STOCK PURCHASE AGREEMENT

 

AMONG

 

STAFFING 360 SOLUTIONS, INC.

(the “Purchaser”)

 

AND

 

NEWCSI, INC.

(“NCSI”)

 

AND

 

THE SHAREHOLDERS OF NCSI

 

Dated as of August 14, 2013

  

 

 

 

TABLE OF CONTENTS

 

ARTICLE I      Definitions 6     1.1     Definitions 8    
1.2     Meaning of Knowledge 8     ARTICLE II     Purchase and Sale of Shares 8
    2.1     Sale and Delivery 8     2.2     Purchase Price 9    
2.3     Employment Agreement 11     2.4     Closing 11    
2.5     Other Payments at Closing 11    
2.6     Accounts Receivable and WIP Reimbursement 11    
2.7     Deferred Tax Asset 12     2.8     Forwarding of Payments 12    
ARTICLE III     Representations and Warranties Concerning NCSI 12    
3.1     Organization and Good Standing 12    
3.2     Ownership of Shares and CCSI Capital Stock 12    
3.3     Consents; Valid Title 13     3.4     Authorization 13    
3.5     No Conflicts 13     3.6     Access to Information 13    
3.7     Investment 13    
ARTICLE IIIA     Representation and Warranties Concerning the Shareholders 13  
  3A.1        Consents 13     3A.2        Authorization 14    
3A.3        No Conflicts 14    
ARTICLE IV     Representations and Warranties Concerning CSI 14    
4.1      Organization and Good Standing 14     4.2      Subsidiaries 14    
4.3     No Conflicts 14     4.4     Capitalization 15    
4.5     Financial Statements 15     4.6     Title to Property; Encumbrances 15  
  4.7     Insurance 16     4.8     Indebtedness 16

 

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4.9     Litigation 16     4.10   Income and Other Tax 16    
4.11   Employee Benefit Matters 17     4.12    Consents 17    
4.13   Material Contracts; No Defaults 17     4.14   Employee and Labor Matters
18     4.15   Principal Customers and Supplies 18     4.16   Books and Records
19     4.17   Intellectual Property 19     4.18   Authorization 19    
4.19   Absence of Changes 19     4.20   Absence of Undisclosed Liabilities 19  
  4.21   Legal Compliance 19     4.22   Illegal Payments 20    
4.23   Affiliate Transactions 20     4.24   Money Laundering Laws 20    
4.25   Accounts Receivable 20     4.26   Environmental Matters 20    
4.27   Disclosure 21    
ARTICLE V     Representations and Warranties of Purchaser 21    
5.1     Organization and Good Standing 21    
5.2     Authorization; Compliance with Law 21     5.3     Purchaser Shares 21  
  5.4     No Conflicts 21     5.5     Consents 21     5.6     Litigation 22    
5.7     Exchange Act Documents 22     ARTICLE VI     Covenants 22    
6.1     Ordinary Course 22     6.2     Dividends; Capital Stock 22    
6.3     Covenant Not to Use Name 22     6.4     Confidentiality 23    
6.5     Publicity 23     6.6     Required Information 23

 

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6.7     Insurance 23     6.8     Employment Practices 23    
6.9     Transfer Taxes 23     ARTICLE VII     Conditions Precedent to Closing 23
    7.1     Conditions of the Purchaser 23    
7.2     Conditions of NCSI and the Shareholders 25    
ARTICLE VIII     Indemnification 25    
8.1     Survival of Representations and Warranties 26    
8.2     Indemnification 26     ARTICLE IX     Termination; Amendment and Waiver
27     9.1     Termination 27     9.2     Effect 27     9.3     Amendment 27    
9.4     Waiver 28     ARTICLE X     General Provisions 28    
10.1   Complete Agreement and other Matters 28     10.2   Expenses 28    
10.3   Broker's Fees 28     10.4   Further Action 28     10.5   Notice 28    
10.6   Right of Set Off 29     10.7   Survival 29

  

SCHEDULE   SUBJECT       2.1(c)   Excluded Liabilities 4.1   Foreign
Qualifications 4.3   No Conflicts 4.6(a)   Liens 4.6(b)   Property Leases and
Licenses 4.7   Insurance 4.9   Litigation 4.11(a)   Employee Welfare Plans
4.11(b)   Employee Benefit Plans 4.12   Consents 4.13(a)   Customer Agreements
4.13(b)   Consultant Agreements 4.13(c)   Non-Competition and Non-Disclosure
Agreements 4.13(d)   Key Employee Agreements 4.13(e)   Other Material Contracts

 

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4.13(f)   Defaults 4.13(g)   Agreements for Borrowed Money and Investments 4.14
  Employee and Labor Matters 4.15(a)   Major Customer Sales 4.15(b)  
Termination of Major Customers 4.19   Material Changes 4.20   Liabilities 4.21  
Compliance with Laws 4.23(a)   Affiliate Transactions 4.23(b)   Interests in
Assets

 

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STOCK PURCHASE AGREEMENT

 

THIS STOCK PURCHASE AGREEMENT (this “Agreement”), dated as of August 14, 2013,
is by and among Staffing 360 Solutions, Inc., a Nevada corporation (the
“Purchaser”), those Persons listed on Exhibit A hereto (individually a
“Shareholder”, and individually and collectively the “Shareholders”), and
NewCSI, Inc., a Delaware corporation (“NCSI”). The Purchaser, the Shareholders
and NCSI are collectively referred to herein as the “Parties.”

 

This Agreement contemplates a transaction in which the Purchaser will purchase
from NCSI all of the issued and outstanding shares of capital stock of Control
Solutions International, Inc., a Florida corporation (the “Company” or “CSI”) in
consideration of the Purchase Price (as defined below).

 

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

 

ARTICLE I

 

Definitions

 

1.1         Definitions. In addition to the capitalized terms defined elsewhere
in this Agreement, including the recitals, the following capitalized terms, when
used herein, shall have the following meanings:

 

Adjustment Events” has the meaning set forth in Section 2.2(c)(ii) hereof;

 

“Affiliate” means, with respect to a specified Person, any other Person or
member of a group of Persons acting together that, directly or indirectly,
through one or more intermediaries, Controls, or is Controlled by or is under
common Control with, the specified Person.

 

“Agreement,” “this Agreement,” “hereto,” “hereof,” “hereunder,” “hereby,” and
similar expressions refer to this Stock Purchase Agreement, including the
Schedules and exhibits attached hereto, and not any particular article, section,
subsection or other subdivision hereof or thereof.

 

“Annual Financial Statements” has the meaning set forth in Section 4.5(a)
hereof.

 

“Business Day” means a day, other than Saturday or Sunday, on which banks in
Boston, Massachusetts and New York, New York are open to the public for the
transaction of their normal banking business.

 

“CCSI” means Canada Control Solutions International, Inc., the wholly-owned
British Columbia subsidiary of CSI.

 

“Cash Portion of the Purchase Price” has the meaning set forth in section 2.2(a)
hereto.

 

“Closing” has the meaning set forth in Section 2.4 hereof.

 

“Closing Date” has the meaning set forth in Section 2.4 hereof.

 

“Closing Payment” has the meaning set forth in Section 2.2 hereof.

 

“Code” means the Internal Revenue Code of 1986, as amended, and regulations
promulgated thereunder.

 

“Consents” has the meaning set forth in Section 4.12 hereof.

 

“Control” (including the terms “Controlling,” “Controlled By,” and “under Common
Control With”) means the possession, direct or indirect, of the power to direct
or cause the direction of the management and policies of a Person, whether
through the ownership of voting securities, by contract, by position or
otherwise.

 

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“Disclosure Schedule” means, individually, a Schedule referred to in Article IV
hereof, and collectively, all of the Schedules referred to in Article IV hereof.

 

“Earn Out” has the meaning set forth in Section 2.2(c)(i) hereof.

 

“Earn Out Period” has the meaning set forth in Section 2.2(c)(i) hereof.

 

“Earn Out Statement” has the meaning set forth in Section 2.2(c)(i) hereof.

 

“EBITDA” means earnings before interest, taxes, depreciation and amortization
and shall be calculated in accordance with generally accepted accounting
principles, consistently applied.

 

“Eligible Accounts” means the accounts receivable of CSI and CCSI that have not
been outstanding for more than 90 days as of the Closing Date.

 

“Eligible Accounts Payment” has the meaning as set forth in Section 2.6.

 

“Employment Agreement” has the meaning set forth in Section 2.3 hereof.

 

“Environmental Law’ has the meaning set forth in Section 4.26 hereof.

 

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

 

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

 

“Excluded Assets” has the meaning set forth in Section 2.1(b) hereof.

 

“Excluded Liabilities” has the meaning set forth in Section 2.1(c) hereof.

 

“Financial Statements” means the Annual Financial Statements and the Interim
Financial Statements.

 

“Governmental Body” means any foreign, federal, state, provincial or local
governmental body or political subdivision thereof, and any agency or other
entity exercising executive, legislative, judicial, regulatory or administrative
functions of government, including, without limitation, all taxing authorities.

 

“Gross Profit” means, with respect to any particular month or portion hereof,
the difference between gross revenue and the cost of services sold for such
month (or portion thereof) reduced by the cumulative losses, if any, measured as
the difference between gross revenue and cost of services sold of all prior
month(s) beginning with the month (or portion thereof) which includes the
Closing Date to the extent such losses have not been offset by Gross Profits in
succeeding months.

 

“Indebtedness” has the meaning set forth in Section 4.8 hereof.

