EXHIBIT 10.1

 

STOCK PURCHASE AGREEMENT

 

BETWEEN

 

GENERAL EMPLOYMENT ENTERPRISES, INC.,

an Illinois corporation

 

AND

 

ENOCH S. TIMOTHY & DOROTHY TIMOTHY

 

JANUARY 1, 2016

 

 1

 

 

TABLE OF CONTENTS

 

§1. Definitions; Basic Transaction

(a)

Definitions

(b)

Basic Transaction

(c)

Closing

(d)

Deliverables at Closing

§2. Purchase Price

(a)

Purchase Price

§3. Representations and Warranties Concerning Transaction

(a)

Sellers' Representations and Warranties

(b)

Buyer's Representations and Warranties

§4. Representations and Warranties Concerning Target

(a)

Organization, Qualification, and Corporate Power

(b)

Capitalization

(c)

Non-contravention

(d)

Brokers' Fees

(e)

Title to Assets

(f)

Subsidiaries

(g)

Financial Statements

(h)

Events Subsequent to Most Recent 2014 Fiscal Year End and Since Most Recent
Fiscal Month End

(i)

Undisclosed Liabilities; Long Term Debt

(j)

Legal Compliance

(k)

Tax Matters

(l)

Real Property

(m)

Intellectual Property

(n)

Tangible Assets

(o)

Inventory

(p)

Contracts

(q)

Notes and Accounts Receivable

(r)

Powers of Attorney

(s)

Insurance

(t)

Litigation

(u)

Product Liability

(v)

Key Employees

(w)

Employees

(x)

Employee Benefits

(y)

Guaranties

(z)

Environmental, Health, and Safety Matters

(aa)

Business Continuity

(bb)

Certain Business Relationships with Target

(cc)

Intentionally Omitted

(dd)

Customers and Suppliers

(ee)

Data Privacy

(ff)

Preferential Status

(gg)

Disclosure

 

 2

 

 

§4A. Representations and Warranties Concerning GEE Shares

(a)

Sellers' Representations and Warranties Concerning GEE Shares

(b)

Buyer's Representations and Warranties Concerning GEE Shares

§5. Certain Closing Covenants

(a)

Notices and Consents

(b)

Operation of Business

(c)

Leases

(d)

Tax Matters

(e)

NYSE MKT Rules

§6. Post-Closing Covenants

(a)

General

(b)

Litigation Support

(c)

Transition

(d)

Confidentiality

(e)

Covenant Not to Compete

(f)

Filing of Reports

(g)

Sellers' Piggyback Registration Rights

(h)

Restriction or Transfer of GEE Shares

§7. Deliveries at Closing

(a)

Closing Deliveries of Sellers

(b)

Closing Deliveries of Buyer

§8. Remedies for Breaches of This Agreement

(a)

Survival of Representations and Warranties

(b)

Indemnification Provisions for Buyer's Benefit

(c)

Intentionally Omitted

(d)

Indemnification Provisions for Sellers' Benefit

(e)

Indemnification Deductible Effect on 'Materiality' Qualifiers

(f)

Matters Involving Third-Parties

(g)

Determination of Adverse Consequences

(h)

Exclusive Remedy

§8A. Special Indemnities

§9. Tax Matters

(a)

Tax Indemnification

(b)

Straddle Period

(c)

Responsibility for Filing Tax Returns

(d)

Refunds and Tax Benefits

(e)

Cooperation on Tax Matters

(f)

Intentionally Omitted

(g)

Certain Taxes and Fees

§10. Section 338(h)(10) Election

(a)

Buyer's Payment to Sellers for Costs of Section 338(h)(10) Election as
Additional Consideration for Target Shares

(b)

Computation and Payment of Estimated Section 338 Price Increase

(c)

Factors Included in the Section 338 Price Increase

(d)

Assumptions Controlling Computation of Section 338 Price Increase

(e)

Agreement to Make Section 338(h)(10) Election and File Consistently

(f)

Preparation and Filing of Section 338 Forms

(g)

Computation and Payment of Revised Section 338 Price Increase

 

 3

 

 

§11. Miscellaneous

(a)

Nature of Sellers' Obligations

(b)

Press Releases and Public Announcements

(c)

No Third-Party Beneficiaries

(d)

Entire Agreement

(e)

Succession and Assignment

(f)

Counterparts

(g)

Headings

(h)

Notices

(i)

Governing Law, Jurisdiction, Venue and Service of Process

(j)

Amendments and Waivers

(k)

Severability

(l)

Expenses

(m)

Construction

(n)

Incorporation of Exhibits, Appendices, and Schedules

(o)

Governing Language

 

EXHIBITS

 

 

Exhibit A

Definitions

 

Exhibit B

Purchase Price Allocation Schedule

 

Exhibit C

Promissory Notes

 

Exhibit D

Intentionally Omitted

 

Exhibit E

Financial Statements

 

Exhibit F

Sellers' Release

 

Exhibit G

Sellers' Non-Competition Agreement

 

Exhibit H

Mr. Timothy's Agreement

 

Exhibit I

Intentionally Omitted

 

Exhibit J

Target's and Sellers' Counsel Opinion Letter

 

APPENDICES

 

Appendix I

Net Working Capital Adjustment

Appendix II

Earnout

Appendix III

Additional Earnout

Appendix IV

Contingent Promissory Notes

 

 4

 

 

SELLERS' DISCLOSURE SCHEDULES

 

Disclosure Schedule3(a)

Sellers' Section 3 Representations and Warranties

4(a)

Organization, Qualification, and Corporate Power

4(b)

Capitalization

4(c)

Non-Contravention

4(e)

Title to Assets

4(h)

Events Subsequent to Most Recent 2014 Fiscal Year End and Since Most Recent
Fiscal Month End

4(h)(i)(M)

Loans to Shareholder(s)

4(h)(ii)

Written Approval(s) by Buyer for Events Outside "Ordinary Course of Business"

4(i)

Undisclosed Liabilies; Long Term Debt

4(j)(i)

Legal Compliance

4(k)(ii)

Tax Liability

4(k)(iii)

Tax Returns

4(l)(i)

Owned Real Property Transferred to Sellers Prior to Closing

4(l)(ii)

Leases and Leased Real Property

4(m)(ii)

Patents, Registration, Trademark, Intellectual Property

4(m)(iii)

Third Party Intellectual Property

4(p)

Contracts

4(p)(v)

Confidentiality/Non-Competition Agreements

4(p)(xvi)

Written Claims Under Warranties

4(s)

Insurance Policy

4(t)

Litigation

4(v)(i)(a)

Key Employees

4(v)(i)(b)

Key Employees That Meet Certain Criteria

4(v)(ii)

Intellectual Property/Copyright License Rights

4(v)(iii)

Franchise, Commission, Agency, Representation Agreements

4(w)

Employees

4(x)

Employee Benefit Plans

4(x)(vi)

Nonqualified Employee Benefits

4(x)(viii)

Health Insurance Plans and Policies

4(bb)

Sellers' Business Relationships with Target

4(dd)

Target's Largest Customers and Suppliers

4(ee)

Data Privacy and Security Policy

 

BUYER'S DISCLOSURE SCHEDULES

 

Disclosure Schedule3(b)

Buyer's Section 3 Representations and Warranties

4A(b)

Buyer's Representations and Warranties Concerning GEE Shares

 

 5

 

 

STOCK PURCHASE AGREEMENT

 

This Stock Purchase Agreement (this "Agreement") is entered into as of January
1, 2016, by and among GENERAL EMPLOYMENT ENTERPRISES, INC., an Illinois
corporation, or its designee ("Buyer" or "GEE"), and ENOCH S. TIMOTHY and
DOROTHY TIMOTHY (collectively called "Sellers," and each individually called a
"Seller" or "each Seller"). Buyer and Sellers may be referred to collectively
herein as the "Parties" or, individually, as a "Party."

 

Sellers own all of the outstanding capital stock of PALADIN CONSULTING, INC., a
Texas corporation ("Target").

 

This Agreement contemplates a transaction in which Buyer will purchase from
Sellers, and Sellers will sell to Buyer, all of the outstanding capital stock of
Target ("Target Shares") in return for cash, stock and certain other
consideration as set forth below.

 

Now, therefore, in consideration of the premises and the mutual promises herein
made, and in consideration of the representations, warranties, and covenants
herein contained, the Parties agree as follows.

 

§1. Definitions; Basic Transaction.

 

(a) Definitions. For purposes of this Agreement, the terms and variations
thereof set forth in Exhibit A to this Agreement shall have the meanings given
to them in Exhibit A.

 

(b) Basic Transaction. In accordance with the terms and conditions of this
Agreement, Buyer agrees to purchase from Sellers, and Sellers (and each of the
respective Sellers) agree to sell to Buyer, all of Sellers' (and each Seller's)
Target Shares free and clear of all Liens and any other interests or claims for
the consideration specified below in §2.

 

(c) Closing. The closing of the transactions contemplated by this Agreement (the
"Closing") shall take place via the use of overnight deliveries or email
delivered pdf or facsimile executed documents (as contemplated by §11(f) of this
Agreement), unless the parties otherwise agree at the time of the mutual signing
and delivery of this Agreement between the Sellers and the Buyer; provided the
Sellers shall prior to the Closing physically deliver the original certificates
for the Target Shares, together with duly executed stock powers or assignment
documents to convey same, to the Buyer's counsel, to hold in trust pending
Sellers' authorization to disburse and deliver to Buyer for Closing (the
"Closing Date"). The closing shall be at [5:00 P.M. on January 1, 2016] or such
other date as Buyer and Sellers may mutually determine (the "Closing Date").

 

(d) Deliverables at Closing. At the Closing, (i) Sellers will deliver to Buyer
the various certificates, instruments, and documents referred to in and in
accordance with §7 below, (ii) Buyer will deliver to Sellers the various
certificates, instruments, and documents referred to in and in accordance with
§7 below, (iii) Sellers will deliver to Buyer stock certificates representing
all of the Target Shares accompanied by duly executed assignment documents for
assignment or stock powers to Buyer or Buyer's designee, and (iv) Buyer will
deliver to Sellers the consideration specified in §2 below that is to be
delivered at Closing.

 

 6

 

 

§2. Purchase Price.

 

(a) Purchase Price. The aggregate "Purchase Price" for the Target Shares shall
be $1,750,000 minus the Circle Lending Loan Amount, plus up to $1,000,000 in
contingent promissory notes, minus the NWC Reduction Amount (if any) plus up to
$1,250,000 of "earnouts" in each case in the form (cash or otherwise) and
subject to the adjustment, conditions and provisions set forth in this§2and is
payable as set forth below. The Purchase Price shall be allocated between the
Sellers as set forth on the "Purchase Price Allocation Schedule" attached hereto
as Exhibit B, and any wire transfers to the Sellers shall be in accordance with
the wire transfer instructions on Exhibit B.

 

(i) Closing Cash Payment to Sellers. At Closing, Buyer shall pay $1,750,000
minus the Circle Lending Loan Amount to Sellers by wire transfer of immediately
available U.S. federal funds pursuant to the wire transfer instructions set
forth on Exhibit B (the "Closing Cash Payment to Sellers"), which shall be
allocated between the Sellers in the amounts set forth on Exhibit B. The Circle
Lending Loan Amount is the outstanding amount owing by Target to Circle Lending,
L.P. (or Funding Circle USA, Inc., or Victory Park Capital Advisors, or FC
Marketplace, LLC, or an affiliate), which Sellers represent to Buyer is
$77,823.37.

 

(ii)Contingent Promissory Notes. Subject to the terms and conditions of Appendix
IV, up to an additional $1,000,000 of the Purchase Price shall subsequently be
paid by Buyer to Sellers in the form of contingent Promissory Notes (the
"Promissory Notes"). The principal amount of the Promissory Notes is subject to
reduction by the NWC Reduction Amount as provided below. If issued, the
Promissory Notes (a) shall be in the form attached hereto as Exhibit C, and (b)
shall be executed by Buyer.

 

(iii) NWC Reduction Amount. The Sellers are responsible for paying to Buyer the
amount by which the Net Working Capital is a negative number, which shall first
be effectuated as set forth below. The Net Working Capital shall be determined
in accordance with Appendix I. The Purchase Price is reduced dollar for dollar
for each dollar by which the Net Working Capital is a negative amount (i.e.,
less than $0). The amount by which the Net Working Capital is less than $0 is
the "NWC Reduction Amount." For example purposes only, if the Net Working
Capital were a negative $10,000; then the Purchase Price would be reduced by
$10,000. The reduction shall first be applied to reduce the $1,000,000 portion
of the Purchase Price that is the Promissory Notes. If the reduction exceeds
$1,000,000, then that excess shall be immediately paid by the Sellers via a wire
transfer of the applicable dollar amount to Buyer.

 

(iv) Earnout Payment. Up to an additional $750,000 of the Purchase Price (the
"Earnout") will subsequently be paid by Buyer to Sellers in accordance with and
subject to the terms and conditions of Appendix II, which payment shall at the
option of GEE be paid (i) in shares of GEE Common Stock, or (ii) immediately
available funds. Any "retention bonuses" paid to Target employees will reduce
the Earnout payment, as set forth in Appendix II.

 

(v) Additional Stock Earnout Payment. Up to an additional $500,000 of the
Purchase Price (the "Additional Earnout") will subsequently be paid by Buyer to
Sellers in accordance with and subject to the terms and conditions of Appendix
III in shares of GEE Common Stock.

 

The shares of GEE Common Stock issued to the Sellers pursuant to this §2
(including any pursuant to Appendix II and Appendix III) are the "GEE Shares."
The GEE Shares shall be allocated among the Sellers as set forth on Exhibit B.

 

 7

 

 

(vi) Subordinated Deferred Payment Rights. Notwithstanding the above, Sellers
agree that the Earnout Payment and Additional Stock Earnout Payment
(collectively "Deferred Payment Rights") are subordinate and junior in right of
payment to any "Senior Indebtedness" now or hereafter existing to "Senior
Lenders" (current or future). The Sellers agree for the benefit of each (current
and future) holder of (current and future) Senior Indebtedness (including each
such a Senior Lender of any future Senior Indebtedness, upon the written request
of Buyer (for a prospective lender) or a then current Senior Lender) to promptly
execute and deliver a subordination and inter-creditor agreement confirming the
subordination of said Deferred Payment Rights to that current or prospective
Senior Lender's priority rights in the form and substance as reasonably
requested by the applicable current or prospective Senior Lender.

 

§3. Representations and Warranties Concerning Transaction.

 

(a) Sellers' Representations and Warranties. Sellers (and each Seller) represent
and warrant to Buyer that the statements contained in this §3(a) are correct and
complete as of the date of this Agreement, except as set forth in the Sellers'
Disclosure Schedule attached hereto or executed and delivered separately in
connection therewith (the "Sellers' Disclosure Schedule" or "Sellers' Disclosure
Schedules"). The Sellers' Disclosure Schedules will be lettered and numbered so
as to correspond to the lettered and numbered paragraphs and subsections
contained in this Agreement.

 

(i) Sellers. The Sellers are individuals residing in the Stateof Texas.

 

(ii) Enforceable Obligation. This Agreement constitutes the valid and legally
binding obligation of the Sellers, enforceable in accordance with its terms and
conditions. Sellers need not give any notice to, make any filing with, or obtain
any authorization, consent, or approval of any government or governmental agency
in order to consummate the transactions contemplated by this Agreement.

 

(iii) Non-contravention. Neither the execution and delivery of this Agreement,
nor the consummation of the transactions contemplated hereby, will: (A) violate
any constitution, statute, regulation, rule, injunction, judgment, order,
decree, ruling, charge, or other restriction of any government, governmental
agency, or court to which any Seller is subject; (B) conflict with, result in a
breach of, constitute a default under, result in the acceleration of, create in
any party the right to accelerate, terminate, modify, or cancel, or require any
notice under any agreement, contract, lease, license, instrument, or other
arrangement to which any Seller is a party or by which he, she, or it is bound
or to which any of his, her, or its assets are subject; or (C) result in the
imposition or creation of a Lien upon or with respect to Target Shares.

 

(iv) Brokers' Fees. No Seller has any liability or obligation to pay any fees or
commissions to any broker, finder, or agent with respect to the transactions
contemplated by this Agreement.

 

 8

 

 

(v) Target Shares. Sellers hold of record and own beneficially one hundred
percent (100%) of the outstanding Target Shares (i.e., shares of capital stock
of Target), 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. None of the Sellers is a party to any option, warrant, purchase
right, or other contract or commitment (other than this Agreement) that could
require Sellers or Target to sell, transfer, or otherwise dispose of any capital
stock of Target. No Seller is a party to any voting trust, proxy, or other
agreement or understanding with respect to the voting of any capital stock of
Target. The Target Shares represent all of the Sellers' equity ownership
interest in the Target (including any contingent interests).

 

(vi) Investment. Sellers (A) understand that the Promissory Noteshave not been,
and will not be, registered under the Securities Act, or under any state
securities laws, and are being offered and sold in reliance upon federal and
state exemptions for transactions not involving any public offering, (B) are
acquiring the Promissory Notes solely for his, her, or their own account for
investment purposes, and not with a view to the distribution thereof, (C) are
sophisticated investors with knowledge and experience in business and financial
matters, (D) has received certain information concerning Buyer and have had the
opportunity to obtain additional information as desired in order to evaluate the
merits and the risks inherent in holding their respective Promissory Notes, (E)
are able to bear the economic risk and lack of liquidity inherent in holding the
Promissory Notes, and (F) are Accredited Investors for the reasons set forth on
Sellers' Disclosure Schedules.

 

(b) Buyer's Representations and Warranties.Buyer represents and warrants to
Sellers that the statements contained in this §3(b) are correct and complete as
of the date of this Agreement, except as set forth in the Buyer's Disclosure
Schedule attached hereto or initialed and delivered separately in connection
herewith (the "Buyer's Disclosure Schedule" or "Buyer's Disclosure Schedules").
The Buyer's Disclosure Schedules will be lettered and numbered so as to
correspond to the lettered and numbered paragraphs and subsections contained in
this Agreement.

 

(i) Organization of Buyer. Buyer is a corporation duly organized, validly
existing, and in good standing under the laws of the State of Illinois.

 

(ii) Authorization of Transaction. Buyer has full power and authority (including
full corporate or other entity power and authority) to execute and deliver this
Agreement and to perform its obligations hereunder. This Agreement constitutes
the valid and legally binding obligation of Buyer, enforceable in accordance
with its terms and conditions. Buyer need not give any notice to, make any
filing with, or obtain any authorization, consent, or approval of any government
or governmental agency in order to consummate the transactions contemplated by
this Agreement. The execution, delivery and performance of this Agreement and
all other agreements contemplated hereby have been duly authorized by Buyer.

 

(iii) Non-contravention. Neither the execution and delivery of this Agreement,
nor the consummation of the transactions contemplated hereby, will: (A) violate
any constitution, statute, regulation, rule, injunction, judgment, order,
decree, ruling, charge, or other restriction of any government, governmental
agency, or court to which Buyer is subject or any provision of its charter,
bylaws, or other governing documents; or (B) conflict with, result in a breach
of, constitute a default under, result in the acceleration of, create in any
party the right to accelerate, terminate, modify, or cancel, or require any
notice under any agreement, contract, lease, license, instrument, or other
arrangement to which Buyer is a party or by which it is bound or to which any of
its assets are subject.

 

 9

 

 

(iv) Brokers' Fees. Buyer has no liability or obligation to pay any fees or
commissions to any broker, finder, or agent with respect to the transactions
contemplated by this Agreement other than Childs Advisory Partners.

 

(v) Investment. Buyer is not acquiring the Target Shares with a view to, or for
sale in connection with, any distribution thereof within the meaning of the
Securities Act.

 

§4. Representations and Warranties Concerning Target.Sellers, and each Seller,
represent and warrant to Buyer that the statements contained in this §4 are
correct and complete as of the date of this Agreement, except as set forth in
the Sellers' Disclosure Schedules related to this §4 delivered by Sellers to
Buyer and initialed by the Parties. The Disclosure Schedules will be lettered
and numbered so as to correspond to the lettered and numbered paragraphs and
subsections contained in this Agreement.

