of
the Company to be released.

Section 7.15        Business Relationships. Until the Closing, the Company shall
cooperate with the reasonable requests of Buyer in Buyer’s efforts to continue
and maintain for the benefit of Buyer and the Company those business
relationships of the Business existing prior to the Closing, including
relationships with customers, suppliers and others.

Section 7.16        Financing. Buyer shall use its commercially reasonable
efforts to obtain debt to fund the transactions contemplated hereby and other
transactions expected to be consummated on the Closing Date. Upon request of
Buyer, the Company shall provide reasonable cooperation and assistance to Buyer
in connection with any debt financing contemplated by Buyer for the funding of
the transactions contemplated by this Agreement.

Section 7.17        Termination. This Agreement may be terminated:

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

(b)               by Buyer if any condition in Section 8.05 has not been
satisfied or if the required items therein have not been delivered as of the
Closing Date or if satisfaction of such a condition or delivery of an item by
such date is or becomes impossible (in either case, other than as a result of a
breach or default by Buyer in the performance of its obligations hereunder) and
Buyer has not waived such condition in writing at or prior to the Closing Date;

(c)                by Trustee acting on behalf of Seller, if any condition in
Section 8.03 or the condition in Section 8.04 has not been satisfied or if the
required items therein have not been delivered as of the Closing Date or if
satisfaction of such a condition or delivery of an item by

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such date is or becomes impossible (in either case other than as a result of a
breach or default by any of the Company or Seller in the performance of their
obligations hereunder) and Trustee acting on behalf of Seller has not waived
such condition in writing at or prior to the Closing Date;

(d)               by any Party (other than a Party that is in material default
of its obligations under this Agreement) if the Closing has not occurred on or
before February 28, 2018; or

(e)                by any Party if the other Party materially breaches any of
the covenants or agreements in this ARTICLE VII or elsewhere in the Agreement
provided that such breach is not capable of being cured or has not been cured
within thirty (30) days after the giving of notice thereof by the nonbreaching
Party.

Section 7.18        Effect of Termination.

If this Agreement is terminated, all obligations of the Parties under this
Agreement will terminate; provided, however, that if this Agreement is
terminated because of fraud or an uncured willful or intentional breach of this
Agreement by the non-terminating party, or because one or more of the conditions
to the terminating party’s obligations to close is not satisfied as a result of
the non-terminating party’s uncured willful or intentional breach of its
obligations under this Agreement, the terminating party’s right to pursue all
legal remedies will survive such termination unimpaired.

Section 7.19        Sale of Buyer Common Stock. Each of Seller and the Company
acknowledge and agree that the shares of Buyer Common Stock issuable to Seller
pursuant to Section 2.02(a) shall constitute “restricted securities” within the
meaning of Rule 144 of the Securities Act and will be issued in a private
placement transaction in reliance upon the exemption from the registration and
prospectus delivery requirements of Section 5 of the Securities Act afforded by
Section 4(a)(2) of the Securities Act and Regulation D promulgated thereunder.
The certificates evidencing the shares of Buyer Common Stock to be issued to
Seller pursuant to Section 2.02(a) shall bear appropriate legends to identify
such privately placed shares as being “restricted securities” under the
Securities Act to comply with state and federal securities laws and, if
applicable, to notice the restrictions on transfer of such shares. For so long
as the ESOP is a holder of Buyer Common Stock, Buyer agrees to use commercially
reasonable efforts to timely (or within the periods permitted under Rule 12b-25
of the Exchange Act) file with the SEC all reports required to be so filed under
the Exchange Act, and the Buyer will not terminate its status as an issuer
required to file reports under the Exchange Act even if the Exchange Act or the
rules and regulations thereunder would permit such termination.

Section 7.20        Warrants. No later than one (1) Business day following the
date hereof, the Company shall deliver to the Warrant Holders written notice
(the “Sale Notice”) of the proposed Stock Purchase. Within ten (10) Business
Days of the Closing Date, each Warrant Holder shall, in accordance with Section
2(f) of each Warrant, put such Warrant Holder’s Warrant to the Company by
delivering to the Company written notice (the “Put Notice”) of such Warrant
Holder’s election to put such Warrant Holder’s warrant to the Company. Upon
receipt of the Put Notice, the Company shall pay the put price for each Warrant
by delivering to each Warrant Holder a promissory note pursuant to Section
2(f)(ii) of each Warrant.

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Section 7.21        2018 Audited Financial Statements. The Company will prepare,
or cause to be prepared, at its expense audited consolidated financial
statements consisting of the consolidated balance sheet of the Company as at
December 31, 2018 and the related consolidated statements of income,
stockholders’ equity and cash flows for the year then ended (the “2018 Audited
Financial Statements”), and such 2018 Audited Financial Statements will be
prepared in accordance with the Accounting Principles applied on a consistent
basis throughout the period involved and will fairly present in all material
respects the financial condition of the Company as of the date they were
prepared and the results of the operations of the Company for the period
indicated. The cost and expense of the Company’s outside auditor in preparing
the 2018 Audited Financial Statements shall be a Transaction Expense if incurred
prior to the Closing or deducted from the Escrow if incurred after the Closing.