 

“Interim Financial Statements” has the meaning set forth in Section 4.5(a)
hereof.

 

“Key Employee” means an employee of CSI or CCSI who meets any one or more of the
following criteria: (i) owns either directly or indirectly at least five percent
of the issued and outstanding stock of NCSI; or (ii) is an officer or member of
the Board of Directors of CSI or CCSI.

 

“Lien” means any interest, consensual or otherwise, in property securing a
monetary obligation owed to, or a claim by, a Person other than the owner of the
Property, whether such interest is based on the common law, statute or contract,
including without limitation, all liens, mortgages, security interests, pledges,
deeds of trust, statutory liens for unpaid rentals, options or other charges and
encumbrances.

 

“Material” or “Materially” (whether or not capitalized) means (a) a contract
with a value in excess of Fifty Thousand Dollars ($50,000), or (b) an effect on
CSI or CCSI in excess of Fifty Thousand Dollars ($50,000).

 

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“Material Adverse Change” or “Material Adverse Effect” means any change, effect,
event, occurrence or state of facts that is, or is reasonably likely to be,
Materially adverse to the business and/or financial condition, assets, results
of operations or prospects of CSI and CCSI (on a combined basis), other than any
change, effect, event, occurrence or state of facts relating to the economy in
general.

 

“Permitted Lien” has the meaning set forth in Section 4.6(a) hereof

 

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

 

“Purchase Price” has the meaning set forth in Section 2.2 hereof.

 

“Purchaser Shares” has the meaning set forth in Section 2.2(b) hereof.

 

“Schedule” means any Schedule to this Agreement, including without limitation
any Disclosure Schedule.

 

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

 

“Shares” has the meaning set forth in Section 2.1(a) hereof.

 

“Subsidiary” means, as to any particular parent corporation, any corporation,
partnership, trust, joint venture, limited liability company, association, or
other business entity, as to which more than fifty percent (50%) of the
outstanding stock or equity interests having ordinary voting rights or power of
which at the time is owned or Controlled by such parent corporation or by one or
more Subsidiaries of such parent corporation.

 

“Transaction Documents” means this Agreement and the other agreements, documents
and instruments contemplated hereby.

 

“Work in Process” or “WIP” means the right to receive payment from a client of
CSI or CCSI for services provided by CSI or CCSI (whether the services are
complete or incomplete) before the Closing Date and which, as of the Closing
Date, has not been included in an invoice sent to the client. Work in Process is
separate and distinct from CSI’s and CCSI’s accounts receivable, for purposes of
this Agreement.

 

1.2          Meaning of “Knowledge.”

 

For the purposes of this Agreement, any reference to the existence or absence of
facts which is indicated to be based on the Knowledge of NCSI means the actual
knowledge of any of the Shareholders or the Key Employees of CSI or CCSI.

 

ARTICLE II

 

Purchase and Sale of Shares

 

2.1          Sale and Delivery

 

(a)          Purchase of Shares. On the terms and subject to the conditions set
forth in this Agreement, NCSI hereby agrees to sell, assign, transfer, convey
and deliver to the Purchaser, and the Purchaser hereby agrees to purchase,
acquire and take assignment and delivery of, all of the shares of capital stock
of CSI held by NCSI, which on the Closing Date shall collectively constitute one
hundred percent (100%) of the issued and outstanding shares of capital stock of
CSI (the “Shares”), free and clear of any and all Liens.

 

(b)          Excluded Assets. Notwithstanding the purchase of the Shares, the
Parties acknowledge and agree that Purchaser shall acquire no interest in: (i)
any bank accounts or investment accounts of CSI or CCSI or cash therein as such
exist immediately prior to the Closing, (ii) any account Receivable not deemed
an Eligible Account as of the Closing Date; (iii) the cell phones and cell phone
numbers of any Shareholder or any employee of CSI or CCSI; or (iii) any LinkedIn
account or Facebook, Twitter or other social media account of any Shareholder or
any employee of CSI or CCSI; all of which items in clauses (i) through (iii)
shall belong to NCSI, the Shareholders or the employees of CSI or CCSI, as the
case may be (the “Excluded Assets”).

 

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(c)          Excluded Liabilities. Notwithstanding the purchase of the Shares,
the Parties acknowledge and agree that CSI shall not retain and the Purchaser
shall not assume the liabilities set forth on Schedule 2.1(c) to be attached to
this Agreement at the Closing Date (the “Excluded Liabilities”).

 

2.2          Purchase PriceThe aggregate consideration to be paid by the
Purchaser to NCSI for the sale and purchase of the Shares (the “Purchase Price”)
shall be the sum of the Cash Portion of the Purchase Price and the Purchaser
Shares payable at Closing as set forth in Sections 2.2(a) and (b) below (the
“Closing Payment”), plus (b) the amount of the Earn Out determined and paid as
set forth in Section 2.2(c) below. The Purchase Price shall be payable as
follows:

 

(a)          Cash Portion of the Purchase Price at Closing. At the Closing, the
Purchaser shall pay to the NCSI $205,000 plus (i) the Eligible Accounts Payment,
as defined in Section 2.6 and (ii) an amount equal to the prepaid expenses and
prepaid rent of the Company as of the Closing Date in immediately available
funds by (i) wire transfer to accounts specified by NCSI, (collectively, the
“Cash Portion of the Purchase Price”).

 

(b)          Purchaser Shares. At the Closing, the Purchaser shall pay the
remaining $204,000 of the Closing Payment by the issuance to NCSI of One Hundred
Thirty Six Thousand (136,000) restricted shares of the Purchaser’s common stock
(the “Purchaser Shares”) valued at a price of $1.50 per share. The Purchaser
Shares will be issued free and clear of all Liens, and will have all rights
associated with Purchaser’s common stock issued to or held by the other
shareholders of the Purchaser and piggyback registration rights as provided in a
registration rights agreement in form and substance satisfactory to Purchaser
and NCSI. The Purchaser Shares may be transferred by NCSI to Shareholders,
subject to the forfeiture provisions as set forth in Section 8.2(c).

 

(c)          Earn Out.

 

(i)           Calculation and Payment of Earn Out. In addition to the Closing
Payment payable at Closing, the Purchaser shall pay to NCSI performance based
compensation (the “Earn Out”) in an amount in cash equal to Twenty percent (20%)
of CSI’s and CCSI’s consolidated Gross Profit, calculated as described herein,
from the Closing Date through the end of the sixteenth (16th) quarter following
the Closing Date (the “Earn Out Period”) not to exceed a total of Two Million
One Hundred Thousand Dollars ($2,100,000).

 

For purposes of the Earn Out, “CSI’s Gross Profit” means the consolidated Gross
Profit of CSI and CCSI or, if CSI is not operated as a separate subsidiary of
the Purchaser, the Gross Profit of the division or other internal organization
of the Purchaser which includes the business formerly conducted by CSI and any
additional gross profit that is generated from client projects that the Staffing
360 ° CSI division manages, whether from organic growth or business acquisition.

 

The Earn Out shall be calculated monthly on the last day of each month then
ended, and shall be paid by the fifteenth (15th) day of the immediately
succeeding month. If the Closing Date does not occur on the last day of a month,
the Gross Profit for the number of days from the Closing Date to the
commencement of the next month shall be included in the Earn Out calculation for
such first month.

 

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With each monthly payment of the Earn Out, if any, the Purchaser shall deliver
to NCSI and each Shareholder a statement detailing the calculation of the
payment based on the consolidated Gross Profit of CSI and CCSI and additional
Gross Profit that is generated from client projects that the Staffing 360 ° CSI
division manages, whether from organic growth or business acquisition during the
applicable month (the “Earn Out Statement”). During the term of this Earn-Out,
NCSI and/or any internal or external audit representative acting on behalf of
NCSI (the “Seller Audit Representatives”) will have the right, and Purchaser
will provide access to NCSI and Seller Audit Representatives, during regular
business hours, to audit and inspect the financial records of Purchaser as may
be reasonably necessary to verify the Purchaser’s compliance with the Earn Out
payments due hereunder that may relate to the calculation of Gross Profit in
order to verify such calculation, subject to Purchaser’s right to require any
Seller Audit Representative to execute a customary non-disclosure agreement. In
the event the Auditor reasonably determines that there was an underpayment of
the Earn Out to NCSI or the Shareholders for any period, the Purchaser will pay
such underpayment within thirty (30) days after the date the Purchaser receives
such Auditor’s written report. In the event the Auditor reasonably determines
that there was an overpayment of the Earn Out for any period, the overpayment
will be credited toward future payments of the Earn Out, if any, to be paid by
the Purchaser to NCSI under this Agreement, provided, however, that in the event
no further payments of the Earn Out will become due under this Agreement, said
overpayment will be paid by NCSI and the Shareholders to the Purchaser within
thirty (30) days after the date NCSI receives such Auditor’s written report. If
an underpayment of the Earn Out is greater than $10,000 as determined by the
Auditor to be payable to NCSI or the Shareholders, the reasonable fees and
expenses charged by the Auditor will be paid by the Purchaser; otherwise the
fees and expenses charged by such Auditor shall be paid by NCSI.

 

At any time within one (1) Business Day prior to a payment owed under this
Agreement (whether for the Cash Portion of the Purchase Price, the Purchaser
Shares, an Earn Out payment, or an Adjustment Amount), NCSI may direct the
Purchaser in writing to pay such amount(s) directly to the Shareholders, on a
pro rata basis according to their ownership of NSCI (currently 1/3 held by each
of them). Purchaser is entitled to rely on such written instructions if signed
by all three current Shareholders.

