Exhibit 10.2

 

 

 

 

 

 

STOCK PURCHASE AGREEMENT

by and among

ONCOLOGIX TECH, INC.

 

MADHU MATHEW MAMMEN

 

IMAD SIDDIQUI

 

and

ESTEEMCARE, INC.

 

SEPTEMBER 25, 2014

 

 

STOCK PURCHASE AGREEMENT

 

THIS STOCK PURCHASE AGREEMENT (this “Agreement”), dated as of
September 25, 2014, is made and entered into by and among Oncologix Tech, Inc.,
a Nevada corporation (the “Purchaser”), Esteemcare, Inc., a South Carolina
corporation (the “Company”), and Madhu Mathew Mammen, a resident of the State of
South Carolina, and Imad Siddiqui, a resident of the State of Georgia, being the
sole stockholders of the Company (each a “Seller” and collectively, “Sellers”).

WHEREAS, the Company is engaged in the manufacture, sale and distribution of
home medical, durable medical and C-PAP equipment and supplies (the “Business”);

WHEREAS, the Sellers own, beneficially and of record, all of the issued and
outstanding shares of capital stock of the Company (the “Shares”) comprised of
seventy-five (75) shares of common stock owned beneficially and of record by
Madhu Mathew Mammen and twenty-five (25) shares owned beneficially and of record
by Imad Siddiqui; and

WHEREAS, the Purchaser wishes to purchase, and the Sellers wish to sell, all of
the Shares on the terms and conditions set forth in this Agreement.

In consideration of the mutual promises and covenants set forth herein, the
parties hereby agree as follows:

                                                                                                                                                           
ARTICLE I

SALE AND PURCHASE OF SHARES

1.1              Sale and Purchase of Shares. Subject to the terms and
conditions set forth in this Agreement and in reliance upon the representations
and warranties herein set forth, at the Closing, the Sellers shall sell,
transfer, convey, assign and deliver to the Purchaser, and the Purchaser shall
purchase from the Sellers, all of Sellers’ right, title and interest in and to
the Shares.

1.2              Purchase Price. The purchase price for the Shares (the
“Purchase Price”) shall be equal to Five Hundred Thousand Dollars ($500,000),
paid as follows:

(a)                Four Hundred Thousand Dollars ($400,000) (the “Cash Payment”)
shall be paid in cash at the Closing to the Sellers with Three Hundred Thousand
Dollars ($300,000) to be paid to Madhu Mathew Mammen and One Hundred Thousand
Dollars ($100,000) to be paid to Imad Siddiqui; and

(b)               The delivery of a promissory note to each of the Sellers, in
the aggregate principal amount of One Hundred Thousand Dollars ($100,000), in
substantially the form of Exhibit A attached hereto (the “Note”) as follows:

Madhu Mathew Mammen: $75,000.00

Imad Siddiqui: $25,000.00

1.3              Time and Place. The closing of the purchase and sale of the
Shares provided for in this Agreement (the “Closing”) shall take place at the
offices of the Company, 3223 Sunset Boulevard, Suite 104, West Columbia, South
Carolina 29169 at 9:00 a.m. local time, immediately following the execution of
this Agreement and following the satisfaction or waiver (to the extent permitted
by applicable

 

 

law) by the appropriate party of the conditions set forth in ARTICLE VII or at
such other time, date and place as the Purchaser and the Sellers may mutually
agree (such date, the “Closing Date”).

1.4              Transactions at the Closing. At the Closing, the following
shall occur:

(a)                The Purchaser shall make the following deliveries:

                                                                                            
(i)                     payment of an amount equal to the Cash Payment by wire
transfer of immediately available funds;

                                                                                           
(ii)                    a Pledge Agreement in substantially the form of Exhibit
B attached hereto for each Seller (the “Pledge Agreements”) as collateral
security for the Notes;

                                                                                          
(iii)                   duly executed Notes;

                                                                                          
(iv)                   certificate of an officer of the Purchaser as to the
incumbency of the officer authorized to execute this Agreement and each other
document to which it is a party; and

                                                                                           
(v)                    a certificate of an officer of the Purchaser certifying
that the conditions to the Sellers’ obligations hereunder set forth in Section
7.3 have been satisfied.

(b)               The Company and the Sellers shall make the following
deliveries to the Purchaser:

(i)                 stock certificates evidencing the Shares, accompanied by a
stock power or other instruments of transfer duly executed;

(ii)               duly executed Non-Compete and Non-Solicitation Agreements for
each Seller, in substantially the form of Exhibit C attached hereto;

(iii)             a copy of the Organizational Documents of the Company and each
of its Subsidiaries, each as amended through the Closing Date, certified by an
authorized officer of the Company;

(iv)             a certificate of an authorized officer of the Company as to the
incumbency of its officers authorized to execute this Agreement and each other
document to be executed at the Closing on behalf of the Company;

(v)               a certificate dated not later than ten (10) Business Days
prior to the Closing Date from the Secretary of State of the state of
incorporation of the Company and each of its Subsidiaries, and each state where
each entity is duly registered as a foreign corporation as to the good standing
of the Company and each of its Subsidiaries;

(vi)             the consents required to be obtained from third parties to
allow the completion of the transactions contemplated hereby set forth on
Schedule 1.4(b)(vi), which shall include all of the consents set forth on
Schedule 3.4 (the “Required Consents”);

(vii)           resignation letters from each of the directors and officers of
the Company and each of its Subsidiaries, effective immediately as of the
Closing;

(viii)         a certificate of an authorized officer of the Company certifying
in such capacity that the conditions to the Purchaser’s obligations hereunder
set forth in Sections 7.2(a), 7.2(b),

 

 

7.2(c) and 7.2(d) (as each such condition pertains to the Company or the
representations, warranties or covenants of the Company) have been satisfied;
and

(ix)             a payoff letter, as of the Closing Date, for any outstanding
Indebtedness of the Company and each of its Subsidiaries is form and substance
reasonably acceptable to Purchaser.

                                                                                                                                                         
ARTICLE II

REPRESENTATIONS AND WARRANTIES OF THE SELLERS

Each Seller represents and warrants to the Purchaser as of the date of this
Agreement, severally as to himself and the Shares recited in this Agreement as
held by him only, as follows:

2.1              Title. Each Seller is the record and beneficial owner of the
Shares recited as held by him in the recitals to this Agreement, free and clear
of all Encumbrances. Each Seller has the full right, power and authority to
enter into this Agreement and has the full right, power and authority to
transfer, convey and sell to the Purchaser at the Closing the Shares recited as
held by him. Neither Seller is a party to, subject to or bound by any agreement,
any Order, or any Law which would prevent the execution or delivery of this
Agreement or any other document to which he is a party or the consummation of
the Contemplated Transactions and no authorization or approval or other action
by, and no notice to or filing with, any Authority will be required to be
obtained or made by either Seller in connection with the execution and delivery
by him of this Agreement or any other documents to which he is a party or the
consummation of the Contemplated Transactions.

2.2              Due Authorization; Enforceability. Each Seller has the full and
absolute legal right, capacity, power and authority to execute and deliver this
Agreement and any other documents to which he is a party, to perform his
obligations hereunder and thereunder and to consummate the Contemplated
Transactions. This Agreement and any other documents to which the Seller is a
party has been validly executed and delivered by the Seller, and each
constitutes a valid and binding obligation of the Seller, enforceable against
the Seller in accordance with its terms, subject to applicable bankruptcy,
insolvency and other similar laws relating to the enforcement of creditors’
rights generally and to general principles of equity.

2.3              No Violation. The execution and delivery by each Seller of this
Agreement, the consummation of the Contemplated Transactions, and the
performance of each Seller’s obligations hereunder does not and will not: (a)
violate, conflict with or constitute a default under any contract to which that
Seller is party or by which that Seller is bound or to which that Seller’s
property is subject, (b) violate any applicable Law or Order of any Authority
having jurisdiction over that Seller or any of that Seller’s property, subject
to the Purchaser’s representations of investment purpose and restrictions on
further transfer imposed by applicable securities laws and regulations,
(c) require any authorization, consent or approval of, filing with, exemption or
other action by, or notice to, any Authority or any party to any contract to
which that Seller is party or by which that Seller is bound or to which that
Seller’s property is subject; or (d) result in the creation or imposition of any
Encumbrance upon the Shares.

                                                                                                                                                       
ARTICLE III

REPRESENTATIONS AND WARRANTIES REGARDING THE COMPANY

Except as set forth in the disclosure schedules dated as of the date hereof and
delivered herewith to the Purchaser, which identifies the section and subsection
to which each disclosure therein relates (the

 

 

“Disclosure Schedules”), each Seller and the Company, jointly and severally,
hereby represent and warrant to the Purchaser as of the date of this Agreement
as follows:

3.1              Organization; Authority; Due Authorization. The Company and
each of its Subsidiaries is a corporation duly organized, validly existing, and
in good standing under the laws of its state of incorporation, and has all
necessary corporate power and authority to own, lease and operate the assets
owned by it and the Business and to carry on the Business as now conducted. The
Company and each of its Subsidiaries is duly qualified to transact business as a
foreign corporation and is in good standing in each of the jurisdictions listed
on Schedule 3.1, which jurisdictions are the only jurisdictions in which the
ownership, leasing or operation of the assets owned by it or the conduct of the
Business requires such qualification, except to the extent that the failure to
be qualified in a particular jurisdiction would not have a material adverse
effect on the Company. The Company has all requisite corporate power and
authority to enter into, execute and deliver this Agreement and any other
documents to which the Company is a party, to consummate the Contemplated
Transactions, and to perform fully its respective obligations hereunder and
thereunder. The Company has taken all actions necessary to authorize it to
execute, deliver and perform fully its obligations under this Agreement and to
consummate the Contemplated Transactions, and no other action or proceeding is
necessary for the Company to execute, deliver and perform its obligations under
this Agreement and to consummate the Contemplated Transactions. This Agreement
has been duly and validly executed and delivered by the Company and constitutes
a valid and binding obligation of the Company, enforceable against the Company
in accordance with its terms, subject to applicable bankruptcy, insolvency and
other similar laws relating to the enforcement of creditors’ rights generally
and to general principles of equity. Schedule 3.1 sets forth a true and complete
list of the names of the directors and the officers of the Company and the
directors and officers of each of its Subsidiaries.

3.2              Capitalization of the Company and Subsidiaries.

(a)                The Company has one hundred (100) shares of common stock, no
par value, which is the only outstanding class of the Company’s capital stock,
issued and outstanding and owned of record and beneficially by the Sellers as
set forth on Schedule 3.2. No other class or series of equity of the Company is
authorized, reserved or outstanding. The Sellers are the sole stockholders of
the Company. The Shares have been duly authorized and validly issued. Except as
set forth on Schedule 3.2(a): (i) there are no outstanding subscriptions,
warrants, calls, options, rights (including unsatisfied preemptive rights, stock
appreciation rights or conversion or exchange rights or other arrangements),
commitments or agreements to which the Company is bound that permit or entitle
any Person to purchase or otherwise to receive from or to be issued any Shares
or any security or obligation of any kind convertible into or exchangeable for
any Shares, (ii) no Person has any right to cause the purchase, redemption or
repurchase of any Shares or other securities of the Company legally or
beneficially owned by it, (iii) no Shares are subject to any agreements or
understandings among any Persons with respect to the voting or transfer of the
Shares (other than the Organizational Documents of the Company), (iv) the
Company has not granted any registration rights to any Person with respect to
its outstanding Shares or other securities and (v) the Company does not have
outstanding any bonds, debentures, notes or other obligations the holders of
which have the right to vote (or are convertible into or exercisable for
securities having the right to vote) on any matter.

(b)               Except for Affordable Medical Equipment Solutions, Inc., a
Florida corporation (“AME”), the Company has no Subsidiaries. AME is wholly
owned, directly or indirectly, by the Company and there are no outstanding
subscriptions, options, warranties, commitments, preemptive rights of any kind
relating to the issuance or sale of any shares of capital stock of AME. Yarita
Sanchez has no ownership interest of any kind in AME or any of its assets.