ARTICLE VIII
CLOSING CONDITIONS AND DELIVERABLES

Section 8.01        Company Deliveries. At or prior to the Closing, Company
shall deliver, or cause to be delivered to Buyer, the following (which shall be
in addition to the deliveries required to be delivered pursuant to ARTICLE II):

(a)                A certificate of the Secretary or an Assistant Secretary (or
equivalent officer) of the Company certifying that attached thereto are (i) the
certificate of incorporation for the Company, certified by the Secretary of
State of the Commonwealth of Pennsylvania; (ii) the bylaws of the Company; and
(iii) true and complete copies of all resolutions adopted by the board of
directors of the Company authorizing the execution, delivery and performance of
this Agreement and the other Transaction Documents and the consummation of the
transactions contemplated hereby and thereby, and that all such resolutions are
in full force and effect and are all the resolutions adopted in connection with
the transactions contemplated hereby;

(b)               A certificate of the Secretary or an Assistant Secretary (or
equivalent officer) of the Company certifying the names and signatures of the
officers of the Company authorized to sign this Agreement and the other
documents to be delivered hereunder;

(c)                Good standing certificates of the Company issued by the
Secretary of State of the States of Pennsylvania, Maryland, Delaware, New
Jersey, Virginia, and West Virginia;

(d)               Each of the other Transaction Documents to which Company,
Warrant Holders or Warrant Holder Representative is a party;

(e)                All consents, authorizations, orders and approvals from all
third parties referred to on Sections 3.04, 4.02 and 5.02 of the Disclosure
Schedules in form and substance reasonably satisfactory to Buyer, and no such
consent, authorization, order and approval shall have been revoked;

(f)                Written resignations, effective as of the Closing Date, of
the officers and directors of the Company set forth on Section 8.01(g) of the
Disclosure Schedules;

(g)               Evidence in form and substance reasonably satisfactory to
Buyer that all Benefit Plans, including but not those limited to those set forth
in Section 7.10, have been terminated as

 51

 

of the Closing Date and/or amended and all other related actions have been
taken, as requested by Buyer;

(h)               Payoff letters (with wire instructions) with respect to the
termination of all documents and agreements evidencing Indebtedness and signed
copies of Form UCC 3s or other applicable form releasing or authorizing the
release of all Liens with respect thereto;

(i)                 Payoff letters (with wire instructions) with respect to all
Transaction Expenses, including payments of any transaction bonuses, change in
control payments or phantom equity awards, with corresponding executed written
releases from the counterparties thereto with respect to full payment thereof by
the Company;

(j)                 A certificate, dated the Closing Date and signed by the
President and Chief Executive Officer of the Company, and the Warrant Holder
Representative, certifying as to the matters set forth in Sections 8.05(a), (b)
and (c).

(k)               The Stockholders Agreement, duly signed by each of the Key
Employees, and Warrant Holders;

(l)                 The Non-Competition Agreements, duly signed by each of the
Key Employees, and Warrant Holders;

(m)             The Facility Leases, duly signed by the lessor and the
termination of the Existing Leases, duly signed by the lessor thereunder;

(n)               Evidence of the backlog of the Company as of the Closing Date,
to be delivered one (1) business day prior to the Closing; and

(o)               Evidence of the satisfactory resolution, in the sole
discretion of Buyer, of any and all pending litigation between the Company and
any of its officers, directors, stockholders, or any of their respective
Affiliates.

Section 8.02        Trustee Deliveries. At or prior to the Closing, Trustee, on
behalf of Seller shall deliver, or cause to be delivered, to Buyer, the
following:

(a)                Stock certificates evidencing the Shares (reduced by that
number of Shares applied in repayment of the ESOP Loan in Section 7.07(f)),
which shall constitute all of the then-issued and outstanding capital stock of
the Company, free and clear of Liens, duly endorsed in blank or accompanied by
stock powers or other instruments of transfer duly executed in blank;

(b)               A copy of the Fairness Opinion, dated as of the Closing Date,
that (i) the consideration to be received by the ESOP hereunder is not less than
adequate consideration as that term is defined in Section 3(18) of ERISA and
(ii) that the terms of the Stock Purchase and related transactions, taken as a
whole, are fair to the ESOP from a financial point of view;

(c)                A copy of a certificate from the Trustee, duly executed by an
authorized Person on behalf of the Trustee, substantially the form attached
hereto as Exhibit G;

 52

 

(d)               All consents, authorizations, orders and approvals from all
third parties referred to on Section 5.02 of the Disclosure Schedules in form
and substance reasonably satisfactory to Buyer, and no such consent,
authorization, order or approval shall have been revoked;

(e)                Each of the other Transaction Documents to which Seller is a
party;

(f)                Two (2) IRS Forms 8023; and

(g)               A certificate, in form satisfactory to Buyer, pursuant to
Treasury Regulations Section 1.445-2(b) that such Seller is not a foreign person
within the meaning of Section 1445 of the Code.

Section 8.03        Buyer Deliveries. At or prior to the Closing, Buyer shall
deliver, or cause to be delivered, to Seller and Warrant Holder Representative,
the following:

(a)                A certificate of the Secretary or an Assistant Secretary (or
equivalent officer) of Buyer certifying the names and signatures of the officers
of Buyer authorized to sign this Agreement and the other documents to be
delivered hereunder;

(b)               Cash in an amount equal to Estimated Closing Cash Payment
(less the Escrow Amount) by wire transfer in immediately available funds, to an
account or accounts designated at least two Business Days prior to the Closing
Date by Seller in a written notice to Buyer;

(c)                Certificates representing the ESOP Equity Consideration and
the Warrant Holders Equity Consideration;

(d)               The other Transaction Documents to which Buyer is a party;

(e)                A certificate, dated the Closing Date and signed by a duly
authorized officer of Buyer, certifying as to the matters set forth in Sections
8.04(a) and (b); and

(f)                All consents, authorizations, orders and approvals from the
Governmental Authorities referred to in Section 6.02 of the Disclosure Schedules
in form and substance reasonably satisfactory to Seller, and no such consent,
authorization, order and approval shall have been revoked.