 

(d)          Adjustment to Earn Out. The Purchaser acknowledges and agrees that
the following events (“Adjustment Events”) may have a negative impact on CSI and
CCSI’s consolidated Gross Profit. The Purchaser further acknowledges that the
actual damages likely to result from an Adjustment Event are difficult to
estimate on the date of this Agreement and would be difficult for NCSI or the
Shareholders to prove. Therefore, the Purchaser acknowledges and agrees that,
upon the occurrence of an Adjustment Event, the Purchaser shall pay NCSI, an
amount equal to, in the case of Adjustment Event listed in (i), (ii), (iii) or
(iv) below, $1.4 million less the amount of any Earn Out previously paid to NCSI
or the Shareholders; and in the case of all other Adjustment Events, $2.1
million less the amount of any Earn Out previously paid to NCSI or the
Shareholders (the “Adjustment Amount”), provided that the Shareholders of NCSI
has provided written notice to the Purchaser alleging that an Adjustment Event
set forth in (v), (vi) or (vii) has occurred. Additionally, the Purchaser agrees
to pay any reasonable legal fees of NCSI and the Shareholders in connection with
the collection of any Earn Out. The Parties intend that the Purchaser’s payment
of the Adjustment Amount would serve to compensate NCSI and the Shareholders for
any Adjustment Event, and they do not intend for it to serve as a penalty to the
Purchaser for any such Adjustment Event. The payment of any Adjustment Amount
shall not, however, limit the ability of NCSI or the Shareholders to pursue any
other Indemnity claims or any other remedies under this Agreement or the law.
Any Adjustment Amount shall be applied toward the final payment amount due under
the Earn Out, and the regular schedule of Earn Out payments shall continue as if
the Adjustment Amount had not been paid, until such time as the full Earn Out
obligation (including Adjustment Amounts paid) has been satisfied.

 

 

For purposes of this Section, the occurrence of any of the following events
constitutes an “Adjustment Event”:

 

i.The failure of the Purchaser to pay any Earn Out amount due, and such failure
is not cured within thirty (30) days after the due date;

 

ii.The failure of the Purchaser to perform, keep or observe any term, provision,
condition, covenant, warranty or representation contained in this Agreement;

 

iii.Any warranty, representation or statement made or furnished to the
Shareholders by or on behalf of the Purchaser in connection with the
transactions contemplated under this Agreement proves at any time to be not true
and correct in any material respect.

 

iv.The occurrence of any material breach by Purchaser under the Dealy, Gesualdi
or Cooper Employment Agreements;

 

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v.the Purchaser, or CSI or CCSI for so long as CSI or CCSI are operated as a
separate companies from the Purchaser, shall (a) apply for or consent to the
appointment of a receiver, conservator, trustee or liquidator of all or a
substantial part of any of its assets; (b) be unable, or admit in writing its
inability, to pay its debts as they mature; (c) file or permit the filing of any
petition, case, arrangement, reorganization, or the like under any insolvency or
bankruptcy law, or the adjudication of it as a bankrupt, or the making of an
assignment for the benefit of creditors or the consenting to any form of
arrangement for the satisfaction, settlement or delay of debt or the appointment
of a receiver for all or any part of its properties; or (d) take any action for
the purpose of effecting any of the foregoing;

 

vi.An order, judgment or decree shall be entered, or a case shall be commenced,
against the Purchaser, CSI or CCSI without the application, approval or consent
of the Purchaser, CSI or CCSI, as applicable, by or in any court of competent
jurisdiction, approving a petition or permitting the commencement of a case
seeking reorganization or liquidation of the Purchaser, CSI or CCSI, or
appointing a receiver, trustee, conservator or liquidator of the Purchaser, CSI
or CCSI, or of all or a substantial part of their respective assets and the
Purchaser, CSI or CCSI, as applicable, by any act, indicates its approval
thereof, consent thereto, or acquiescence therein, or such order, judgment,
decree or case shall continue unstayed and in effect for any period of thirty
(30) consecutive days;

 

vii.The dissolution, termination of existence of the Purchaser, CSI or CCSI

 

2.3          Employment Agreement. As of the Closing, the Purchaser, CSI, and
each of Margaret Gesualdi, Charlie Cooper and Simon Dealy will each enter into
an employment agreement, in form attached hereto as Exhibit XX (the “Employment
Agreement(s)”).

 

2.4          Closing. The purchase and sale of the Shares and the consummation
of the other transactions contemplated by this Agreement (the “Closing”) shall
occur on such date, hour and place as shall be agreed upon in writing by NCSI
and the Purchaser, but not later than forty five (45) days from the date of the
completion of the audit of the Financial Statements of CSI and CCSI by the CPA
firm of RBSM, LLP (the “Audit”) (unless said date is otherwise mutually extended
in writing by the Parties), upon fulfillment of all (or waiver in writing of
certain) conditions precedent to the Closing, said date being generally referred
to as the “Closing Date.” The parties will agree on the Closing Date at least
five (5) business days in advance, in order for Seller to provide required
notice of the Closing Date to interested third parties.

 

2.5          Other Payments at Closing. If necessary, at the Closing the Parties
shall make such payments to each other as the Parties may agree prior to the
Closing in order to address certain issues, including without limitation,
balance sheet items, and such issues as Excluded Liabilities, reimbursement of
prepaid expenses, and timing of collection of accounts receivable.

 

2.6          Accounts Receivable and WIP Reimbursement. In connection with the
accounts receivable and WIP of CSI and CCIS that Purchaser acquires pursuant to
this Agreement, Purchaser and NCSI agree as follows:

 

(a)          Eligible Accounts. At the Closing, Purchaser shall pay the NCSI, in
cash, an amount equal to eighty percent (80%) of the value of the Eligible
Accounts (the “Eligible Accounts Payment”). This amount shall be included in the
definition of “Cash Consideration.” Pursuant to Section 2.6(e) below, NCSI may
be entitled to an additional payment related to the remainder of the Eligible
Accounts.

 

(b)          Other Accounts Receivable. Purchaser shall pay NCSI, in cash, an
amount equal to 100% of any collections of CSI’s or CCSI’s accounts receivable
billed prior to Closing acquired by Purchaser, in excess of the amount paid at
the Closing for the Eligible Accounts pursuant to Section 2.6(a) and for related
financing costs pursuant to Section 2.6(d). Such payment, if any, shall be made
in accordance with Section 2.6(e) below.

 

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(c)          Work in Process. Within five (5) Business Days after the Closing
Date, NCSI, CSI and CCSI shall provide Purchaser with a report and supporting
documentation that detail the Work in Process of both CSI and CCSI as of the
Closing. Purchaser shall cause CSI and CCSI to include this Work in Process in
CSI’s and CCSI’s next monthly invoices sent to clients. At the time that CSI or
CCSI send the invoices to clients that include acquired Work in Process,
Purchaser shall pay NCSI, in cash, an amount equal to eighty percent (80%) of
the amount of the Work in Process as invoiced.

 

(d)          Cost of Financing. Purchaser’s financing cost for the Eligible
Accounts Payment required by Section 2.6(a) above shall be paid by NCSI. The
cost shall be the direct charges charged to Purchaser by Purchaser’s bank for
its working capital line, as described in Schedule 2.6(d) attached hereto. This
cost shall be paid or deducted by Purchaser from any payments owed to NCSI, as
the case may be, pursuant to Section 2.6(e) below.

 

(e)          Final Settlement. On the first Business Day that is 120 days after
the Closing Date, the parties shall determine the total amount collected by
Purchaser from acquired accounts receivable of CSI and CCSI, including both
Eligible Accounts and accounts receivable that did not so qualify. If the total
collected by Purchaser during the 120-day period exceeds the Eligible Accounts
Payment plus the financing cost calculated pursuant to Section 2.6(d) above,
then Purchaser shall pay NCSI such excess within ten (10) days. If the total
collected by Purchaser during the 120-day period is less than the Eligible
Accounts Payment and Work in Process plus the financing cost calculated pursuant
to Section 2.6(d) above, then Purchaser shall deduct such shortfall from the
next Earn-Out payment(s) owed to NCSI until the shortfall is fully repaid. In
any event, any uncollected accounts receivable as of the 120th day after the
Closing Date shall be assigned to NCSI, after which NCSI shall retain any
amounts collected and Purchaser will forward to NCSI any amounts received with
respect to the re-assigned accounts.

 

2.7          Deferred Tax Asset. Within 90 days after December 31, 2013, the
Purchaser shall reasonably finalize the dollar value of Deferred Tax Assets as
of the Closing Date that have accrued or will benefit in the future to CSI or
the Purchaser as a result of the Purchaser’s acquisition of CSI (the “Deferred
Tax Benefit”) and without regard as to whether or not such Deferred Tax Asset
has been or can be used in the current tax year or is deferred to a future tax
year. Fifty Percent (50%) of the Deferred Tax Benefit shall be paid in cash to
NCSI on the next scheduled Earn Out payment date following the completion of
such determination.

 

2.8          Forwarding of Payments. The Purchaser will immediately deliver to
NCSI any amounts received from clients or other third parties that are due to
NCSI, without offset of any kind, and NCSI will immediately deliver to Purchaser
any amounts received from clients or other third parties that are due to the
Purchaser, without offset of any kind.