 

(a) Organization, Qualification, and Corporate Power. Target is a corporation
duly organized, validly existing, and in good standing under the laws of the
State of Texas. Target is duly authorized to conduct business and is in good
standing under the laws of each jurisdiction where such qualification is
required, which jurisdictions are set forth in Sellers' Disclosure Schedule
4(a). Target has full corporate power and authority to carry on the business in
which it is engaged and to own and use the properties owned and used by it.
Sellers' Disclosure Schedule 4(a) also lists the directors and officers of
Target.

 

(b) Capitalization. The entire authorized capital stock of Target consists of
100,000 Target Shares, of which 3,000 Target Shares are issued and outstanding
and none of which Target Shares are held in treasury. All of the issued and
outstanding Target Shares have been duly authorized, are validly issued, fully
paid, and non-assessable, and are held of record by the Sellers as set forth in
Sellers' Disclosure Schedule 4(b). There are no outstanding or authorized
options, warrants, purchase rights, subscription rights, conversion rights,
exchange rights, or other contracts or commitments that could require Target to
issue, sell, or otherwise cause to become outstanding any of its capital stock.
There are no outstanding or authorized stock appreciation, phantom stock, profit
participation, or similar rights with respect to Target or the Target Shares.
There are no voting trusts, proxies, or other agreements or understandings with
respect to the voting of the Target Shares. The Target Shares are the only
equity or ownership interests in Target.

 

(c) Non-contravention. Neither the execution and the delivery of this Agreement,
nor the consummation of the transactions contemplated hereby, will: (i) violate
any constitution, statute, regulation, rule, injunction, judgment, order,
decree, ruling, charge, or other restriction of any government, governmental
agency, or court to which Target is subject or any provision of the charter,
bylaws or resolutions of Target; or (ii) conflict with, result in a breach of,
constitute a default under, result in the acceleration of, create in any party
the right to accelerate, terminate, modify, or cancel, or require any notice
under any material agreement, contract, lease, license, instrument, or other
arrangement to which Target is a party or by which it is bound or to which any
of its assets is subject (or result in the imposition of any Lien upon any of
its assets), where the violation, conflict, breach, default, acceleration,
termination, modification, cancellation, failure to give notice, or Lien, except
as set forth in Sellers' Disclosure Schedule 4(c). Target does not need to give
any notice to, make any filing with, or obtain any authorization, consent, or
approval of any government or governmental agency in order for the Parties to
consummate the transactions contemplated by this Agreement, exceptas set forth
in Sellers' Disclosure Schedule 4(c).

 

 10

 

 

(d) Brokers' Fees. Target has no liability or obligation to pay any fees or
commissions to any broker, finder, or agent with respect to the transactions
contemplated by this Agreement.

 

(e) Title to Assets. Target has good and valid title to, or a valid leasehold
interest in, the properties and all, of its assets, which assets are either
shown either on the Most Recent Balance Sheetor are listed on Sellers'
Disclosure Schedule 4(e), free and clear of all Liens. Target has distributed
the Permitted Distributions to Sellers prior to Closing.

 

(f) Subsidiaries. Target does not own any Subsidiaries or Predecessor companies.
Each of Seller's Affiliates is listed on Sellers' Disclosure Schedule 4(bb).

 

(g) Financial Statements. Attached hereto as Exhibit E are the following
financial statements (collectively the "Financial Statements"):

 

(i) unaudited consolidated balance sheets and statements of income, changes in
stockholders' equity, and cash flow as of and for the fiscal years ended 2012
and 2013, and December 31, 2014, (the "Most Recent Fiscal Year End") for Target;
and

 

(ii) unaudited consolidated balance sheets and statements of income, changes in
stockholders' equity, and cash flow (the "Most Recent Financial Statements") as
of and for the months in 2015 ended November 30, 2015 (the "Most Recent Fiscal
Month End") for Target. The Financial Statements (including the notes thereto)
have been prepared for purposes of preparing Target's Federal Income Tax Return
throughout the periods covered thereby and, from a Federal Income Tax reporting
perspective, present fairly the financial condition of Target as of such dates
and the results of operations of Target for such periods.

 

(h) Events Subsequent to Most Recent 2014 Fiscal Year End and Since Most Recent
Fiscal Month End.

 

(i) Since the Most Recent Fiscal Year End there has not been any Material
Adverse Effect to, or incurred or suffered by, Target, the Target Shares or the
Business. Without limiting the generality of the foregoing, and except as set
forth on Sellers' Disclosure Schedule 4(h), since that date:

 

(A) With the exception of the Permitted Distributions, Target has not sold,
leased, transferred, or assigned, or experienced damage to or loss of, any of
Target's assets, tangible or intangible;

 

(B) Target has not entered into any agreement, contract, lease, license or other
obligation that obligates Target to pay Five Thousand Dollars ($5,000) or more;

 

(C) no party (including Target) has accelerated, terminated, made material
modifications to, or canceled any material agreement, contract, lease, or
license to which Target is a party, or by which any of them is bound that would
result in a Material Adverse Effect;

 

 11

 

 

(D) neither Target, nor any third party, has imposed any Lien upon any of
Target's Assets, tangible or intangible, or the Target Shares;

 

(E) Target has not made any capital expenditures;

 

(F) Target has not made any material capital investment in, or any loan to, any
other Person;

 

(G) Target has not created, incurred, assumed, received any credit 'advance'
from or incurred an increase in its liabilities to any creditor (long or short
term) other than in the Ordinary Course of Business (including under any
pre-existing credit, line or loan agreements with a bank or other lender), or
guaranteed more than One Dollar ($1) in aggregate Indebtedness for borrowed
money and capitalized lease obligations;

 

(H) Target has not transferred, assigned, or granted any license or sublicense
of any rights under or with respect to any Intellectual Property;

 

(I) there has been no change made or authorized in the charter or bylaws of
Target;

 

(J) neither any Seller nor Target has issued, sold, pledged, assigned or
otherwise disposed of any Target Shares, or granted any options, warrants, or
other rights to purchase or obtain (including upon conversion, exchange, or
exercise) any of the Target Shares;

 

(K) Target has not declared, set aside, or paid any dividend or made any
distribution with respect to its capital stock (whether in cash or in kind) or
redeemed, purchased, or otherwise acquired any of its capital stock other than
the Permitted Distributions;

 

(L) Target has not experienced any damage, destruction, or loss (whether or not
covered by insurance) to the Target Assets or to its property;

 

(M) Target has not made, nor released, compromised or settled, any loan to any
Seller orany of its directors, officers or managers, nor has it made any loans
to or entered into any other transaction with any of its employees except as
described on Sellers' Disclosure Schedule 4(h)(i)(M);

 

(N) Target has not entered into or terminated any employment contract or
collective bargaining agreement, written or oral, or modified the terms of any
existing such contract or agreement, or entered into any collective bargaining
relationship;

 

(O) Target has not granted any increase in the base compensation of any of its
directors, officers, managers or employees;

 

(P) Target has not adopted, amended, modified, or terminated any bonus, profit
sharing, incentive, severance, or other plan, contract, or commitment for the
benefit of any of its directors, officers, managers or employees (or taken any
such action with respect to any other Employee Benefit Plan);

 

(Q) Target has not made any other change in employment terms for any of its
directors, officers, managers or employees;

 

 12

 

 

(R) Target has not implemented any employee layoffs requiring notice under the
Worker Adjustment and Retraining Notification Act of 1988, as amended, or any
similar state, local, or non-U.S. law, regulation, or ordinance (collectively
the "WARN Act");

 

(S) Target has not made, nor released, compromised or settled, any loans or
advances of money;

 

(T) Target has not become subject to any judgments, orders, consent agreements,
decrees or other legal requirements that may result in a Material Adverse
Effect; and

 

(U) Target has not committed to do any of the foregoing acts.

 

(ii) Without prior specific written approval from Buyer (which approvals are
listed and described on Sellers' Disclosure Schedule 4(h)(ii)), Target has not
acted outside of the Ordinary Course of Business since the Most Recent Fiscal
Month End (or committed to do so), including (a) making cash withdrawals, cash
expense payments, distributions payments, salary or bonus payments, (b)
incurring or increasing any liabilities, and (c) assuming or increasing any
indebtedness. As a matter of clarification, actions which are in the Ordinary
Course of Business, including borrowing under a credit facility to finance
working capital, consistent with Target's historical practice, shall not be
deemed a violation of this subsection (ii).

 

(i) Undisclosed Liabilities; Long Term Debt.

 

(i)Target has no liabilities (whether known or unknown, whether asserted or
unasserted, whether absolute or contingent, whether accrued or unaccrued,
whether liquidated or unliquidated, and whether due or to become due, including
any liability for taxes) of a type that would be recorded on Target's balance
sheet if Target were using the accrual method of accounting in accordance with
GAAP, except for: (i) liabilities included and described in the Most Recent
Balance Sheet (rather than in any notes thereto); and (ii) those liabilities
that have arisen since the Most Recent Fiscal Month End in the Ordinary Course
of Business. Target has no unrecorded, undisclosed or contingent Indebtedness
other than those set forth on Sellers' Disclosure Schedule 4(i).

 

(ii) Target has no long term debt or liabilities, other than (i) equipment
leases not exceeding Twenty Five Thousand Dollars ($25,000) of future rent or
other payments in the aggregate and (ii) the office leases set forth on Sellers
Disclosure Schedule 4(l)(ii).

 

(j) Legal Compliance.

 

(i) Target has complied in all material respects with all applicable laws
(including rules, regulations, codes, plans, injunctions, judgments, orders,
decrees, rulings, and charges thereunder and including the Foreign Corrupt
Practices Act, 15 U.S.C. 78dd-1 et seq.) of federal, state, local, and non-U.S.
governments (and all agencies thereof) affecting Target or the Business, and no
action, suit, proceeding, hearing, investigation, charge, complaint, claim,
demand, or notice has been filed or commenced against it alleging any failure so
to comply, except as set forth in Sellers' Disclosure Schedule 4(j)(i).

 

 13

 

 

(ii) The representatives of Target have not, to obtain or retain business,
directly or indirectly offered, paid or promised to pay, or authorized the
payment of, any money or other thing of value (including any fee, gift, sample,
travel expense or entertainment with a value in excess of One Hundred Dollars
($100) in the aggregate to any one individual in any year) to:

 

(A) any person who is an official, officer, agent, employee or representative of
any Governmental Body or of any existing or prospective customer (whether
government owned or nongovernment owned);

 

(B) any political party or official thereof;

 

(C) any candidate for political or political party office; or

 

(D) any other individual or entity;

 

while knowing or having reason to believe that all or any portion of such money
or thing of value would be offered, given, or promised, directly or indirectly,
to any such official, officer, agent, employee, representative, political party,
political party official, candidate, individual, or any entity affiliated with
such customer, political party, official or political office.

 

(iii) Target has all Necessary Permits.

 

(k) Tax Matters.

 

(i) Target has filed all Federal Income Tax Returns and all other Tax Returns
that it is required to file. All such Tax Returns are true and correct in all
material respects. All Taxes due and owing by Target (whether or not shown on
any Tax Return) have been paid and Target has not deferred any Taxes. Target is
not currently the beneficiary of any extension of time within which to file any
Tax Return. There are no Liens for Taxes (other than Taxes not yet due and
payable) upon any of the assets of Target. Target has withheld and paid all
Taxes required to have been withheld and paid in connection with amounts paid or
owing to any employee, independent contractor, creditor, stockholder, or other
Person, and Target has complied in all material respects with the related
reporting requirements relating thereto, including properly completed and filed
all required Forms W-2 and 1099.

 

(ii) Except as set forth on Sellers' Disclosure Schedule 4(k)(ii), there is no
dispute or claim concerning any Tax liability of Target either: (A) claimed or
raised by any authority in writing; or (B) as to which Sellers or the directors
and officers of Target have Knowledge based upon personal contact with or
written notice from any agent of such authority.

 

(iii) Sellers' Disclosure Schedule 4(k)(iii) lists all Federal, state, local,
and non-U.S. Tax Returns filed with respect to Target for taxable periods ended
on or after December 31, 2013, and indicates whether or not those Tax Returns
that have been audited, and indicates whether or not those Tax Returns currently
are the subject of audit. Sellers have delivered to Buyer correct and complete
copies of all Federal Income Tax Returns, examination reports, and statements of
deficiencies assessed against, or agreed to by Target since December 31, 2011.
Target has not waived any statute of limitations in respect of Taxes or agreed
to any extension of time with respect to a Tax assessment or deficiency.

 

 14

 

 

(iv) Target is not a party to any agreement, contract, arrangement, or plan that
has resulted or would result, separately or in the aggregate, in the payment of
any "excess parachute payment" within the meaning of Code §280G (or any
corresponding provision of state, local, or non-U.S. Tax law). Target has not
been a United States Real Property holding corporation within the meaning of
Code §897(c)(2) during the applicable period specified in Code
§897(c)(1)(A)(ii). Target is not a party to or bound by any tax allocation or
sharing agreement. Target (A) has not been a member of an Affiliated Group
filing a consolidated Federal Income Tax Return, and (B) has no liability for
the Taxes of any Person (other than Target) under Reg. §1.1502-6 (or any similar
provision of state, local, or non-U.S. law), as a transferee or successor, by
contract, or otherwise.

 

(v) The unpaid Taxes of Target: (A) did not, as of the Most Recent Fiscal Month
End, exceed the reserve for Tax liability (rather than any reserve for deferred
Taxes established to reflect timing differences between book and Tax income) set
forth on the face of the Most Recent Balance Sheet; and (B) will not exceed that
reserve as adjusted for operations and transactions through the Closing Date.

 

(vi) Target will not be required to include any item of income in, or exclude
any item of deduction from, taxable income for any taxable period (or portion
thereof) ending after the Closing Date as a result of any:

 

(A) change in method of accounting for a taxable period ending on or prior to
the Closing Date;

 

(B) "closing agreement" as described in Code §7121 (or any corresponding or
similar provision of state, local, or non-U.S. income Tax law) executed on or
prior to the Closing Date;

 

(C) installment sale or open transaction disposition made on or prior to the
Closing Date; or

 

(D) prepaid amount received on or prior to the Closing Date.

 

(vii) Target has not distributed stock of another Person, nor had its stock
distributed by another Person, in a transaction that was purported or intended
to be governed in whole or in part by Code §355 or Code §361.

 

(viii) Target is not, and has not been, a party to any "listed transaction," as
defined in Code §6707A(c)(2) and Reg. §1.6011-4(b)(2).

 

(ix) Target (and any predecessor of Target) has been a validly electing
S-corporation within the meaning of Code §1361 and §1362 at all times during its
existence and Target will be an S-corporation up to and including the Closing
Date.

 

(x) Target has no potential liability for any Tax under Code §1374. Furthermore,
Target shall not be liable for any Tax under Code §1374 in connection with the
deemed sale of Target's assets caused by the §338(h)(10) election. Target has
not, in the past ten (10) years:(A) acquired assets from another corporation in
a transaction in which Target'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.

 

 15

 

 

(l) Real Property.

 

(i) Target does not own and has not in the past owned any Owned Real Property.

 

(ii) Sellers' Disclosure Schedule 4(l)(ii) sets forth the address of the only
parcels of Leased Real Property, and identifies the Leases for that Leased Real
Property (including the date and name of the parties to such Lease document).
Sellers have delivered to Buyer a true and complete copy of the Lease documents
for that Leased Real Property. With respect to each Lease:

 

(A) such Lease is legal, valid, binding, enforceable and in full force and
effect;

 

(B) the transactions contemplated by this Agreement do not under the terms of
any such Lease require the consent of any other party to such Lease, will not
result in a breach of or default under such Lease, and will not otherwise cause
such Lease to cease to be legal, valid, binding, enforceable and in full force
and effect on identical terms following the Closing;

 

(C) none of Target's possession and quiet enjoyment of the Leased Real Property
under such Lease has been disturbed and there are no disputes with respect to
such Lease;

 

(D) neither Target, nor any other party to the Lease is in breach of or default
under such Lease, and, no event has occurred or circumstance exists that, with
the delivery of notice, the passage of time or both, would constitute such a
breach or default, or permit the termination, modification or acceleration of
rent under such Lease;

 

(E) no security deposit or portion thereof deposited with respect to such Lease
has been applied in respect of a breach of or default under such Lease that has
not been redeposited in full;

 

(F) Target does not owe, and will not owe in the future, any brokerage
commissions or finder's fees with respect to such Lease;

 

(G) Target has not subleased, licensed or otherwise granted any Person the right
to use or occupy the Leased Real Property or any portion thereof; and

 

(H) Target has not collaterally assigned or granted any other Lien in such Lease
or any interest therein.

 

(iii) The Leased Real Property identified in Sellers' Disclosure Schedule
4(l)(ii) comprises all of the real property used, or intended to be used, in the
business of Target; and Target is not a party to any agreement or option to
purchase any real property or interest therein.

 

(iv) All buildings, structures, fixtures, building systems and equipment, and
all components thereof, included in the Leased Real Property (the
"Improvements") are in good condition and repair and sufficient for the
operation of the Business of Target. There are no facts or conditions affecting
any of the Improvements that would, individually or in the aggregate, interfere
in any material respect with the use or occupancy of the Improvements or any
portion thereof in the operation of the business of Target as currently
conducted thereon.

 

 16

 

 

(v) Target has made all rent and other payments required under the Lease and
Target is not liable for paying the costs of any Improvements, repairs or
betterments related to the Leased Real Property.

 

(vi) To the Knowledge of each Seller, and the directors and officers of Target,
the Leased Real Property is in material compliance with all applicable building,
zoning, subdivision, health and safety and other land use Laws, including The
Americans with Disabilities Act of 1990, as amended, and all insurance
requirements affecting the Leased Real Property (collectively, the "Real
Property Laws"). Target has not received any notice of violation of any Real
Property Law and there is no Basis for the issuance of any such notice or the
taking of any action for such violation.

 

(vii) The Leased Real Property has direct access to a public street adjoining
the Leased Real Property or has access to a public street via insurable
easements benefitting such parcel of Leased Real Property, and such access is
not dependent on any land or other Real Property interest that is not included
in the Leased Real Property. None of the Improvements, or any portion thereof,
is dependent for its access, use or operation on any land, building, improvement
or other Real Property interest that is not included in the Leased Real Property
(including its related easements and appurtenances in the case of condominium
units).

 

(viii) All water, oil, gas, electrical, steam, compressed air,
telecommunications, sewer, storm and waste water systems and other utility
services or systems for the Leased Real Property have been installed and are
operational and sufficient for the operation of the business of Target as
currently conducted thereon.

 

(ix) Target's use or occupancy of the Leased Real Property or any portion
thereof and the operation of the business of Target as currently conducted
thereon is not dependent on a "permitted non-conforming use" or "permitted
non-conforming structure" or similar variance, exemption or approval from any
governmental authority.

 

(x) None of the Leased Real Property, or any portion thereof, is located in a
flood hazard area (as defined by the Federal Emergency Management Agency).

 

(m) Intellectual Property.

 

(i) Target, and its Business as presently conducted and as presently proposed to
be conducted, have not and will not interfere with, infringe upon,
misappropriate, or otherwise come into conflict with, any Intellectual Property
rights of third-parties; there are no facts indicating a likelihood of the
foregoing; and no Seller has received any charge, complaint, claim, demand, or
notice alleging any such interference, infringement, misappropriation, or
conflict (including any claim that Target must license or refrain from using any
Intellectual Property rights of any third-party). To the Knowledge of Sellers,
no third-party has interfered with, infringed upon, misappropriated, or
otherwise come into conflict with, any Intellectual Property rights of Target.

 

 17

 

 

(ii) Sellers' Disclosure Schedule 4(m)(ii) identifies each patent or
registration which has been issued to Target with respect to any of its
Intellectual Property, identifies each pending patent application or application
for registration that Target has made with respect to any of its Intellectual
Property, and identifies each material license, sublicense, agreement, covenant
not to sue, or other permission that Target has granted to any third-party with
respect to any of its Intellectual Property (together with any exceptions).
Sellers have delivered to Buyer correct and complete copies of all such patents,
registrations, applications, licenses, sublicenses, agreements, covenants not to
sue, and permissions (as amended to date). Sellers' Disclosure Schedule 4(m)(ii)
also identifies each material trade name or unregistered trademark, service
mark, corporate name, internet domain name, copyright and material computer
software item used by Target in connection with its Business. With respect to
each item of Intellectual Property required to be identified in Sellers'
Disclosure Schedule 4(m)(ii):

 

(A) Target possesses all right, title, and interest in and to the item, free and
clear of any Lien, license, or other restriction;

 

(B) the item is not subject to any outstanding injunction, judgment, order,
decree, ruling, or charge;

 

(C) no action, suit, proceeding, hearing, investigation, charge, complaint,
claim, or demand is pending or, to the Knowledge of Sellers and the directors
and officers of Target, is threatened that challenges the legality, validity,
enforceability, use, or ownership of the item; and

 

(D) Target has not ever agreed to indemnify any Person for or against any
interference, infringement, misappropriation, or other conflict with respect to
the item.