Section 8.04        Conditions to Obligations of Seller. The obligations of
Seller and Warrant Holders to consummate the Closing and the other contemplated
transactions shall be subject to the satisfaction or waiver, at or prior to the
Closing, of each of the following conditions:

(a)                All covenants contained in this Agreement to be complied with
by Buyer on or before the Closing shall have been complied with in all material
respects.

(b)               Each of the representations and warranties of Buyer contained
in ARTICLE VI shall be true and correct as of the Closing Date as though made on
and as of the Closing Date; except as (i) would not, materially delay, hinder or
prevent the consummation of the

 53

 

contemplated transactions by Buyer, or (ii) would not have in the aggregate a
Material Adverse Effect on Buyer or its ability to perform its obligations under
this Agreement.

(c)                No Governmental Authority or court of competent jurisdiction
shall have enacted, issued, promulgated, enforced or entered any statute, rule,
regulation, injunction or other order (whether temporary, preliminary or
permanent) that is in effect and has the effect of making the contemplated
transactions or the Closing illegal or otherwise restraining or prohibiting
consummation thereof.

(d)               The Company shall have adopted the ESOP amendment described in
Section 7.07(b) relating to the freeze of the ESOP.

(e)                The Company shall have made the Company’s 2018 Contribution
to the ESOP in accordance with Section 7.07(f).

(f)                The Trustee shall: (i) have received the Fairness Opinion
dated as of the Closing Date in form and substance reasonably satisfactory to
the Trustee, (ii) have concluded that Seller’s agreement to enter into and
consummate Seller’s obligations in connection with the transactions that are the
subject of this Agreement and the other Transaction Documents do not violate the
ERISA Fiduciary Standards, and (iii) be satisfied in its sole discretion as of
the Closing Date that the transactions that are the subject of this Agreement
and the other Transaction Documents are prudent and in the best interests of the
Plan participants and their beneficiaries.

(g)               The Trustee shall have received the Closing Balance Sheet
prior to the Closing Date.

(h)               Buyer shall have executed and delivered, or be prepared to
execute and deliver, the documents and other items set forth in Section 8.03.

Section 8.05        Conditions to Obligations of Buyer. The obligations of Buyer
to consummate the Closing and the other contemplated transactions shall be
subject to the satisfaction or waiver, at or prior to the Closing, of each of
the following conditions:

(a)                All covenants contained in this Agreement to be complied with
by Seller, the Company and Warrant Holders on or before the Closing shall have
been complied with in all material respects.

(b)               Other than the Fundamental Representations, each of the
representations and warranties concerning the Company contained in ARTICLE III,
concerning the Warrant Holders contained in ARTICLE IV, and concerning Seller in
ARTICLE V hereof shall be true and correct in all respects (in the case of any
representation or warranty qualified by materiality or the absence of a Material
Adverse Effect) or in all material respects (in the case of any representation
or warranty not qualified by materiality or the absence of a Material Adverse
Effect) on and as of the date hereof and on and as of the Closing Date as though
made on and as of the Closing Date (except for those representations and
warranties that address matters only as of a particular date, the accuracy of
which shall be determined as of that specified date in all respects). The
Fundamental Representations shall be true and correct in all respects on and as
of

 54

 

the date hereof and on as of the Closing Date as though made on and as of the
Closing Date, except for those representations and warranties that address
matters only as of a particular date (the accuracy of which shall be determined
as of that specified date in all respects).

(c)                Since the date of this Agreement, there shall not have
occurred a Material Adverse Effect with respect to the Company, or any change,
fact, circumstance, condition, event or effect, or combination of changes,
facts, circumstances, conditions, events or effects, that individually or in the
aggregate would reasonably be expected to have a Material Adverse Effect with
respect to the Company;

(d)               There shall not exist any material Liens on any of the assets
of the Company.

(e)                Buyer shall have obtained debt financing sufficient to fund
the transactions contemplated hereby on the Closing Date, on terms and
conditions reasonably acceptable to Buyer.

(f)                No Governmental Authority or court of competent jurisdiction
shall have enacted, issued, promulgated, enforced or entered any statute, rule,
regulation, injunction or other order (whether temporary, preliminary or
permanent) which is in effect and has the effect of making the contemplated
transactions or the Closing illegal or otherwise restraining or prohibiting
consummation of such transactions.

(g)               Seller, Warrant Holders, Warrant Holder Representative and the
Company shall have executed and delivered, or be prepared to execute and
deliver, the documents and other items set forth in Sections 8.01 and 8.02.