 

ARTICLE III

 

Representations and Warranties

Concerning NCSI

 

NCSI and the Shareholders hereby, jointly and severally, represent and warrant
to the Purchaser, that:

 

3.1          Organization and Good Standing. NCSI has been duly organized and is
validly existing as a corporation in good standing under the laws of the state
of Delaware with full power and authority to own or lease its properties and to
conduct its business as currently conducted. NCSI is duly qualified, licensed or
admitted to do business as a foreign corporation and is in good standing in
every jurisdiction in which the operation of its business or the ownership of
its assets requires it to be so qualified, licensed, admitted or in good
standing. Schedule 3.1 lists all of the jurisdictions in which NCSI is qualified
to do business as a foreign corporation.

 

3.2          Ownership of Shares and CCSI Capital Stock. NCSI owns of record and
beneficially the Shares (which constitute 100% of the issued and outstanding
shares of capital stock CSI), free and clear of any and all Liens. NCSI has good
and valid title to the Shares, free and clear of all Liens. CSI owns of record
and beneficially 100% of the issued and outstanding shares of capital stock of
CCSI (the “CCSI Shares”), free and clear of any and all Liens. CSI has good and
valid title to all of the CCSI Shares, free and clear of any and all Liens. Upon
delivery of the Shares to be sold by NCSI hereunder and payment of the Closing
Payment at the Closing pursuant to this Agreement, the Purchaser will receive
good and valid title to the Shares, free and clear of all Liens and other
encumbrances.

 

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3.3          Consents; Valid Title. All consents, approvals and waivers
necessary for the execution and delivery by NCSI of this Agreement and the other
Transaction Documents to which NCSI is a party, the sale and delivery of the
Shares to be sold by NCSI hereunder and the consummation of the transactions
contemplated hereby and thereby have been obtained or will be obtained on or
prior to the Closing Date, and NCSI has, and immediately prior to the Closing
will have, full right, power, authority and capacity to enter into and perform
fully NCSI’s obligations under this Agreement and the other Transaction
Documents to which NCSI is a party, including without limitation to sell,
assign, transfer and deliver the Shares pursuant to this Agreement.

 

3.4          Authorization. NCSI has all requisite corporate power and authority
to execute, deliver and perform this Agreement and the other Transaction
Documents to which it is a party. All corporate action required to be taken by
NCSI’s Board of Directors and shareholders in order to authorize NCSI to enter
into and perform this Agreement and the other Transaction Documents to which it
is a party has been taken or will have been taken prior to the Closing. This
Agreement and the other Transaction Documents to which NCSI is a party, when
executed and delivered by NCSI, shall constitute the valid and legally binding
obligation of NCSI, enforceable against NCSI in accordance with its terms
except: (a) as limited by applicable bankruptcy, insolvency, reorganization,
moratorium, fraudulent conveyance, or other laws of general application relating
to or affecting the enforcement of creditors’ rights generally; or (b) as
limited by laws relating to the availability of specific performance, injunctive
relief, or other equitable remedies.

 

3.5          No Conflicts. The execution, delivery and performance of this
Agreement and the other Transaction Documents by NCSI and the consummation of
the transactions contemplated hereby and thereby by NCSI will not conflict with,
require consent or result in a breach or violation of any term or provision of,
or constitute a default under, any indenture, mortgage, deed of trust, loan
agreement or other agreement or instrument to which NCSI is a party or by which
any of NCSI’s assets are bound.

 

3.6          Access to Information. NCSI is a sophisticated investor with
respect to the acquisition of the Purchaser Shares, has adequate information
concerning the Purchaser Shares and the business and financial condition of the
Purchaser and its assets and has been given the information necessary to make an
informed decision regarding this Agreement and the transactions contemplated
hereby and has independently made its analysis and decision to enter into and
consummate this Agreement based upon such information NCSI deems appropriate.

 

3.7          Investment. NCSI is acquiring the Purchaser Shares in a private
placement pursuant to Section 4(2) of the Securities Act. NCSI understands that
the Purchaser Shares are “restricted securities” as defined in Rule 144 under
the Securities Act and have not been registered under the Securities Act and
NCSI is acquiring the Purchaser Shares in accordance with an exemption from
registration under the Securities Act. NCSI acknowledges that it will not
reoffer, resell, pledge or otherwise transfer any Purchaser Shares except
pursuant to an applicable exemption under the Securities Act or an effective
registration statement, in each case in accordance with any applicable
securities laws of any state of the United States or any other relevant
jurisdiction.

 

ARTICLE IIIA

 

Representations and Warranties

Concerning the Shareholders

 

Each Shareholder, severally as to such Shareholder only, and not jointly and
severally, represents and warrants to the Purchaser, that:

 

3A.1      Consents. All consents, approvals and waivers necessary for the
execution and delivery by such Shareholder of this Agreement and the other
Transaction Documents to which such Shareholder is a party and the consummation
of the transactions contemplated hereby and thereby have been obtained or will
be obtained on or prior to the Closing Date, and such Shareholder has, and
immediately prior to the Closing will have the capacity to enter into and
perform fully his or her obligations under this Agreement and the other
Transaction Documents.

 

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3A.2      Authorization. Such Shareholder has all requisite capacity to execute,
deliver and perform this Agreement and the other Transaction Documents to which
he or she is a party. This Agreement and other Transaction Documents to which
such Shareholder is a party, when executed and delivered by such Shareholder,
shall constitute the valid and legally binding obligation of such Shareholder,
enforceable against such Shareholder in accordance with its terms except: (a) as
limited by applicable bankruptcy, insolvency, reorganization, moratorium,
fraudulent conveyance, or other laws of general application relating to or
affecting the enforcement of creditors’ rights generally; or (b) as limited by
laws relating to the availability of specific performance, injunctive relief, or
other equitable remedies.

 

3A.3      No Conflicts. The execution, delivery and performance of this
Agreement and the other Transaction Documents by such Shareholder and the
consummation of the transactions contemplated hereby and thereby by such
Shareholder will not conflict with, require consent or result in a breach or
violation of any term or provision of, or constitute a default under, any
indenture, mortgage, deed of trust, loan agreement or other agreement or
instrument to which such Shareholder is a party or by which any of such
Shareholder’s assets are bound.

 

ARTICLE IV

 

Representations and Warranties

Concerning CSI

 

As a material inducement to the Purchaser to enter into and perform its
obligations under this Agreement, the NCSI, CSI, CCSI and the Shareholders
represent and warrant to the Purchaser as of the date of this Agreement (subject
to the Seller Disclosure Schedules) that each of the representations, warranties
and statements contained in the following sections of this Article IV (a) is
true and correct as of the date hereof and (b) will be true and correct as of
the Closing Date (provided that NCSI, CSI, CCSI or the Shareholders may, up to
two (2) business days before the scheduled Closing Date, deliver to the
Purchaser amendments to the Seller Disclosure Schedules as required to make the
following representations and warranties true, complete and not misleading as of
the Closing Date, and if such amendments disclose a Material Adverse Change, the
Purchaser’s conditions to closing under Section 7.1, in particular Section
7.1(e), shall not be satisfied):

 

4.1          Organization and Good Standing. CSI has been duly organized and is
validly existing as a corporation in good standing under the laws of the state
of Florida with full power and authority to own or lease its properties and to
conduct its business as currently conducted. CSI is duly qualified, licensed or
admitted to do business as a foreign corporation and is in good standing in
every jurisdiction in which the operation of its business or the ownership of
its assets requires it to be so qualified, licensed, admitted or in good
standing, except where failure to so qualify would not have a material adverse
effect on CSI. Schedule 4.1(a) lists all of the jurisdictions in which CSI is
qualified to do business as a foreign corporation. CCSI has been duly organized
and is validly existing as a corporation in good standing under the laws of the
province of British Columbia, Canada with full power and authority to own or
lease its properties and to conduct its business as currently conducted. CCSI is
duly qualified, licensed or admitted to do business as a foreign corporation and
is in good standing in every jurisdiction in which the operation of its business
or the ownership of its assets requires it to be so qualified, licensed,
admitted or in good standing, except where failure to so qualify would not have
a material adverse effect on CCSI. Schedule 4.1(b) lists all of the
jurisdictions in which CCSI is qualified to do business as a foreign
corporation.

 

4.2          Subsidiaries. CCSI is the only Subsidiary of CSI. CCSI has no
Subsidiaries.

 

4.3          No Conflicts. Except as set forth on Schedule 4.3, the execution,
delivery and performance of this Agreement and the consummation of the
transactions contemplated hereby will not (i) conflict with or result in a
breach or violation of any term or provision of, or constitute a default under,
the charter or bylaws of CSI or CCSI, or any indenture, mortgage, deed of trust,
loan agreement, or other agreement or instrument to which CSI or CCSI is a party
or by which CSI or CCSI is bound or to which any of the property or assets of
CSI or CCSI is subject, or (ii) violate or conflict with any law or order to
which CSI or CCSI is subject.