 

(iii) Sellers' Disclosure Schedule 4(m)(iii) identifies each item of
Intellectual Property that any third-party owns and that Target uses pursuant to
license, sublicense, agreement, covenant not to sue, or permission excluding
off-the-shelf retail licensed software (e.g., Microsoft Windows or Microsoft
Word) which has been and is being used in compliance with such retail license.
Sellers have delivered to Buyer correct and complete copies of all such
licenses, sublicenses, agreements, covenants not to sue, and permissions (as
amended to date). With respect to each item of Intellectual Property required to
be identified in Sellers' Disclosure Schedule 4(m)(iii):

 

(A) the license, sublicense, agreement, covenant not to sue, or permission
covering the item is legal, valid, binding, enforceable, and in full force and
effect;

 

(B) no party to the license, sublicense, agreement, covenant not to sue, or
permission is in material breach or default, and no event has occurred that with
notice or lapse of time would constitute a breach, default or permit
termination, modification, or acceleration thereunder;

 

(C) no party to the license, sublicense, agreement, covenant not to sue, or
permission has repudiated any provision thereof;

 

(D) Target has not granted any sublicense or similar right with respect to the
license, sublicense, agreement, covenant not to sue, or permission; and

 

 18

 

 

(E) no loss or expiration of the item is, threatened, pending, or reasonably
foreseeable, except for patents expiring at the end of their statutory terms
(and not as a result of any act or omission by Sellers or Target, including
without limitation, a failure by Sellers or Target to pay any required
maintenance fees).

 

(iv) Target entered into agreements with each of its employees and 1099
contractors such that none of them retains any copyright or other intellectual
property rights to any work product provided to clients of Target by those
employees or 1099 contractors.

 

(n) Tangible Assets. The machinery, equipment, and other tangible assets that
Target owns or leases are set forth on the Most Recent Balance Sheet, are free
from material defects (patent and latent), have been maintained in accordance
with normal industry practice, and are in good operating condition and repair
(subject to normal wear and tear).

 

(o) Inventory. Target does not maintain any inventory of goods except as may be
set forth on the Most Recent Balance Sheet.

 

(p) Contracts. Sellers' Disclosure Schedule 4(p) lists the following contracts
and other agreements, written or oral, to which Target is a party:

 

(i) any agreement (or group of related agreements) for the lease of personal
property to or from any Person providing for lease payments in excess of Five
Thousand Dollars ($5,000) per annum;

 

(ii) (A) any agreement (or group of related agreements) for the purchase or sale
of raw materials, commodities, supplies, products, or other personal property,
or for the furnishing or receipt of services, the performance of which will
extend over a period of more than one (1) year or involve consideration in
excess of Five Thousand Dollars ($5,000), and also (B) of the above listed
agreements, 4(p)(ii)(B) specifically identifies those (and only those)
agreements which extend over a period of more than three (3) years or involve
consideration in excess of Twenty Five Thousand Dollars ($25,000);

 

(iii) any agreement concerning a partnership or joint venture;

 

(iv) any agreement (or group of related agreements) under which it has created,
incurred, assumed, or guaranteed any Indebtedness for borrowed money, or any
capitalized lease obligation, in excess of One Dollar ($1) or under which it has
imposed a Lien on any of its assets, tangible or intangible;

 

(v) any agreement concerning confidentiality or non-competition; and the
material terms of any restrictions on the Target in such agreement are
summarized in Sellers' Disclosure Schedule 4(p)(v) with respect to the
applicable agreement listed therein;

 

(vi) any agreement with any Seller and their Affiliates (other than Target);

 

(vii) any profit sharing, stock option, stock purchase, stock appreciation,
phantom stock, cash bonuses due upon sale of Target, deferred compensation,
severance, or other material plan or arrangement for the benefit of its current
or former directors, officers, and employees;

 

(viii) any collective bargaining agreement;

 

 19

 

 

(ix) any agreement for the employment of any individual on a full-time,
part-time, consulting, or other basis providing any of the following: (A) annual
compensation in excess of Thirty Thousand Dollars ($30,000); (B) a guarantee of
employment of one (1) year or more; or (C) providing severance benefits;

 

(x) any agreement under which Target has advanced or loaned any amount to any of
its directors, officers, managers or employees;

 

(xi) any agreement under which the consequences of a default or termination
could have a Material Adverse Effect;

 

(xii) any agreement under which it has granted any Person any registration
rights (including, without limitation, demand and piggyback registration
rights);

 

(xiii) any settlement, conciliation or similar agreement with any governmental
entity or which will likely involve payment after the Closing Date of
consideration in excess of Five Thousand Dollars ($5,000);

 

(xiv) any agreement under which Target has advanced or loaned any other Person
amounts in the aggregate exceeding Five Thousand Dollars ($5,000);

 

(xv) any other agreement (or group of related agreements) the performance of
which involves consideration or expenditures by Target in excess of Five
Thousand Dollars ($5,000); or

 

(xvi) Sellers' Disclosure Schedule 4(p)(xvi) contains a general description of
the history and scope of any claims under warranties under contracts or
agreements with clients for work done by Target for that client.

 

Sellers have delivered to Buyer a correct and complete copy of each written
contract listed in Sellers' Disclosure Schedule 4(p) and a written summary
setting forth the material terms and conditions of each oral agreement referred
to in Sellers' Disclosure Schedule 4(p). With respect to each such agreement:
(A) the agreement is legal, valid, binding, enforceable, and in full force and
effect in all material respects; (B) Sellers are not and, to the Knowledge of
Sellers, no other party is in material breach or default, and no event has
occurred that with notice or lapse of time would constitute a material breach or
default, or permit termination, modification, or acceleration, under the
agreement; and (C) no party has repudiated any material provision of the
agreement.

 

(q) Notes and Accounts Receivable. All notes and accounts receivable of Target
are reflected properly on their books and records, are valid receivables subject
to no setoffs or counterclaims known to any Seller, are current and collectible
and will be collected in accordance with their terms at the recorded amounts
thereof, subject only to the reserve, if any, for bad debts set forth on the
face of the Most Recent Balance Sheet (rather than in any notes thereto).

 

(r) Powers of Attorney. There are no outstanding powers of attorney executed on
behalf of Target.

 

(s) Insurance. Sellers' Disclosure Schedule 4(s) sets forth the following
information with respect to each insurance policy (including policies providing
property, casualty, liability, and workers' compensation coverage and bond and
surety arrangements) to which Target is a party, a named insured, or otherwise
the beneficiary of coverage:

 

(i) the name, address, and telephone number of the agent;

 

 20

 

 

(ii) the name of the insurer, the name of the policyholder, and the name of each
covered insured;

 

(iii) the policy number, coverage limits, and the period of coverage;

 

(iv) the scope (including an indication of whether the coverage is on a claims
made, occurrence, or other basis) and available amounts (including a description
of how deductibles and ceilings are calculated and operate) of coverage;

 

(v) a description of any retroactive premium adjustments or other material
loss-sharing arrangements;

 

(vi) a description of any claims filed against each such policy within the past
five (5) years; and

 

(vii) a description of 'loss runs,' including any worker's compensation
policies.

 

With respect to each such insurance policy: (A) the policy is legal, valid,
binding, enforceable, and in full force and effect in all material respects; (B)
neither Target, nor to the Knowledge of Sellers any other party to the policy is
in material breach or default (including with respect to the payment of premiums
or the giving of notices), and no event has occurred that, with notice or the
lapse of time, would constitute such a material breach or default, or permit
termination, modification, or acceleration, under the policy; and (C) no party
to the policy has repudiated any material provision thereof. Sellers' Disclosure
Schedule 4(s) also describes any material self-insurance arrangements affecting
Target. Target has maintained all insurance coverages appropriate for the
Business and there have been no gaps in such coverages at any time.

 

(t) Litigation. Sellers' Disclosure Schedule 4(t) sets forth each instance in
which: (i) Target is subject to any outstanding injunction, judgment, order,
decree, ruling, or charge; or (ii) Target is a party or the directors and
officers of Target, are to Sellers' Knowledge, threatened to be made a party, to
any action, suit, proceeding, hearing, or investigation of, in, or before (or
that could come before) any court or quasi-judicial or administrative agency of
any federal, state, local, or non-U.S. jurisdiction or before (or that could
come before) any arbitrator.

 

(u) Product Liability. Target does not sell products in the Ordinary Course of
Business and has no product liability exposure.

 

(v) Key Employees.

 

(i) Sellers' Disclosure Schedule 4(v)(i)(a) identifies each of the individuals
who currently perform or have performed in the last twenty-four (24) months any
of the following services for the Target: recruiting of workers, marketing and
customer relations (each individual being a "Key Employee"). Furthermore,
Sellers' Disclosure Schedule 4(v)(i)(a) sets forth the identity and job
descriptions for each of the Key Employees. Each of the Key Employees has
entered into a binding and enforceable confidentiality and non-solicitation
agreement in the form (b) attached as part of Sellers' Disclosure Schedule
4(v)(i)(a). No Seller is, and to Sellers' Knowledge, no Key Employee is, subject
to any non-competition or confidentiality agreement with any Person other than
Target. Sellers' Disclosure Schedule 4(v)(i)(b) identifies all (and only) those
"Key Employees" which meet any of the following criteria: (A) received a
performance or unscheduled bonus (in the form of cash or other consideration)
from Target within the last twenty-four (24)months, (B) are by the measure of
total sales, total revenues, or total new accounts (by volume or business
projected from the new customer/client), within the top three (3) employees of
Target, of all the Key Employees.

 

 21

 

 

(ii) Sellers' Disclosure Schedule 4(v)(ii) lists any intellectual property
rights or copyright licenses agreements binding upon or obligating any Seller
or, to the knowledge of Sellers, any other Key Employee of the Target
individually.

 

(iii) Sellers' Disclosure Schedule 4(v)(iii) lists any franchise, distribution,
commission, agency or representation agreements relating to the staffing,
recruiting, and employee placement services business binding upon or obligating
any Seller or, to the knowledge of Sellers, any other Key Employee of the Target
individually.

 

(w) Employees.

 

(i)To the Knowledge of Sellers, no directors or officers of Target, no
executive, no Key Employee, or significant group of employees, plans to
terminate employment with Target during the next twelve (12) months. Target is
not a party to or bound by any collective bargaining agreement, nor has it
experienced any strike or material grievance, claim of unfair labor practices,
or other collective bargaining dispute within the past three (3) years. Target
has not committed any material unfair labor practice. There is no organizational
effort presently being made or, to Knowledge of Sellers or the directors or
officers of Target, threatened by or on behalf of any labor union with respect
to employees of Target, except as set forth in Sellers' Disclosure Schedule
4(w).

 

(ii) Within the past three (3) years, Target has not implemented any plant
closing or layoff of employees requiring notice under the WARN Act, and no such
action will be implemented without advance notification to Buyer. Sellers'
Disclosure Schedule 4(w) lists all full-time and part-time employees of Target.

 

(iii) Target is and since January 1, 2011 has been, in compliance in all
material respects with all applicable Laws respecting labor, employment, fair
employment practices, labor relations, terms and conditions of employment,
immigration, employee classification and wages, hours, meal and break periods,
hiring, promotion, termination, workers', compensation, occupational safety and
health requirements, plant closings, withholding of taxes, employment
discrimination, harassment, retaliation, disability rights or benefits, equal
opportunity, equal pay, employee privacy, employee leave requirements, health
and medical insurance (including the Affordable Care Act), unemployment
insurance and related matters ("Labor Laws"). Target has paid its current and
former employees, officers, directors, managers, independent contractors and
consultants or adequately accrued for in accordance with GAAP in the Financial
Statements all wages, salaries, commissions, bonuses, benefits and other
compensation due to or on behalf of such employees, officers, directors,
managers or consultants prior to the Most Recent Fiscal Month End. Target has
properly classified each of its employees, officers, directors, managers,
independent contractors and consultants and "employees" or "independent
contractors" and as "exempt" or "non-exempt" for all purposes (including with
respect to eligibility for minimum wage and overtime under the Fair Labor
Standards Act of 1938, as amended) and has properly reported all compensation
paid to such employees, officers, directors, managers, independent contractors
and consultants for all purposes and no reserves have been taken for any such
matters. Target is, and since January 1, 2011 has been, in compliance with all
documentation requirements of the Immigration Reform and Control Act of 1986, as
amended, and the rules and regulations promulgated thereunder and no reserves
have been taken for any such matters.

 

 22

 

 

(iv) Since January 1, 2011 there has been, no Litigation pending, or to the
Knowledge of Sellers, threatened against Target by or before any Governmental
Authority with respect to any current or former employees, officers, directors,
managers or consultants of any Target, including any claim relating to the
alleged violation of any Labor Law.

 

(x) Employee Benefits.

 

(i) Sellers' Disclosure Schedule 4(x) lists each Employee Benefit Plan that
Target maintains, to which Target contributes or has any obligation to
contribute, or with respect to which Target has any liability.

 

(A) Each such Employee Benefit Plan (and each related trust, insurance contract,
or fund) has been maintained, funded and administered in accordance with the
terms of such Employee Benefit Plan and complies in form and in operation in all
material respects with the applicable requirements of ERISA, the Code, the
Affordable Care Act and all other applicable laws.

 

(B) All required reports and descriptions (including Form 5500 annual reports,
summary annual reports, and summary plan descriptions) have been timely filed
and/or distributed in accordance with the applicable requirements of ERISA and
the Code with respect to each such Employee Benefit Plan. The requirements of
COBRA have been met in all material respects with respect to each such Employee
Benefit Plan and each Employee Benefit Plan maintained by an ERISA Affiliate
that is an Employee Welfare Benefit Plan subject to COBRA.

 

(C) All contributions (including all employer contributions and employee salary
reduction contributions) that are due have been made within the time periods
prescribed by ERISA and the Code to each such Employee Benefit Plan that is an
Employee Pension Benefit Plan and all contributions for any period ending on or
before the Closing Date that are not yet due have been made to each such
Employee Pension Benefit Plan or accrued in accordance with the past custom and
practice of Target. All premiums or other payments for all periods ending on or
before the Closing Date have been paid with respect to each such Employee
Benefit Plan that is an Employee Welfare Benefit Plan.

 

(D) Each such Employee Benefit Plan that is intended to meet the requirements of
a "qualified plan" under Code §401(a) has received a determination from the
Internal Revenue Service that such Employee Benefit Plan is so qualified, and
Sellers are not aware of any facts or circumstances that would reasonably be
expected to adversely affect the qualified status of any such Employee Benefit
Plan.

 

(E) There have been no Prohibited Transactions with respect to any such Employee
Benefit Plan or any Employee Benefit Plan maintained by an ERISA Affiliate. No
Fiduciary has any liability for material breach of fiduciary duty or any other
material failure to act or comply in connection with the administration or
investment of the assets of any such Employee Benefit Plan. No action, suit,
proceeding, hearing, or investigation with respect to the administration or the
investment of the assets of any such Employee Benefit Plan (other than routine
claims for benefits) is pending or, to the Knowledge of Sellers and the
directors and officers of Target, threatened.

 

 23

 

 

(F) Sellers have delivered to Buyer correct and complete copies of the plan
documents and summary plan descriptions, the most recent determination letter
received from the Internal Revenue Service, the most recent annual report (Form
5500, with all applicable attachments), and all related trust agreements,
insurance contracts, and other funding arrangements which implement each such
Employee Benefit Plan.

 

(ii) Neither Target nor any ERISA Affiliate contributes to, has any obligation
to contribute to, or has any liability under or with respect to any Employee
Pension Benefit Plan that is a "defined benefit plan" (as defined in ERISA
§3(35)).

 

(iii) Neither Target nor any ERISA Affiliate contributes to, has any obligation
to contribute to, or has any material liability (including withdrawal liability
as defined in ERISA §4201) under or with respect to any Multiemployer Plan.

 

(iv) Target does not maintain, contribute to or have an obligation to contribute
to, or have any material liability or potential liability with respect to, any
Employee Welfare Benefit Plan or other arrangement providing health or life
insurance or other welfare-type benefits for current or future retired or
terminated employees (or any spouse or other dependent thereof) of Target other
than in accordance with COBRA.

 

(v) The consummation of the transactions contemplated by this Agreement will not
accelerate the time of the payment or vesting of, or increase the amount of, or
result in the forfeiture of compensation or benefits under, any Employee Benefit
Plan.

 

(vi) Sellers' Disclosure Schedule 4(x)(vi) lists each written agreement,
contract, or other arrangement - whether or not an Employee Benefit Plan
(collectively a "Nonqualified Plan") - to which Target is a party that is a
"nonqualified deferred compensation plan" subject to Code §409A. Each Plan has
been maintained in good faith compliance with Code §409A and the regulations
thereunder and no amounts under any such Plan is or has been subject to the
interest and additional tax set forth under Code §409A(a)(1)(B).Target has no
actual or potential obligation to reimburse or otherwise "gross-up" any Person
for the interest or additional tax set forth under Code §409A(a)(1)(B).

 

(vii) The Target has not attempted to maintain the grandfathered health care
plan status under the Affordable Care Act of any Employee Benefit Plan.

 

(viii) Sellers' Disclosure Schedule 4(x)(viii) lists each health insurance plan
and policy that Target maintains, to which Target contributes, or has any
obligation to contribute, or with respect to which Target has liability. Target
has properly prepared and distributed to its applicable employees the "summary
of benefits and coverage" for each group health plan in accordance with the
Affordable Care Act and all other applicable laws.

 

(y) Guaranties. Target is not a guarantor or otherwise responsible for any
liability or obligation (including Indebtedness) of any other Person.

 

 24

 

 

(z) Environmental, Health, and Safety Matters.

 

(i) Target has for the past five (5) years complied and is in compliance, in
each case in all material respects, with all Environmental, Health, and Safety
Requirements.

 

(ii) Without limiting the generality of the foregoing, Target has obtained, has
for the past five (5) years complied, and is in compliance with, in each case in
all material respects, all material permits, licenses and other authorizations
that are required pursuant to Environmental, Health, and Safety Requirements for
the occupation of its facilities and the operation of its business.

 

(iii) Target has not received any written notice, report, or other information
regarding any actual or alleged material violation of Environmental, Health, and
Safety Requirements, or any material liabilities or potential material
liabilities, including any material investigatory, remedial, or corrective
obligations, relating to any of them, their business, or their past or current
facilities arising under Environmental, Health, and Safety Requirements.

 

(iv) Target has not treated, stored, disposed of, arranged for, permitted the
disposal of, transported, handled, manufactured, distributed, exposed and person
to or caused the release of any substance to the environment, including without
limitation any hazardous substance, hazardous material or hazardous waste, or
owned or operated any property or facility which is or has been contaminated by
any such substance so as to give rise to any current or future liabilities,
including any liability for fines, penalties, response costs, corrective action
costs, personal injury, property damage, natural resources damages, or
attorneys' fees, pursuant to the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended ("CERCLA"), or the Solid
Waste Disposal Act, as amended ("SWDA"), or any other Environmental, Health, and
Safety Requirements.

 

(v) Target has not designed, manufactured, sold, marketed, installed, or
distributed products or other items containing asbestos and none of such
entities is, or will become, subject to any liabilities with respect to the
presence of asbestos in any product or item or in or upon any property,
premises, or facility.

 

(vi) Sellers and Target have furnished to Buyer all environmental audits,
reports, and other material environmental documents relating to Target's or its
respective predecessors' or Affiliates' past or current properties, facilities,
or operations that are in their possession, custody, or under their reasonable
control.

 

 25

 

 

(aa) Business Continuity. None of the computer software, computer hardware
(whether general or special purpose), telecommunications capabilities (including
all voice, data and video networks) and other similar or related items of
automated, computerized, and/or software systems and any other networks or
systems and related services that are used by or relied on by Target in the
conduct of their Business (collectively, the "Systems") have experienced bugs,
failures, breakdowns, or continued substandard performance in the past twelve
(12) months that has caused any substantial disruption or interruption in, or to
the use of, any such Systems by Target. Target is covered by business
interruption insurance in scope and amount customary and reasonable to ensure
the ongoing business operations of Target's Business.