ARTICLE IX
INDEMNIFICATION

Section 9.01        Survival. Subject to the limitations and other provisions of
this Agreement, the representations and warranties contained herein shall
survive the Closing and shall remain in full force and effect until the date
that is one (1) year following the Closing Date; provided, however, that the
Fundamental Representations shall survive the Closing and remain in effect until
sixty (60) days following the expiration of the applicable statute of
limitations. None of the covenants or other agreements contained in this
Agreement shall survive the Closing Date other than those which by their terms
contemplate performance after the Closing Date, and each such surviving covenant
and agreement shall survive the Closing for the period contemplated by its
terms. Notwithstanding the foregoing, any claims asserted in good faith with
reasonable specificity (to the extent known at such time) and in writing by
notice from the non-breaching party to the breaching party prior to the
expiration date of the applicable survival period shall not thereafter be barred
by the expiration of such survival period and such claims shall survive until
finally resolved.

Section 9.02        Escrow. Subject to the other terms and conditions of this
ARTICLE IX, Buyer, its Affiliates (including the Company after the Closing Date)
and their respective officers, directors, employees and representatives (each, a
“Buyer Indemnified Party”) shall be indemnified and held harmless by the Escrow
from and against, any and all Losses resulting

 55

 

from, incurred or sustained by, or imposed upon, any Buyer Indemnified Party,
based upon, arising out of, with respect to or by reason of:

(a)                any inaccuracy in or breach of any of the representations or
warranties of the Company contained in ARTICLE III of this Agreement;

(b)               any inaccuracy in or breach of any of the representations or
warranties of Warrant Holders contained in ARTICLE IV of this Agreement;

(c)                any inaccuracy in or breach of any of the representations or
warranties of Seller or Trustee contained in ARTICLE V of this Agreement;

(d)               any breach or non-fulfillment of any covenant, agreement or
obligation to be performed by Seller, the Company, Trustee or Warrant Holders
pursuant to this Agreement;

(e)                any unpaid Indebtedness or unpaid Transaction Expenses of the
Company; and

(f)                any Pre-Closing Taxes.

Section 9.03        Indemnification By Buyer. Subject to the other terms and
conditions of this ARTICLE IX, Buyer shall indemnify Warrant Holders, Seller,
their Affiliates and their respective officers, directors, employees and
representatives (each, a “Seller Indemnified Party”), and shall hold Seller
Indemnified Parties harmless from and against, any and all Losses resulting
from, incurred or sustained by, or imposed upon, any Seller Indemnified Party
based upon, arising out of, with respect to or by reason of:

(a)                any inaccuracy in or breach of any of the representations or
warranties of Buyer contained in ARTICLE VI of this Agreement; or

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

Section 9.04        Certain Limitations. The party making a claim under this
ARTICLE IX is referred to as the “Indemnified Party”, and the party against whom
such claims are asserted under this ARTICLE IX (including, for the avoidance of
doubt, the Escrow for a claim made by a Buyer Indemnified Party) is referred to
as the “Indemnifying Party”. The indemnification provided for in Section 9.02
and Section 9.03 shall be subject to the following limitations:

(a)                The Indemnifying Party shall not be liable to the Indemnified
Party for indemnification under Section 9.02(a), Section 9.02(b) and Section
9.02(c), on the one hand, or Section 9.03(a) on the other hand, until the
aggregate amount of all Losses in respect of indemnification under Section
9.02(a), Section 9.02(b) and Section 9.02(c), on the one hand, or Section
9.03(a), on the other hand, exceeds $25,000 (the “Deductible”), in which event
the Indemnifying Party shall only be required to pay or be liable for Losses in
excess of the Deductible; provided, however, that the Deductible shall not be
applicable with respect to breaches of the Fundamental Representations.

 56

 

(b)               The aggregate amount of all Losses for which an Indemnifying
Party shall be liable pursuant to this Agreement, including Section 9.02(a),
Section 9.02(b) and Section 9.02(c), on the one hand, or Section 9.03(a), on the
other hand, shall not exceed an amount equal to the Escrow Amount (the “Cap”).
Without limiting the foregoing, Seller’s, Warrant Holders’ and the Trustee’s
liability in all cases following the Closing is limited to amounts remaining
available under the Escrow Amount then remaining in the Escrow, and the sole
source of payment for any indemnification obligation of Seller and Warrant
Holders shall be the escrow fund pursuant to the Escrow Agreement.

(c)                Notwithstanding anything to the contrary set forth in this
Section 9.04 or otherwise set forth in this ARTICLE IX, the Deductible shall not
be applicable to fraud or any willful or intentional breach of a representation
or warranty made by Seller.

(d)               Payments by, or on behalf of, an Indemnifying Party pursuant
to Section 9.02 or Section 9.03 in respect of any Loss shall be limited to the
amount of any liability or damage that remains after deducting therefrom any
insurance proceeds and any indemnity, contribution or other similar payment
actually received by the Indemnified Party (or the Company) in respect of any
such claim.

(e)                In no event shall any Indemnifying Party be liable to any
Indemnified Party for any punitive, incidental, consequential, special or
indirect damages, including loss of future revenue or income, loss of business
reputation or opportunity relating to the breach or alleged breach of this
Agreement, or diminution of value or any damages based on any type of multiple,
except to the extent any Indemnified Party may become obligated for such damages
as a result of a Third-Party Claim.

(f)                The Parties agree that for purposes of determining Losses
pursuant to this ARTICLE IX, all qualifiers with respect to materiality,
Material Adverse Effect or other similar qualification contained in or otherwise
applicable to such representation or warranty shall be disregarded.

(g)               No Indemnified Party shall be entitled to recover more than
once from an Indemnifying Party for matters based on the same inaccuracy or
breach.