 

 

3.3              No Violation. The execution and delivery by the Company of this
Agreement and the other documents to which it is a party, the consummation the
Contemplated Transactions, and the performance of the Company hereunder and
thereunder will not: (a) violate any provision of any of the Organizational
Documents of the Company, (b) except as set forth on Schedule 3.3, violate,
conflict or constitute a default under, permit the termination or acceleration
of, or cause the loss of any rights or options under, any Contract or License to
which the Company or any of its Subsidiaries is a party or by which the Company
or any of its Subsidiaries may be bound or to which its property may be subject;
(c) except as set forth on Schedule 3.3 or Schedule 3.4, require any
authorization, consent or approval of, filing with, exemption or other action
by, or notice to, any Authority or any party to any Contract or License to which
the Company or any of its Subsidiaries is a party or by which the Company or any
of its Subsidiaries is bound or to which the Company’s or any of its
Subsidiaries’ property is subject; or (d) result in the creation or imposition
of any Encumbrance upon the Shares or upon any Asset of the Company or any of
its Subsidiaries (other than, in the case of the Assets only, a Permitted Lien).
Neither, the Company nor any of its Subsidiaries is in default in the
performance, observance or fulfillment of any provision of its Organizational
Documents.

3.4              Regulatory Approvals and Other Consents. Schedule 3.4 sets
forth a complete list of (a) each consent, approval, authorization, notice,
filing, exemption, waiver or other requirement required by the Organizational
Documents of the Company or any Law which must be obtained or is required to be
made, obtained or otherwise satisfied by the Company in order for the Company to
execute and deliver this Agreement or Other Company Documents as applicable, to
perform its obligations hereunder and thereunder and to consummate the
Contemplated Transactions; and (b) each consent, approval, authorization,
notice, filing, exemption or waiver required by the terms of any Contract in
connection with the consummation of the Contemplated Transactions.

3.5              Sufficiency of and Title to Assets. Schedule 3.5 sets forth a
list, including the location of each item, of Tangible Personal Property owned
by the Company and each of its Subsidiaries having either a depreciated book
value or estimated fair market value in excess of $10,000, or used in the
Business and having rental, license or other payments therefor in excess of
$20,000 per year. Without limiting the representations and warranties as to
specific classes of assets: (a) the Assets are sufficient for the conduct of the
Business immediately after the Closing in the same manner as conducted
immediately prior to the Closing; (b) the Company and each of its Subsidiaries
has good title to the Assets owned or purported to be owned by it (including all
of the Assets reflected in the balance sheets included in the Financial
Statements) and has the valid and enforceable right (subject to applicable
bankruptcy, insolvency and other similar laws relating to the enforcement of
creditors’ rights generally and to general principles of equity) to use all of
the Assets not owned by it, in each case free and clear of all Encumbrances
other than Permitted Liens and Encumbrances described on Schedule 3.5. Neither
the Company nor any of its Subsidiaries has received any written notice from any
Authority with respect to any taking of any of the Assets or any portion thereof
or interest therein by eminent domain or otherwise, and there is no proceeding
pending or threatened with respect thereto. The Company and AME have the right,
title and interest to use the name “Affordable Medical Equipment Solutions” or
any variation thereof in the conduct and operation of the Business in the State
of Florida only.

3.6              Financial Condition; Financial Statements; Books and Records;
Financial Due Diligence.

(a)                Schedule 3.6 contains a true and correct copy of the
unaudited consolidated balance sheet of the Company and its Subsidiaries as of
December 31, 2013 and the related statements of income and cash flow for the
fiscal year ended December 31, 2013 and the unaudited consolidated balance sheet
of the Company and its Subsidiaries as of September 15, 2014 (the “Balance
Sheet”) and the related statement of income and cash flow for the nine and
one-half (9 1/2) months ended September 15, 2014

 

 

(collectively, the “Financial Statements”). The Financial Statements: (i) fairly
present the financial position of the Company and its Subsidiaries as of the
date, and the results of its operations for the periods indicated therein; and
(ii) have been prepared in accordance with GAAP applied on a consistent basis
throughout the periods involved (subject, in the case of unaudited statements,
to the absence of footnote disclosure and in the case of unaudited interim
statements to normal year-end adjustments (the effect of which will not,
individually or in the aggregate, be materially adverse)).

(b)               Neither the Company nor any of its Subsidiaries has material
liabilities, claims or obligations of any nature, whether accrued, absolute,
contingent, anticipated or otherwise, whether due or to become due, that are
required to be disclosed in a balance sheet prepared in accordance with GAAP,
except for those (i) reflected or reserved against in the Balance Sheet, and
(ii) incurred after the date of the Balance Sheet in the ordinary course of
business, including, without limitation, those incurred in connection with the
transactions contemplated by this Agreement. For the purposes of this Section
3.6 “material” shall mean that the reasonable effect of any such inaccuracy (i)
could have caused the Purchaser to draw a different conclusion to the relevant
matters concerned and (ii) could, had the Purchaser known, have impacted on the
key commercial terms of the acquisition of the Shares. The books of account,
minute books, stock ledgers and other financial books and records of the Company
and each of its Subsidiaries are kept in the ordinary course of business in
accordance with reasonable business practices and applicable Laws. The Company
and each of its Subsidiaries records transactions as necessary to permit
preparation of the consolidated financial statements of the Company
and accounts, notes and other receivables are recorded accurately.

(c)                There has been no material adverse change in the business,
operations or condition (financial or otherwise) of either the Company or any of
its Subsidiaries since December 31, 2013.

3.7              Tax Matters.

All Tax Returns required to have been filed by the Company and each of its
Subsidiaries on or prior to the Closing Date have been duly and timely filed,
and each such Tax Return is true, accurate and correct. All Taxes required to be
paid by the Company and each of its Subsidiaries (whether or not shown on any
Tax Return) on or prior to the Closing Date have been timely paid. As of the
Closing Date, the liability of the Company and/or any of its Subsidiaries for
any unpaid Taxes will not exceed the reserve for unpaid Taxes then carried on
the Company’s books and records.

(a)                There is no action, audit, dispute or claim in respect of any
Taxes now proposed or pending which has been communicated to the Company or any
of its Subsidiaries, or, to the Knowledge of the Company, threatened against,
the Company or any of its Subsidiaries. Neither the Company nor any of its
Subsidiaries is the beneficiary of any extension of time within which to file
any Tax Return, nor has it made (or had made on its behalf) any requests for
such extensions. No claim has ever been made by a taxing Authority in a
jurisdiction where either the Company does not file Tax Returns that the Company
or any of its Subsidiaries is or may be subject to taxation by that jurisdiction
or that the Company or any of its Subsidiaries must file Tax Returns in that
jurisdiction, and the Company is not aware of any reasonable grounds upon which
any such taxing Authority might successfully assert that the Company or any of
its Subsidiaries is or may be subject to taxation by that jurisdiction or that
the Company or any of its Subsidiaries must file Tax Returns in that
jurisdiction. There are no Encumbrances, other than Permitted Liens, on any of
the assets of the Company or any of its Subsidiaries with respect to Taxes.

(b)               The Company and each of its Subsidiaries has (i) withheld all
required amounts from its employees, agents, contractors, nonresident creditors,
or other third parties that were required to be withheld on or prior to the
Closing Date and has remitted such amounts to the proper Authority unless
otherwise not yet due; (ii) paid all employee contributions and premiums
required to be paid on or prior to

 

 

the Closing Date; and (iii) filed all Tax returns with respect to employee
income Tax withholding, and social security and unemployment Taxes and premiums
that were required to be filed on or prior to the Closing Date, all in
compliance with the withholding Tax provisions of the Code, as in effect for the
applicable year or any prior provisions thereof and other applicable Laws,
including state, local or foreign law.

(c)                Schedule 3.7: (i) lists all federal, state, local, and
foreign Tax Returns filed by the Company and each of its Subsidiaries for all
taxable periods over past five (5) years and (ii) indicates those Tax Returns
described in clause (i) that have been audited. The Company has delivered or
made available to the Purchaser correct and complete copies of all Tax Returns
filed, examination reports, and statements of deficiencies assessed against or
agreed to by to the Company and each of its Subsidiaries for all taxable periods
for the past five (5) years. Neither the Company nor any of its Subsidiaries has
waived (and is not subject to a waiver of) any statute of limitations in respect
of Taxes and has not agreed to (and is not subject to) any extension of time
with respect to a Tax assessment or deficiency.

(d)               Except as set forth on Schedule 3.7, there is no contract,
agreement, plan or arrangement covering any employee or former employee of the
Company or any of its Subsidiaries that, individually or collectively, could
give rise to the payment by the Company or any of its Subsidiaries on or prior
to the Closing Date of any amount that would not be deductible by reason of
Section 280G of the Code or any corresponding provisions of state, local or
foreign Tax Law. There is no contract,agreement, plan or arrangement to which
the Company or any of its Subsidiaries is a party or by which the Company or any
of its Subsidiaries is bound to compensate any individual for excise Taxes paid
pursuant to Section 4999 or 409A of the Code.

(e)                Neither the Company nor any of its Subsidiaries will 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 (i) change in method of accounting for a
taxable period ending on or prior to the Closing Date, (ii) “closing agreement”
as described in Section 7121 of the Code (or any corresponding or similar
provision of state, local or foreign income Tax law) executed on or prior to the
Closing Date, (iii) installment sale or open transaction disposition made on or
prior to the Closing Date, (iv) prepaid amount received on or prior to Closing
Date; (v) election pursuant to Code Section 108(i) made effective on or prior to
the Closing Date; or (vi) excess loss account. Neither the Company nor any of
its Subsidiaries has distributed stock of another entity, nor has the Company
had its stock distributed by another entity, in a transaction that was purported
or intended to be governed in whole or in part by Code Section 355 or Code
Section 361. Neither the Company nor any of its Subsidiaries has engaged in any
transaction that could affect the income Tax liability for any taxable year not
closed by the applicable statute of limitations which is (i) a “tax shelter”,
(ii) “reportable transaction”, (iii) a “listed transaction” or has (iv) a
“significant purpose of which is the avoidance or evasion of United States
federal income tax” within the meanings of Sections 6662, 6662A, or 6707A of the
Code or Treasury Regulations promulgated thereunder or pursuant to notices or
other guidance published by the IRS (irrespective of the effective dates).

3.8              Litigation. There is no complaint, action, suit, proceeding,
arbitration or other alternate dispute resolution procedure, demand,
investigation or inquiry, whether civil, criminal or administrative
(“Litigation”) pending or, to the Company’s Knowledge, threatened against the
Company, any of its Subsidiaries, the directors or officers of the Company (in
such capacity) or its Business or Assets. Neither the Company, any of its
Subsidiaries, nor any of its Assets is subject to any Order. There is no
Litigation pending or, to the Knowledge of the Company, threatened against the
Company or any of its Subsidiaries which seeks to prevent consummation of the
Contemplated Transactions or which seeks damages in connection with the
Contemplated Transactions, and no temporary restraining order, preliminary or

 

 

permanent injunction or other Order or decree which prevents the consummation of
the Contemplated Transactions has been issued and remains in effect.