 

(bb) Certain Business Relationships with Target. Other than as disclosed on
Sellers' Disclosure Schedule 4(bb), none of the Sellers, their Affiliates or
Target's directors, officers, employees, and shareholders has been involved in
any material business arrangement or relationship with Target within the past
twelve (12) months, and none of the Sellers, their Affiliates or Target's
directors, officers, employees, and shareholders owns any asset, tangible or
intangible, that is used in the Business of Target.

 

(cc) Intentionally Omitted.

 

(dd) Customers and Suppliers.

 

(i) Sellers' Disclosure Schedule 4(dd)(i) lists thetop 80% of billed customers
of Target by revenue for each of calendar years 2014 and 2015 (through November
2015) and sets forth opposite the name of each such customer the net sales to
such customer. 

 

None of those 2015 top customers has indicated that it will stop or materially
decrease its purchases of services from Target except for those (if any) set
forth in a separate list in Sellers Disclosure Schedule 4(dd)(i) with the
heading "Customers Decreasing Business with Paladin."

 

(ii) Sellers' Disclosure Schedule 4(dd)(ii) sets forth the following by customer
for September, October, November and projected December 2015: (i) revenue, (ii)
average spread, (iii) average bill rate, and (iv) the billable headcount.

 

(iii) Since the date of the Most Recent Balance Sheet, no supplier of Target has
indicated that it shall stop, or materially decrease the rate of, supplying
materials, products or services to Target.

 

(ee) Data Privacy. Target's business has complied with and, as presently
conducted and as presently proposed to be conducted, is in compliance with, all
Data Laws except, in each case, to the extent that a failure to comply would not
have a Material Adverse Effect. Target has complied with, and is presently in
compliance with, its policies applicable to data privacy, data security, and/or
personal information except, in each case, to the extent that a failure to
comply would not have a Material Adverse Effect. Target has not experienced any
incident in which personal information or other sensitive data was or may have
been stolen or improperly accessed, and Target is not aware of any facts
suggesting the likelihood of the foregoing, including without limitation, any
breach of security or receipt of any notices or complaints from any Person
regarding personal information or other data. Sellers' Disclosure Schedule 4(ee)
lists Target's data privacy and security policies and Sellers agree to deliver
copies of all such policies to Buyer within ten (10) days from the date of this
Agreement.

 

(ff) Preferential Status. There are no contracts with customers that either
require the continuation of ownership of the Target by, or permit termination by
the customer, due to Target's loss of small business status, woman-owned
business status, disadvantaged business status, protégé status, "8(a)" status or
other preferential status. Furthermore, there are no contracts that were
acquired by the Target due to the Target's preferential status.

 

(gg) Disclosure.The representations and warranties contained in this §4 do not
to Sellers' Knowledgecontain any untrue statement of a material fact, or omit to
state any material fact, necessary in order to make the statements and
information contained in this §4 not misleading.

 

 26

 

 

§4A. Representations and Warranties Concerning GEE Shares.

 

(a) Sellers' Representations and Warranties Concerning GEE Shares. Sellers, and
each Seller, represent and warrant to Buyer that the statements contained in
this §4A(a) are correct and complete as of the date of this Agreement.

 

(i) Access to Information. Each Seller understands that an investment in the GEE
Shares involves a high degree of risk and long term or permanent illiquidity,
including, risk of loss of their entire investment. Sellers have been given full
and complete access to the Buyer for the purpose of obtaining such information
as each Seller or that Seller's qualified representative has reasonably
requested in connection with the decision to acquire the GEE Shares. The Sellers
have received and reviewed copies of the Public Reports. The Sellers have been
afforded the opportunity to ask questions of the officers of the Buyerregarding
its business prospects, all as each Seller (or that Seller's investor's
representatives) has deemed necessary to make an informed investment decision to
purchase the GEE Shares.

 

(ii) Restricted Securities. (A) Sellers have been advised that none of the GEE
Shares have been registered under the Securities Act or any other applicable
securities laws. Sellers acknowledge that the GEE Shares will be issued as
"restricted securities" as defined by Rule 144 promulgated pursuant to the
Securities Act. None of the GEE Shares may be resold in the absence of an
effective registration thereof under the Securities Act and applicable state
securities laws unless, in the opinion of counsel reasonably satisfactory to the
Buyer, an applicable exemption from registration is available; (B) Sellers are
acquiring the GEE Shares for each Seller's own account, and not as nominee or
agent, for investment purposes only and not with a view to, or for sale in
connection with, a distribution, as that term is used in Section 2(11) of the
Securities Act, in a manner which would require registration under the
Securities Act or any state securities laws; (C) each Seller understands and
acknowledges that the certificates representing the GEE Shares will bear
substantially the following legend:

 

"THE SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR APPLICABLE STATE LAW, AND NO
INTEREST THEREIN MAY BE SOLD, DISTRIBUTED, ASSIGNED, OFFERED, PLEDGED OR
OTHERWISE TRANSFERRED UNLESS: (i) THERE IS AN EFFECTIVE REGISTRATION STATEMENT
UNDER THE ACT AND APPLICABLE STATE SECURITIES LAWS COVERING ANY SUCH TRANSACTION
INVOLVING SAID SECURITIES; (ii) THE COMPANY RECEIVES AN OPINION OF LEGAL COUNSEL
REASONABLY SATISFACTORY TO THE COMPANY STATING THAT SUCH TRANSACTION IS EXEMPT
FROM REGISTRATION; OR (iii) THE COMPANY OTHERWISE SATISFIES ITSELF THAT SUCH
TRANSACTION IS EXEMPT FROM REGISTRATION."

 

and (D) Sellers acknowledge that an investment in the GEE Shares is not liquid
and is transferable only under limited conditions. Sellers acknowledge that such
securities must be held indefinitely unless they are subsequently registered
under the Securities Act or an exemption from such registration is available.
Sellers are aware of the provisions of Rule 144 promulgated under the Securities
Act ("Rule 144"), which permits limited resale of restricted securities subject
to the satisfaction of certain conditions and that Rule 144 is not now available
and, in the future, may not become available for resale of any of the GEE
Shares.

 

 27

 

 

(iii) Sellers' Sophistication and Ability to Bear Risk of Loss. Each Seller is
an Accredited Investor as that term is defined in Regulation D of the Securities
Exchange Act, and is able to protect its interests in connection with the
acquisition of the GEE Shares and can bear the economic risk of investment in
such securities without producing a material adverse change in each respective
Seller's financial condition. Each Seller, either alone or with Sellers'
Representative, otherwise has such knowledge and experience in financial or
business matters that said Seller is capable of evaluating the merits and risks
of the investment in the GEE Shares.

 

(b) Buyer's Representations and Warranties Concerning GEE Shares. Buyer
represents and warrants to Sellers that the statements contained in this §4A(b)
are correct and complete as of the date of this Agreement, except as set forth
in the Buyer's Disclosure Schedules accompanying this Agreement and initialed by
the Parties. The Buyer's Disclosure Schedules will be arranged in sections
corresponding to the lettered and numbered sections contained in this §4A(b).

 

(i) Capitalization. The Buyer's capitalization is set forth in the Public
Reports.

 

(ii) Filings with SEC. To Buyer's Knowledge, Buyer has made all filings with SEC
that it has been required to make within the past two (2) years under the
Securities Act and the Securities Exchange Act (collectively the "Public
Reports"). To Buyer's knowledge, as of the time it was filed with the SEC (or,
if amended or superseded by a filing prior to the date of this Agreement) each
of the Public Reports: (i) has complied with the Securities Act and the
Securities Exchange Act in all material respects; and (ii) does not contain any
untrue statement of a material fact or omitted to state a material fact
necessary in order to make the statements made therein, in light of the
circumstances under which they were made, not misleading. Buyer has made
available to Seller, through the SEC's "EDGAR System," a correct and complete
copy of each Public Report.

 

(iii) Financial Statements. Buyer has filed quarterly reports on Form 10-Q for
the fiscal quarter ended June, 2015 (the "Most Recent Fiscal Quarter End"), and
an annual report on Form 10-K for the fiscal year ended December 31, 2014. The
financial statements included in or incorporated by reference into these Public
Reports (including the related notes and schedules) have been prepared in
accordance with GAAP throughout the periods covered thereby, and present fairly
the financial condition of Buyer and its Subsidiaries as of the indicated dates
and the results of operations of Buyer and its Subsidiaries for the indicated
periods; provided, however, that the interim statements are subject to normal
year-end adjustments.

 

(iv) Events Subsequent to Most Recent Fiscal Quarter End. To Buyer's Knowledge,
since the Most Recent Fiscal Quarter End, there has not been any Material
Adverse Change.

 

§5. Certain Closing Covenants.The Parties agree as of Closing as follows:

 

(a) Notices and Consents. Sellers have caused Target to give any notices to
third-parties, and obtained any third-party consents referred to in §4(m)(iii)
above, the Lease Consents, and any authorizations, consents, and approvals of
governments and governmental agencies in connection with the matters referred to
in §3(a)(ii) and §4(c) above.

 

 28

 

 

(b) Operation of Business. Sellers have not caused or permitted Target to engage
in any practice, take any action, or enter into any transaction outside the
Ordinary Course of Business since the Most Recent Fiscal Month End. Without
limiting the generality of the foregoing, Sellers have not since the Most Recent
Fiscal Month End caused or permitted Target to (i) declare, set aside, or pay
any dividend or make any distribution with respect to its capital stock or
redeem, purchase, or otherwise acquire any of its capital stock, except for the
Permitted Distributions, (ii) otherwise engage in any practice, take any action,
or enter into any transaction of the sort described in §4(h) above (without
regard to any disclosures listed on the Sellers' Disclosure Schedules as to
4(h)), (iii) without Buyer's written consent, undertake any transaction or
series of transactions which materially increases the amount of Target's Net
Working Capital, (iv) incur or increase any Indebtedness outside of the Ordinary
Course of Business, or (v) make cash withdrawals, cash expense payments, salary
or bonus payments outside of the Ordinary Course of Business.

 

(c) Leases. Sellers have not since the Most Recent Fiscal Month End, caused or
permitted any Lease to be amended, modified, extended, renewed or terminated.

 

(d) Tax Matters. Without the prior written consent of Buyer, since the Most
Recent Fiscal Month End, Target did not made or change any election, change an
annual accounting period, adopt or change any accounting method, file any
amended Tax Return, enter into any closing agreement, settle any Tax claim or
assessment relating to Target, surrender any right to claim a refund of Taxes,
consent to any extension or waiver of the limitation period applicable to any
Tax claim or assessment relating to Target, or take any other similar action
relating to the filing of any Tax Return or the payment of any Tax, if such
election, adoption, change, amendment, agreement, settlement, surrender, consent
or other action would have the effect of increasing the Tax liability of Target
for any period ending after the Closing Date or decreasing any Tax attribute of
Target existing on the Closing Date.

 

(e) NYSE MKT Rules. GEE and Sellers hereby acknowledge and agree, unless and
until GEE obtains the affirmative vote of its shareholders pursuant to
applicable New York Stock Exchange Market rules and regulations, GEE may only
issue up to the Issuance Cap of its common stock to Sellers under the terms of
this Agreement and any ancillary agreements. The "Issuance Cap" is a number of
shares equal to 19.99% of the total shares of GEE common stock issued and
outstanding on the date specified by the New York Stock Exchange. The Issuance
Cap is subject to adjustment for stock splits, stock combinations,
recapitalizations, and reorganizations.

 

In the event GEE's issuance of common stock under this Agreement reaches the
Issuance Cap, GEE will use its reasonable best efforts to obtain the above
referenced shareholder approval to issue any additional shares above the
Issuance Cap as are required pursuant to the terms of this Agreement.

 

Furthermore, GEE and Sellers acknowledge and agree that prior to GEE issuing the
GEE Shares, that GEE must obtain consent for listing the GEE Shares on the New
York Stock Exchange, which consent GEE agrees to use its reasonably best efforts
to obtain.

 

 29

 

 

§6. Post-Closing Covenants.The Parties agree as follows with respect to the
period following the Closing:

 

(a) General. In case at any time after the Closing any further actions are
necessary to carry out the purposes of this Agreement, each of the Parties will
take such further actions (including the execution and delivery of such further
instruments and documents) as any other Party may reasonably request, all at the
sole cost and expense of the requesting Party (unless the requesting Party is
entitled to indemnification therefor under §8 below). Sellers acknowledge and
agree that, from and after the Closing Buyer will be entitled to possession of
all documents, books, records (including tax records), agreements, insurance
policies, title documents, and financial data of any sort relating to Target.

 

(b) Litigation Support. In the event and for so long as any Party actively is
contesting or defending against any action, suit, proceeding, hearing,
investigation, charge, complaint, claim, or demand in connection with:

 

(i) any transaction contemplated under this Agreement; or

 

(ii) any fact, situation, circumstance, status, condition, activity, practice,
plan, occurrence, event, incident, action, failure to act, or transaction on or
prior to the Closing Date involving Target,

 

Each of the other Parties will cooperate with him, her, or it and his, her, or
its counsel in the contest or defense, make available his, her, or its
personnel, and provide such testimony and access to his, her, or its books and
records as shall be necessary in connection with the contest or defense, all at
the sole cost and expense of the contesting or defending Party (unless the
contesting or defending Party is entitled to indemnification therefor under §8
below).

 

(c) Transition. No Seller shall take any action that is designed or intended to
have the effect of discouraging any lessor, licensor, customer, supplier, or
other business associate of Target from maintaining the same business
relationships with Target after the Closing as it maintained with Target prior
to the Closing.

 

(d) Confidentiality.Sellers will treat and hold as such all of the Confidential
Information, refrain from using any of the Confidential Information except in
connection with this Agreement, and deliver promptly to Buyer or destroy, at the
request and option of Buyer, all tangible embodiments (and all copies) of the
Confidential Information that are in his, her, or its possession. In the event
that any Seller is requested, or required pursuant to oral or written question
or request, for information or documents in any legal proceeding, interrogatory,
subpoena, civil investigative demand, or similar process to disclose any
Confidential Information, that Sellers will notify Buyer promptly of the request
or requirement so that Buyer may seek an appropriate protective order or waive
compliance with the provisions of this §6(d). If, in the absence of a protective
order or the receipt of a waiver hereunder, any Sellers is, on the advice of
counsel, compelled to disclose any Confidential Information to any tribunal or
else stand liable for contempt, that Sellers may disclose the Confidential
Information to the tribunal; provided, however, that Sellers shall use their
reasonable best efforts to obtain, at the reasonable request of Buyer, an order
or other assurance that confidential treatment will be accorded to such portion
of the Confidential Information required to be disclosed as Buyer shall
designate.

 

 30

 

 

(e) Covenant Not to Compete.At the Closing, each Seller shall enter into a
Covenant not to Compete in the form of Exhibit G attached hereto (the "Sellers'
Non-Competition Agreement").

 

(f) Filing of Reports. From the Closing Date until the first anniversary of the
Closing Date, so long as the Sellers own, collectively, fifty one percent (51%)
of the GEE Shares acquired hereby, the Buyer shall file on a timely basis, any
and all Public Reports or amendments thereto, as it is required to file in order
to remain fully current with all of its reporting obligations under the
Securities Exchange Act so as to enable sales without resale limitations,
pursuant to Rule 144, as amended ("Rule 144 Sales"). The Buyer shall pay for all
opinions or similar letters to its transfer agent, as well as pay for all
transfer agent costs, relating to the removal of the Rule 144 restrictive legend
on share certificates representing the GEE Shares. For the avoidance of doubt,
all references herein to filings to be made on a "timely basis" shall include
and mean, any extension periods permissible under Rule 12b-25 of the Securities
Exchange Act, provided that the Buyer has complied with such rule, but not
beyond said extension date.

 

(g) Sellers' Piggyback Registration Rights. If at any time during the period
from the Closing Date until the second anniversary of the Closing Date, the
Buyer shall determine to file with the Securities and Exchange Commission (the
"SEC") a Registration Statement relating to an offering for its own account or
the account of others of any of its equity securities (other than on Form S-4 or
Form S-8 or their then equivalents relating to equity securities to be issued
solely in connection with any acquisition of any entity or business or equity
securities issuable in connection with stock option or other employee benefit
plans and other than the Form S-1 currently subject to the SEC review), the
Buyer shall send each of the Sellers written notice of such determination and,
if within fifteen (15) business days after the date of such notice, the Sellers
shall so request in writing, the Buyer shall include in such Registration
Statement all or any part of the GEE Shares that Sellers request to be
registered, except that if, in connection with any underwritten public offering
for the account of the Buyer the managing underwriter(s) thereof shall impose a
limitation on the number of shares of Common Stock which may be included in the
Registration Statement because, in such underwriter(s)' judgment, marketing or
other factors dictate such limitation is necessary to facilitate public
distribution, then the Buyer shall be obligated to include in such Registration
Statement only such limited portion of the GEE Shares with respect to which the
Sellers have requested inclusion hereunder as the underwriter shall permit. Any
exclusion of GEE Shares shall be made on a pro rata basis with exclusions of any
other issued and outstanding shares of the Buyer's common stock proposed to be
included in such underwritten public offering. If an offering in connection with
which any Sellers are entitled to registration under this §6(g) is an
underwritten offering, then such Seller shall, unless otherwise agreed by the
Buyer, offer and sell such shares in an underwritten offering using the same
underwriter or underwriters and on the same terms and conditions as other shares
of Common Stock included in such underwritten offering.

 

(h) Restriction or Transfer of GEE Shares.Sellers shall not transfer, assign or
convey the Issued Shares within twelve (12) months of issuance of those shares.
The Stock Certificate for those shares shall bear a legend to that effect.

 

 31

 

 

(i) Auditable Financials. Sellers represent, warrant and covenant to Buyer that
the Target has the necessary records and documents for auditable financial
statements by a certified public accounting firm.

 

***Remainder of Page Intentionally Blank – Agreement Text Continues on Following
Page***

 

 

 

 

 

 32

 

 

§7. Deliveries at Closing.

 

(a) Closing Deliveries of Sellers.

 

(i) Sellers shall have obtained and delivered to Buyer the resignations,
effective as of the Closing, of each director and officer of Target, and of each
Seller individually, as applicable, from all offices and positions with Target;

 

(ii) Sellers shall have caused Target to obtain and deliver to Buyer a written
consent for a change in control of the Target with respect to any Leases that
contain a prohibition on Change of Control, and, if requested by Buyer's Lender
(if applicable) in connection with any Material Leased Real Property, a waiver
of landlord liens, collateral assignment of lease or leasehold mortgage from the
landlord or other party whose consent thereto is required under such Lease (the
"Lease Consents"), in form and substance satisfactory to Buyer and (if
applicable) Buyer's Lender;

 

(iii) Sellers shall have caused Target to obtain and deliver to Buyer an
estoppel certificate with respect to each of the Leases, dated no more than
thirty (30) days prior to the Closing Date, from the other party to such Lease,
in form and substance satisfactory to Buyer (the "Estoppel Certificates");

 

(iv) Sellers shall have each entered into a release with Buyer and Target in the
form attached hereto as Exhibit F ("Sellers' Release"), and such release shall
be in full force and effect as of the Closing;

 

(v) each Seller shall have entered into a Sellers' non-competition agreement
with Buyer, in the form attached hereto as Exhibit G ("Sellers' Non-Competition
Agreement") and such agreements shall be in full force and effect as of the
Closing;

 

(vi) Enoch S. Timothy shall have entered into atransition services agreement
with Target in the form attached hereto as Exhibit H, as applicable("Mr.
Timothy's Agreement") andsuch agreement shall be in full force and effect as of
the Closing;

 

(vii) Waiver of Right of Offer/First Refusal (under Articles of Incorporation of
Target) executed by each Seller and by Target in form reasonably satisfactory to
Buyer;

 

(viii) Intentionally Omitted;

 

(ix) Buyer shall have received from counsel to Sellers an opinion in form and
substance as set forth in Exhibit J attached hereto ("Target's and Sellers'
Counsel Opinion Letter"), addressed to Buyerand on which Buyer's Lender shall be
entitled to rely, and dated as of the Closing Date;

 

(x) Sellers shall have delivered to Buyer copies of the certificates of
incorporation or organization of Target, certified on or soon before the Closing
Date by the Secretary of State (or comparable officer) of the jurisdiction of
Target's incorporation;

 

(xi) Sellers shall have delivered to Buyer copies of the certificate of good
standing of Target, issued on or soon before the Closing Date by the Secretary
of State (or comparable officer) of the jurisdiction of Target's organization
and of each jurisdiction in which Target is qualified to do business;

 

 33

 

 

(xii) Sellers shall have delivered to Buyer a Subordination Agreement between
Sellers and Buyer's Lender (as defined below) that is in form and substance
satisfactory to Buyer's Lender; and

 

(xiii) Sellers shall have delivered to Buyer a certificate of the secretary or
an assistant secretary of Target, dated the Closing Date, in form and substance
reasonably satisfactory to Buyer, as to: (i) the certificate of incorporation of
Target and any amendments to the certificate of incorporation of Target and any
amendments thereto;(ii) the bylaws of the Target, and if applicable of Sellers
(if a corporate entity); and (iii) any resolutions of the board of directors (or
a duly authorized committee thereof) of the Target, relating to this Agreement
and the transactions contemplated hereby.