Section 9.05        Indemnification Procedures.

(a)                Third-Party Claims. If any Indemnified Party receives notice
of the assertion or commencement of any action, suit, claim or other legal
proceeding made or brought by any Person who is not a party to this Agreement or
an Affiliate of a party to this Agreement or a Representative of the foregoing
(a “Third-Party Claim”) against such Indemnified Party with respect to which the
Indemnifying Party is obligated to provide indemnification under this Agreement,
the Indemnified Party shall give the Indemnifying Party prompt written notice
thereof. For claims made against the Escrow by a Buyer Indemnified Party, notice
shall also be provided to Seller and the Trustee, who shall be deemed to be an
Indemnifying Party under this Section 9.05 solely for the limited purposes of
the indemnification claims procedures and resolving claims made by Buyer
Indemnified Parties hereunder while any amount in the Escrow remains
outstanding. The failure to give such prompt written notice shall not, however,
relieve

 57

 

the Indemnifying Party of its indemnification obligations, except and only to
the extent that the Indemnifying Party is materially prejudiced thereby. Such
notice by the Indemnified Party shall describe the Third-Party Claim in
reasonable detail, shall include copies of all material written evidence thereof
and shall indicate the estimated amount of the Loss that has been or may be
sustained by the Indemnified Party. The Indemnifying Party shall have the right
to participate in, or by giving written notice to the Indemnified Party, to
assume the defense of any Third-Party Claim at the Indemnifying Party’s expense
and by the Indemnifying Party’s own counsel, and the Indemnified Party shall
cooperate in good faith in such defense; provided, that if the Indemnifying
Party is Seller or the Trustee, such Indemnifying Party shall not have the right
to defend or direct the defense of any such Third Party Claim that (x) is
asserted directly by or on behalf of a Person that is a supplier or customer of
the Company, (y) seeks an injunction or other equitable relief against the
Indemnified Party, or (z) involves a conflict of interest between the
Indemnifying Party and the Indemnified Party that cannot be waived. In the event
that the Indemnifying Party assumes the defense of any Third-Party Claim,
subject to Section 9.05(b), it shall have the right to take such action as it
deems necessary to avoid, dispute, defend, appeal or make counterclaims
pertaining to any such Third-Party Claim in the name and on behalf of the
Indemnified Party. The Indemnified Party shall have the right, at its own cost
and expense, to participate in the defense of any Third-Party Claim with counsel
selected by it subject to the Indemnifying Party’s right to control the defense
thereof. If the Indemnifying Party elects not to compromise or defend such
Third-Party Claim or fails to promptly notify the Indemnified Party in writing
of its election to defend as provided in this Agreement, the Indemnified Party
may, subject to Section 9.05(b), pay, compromise, defend such Third-Party Claim
and seek indemnification, subject to the limitations set forth herein, for any
and all Losses based upon, arising from or relating to such Third-Party Claim.
Seller and Buyer shall cooperate with each other in all reasonable respects in
connection with the defense of any Third-Party Claim, including making available
(subject to the provisions of Section 7.06) records relating to such Third-Party
Claim and furnishing, without expense (other than reimbursement of actual
out-of-pocket expenses) to the defending party, employees of the non-defending
party as may be reasonably necessary for the preparation of the defense of such
Third-Party Claim.

(b)               Settlement of Third-Party Claims. Notwithstanding any other
provision of this Agreement, the Indemnifying Party shall not enter into
settlement of any Third-Party Claim without the prior written consent of the
Indemnified Party (which consent shall not be unreasonably withheld or delayed),
except as provided in this Section 9.05(b). If a firm offer is made to settle a
Third-Party Claim without leading to liability or the creation of a financial or
other obligation on the part of the Indemnified Party and provides, in customary
form, for the unconditional release of each Indemnified Party from all
liabilities and obligations in connection with such Third-Party Claim and the
Indemnifying Party desires to accept and agree to such offer, the Indemnifying
Party shall give written notice to that effect to the Indemnified Party. If the
Indemnified Party fails to consent to such firm offer within ten days after its
receipt of such notice, the Indemnified Party may continue to contest or defend
such Third-Party Claim and in such event, the maximum liability of the
Indemnifying Party as to such Third-Party Claim shall not exceed the amount of
such settlement offer. If the Indemnified Party fails to consent to such firm
offer and also fails to assume defense of such Third-Party Claim, the
Indemnifying Party may settle the Third-Party Claim upon the terms set forth in
such firm offer to settle such Third-Party Claim. If the Indemnified Party has
assumed the defense pursuant to Section 9.05(a), it

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shall not agree to any settlement without the written consent of the
Indemnifying Party (which consent shall not be unreasonably withheld or
delayed).

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

Section 9.06        Tax Treatment of Indemnification Payments. All
indemnification payments made under this Agreement shall be treated by the
Parties as an adjustment to the Purchase Price for Tax purposes, unless
otherwise required by Law.