3.9              Intellectual Property. Schedule 3.9 sets forth a correct and
complete list of all Intellectual Property Assets that are (i) registered or
otherwise filed by or with any Authority, (ii) any trade secrets, processes,
techniques, methods, formulae, ideas and know-how, material to the Company, and
(iii) Intellectual Property Licenses. Except as indicated on Schedule 3.9:

(a)                Either the Company or one of its Subsidiaries is the sole
owner of all right, title and interest in and to each Intellectual Property
Asset owned or purported to be owned by it and has the valid and enforceable
right (subject to applicable bankruptcy, insolvency and other similar laws
relating to the enforcement of creditors’ rights generally and to general
principles of equity) to use all of the Intellectual Property Assets not owned
by it, free and clear of all Encumbrances (other than Permitted Liens) and with
absolute right of use without seeking the approval or consent of any Person and
without payment (except in each case for Intellectual Property Assets licensed
to the Company under an Intellectual Property License or other contract,
agreement or other arrangement relating to such Intellectual Property Asset);

(b)               the Intellectual Property Assets are all intellectual property
necessary for the operation of the Business as currently conducted;

(c)                all registrations and applications for the Intellectual
Property Assets required to be disclosed on Schedule 3.9 are in full force and
effect;

(d)               none of the Intellectual Property Assets required to be
disclosed on Schedule 3.9 is subject to any outstanding Order limiting the scope
or use thereof or declaring any of the Intellectual Property Assets abandoned;

(e)                (i) to the Knowledge of the Company, its current use of the
Intellectual Property Assets does not unlawfully infringe or dilute the
intellectual property rights of any third person, and (ii) no investigations are
pending concerning the possibility of such infringing or diluting use;

(f)                except as set forth on Schedule 3.9, neither the Company nor
any of its Subsidiaries has granted any license, franchise, permit or other
right to any Person to use any of the Intellectual Property Assets;

(g)                to the Knowledge of the Company, the conduct of the Business
has not and does not infringe upon or misappropriate any intellectual property
of any Person, and there are no pending or, to the Knowledge of the Company,
threatened in writing claims alleging that the Company, any of its Subsidiaries
or the operation of the Business infringes or misappropriates the intellectual
property rights of any Person;

(h)               there are no pending claims, actions, judicial or other
adversary proceedings nor to the Knowledge of the Company, are there any
disputes or disagreements involving any Intellectual Property Asset, and, to the
Knowledge of the Company, no such action, proceeding, dispute or disagreement is
threatened; and

(i)                 neither the Sellers nor any employees of the Company or any
of its Subsidiaries own, or can legitimately claim to own, in a personal
capacity any intellectual property rights that are necessary for the Company or
any of its Subsidiaries to continue operating the Business in the same manner as
at the Closing Date.

 

 

3.10          Contracts.

(a)                Schedule 3.10 sets forth a correct and complete list of the
following written and verbal contracts or agreements by which the Company and
each of its Subsidiaries currently is bound, including any amendments,
supplements or modifications thereto (the “Contracts”), listed by subsection set
forth below:

(i)             each contract, unpaid invoice, unfilled sales order and other
arrangement or agreement that involves performance of services by the Company
and each of its Subsidiaries of an amount or value in excess of $25,000;

(ii)           each contract, unpaid invoice, unfilled sales order and other
arrangement or agreement that involves performance of services or delivery of
goods or materials to the Company and each of its Subsidiaries of an amount or
value in excess of $25,000;

(iii)         each contract, unpaid invoice, unfilled sales order and other
arrangement or agreement that involves expenditures or receipts of or by the
Company and each of its Subsidiaries in excess of $25,000;

(iv)         each contract, unpaid invoice, unfilled sales order and other
arrangement or agreement that cannot be cancelled by the Company and each of its
Subsidiaries without penalty or further payment and without more than thirty
(30) days’ notice;

(v)           each loan agreement, promissory note, bond, letter of credit or
other instrument or agreement with respect to the borrowing of money;

(vi)         each lease, rental or occupancy agreement, license, installment and
conditional sale agreement, and other agreement affecting the ownership of,
leasing of, title to, use of, or any leasehold or other interest in, any real or
personal property;

(vii)           each Intellectual Property License;

(viii)         each agreement containing an indemnification obligation of the
Company;

(ix)             each agreement in which the Company’s and each of its
Subsidiaries’ liability is not limited (other than an exclusion from the
limitation of liability for gross negligence or willful or intentional
misconduct);

(x)           each collective bargaining agreement and contract with any labor
union or other employee representative of a group of employees;

(xi)         each joint venture, partnership, limited liability company and
other agreement (however named) involving a sharing of profits, losses, costs or
liabilities by the Company or any of its Subsidiaries with any other Person
(excluding bonus arrangements and employment plans for officers or employees of
the Company);

(xii)       each agreement or contract containing covenants that in any way
purport to limit the freedom of the Company or any of its Subsidiaries, or any
officer, director, manager, employee, consultant or contractor thereof, to
engage in any line of business, compete with any Person, or operate in any
territory;

 

 

(xiii)     each agreement or contract providing for payments to or by any Person
based on sales, purchases, or profits, other than direct payments for goods;

(xiv)     each agreement or contract for individual capital expenditures in
excess of $5,000 or aggregate capital expenditures in excess of $25,000; and

(xv)           each employment, consulting, management, separation, severance or
similar agreement with employees of, or consultants or independent contractors
to, the Company or any of its Subsidiaries, in each case involving payments by
the Company in excess of $25,000.

(b)               Except as disclosed in the list set forth on Schedule 3.10:

(i)             each Contract is the valid and binding obligation of the Company
or any of its Subsidiaries and, to the Knowledge of the Company, each other
Person or party thereto, enforceable in accordance with its terms, and is in
full force and effect subject to applicable bankruptcy, insolvency and other
similar laws relating to the enforcement of creditors’ rights generally and to
general principles of equity;

(ii)           there exists no material breach of or default by the Company or
any of its Subsidiaries under any Contract and assuming that the Required
Consents and all consents listed on Schedule 3.4 are obtained prior to the
Closing, there has not occurred any event or events that, with the lapse of time
or the giving of notice or both, would constitute a material breach or default
by the Company under any Contract;

(iii)         to the Knowledge of the Company: (A) no other Person party to any
Contract is now in breach of or default under any term thereof or has breached
or defaulted under any term thereof (which breach or default remains uncured as
of the date hereof) and (B) there has not occurred any event or events that,
with the lapse of time or the giving of notice or both, would constitute a
breach or default by any other party under any Contract; neither the Company nor
any of its Subsidiaries has received any notice of any anticipated breach of or
default under any term thereof by any Person party to any Contract;

(iv)         neither the Company nor any of its Subsidiaries has received any
written notice that any Person party to any Contract currently intends to
cancel, terminate or renegotiate prior to its expiration such Contract or to
exercise or not to exercise any option to acquire assets thereunder; and

(v)               copies of each of the written Contracts, together with all
amendments, modifications or other changes thereto have been made available to
the Purchaser.

3.11          Compliance With Laws.

(a)                The Company and each of its Subsidiaries is in and has been
in material compliance with all applicable Laws in connection with the operation
of the Business or ownership or use of the Assets and no investigation, inquiry,
audit or review by any Authority with respect to the Company, any of its
Subsidiaries or the Business is pending or, to the Knowledge of the Company,
threatened against the Company or any of its Subsidiaries alleging any failure
to so comply, nor has any Authority notified the Company or any of its
Subsidiaries of an intention to conduct the same. All reports, filings and
returns required to be filed by or on behalf of the Company or any of its
Subsidiaries with any Authority on or prior to the Closing Date have been filed.

 

 

(b)               The Company and each of its Subsidiaries possesses all
Licenses required to be obtained for the operation of the Business as presently
conducted, all such Licenses are in full force and effect and no suspension or
cancellation is, to the Knowledge of the Company, threatened in writing.
Schedule 3.11(b) contains a complete and accurate list of each License that is
held by the Company or that otherwise relates to the Business and is required
for the operation of the Business substantially as presently conducted. Each
License listed or required to be listed on Schedule 3.11(b) is valid and in full
force and effect. Except as set forth on Schedule 3.11(b): (i) the Company and
each of its Subsidiaries is, and at all times has been, in compliance with all
of the terms and requirements of each License identified or required to be
identified on Schedule 3.11(b), (ii) no event has occurred or circumstances
exists that may (with or without notice or lapse of time) (A) constitute or
result in a violation of or a failure to comply with any term or requirement of
any License listed or required to be listed on Schedule 3.11(b) or (B) result in
the revocation, withdrawal, suspension, cancellation or termination of, or any
modification to, any License listed or required to be listed on
Schedule 3.11(b), (iii)  the Company and each of its Subsidiaries has not
received any written notice from any Authority or any other Person regarding
(A) any actual or alleged violation of or failure to comply with any term or
requirement of any License or (B) any actual or proposed revocation, withdrawal,
suspension, cancellation, termination of or modification or any License, in each
case relating to the Business, and (iv) all applications required to have been
filed for the renewal of the Licenses listed or required to be listed on
Schedule 3.11(b) have been duly filed on a timely basis with the appropriate
Authority, and all other filings required to have been made with respect to such
Licenses have been duly made on a timely basis with the appropriate Authority.
The Licenses listed on Schedule 3.11(b) collectively constitute all of the
Licenses necessary to permit the Company and each of its Subsidiaries to
lawfully conduct and operate the Business in the manner in which its currently
conduct and operate the Business and to permit the Company to own or lease and
use its Assets in the manner in which it currently owns or leases and uses such
Assets.

3.12          Insurance Coverage. Schedule 3.12 contains a complete and accurate
list of all of the insurance policies maintained by the Company that cover the
assets, business, equipment, properties, operations, employees, officers and
directors of the Company. Except as set forth on Schedule 3.12, there are no
pending claims under any of such policies. All premiums due and payable under
all such policies and bonds have been paid and the Company is otherwise in
material compliance with the terms and conditions of all such policies. Such
policies of insurance are in full force and effect and are of such types and in
such amounts and for risks, casualties and contingencies as may be required
under applicable Laws.

3.13          Real Property.

(a)                Neither the Company nor any of its Subsidiaries owns any real
property.

(b)               All real property leases and subleases to which the Company or
any of its Subsidiaries is a party and any amendments or modifications thereof
are listed on Schedule 3.13 (each a “Lease” and collectively, the “Leases”).
Schedule 3.13 indicates each property of which the Company is the tenant or
subtenant. True and complete copies of each Lease have been made available to
the Purchaser, and the Leases constitute the entire understanding relating to
the Company’s or any of its Subsidiaries’ use and occupancy of the leased
premises. Except as listed on Schedule 3.13, the Leases are valid, in full force
and effect and enforceable subject to applicable bankruptcy, insolvency and
other similar laws relating to the enforcement of creditors’ rights generally
and to general principles of equity. Except as listed on Schedule 3.13 (i) there
are no existing defaults on the part of the Company or any of its Subsidiaries
or, to the Knowledge of the Company, any other Person, under the Leases,
(ii) neither the Company nor any of its Subsidiaries has received or given
written notice of any default or claimed default with respect to any Lease that
remains uncured, and (iii)  no event has occurred or circumstances exist that
(with or without notice or lapse of time) constitute or will result in a default
on the part of the Company or any of its Subsidiaries thereunder. The Company
and each of its Subsidiaries has performed all tenant or subtenant

 

 

obligations under each Lease concerning the construction of tenant improvements
at each property subject to such Lease, and all fees, tenant improvement
allowances and other landlord concessions under each Lease have been paid or
performed in full. None of the Leases prohibits the use of property subject to
such Lease for the purposes for which each is currently used. No commission or
other payment is due any real estate broker by the Company in connection with
any Lease, and there are no agreements, oral or written, under which any real
estate broker is entitled to any future payment or commission by the Company and
each of its Subsidiaries or its assignees, in connection with any Lease or
property subject to any Lease. Other than as set forth on Schedule 3.13, no
leased property is subject to any lease, sublease, license or other written
agreement to which the Company or any of its Subsidiaries is a party granting to
any other Person any right to the use, occupancy or enjoyment of such leased
property or any part thereof. Neither the Company nor any of its Subsidiaries
has granted to any Person any right, option, right of first offer or right of
first refusal to lease, sublease, use or occupy all or part of any property
subject to a Lease. The improvements constructed on property subject to a Lease
are supplied with water, sewage disposal or septic, electricity, gas, telephone
and other services necessary for the operation of such improvements as currently
operated, and there is no condition which would reasonably be expected to result
in the termination of the present access from any improvements to such utility
services. All septic systems are in functioning condition and in good order and
repair.