 

(b) Closing Deliveries of Buyer.

 

(i) Buyer shall have entered into the Sellers' Release and such release shall be
in full force and effect as of the Closing:

 

(ii) Intentionally Omitted;

 

(iii) Intentionally Omitted;

 

(iv) Buyer shall have entered into the Sellers' Non-Competition Agreement, and
such agreement shall be in full force and effect as of the Closing;

 

(v) Buyer shall have entered into Mr. Timothy's Agreement and such agreement
shall be in full force and effect as of the Closing;

 

(vi) Intentionally Omitted;

 

(vii) Intentionally Omitted;

 

(viii) Buyer shall have obtained from Buyer's Lender a consent to the
transactions contemplated by this Agreement including (A) the acquisition of
Target, (B) the issuance of the Promissory Notes by Buyer; and

 

(ix) Buyer shall have delivered to Sellers a certificate of the secretary or an
assistant secretary of Buyer, dated the Closing Date, in form and substance
reasonably satisfactory to Sellers, as to: (i) the certificate of incorporation
of Buyer and any amendments to the certificate of incorporation of Buyer; (ii)
the bylaws of the Buyer; and (iii) authorizing resolutions of the board of
directors (or a duly authorized committee thereof) of the Buyer relating to this
Agreement and the transactions contemplated hereby.

 

§8. Remedies for Breaches of This Agreement.

 

(a) Survival of Representations and Warranties.The "Fundamental Representations
and Warranties" of Sellers are the representations and warranties of Sellers in
§3 and the following representations and warranties of Sellers in §4: 4(a)
Organization, Qualification and Corporate Power; 4(b) Capitalization; 4(c)
Non-contravention; 4(e) Title to Assets; 4(i) Undisclosed Liabilities; 4(k) Tax
Matters; and 4(x) Employee Benefits. All representations and warranties of
Sellers that are not Fundamental Representations and Warranties are the
"Non-Fundamental Representations and Warranties." All representations and
warranties of the Parties survive the Closing. The Non-Fundamental
Representations and Warranties shall survive the Closing hereunder (even if
Buyer knew or had reason to know of any misrepresentation or breach of warranty
at the time of Closing) and continue in full force and effect until the date
that is twenty-four (24) months after the Closing. All of the other
representations and warranties of the Parties contained in this Agreement
(including the other representations and warranties of the Parties contained in
§3 and §4A above and the Fundamental Representations and Warranties) shall
survive the Closing (even if the damaged Party knew or had reason to know of any
misrepresentation or breach of warranty at the time of Closing) and continue in
full force and effect until that date that is thirty (30) days following the
expiration of the applicable statutes of limitations (including any extension
thereto). The covenants and agreements of the Parties shall survive the Closing
in accordance with their terms.

 

 34

 

 

(b) Indemnification Provisions for Buyer's Benefit. In the event Sellers breach
any of Sellers' representations, warranties, covenants or agreements contained
herein, and provided that Buyer makes a written claim for indemnification
against Sellers pursuant to §11(h) below within the applicable survival period
(in §8(a) above) if there is an applicable survival period pursuant to §8(a)
above), then Sellers shall be obligated to indemnify Buyer from and against the
entirety of any Adverse Consequences Buyer may suffer (including any Adverse
Consequences Buyer or Target may suffer after the end of any applicable survival
period) resulting from, arising out of, relating to, in the nature of, or caused
by the breach. If Sellers fail to indemnify Buyer after Buyer delivers written
notice as provided above, then Buyer shall have the right to bring an action for
indemnification for such claim including after the end of the applicable
survival period. Provided, however:

 

(i) Sellers shall not have any obligation to indemnify Buyer for a breach of any
of the Non-Fundamental Representations and Warranties of Sellers until Buyer (or
Target) has suffered Adverse Consequences by reason of all such breaches (of
those Non-Fundamental Representations and Warranties), in the aggregate, in
excess of Forty Thousand Dollars ($40,000) ("Indemnification Basket") after
which point Sellers will be obligated to indemnify Buyer from and against all
such Adverse Consequences as provided herein in their totality including the
Indemnification Basket amount (i.e.; as incurred, from and including the "first
dollar" of such consequences);

 

(ii) (A) there will be an aggregate ceiling ("Indemnification Ceiling") on the
obligation of Sellers to indemnify Buyer from and against Adverse Consequences
resulting from, arising out of, relating to, in the nature of, or caused by
breaches of any of the Non-Fundamental Representations and Warranties of
Sellers; such Indemnification Ceiling being an amount equal to Four Million
Dollars ($4,000,000); and

 

(c) Intentionally Omitted.

 

(d) Indemnification Provisions for Sellers' Benefit. In the event Buyer breaches
any of its representations, warranties, covenants or agreements contained
herein, and provided that Sellers make a written claim for indemnification
against Buyer pursuant to §11(h) below within the applicable survival period (in
§8(a) above) then Buyer agrees to indemnify Sellers from and against the
entirety of any Adverse Consequences suffered (including any Adverse
Consequences suffered after the end of any applicable survival period) resulting
from, arising out of, relating to, in the nature of, or caused by the breach. If
Buyer fails to indemnify Sellers after Sellers deliver written notice as
provided above, then Sellers shall have the right to bring an action for
indemnification for such claim including after the end of the applicable
survival period.

 

 35

 

 

(e) Indemnification Deductible Effect on 'Materiality' Qualifiers. For purposes
of this §8, any breach of or inaccuracy in any representation or warranty (other
than the first sentence of §4(h)), to the extent an particular indemnification
obligation is subject to the Indemnification Basket above, shall be determined
without regard to any materiality, Material Adverse Effect or other similar
qualification contained in or otherwise applicable to such representation or
warranty.

 

(f)Matters Involving Third-Parties.

 

(i) If any third-party notifies either Party (the "Indemnified Party") with
respect to any matter (a "Third-Party Claim") that may give rise to a claim for
indemnification against the other Party (the "Indemnifying Party") under this §8
or under §8A, then the Indemnified Party shall promptly notify the Indemnifying
Party thereof in writing; provided, however, that no delay on the part of the
Indemnified Party in notifying the Indemnifying Party shall relieve the
Indemnifying Party from any obligation hereunder unless (and then solely to the
extent) the Indemnifying Party is thereby prejudiced.

 

(ii) Any Indemnifying Party will have the right to assume the defense of the
Third-Party Claim with counsel of his, her, or its choice reasonably
satisfactory to the Indemnified Party at any time within fifteen (15) days after
the Indemnified Party has given notice of the Third-Party Claim; provided,
however, that the Indemnifying Party must conduct the defense of the Third-Party
Claim actively and diligently thereafter in order to preserve the rights and
defenses of the Indemnified Party; and provided further that the Indemnified
Party may retain separate co-counsel at its sole cost and expense and
participate in the defense of the Third-Party Claim.

 

(iii) So long as the Indemnifying Party has assumed, and is conducting the
defense of the Third-Party Claim in accordance with §8(f)(ii) above, (A) the
Indemnifying Party will not consent to the entry of any judgment on or enter
into any settlement with respect to the Third-Party Claim without the prior
written consent of the Indemnified Party (not to be unreasonably withheld)
unless the judgment or proposed settlement involves only the payment of money
damages by the Indemnifying Party and does not impose an injunction or other
equitable relief upon the Indemnified Party, and (B) the Indemnified Party will
not consent to the entry of any judgment on or enter into any settlement with
respect to the Third-Party Claim without the prior written consent of the
Indemnifying Party (not to be unreasonably withheld).

 

(iv) In the event that the Indemnifying Party does not assume and conduct the
defense of the Third-Party Claim in accordance with §8(f)(ii) above, however,
(A) the Indemnified Party may defend against, and consent to the entry of any
judgment on or enter into any settlement with respect to, the Third-Party Claim
in any manner he, her, or it may reasonably deem appropriate (and the
Indemnified Party need not consult with, or obtain any consent from, any
Indemnifying Party in connection therewith), and (B) the Indemnifying Party will
remain responsible for any Adverse Consequences the Indemnified Party may suffer
resulting from, arising out of, relating to, in the nature of, or caused by the
Third-Party Claim to the fullest extent provided in this §8.

 

 36

 

 

(g) Determination of Adverse Consequences. Indemnification payments under this
§8, and §8A and §9 (below), shall be paid by the Indemnifying Party without
reduction for any Tax Benefits available to the Indemnified Party. The Parties
shall make appropriate adjustments for insurance coverage and take into account
the time cost of money (using the Applicable Rate as the discount rate) in
determining Adverse Consequences for purposes of this §8 and §8A. All
indemnification payments under this §8, §8A and §9 (below) shall be deemed
adjustments to the Purchase Price.

 

(h) Exclusive Remedy.Buyer and Sellers acknowledge and agree that the
indemnification provisions in this §8, and in §8A and §9 (below), shall be the
exclusive remedy of Buyer and Sellers against each other with respect to
breaches of the representations, warranties, covenants and agreements contained
in this Agreement and the transactions contemplated by this Agreement, with the
exception of claims for fraud and the right to equitable relief such as specific
performance or injunctive relief. Sellers hereby agree that they will not make
any claim for indemnification against Target or Buyer by reason of the fact that
they were a director, officer, employee, or agent of any such entity or was
serving at the request of any such entity as a partner, trustee, director,
officer, employee, or agent of another entity (whether such claim is for
judgments, damages, penalties, fines, costs, amounts paid in settlement, losses,
expenses, or otherwise and whether such claim is pursuant to any statute,
charter document, bylaw, agreement, or otherwise) with respect to any action,
suit, proceeding, complaint, claim, or demand brought by Buyer against Sellers
(whether such action, suit, proceeding, complaint, claim, or demand is pursuant
to this Agreement, applicable law, or otherwise).

 

§8A. Special Indemnities. (a) Sellers shall indemnify Buyer from and against the
entirety of any Adverse Consequences (affecting Buyer or Target) resulting from,
arising out of or relating to any and all liabilities of Target (whether known
or unknown, whether asserted or unasserted, whether absolute or contingent,
whether accrued or unaccrued, whether liquidated or unliquidated, and whether
due or to become due, including any liability for taxes), except for: (i)
liabilities included and described in the Most Recent Balance Sheet (rather than
in any notes thereto); (ii) those liabilities that have arisen since the Most
Recent Fiscal Month End in the Ordinary Course of Business; and (iii) those
liabilities set forth with specificity on Disclosure Schedule 4(i). (b) Sellers
shall indemnify Buyer from and against the entirety of any Adverse Consequences
(affecting Buyer or Target) resulting from, arising out of or relating to Target
listing, depicting or representing on its Tax Returns and/or Financial
Statements that Target owned real property that was actually not owned by
Target.

 

§9. Tax Matters.

 

The following provisions shall govern the allocation of responsibility as
between Buyer and Sellers for certain Tax matters following the Closing Date:

 

(a)Tax Indemnification. Sellers shall indemnify Target and Buyer and hold them
harmless from and against: (i) all Income and other Taxes (or the non-payment
thereof) of Target 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 ("Pre-Closing Tax Period"); (ii)
any and all Income and other Taxes of any member of an affiliated, consolidated,
combined, or unitary group of which Target (or any predecessor) is or was a
member on or prior to the Closing Date, including pursuant to Treasury
Regulation §1.1502-6 or any analogous or similar state, local, or non-U.S. law
or regulation; and (iii) any and all Income and other Taxes of any person (other
than Target) imposed on Target as a transferee or successor, by contract or
pursuant to any law, rule or regulation, which Taxes relate to an event or
transaction occurring before the Closing.

 

 37

 

 

If Taxes were reserved for on the face of the Most Recent Balance Sheet as
current liabilities that reduced the Purchase Price under §2(a)(iii) (above),
then for purposes of the indemnification under above clauses (i), (ii) and
(iii), the Sellers shall be credited with the applicable reduction in Purchase
Price resulting therefrom to the extent that would result in a duplication in
payment by Sellers. For example purposes only, if there were a current liability
for Taxes on the Most Recent Balance Sheet of $10,000, which reduced the
Purchase Price under §2(a)(iii); then Sellers shall be credited with paying that
through the reduction in Purchase Price.

 

The foregoing indemnification obligation includes without limitation Sellers
indemnifying Buyer against and to the extent of any liability of Target arising
(x) because of Target's misclassification of employees as Form 1099 'independent
contractors,' (y) failing to withhold or pay any Taxes relating to employees by
Target, or (z) relating to any persons engaged (directly or indirectly) by the
Target as Form 1099 'independent contractors' but for which W-2 filings and Tax
treatment by Target for classification as an 'employee' and applicable Tax
payments and withholdings by the Target as employer was, or is subsequently
determined to be, required by law. Sellers shall reimburse Buyer for any Taxes
of Target that are the responsibility of Sellers pursuant to this §9(a) within
fifteen (15) Business Days after payment of such Taxes by Buyer or Target.

 

(b) Straddle Period.In the case of any taxable period that includes (but does
not end on) the Closing Date (a "Straddle Period"), the amount of any Income
Taxes for the Pre-Closing Tax Period shall be determined based on an interim
closing of the books as of the close of business on the Closing Date (and for
such purpose, the taxable period of any partnership or other pass-through entity
in which Target holds a beneficial interest shall be deemed to terminate at such
time).

 

(c) Responsibility for Filing Tax Returns. Buyer shall prepare or cause to be
prepared and file or cause to be filed all Tax Returns for Target for all
periods ending on or prior to the Closing Date that are filed after the Closing
Date. Buyer shall permit Sellers to review and comment on each such Tax Return
described in the preceding sentence prior to filing and shall make all changes
as are reasonably requested by Seller. To the extent permitted by applicable
law, Sellers shall include any income, gain, loss, deduction or other tax items
for such periods on Sellers' Tax Return in a manner consistent with the Schedule
K-1 prepared by Target for such periods.

 

(d) Refunds and Tax Benefits. Any Income Tax refunds that are received by Buyer
or Target, and any amounts credited against Income Tax to which Buyer or Target
become entitled, that relate to Income Tax periods or portions thereof ending on
or before the Closing Date shall be for the account of Sellers, and Buyer shall
pay over to Sellers any such refund or the amount of any such credit within
fifteen (15) Business Days after receipt or entitlement thereto. In addition, to
the extent that a claim for refund or a proceeding results in a payment or
credit against Income Tax by a taxing authority to Buyer or Target of any amount
accrued on the Most Recent Balance Sheet, Buyer shall pay such amount to Sellers
within fifteen (15) Business Days after receipt or entitlement thereto.

 

 38

 

 

(e) Cooperation on Tax Matters.

 

(i) Buyer, Target and Sellers shall cooperate fully, as and to the extent
reasonably requested by the other Party, in connection with the filing of Tax
Returns and any audit, litigation or other proceeding with respect to Taxes.
Such cooperation shall include the retention and (upon the other Party's
request) the provision of records and information reasonably relevant to any
such audit, litigation, or other proceeding and making employees available on a
mutually convenient basis to provide additional information and explanation of
any material provided hereunder. Target, Sellers and Buyer agree: (A) to retain
all books and records with respect to Tax matters pertinent to Target relating
to any taxable period beginning before the Closing Date until expiration of the
statute of limitations (and, to the extent notified by Buyer or Sellers, any
extensions thereof) of the respective taxable periods, and to abide by all
record retention agreements entered into with any taxing authority; and (B) to
give the other Party reasonable written notice prior to transferring, destroying
or discarding any such books and records and, if the other party so requests,
Target or Sellers, as the case may be, shall allow the other Party to take
possession of such books and records.

 

(ii) Buyer and Sellers further agree, upon request, to use their best efforts to
obtain any certificate or other document from any governmental authority or any
other Person as may be necessary to mitigate, reduce or eliminate any Tax that
could be imposed (including with respect to the transactions contemplated
hereby).

 

(f) Intentionally Omitted.

 

(g) Certain Taxes and Fees. All transfer, documentary, sales, use, stamp,
registration and other such Taxes and fees (including any penalties and
interest) incurred in connection with this Agreement and the transactions
contemplated herein shall be paidby Sellers when due, and the Party required by
applicable law shall file all necessary Tax Returns and other documentation with
respect to all such transfer, documentary, sales, use, stamp, registration and
other Taxes and fees, and, if required by applicable law, the other
Party/Parties shall, and shall cause their Affiliates to, join in the execution
of any such Tax Returns and other documentation. The expense of such filings
shall be paid one-half by Buyer and one-half by Sellers.

 

§10. Section 338(h)(10) Election. At Buyer's option, Target and Sellers shall
join with Buyer in making an election under Section 338(h)(10) (and any
corresponding election under state and local tax law), in accordance with the
following provisions.

 

(a) Buyer's Payment to Sellers for Costs of Section 338(h)(10) Election as
Additional Consideration for Target Shares. As additional consideration for the
purchase of the Target Shares under this Agreement, and in consideration for the
agreement of Sellers to make the Section 338(h)(10) Election pursuant to
subsection (e) (below), Buyer shall pay to the Sellers such amount as is
required to cause Sellers to be in the same after-tax economic position with
respect to the sale of the Target Shares in which they would have been if the
Section 338(h)(10) Election not been made (the "Section 338 Price Increase").
The Parties agree that any payment among the Parties in respect of the amount of
Section 338 Price Increase (other than interest thereon) shall be deemed to be
an adjustment in the amount of the Purchase Price. Each payment by Buyer shall
be made when reasonably requested by Sellers, but Buyer is not required to make
the payment in advance of ten (10) days prior to the last date on which the
applicable Tax amount would be due after taking into account available
extensions. Sellers agree to file applicable extensions for the applicable Tax
Returns if reasonably requested in writing by Buyer.

 

 39

 

 

(b) Computation and Payment of Estimated Section 338 Price Increase. The Target
shall cause an accountant of Target's choice other than PricewaterhouseCoopers,
LLP (the "Accountant") to prepare and deliver to the Parties a computation of
the Section 338 Price Increase as soon as practical after December 31, 2015.

 

(c) Factors Included in the Section 338 Price Increase. The Section 338 Price
Increase shall take into account, without limitation, the following:

 

(i) all Taxes imposed on Sellers as a result of the making of the Section
338(h)(10) Election (including Income Taxes on the increases to the Purchase
Price required under this Section), to the extent such Taxes exceed the amount
of such Taxes that would have been imposed on the Sellers if the Section
338(h)(10) Election had not been made with respect to the acquisition of the
Target Shares hereunder; and

 

(ii) all other reasonable costs incurred by Sellers as a result of the Section
338(h)(10) Election, including reasonable costs incurred in connection with
review of documents, computations and tax filings or participation in
examinations related to the Section 338(h)(10) Election and its consequences
(including the computations required under this §10) (the "Incidental Costs")
subject to a maximum payment to the Accountant of Five Thousand Dollars
($5,000).

 

(d) Assumptions Controlling Computation of Section 338 Price Increase. The
Section 338 Price Increase shall be computed using the following assumptions:

 

(i) Sellers would have recognized long-term capital gain and no ordinary income
on the sale of the Target Shares, except for the amount reasonably allocated by
Buyerto the Non-Competition Agreement (and any payments would have been required
to be characterized as interest); and

 

(ii) Sellers have no other installment receivables arising in the year of the
Closing which are being reported on the installment method pursuant to Section
453 of the Code.