 

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4.4          Capitalization. The authorized, issued and outstanding capital
stock of CSI is set forth in Schedule 4.4(a). At the Closing, the Shares shall
constitute all of the issued and outstanding equity securities of CSI. The
Shares have been duly authorized and validly issued and are outstanding, fully
paid and nonassessable. The Company holds no treasury stock. There are no
outstanding options, warrants, rights (including conversion or preemptive rights
and rights of first refusal or similar rights) or agreements, orally or in
writing, to purchase or acquire from CSI any shares of any class of capital
stock, or any securities or other instruments convertible into or exchangeable
for shares of capital stock of CSI, and no commitments to issue any such
securities or instruments. The authorized, issued and outstanding capital stock
of CCSI is set forth in Schedule 4.4(b). At the Closing, the CCSI Shares shall
constitute all of the issued and outstanding equity securities of CCSI. The CCSI
Shares have been duly authorized and validly issued and are outstanding, fully
paid and nonassessable. CCSI holds no treasury stock. There are no outstanding
options, warrants, rights (including conversion or preemptive rights and rights
of first refusal or similar rights) or agreements, orally or in writing, to
purchase or acquire from CCSI any shares of any class of capital stock, or any
securities or other instruments convertible into or exchangeable for shares of
capital stock of CCSI, and no commitments to issue any such securities or
instruments.

 

4.5          Financial Statements.

 

(a)          Each of CSI and CCSI maintains its financial information and
creates its financial statements with the use of “QuickBooks” and Solomon
software programs. NCSI has delivered to the Purchaser true and complete copies
of (i) balance sheet, the statements of assets, liabilities and stockholders’
equity of CSI and CCSI, on a combined basis, as of December 31, 2012, and 2011,
and the related statements of revenue and expenses for the twelve months then
ended (the “Annual Financial Statements”); and (ii) the balance sheet (“Latest
Balance Sheet”), statement of assets, liabilities and stockholders’ equity of
CSI and CCSI, on a combined basis, for the year-to-date ending May 31, 2013, and
the related statements of revenue and expenses for the period then ended (the
“Interim Financial Statements” and, together with the Annual Financial
Statements, the “Financial Statements”).

 

(b)          The Financial Statements (including in all cases the notes thereto,
if any) are accurate and complete in all material respects, have been prepared
from and are consistent with the books and records of CSI and CCSI (which books
and records are correct and complete in all material respects) and present
fairly, in all material respects, the financial position of CSI and CCSI as of
the dates indicated therein and the results of operations and changes in
financial position of CSI and CCSI for the periods specified therein and, to the
Knowledge of NCSI, the Financial Statements have been prepared in accordance
with accounting principles applied on a consistent basis during the periods
covered thereby. The Purchaser will be afforded the opportunity to have the CPA
firm of RBSM, LLP conduct the Audit of the Financial Statements.

 

4.6          Title to Property: Encumbrances.

 

(a)          Each of CSI and CCSI has, and immediately prior to the Closing each
of CSI and CCSI will have, good, clear and marketable title to all real property
and good, clear and valid title to all personal property reflected on the
Interim Financial Statements and all real property and personal property
acquired by CSI and CCSI since June 30, 2013, in each case free and clear of all
Liens except (i) as set forth on Schedule 4.6(a) hereto and (ii) for Permitted
Liens. The term “Permitted Liens,” as used in this Agreement, shall mean (i)
statutory liens for taxes or assessments not at the time due, (ii) liens in
respect of pledges or deposits under workers’ compensation laws or similar
legislation, (iii) carriers’, warehousemen’s, mechanics’, laborers’ and material
men’s liens if the obligations secured by such liens are not then delinquent,
(iv) encumbrances in the nature of zoning restrictions, easements, rights or
restrictions of record on the use of real property if the same do not detract
from the value of the property encumbered thereby or impair the use of such
property in the business of CSI or CCSI, as applicable.

 

(b)          All real property, personal property leases and licenses pursuant
to which CSI or CCSI leases or licenses from others real or personal property
are valid, subsisting and effective in accordance with their respective terms,
and there is not, under any real property lease, license or personal property
lease, any existing default or event of default of CSI, CCSI or any other party
thereto. Schedule 4.6(b) hereto contains a list of all real property leases,
licenses and personal property leases under which CSI and/or CCSI is the lessee
or licensee. True and complete copies of all real property leases, licenses and
personal property leases listed on said Schedule 4.6(b) hereto have been
delivered to Purchaser heretofore. Except as set forth on said Schedule 4.6(b),
no such lease or license will require the consent of the lessor or licensor to
or as a result of the consummation of the transactions contemplated by this
Agreement. CSI and CCSI do not own any real property.

 

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4.7          Insurance. Schedule 4.7 hereto contains a true and complete list of
all insurance policies currently in force that cover or purport to cover risks
or losses to or associated with CSI’s and CCSI’s business, operations, premises,
properties, assets, employees, agents and directors and all such policies are in
full force and effect. CSI and CCSI have not received notice advising them that
they will be unable to renew their existing insurance coverage as and when the
same shall expire upon terms at least as favorable as those currently in effect,
other than possible increases in premiums. Except as disclosed in Schedule 4.7,
neither CSI nor CCSI has received any notice that any insurer under any policy
referred to in this Section 4.7 is denying liability with respect to a claim
thereunder or defending under a reservation of rights clause.

 

4.8          Indebtedness. CSI has no liability or obligation for Indebtedness
except as disclosed in Schedule 4.8(a). CCSI has no liability or obligation for
Indebtedness except as disclosed in Schedule 4.8(b). The term “Indebtedness”, as
used in this Agreement, shall mean: (a) any liability of CSI or CCSI created or
assumed by CSI or CCSI, as applicable: (i) for borrowed money; (ii) evidenced by
a bond, note, debenture or similar instrument (including a purchase money
obligation, deed of trust or mortgage) given in connection with the acquisition
of, or exchange for, any property or assets (other than inventory or similar
property acquired and consumed or to be consumed in the ordinary course of CSI’s
or CCSI’s business), including securities and debt instruments; (iii) in respect
of letters of credit issued for CSI’s or CCSI’s account and “swaps” of interest
and currency exchange rates (and other interest and currency exchange rate
hedging agreements) to which CSI or CCSI is a party; or (iv) for the payment of
money as lessee under leases that are consistent with the past practice of CSI
or CCSI described in the Financial Statements recorded as capital leases for
financial reporting purposes; and (b) any amendment, renewal, extension,
revision or refunding of any such liability or obligation; provided, however,
that Indebtedness shall not include any liability for: (1) compensation of
Company or CCSI employees in the ordinary course of business; (2) interest that
has been accrued and is not yet due and payable; (3) inventory or similar
property acquired and consumed or to be consumed in the ordinary course of CSI’s
or CCSI’s business; (4) services in the ordinary course of business; (5) rent or
other amounts payable under real or personal property leases that have been as
disclosed elsewhere herein, other than capital leases as described in subsection
(a)(iv) above; (6) amounts payable on credit cards to the extent used to acquire
inventory or similar property; and (7) utility bills, property taxes and other
accounts payable.

 

4.9          Litigation. Except as set forth on Schedule 4.9 hereto, there is no
claim, legal action, suit, arbitration, or mediation proceeding or other legal,
administrative or governmental investigation, inquiry or proceeding pending or,
to the Knowledge of NCSI threatened, against or affecting CSI, CCSI or any of
their respective properties, assets or business or any director, officer,
employee or agent (in his, her or its capacity as such) of CSI, CCSI or NCSI or
any Shareholder or to which any assets of CSI or CCSI are subject, or to which
any CSI capital stock or CCSI capital stock is subject or relating to the
transactions contemplated by this Agreement or the other Transaction Documents
or the consummation hereof or thereof. Except as set forth on Schedule 4.9
hereto, neither CSI nor CCSI is subject to or bound by any currently existing
judgment, order, writ, injunction or decree. CSI and CCSI are not in default
with respect to any order, writ, judgment, injunction, decree, determination or
award of any court or of any governmental agency or instrumentality, or of any
decision of any arbitrator, mediator or other dispute resolution proceeding.

 

4.10        Income and Other Taxes. All foreign, federal, state, provincial and
local tax returns required to be filed with any Governmental Body to date in
connection with the operations of CSI and CCSI have been timely filed, or
extensions for the filing of any tax returns have been made, and all taxes
required to be paid, and required to be deposited to date in connection with
their operations and ownership and use of assets have been timely paid and
deposited. All of the information that CSI and CCSI use for their income tax
returns for the period of January 1, 2013 through the Closing Date is true and
correct in all material respects and reasonably will enable CSI’s and CCSI’s tax
preparers to prepare such returns consistently with the income tax returns of
prior periods. No audit, examination or similar proceeding is pending or, to the
Knowledge of NCSI, threatened in regard to any taxes due from or with respect to
CSI or CCSI or any tax return filed by or with respect to CSI or CCSI.

 

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4.11        Employee Benefit Matters.

 

(a)          Schedule 4.11(a) hereto contains a true and complete list of each
employee welfare benefit plan (as defined in Section 3(l) of ERISA or any
similar Canadian statute (an “Employee Welfare Plan”)) currently maintained by
CSI or CCSI or to which CSI or CCSI contributes or is required to contribute.
Schedule 4.11(b) hereto contains a true and complete list of each employee
pension benefit plan (as defined in Section 3(2) of ERISA or any similar
Canadian statute (an “Employee Pension Plan”)) currently maintained by CSI or
CCSI or to which CSI or CCSI contributes or is required to contribute. The
Employee Welfare Plans and the Employee Pension Plans are sometimes collectively
referred to herein as the “Plans.”

 

(b)          With respect to each current Plan, the Purchaser has been provided
heretofore true and complete copies of all Plan documents and all documents or
instruments establishing or constituting any related trust, annuity contract or
other funding instrument, and any amendments thereto.