Section 9.07        Exclusive Remedies. Subject to Section 2.05 (which shall
govern any Closing Working Capital disputes in accordance with the dispute
mechanism set forth therein) and Section 8.11, the Parties acknowledge and agree
that their sole and exclusive remedy with respect to any and all claims whether
based on tort, contract or otherwise (other than claims arising from fraud on
the part of a party hereto) in connection with the transactions contemplated by
this Agreement for any breach of any representation, warranty, covenant,
agreement or obligation set forth herein or otherwise relating to the subject
matter of this Agreement, shall be pursuant to the indemnification provisions
set forth in this ARTICLE IX. In furtherance of the foregoing, each party hereby
waives, to the fullest extent permitted under Law, any and all rights, claims
and causes of action for any breach of any representation, warranty, covenant,
agreement or obligation set forth herein or otherwise relating to the subject
matter of this Agreement it may have against the other parties hereto and their
Affiliates and each of their respective Representatives arising under or based
upon any Law, except pursuant to the indemnification provisions set forth in
this ARTICLE IX. Nothing in this shall limit any Person’s right to seek and
obtain any equitable relief to which any Person shall be entitled pursuant to
Section 10.11 or to seek any remedy on account of intentional fraud by any party
hereto.

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Section 9.08        Other Limitations. If at any time subsequent to the receipt
by an Indemnified Party of an indemnity payment hereunder, such Indemnified
Party (or any Affiliate thereof) receives any recovery, settlement or other
similar payment with respect to the Loss for which it received such indemnity
payment (the “Recovery”), such Indemnified Party shall promptly pay to the
Indemnifying Party an amount equal to the amount of such Recovery, less any
expense incurred by such Indemnified Party (or its Affiliates) in connection
with such Recovery, but in no event shall any such payment exceed the amount of
such indemnity payment.

ARTICLE X
MISCELLANEOUS

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

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

If to Seller:                                             PAC Industries, Inc.
Employee Stock Ownership Plan and Trust

c/o First Bankers Trust Services, Inc.

2321 Kochs Lane

P.O. Box 4005

Quincy, IL 62305

Email: Dawn.Goestenkors@FBTServices.com
Attn: Dawn Goestenkors

 

with a copy to:                                      Seyfarth Shaw LLP
233 S. Wacker Drive, Suite 8000
Chicago, Illinois 60606-6448
Email: slifson@seyfarth.com

Attn.: Steven R. Lifson

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If to the Company:                               PAC Industries, Inc.

5341 Jaycee Avenue,

Harrisburg, PA 17112

Fax No.: 717-657-8678

Email: Frank@pacindustries.com

Attn: Frank Costabile, President

 

with a copy to:                                      Steiker, Greenapple &
Fusco, P.C.

555 City Avenue, Suite 910

Bala Cynwyd, PA 19004

Fax No.: 215-508-2500

Email: jsteiker@esoplegal.com
Attn.: James G. Steiker

 

If to Warrant Holder
Representative, on behalf

of Warrant Holders:                             PAC Industries, Inc.

5341 Jaycee Avenue,

Harrisburg, PA 17112

Fax No.: 717-657-8678

Email: Frank@pacindustries.com

Attn: Frank Costabile, President

 

 

If to Buyer:                                            EVI Industries, Inc.

290 Northeast 68th Street

Miami, Florida 33138

Tel. No.: (305) 754-4551

Fax No.: (305) 751-4903

Email: hnahmad@envirostarinc.com

Attn.: Mr. Henry M. Nahmad

 

 

with a copy to:                                     Troutman Sanders LLP

875 Third Avenue

New York, New York 10022

Tel. No.: (212) 704-6030

Fax No.: (212) 704-5919

E-mail: joseph.walsh@troutman.com

Attention: Joseph Walsh, Esq.

 

Section 10.03    Interpretation. For purposes of this Agreement: (a) the words
“include,” “includes” and “including” shall be deemed to be followed by the
words “without limitation”; (b) the word “or” is not exclusive; and (c) the
words “herein,” “hereof,” “hereby,” “hereto” and “hereunder” refer to this
Agreement as a whole. Unless the context otherwise requires, references herein:
(x) to Articles, Sections, Disclosure Schedules and Exhibits mean the Articles

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and Sections of, and Disclosure Schedules and Exhibits attached to, this
Agreement; (y) to an agreement, instrument or other document means such
agreement, instrument or other document as amended, supplemented and modified
from time to time to the extent permitted by the provisions thereof; and (z) to
a statute means such statute as amended from time to time and includes any
successor legislation thereto and any regulations promulgated thereunder. This
Agreement shall be construed without regard to any presumption or rule requiring
construction or interpretation against the party drafting an instrument or
causing any instrument to be drafted. The Disclosure Schedules and Exhibits
referred to herein shall be construed with, and as an integral part of, this
Agreement to the same extent as if they were set forth verbatim herein.

Section 10.04    Headings. The headings in this Agreement are for reference only
and shall not affect the interpretation of this Agreement.

Section 10.05    Severability. If any term or provision of this Agreement is
invalid, illegal or unenforceable in any jurisdiction, such invalidity,
illegality or unenforceability shall not affect any other term or provision of
this Agreement or invalidate or render unenforceable such term or provision in
any other jurisdiction. Upon such determination that any term or other provision
is invalid, illegal or unenforceable, the Parties hereto shall negotiate in good
faith to modify this Agreement so as to effect the original intent of the
Parties as closely as possible in a mutually acceptable manner in order that the
transactions contemplated hereby be consummated as originally contemplated to
the greatest extent possible.

Section 10.06    Entire Agreement. This Agreement constitutes the sole and
entire agreement of the Parties to this Agreement with respect to the subject
matter contained herein, and supersedes all prior and contemporaneous
representations, warranties, understandings and agreements, both written and
oral, with respect to such subject matter. In the event of any inconsistency
between the statements in the body of this Agreement, the Exhibits and
Disclosure Schedules (other than an exception expressly set forth as such in the
Disclosure Schedules), the statements in the body of this Agreement will
control.