3.14          Environmental Matters. There has been no spill or release of any
Hazardous Substance at any real properties currently owned, leased or operated
by the Company or any of its Subsidiaries during the period of occupancy by the
Company or its Subsidiaries in violation of any Environmental Law. There are no
underground or aboveground storage tanks or any surface impoundments, septic
tanks, pits, sumps or lagoons in which Hazardous Substances are being or, to the
Company's Knowledge, have been treated, stored or disposed of, on any real
property currently or formerly owned, leased, used or occupied by the Company
except in a manner that complies in all material respects with Environmental
Laws as in effect on the date of this Agreement. To the Company’s Knowledge,
there is no friable asbestos or asbestos containing material in a friable state
on any of the real properties currently owned, leased or occupied by the
Company. Neither the Company nor any of its Subsidiaries has received any notice
of claim, demand or other notification or communication that the Company or any
of its Subsidiaries is or may be responsible with respect to any Remedial Action
relating to any threatened or actual release of any Hazardous Substance or
alleging any violation or failure to comply with any Environmental Law or
License. There are no claims pending or, to the Knowledge of the Company,
threatened with respect to compliance with, or liability under, any
Environmental Law or License. The Company has made available to the Purchaser
copies of (i) all known reports and assessments and (ii) all correspondence to
or from any Authority or third party complaints related to purported violations
of Environmental Laws, in each case to the extent in the possession of the
Company and relating to environmental matters at any real properties currently
owned, leased or operated by the Company, or relating to the Company’s or any of
its Subsidiaries’ compliance with or potential liability under Environmental
Laws as in effect on the date of this Agreement.

3.15          Employee Matters.

(a)                Schedule 3.15(a) sets forth, with respect to each Employee
(including any Employee who is on a leave of absence by reason of disability or
otherwise or on layoff status subject to recall), (i) the name of such employee
and the date as of which such employee was originally hired by the Company or
any of its Subsidiaries, and whether the employee is on an active or inactive
status; (ii) such employee’s title or position; (iii) such employee’s wage
classification as exempt or non-exempt; and (iv) such employee’s annualized
compensation as of the date of this Agreement, including base salary.

(b)               Schedule 3.15(b) lists (i) all Persons who are currently
performing services for the Company or any of its Subsidiaries who are
classified for Tax, labor or employment Law purposes as “consultants” or
“independent contractors,” (ii) the current rate of compensation of each such
Person, and

 

 

(iii) whether the Company is party to an agreement with such Person (whether or
not in writing). Any such agreements are listed on Schedule 3.15(b) and have
been made available (or, in the case of agreements that are not in writing, a
summary thereof has been delivered) to the Purchaser.

(c)                Neither the Company nor any of its Subsidiaries is a party to
or bound by any union contract, collective bargaining agreement or similar
contract.

(d)               Except as disclosed on Schedule 3.15(d), (i) no current
Employee has notified or otherwise indicated to the Company or any of its
Subsidiaries that he or she intends to terminate his or her employment with the
Company; (ii) the Company does not have the present intention to notify nor has
it notified any Employee of its intent to terminate the employment of such
Employee; (iii) all Employees have executed a form of noncompetition,
nondisclosure and assignment of inventions agreement, which has been made
available to the Purchaser; (iv) no Employee is a party to or is bound by any
employment contract, patent disclosure agreement, noncompetition agreement or
other restrictive covenant or other contract with any Person that would be
likely to affect in any way (A) the performance by such Employee of any of his
or her duties or responsibilities as an employee of the Company, or (B) the
Business or operations of the Company; and (iv) to the Knowledge of the Company,
no Employee of the Company or any of its Subsidiaries is in violation of any
term of any employment contract, patent disclosure agreement, noncompetition
agreement, or any other restrictive covenant to a former employer relating to
the right of any such Employee to be employed by the Company or any of its
subsidiaries. Except as disclosed on Schedule 3.15(d), (i) neither the Company
nor any of its Subsidiaries has any severance pay practice or policy; and
(ii) other than as mandated by Law, no Employee is entitled to any severance
pay, bonus compensation, acceleration of payment or vesting of any equity
interest, or other payment from the Company (other than accrued salary,
vacation, or other paid time off in accordance with the policies of the Company)
or the Purchaser as a result of or in connection with the Contemplated
Transactions or as a result of any termination by the Company on the Closing of
any Person employed by the Company on or prior to the Closing Date. The Company
and each of its Subsidiaries is in and has been in material compliance with all
currently applicable Laws respecting employment and employment and hiring
practices, terms and conditions of employment, immigration, occupational health
and safety, wages and hours. The Employees are properly classified under the
Fair Labor Standards Act of 1938, as amended, and under any applicable state
law, and have all times been properly classified under the Fair Labor Standards
Act of 1938, as amended, and under any applicable state law. Except a set forth
on Schedule 3.15(d), (i) there are no unfair labor practice complaints pending
against the Company before the National Labor Relations Board or any other
Authority or any current union representation questions involving Employees;
(ii) the Company and each of its Subsidiaries is currently in compliance in all
material respects with all applicable Laws relating to the employment of
Employees, including those related to wages, hours, and collective bargaining;
(iii) the Company and each of its Subsidiaries has paid in full to all of its
Employees or adequately accrued for in accordance with GAAP all wages, salaries,
commissions, bonuses, benefits and other compensation due to or on behalf of
such Employees; (iv) there is no claim with respect to payment of wages, salary
or overtime pay that is now pending or, to the Knowledge of Company, threatened
before any Authority with respect to any Persons currently employed by the
Company or any of its Subsidiaries in connection with the Business; (v) the
Company is not a party to, or otherwise bound by, any consent decree with, or
citation by, any Authority relating to Employees or employment practices
relating to the conduct of the Business; (vi) there is no charge or proceeding
with respect to a violation of any occupational safety or health standard that
has been asserted or is now pending or, to the Knowledge of the Company,
threatened with respect to the Company or any of its Subsidiaries relating to
the conduct of the Business; (vii) there is no charge of sexual harassment, or
discrimination in employment or employment practices, for any reason, including
age, gender, race, religion or other legally protected category, which has been
asserted or is now pending or, to the Company’s Knowledge, threatened, before
the United States Equal Employment Opportunity Commission, or any other
Authority in any jurisdiction in which the Company has employed or currently
employs any Person in connection with the Business; and (viii) during the past
twelve (12) months, the

 

 

Company has not implemented or initiated any layoff or made or started any
collective dismissal of employees requiring advance notice under the Workers
Adjustment and Retraining Notification Act and any similar state or local Law
(“WARN”).

3.16          ERISA/Employee Benefits. Schedule 3.16 lists each Employee Plan
that covers any Employee, copies of which, and a summary plan description of
each of which, have been made available or furnished to the Purchaser. Neither
the Company nor any ERISA Affiliate has ever sponsored or maintained or has ever
had any liability with respect to any plan subject to Title IV or ERISA, any
funded welfare benefit plan, as defined in Section 419 of the Code, any multiple
employer plan, or any arrangement subject to Section 409A of the Code. Neither
the Company nor any ERISA Affiliate has any agreement or commitment to create
any additional Employee Plan or Benefit Arrangement, enter into any additional
employment agreement, or modify or change any existing Plan or employment
agreement. With respect to each Employee Plan or Benefit Arrangement (each, a
“Plan”), the Company has heretofore made available to the Purchaser true,
correct and complete copies of (i) all documents which comprise the most current
version of each such Plan, including any related trust agreements, insurance
contracts or other funding or investment agreements and any amendments thereto,
and (ii) with respect to each Plan that is an “employee benefit plan,” as
defined in Section 3(3) of ERISA, (A) the three (3) most recent Annual Reports
(Form 5500 Series) and accompanying schedules for each of the Plans for which
such a report is required, (B) the three (3) most recent certified financial
statements for each of the Plans for which such a statement is required or was
prepared and (C) for each Plan intended to be “qualified” within the meaning of
Section 401(a) of the Code, the most recent IRS determination, advisory or
opinion letter issued to the Company, the Subsidiaries or, as applicable, the
prototype plan sponsor, with respect to such Plan. To the Knowledge of the
Company, the Company and each ERISA Affiliate has performed and complied with
all of their obligations under and with respect to the Plans and each of the
Plans has, at all times, in form, operation and administration complied with its
terms, and, where applicable, the requirements of the Code, ERISA and all other
applicable Laws. To the Knowledge of the Company, each Plan which is intended to
be “qualified” within the meaning of Section 401(a) of the Code is so qualified
and is the subject of a favorable IRS determination, advisory or opinion letter
on which it may rely and, to the Knowledge of the Company, nothing has occurred
which reasonably could be expected to adversely affect such qualified status.
Except as set forth on Schedule 3.16, there are no unpaid contributions due
prior to the date hereof with respect to any Plan that are required to have been
made prior to the date hereto under the terms of the Plan or any applicable
Laws. Neither the Company nor any ERISA Affiliate has any obligation to provide
health benefits or other non-pension benefits to retired or other former
employees, except as specifically required by Section 4980B of the Code or
Part 6 of Title I of ERISA, and the Company and each ERISA Affiliate has
complied with the requirements of Code Section 4980B and such Part 6, the
requirements of the Health Insurance Portability and Accountability Act of 1996,
and all similar state Laws. To the Knowledge of the Company, none of the
Company, any ERISA Affiliate, or any director, officer or employee of the
Company or any other “disqualified person” or “party in interest,” as defined in
Section 4975 of the Code and Section 3(14) of ERISA, respectively, has engaged
in any “prohibited transaction,” as defined in Section 4975 of the Code or
Section 406 of ERISA, except when there has been a statutory or regulatory
exemption, nor have there been any fiduciary violations under ERISA that could
subject the Purchaser, the Company, or any ERISA Affiliate (or any officer,
director or employee thereof) to any penalty or tax under Section 502(i) of
ERISA or Sections 4971 and 4975 of the Code. With respect to any Plan: (i) no
filing, application or other matter is pending with the IRS, the Pension Benefit
Guaranty Corporation, the United States Department of Labor or any other
Authority, (ii) there is no action, suit or claim pending (nor, to the Knowledge
of the Company, any basis for such a claim), other than routine claims for
benefits, and (iii) there are no outstanding liabilities for taxes, penalties or
fees. Neither the execution and delivery of this Agreement nor the consummation
of the transactions contemplated hereby will: (i) entitle any current or former
employee of the Company or any ERISA Affiliate to severance pay, unemployment
compensation or any other payment, (ii) accelerate the time of payment or
vesting or increase the amount of any compensation due to any such employee or
former employee or (iii) directly or indirectly result in any payment made or to
be made to or on behalf of

 

 

any person constituting a “parachute payment” within the meaning of Section 280G
of the Code, nor is the Company party to or bound by any contract that could
require it to make any payment that could constitute a “parachute payment”
within the meaning of Section 280G of the Code.