 

(c)          With respect to each Plan, to the Knowledge of CSI or CCSI, all
premiums, and accruals for all periods ending prior to or as of the Closing Date
shall have been made or provided for and there is no material unfunded liability
which is not reflected on the Latest Balance Sheet. To the Knowledge of NCSI,
all Plans are fully insured with no claim accrual liabilities except as set
forth in Schedule 4.11.

 

(d)          To the Knowledge of NCSI, each Plan has been maintained, funded and
administered in all material respects in accordance with its terms and in
compliance with all applicable laws, including ERISA and the Code and similar
Canadian statutes. With respect to each Plan, to the Knowledge of NCSI (i) there
have been no nonexempt prohibited transactions, and (ii) no breach of fiduciary
duty (as determined under ERISA or any similar Canadian statute) or any other
failure to act or comply in connection with the administration or investment of
the assets of such Plan. No action with respect to any Plan (other than routine
claims for benefits and appeals of denials of such claims) is pending or to the
Knowledge of NCSI threatened.

 

(e)          To the Knowledge of NCSI, the transfer of the Shares contemplated
by this Agreement will not cause the acceleration of vesting in, or payment of,
any compensation or benefits under any Plan and will not otherwise accelerate or
increase any current or potential liability or obligation under any Plan.

 

4.12        Consents. Except as set forth on Schedule 4.12, no consents,
authorizations, order or approvals of or registration, qualification,
designation, declaration or filing with any court, governmental body or agency
or instrumentality thereof or any arbitrator or any other Person (“Consents”) is
required for the execution and delivery of this Agreement and the other
Transaction Documents by NCSI and the consummation of the transactions
contemplated hereby and thereby.

 

4.13        Material Contracts; No Defaults.

 

(a)          Schedule 4.13(a) hereto contains a true and complete list as of the
date hereof of each agreement of CSI and CCSI with their customers and clients
(“Customer Agreements”), and true and complete copies of the same have been
delivered to Purchaser heretofore. All Customer Agreements have been entered
into in the ordinary course of business of CSI and CCSI and reflect terms
customarily offered by CSI and CCSI.

 

(b)          Schedule 4.13(b)(i) hereto contains a true and complete list as of
the date hereof of each agreement of CSI or CCSI with its consultants and
independent contractors (“Consultant Agreements”), and true and complete copies
of the same have been delivered to Purchaser heretofore. All Consultant
Agreements have been entered into in the ordinary course of business of CSI and
CCSI, and reflect terms customarily offered by CSI and CCSI. Schedule
4.13(b)(ii) hereto contains a true and complete list as of the date hereof of
each agreement of CSI or CCSI with its licensees and partners (“Licensee
Agreements”), and true and complete copies of the same have been delivered to
Purchaser heretofore. All Licensee Agreements have been entered into in the
ordinary course of business of CSI and CCSI.

 

(c)          Schedule 4.13(c) hereto contains a true and complete list of all
noncompetition and nondisclosure agreements and nondisclosure covenants under
which either of CSI, CCSI, or any Shareholder or Key Employee is or are
obligated, and true and complete copies of the same have been delivered to
Purchaser heretofore (excluding those entered into with the Purchaser). Except
as described in Schedule 4.13(c) hereto, CSI and CCSI are not restricted by any
agreement from carrying on their respective business or engaging in any other
activity anywhere in the world, and no Shareholder or Key Employee is a party to
or otherwise bound or affected by any agreement, covenant or other arrangement
or understanding that would restrict or impair his or her ability to perform
diligently his or her duties to CSI and CCSI.

 

17

 

 

(d)          Schedule 4.13(d) hereto contains a true and complete list and
description of all contracts, agreements, employment agreements, understandings
arrangements and commitments, written or oral, of CSI and CCSI with any
Shareholder, Key Employee or any officer or director of CSI or CCSI, including
without limitation severance agreements (other than those contracts disclosed in
Schedule 4.13(c) hereto); in each case, a true and complete copy of such
contract, agreement, understanding, arrangement or commitment has been delivered
to Purchaser heretofore.

 

(e)          Schedule 4.13(e) hereto contains a true and complete list and
description of all other material contracts, agreements, understandings,
arrangements and commitments, written or oral, of CSI and CCSI by which they or
their respective properties, rights or assets are bound that are not otherwise
disclosed in this Agreement or the Schedules hereto. True and complete copies of
such written contracts, agreements, understandings, arrangements and commitments
and true and complete summaries of such oral contracts, agreements,
understandings, arrangements and commitments have been delivered to Purchaser
heretofore.

 

(f)           Except as described in Schedule 4.13(f) hereto, no event or
condition has occurred or is alleged to have occurred that constitutes or, with
notice or the passage of time, or both, would constitute a default or a basis of
force majeure or other claim of excusable delay or nonperformance by CSI or
CCSI, or any other person or entity, under any contract, agreement, arrangement,
commitment or other understanding, written or oral, described above in this
Section 4.13, which default, or the delay or nonperformance of which,
individually or in the aggregate, would have a Material Adverse Effect. Except
as set forth on Schedule 4.13(f) hereto, to NCSI’s Knowledge, no person or
entity with whom CSI or CCSI has such a contract, agreement, arrangement,
commitment or other understanding is in default thereunder or has failed to
perform fully thereunder by reason of force majeure or other claim of excusable
delay or nonperformance thereunder, which default, or the delay or
nonperformance of which, individually or in the aggregate, would have a Material
Adverse Effect.

 

(g)          Schedule 4.13(g) lists any agreement or indenture relating to the
borrowing of money or to the mortgaging, pledging, guaranteeing or otherwise
placing a Lien on any asset or group of assets of CSI or CCSI; any partnership,
joint venture, joint development, joint design, collaboration, joint marketing,
equity holders’ or other similar contract with any Person; any obligation, or
guarantee of any obligation, for borrowed money or otherwise; and agreement with
respect to the lending or investing of its funds; and any licensing of
intellectual property.

 

4.14        Employees and Labor Matters. Neither CSI nor CCSI has been, or is
now, a party to any collective bargaining agreement or other labor contract. To
the Knowledge of NCSI, CSI and CCSI are in compliance in all material respects
with all laws respecting employment and employment practices, terms and
conditions of employment, and wages and hours. Schedule 4.14 hereto sets forth a
list of all employees and independent contractors who have employment contracts
or loans or other agreements with CSI or CCSI, true, complete copies of which
have been delivered to the Purchaser heretofore. CSI and CCSI have provided to
the Purchaser a true, correct and complete copy of all of their respective
Employee Manuals and Handbooks and list of benefits. No Key Employee, or group
of employees of CSI or CCSI has notified CSI or CCSI of such Person’s or group’s
intent to terminate employment with CSI or CCSI, and there are no pending or, to
the Knowledge of NCSI, threatened Material disputes, disagreements or
controversies between CSI or CCSI, on the one hand, and any employee or
consultant of CSI or CCSI on the other hand. Any notice required under any law
applicable to CSI or CCSI in order to consummate the transactions contemplated
by this Agreement has been or, prior to Closing, will be given.

 

4.15        Principal Customers and Suppliers.

 

(a)          Schedule 4.15(a) states a total of all sales of CSI and CCSI for
the period from May 31, 2012 through May 31, 2013 to each of the customers that
constitute the ten (10) largest customers of CSI and CCSI, on a combined basis,
in terms of CSI’s and CCSI’s sales of services during such period, and lists
each of such ten (10) largest customers. Except as disclosed on Schedule 4.15(A)
none of such customers has given notice of its intention to terminate their
business with CSI or CCSI or take any other action, for any reason, which would
adversely affect CSI’s or CCSI’s business or relationship with such customer.

 

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(b)          Except as shown on Schedule 4.15(b), none of the ten (10) largest
suppliers of CSI and CCSI, on a combined basis, as listed on Schedule 4.15(b) in
terms of CSI’s and CCSI’s purchase of goods or services during the five months
ended on May 31, 2013 has terminated its relationship with CSI or CCSI, or
imposed Materially more adverse terms on its relationship with CSI or CCSI, on a
combined basis, or indicated (for any reason) its intention to terminate such
relationship or take such adverse action with respect thereto.

 

4.16        Books and Records. CSI’s minute book and other books and records of
CSI are located at the residence of the Corporate Secretary, at 101 Colorado St.
Apt 2904, Austin, TX 78701 or at CSI’s principal offices at 500 West Cummings
Park, Ste. 2550, Woburn, MA 01801. The books of account and other financial and
corporate records of CSI are in all material respects complete and correct and
are accurately reflected in the Financial Statements. The minute book(s) of CSI,
as previously made available to the Purchaser and its counsel, contain
materially accurate records of all meetings and accurately reflect all other
corporate action of the stockholders and directors of CSI through the date
hereof. The minute books of CSI will be delivered to the Purchaser at Closing.
CCSI’s minute book and other books and records of CCSI are located at the
residence of the Corporate Secretary, at 101 Colorado St. Apt 2904, Austin, TX
78701. The books of account and other financial and corporate records of CCSI
are in all material respects complete and correct and are accurately reflected
in the Financial Statements. The minute book(s) of CCSI, as previously made
available to the Purchaser and its counsel, contain materially accurate records
of all meetings and accurately reflect all other corporate action of the
stockholders and directors of CCSI through the date hereof. The minute books of
CCSI will be delivered to the Purchaser at Closing.