 

(e) Agreementto Make Section 338(h)(10) Election and File Consistently. Sellers
shall join with the Buyer in making an election under Section 338(h)(10) of the
Code (and any similar elections under state, local, or foreign tax law)
(collectively, a "Section 338(h)(10) Election") with respect to the purchase and
sale of the Target Shares hereunder, provided that the Buyer shall be obligated
to pay to Sellers an amount equal to the excess, if any, of Sellers' Section 338
Price Increase computed pursuant to subsection (g)(i) (below) over the estimated
Section 338 Price Increase paid pursuant to subsection (b) (above), on or before
the applicable dates required in this §10. For Income Tax purposes, Buyer and
Sellers will report the stock purchase as a purchase and sale, respectively, of
the assets of Target, where such treatment is the required consequence of the
Section 338(h)(10) Election. Sellers shall include any income, gain, loss,
deduction or other tax items for the taxable period ending on the Closing Date
on the Sellers' personal Tax Return in a manner consistent with the Form K-1s
(or their equivalent) furnished by Buyer to Sellers.

 

 40

 

 

(f) Preparation and Filing of Section 338 Forms.

 

(i) At least ninety (90) days prior to the latest permissible date for filing
the Section 338(h)(10) Election, Buyer shall prepare and submit to Sellers the
forms required to be filed to make such election (the "Section 338 Forms"). With
the submission of such Section 338 Forms, Buyer shall advise Sellers in writing
of those actions that Buyer considers necessary and appropriate for the Sellers
to take to effect, preserve, or perfect a timely Section 338(h)(10) Election.

 

(ii) On or prior to the thirtieth (30th) day after Sellers' receipt of any
Section 338 Form from Buyer, Sellers shall deliver to Buyer either (A) such
executed Section 338 Form and a consent to its filing, or (B) a written notice
specifying in reasonable detail all disputed items and the basis therefor. If
Buyer and Sellers have been unable to resolve all disputed matters relating to
the Section 338 Form within thirty (30) days after Buyer's receipt of the
written notice described in clause (B) above, any remaining disputed issues
shall be resolved pursuant to the following procedures:

 

Sellers and Buyer shall submit the issues remaining in dispute (the "Remaining
338 Disputed Issues") to PricewaterhouseCoopers, LLP independent public
accountants (the "Independent Accountants") for resolution applying the
principles, policies and practices referred to in this §10. If Remaining 338
Disputed Issues are submitted to the Independent Accountants for resolution (i)
Sellers and Buyer shall furnish or cause to be furnished to the Independent
Accountants such work papers and other documents and information relating to the
disputed issues as the Independent Accountants may request and are available to
that party or its agents and shall be afforded the opportunity to present to the
Independent Accountants any materials relating to the disputed issues and to
discuss the issues with the Independent Accountants, (ii) the determination by
the Independent Accountants, as set forth in a notice to be delivered to both
Sellers and Buyer withinthirty (30)days of the submission to the Independent
Accountants of the Remaining 338 Disputed Issues, shall be final, binding and
conclusive on the parties and shall be used in the calculation of the Section
338 Price Increase, and (iii) fees and costs incurred for such Independent
Accountants as a result of such dispute shall be allocated between Buyer and
Sellers in proportion to the respective amounts of the difference between
Sellers' calculation of the Remaining 338 Disputed Issues and Buyer's
calculation of the Remaining 338 Disputed Issues (the "Total 338 Disputed
Amount") which are resolved against them. For example, if with respect to the
Remaining 338 Disputed Issues, Buyer calculates the Section 338 Price Increase
to be $100x, and Sellers calculate the Section 338 Price Increase to be $150x
(so that the Total 338 Disputed Amount is $50x); and the Independent Accountants
determine that Section 338 Price Increase is $140x ($10x is resolved against
Sellers, and $40x is resolved against Buyer), then the fees and expenses of the
Independent Accountants would be allocated eighty percent (80%) to Buyer (i.e.,
$40x/$50x) and twenty percent (20%) to Sellers (i.e., $10x/$50x).

 

(iii) Buyer will have the sole responsibility for assuring that the Section
338(h)(10) Election is validly and timely made. Sellers (to the extent so
advised by the Buyer pursuant to subsection (f)(i) (above)) and the Buyer shall
comply fully with all filing and other requirements necessary to effectuate such
Section 338(h)(10) Election on a timely basis and agree to cooperate in good
faith with each other in the preparation and timely filing of any Tax Returns
required to be filed in connection with the making of such Section 338(h)(10)
Election.

 

 41

 

 

(iv) Sellers and Buyer shall use their best efforts to mutually agree upon the
initial determination and allocation among the assets of Target of the
"aggregate deemed sale price" and "adjusted grossed up basis" (within the
meaning of Treas. Regs. Sections 1.338-4 and 1.338-5 respectively), as soon as
practicable after December 31, 2015. Such allocation shall be made in accordance
with Section 338 of the Code and the regulations thereunder. If Buyer and
Sellers are unable to agree upon such determination or allocation within such
time period, then such determination and allocation shall be made pursuant to
the same procedures set forth in Paragraph 3(c) of Appendix I, attached hereto.
When finally determined hereunder (whether by agreement or otherwise) such
allocation shall be binding upon each of Sellers and Buyer for all purposes
(including financial accounting purposes, financial and regulatory reporting
purposes and Tax purposes).

 

(g) Computation and Payment of Revised Section 338 Price Increase.

 

(i) Buyer promptly shall cause the Independent Accountants serving as arbiter to
prepare a recomputation of the Section 338 Price Increase upon receipt of
written notice from Sellers to Buyer that such a recomputation is necessary to
reflect either a change to the income recognized by reason of the Section
338(h)(10) Election (including by reason of a change in the Purchase Price) or a
redetermination by a taxing authority of the effect on Sellers of the Section
338(h)(10) Election that is inconsistent with the most recent computations of
the Section 338 Price Increase. Subsequent payments between the Parties as a
result of any subsequent adjustments to the Section 338 Price Increase amount
shall be made within five (5) business days after the date that a revised
computation of the Section 338 Price Increase is determined by the arbiter and
provided to the Parties.

 

(ii) In the case of any payment in respect of the Section 338 Price Increase
under this §10, Buyer shall pay with such Section 338 Price Increase payment the
interest on the amount payable at the rate of six percent (6%) per annum from
the Closing Date to the date of payment.

 

§11. Miscellaneous.

 

(a) Nature of Sellers' Obligations.

 

(i) The representations, warranties, and covenants in this Agreement are joint
and several obligations. This means that each Seller shall be responsible to the
extent provided in §8 above for the entirety of any Adverse Consequences Buyer
may suffer as a result of any breach thereof.

 

 42

 

 

(b) Press Releases and Public Announcements. None of the Sellers, the Target, or
any officer, employee, representative or agent of the Target, will issue any
press release or other public announcement regarding the proposed Agreement.
Sellers and Target shall use best efforts to cause Target's employees to not
disclose any information about the transaction or confidential GEE information
that is non-public or trade in Buyer's stock or disseminate insider information
unless approved in advance by Buyer's counsel in writing. Prior to Closing, no
clients or employees of either Party will be contacted by the other Party or
otherwise informed about a possible transaction unless mutually agreed upon by
the Parties. After Closing, no client or employee notifications will be made
unless approved in writing by the Buyer. Once Closing has occurred, only the
Buyer will make any announcement at its sole discretion. The Buyer will not
announce any transaction prior to Closing unless the Parties mutually agree to
such disclosure, or it is required to do so as determined by Buyer's counsel
because of SEC rules, regulations and interpretations.

 

(c) No Third-Party Beneficiaries. Except as provided in §8 above (as to Target),
this Agreement shall not confer any rights or remedies upon any Person other
than the Parties and their respective successors and permitted assigns.

 

(d) Entire Agreement. This Agreement (including the documents referred to
herein) constitutes the entire agreement among the Parties and supersedes any
prior understandings, agreements, or representations by or among the Parties,
written or oral, to the extent they relate in any way to the subject matter
hereof, subject to the following sentence. The non-disclosure agreement under
§11(b) and other obligations under this Agreement supplement, but do not
supercede, the non-disclosure obligations set forth in Paragraph 9 of that
certain Letter of Intent, dated November 9, 2015, executed Buyer and Sellers
agree to comply with that Paragraph 9 and cause their respective employees and
agents to comply with those provisions concerning how post-Closing public
announcements and disclosures shall be made.

 

(e) Succession and Assignment. This Agreement shall be binding upon and inure to
the benefit of the Parties named herein and their respective successors and
permitted assigns. No Party may assign either this Agreement or any of his, her,
or its rights, interests, or obligations hereunder without the prior written
approval of Buyer and Sellers; provided, however, that Buyer may: (i) assign any
or all of its rights and interests hereunder to one (1) or more of its
Affiliates; and (ii) designate one (1) or more of its Affiliates to perform its
obligations hereunder (in any or all of which cases Buyer nonetheless shall
remain responsible for the performance of all of its obligations hereunder).

 

(f) Counterparts. This Agreement may be executed in one (1) or more counterparts
(including by means of facsimile or email pdf document or signature pages), each
of which shall be deemed an original but all of which together will constitute
one and the same instrument.

 

(g) Headings. The section headings contained in this Agreement are inserted for
convenience only and shall not affect in any way the meaning or interpretation
of this Agreement.

 

 43

 

 

(h) Notices.All notices, requests, demands, claims, and other communications
hereunder shall be in writing. Any notice, request, demand, claim, or other
communication hereunder shall be deemed duly given: (i) when delivered
personally to the recipient; (ii) one (1) Business Day after being sent to the
recipient by reputable overnight courier service (charges prepaid); (iii) one
(1) Business Day after being sent to the recipient by facsimile transmission or
electronic mail; or (iv) four (4) Business Days after being mailed to the
recipient by certified or registered mail, return receipt requested and postage
prepaid, and addressed to the intended recipient as set forth below:

 

If to Buyer:

General Employment Enterprises, Inc.
Attn: Derek Dewan, CEO
13500 Sutton Park Drive South, Suite 204
Jacksonville, Florida 32224

If to Sellers:

Enoch S. Timothy
7905 Vale Court
North Richland Hills, Texas 76182
&
Dorothy Timothy
7905 Vale Court
North Richland Hills, Texas 76182

 

With a Copy to:

Averitt & Alford, P.A.
Attn: Barry C. Averitt, Esq.
3010 South Third Street, Suite B
Jacksonville Beach, Florida 32250

With a Copy to:

D. Woodard Glenn, P.C.
Attn: D. Woodard Glenn, Esq.
2626 Cole Avenue, Suite 510
Dallas, Texas 75204

 

Any Party may change the address to which notices, requests, demands, claims,
and other communications hereunder are to be delivered by giving the other
Parties notice in the manner herein set forth.

 

(i) Governing Law, Jurisdiction, Venue and Service of Process. This Agreement
shall be governed by and construed in accordance with the domestic laws of the
State of Florida without giving effect to any choice or conflict of law
provision or rule (whether of the State of Florida or any other jurisdiction)
that would cause the application of the laws of any jurisdiction other than the
State of Florida. The Parties agree that the courts of the State of Florida and
the federal courts of the United States located in the State of Florida shall
have non-exclusive jurisdiction over any dispute, claim or controversy which may
arise involving this Agreement or its subject matter. The Parties waive any
defense of lack of personal jurisdiction that any of them may have otherwise had
to an action brought in Florida. The Parties agree that exclusive venue shall
lie solely in the appropriate federal or state court located in Duval County,
Florida; provided that this provision shall not prohibit a Party from commencing
an action in any court with appropriate jurisdiction for the purpose of
enforcing this choice of venue provision, and bringing such an action shall not
serve to waive such Party's rights under the choice of venue provision. The
Parties irrevocably submit and consent to the above jurisdiction and chosen
venue and except as provided herein waive any right they may have to bring or
maintain an action in any other jurisdiction or venue or seek any change of
jurisdiction or venue or that such venue is inconvenient. The Parties agree that
service of process in any proceeding in any such court may be effected by
U.S.P.S. certified mail at the addresses as stated herein.

 

(j) Amendments and Waivers. No amendment of any provision of this Agreement
shall be valid unless the same shall be in writing and signed by Buyer and
Sellers. No waiver by any Party of any provision of this Agreement or any
default, misrepresentation, or breach of warranty or covenant hereunder, whether
intentional or not, shall be valid unless the same shall be in writing and
signed by the Party making such waiver nor shall such waiver be deemed to extend
to any prior or subsequent default, misrepresentation, or breach of warranty or
covenant hereunder or affect in any way any rights arising by virtue of any
prior or subsequent such occurrence.

 

 44

 

 

(k) Severability. Any term or provision of this Agreement that is invalid or
unenforceable in any situation in any jurisdiction shall not affect the validity
or enforceability of the remaining terms and provisions hereof, or the validity
or enforceability of the offending term or provision in any other situation, or
in any other jurisdiction.

 

(l) Expenses. Each Buyer, Seller and Target will bear his, her, or its own costs
and expenses (including legal fees and expenses) incurred in connection with
this Agreement and the transactions contemplated hereby; provided, however, that
(except as provided in §9(g) above) Seller will also bear the cost and expenses
of Target (including all of Target's legal fees and expenses) in connection with
this Agreement and the transactions contemplated hereby in the event that the
transactions contemplated by this Agreement are consummated.

 

(m) Construction. The Parties have participated jointly in the negotiation and
drafting of this Agreement. In the event an ambiguity or question of intent or
interpretation arises, this Agreement shall be construed as if drafted jointly
by the Parties and no presumption or burden of proof shall arise favoring or
disfavoring any Party by virtue of the authorship of any of the provisions of
this Agreement. Any reference to any federal, state, local, or non-U.S. statute
or law shall be deemed also to refer to all rules and regulations promulgated
thereunder, unless the context requires otherwise. The word "including" shall
mean including without limitation.

 

(n) Incorporation of Exhibits, Appendices, and Schedules. The Exhibits,
Appendices, and Schedules (including without limitation the respective Parties'
Disclosure Schedules) identified in this Agreement are incorporated herein by
reference and made a part hereof.

 

(o) Governing Language. This Agreement has been negotiated and executed by the
Parties in English. In the event any translation of this Agreement is prepared
for convenience or any other purpose, the provisions of the English version
shall prevail.

 

[Signatures on the following page.]

 

 45

 

 

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

 

 

"BUYER"

"SELLERS"

 

 

    

General Employment Enterprises, Inc., an Illinois corporation

 

 

 

 

 

By: 

 

 

 

Print Name:  

 

 

Enoch S. Timothy, individually

 

Title:

 

 

 

 

 

 

 

 

 

 

 

 

Dorothy Timothy, individually

 

 

 46

 

 

EXHIBIT A – DEFINITIONS

 

"Accredited Investor" has the meaning set forth in Regulation D promulgated
under the Securities Act.

 

"Additional Earnout" has the meaning set forth in §2(a)(v).

 

"Adverse Consequences" means all actions, suits, proceedings, hearings,
investigations, charges, complaints, claims, demands, injunctions, judgments,
orders, decrees, rulings, damages, deficiencies, dues, penalties, fines, costs,
reasonable amounts paid in settlement, liabilities, obligations, taxes,
dimunition in value, liens, losses, expenses, and fees, including court costs
and reasonable attorneys' fees and expenses (including, as to Buyer, such
consequences to the extent suffered or realized by Target as acquired by Buyer).
For purposes of indemnification under this Agreement, the term Adverse
Consequences shall be determined without regard to any materiality, Material
Adverse Effect or other similar qualification.

 

"Affiliate" means: (i) in the case of an individual, the members of the
immediate family (including the individual's spouse and the parents, siblings
and children of the individual and/or the individual's spouse) and any Business
Entity that directly or indirectly, through one or more intermediaries,
controls, or is controlled by, or is under common control with, any of the
foregoing individuals; or (ii) in the case of a Business Entity, another
Business Entity or a person that directly or indirectly, through one or more
intermediaries, controls, or is controlled by, or is under common control with,
the Business Entity.

 

"Affiliated Group" means any affiliated group within the meaning of Code
§1504(a) or any similar group defined under a similar provision of state, local,
or non-U.S. law.

 

"Applicable Rate" means the corporate base rate of interest publicly announced
from time to time by Wells Fargo Bank, N.A.

 

"Basis" means any past or present fact, situation, circumstance, status,
condition, activity, practice, plan, occurrence, event, incident, action,
failure to act, or transaction that forms, or could form, the basis for any
specified consequence.

 

"Business" means the staffing, recruiting, employee placement services business,
and all other businesses, as or similar to that engaged in by Target, including
but not limited to the following: Information Technology ("IT") staff
augmentation and (IT) consulting services, including without limitation relating
to contract labor, contingent employment, staff augmentation, permanent
placement, temporary or contract to hire, retained search, and vendor management
systems and resource process outsourcing, and management service provider.

 

"Business Day" means any day, excluding Saturday, Sunday and any national or
Florida state holiday.

 

"Business Entity" means any corporation, partnership, limited liability company,
trust or other domestic or foreign form of business association or organization.

 

"Buyer" has the meaning set forth in the preface.

 

"Buyer's Disclosure Schedule/Schedules" has the meaning set forth in §3(b).

 

"Buyer's Lender" means ACF FINCO I, L.P.

 

"CERCLA" has the meaning set forth in §4(z)(iv).

 

 47

 

 

"Charter" means the Certificate of Incorporation, Articles of Incorporation or
Organization or other organizational document of a corporation or other Business
Entity, as amended and restated through the date hereof.

 

"Circle Lending Loan Amount" has the meaning set forth in §2(a)(i).

 

"Closing" has the meaning set forth in §1(c).

 

"Closing Cash Payment to Sellers" has the meaning set forth in §2(a)(i).

 

"Closing Date" has the meaning set forth in §1(c).

 

"Closing Net Working Capital" has the meaning set forth in Appendix I.

 

"COBRA" means the requirements of Part 6 of Subtitle B of Title I of ERISA and
Code §4980B and of any similar state law.

 

"Code" means the Internal Revenue Code of 1986, and the regulations thereunder,
published Internal Revenue Service rulings, and court decisions in respect
thereof, all as the same shall be in effect at the time.

 

"Compliance" or words of similar meaning shall mean adherence, in all material
respects, to any and all Legal Requirements.

 

"Confidential Information" means any information concerning the Business and
affairs of Target that is not already generally available to the public.

 

"Data Laws" means laws, regulations, guidelines, and rules in any jurisdiction
(federal, state, provincial, or local) applicable to data privacy, data
security, and/or personal information, as well as industry standards applicable
to Target.

 

"Disclosure Schedule" or "Disclosure Schedules" has the meaning set forth in §4.

 

"Earnout" has the meaning set forth in §2(a)(iv).

 

"Employee Benefit Plan" means any "employee benefit plan" (as such term is
defined in ERISA §3(3)) and any other material employee benefit plan, program or
arrangement of any kind, including without limitation, each pension, benefit,
retirement, supplemental retirement, compensation, employment, consulting,
profit-sharing, deferred compensation, incentive, bonus, performance award,
phantom equity, stock, stock-based, change in control, retention, severance,
salary continuation, accrued leave, sick leave, vacation, paid time off, health,
medical, disability, life insurance, accidental death and dismemberment
insurance, welfare, fringe benefit and other similar agreement, plan, contract,
policy, program, practice or arrangement (and any amendments thereto), in each
case whether or not reduced to writing and whether funded or unfunded, whether
or not tax-qualified and whether or not subject to ERISA, which is or has been
established, maintained, sponsored, contributed to, or required to be
contributed to by the Target for the benefit of any current or former employee,
officer, director, retiree, independent contractor or consultant of the Company
or any spouse or dependent of such individual, or under which the Company has or
may have any Liability, or with respect to which Buyer or any of its Affiliates
would reasonably be expected to have any liability, contingent or otherwise.

 

"Employee Pension Benefit Plan" has the meaning set forth in ERISA §3(2).

 

"Employee Welfare Benefit Plan" has the meaning set forth in ERISA §3(1).