3.17          Absence of Certain Changes and Events. Except as set forth on
Schedule 3.17 or as contemplated by this Agreement, since the date of the
Balance Sheet, there has not been:

(a)                any transaction or expenditure involving more than $20,000
entered into by the Company or any of its Subsidiaries other than in the
ordinary course of business;

(b)               any uninsured loss of or damage to any of the properties of
the Company or any of its Subsidiaries due to fire or other casualty, amounting
to more than $20,000 in the aggregate;

(c)                any declaration, setting aside or payment of any dividend or
other distribution with respect to any Shares, or any repurchase, redemption,
retirement or other acquisition by the Company of any outstanding Shares, or
other securities of, or other equity or ownership interests in, the Company or
any other capital contribution to or equity investment in the Company or any of
its Subsidiaries;

(d)               the incurrence of any Encumbrance (other than a Permitted
Encumbrance) or the incurrence of any obligation or liability other than current
liabilities incurred since the date of the Balance Sheet in the ordinary course
of business and consistent with past practice;

(e)                any change in the Organizational Documents of the Company or
any of its Subsidiaries or any amendment of any term of any outstanding security
of the Company;

(f)                any incurrence, assumption or guarantee by the Company or any
of its Subsidiaries of any indebtedness for borrowed money other than in the
ordinary course of business and in an aggregate amount not exceeding $20,000;

(g)                any making of any loan, advance or capital contributions to,
or investment in, any Person other than ordinary course advances or deemed
advances to and from operations;

(h)               any sale, lease, pledge, transfer or other disposition of any
asset having a value in excess of $20,000 except for sales of inventory in the
ordinary course of business or dispositions of obsolete machinery and equipment;

(i)                 any material transaction or commitment made, or any material
contract or agreement entered into, by the Company or any of its Subsidiaries
relating to the Business (including the acquisition or disposition of any assets
except for sales of inventory in the ordinary course of business or dispositions
of obsolete machinery and equipment) or any relinquishment by Company of any
material contract or other right other than purchases or sales (or contracts or
commitments therefor) made in the ordinary course of business;

(j)                 any (A) grant of any severance or termination pay to any
director, manager, officer or employee of the Company or any of its
Subsidiaries, (B) entering into of any employment, severance, management,
consulting, deferred compensation or other similar agreement (or any amendment
to any such existing agreement) with any director, manager, officer or employee
of the Company or any of its Subsidiaries, (C) change in benefits payable under
existing severance or termination pay policies or employment, severance,
management, consulting or other similar agreements other than in the ordinary
course of business, (D) change in compensation, bonus or other benefits payable
to directors, managers, officers or employees of the Company or any of its
Subsidiaries, other than in the ordinary course of

 

 

business with respect to employees other than officers, directors and managers
of the Company or any of its Subsidiaries, or (E) change in the payment or
accrual policy with respect to any of the foregoing;

(k)               any labor dispute or any activity or proceeding by a labor
union or representative thereof to organize any employees of the Company or any
of its Subsidiaries, or any lockouts, strikes, slowdowns, work stoppages,
grievances or threats thereof by or with respect to any employees of the
Company;

(l)                 any sale, assignment or transfer of any Intellectual
Property Asset owned or purported to be owned by the Company or any of its
Subsidiaries;

(m)             any capital expenditures, or commitment to make any capital
expenditures, for additions to property, plant or equipment in an aggregate
amount exceeding $20,000;

(n)               any write-down or write-up (or failure to write down or write
up in accordance with GAAP consistent with past practice) the value of any
inventories or accounts receivables or revalued any Assets other than in the
ordinary course of business consistent with past practice and in accordance with
GAAP;

(o)               any change in any method of accounting or accounting practice
or policy used by the Company, other than such changes required by GAAP;

(p)               any payment of any amounts to, or liability incurred to or in
respect of, or sale of any properties or assets (real, personal or mixed,
tangible or intangible) to, or any transaction or any agreement or arrangement
with, any corporation or business in which the Company or any of its
Subsidiaries or any of its officers, directors or managers, or any “affiliate”
or “associate” (as such terms are defined in the rules and regulations
promulgated under the Securities Act) of any such Person, has any direct or
indirect ownership interests (excluding bonus arrangements and employment plans
for officers or employees of the Company pursuant to any Contract); or

(q)               any failure to renew any insurance policy or License that is
scheduled to terminate or expire within thirty (30) calendar days of the
Closing.

3.18          Certain Transactions. Except as set forth on Schedule 3.18, and
except for (a) relationships with the Company as an officer, director, or
employee thereof (and compensation by the Company in consideration of such
services) and (b) relationships with the Company as sellers, none of the
directors, officers, or stockholders of the Company, or any stockholder of any
of their families, is presently a party to, or was a party to during the three
(3) years preceding the date of this Agreement, any transaction, or series of
similar transactions, with the Company, in which the amount involved exceeds
$20,000, including, without limitation, any contract, agreement, or other
arrangement (i) providing for the furnishing of services to or by,
(ii) providing for rental of real or personal property to or from, or
(iii) otherwise requiring payments to or from, any such Person or any other
Person in which any such Person has or had a 5%-or-more interest (as a
stockholder, partner, beneficiary, or otherwise) or is or was a director,
officer, employee, or trustee. None of the Company’s officers or directors has
any interest in any property, real or personal, tangible or intangible,
including inventions, copyrights, trademarks, or trade names, used in or
pertaining to the Business, or any supplier, services provider, joint venturer
or customer of the Company, except for the normal rights of a Seller, and except
for rights under existing employee benefit plans.

3.19          Banking Facilities. Schedule 3.19 contains a complete and correct
list of the names and locations of all banks in which the Company and each of
its Subsidiaries has accounts or safe deposit boxes,

 

 

the designation of each such account and safe deposit box, and the names of all
persons authorized to draw on or have access to each such account and safe
deposit box.

3.20          No Broker. Except as set forth on Schedule 3.20, no broker,
finder, agent or similar intermediary has acted for or on behalf of the Company
in connection with this Agreement or the Contemplated Transactions, and no
broker, finder, agent or similar intermediary is entitled to any broker’s,
finder’s or similar fee or other commission in connection therewith based on any
agreement, arrangement or understanding with the Company.

3.21          Major Customers. Schedule 3.21 contains a true, correct and
complete list of the twenty-five (25) largest (determined on the basis of the
total dollar amount of sales) customers of the Company for the year ended
December 31, 2013 and the eight (8) month of period ending on August 31, 2014
showing the total dollar amount of such business from each such customer during
such period and whether such customer is an Affiliate or third party. Except as
set forth on Schedule 3.21, none of the foregoing customers has provided the
Company or any of its Subsidiaries with written notice that it will stop or
materially decrease its use of the Company’s or any of its Subsidiaries
business, products or services, or that it will implement changes in the terms
and conditions in the provision of such use adverse to the Company, or is
otherwise involved in, or is threatening, a dispute with the Company or any of
its Subsidiaries.

3.22          Accounts Receivable. Schedule 3.22 is an aged list of the accounts
receivable, notes and other amounts receivable from third parties, including
customers and employees, arising from the conduct of the Business before the
Closing, whether or not in the ordinary course, together with any unpaid
financing charges accrued thereon (“Receivables”) as of the Closing Date showing
the aging of such Receivables as follows: (a) 0-30 days, (b) 31-60 days, (c)
61-90 days, and (d) more than ninety (90) days. Except to the extent, if any,
reserved for on the Balance Sheet, all Receivables reflected on the Balance
Sheet arose from, and the Receivables existing as of the Closing (subject, in
the case of Receivables arising since the date of the Balance Sheet, to a
reasonable allowance for bad debts) will have arisen from, the sale of inventory
or services to Persons not affiliated with the Company or any of its
Subsidiaries and in the ordinary course of business consistent with past
practice and, except as reserved against on the Balance Sheet, constitute or
will constitute, as the case may be, only valid, undisputed claims of the
Company or any of its Subsidiaries not subject to valid claims of setoff or
other defenses or counterclaims other than normal cash discounts accrued in the
ordinary course of business consistent with past practice.

3.23          Inventories. A list of the Company’s inventory and the inventory
of each of its Subsidiaries as of the date hereof is set forth on Schedule 3.23
attached hereto (the “Inventory”). All of the Inventory can be used or consumed
in the ordinary course of business as now conducted. Since December 31, 2013,
there has been no change in the amount of such Inventory of the Company and each
of its Subsidiaries except for changes as a result of the purchase and sale of,
adjustment to, or consumption of Inventory in the ordinary course of business
consistent with prior practice, including, but not limited to, established
seasonal patterns. All Inventory is owned by the Company and each of its
Subsidiaries free and clear of all Encumbrances, and no Inventory is held on a
consignment basis. The quantities of each item of Inventory (whether raw
materials, work-in-process or finished goods) are reasonable in the present
circumstances of the Company and consistent with past practices of the Company
and each of its Subsidiaries.

3.24          Complete Disclosure. No representation or warranty by the Company
in this Agreement, and no exhibit, schedule, statement, certificate or other
writing furnished to Purchaser pursuant to this Agreement or in connection with
the transactions contemplated hereby, contains or will contain any untrue
statement of a material fact or omits or will omit to state a material fact
necessary to make the statements contained herein and therein in the context in
which they were made not misleading. There is no fact, development or threatened
development which the Company has not disclosed to Purchaser in writing and

 

 

which is having or is likely to have a material adverse effect on the Company,
its business, assets, operations or condition (financial or otherwise). The
Company has provided or made available to Purchaser true, correct and complete
copies of all documents, including all amendments, supplements and modifications
thereof or waivers currently in effect thereunder, described in the Disclosure
Schedule.

                                                                                                                                                       
ARTICLE IV

REPRESENTATIONS AND WARRANTIES OF THE PURCHASER

The Purchaser represents and warrants to the Sellers as follows:

4.1              Due Incorporation; Authority. The Purchaser is a corporation
duly incorporated, validly existing and in good standing under the laws of the
State of Nevada. The Purchaser has all requisite corporate power and authority
to enter into, execute and deliver this Agreement and any other documents to
which it is a party and to perform fully its obligations hereunder and
thereunder. The Purchaser has taken all actions necessary to authorize it to
execute and deliver and perform fully its obligations under this Agreement and
any other documents to which it is a party and to consummate the Contemplated
Transactions. This Agreement has been validly executed and delivered by the
Purchaser and constitutes a valid and binding obligation of the Purchaser,
enforceable against such party, as applicable, in accordance with its terms,
subject to applicable bankruptcy, insolvency and other similar laws relating to
the enforcement of creditors’ rights generally and to general principles of
equity.

4.2              Investment Representations4.3. Purchaser understands that the
Sellers have agreed to sell the Shares to Purchaser in reliance upon Purchaser’s
representation to the Sellers that the Shares are being acquired by Purchaser
for investment for Purchaser’s own account, not as a nominee or agent, and not
with a view to the resale or distribution of any part thereof without
registration or qualification under applicable federal and state securities
laws. Purchaser acknowledges that it can bear the economic risk of its
investment and has such knowledge and experience in financial or business
matters that it is capable of evaluating the merits and risks of the investment
in the Shares. Purchaser understands that the Shares are characterized as
“restricted securities” under the federal securities laws inasmuch as they are
being acquired from the Sellers in a transaction not involving a public offering
and that under such laws and applicable regulations such securities may be
resold without registration under the Securities Act only in certain limited
circumstances. Purchaser understands that no public market exists for any of the
securities issued by the Company and that there is no assurance that a public
market will ever exist for the Shares.

                                                                                                                                                         
ARTICLE V

COVENANTS OF THE PARTIES

The parties hereto covenant and agree as follows:

5.1              Confidential Information. From and after the Closing, each
Seller shall keep secret and retain in strictest confidence, and not use for the
benefit of such Person or any Person other than the Company and its Affiliates,
all confidential matters and trade secrets of the Company or any of its
Subsidiaries known to him, her or it relating to the Business (“Confidential
Information”); provided, however, that the Sellers may disclose such
Confidential Information if required by applicable Law or pursuant to an Order.
Confidential Information shall not include (a) information which is or becomes
generally known to the public through no act or omission of the Sellers, (b)
information that was or is independently developed by one or both Sellers not in
the course of their employment with (or service as a director or owner of) the
Company or any successor entity and without any use of the Confidential
Information of the Company, as demonstrated by files created by such Seller in
the ordinary course of

 

 

business at the time of such independent development, (c) is disclosed generally
to third parties by the Company or the Purchaser without restrictions similar to
those contained in this Agreement, (d) is disclosed with the prior written
approval of the Purchaser or (e) information which has been or hereafter is
lawfully obtained by a Seller from a source other than the party to whom such
Confidential Information belongs (or any of its Affiliates or their respective
officers, directors, managers, employees, equity holders or agents) so long as,
in the case of information obtained from a third party, such third party was or
is not, directly or indirectly, subject to an obligation of confidentiality owed
to the party to whom such confidential information belongs or any of its
Affiliates at the time such Confidential Information was or is disclosed to the
other party. Notwithstanding the foregoing, each Seller is permitted to disclose
Confidential Information to (A) its advisors, but only to the extent reasonably
necessary in order for such party to perform its obligations and exercise its
rights and remedies under this Agreement, and (B) customers, suppliers,
potential customers, suppliers and other Persons in the ordinary course of
operating the Business, consistent with past practices, provided, that, in each
case, and such party will take all such action as is necessary and customary in
order to ensure that each of such persons maintains the confidentiality of any
confidential information that is so disclosed; and make additional disclosures
of or use for its own benefit Confidential Information, but only if and to the
extent that such disclosures or use are specifically contemplated by this
Agreement.