 

4.17        Intellectual Property. CSI owns or possesses sufficient legal rights
to all patents, trademarks, service marks, trade names, copyrights, trade
secrets, licenses, information and other proprietary rights and processes
necessary for its business as now conducted and, to NCSI’s Knowledge, as
presently proposed to be conducted (the “Intellectual Property”), without any
Known infringement of the rights of others. CCSI owns or possesses sufficient
legal rights to all the Intellectual Property necessary for its business as now
conducted and, to NCSI’s Knowledge, as presently proposed to be conducted,
without any Known infringement of the rights of others.

 

4.18        Authorization. CSI has all requisite corporate power and authority
to execute, deliver and perform the Transaction Documents to which it is a
party. All corporate action required to be taken by CSI’s Board of Directors in
order to authorize CSI to enter into and perform the Transaction Documents to
which it is a party has been taken or will have been taken prior to the Closing.
The Transaction Documents to which CSI is a party, when executed and delivered
by CSI, shall constitute the valid and legally binding obligation of CSI,
enforceable against CSI in accordance with its terms except: (a) as limited by
applicable bankruptcy, insolvency, reorganization, moratorium, fraudulent
conveyance, or other laws of general application relating to or affecting the
enforcement of creditors’ rights generally; or (b) as limited by laws relating
to the availability of specific performance, injunctive relief, or other
equitable remedies.

 

4.19        Absence of Changes. Except as set forth on Schedule 4.19, since
December 31, 2012, there has not occurred any event, circumstance or occurrence
that could reasonably be expected to have a Material Adverse Effect on CSI and
CCSI, on a combined basis.

 

4.20        Absence of Undisclosed Liabilities. Except as set forth on Schedule
4.20, CSI and CCSI have no liability and there is no basis for any claim with
respect to any liability that has, or could reasonably be expected to have, a
Material Adverse Effect on CSI and CCSI, on a combined basis, except in either
case for (a) liabilities set forth on the Latest Balance Sheet, and (b)
liabilities which have arisen since the date of the Latest Balance Sheet in the
ordinary course of business.

 

4.21        Legal Compliance.

 

(a)          Compliance with Laws. Except as set forth on Schedule 4.21, neither
CSI nor CCSI has received any communication, written or otherwise, during the
past three (3) years from a Governmental Body that alleges that CSI or CCSI is
not in compliance with any law applicable to the conduct of its business, the
noncompliance with which could reasonably be expected to have a Material Adverse
Effect on CSI and CCSI, on a combined basis. To the Knowledge of NCSI, CSI and
CCSI are in compliance, in all material respects, with all laws applicable to
the conduct of their respective business.

 

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(b)          Permits. To the Knowledge of NCSI, CSI and CCSI possess all
Material certificates, licenses, permits, authorizations and approvals made or
issued pursuant to or under, or required by, laws applicable to CSI or CCSI to
own, lease and operate its assets and to conduct the business of CSI and CCSI as
currently conducted.

 

4.22        Illegal Payments. Neither CSI, CCSI, nor to the Knowledge of NCSI,
any officer, director or employee of CSI or CCSI has: (a) used any funds of CSI
or CCSI for unlawful contributions, gifts, entertainment or other unlawful
expenses relating to political activity; (b) made any payment in violation of
applicable law to any foreign or domestic government official or employee or to
any foreign or domestic political party or campaign or violated any provision of
the Foreign Corrupt Practices Act of 1977, as amended; or (c) made any other
payment in violation of applicable law.

 

4.23        Affiliate Transactions.

 

(a)          Except as set forth on Schedule 4.23(a) or as related to
employment, (i) there are no agreements, understandings, arrangements (in each
case whether written or oral), liabilities or obligations between CSI or CCSI,
on the one hand, and NCSI or any of the Shareholders, any trustee of the
Shareholders, or any current or former shareholder, member, partner, officer,
director or manager of CSI, CCSI or any Affiliate of any such Person, on the
other hand, (ii) CSI and CCSI do not provide or cause to be provided any assets,
services or facilities to any Person described in clause (i) foregoing, (iii) no
Person described in clause (i) foregoing provides or causes to be provided any
assets, services or facilities to CSI or CCSI, and (iv) CSI and CCSI do not
beneficially own, directly or indirectly, any interests or investment assets of
any Person described in clause (i).

 

(b)          Except as set forth on Schedule 4.23(b), and except for the
ownership by NCSI of the Shares and the ownership by CSI of the CCSI Shares,
none of NCSI or the Shareholders nor any of their Affiliates, as the case may
be, have any interest of any nature in any of the assets and properties used for
or related to the business or operations of CSI or CCSI.

 

4.24        Money Laundering Laws. The operations of CSI and CCSI are and have
been conducted at all times in compliance in all material respects with money
laundering statutes in all applicable jurisdictions, the rules and regulations
thereunder and any related or similar rules, regulations or guidelines, issued,
administered or enforced by any Governmental Body (collectively, the “Money
Laundering Laws”) and no action involving CSI or CCSI with respect to the Money
Laundering Laws is pending or, to the Knowledge of NCSI, threatened.

 

4.25        Accounts Receivable. The accounts receivable of CSI and CCSI: (a)
are collectible in the ordinary course of business in amounts similar to amounts
historically collected (net of contractual allowances and bad debt reserves
established in accordance with prior practice), (b) represent legal, valid and
binding obligations for services actually performed by CSI or CCSI, as
applicable, enforceable in accordance with their terms (except as modified by
bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the
rights of creditors), (c) to the Knowledge of NCSI, CSI or CCSI, there are no
contests, claims, counterclaims, rights of set off or other defenses with
respect to such accounts receivable, and (d) have arisen only from bona fide
sales transactions in the ordinary course of business and are payable on
ordinary trade terms.

 

4.26        Environmental Matters.

 

(a)          To the Knowledge of NCSI, CSI and CCSI have complied with and are
in compliance in all material respects with all applicable Environmental Laws,
except where the failure to comply would not have a Material Adverse Effect, and
no proceeding is pending or, to the Knowledge of NCSI, threatened, alleging any
failure to so comply.

 

20

 

 

(b)          CSI and CCSI have not received any notice of any pending or, to the
Knowledge of NCSI, threatened litigation, proceeding or claim to the effect that
CSI or CCSI may be liable to any Person, or responsible or potentially
responsible for the costs of any remedies or removal action or other cleanup
costs, as a result of non-compliance with any Environmental Law. There is no
past or present action, activity, condition or circumstance that could be
expected to give rise to any such liability on the part of CSI or CCSI to any
Person for such cleanup costs.

 

(c)          As used herein, the term “Environmental Law” means any foreign,
federal, state, provincial or local law, permit or agreement with any
governmental body relating to the environment in effect in any and all
jurisdictions in which CSI or CCSI owns or leases property or conducts any
business.

 

4.27        Disclosure. Neither this Agreement nor any of the Disclosure
Schedules, other schedules, attachments or exhibits hereto contains any untrue
statement of a material fact or omits to state a material fact necessary in
order to make the statements made herein or therein, in the light of the
circumstances under which they were made, not misleading.

 

ARTICLE V

 

Representations and Warranties of Purchaser

 

The Purchaser hereby represents and warrants to NCSI and the Shareholders that:

 

5.1          Organization and Good Standing. The Purchaser has been duly
organized and is validly existing as a corporation in good standing under the
laws of the jurisdiction of its organization with full power and authority
(corporate and otherwise) to enter into this Agreement and the other Transaction
Documents to which it is a party and to consummate the transactions contemplated
hereby and thereby.

 

5.2          Authorization; Compliance with Law. Each of this Agreement and all
other Transaction Documents to be executed and delivered by Purchaser hereunder
has been duly authorized by all necessary action on the part of the Purchaser,
and each of this Agreement and the other Transaction Documents to which
Purchaser is a party has been duly executed and delivered by the Purchaser and
constitutes the legal, valid and binding obligation of the Purchaser enforceable
against the Purchaser in accordance with its terms, except as such enforcement
may be limited by bankruptcy, insolvency and other similar laws affecting the
enforcement of creditors’ rights generally, and by general equitable principles.
The Purchaser is in compliance, in all material respects, with all federal,
state and local laws and regulations applicable to it and its business,
including without limitation the Securities Act, the Exchange Act, and the
regulations promulgated thereunder.

 

5.3          Purchaser Shares. The Purchaser Shares have been duly authorized by
all necessary action, and when issued at Closing, shall be validly issued, fully
paid and non-assessable and free and clear of all Liens.

 

5.4          No Conflicts. Neither the execution, delivery and performance of
this Agreement and the other Transaction Documents to which Purchaser is a
party, nor the consummation of the transactions contemplated hereby and thereby,
nor the issuance of the Purchaser Shares, will conflict with or result in a
breach or violation of any term or provision of, or (with or without notice or
passage of time, or both) constitute a default under, or otherwise give any
person or entity a basis for nonperformance under, any indenture, mortgage, deed
of trust, loan or credit agreement, or other agreement or instrument to which
the Purchaser is a party or by which the Purchaser is bound or to which any of
the property or assets of the Purchaser is subject, nor will such action result
in the violation of the provisions of the charter or bylaws of the Purchaser or
any statute applicable to it (including, without limitation, the Securities Act,
the Exchange Act or the regulations promulgated thereunder), or any order, rule
or regulation of any Governmental Body applicable to the Purchaser, or any
order, writ, injunction or decree of any court or any arbitrator having
jurisdiction over the Purchaser or any of its property or assets.

 

5.5          Consents. All consents, authorizations and approvals of any
Governmental Body or any arbitrator or any other Person required to be obtained
by the Purchaser as a result of the consummation of the transactions
contemplated by this Agreement, including without limitation the issuance of the
Purchaser Shares, have been obtained.