Section 10.07    Successors and Assigns. This Agreement shall be binding upon
and shall inure to the benefit of the Parties hereto and their respective
successors and permitted assigns. Neither party may assign its rights or
obligations hereunder without the prior written consent of the other party,
which consent shall not be unreasonably withheld or delayed. No assignment shall
relieve the assigning party of any of its obligations hereunder.

Section 10.08    No Third-Party Beneficiaries. Except as provided in ARTICLE IX,
this Agreement is for the sole benefit of the Parties hereto and their
respective successors and permitted assigns and nothing herein, express or
implied, is intended to or shall confer upon any other Person or entity any
legal or equitable right, benefit or remedy of any nature whatsoever under or by
reason of this Agreement.

Section 10.09    Amendment and Modification; Waiver. This Agreement may only be
amended, modified or supplemented by an agreement in writing signed by each
party hereto. No waiver by any party of any of the provisions hereof shall be
effective unless explicitly set forth in writing and signed by the party so
waiving. No waiver by any party shall operate or be construed as a waiver in
respect of any failure, breach or default not expressly identified by such
written

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waiver, whether of a similar or different character, and whether occurring
before or after that waiver. No failure to exercise, or delay in exercising, any
right, remedy, power or privilege arising from this Agreement shall operate or
be construed as a waiver thereof; nor shall any single or partial exercise of
any right, remedy, power or privilege hereunder preclude any other or further
exercise thereof or the exercise of any other right, remedy, power or privilege.

Section 10.10    Governing Law; Submission to Jurisdiction; Waiver of Jury
Trial.

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

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

(c)                EACH PARTY ACKNOWLEDGES AND AGREES THAT ANY CONTROVERSY WHICH
MAY ARISE UNDER THIS AGREEMENT OR THE OTHER TRANSACTION DOCUMENTS IS LIKELY TO
INVOLVE COMPLICATED AND DIFFICULT ISSUES AND, THEREFORE, EACH SUCH PARTY
IRREVOCABLY AND UNCONDITIONALLY WAIVES ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY
IN RESPECT OF ANY LEGAL ACTION ARISING OUT OF OR RELATING TO THIS AGREEMENT, THE
OTHER TRANSACTION DOCUMENTS OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY.
EACH PARTY TO THIS AGREEMENT CERTIFIES AND ACKNOWLEDGES THAT (A) NO
REPRESENTATIVE OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT
SUCH OTHER PARTY WOULD NOT SEEK TO ENFORCE THE FOREGOING WAIVER IN THE EVENT OF
A LEGAL ACTION, (B) SUCH PARTY HAS CONSIDERED THE IMPLICATIONS OF THIS WAIVER,
(C) SUCH PARTY MAKES THIS WAIVER VOLUNTARILY, AND (D) SUCH PARTY HAS BEEN
INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS
AND CERTIFICATIONS IN THIS SECTION 10.10(c).

Section 10.11    Specific Performance. The Parties agree that irreparable damage
would occur if any provision of this Agreement were not performed in accordance
with the terms hereof

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and that the Parties shall be entitled to seek specific performance of the terms
hereof, in addition to any other remedy to which they are entitled at law or in
equity.

Section 10.12    Counterparts. This Agreement may be executed in counterparts,
each of which shall be deemed an original, but all of which together shall be
deemed to be one and the same agreement. A signed copy of this Agreement
delivered by facsimile, e-mail or other means of electronic transmission shall
be deemed to have the same legal effect as delivery of an original signed copy
of this Agreement.

Section 10.13    Disclosure Schedules. Any information disclosed in any Schedule
shall be deemed fully disclosed for the purposes of all of the Schedules and
shall be deemed to qualify all representations and warranties in ARTICLES III,
IV and V to the extent such qualification is reasonably apparent from the face
of such Schedule. Neither the specification (directly or indirectly by reference
to a defined term hereof) of any dollar amount in the representations and
warranties set forth in ARTICLES III, IV, V or VI or the indemnification
provisions of ARTICLE IX nor the inclusion of any items in the Schedules shall
be deemed to constitute an admission by the Company, Seller or Buyer, or
otherwise imply, that any such amount or such items so included are material for
the purposes of this Agreement. The inclusion of, or reference to, any item
within any particular Schedule does not constitute an admission by the Company,
Seller or Buyer that such item meets any or all of the criteria set forth in
this Agreement for inclusion on such Schedule.

Section 10.14    Non-recourse. This Agreement may only be enforced against, and
any claim, action, suit or other legal proceeding based upon, arising out of, or
related to this Agreement, or the negotiation, execution or performance of this
Agreement, may only be brought against the entities that are expressly named as
Parties hereto and then only with respect to the specific obligations set forth
herein with respect to such party. No past, present or future director, officer,
employee, incorporator, manager, member, partner, stockholder, Affiliate, agent,
attorney or other Representative of any party hereto or of any Affiliate of any
party hereto, or any of their successors or permitted assigns, shall have any
liability for any obligations or liabilities of any party hereto under this
Agreement or for any claim or action based on, in respect of or by reason of the
transactions contemplated hereby. Without limiting the foregoing, FBTS has
executed and delivered this Agreement and related documents, not in its
individual or corporate capacity, but solely as Trustee of the Trust.
Accordingly, the performance of this Agreement and the related documents by FBTS
and any and all duties, obligations and liabilities of the Trustee hereunder
will be effected by FBTS only as Trustee and not by FBTS in its individual or
corporate capacity. Further, any employee, officer or agent of FBTS shall be
acting only on behalf of FBTS and shall not be considered to be acting in his or
her individual capacity. Neither FBTS nor its officers, employees, directors,
agents or shareholders shall have any personal liability or obligation of any
nature whatsoever by virtue of the execution and delivery of this Agreement and
the related documents or the representations, covenants or warranties contained
therein.