5.2              Publicity. Unless otherwise required by any Authority, by
applicable Law or the rules of any securities exchange that may be applicable,
no publicity release or announcement concerning this Agreement or the
transactions contemplated hereby shall be issued without advance written
approval of the form and substance thereof by each Seller and the Purchaser.

                                                                                                                                                       
ARTICLE VI

TAX MATTERS

6.1              Tax Covenants. The following provisions shall govern the
allocation of responsibility as between the Purchaser, the Company, and the
Sellers for certain tax matters following the Closing Date:

(a)                Post-Closing. The Purchaser shall prepare or cause to be
prepared and file or cause to be filed all Tax Returns for the Company and each
of its Subsidiaries which are filed after the Closing Date; provided, however,
that the Sellers shall have an opportunity to review and comment on such Tax
Returns if the Sellers have an indemnification obligation under Section 8.2 with
respect to such Tax Returns. For purposes of this Agreement, Pre-Closing Taxes
for any Straddle Periods shall be determined assuming that payment has been made
in a manner without regard to penalties, interest or other amounts resulting
from the failure to pay such Taxes in a timely manner unless such failure is
due, all or in part, to the actions or inaction of the Sellers. The Company
shall be entitled to reimbursement of all Taxes paid pursuant to this Section
6.1(a) for Pre-Closing Tax Periods. The Purchaser and the Sellers shall
cooperate fully, as and to the extent reasonably requested by the other party,
in connection with the filing of Tax Returns pursuant to this Article VI and any
audit, litigation or other proceeding with respect to Taxes (any such
proceeding, a “Tax Proceeding”). Such cooperation shall include the retention
and (upon the other party’s reasonable request) the provision of records and
information which are reasonably relevant to any such audit, actual or
threatened litigation or other proceeding and making employees available on a
mutually convenient basis to provide additional information and explanation of
any material provided hereunder. The Purchaser agrees (A) to retain all books
and records with respect to Tax matters pertinent to the Company relating to any
Tax period beginning before the Closing Date until the expiration of the statute
of limitations (and, to the extent notified by the Company or either Seller, any
extensions thereof) of the respective Tax periods, and to abide by all record
retention agreements entered into with any taxing authority, and (B) to give the
Sellers reasonable written notice prior to transferring, destroying or
discarding any such books and records and, if either Seller so requests, the
Company shall allow that Seller to take possession of such books and

 

 

records. The Purchaser shall have the right to control the conduct and
resolution of any Tax Proceeding; provided, however, that if a Tax Proceeding is
with respect to Taxes attributable to a Pre-Closing Tax Period for which the
Sellers may be liable for a material amount under this Agreement, then the
Sellers shall have the right to participate in such Tax Proceeding at their own
expense and, in such case, the Purchaser shall not settle any such Tax
Proceeding without the Sellers’ written consent, which shall not be unreasonably
withheld, delayed or conditioned. The Purchaser and the Sellers further agree,
upon request, to use their commercially reasonable efforts to obtain any
certificate or other document from any Authority or any other Person as may be
necessary to mitigate, reduce or eliminate any Tax that could be imposed
(including, but not limited to, with respect to the Contemplated Transactions).

(b)               Closing of the Books.  Unless closing of the books on the
Closing Date takes place automatically by operation of Code section
1362(e)(6)(D), Purchaser will cause the Company to elect to close its books as
of the date of the transfer pursuant to Code section 1377(a)(2), and Sellers
hereby consent to such election.

(c)                Transfer Taxes. All transfer, documentary, sales, use, stamp,
registration and other such Taxes, and all conveyance fees, recording charges
and other fees and charges (including any penalties and interest) incurred in
connection with consummation of the transactions contemplated by this Agreement
(together with the cost of preparation and filing any related Tax Returns) shall
be paid by the Sellers when due, and the Sellers will, at their own expense,
file all necessary Tax Returns and other documentation with respect to all such
Taxes, fees and charges, and, if required by applicable law, the Purchaser
and/or the Company will join in the execution of any such Tax Returns and other
documentation.

                                                                                                                                                     
ARTICLE VII

CONDITIONS TO CLOSING

7.1              Conditions to the Obligations of each Party. The obligations of
the Purchaser, the Company, and the Seller to consummate the Contemplated
Transactions are subject to the satisfaction of the following conditions:

(a)                No provision of any applicable Law and no Order shall
prohibit the consummation of the Contemplated Transactions as of the Closing.

(b)               Each other party to this Agreement shall have executed and
delivered each of the ancillary agreements, documents and instruments required
to be delivered by it at the Closing pursuant to Section 1.4.

7.2              Conditions to the Obligations of the Purchaser. The obligations
of the Purchaser to consummate the Contemplated Transactions are subject to the
satisfaction of the following further conditions:

(a)                The Company and each Seller shall have performed all of their
obligations hereunder required to be performed by them on or prior to the
Closing Date, and (ii) the representations and warranties of the Company and
each Seller contained in this Agreement shall be true and correct in all
respects as of the date hereof and at and as of the Closing Date as though made
at and as of the Closing Date (or to the extent expressly made as of an earlier
date, as of such date).

(b)               The Company shall have received all Licenses, consents,
authorizations or approvals from, and shall have filed all notices and materials
with, any Authority that are listed on Schedule 3.4 in connection with the
consummation of the transactions contemplated hereby, in each case in form and

 

 

substance previously agreed to by the Company and the Purchaser, and no such
License, consent, authorization or approval shall have been revoked.

(c)                No Litigation by or before any Authority shall be pending or
threatened (i) against the Company or its Assets, or (ii) which questions the
validity or legality of the Contemplated Transactions or any aspect thereof, or
seeks to restrain the Contemplated Transactions or any aspect thereof or to
recover any damages in connection therewith.

(d)               The Company shall have obtained all Required Consents.

(e)                The Purchaser shall have, in its sole discretion, completed
its legal, financial and commercial due diligence to its reasonable
satisfaction.

7.3              Conditions to the Obligations of the Company and the Sellers.
The obligations of the Sellers to consummate the Contemplated Transactions are
subject to the satisfaction of the following further conditions: (a) the
Purchaser shall have performed all of its obligations hereunder required to be
performed by it at or prior to the Closing Date and (b) the representations and
warranties of the Purchaser contained in this Agreement shall be true and
correct in all respects as of the date hereof and at and as of the Closing Date
as though made at and as of the Closing Date (or, to the extent expressly made
as of an earlier date, as of such date).

                                                                                                                                                  
ARTICLE VIII

SURVIVAL; INDEMNIFICATION

8.1              Survival. All representations, warranties, covenants, and
obligations in this Agreement, the Disclosure Schedule and any other certificate
or document delivered pursuant to this Agreement will survive the Closing,
subject to applicable time limitations set forth in Section 8.3. The right to
indemnification, payment of Losses or other remedy based on such
representations, warranties, covenants, and obligations will not be affected by
any investigation conducted with respect to, or any Knowledge acquired (or
capable of being acquired) at any time after the execution and delivery of this
Agreement or the Closing Date, with respect to the accuracy or inaccuracy of or
compliance with, any such representation, warranty, covenant, or obligation.
Unless otherwise agreed to in a separate written agreement, the waiver of any
condition based on the accuracy of any representation or warranty, or on the
performance of or compliance with any covenant or obligation, will not affect
the right to indemnification, payment of Losses, or other remedy based on such
representations, warranties, covenants, and obligations, provided that if a
party proceeds to consummate the Closing notwithstanding the failure of a
condition precedent to that party’s obligation to close, then such party’s
recourse shall be limited to a claim for a breach of a representation and
warranty rather than a claim based on the failure of the covenant or condition.

8.2              Indemnification and Payment of Losses by the Sellers. Subject
to applicable limitations in time and amount set forth in Sections 8.4 and 8.5,
the Sellers, after the Closing, will indemnify and hold harmless the Purchaser,
its successors and assigns in interest, and each of their respective officers,
directors, partners, stockholders, employees, agents, advisors, controlling
persons, and affiliates (collectively, the “Purchaser Indemnitees”) for, and
will pay to the Purchaser Indemnitees the amount of, any Losses, arising,
directly or indirectly, from or in connection with:

(i)             any breach of any representation or warranty contained in
ARTICLE II or ARTICLE III of this Agreement or any representation or warranty of
the Company or the Sellers contained in any other document or any other
certificate delivered by either Seller (on behalf of the Company or in his or
capacity as an officer or stockholder of the Company), or the Company pursuant
to this Agreement

 

 

with respect to such representations or warranties, disregarding (solely for
purposes of determining the Losses but not for determining whether or not any
such breach has occurred) all qualifications and exceptions contained therein
including the phrase “in all material respects” or any equivalent phrase;

(ii)           any breach by the Company or the Sellers of any covenant or
obligation of the Company or the Sellers contained in this Agreement or any
other document or certificate delivered by or on behalf of the Company or the
Sellers;

(iii)             any claim by any Person for brokerage or finder’s fees or
commissions or similar payments based upon any agreement or understanding
alleged to have been made by any such Person with the Company (or any Person
acting on its behalf) in connection with any of the Contemplated Transactions;

(iv)             any Pre-Closing Taxes; and

(v)               any Indebtedness of the Company existing at Closing.

Notwithstanding the foregoing, the indemnification obligation of each Seller to
indemnify the Purchaser with respect to any breach of a covenant, representation
of warranty of the Sellers set forth in ARTICLE II shall extend only to Losses
occasioned by a breach by that Seller of his own covenants, representations and
warranties.

8.3              Time Limitations. The representations and warranties of the
Purchaser, the Company and the Sellers in this Agreement (i) will survive the
Closing and (ii) will continue until the date that is eighteen (18) months from
the Closing Date (the “Termination Date”), at which time all representations and
warranties will expire; provided, however, (A) the Sellers will continue to have
liability pursuant to Section 8.2 with respect to the representations and
warranties contained in ARTICLE II, Sections 3.1 (Organization; Authority; Due
Authorization), 3.2 (Capitalization of the Company and Subsidiaries) and 3.5
(Sufficiency of and Title to Assets) indefinitely, and (B) the Sellers will
continue to have liability pursuant to Section 8.2 with respect to the
representations and warranties contained in Sections 3.7 (Taxes), 3.14
(Environmental Matters), 3.15 (Employee Matters) and 3.16 (ERISA/Employee
Benefits) until the date that is sixty (60) calendar days after the underlying
obligation is barred by the applicable period of limitation under federal and
state Laws relating thereto (claims for indemnification pursuant to Section
8.2(i) with respect to the matters set forth in clauses (A) and (B),
(collectively, the “Extended Representations and Warranties”).

8.4              Limitations on Amount – Company and Sellers. The Sellers will
have no liability (for indemnification or otherwise) with respect to the matters
described in Section 8.2(i) unless and until the total of all Losses incurred by
the Purchaser Indemnitees under such Section exceeds an aggregate amount of
Fifteen Thousand Dollars ($15,000) (the “Threshold”). After the total of all
Losses incurred by the Purchaser Indemnitees with respect to matters described
in Section 8.2(i) exceeds the Threshold, the Purchaser Indemnitees will be
entitled to indemnification of all Losses (including those below the Threshold)
with respect to the matters described in Section 8.2(i) up to a maximum (in the
aggregate) of One Hundred Thousand Dollars ($100,000) (the “Cap”).
Notwithstanding anything to the contrary herein, the Threshold and the Cap shall
not apply to claims based on (a) fraud or intentional misrepresentation by the
Company or any Seller in this Agreement; or (b) any Extended Representations and
Warranties.

8.5              Setoff. To the extent either Seller has an indemnification
obligation to Purchaser pursuant to this ARTICLE VIII, Purchaser may set off, at
its option, any Losses hereunder against amounts then due and owing under the
Note to such Seller or both of the Notes.