 

 48

 

 

"Environmental, Health, and Safety Requirements" means all federal, state,
local, and non-U.S. statutes, regulations, ordinances, and similar provisions
having the force or effect of law, all judicial and administrative orders and
determinations, and all common law concerning public health and safety, worker
health and safety, pollution, or protection of the environment, including all
those relating to the presence, use, production, generation, handling,
transportation, treatment, storage, disposal, distribution, labeling, testing,
processing, discharge, release, threatened release, control, exposure to, or
cleanup of any hazardous materials, substances, wastes, chemical substances,
mixtures, pesticides, pollutants, contaminants, toxic chemicals, petroleum
products or byproducts, asbestos, polychlorinated biphenyls, noise, odor, mold,
or radiation.

 

"ERISA" means the Employee Retirement Income Security Act of 1974, and any
similar or successor federal statute, and the rules, regulations and
interpretations thereunder, all as the same shall be in effect at the time.

 

"ERISA Affiliate" means, for purposes of Title IV of ERISA, any trade or
business, whether or not incorporated, that together with Target, would be
deemed to be a "single employer" within the meaning of Section 4001 of ERISA,
and, for purposes of the Code, any member of any group that, together with
Target, is treated as a "single employer" for purposes of Section 414 of the
Code.

 

"Estoppel Certificates" has the meaning set forth in §7(a)(iii).

 

"Fiduciary" has the meaning set forth in ERISA §3(21).

 

"Financial Statements" has the meaning set forth in §4(g).

 

"Form 1099 Contractors" means any personnel who are "leased" to customers of
Target or whose services are provided to customers of Target including those
provided directly or through entities (e.g. corporations) owned by the
personnel, who are not treated as being W-2 employees of Target.

 

"Fundamental Representations and Warranties" has the meaning set forth in §8(a).

 

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

 

"GEE Common Stock" means the no par value common stock of GEE.

 

"GEE Shares" has the meaning set forth in §(2)(a)(v).

 

"Improvements" has the meaning set forth in §4(l)(iv).

 

"Incidental Costs" has the meaning set forth in §10(c)(ii)

 

"Income Tax" means any federal, state, local, or non-U.S. Income Tax, including
any interest, penalty, or addition thereto, whether disputed or not.

 

"Income Tax Return" means any return, declaration, report, claim for refund, or
information return or statement relating to Income Taxes, including any schedule
or attachment thereto, and including any amendment thereof.

 

"Indebtedness" means all obligations, contingent or otherwise, whether current
or long-term, which in accordance with GAAP would be classified upon the
obligor's balance sheet as liabilities (other than deferred taxes) and shall
also include capitalized leases, guaranties, endorsements (other than for
collection in the ordinary course of business) or other arrangements whereby
responsibility is assumed for the obligations of others, including any agreement
to purchase or otherwise acquire the obligations of others or any agreement,
contingent or otherwise, to furnish funds for the purchase of goods, supplies or
services for the purpose of payment of the obligations of others.

 

 49

 

 

"Indemnification Ceiling" has the meaning set forth in §8(b)(ii).

 

"Indemnification Basket" has the meaning set forth in §8(b)(i).

 

"Indemnified Party" has the meaning set forth in §8(f)(i).

 

"Indemnifying Party" has the meaning set forth in §8(f)(i).

 

"Independent Accountants" has the meaning set forth in §10(f)(ii).

 

"Intellectual Property" means all of the following in any jurisdiction
throughout the world: (a) all inventions (whether patentable or unpatentable and
whether or not reduced to practice), all improvements thereto, and all patents,
patent applications, and patent disclosures, together with all reissuances,
continuations, continuations-in-part, revisions, extensions, and reexaminations
thereof; (b) all trademarks, service marks, trade dress, logos, slogans, trade
names, corporate names, Internet domain names, and rights in telephone numbers,
together with all translations, adaptations, derivations, and combinations
thereof and including all goodwill associated therewith, and all applications,
registrations, and renewals in connection therewith; (c) all copyrightable
works, all copyrights, and all applications, registrations, and renewals in
connection therewith; (d) all mask works and all applications, registrations,
and renewals in connection therewith; (e) all trade secrets and confidential
business information (including ideas, research and development, know-how,
formulas, compositions, manufacturing and production processes and techniques,
technical data, designs, drawings, specifications, customer and supplier lists,
pricing and cost information, and business and marketing plans and proposals);
(f) all computer software (including source code, executable code, data,
databases, and related documentation); (g) all material advertising and
promotional materials; (h) all other proprietary rights; and (i) all copies and
tangible embodiments thereof (in whatever form or medium).

 

"Issue Price" has the meaning set forth in §2(a)(iv).

 

"Issued Shares" has the meaning set forth in §2(a)(iii).

 

"Key Employee" has the meaning set forth in §4(v)(i).

 

"Knowledge," "Know," "Known" or words of similar meaning shall mean, with
respect to Seller, the knowledge of Seller after reasonable investigation.

 

"Labor Laws" has the meaning set forth in §4(w)(iii).

 

"Law" means any federal, state and local laws, statutes, ordinances, rules,
regulations and the like, as well as common law, as applicable to the Business
or Target. The term "Law" includes, without limitation, the following statutes,
as amended, and in effect from time to time up to the Closing Date, and any
regulations promulgated pursuant thereto, and any state or local statutes,
ordinances, rules, regulations and the like addressing similar issues: the
Comprehensive Environmental Response, Compensation and Liability Act; the
Emergency Planning and Community Right-to-Know Act; the Hazardous Substances
Transportation Act; the Resource Conservation and Recovery Act (including but
not limited to Subtitle I relating to underground Storage Tanks); the Solid
Waste Disposal Act; the Clean Water Act; the Clean Air Act; the Toxic Substances
Control Act; and any similar state and local laws, and all amendments thereto,
or the by-laws, the rules, regulations and interpretations thereunder, all as
the same shall be in effect from time to time.

 

"Lease Consents"has the meaning set forth in §7(a)(ii).

 

"Leased Real Property" means all leasehold or subleasehold estates and other
rights to use or occupy any land, buildings, structures, improvements, fixtures,
or other interest in real property held by Target.

 

 50

 

 

"Leases" means all leases, subleases, licenses, concessions and other agreements
(written or oral), including all amendments, extensions, renewals, guaranties,
and other agreements with respect thereto, pursuant to which Target holds any
Leased Real Property, including the right to all security deposits and other
amounts and instruments held by or on behalf of Target thereunder.

 

"Lien" or "Liens" means, with respect to any asset, any mortgage, deed of trust,
pledge, hypothecation, assignment, security interest, lien, charge, restriction,
adverse claim by a third-party, title defect or encumbrance of any kind
(including any conditional sale or other title retention agreement, any lease in
the nature thereof, any assignment or other conveyance of any right to receive
income and any assignment of receivables with recourse against assignor), any
filing of any financing statement as debtor under the Uniform Commercial Code or
comparable law of any jurisdiction and any agreement to give or make any of the
foregoing.

 

"Material Adverse Effect" or "Material Adverse Change" means any effect or
change that would be materially adverse to, or would likely have a material
adverse impact or effect on: (a) the business, operations, assets, liabilities,
condition or prospects (financial or otherwise) of Target; (b) the ability of
the Sellers to perform its obligations under any of the Purchase Documents; (c)
the validity or enforceability of any of the Purchase Documents; or (d) the
rights and remedies of the Buyer under any of the Purchase Documents.

 

"Material Leased Real Property" means any Leased Property that is leased by
Target at an annual rent in excess of twelve thousand ($12,000).

 

"Most Recent Balance Sheet" means the balance sheet contained within the Most
Recent Financial Statements.

 

"Most Recent Financial Statements" has the meaning set forth in §4(g)(ii).

 

"Most Recent Fiscal Month End" has the meaning set forth in §4(g)(ii).

 

"Most Recent Fiscal Quarter End" has the meaning set forth in §4A(b)(iii).

 

"Most Recent Fiscal Year End" has the meaning set forth in §4(g)(i).

 

"Mr. Timothy's Agreement"has the meaning set forth in §7(a)(vi).

 

"Multiemployer Plan" has the meaning set forth in ERISA §3(37).

 

"Necessary Permits" or "Permits" mean all licenses, permits, franchises, orders,
approvals, accreditations, written waivers and other governmental and other
authorizations as are necessary in order to enable Target (prior to Closing) and
Buyer (after Closing) to continue to own, operate and conduct the Business as
currently conducted and proposed to be conducted and to occupy and use Target's
real and personal properties without incurring any material liability.

 

"Nonqualified Plan" has the meaning set forth in §4(x)(vi).

 

"Non-Fundamental Representations and Warranties" has the meaning set forth in
§8(a).

 

"NWC Reduction Amount" has the meaning set forth in §2(a)(iii).

 

"Ordinary Course of Business" means the ordinary course of business consistent
with past custom and practice (including with respect to quantity and
frequency).

 

"Owned Real Property" means all land, together with all buildings, structures,
improvements, and fixtures located thereon, and all easements and other rights
and interests appurtenant thereto, owned by Target and its Subsidiaries.

 

 51

 

 

"Party" or "Parties" has the meaning set forth in the preface.

 

"Permitted Distributions" means the distribution of the following prior to
Closing:

 

(i) the loan receivables owing from the Sellers up to $1,963,464 titled as "Home
Office Accounts" on the Most Recent Balance Sheet; and

 

(ii) domain names containing the name "Woodwind."

 

"Person" means an individual, a partnership, a corporation, a limited liability
company, an association, a joint stock company, a trust, a joint venture, an
unincorporated organization, any other business entity, or a governmental entity
(or any department, agency, or political subdivision thereof).

 

"Pre-Closing Tax Period" has the meaning set forth in §9(a).

 

"Predecessor" means any Person, if any, whose status and activities could give
rise to a claim against Buyer or Target as successor in interest to such Person.

 

"Prohibited Transactions" has the meaning set forth in ERISA §406 and Code
§4975.

 

"Promissory Notes" has the meaning set forth in §2(a)(ii).

 

"Public Reports" has the meaning set forth in §4A(b)(ii).

 

"Purchase Documents" means this Agreement and any other certificate, document,
instrument, stock power, or agreement executed in connection therewith, and any
assignment or other agreement related to the Stock or any purchased assets.

 

"Purchase Price" has the meaning set forth in §2.

 

"Real Property" means real property and real estate.

 

"Real Property Laws" has the meaning set forth in §4(l)(vi).

 

"Remaining 338 Disputed Issues" has the meaning set forth in §10(f)(ii).

 

"Rule 144" has the meaning set forth in §4A(a)(ii).

 

"Rule 144 Date" has the meaning set forth in §2(a)(iv).

 

"Rule 144 Sales" has the meaning set forth in §6(f).

 

"EDGAR System" means the Electronic Data Gathering, Analysis, and Retrieval
system, which performs automated collection, validation, indexing, acceptance,
and forwarding of submissions by companies and others who are required by law to
file forms with the U.S. Securities and Exchange Commission.

 

"SEC" means the Securities and Exchange Commission.

 

"Section 338 Price Increase" has the meaning set forth in §10(a).

 

"Section 338(h)(10) Election" has the meaning set forth in §10(e).

 

"Section 338 Forms"has the meaning set forth in §10(f)(i).

 

"Securities Act" means the Securities Act of 1933, as amended.

 

"Securities Exchange Act" means the Securities Exchange Act of 1934, as amended.

 

"Sellers," "individually, a Seller" or "each Seller" has the meaning set forth
in the preface.

 

 52

 

 

"Sellers' Disclosure Schedule/Schedules" has the meaning set forth in §3(a).

 

"Sellers' Non-Competition Agreement"has the meaning set forth in §6(e).

 

"Sellers' Release"has the meaning set forth in §7(a)(iv).

 

"Sellers' Representative" shall mean Enoch S. Timothy.

 

"Senior Indebtedness" means: (i) that(those) certain Loan and Security Agreement
between ACF (defined below) and Buyer (and certain others, collectively called
'Borrower' therein) dated September 27, 2013, as amended by a First Amendment
effective as of December 31, 2013, a Second Amendment effective as of December
3, 2014, a Third Amendment, Consent and Waiver effective as of April 1, 2015, a
Fourth Amendment, Consent and Waiver effective as of June 15, 2015, a Fifth
Amendment, Consent and Waiver dated as of August 1, 2015, a Sixth Amendment,
Consent and Waiver dated as of September 18, 2015, and a Seventh Amendment,
Consent and Waiver dated as of October ___, 2015, and an Eighth Amendment,
Consent and Waiver dated on of about the date hereof, and related Revolving
Credit Note by the named 'Borrower' to Senior Lender dated September 27, 2013,
and other related documents, agreements and instruments, as amended as of the
date hereof evidencing, creating, reflecting or securing a loan, debt or credit
arrangement obligations owed by Buyer to ACF FINCO I LP, a limited partnership
organized under the laws of the state of Delaware,successor-in-interest to
Keltic Financial Partners II, LP ("ACF"), together with any extensions,
modifications, renewals, amendments and refinancings thereof by the named lender
or any alternate lender, including without limitation any of those that
increases the amount of the indebtedness; (ii) any debt or loan obligation now
or hereafter existing (regardless of amount), entered into, borrowed from or
otherwise becoming owed (by Buyer) by agreement to an 'institutional lender'
(institutional lender means and includes a federally chartered 'national bank'
or 'national association,' a state chartered 'insurance company' or mutual
insurance company, or state chartered bank, an investment banking entity or
institution, or any other business entities which make commercial loans
regularly in their ordinary course of business); (iii) any debt or loan
obligation now or hereafter existing (regardless of amount), entered into,
borrowed from or otherwise becoming owed by agreement to any corporation,
limited liability company, limited partnership or other business entity
(including a mezzanine loan lender/creditor which may be a special purchase
entity formed for such purpose; (iv) any debt or loan obligation now or
hereafter existing, entered into or borrowed from any affiliate of Buyer
(including directly or indirectly from Derek Dewan or a director, shareholder of
Buyer or family member thereof or business (corporation, limited liability
company or other) entity or trust owned thereby, from and after the date hereof
in an aggregate principal amount not to exceed $15,000,000 (not including the
amounts of any other Senior Indebtedness); (v) any debt or loan obligation now
or hereafter existing, entered into, borrowed from or otherwise becoming owed by
agreement to any other lender to the extent such loan 'refinances' or provides
substitute or replacement financing of any of the foregoing lenders; and (vi)
(in each case) the respective successors and assigns of any such lender.

 

"Senior Lenders" means each of the applicable lenders as described in (i)
through (vi) of the definition for "Senior Indebtedness" (above).

 

"Stock Event" has the meaning set forth in §2(a)(iv).

 

"Straddle Period" has the meaning set forth in §9(b).

 

 53

 

 

"Subsidiary(ies)" means, with respect to any Person: (a) any corporation,
association or other entity of which at least a majority in interest of the
outstanding capital stock or other Equity Securities having by the terms thereof
voting power under ordinary circumstances to elect a majority of the directors,
managers or trustees thereof, irrespective of whether or not at the time capital
stock or other equity securities of any other class or classes of such
corporation, association or other entity shall have or might have power by
reason of the happening of any contingency, is at the time, directly or
indirectly, owned or controlled by such Person; or (b) any entity (other than a
corporation) in which such Person, one or more Subsidiaries of such Person, or
such Person and one or more Subsidiaries of such Person, directly or indirectly,
at the date of determination thereof, has at least majority ownership interest.
For purposes of this Agreement, a Subsidiary of Target shall include the direct
and indirect Subsidiaries of Target.

 

"SWDA"has the meaning set forth in §4(z)(iv).

 

"Systems" has the meaning set forth in §4(aa).

 

"Target" has the meaning set forth in the preface.

 

"Target's Assets" has the meaning set forth in §4(h)(iv).

 

"Target's and Sellers' Counsel Opinion Letter" has the meaning set forth in
§7(a)(ix).

 

"Target Share" or "Target Shares" means any share of the common stock, no par
value per share of Target.

 

"Target's Net Working Capital" has the meaning set forth in Appendix I.

 

"Tax" or "Taxes" means any federal, state, local, or non-U.S. income, gross
receipts, license, payroll, employment (including taxes under the Affordable
Care Act), excise, severance, stamp, occupation, premium, windfall profits,
environmental (including taxes under Code §59A), customs duties, capital stock,
franchise, profits, withholding, social security (or similar), unemployment,
disability, real property, personal property, sales, use, transfer,
registration, value added, alternative or add-on minimum, estimated, or other
tax of any kind whatsoever, including any interest, penalty, or addition
thereto, whether disputed or not.

 

"Tax Return" means any return, declaration, report, claim for refund, or
information return or statement relating to Taxes, including any schedule or
attachment thereto, and including any amendment thereof.

 

"Third-Party Claim" has the meaning set forth in §8(f)(i).

 

"Total 338 Disputed Amount" has the meaning set forth in §10(f)(ii).

 

"WARN Act" has the meaning set forth in §4(h)(xviii).

 

"Written," "in writing" or words of similar meaning shall include any written
materials, emails or any other forms of written documentation or communication
(including any electronic form).

 

 54

 

 

APPENDIX I

(NET WORKING CAPITAL ADJUSTMENT APPENDIX)

 

1. DEFINITIONS. For purposes of this Appendix, the following terms have the
meanings specified or referred to in this Paragraph 1:

 

Cash and Cash Equivalents means all cash and cash equivalents, including (i)
marketable securities and short term investments, and (ii) uncollected checks
issued to the Target and funds in transit to the Target (but only to the extent
not already otherwise included in Current Assets), but excluding (iii)
uncollected checks issued by the Target and funds in transit from the Target.

 

Closing Financial Statements has the meaning set forth in Paragraph 2 of this
Appendix.

 

Closing Net Working Capital means the Net Working Capital of the Target at
Closing.

 

Current Assets means the current assets of the Target determined in accordance
with GAAP applied on a basis consistent with the Target's audited historical
financial statements including the Most Recent Balance Sheet (provided that
where the Most Recent Balance Sheet is inconsistent with GAAP, GAAP shall
control), including but not limited to the following, in each case without
duplication: Cash and Cash Equivalents; accounts receivable, current portion of
notes receivable; prepaid expenses; deposits; COBRA receivables and accrued
revenue.

 

Current Liabilities means the current liabilities of the Target determined in
accordance with GAAP applied on a basis consistent with the Target's audited
historical financial statements including the Most Recent Balance Sheet
(provided that where the Most Recent Balance Sheet is inconsistent with GAAP,
GAAP shall control), including but not limited to the following, in each case
without duplication: the outstanding balance of line(s) of credit with bank(s)
and other lenders (if any), accounts payable, customer deposits, advances
payable, deferred revenue, deferred rent, royalty advances, sales taxes payable,
accrued federal tax withholding with respect to payroll, accrued FICA
withholding, accrued state tax withholding with respect to payroll, payroll
taxes payable, other employee plans payable, salaries and bonuses payable,
vacation expense payable, sales commissions payable and health care benefits
payable, placement agreements still binding upon Target and under the 'guarantee
period.' The parties agree that the entire amounts of the loans from Wells Fargo
Lending, L.P. shall be treated as current liabilities as shall any termination
fees.

 

Example:

 

 

Current Assets: $1,000,000

Minus:

Current Liabilities: $1,010,000

Net Working Capital as of Closing Date: ($10,000)

NWC Reduction Amount: $10,000

 

Current Portion means that portion of the projected payments to be received,
paid or expenses within the next twelve (12) months following Closing.

 

 55

 

 

GAAP has the meaning set forth in Exhibit A of the Agreement.

 

Independent Accountants has the meaning set forth in Paragraph 3(c) of this
Appendix.

 

Most Recent Balance Sheet has the meaning set forth in Exhibit A of the
Agreement.

 

Net Working Capital means the Target's Current Assets minus the Target's Current
Liabilities.

 

NWC Reduction Amount has the meaning given such term in §2(a)(iv) of the
Agreement.

 

Objection Statement has the meaning set forth in Paragraph 3(b) of this
Appendix.

 

Remaining Disputed Issues has the meaning set forth in Paragraph 3(c) of this
Appendix.

 

Total Disputed Amount has the meaning set forth in Paragraph 3(c) of this
Appendix.

 

2. BUYER'S CALCULATION OF CLOSING NET WORKING CAPITAL. Buyer shall prepare
financial statements of the Target as of the Closing Date in accordance with
GAAP (the "Closing Date Financial Statements"), and determine the Net Working
Capital as of the Closing Date (the "Closing Net Working Capital") in accordance
with GAAP. Buyer shall deliver the Closing Financial Statements and its
determination of the Closing Net Working Capital to Sellers within ninety (90)
days following the Closing Date.