Section 10.15    Warrant Holder Representative. Each Warrant Holder hereby
irrevocably appoints Warrant Holder Representative as agent and attorney-in-fact
for such Warrant Holder, with full power and authority to represent Warrant
Holders and Warrant Holders’ successors and assigns with respect to all matters
arising under this Agreement and the

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other Transaction Documents and all actions taken by Warrant Holder
Representative under this Agreement or such other Transaction Documents will be
binding upon Warrant Holders and Warrant Holders’ successors and assigns as if
expressly ratified and confirmed in writing by them. Without limiting the
generality of the foregoing, Warrant Holder Representative has full power and
authority, on behalf of Warrant Holders and Warrant Holders’ successors and
assigns, (i) to accept on behalf of Warrant Holders any and all payments of
Purchase Price or other amounts payable hereunder and to distribute such
payments to Warrant Holders in proportion to their respective ownership of such
Warrants; (ii) to interpret the terms and provisions of this Agreement, to
dispute or fail to dispute any claim under this Agreement or such other
Transaction Documents, (iii) to negotiate and compromise any dispute that may
arise under this Agreement or such other Transaction Document, and (iv) to sign
any releases or other documents with respect to any such dispute. Each Warrant
Holder will be deemed a party or a signatory to any agreement, document,
instrument or certificate for which Warrant Holder Representative signs on
behalf of such Warrant Holders. All decisions, actions and instructions by
Warrant Holder Representative, including the defense or settlement of any claims
for which any Warrant Holder may be required to indemnify any Buyer Indemnified
Party pursuant to ARTICLE IX hereof, will be conclusive and binding on Warrant
Holders and Warrant Holders have no right to object, dissent, protest or
otherwise contest the same. The Warrant Holder will also pay and indemnify and
hold harmless Seller and any Buyer Indemnified Party from and against any Losses
that they may suffer or sustain as the result of any claim by any Person that an
action taken by Warrant Holder Representative on behalf of Warrant Holders is
not binding on, or enforceable against, Warrant Holder Representative. Seller
and the Buyer each has the right to rely conclusively on the instructions and
decisions of the Warrant Holder Representative as to the settlement of any
claims for indemnification by the Buyer pursuant to ARTICLE IX hereof, or any
other actions required to be taken by the Warrant Holder Representative
hereunder, and no Party hereunder will have any cause of action against Seller
or the Buyer for any action taken by Seller or the Buyer in reliance upon the
instructions or decisions of the Warrant Holder Representative. The appointment
of Warrant Holder Representative is an agency coupled with an interest and is
irrevocable and any action taken by Warrant Holder Representative pursuant to
the authority granted in this Section 10.15 is effective and absolutely binding
on Warrant Holders notwithstanding any contrary action of or direction from
Warrant Holders. The death or incapacity, or dissolution or other termination of
existence, of any Warrant Holder does not terminate the authority and agency of
the Warrant Holder Representative (or successor thereto). The provisions of this
Section 10.15 are binding upon the executors, heirs, legal representatives and
successors of Warrant Holders, and any references in this Agreement to Warrant
Holders means and includes the successors to Warrant Holders’ rights hereunder,
whether pursuant to testamentary disposition, the laws of descent and
distribution or otherwise.

[SIGNATURE PAGE FOLLOWS]

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

  COMPANY:         PAC INDUSTRIES, INC.               By :/s/ Frank Costabile  
  Name: Frank Costabile     Title: President         TRUSTEE:         PAC
INDUSTRIES, INC. EMPLOYEE STOCK
OWNERSHIP TRUST               By: /s/ Dawn Goestenkors, EVP     First Bankers
Trust Services, Inc., not in its corporate     capacity, but solely in its
capacity as Trustee of the     PAC Industries, Inc. Employee Stock Ownership
Trust               BUYER:         EVI INDUSTRIES, INC.               By: /s/
Henry M. Nahmad     Name:  Henry M. Nahmad     Title:  Chief Executive Officer

 

 

  

[Signature Page to Stock Purchase Agreement]

 

 

  WARRANT HOLDERS:           /s/ Kaitlyn A. Costabile   Kaitlyn A. Costabile    
      /s/ Phillip A. Costabile II   Philip A. Costabile II           /s/
Christina Marie Costabile   Christina Marie Costabile           /s/ Emily M.
Bradbury   Emily M. Bradbury           /s/ Karrah D. Devlin   Karrah D. Devlin  
        /s/ Sommer Costabile   Sommer Costabile           /s/ Rocco J. Costabile
  Rocco J. Costabile           WARRANT HOLDER REPRESENTATIVE:           /s/
Frank Costabile   Frank Costabile

 

[Signature Page to Stock Purchase Agreement]