 

 

8.6              Procedure for Indemnification – Third Party Claims.

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

(b)               If any proceeding referred to in Section 8.6(a) is brought
against an indemnified party and it gives notice to the indemnifying party of
the commencement of such proceeding, the indemnifying party will be entitled to
participate in such proceeding and, to the extent that it wishes (unless the
indemnifying party fails to provide reasonable assurance to the indemnified
party of its financial capacity to defend such proceeding and provide
indemnification with respect to such proceeding), to assume the defense of such
proceeding with counsel reasonably satisfactory to the indemnified party and,
after notice from the indemnifying party to the indemnified party of its
election to assume the defense of such proceeding, the indemnifying party will
not, as long as it diligently conducts such defense, be liable to the
indemnified party under this ARTICLE VIII for any fees of other counsel or any
other expenses with respect to the defense of such proceeding, in each case
subsequently incurred by the indemnified party in connection with the defense of
such proceeding, other than reasonable costs of investigation; provided,
however, that if there exists a conflict of interest that would make it
inappropriate in the written legal opinion of counsel for the indemnified party
for the same counsel to represent both the indemnified party and the
indemnifying party, then the indemnified party shall be entitled to retain its
own counsel in each jurisdiction for which the indemnified party determines
counsel is required, at the expense of the indemnifying party. If the
indemnifying party assumes the defense of a proceeding, (i) no compromise or
settlement of such claims may be effected by the indemnifying party without the
indemnified party’s consent, which consent shall not be unreasonably withheld or
delayed, unless (A) there is no finding or admission of any violation of Law or
any violation of the rights of any Person and no effect on any other claims that
may be made against the indemnified party, and (B) the sole relief provided is
monetary damages that are paid in full by the indemnifying party; and (C) such
compromise or settlement shall include an unconditional release of the
indemnified party from all liabilities arising out of such claim. If notice is
given to an indemnifying party of the commencement of any proceeding and the
indemnifying party does not, within twenty (20) days after the indemnified
party’s notice is given, give notice to the indemnified party of its election to
assume the defense of such proceeding, the indemnifying party will be bound by
any determination made in such proceeding so defended or any compromise or
settlement effected, provided that no compromise or settlement of such claims
may be effected by the indemnified party without the indemnifying party’s
consent, which consent shall not be unreasonably withheld or delayed, unless
such compromise or settlement shall include an unconditional release of the
indemnifying party from all liabilities arising out of such claim. The
indemnifying party and indemnified party will cooperate with each other in the
defense of any third party claim subject to indemnification hereunder.

(c)                Notwithstanding the foregoing, if an indemnified party
determines in good faith that there is a reasonable probability that a
proceeding may materially and adversely affect it or its Affiliates, other than
as a result of monetary damages for which it would be entitled to
indemnification under this Agreement, the indemnified party may, by notice to
the indemnifying party, assume the exclusive right to defend, compromise, or
settle such proceeding, but the indemnifying party will not be bound by any
determination of a proceeding so defended or any compromise or settlement
effected without its consent which shall not be unreasonably withheld or
delayed, unless such compromise or settlement shall include an unconditional
release of the indemnifying party from all liabilities, monetary or otherwise,
arising out of such claim.

 

 

8.7              Procedure for Indemnification – Other Claims. A claim for
indemnification for any matter not involving a third-party claim must be
asserted by written notice delivered in accordance with Section 8.6(a) to the
party from whom indemnification is sought which notice shall specify in
reasonable detail the factual basis for such claim and either the fixed amount
of Losses resulting from such claim, or if the Losses have not been finally
determined, a good faith estimate of the amount of such Losses along with a
statement of the basis for such estimate.

8.8              Claims Against the Company. Each Seller (a) expressly waives
any rights of indemnification of such Seller against the Company for acts,
circumstances, and events that give rise to indemnification obligations of such
Seller arising under this ARTICLE VIII, and (b) agrees and acknowledges that he
will have no right of contribution from, or right of subrogation against, the
Company in the event he is required to take, or refrain from taking, any action,
whether by the payment of money or otherwise, as a result of this ARTICLE VIII.

                                                                                                                                                       
ARTICLE IX

MISCELLANEOUS

9.1              Notices. All notices, consents, waivers, requests and other
communications hereunder shall be in writing and shall be delivered by courier
or other means of personal service (including by means of an internationally
recognized courier service or a professional messenger service), or sent by
facsimile or mailed first class, postage prepaid, by certified mail, return
receipt requested, in all cases, addressed as follows:

 

(i)                 If to Sellers, to:

Mr. Madhu Mathew Mammen

100 Julia Court

Lexington, S.C. 29072

Facsimile:____________________

 

Mr. Imad Siddiqui

2457 Valhalla Dr. NE

Atlanta, GA 30345

Facsimile:____________________

 

(with a copy, which shall not constitute notice, to)

 

Eaton Peabody

P.O. Box 1210

80 Exchange Street

Bangor, ME 04402-1210

Attention: Daniel G. McKay, Esq.

Facsimile: (207) 942-3040

 

(ii)               If to the Purchaser, to:

Oncologix Tech, Inc.

1604 West Pinhook Drive, Suite 200

Lafayette, LA 70508

Attention: Roy W. Erwin, Chief Executive Officer

 

 

Facsimile: (616) 977-9955

 

(with a copy, which shall not constitute notice, to)

 

Posternak Blankstein & Lund LLP

Prudential Tower

800 Boylston Street

Boston, MA 02199-8004

Attention: David M. Barbash, Esq.

Facsimile: (617) 367-2315

All notices, requests and other communications shall be deemed given on the date
of actual receipt or delivery as evidenced by written receipt, acknowledgment or
other evidence of actual receipt or delivery to the address or a receipt
generated by the sender’s fax machine showing that such communication was sent
to the appropriate fax number on a specified date, if sent by facsimile;
provided that if the date of receipt is not a Business Day (and, in the case of
delivery by facsimile if not received prior to the end of the normal Business
Day of the recipient), then on the first Business Day of the recipient after the
date of such receipt. In case of service by facsimile, a copy of such notice
shall be personally delivered or sent by registered or certified mail, in the
manner set forth above, intended for receipt within three (3) Business Days
thereafter (provided that the failure to do so shall not prevent such notice
from being effective upon receipt as noted above). Either party hereto may from
time to time by notice in writing served as set forth above designate a
different address or a different or additional person to which all such notices
or communications thereafter are to be given.

9.2              Entire Agreement. This Agreement (including without limitation
the schedules and exhibits hereto) and the agreements, documents and instruments
to be executed and delivered pursuant hereto embody the final, complete and
exclusive agreement among the parties with respect to the sale of the Shares and
the Contemplated Transactions; supersede all prior letters of intent,
agreements, understandings and representations (whether written or oral) with
respect thereto; and may not be contradicted by evidence of any such prior
agreement, understanding or representation, whether written or oral.

9.3              Governing Law and Venue. This Agreement is to be governed by
and construed in accordance with the laws of the State of South Carolina
applicable to contracts made and to be performed wholly within such state, and
without regard to the conflicts of laws principles thereof. Any suit brought
hereon and any and all legal proceedings to enforce this Agreement, whether in
contract, tort, equity or otherwise, shall be brought in the courts of the State
of South Carolina, the courts of the State of Louisiana, the United States
District Court sitting in South Carolina or the United States District Court
sitting in Rapides Parish, Louisiana, the parties hereto hereby waiving any
claim or defense that such forum is not convenient or proper.

9.4              Binding Effect. This Agreement and the rights, covenants,
conditions and obligations of the respective parties hereto and any instrument
or agreement executed pursuant hereto shall be binding upon the parties and
their respective successors, assigns and legal representatives. Neither this
Agreement, nor any rights or obligations of any party hereunder, may be assigned
by a party without the prior written consent of the other party, provided,
however, that (a) each of the Purchaser and the Company shall have the right to
assign its rights hereunder to any lender providing financing to the Purchaser,
the Company or any of their respective affiliates for collateral security
purposes and (b) the Purchaser shall have the right to assign its rights and
obligations under this Agreement, in whole or in part, to an Affiliate or to
designate any of its Affiliates (to the extent permitted by Law) to receive
directly the Shares to be purchased hereunder or to exercise any of the rights
of the Purchaser, or to perform any of its obligations.

 

 

9.5              Miscellaneous. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original but all of which
together shall constitute one and the same instrument, and delivery of an
executed counterpart by fax, pdf or other electronic means shall be equally
effective as delivery of an original, manually executed counterpart of this
Agreement. The section headings of this Agreement are for convenience of
reference only and shall not be deemed to alter or affect any provision hereof.
All references in this Agreement to Articles, Sections, Exhibits or Schedules
refer to Articles or Sections of, or Exhibits or Schedules to, this Agreement
unless otherwise specified. Where the context or construction requires, all
words applied in the plural shall be deemed to have been used in the singular,
and vice versa; the masculine shall include the feminine and neuter, and vice
versa; and the present tense shall include the past and future tense, and vice
versa. Unless otherwise expressly provided, the word “including” does not limit
the preceding words or terms. If any provision of this Agreement is held invalid
or unenforceable by any court of competent jurisdiction, the other provisions of
this Agreement will remain in full force and effect. Any provision of this
Agreement held invalid or unenforceable only in part or degree will remain in
full force and effect to the extent not held invalid or unenforceable. Except as
otherwise expressly set forth in this Agreement, nothing in this Agreement,
whether express or implied, is intended to confer any rights or remedies under
or by reason of this Agreement on any Persons other than the parties to it and
their respective successors in interest and assigns, nor is anything in this
Agreement intended to relieve or discharge the obligation or liability of any
third Persons to any party to this Agreement, nor shall any provision give any
third Persons any right of subrogation or action over against any party to this
Agreement. Except as otherwise expressly set forth in this Agreement, no
provision in this Agreement shall create any third party beneficiary or other
rights in any employee or former employee (including any beneficiary or
dependent thereof) of the Company in respect of continued employment (or resumed
employment) with the Company and no provision shall create any such rights in
any such Persons in respect of any benefits that may be provided, directly or
indirectly, under any Employee Plan or Benefit Arrangement or any plan or
arrangement that may be established by the Purchaser or any of its Affiliates.
No provision of this Agreement shall constitute a limitation on rights to amend,
modify or terminate after the Closing Date any Employee Plan or Benefit
Arrangement.

9.6              Expenses. Each party shall bear its own direct and indirect
expenses.

9.7              Amendments; No Waivers. Any provision of this Agreement
(including the Disclosure Schedules) may be amended if, and only if, such
amendment is in writing and signed by the Purchaser and the Seller. Any
provision of this Agreement may be waived if the waiver is in writing and signed
by the party to be bound. No failure or delay by either party in exercising any
right, power or privilege hereunder shall operate as a waiver thereof nor shall
any single or partial exercise thereof preclude any other of further exercise
thereof or the exercise of any other right, power or privilege. Except as
otherwise expressly provided for herein, the rights and remedies herein provided
shall be cumulative and not exclusive of any rights or remedies provided by Law.

9.8              Further Assurances. From time to time after the Closing, at the
request of the Purchaser and without further consideration, the Seller will
execute and deliver to the Purchaser such other documents, and take such other
action, as the Purchaser may reasonably request in order to consummate more
effectively the transactions contemplated hereby and to vest in the Purchaser
good, valid and marketable title to the Shares.

9.9              Definitions. Terms not otherwise defined herein shall have the
meaning ascribed thereto in Exhibit D attached hereto.

[signature page follows]

 

 

 

SIGNATURE PAGE TO STOCK PURCHASE AGREEMENT

IN WITNESS WHEREOF, the parties hereto have duly executed this Stock Purchase
Agreement as an instrument under seal as of the day and year first above
written.

THE COMPANY:

 

ESTEEMCARE, INC.

 

By:

Madhu Mathew Mammen

President

 

PURCHASER:

 

ONCOLOGIX TECH, INC.