 

3. NET WORKING CAPITAL DISPUTE RESOLUTION PROCEDURE.

 

a.

Within ten (10) days after written request for access by Sellers, Sellers shall
be given reasonable access during reasonable business hours to (and copies of)
all of Target's applicable books, records, and other documents, including work
papers, worksheets, notes, and schedules used in preparation of the Revenue
Statement, other than work papers that Buyer considers proprietary, such as
internal control documentation, engagement planning, time control and audit sign
off, and quality control work papers.

 b.

If within thirty (30) days following delivery of the Closing Net Working Capital
calculation Sellers have not given Buyer a written statement (the "Objection
Statement") of its objection as to the Closing Net Working Capital calculation
(which statement shall state the basis of Sellers' objections with reasonable
particularity), then the Closing Net Working Capital calculated by Buyer shall
be binding and conclusive on the parties and be used in computing the NWC
Reduction Amount (if any). Within three (3) business days after the calculation
of the Closing Net Working Capital becomes binding and conclusive on the
parties, if there is a NWC Reduction Amount, then Buyer is entitled to that
amount from the Sellers which shall be paid by Sellers in accordance with
§2(a)(iv) of the Agreement.

 

 56

 

 

c.

If, however, Sellers duly and timely give Buyer the Objection Statement, and if
Sellers and Buyer fail to resolve the issues outstanding with respect to the
Closing Financial Statements and the calculation of the Closing Net Working
Capital within thirty (30) days of Buyer's receipt of Sellers' Objection
Statement, Sellers and Buyer shall submit the issues remaining in dispute (the
"Remaining Disputed Issues") to PricewaterhouseCoopers, LLP, independent public
accountants, or such other accountants as are mutually agreed to by the parties
in writing (the "Independent Accountants") for resolution applying the
principles, policies and practices referred to in this Appendix. If Remaining
Disputed Issues are submitted to the Independent Accountants for resolution, (i)
Sellers and Buyer shall furnish or cause to be furnished to the Independent
Accountants such work papers and other documents and information relating to the
disputed issues as the Independent Accountants may request and are available to
that party or its agents and shall be afforded the opportunity to present to the
Independent Accountants any material relating to the disputed issues and to
discuss the issues with the Independent Accountants; (ii) the determination by
the Independent Accountants, as set forth in a notice to be delivered to both
Sellers and Buyer within sixty (60) days of the submission to the Independent
Accountants of the Remaining Disputed Issues, shall be final, binding and
conclusive on the parties and shall be used in the calculation of the Closing
Net Working Capital; and (iii) fees and costs incurred for such Independent
Accountants as a result of such dispute shall be allocated between Buyer and
Sellers in proportion to the respective amounts of the difference between
Sellers' calculation of the Remaining Disputed Issues and Buyer's calculation of
the Remaining Disputed Issues (the "Total Disputed Amount") which are resolved
against them. For example, if with respect to the Remaining Disputed Issues,
Buyer calculates Closing Net Working Capital to be $100x, and Sellers calculate
Closing Net Working Capital to be $150x (so that the Total Disputed Amount is
$50x); and the Independent Accountants determine that Closing Net Working
Capital is $140x ($10x is resolved against Sellers, and $40x is resolved against
Buyer), then the fees and expenses of the Independent Accountants would be
allocated 80% to Buyer (i.e., $40x/$50x) and 20% (i.e., $10x/$50x) to Sellers.

 

4. NO ACTIONS WHICH DISTORT NET WORKING CAPITAL. Sellers covenants that Sellers
did not take any action or engage in any extraordinary transaction between June
30, 2015 and the date of Closing for purposes of distorting Target's Net Working
Capital and the calculation of the NWC Reduction Amount (except for matters for
which Target has received specific written approval from Buyer).

 

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APPENDIX II

(EARNOUT APPENDIX)

 

1. DEFINITIONS. For purposes of this Appendix II, the following terms have the
meanings specified or referred to in this Paragraph 1:

 

"Adjusted EBITDA" – EBITDA, adjusted as described in the last sentence of this
definition and by excluding the effects of any of the following to the extent
otherwise included in consolidated earnings from operations:

 

(a)

gains, losses or profits realized by the Target from the sale of assets other
than in the Ordinary Course of Business and any "extraordinary items" of gain or
loss (as determined in accordance with GAAP);

(b)

any management fees, general overhead expenses, or other intercompany charges,
of whatever kind or nature, charged by Buyer to the Target, except that Buyer
may charge interest on any loans or advances made by Buyer or its Affiliates to
the Target in connection with their Business operations at a rate of 5% per
annum; and

(c)

any legal or accounting fees and expenses incurred in connection with the
Agreement.

 

In determining net income from operations, the purchase and sales prices of
goods and services sold by the Target to Buyer or its Affiliates, or purchased
by the Target from Buyer or its Affiliates, shall be adjusted to reflect the
amounts that the Target would have received or paid if dealing with an
independent party in an arm's-length commercial transaction.

 

"Affiliate" – with respect to any entity, an entity that directly or indirectly
controls or is controlled by, or is under common control with, as the case may
be, the relevant entity.

 

"Computation Notice" – as defined in Paragraph 4(a).

 

"Earnout Amount" – Excess EBITDA.

 

"Earnout Payment" – as defined in Paragraph 4(a).

 

"Earnout Period" – the fiscal year beginning January 1, 2016 and ending December
31, 2016.

 

"EBITDA" – Net income derived from earnings from operations of the Target, as
determined in accordance with GAAP as consistently applied by the Target, plus
interest, taxes, depreciation, and amortization of the Target (that was deducted
to reach net income), in each case, as determined in accordance with GAAP as
consistently applied by the Target.

 

"EP Issued Shares" – as defined in Paragraph 6.

 

"EP Issue Price" – as defined in Paragraph 6.

 

"EP Rule 144 Rule Date" – as defined in Paragraph 6.

 

"Excess EBITDA" – an amount equal to (a) Adjusted EBITDA for the Earnout Period,
less (b) the Threshold Amount.

 

 58

 

 

"Income Statement" – as defined in Paragraph 5(a).

 

"Independent Accountants" – as defined in Paragraph 5(d).

 

"Minimum Revenue Target" – An amount equal to 75% of the total revenue recorded
for calendar year 2015. The revenues for both 2015 and the Earnout Period shall
be determined on an accrual basis of accounting in accordance with GAAP
(including an appropriate allowance for doubtful accounts receivable).

 

"Objection Notice" – as defined in Paragraph 5(c).

 

"Payment Rate" – 500%.

 

"Retention Bonuses" – means any bonus payments made to the following employees
of Target on or before February 1, 2017, but not exceeding $275,000 in the
aggregate:

 

Nathan Stilwill

Greg Henderson

Nicole Haesly

Sarah Hahn

James Hess

Betsy Bohman

Marlon Monsalve

Lauren Chatfield

TaMara Battles

Andre Hardowin

Tiffany Able

David Gillian

Joshua Fisher

Sergio Gonzales

Rex Simmons

Victor Sturm

Jim Brown

Justin James

Carol Martin

 

 

"Sellers' Representative" – Enoch S. Timothy.

 

"Threshold Amount" – the amount of $650,000.

 

2. EXAMPLES. Examples of calculation of the Earnout Payment are attached to this
Appendix II as the "Earnout Examples Exhibit."

 

3. CERTAIN OPERATING GUIDELINES.

 

(a)

Buyer agrees that, at all times prior to the expiration of the Earnout Period,
the Target shall remain a separate legal entity or a separate reporting unit
with accounting and financial statements separate from those of Buyer and its
other businesses.

(b)

Buyer shall not intentionally take an action for purposes of preventing the
Target from achieving the EBITDA necessary for the Earnout Payment.

(c)

Sellers shall promptly notify Buyer in writing if Sellers discover that Buyer
has failed to comply with any of the above operating guidelines in this
Paragraph 3. If such failure is capable of being cured, Buyer shall have a
period of ten (10) days to cure.

 

 59

 

 

4. EARNOUT PAYMENT.

 

(a)

If the Minimum Revenue Target is attained for the Earnout Period, the Earnout
Payment equals an amount equal to (i) the Earnout Amount, multiplied by (ii) the
Payment Rate, but only if the Earnout Amount is a positive number. If the
Earnout Amount is a negative number, no Earnout Payment shall be made.

(b)

If the Minimum Revenue Target is not attained for the Earnout Period, then the
Earnout Payment is reduced to be fifty percent (50%) of what it would have been
under Paragraph 4(a) above.

(c)

The final Earnout Payment, after any other reductions, is reduced for any
Retention Bonuses.

(d)

The Earnout Payment will be paid by Buyer within sixty (60) days after the final
determination of the Earnout Amount. Notwithstanding any provision in this
Appendix II to the contrary, in no event will the Earnout Payment exceed
$750,000. The Earnout Payment will be allocated between the Sellers as set forth
on Exhibit B to the Agreement.

(e)

The Earnout Payment shall be payable at the option of Buyer as follows: (i) in
immediately available funds via wire transfer to a bank account designated by
Sellers; (ii) in issued shares of GEE Common Stock which shall be valued as set
forth in Paragraph 6 below; or (iii) any combination of the foregoing clauses
(i) and (ii).

(f)

Sellers shall not be entitled to any interest on the Earnout Payment under this
Appendix II.

(g)

Upon notice to Sellers' Representative specifying in reasonable detail the basis
therefor, Buyer may set off any amount to which it claims to be entitled from
any Seller under the Agreement, or otherwise, against amounts otherwise payable
under this Appendix II. The exercise of such right of setoff by Buyer in good
faith, whether or not ultimately determined to be justified, will not constitute
a default under this Appendix II, regardless of whether any Seller disputes such
setoff claim, or whether such setoff claim is for a contingent or unliquidated
amount. Neither the exercise of, nor the failure to exercise, such right of
setoff will constitute an election of remedies or limit Buyer in any manner in
the enforcement of any other remedies that may be available to it.

 

5. PROCEDURE.

 

(a)

Buyer shall maintain separate accounting books and records for the Target during
the Earnout Period. Promptly following the end of the Earnout Period, Buyer
shall prepare (i) a consolidated income statement of the Target for the Earnout
Period, which shall be prepared in accordance with GAAP (the "Income
Statement"), and (ii) a computation of EBITDA and Adjusted EBITDA, showing
separately each of the adjustments made to EBITDA to arrive at Adjusted EBITDA
and a computation of revenue for 2015 and for the Earnout Period (the
"Computation Notice") in the Computation Notice and (iii. Buyer shall deliver
the Income Statement and the Computation Notice to Sellers' Representative
within sixty (60) days following the end of the Earnout Period.

 

 60

 

 

(b)

Upon execution of such access letters as may be reasonably required by Buyer,
Sellers and/or Sellers' Representative shall be given reasonable access during
reasonable business hours to (and copies of) all of Buyer's and its
representatives' books, records, and other documents, including work papers,
worksheets, notes, and schedules used in preparation of the Income Statement and
its computation of EBITDA, Adjusted EBITDA and revenues in the Computation
Notice for the purpose of reviewing the Income Statement and the Computation
Notice, in each case, other than work papers that Buyer considers proprietary,
such as internal control documentation, engagement planning, time control and
audit sign off, and quality control work papers.

 (c)

If, within sixty (60) days following delivery of the Income Statement and the
Computation Notice to Sellers' Representative, Sellers' Representative has not
given Buyer notice of an objection as to any amounts set forth on the Income
Statement or the computation of EBITDA, Adjusted EBITDA and revenues in the
Computation Notice (which notice shall state in reasonable detail the basis of
Sellers' Representative's objection) (the "Objection Notice"), the Earnout
Amount as computed by Buyer will be final, binding, and conclusive on the
parties.

 (d)

If Sellers' Representative timely gives Buyer an Objection Notice, and if
Sellers' Representative and Buyer fail to resolve the issues raised in the
Objection Notice within thirty (30) days after giving the Objection Notice,
Sellers' Representative and Buyer shall submit the issues remaining in dispute
for resolution to PricewaterhouseCoopers, LLP, independent public accountants,
or such other accountants as are mutually agreed to by the parties in writing)
(the "Independent Accountants").

 (e)

The parties shall negotiate in good faith in order to seek agreement on the
procedures to be followed by the Independent Accountants, including procedures
with regard to the presentation of evidence. If the parties are unable to agree
upon procedures within ten (10) days of the submission to the Independent
Accountants, the Independent Accountants shall establish such procedures giving
due regard to the intention of the parties to resolve disputes as promptly,
efficiently, and inexpensively as possible, which procedures may, but need not,
be those proposed by either Buyer or Sellers' Representative. The Independent
Accountants shall be directed to resolve only those issues in dispute and render
a written report on their resolution of disputed issues with respect to the
Income Statement and the Computation Notice as promptly as practicable, but no
later than sixty (60) days after the date on which the Independent Accountants
are engaged. The determination of Earnout Amount by the Independent Accountants
will be based solely on written submissions of Buyer, on the one hand, and
Sellers' Representative, on the other hand, and will not involve independent
review. Any determination by the Independent Accountants will not be outside the
range established by the amounts in (i) the Income Statement and the computation
of EBITDA and Adjusted EBITDA in the Computation Notice proposed by Buyer, and
(ii) Sellers' Representative's proposed adjustments thereto. Such determination
will be final, binding, and conclusive on the parties.

 

 61

 

 

(f)

If the computation of Earnout Amount is submitted to the Independent Accountants
for resolution:

 

(i)

Sellers' Representative and Buyer shall execute any agreement required by the
Independent Accountants to accept their engagement pursuant to this Paragraph 5;

 (ii)

Sellers' Representative and Buyer shall promptly furnish or cause to be
furnished to the Independent Accountants such work papers and other documents
and information relating to the disputed issues as the Independent Accountants
may request and are available to that party or its accountants or other
representatives, and shall be afforded the opportunity to present to the
Independent Accountants, with a copy to the other party, any other written
material relating to the disputed issues;

 (iii)

the determination by the Independent Accountants, as set forth in a report to be
delivered by the Independent Accountants to both Sellers' Representative and
Buyer, will include all the changes in the Income Statement and the computation
of EBITDA and Adjusted EBITDA in the Computation Notice required as a result of
the determination made by the Independent Accountants; and

 (iv)

Sellers and Buyer shall each bear one-half of the fees and costs of the
Independent Accountants; provided, however, that the engagement agreement
referred to in clause (i) above may require the parties to be bound jointly and
severally to the Independent Accountants for those fees and costs, and in the
event Sellers or Buyer pay to the Independent Accountants any amount in excess
of one-half of the fees and costs of their engagement, the other party(ies)
agree(s) to reimburse Sellers or Buyer, as applicable, upon demand to the extent
required to equalize the payments made by Sellers and Buyer with respect to the
fees and costs of the Independent Accountants.

 

6. VALUATION OF GEE SHARES ISSUED AS PART OF EARNOUT PAYMENT.The number of
shares issued as part of the Earnout Payment (the "EP Issued Shares") will be
based on the mean average closing price of shares of GEE Common Stock during the
twenty (20) trading days immediately preceding December 31, 2016 (the "EP Issue
Price"); provided however, that if, during such twenty (20) day trading period,
there is a Stock Event or there is a Stock Event between December 31, 2016 and
the date of issuance, then the closing prices used in the above calculation
shall be appropriately adjusted to provide the Sellers the same economic effect
as contemplated by this Appendix prior to such action.

 

 62

 

 

Earnout Examples Exhibit

 

The following are examples of the calculations for the Earnout Amount:

 

Example 1

 

Assumptions:

 

Adjusted EBITDA for the year ended December 31, 2016

 

$700,000

 

Revenue for the year ended December 31, 2016

 

$15,175,000

 

Retention Bonuses Paid

 

$125,000

 

 

Calculation:

 

Adjusted EBITDA

 

$700,000

 

Less Threshold amount

 

$650,000

 

Excess EBITDA

 

$50,000

 

 

Multiply by Payment Rate   x 5   (500%)

 

Potential Earnout Payment

 

$250,000

 

Minimum Revenue Target

 

$

15,000,000 met

 

Earnout Payment

 

$250,000

 

Less: Retention Bonuses Paid

 

 

125,000

 

Final Earnout Payment

 

$125,000

 

 

Example 2

 

Same facts as Example 1 except Revenue for the year ended December 31, 2016 is
$14,000,000; Minimum Revenue Target not met; Earnout Payment of $250,000 is
reduced 50% to $125,000; Final Earnout Payment is $ -0- because Earnout Payment
of $125,000 is reduced by Retention Bonuses Paid of $125,000.

 

Example 3

 

Same facts as Example 1 except Adjusted EBITDA is $650,000; it does not exceed
the Threshold Amount so no there is no Excess EBITDA and thus no Earnout Payment
will be paid.

 

Example 4

 

Same facts as Example 1 except Adjusted EBITDA is $900,000. Excess EBITDA is
$250,000 and then multiplied by payment amount (500%) so potential Earnout
Payment is $1,250,000; however Earnout Payment is reduced by retention bonuses
of $125,000 so potential Earnout Payment would be $1,125,000; however, an
overall CAP applies and limits the Final Earnout Payment to $ 750,000.

 

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APPENDIX III

(ADDITIONAL EARNOUT APPENDIX)

 

1. DEFINITIONS. Unless otherwise defined in this Appendix III, the definitions
in Appendix II shall apply to this Appendix III.

 

2. If the final determination of the Adjusted EBITDA for Appendix II for the
Earnout Period, exceeds $650,000, then within sixty (60) days of that final
determination, Buyer shall issue GEE Shares to Sellers that are valued at
$500,000, which valuation shall be determined in accordance with Paragraph 6 of
Appendix II. If the above EBITDA threshold does not exceed $650,000, then no GEE
Shares shall be issued.

 

3. Upon notice to Sellers' Representative specifying in reasonable detail the
basis therefor, Buyer may set off any amount to which it claims to be entitled
from any Seller under the Agreement, or otherwise, against amounts otherwise
payable under this Appendix III. The exercise of such right of setoff by Buyer
in good faith, whether or not ultimately determined to be justified, will not
constitute a default under this Appendix III, regardless of whether any Seller
disputes such setoff claim, or whether such setoff claim is for a contingent or
unliquidated amount. Neither the exercise of, nor the failure to exercise, such
right of setoff will constitute an election of remedies or limit Buyer in any
manner in the enforcement of any other remedies that may be available to it.

 

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APPENDIX IV

(CONTINGENT PROMISSORY NOTE APPENDIX)

 

1. DEFINITIONS. Unless otherwise defined in this Appendix IV, the definitions in
Appendix II shall apply to this Appendix IV.

 

2. CONTINGENCIES. If the final determination of the Revenue for the Earnout
Period as determined in accordance with Appendix II exceeds $15,000,000 and
Adjusted EBITDA for Appendix II for the Earnout Period, exceeds $500,000 (the
"Promissory Note Contingency Thresholds") then within sixty (60) days of that
final determination, Buyer shall issue the Promissory Notes to Sellers (after
reduction of the principal by the NWC Reduction Amount). The procedures of
Paragraph 5 of Appendix II shall apply to this Appendix IV. If either or both of
the Promissory Note Contingency Thresholds is not satisfied, then the Promissory
Notes shall not be issued and the only payment to be made under the Promissory
Notes will be that set forth in Paragraph 4 below.

 

3. SETOFF. Upon notice to Sellers' Representative specifying in reasonable
detail the basis therefor, Buyer may set off any amount to which it claims to be
entitled from any Seller under the Agreement, or otherwise, against amounts
otherwise payable under this Appendix IV. The exercise of such right of setoff
by Buyer in good faith, whether or not ultimately determined to be justified,
will not constitute a default under this Appendix IV, regardless of whether any
Seller disputes such setoff claim, or whether such setoff claim is for a
contingent or unliquidated amount. Neither the exercise of, nor the failure to
exercise, such right of setoff will constitute an election of remedies or limit
Buyer in any manner in the enforcement of any other remedies that may be
available to it.

 

4. SPECIAL INTEREST PROVISION. Commencing on February 1, 2016, Target shall pay
deemed monthly interest payments to the Sellers in the amount of $4,583.33 per
month for a period of 12 months. The interest payable under this Paragraph 4
shall be credited as payments of interest under the Promissory Notes and if it
exceeds the amount of interest payable under the Promissory Notes for that 12
month period, then that excess shall reduce the principal of the Promissory
Notes.

 

 

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