 

By:

Roy W. Erwin

Chief Executive Officer

 

 

SELLERS:

Madhu Mathew Mammen

 

 

Imad Siddiqui

 

 

 

 

 

 

 

EXHIBIT D

DEFINITIONS

For purposes of the Agreement, in addition to all other terms defined elsewhere
in this Agreement, the following terms shall have the meanings set forth below:

“Affiliate” of a Person means a Person that directly, or indirectly, through one
or more intermediaries, controls, is controlled by, or is under common control
with, the first mentioned Person and “control” means, with respect to any
Person, the direct or indirect ability to direct or cause the direction of the
management and policies of such Person, whether through the ownership of voting
securities, by contract or otherwise.

“Assets” means the assets, properties and rights of every nature, kind and
description, whether tangible or intangible, personal or mixed, which are
(i) owned by the Company or in which the Company has any interest (including the
right to use) or (ii) used by the Company in the operation of the Business.

“Authority” means any governmental, regulatory or administrative body, agency or
authority, and any court or other judicial authority, in each case whether
Federal, state, local or foreign.

“Benefit Arrangement” means any employment, severance or similar contract,
arrangement or policy and each plan or arrangement providing for severance,
insurance coverage (including any self-insured arrangements), workers’
compensation, disability benefits, supplemental unemployment benefits, vacation
benefits, pension or retirement benefits or for deferred compensation,
profit-sharing, bonuses, phantom stock, options, stock appreciation rights or
other forms of incentive compensation or post-retirement insurance, compensation
or benefits or any co-employment agreement that (i) is not an Employee Plan,
(ii) is entered into, maintained or contributed to, as the case may be, by the
Company or any of its ERISA Affiliates and (iii) covers any Employee or former
Employee of the Company.

“Business Day” means a day on which banks are open for business in both
Lafayette, Louisiana and Columbia, South Carolina.

“Code” means the Internal Revenue Code of 1986, as amended.

“CERCLA” means the Comprehensive Environmental Response, Compensation and
Liability Act, 42 U.S.C. ss. 9601, et seq.

“Contemplated Transactions” means all of the transactions contemplated by this
Agreement, including, without limitation, (a) the sale of the Shares by the
Sellers to the Purchaser and (b) the performance by the parties hereto of their
respective obligations and covenants under this Agreement.

“Employee” means any employee of the Company.

“Employee Plan” means each “employee benefit plan,” as such term is defined in
Section 3(3) of ERISA, that (i) is subject to any provision of ERISA and (ii) is
maintained or contributed to by the Company or any of its ERISA Affiliates, as
the case may be.

“Encumbrance” means any charge, claim, community property interest, condition,
equitable interest, lien, option, pledge, security interest, right of first
refusal, or restriction on voting, transfer, receipt of income, or exercise of
any other attribute of ownership.

“Environmental Law(s)” means all Laws (including common law), now or hereafter
in effect and as amended, any judicial or administrative order, consent decree
or judgment applicable to the Business or

 

 

the real property used by the Business relating to the environment, health,
safety, natural resources or Hazardous Materials, including, without limitation,
CERCLA; the Resource Conservation and Recovery Act, 42 U.S.C. §§ 6901 et seq.;
the Hazardous Materials Transportation Act, 49 U.S.C. §§ 6901 et seq.; the Clean
Water Act, 33 U.S.C. §§ 1251 et seq.; the Toxic Substances Control Act, 15
U.S.C. §§ 2601 et seq.; the Clean Air Act, 42 U.S.C. §§ 7401 et seq.; the Safe
Drinking Water Act, 42 U.S.C. §§ 300f et seq.; the Atomic Energy Act, 42 U.S.C.
§§ 2011 et seq.; and any similar state or local Law and the regulations adopted
from time to time pursuant to said laws.

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

“ERISA Affiliate” of any entity means any other entity that, together with such
entity, would be treated as a single employer under Section 414 of the Code or
Section 4001 of ERISA.

“GAAP” means generally accepted accounting principles in the United States.

“Hazardous Substances” means (a) petroleum and petroleum products, radioactive
materials, asbestos and asbestos-containing materials, urea formaldehyde,
including foam insulation that contains urea formaldehyde, polychlorinated
biphenyls including transformers or other equipment that contain polychlorinated
biphenyls, (b) any other chemicals, materials or substances defined as or
included in the definition of “hazardous substances”, “hazardous wastes”,
“hazardous materials”, “extremely hazardous wastes”, “restricted hazardous
wastes”, “toxic substances”, “toxic pollutants”, “contaminants” or “pollutants”,
or words of similar import, under any of the applicable Environmental Laws and
(c) any other chemical, material or substance which is regulated by any
Environmental Law.

“Indebtedness” of any Person means and includes, without duplication, (a)
indebtedness for borrowed money or indebtedness issued or incurred in
substitution or exchange for indebtedness for borrowed money, (b) indebtedness
evidenced by any note, bond, debenture, mortgage or other debt instrument, debt
security or other similar instrument, (c) indebtedness secured by an Encumbrance
on assets or properties of such Person, (d) obligations or commitments to repay
deposits or other amounts advanced by and owing to third parties, or (e) with
respect to any indebtedness, obligation, claim or liability of a type described
in clauses (a) through (d) above, all accrued and unpaid interest, premiums,
penalties, breakage costs, unwind costs, fees, termination costs, redemption
costs, expenses and other charges with respect to any thereof, to the extent
actually incurred and not paid or accrued. For the avoidance of doubt,
Indebtedness shall not, however, include (x) accounts payable to trade creditors
or (y) accrued expenses arising in the ordinary course of business.

“Intellectual Property Assets” means all of the following that are owned or used
by the Company (or in which the Company has an interest, including a license or
other right of use): (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, (f) all computer
software (including source code, executable code, data, databases, and related
documentation), (g) all advertising and promotional materials, (h) all other
proprietary rights, and (i) all copies and tangible embodiments thereof (in
whatever form or medium).

“Intellectual Property License” means each contract, agreement or other
arrangement to which the Company is party as licensee or licensor relating to
any Intellectual Property Asset excluding in each case any “shrink wrap” or
“click wrap” or similar standard form license or agreement applicable to mass

 

 

marketed software applications that are generally available with minimal
customization to other companies in the industry and pursuant to which the
Company has acquired a perpetual license or pursuant to which license, service
and maintenance fees do not exceed $10,000 on an annual basis.

“Knowledge” when used in the phrases “to the Company’s Knowledge” or words of
similar import shall mean the actual knowledge of a particular fact,
circumstance, event or other matter by a Seller or, with respect to a Seller,
such knowledge as the Seller should reasonably be expected to have given his
duties, responsibilities and obligations within the Company and upon his inquiry
and investigation as would be reasonable for that Seller to make under the
circumstances

“Law” means any law, statute, regulation, ordinance or other binding action,
announcement or requirement of an Authority.

“Liabilities” means all obligations, commitments and other liabilities (or
contingencies that have not yet become liabilities) of a Person (whether
absolute, accrued, contingent, based on any contingency, known or unknown, fixed
or otherwise) or due or to become due.

“License” means any license, permit, approval, certificate, authorization and
similar authorization issued by an Authority.

“Losses” means all losses, liabilities, claims, actions, causes of action,
awards, judgments, payments, costs, expenses, interest, penalties, fines and
other damages (including consequential, punitive, special, and incidental
damages and diminution in value), all costs and expenses of investigating and
defending any third party claim, lawsuit or arbitration and any appeal therefrom
(including reasonable attorneys’ fees) and all amounts paid (including the
direct and indirect costs and expenses associated with providing property or
services) incident to any compromise or settlement of any such claim, lawsuit or
arbitration, in each case, whether or not involving a third-party claim.

“Order” means any award, decision, injunction, judgment, order, ruling,
subpoena, or verdict entered, issued, made, or rendered by any Authority.

“Organizational Documents” means (a) the articles or certificate of
incorporation and the bylaws of a corporation; (b) the partnership agreement and
any statement of partnership of a general partnership; (c) the limited
partnership agreement and the certificate of limited partnership of a limited
partnership; (d) the articles or certificate of organization and the operating
agreement of any limited liability company; (e) any charter or similar document
adopted or filed in connection with the creation, formation, or organization of
a Person; and (f) any amendment to any of the foregoing.

“Permitted Liens” means (i) Encumbrances with respect to Taxes that are not yet
delinquent; (ii) Encumbrances of landlord’s, repairmen or bailees or similar
liens; (iii) Encumbrances of materialmen or mechanics, provided, however, that
such Encumbrances were incurred in the ordinary course of the Business in
respect of obligations which are not overdue and for which adequate provision
has been made in accordance with GAAP; (iv) pledges or deposits to secure
obligations under workmen’s compensation, social security or unemployment
compensation laws or similar legislation; and (v)  zoning, building and other
similar Laws, none of which individually or in the aggregate, materially impairs
the continued use and operation of property subject to a Lease in the conduct of
the Business as currently conducted.

“Person” means any entity, corporation, company, association, joint venture,
joint stock company, limited liability company, partnership, trust,
organization, individual (including personal representatives, executors and
heirs of a deceased individual), Authority, trustee, receiver or liquidator.

“Pre-Closing Taxes” means Taxes attributable to Pre-Closing Tax Periods. In the
case of any Taxes that are imposed on a periodic basis and are payable for a
Straddle Period, the portion of such Tax

 

 

that constitutes Pre-Closing Taxes shall (x) in the case of any Taxes other than
Taxes based upon or related to income or receipts (including, but not limited
to, any franchise, sales or use (including ad valorem or value added) or payroll
tax that is based on income or receipts), be deemed to be the amount of such Tax
for the entire Tax period multiplied by a fraction the numerator of which is the
number of days in the Pre-Closing Tax Period and the denominator of which is the
number of days in the entire taxable period (with appropriate adjustments made
in the event that any property upon which such Tax is based, whether real,
personal or intangible, is disposed of, acquired or modified after the Closing
Date), and (y) in the case of any Tax based upon or related to income or
receipts (including, but not limited to, any franchise, sales or use (including
ad valorem or value added) or payroll tax that is based on income or receipts),
be deemed equal to the amount which would be payable if the relevant Tax period
ended at the end of the Closing Date.

“Pre-Closing Tax Period” means any taxable period ending on or before the
Closing Date or, with respect to any Straddle Period, that portion of the
taxable period that ends on the Closing Date.

“Remedial Action” shall mean all action to (a) clean up, remove, or remediate
Hazardous Substances; (b) prevent the release of Hazardous Substances so that
they do not migrate, endanger or threaten to endanger public health or the
environment; or (c) perform remedial investigations, feasibility studies,
corrective actions, closures and post-remedial or post-closure studies,
investigations, maintenance of a remedy, operating and monitoring of a remedy
and monitoring.

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

“Straddle Period” means any taxable period that includes the Closing Date and
ends after the Closing Date.

“Subsidiary” or “Subsidiaries” means AME and any other corporation, firm,
enterprise, limited liability company, partnership, joint venture or other
entity in which the Company owns, directly or indirectly, any capital stock,
membership interest, partnership interest or other equity interest but excluding
any passive investment in a publicly held entity representing less than 2% of
the total number of outstanding shares or investment units of that entity.

“Tangible Personal Property” means all computers, machinery, equipment,
furniture, fixtures, supplies, spare parts, tools, stores and other tangible
personal property (other than books and records of the Company and other than
raw materials, work-in process, finished goods and other inventory of the
Company) owned by the Company.

“Tax Returns” means, collectively all Federal, state, foreign and local tax
reports, returns, information returns and other related documents (including,
but not limited to, any schedule or attachment thereto) required to be filed by
any relevant taxing Authority.

“Taxes” means, collectively all taxes, including, without limitation, income,
gross receipts, net proceeds, alternative, add-on, minimum, ad valorem, value
added, turnover, sales, use, property, personal property (tangible and
intangible), stamp, leasing, excise, duty, franchise, transfer, license,
withholding, payroll, employment, fuel, excess profits, environmental,
occupational, interest equalization, windfall profits and severance taxes, and
all other like governmental charges, together with any interest, penalties or
additions to tax imposed with respect thereto.