 

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5.6          Litigation. Except as set forth on Schedule 5.6 hereto, there is no
claim, legal action, suit, arbitration, or mediation proceeding or other legal,
administrative or governmental investigation, inquiry or proceeding pending or,
to the Knowledge of Purchaser threatened, relating to the transactions
contemplated by this Agreement or the other Transaction Documents or the
consummation hereof or thereof.

 

5.7          Exchange Act Documents. Purchaser is subject to the reporting
requirements of Section 13 or 15(d) of the Exchange Act and has filed all forms,
reports and documents (together with any required amendments thereto) required
to be filed by Purchaser with the SEC since February 17, 2012. All such required
forms, reports and documents (including those that Purchaser may file subsequent
to the date hereof) are referred to herein as the “Purchaser Exchange Act
Documents.” As of their respective dates, the Purchaser Exchange Act Documents
(i) were prepared in accordance with the requirements of the Exchange Act, as
the case may be, and the rules and regulations of the SEC thereunder applicable
to such Purchaser Exchange Act Documents and (ii) did not at the time they were
filed (or if amended or superseded by a filing prior to the date of this
Agreement, then on the date of such filing) contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading, except to the extent
corrected prior to the date of this Agreement by a subsequently filed Purchaser
Exchange Act Document. The Purchaser Exchange Act Documents, taken as a whole,
together with any press release that is broadly disseminated after the date of
the most recent Purchaser Exchange Act Documents and the date of this Agreement,
do not contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary in order to make the
statements therein, in the light of the circumstances under which they were
made, not misleading. None of Purchaser’s Subsidiaries is required to file any
forms, reports or other documents with the SEC. Purchaser has complied
materially since February 17, 2012 with all applicable requirements of the
Financial Industry Regulatory Authority and the OTC Bulletin Board.

 

ARTICLE VI

 

Covenants

 

NCSI, the Shareholders and Purchaser hereby covenant as follows:

 

6.1          Ordinary Course. Prior to the Closing Date, NCSI and Shareholder
shall cause each of CSI and CCSI to conduct its business in the usual and
ordinary course, in substantially the same manner as theretofore conducted, use
commercially reasonable efforts (in compliance with this Agreement) to preserve
intact its current business and goodwill, to maintain its equipment in good
condition and repair, to keep available the services of its current officers and
Key Employees and to preserve its relationships with customers, suppliers and
others having business dealings with it.

 

6.2          Dividends; Capital Stock. Prior to the Closing Date, neither CSI
nor CCSI shall (i) declare any dividends on, or make other distributions in
respect of, any shares of its capital stock; (ii) issue, authorize or propose
the issuance of, or purchase or propose the purchase of, any shares of CSI’s or
CCSI’s capital stock or securities convertible into or exchangeable with
securities of CSI or CCSI; (iii) change the outstanding shares of CSI’s or
CCSI’s capital stock into a different number of shares of the same or different
class by reason of any reclassification, recapitalization, forward stock split,
reverse stock split, combination, exchange of shares or readjustment, or declare
a stock dividend thereon; or (iv) obligate itself to do any of the foregoing.

 

6.3          Covenant Not to Use Name. After the Closing, NCSI and the
Shareholders shall not use the name “Control Solutions International”, “Canada
Control Solutions International” or any variations thereof as a trademark,
service mark, trade name, corporate name, logo, slogan, website and Internet
domain name for purposes of conducting or transaction any business.

 

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6.4          ConfidentialityAny information (except publicly available or freely
usable material obtained from another source) respecting any Party or its
Affiliates will be kept in strict confidence by all other Parties to this
Agreement and their agents. Except as required by law, each Party and their
respective Affiliates, directors, officers, employees or agents, will not
disclose the terms of the transactions contemplated hereunder at any time,
currently, or on or after the Closing, regardless of whether the Closing takes
place, except as necessary to their attorneys, accountants, third parties, or
professional advisors, in which instance such persons and any employees or
agents shall be advised of the confidential nature of the terms of the
transaction and shall themselves be required by the applicable Party to keep
such information confidential. Except as required by law, each Party shall
retain all information obtained from the other and their lawyers on a
confidential basis except as necessary to their attorneys, accountants and
professional advisors, in which instance such persons and any employees or
agents of such Party shall be advised of the confidential nature of the terms of
the transaction and shall themselves be required by such Party to keep such
information confidential.

 

6.5          Publicity. If mutually desired by Purchaser and NCSI, Purchaser and
NCSI will cooperate with each other in the development and distribution of any
news releases and other public disclosures relating to the transactions
contemplated by this Agreement and, following the Closing, relating to the
business generally. Notwithstanding the foregoing, the provisions of this
paragraph shall not be applicable in the event a Party hereto is required to
make public disclosure pursuant to the laws of any Governmental Body or
securities exchange.

 

6.6          Required Information. In connection with the preparation of any
report, statement, filing notice or application made by or on behalf of
Purchaser to any Governmental Body, FINRA, the SEC or other third Person in
connection with the transactions contemplated hereby, and for such other
reasonable purposes, NCSI, and/or the Shareholders shall, upon request by
Purchaser, furnish Purchaser with all information concerning themselves, CSI,
CCSI, and directors, officers and employees of CSI or CCSI, and such other
matters as may be reasonably necessary or advisable in connection with the
transactions contemplated hereby, or any other report, statement, filing, notice
or application made by or on behalf of Purchaser to any third party and/ or any
Governmental Authority in connection with the transactions contemplated hereby.

 

6.7          Insurance. Prior to the Closing, the Purchaser and NCSI shall
cooperate in good faith to mutually determine the appropriate levels of
insurance that Purchaser shall cause CSI to maintain in effect following the
Closing Date, covering acts and omissions of CSI and CCSI prior to the Closing
Date (whether through on-going insurance policies purchased by CSI or the
purchase of supplemental insurance), In no event will the coverage period
continue for more than a period of two (2) years following the Closing Date and
shall not include any coverages except::

 

 (i)Professional Liability insurance covering liability for financial loss due
to any error, omission or negligence of CSI or CCSI, their respective employees,
directors, officers, agents or subcontractors not to exceed two million dollar
in coverage;..

 

 (ii)Cyber Liability insurance covering liability not to exceed one million
($1,000,000) in coverage.

 

6.8          Employment Practices Liability insurance not to exceed $1,000,000
in coverage..

 

NCSI shall bear all increased premiums, associated with such additional
insurance coverages to the degree that the additional coverage was not already
included in the insurance programs that CSI had maintained immediately prior to
the Closing. NCSI shall promptly reimburse Purchaser for all such premiums,
costs and expenses if the same shall have been paid by Purchaser or CSI, or
Purchaser may deduct such amounts due from the Earn Out payment.

 

6.9          Transfer Taxes. All transfer, documentary, sales, use, transaction
privilege, stamp, registration and other such taxes and fees incurred in
connection with this Agreement, if any, shall be borne, jointly and severally,
by NCSI and the Shareholders.

 

ARTICLE VII

 

Conditions Precedent to Closing

 

7.1          Conditions of the Purchaser. The obligations of the Purchaser to
consummate the transactions contemplated by this Agreement and the other
Transaction Documents shall be subject to the satisfaction, at or prior to the
Closing, of the following conditions, any of which may be waived in whole or in
part by Purchaser:

 

23

 

 

(a)           the Closing shall occur on the date that is no later than 45 days
from the date of the completion of the Audit (or such other later date as
mutually agreed to by the Parties in writing);

 

(b)          any necessary amendments to the final Disclosure Schedules shall
have been completed and delivered by NCSI and the Shareholders to Purchaser,
which shall be correct in all material respects on and as of the Closing Date
and satisfactory to Purchaser, in its sole discretion;

 

(c)          the representations and warranties of NCSI and the Shareholders in
this Agreement shall be true and correct in all material respects on and as of
the Closing Date with the same effect as if made on the Closing Date, and CSI,
CCSI, NCSI and the Shareholders shall have complied with all covenants and
agreements and satisfied all conditions on their part to be performed or
satisfied under this Agreement or any other Transaction Documents on or prior to
the Closing Date;

 

(d)          Schedule 2.1(c) shall have been completed and finalized to the
satisfaction of the Purchaser, in its sole discretion;

 

(e)          there shall not have occurred any Material Adverse Change with
respect to CSI and CCSI, on a combined basis;

 

(f)           NCSI shall have delivered to the Purchaser (i) the original stock
certificate or certificates for the Shares being transferred hereunder, duly
endorsed for transfer or (ii) a Lost Stock Certificate Affidavit, certifying as
to the loss or destruction of such certificate(s), or certifying that a stock
certificate representing such Shares was never issued to NCSI, in each case in a
form reasonably satisfactory to the Purchaser’s counsel;

 

(g)          each of NCSI and the Shareholders shall have entered into Covenants
Not to Compete/Non-Solicitation with the Purchaser and CSI in form attached
hereto as Schedule 7.1(g);

 

(h)          each current member of the board of directors of CSI and CCSI shall
have tendered his or her written resignation to CSI and CCSI, to be effective
upon the Closing;

 

(i)           each officer of CSI and CCSI requested to do so by the Purchaser
shall have resigned;

 

(j)           NCSI and the Shareholders shall have obtained all of the Consents
required in connection with the consummation of the transactions contemplated by
this Agreement and the other Transaction Documents as set forth in Schedule
4.12;

 

(k)          the Purchaser shall have obtained, on terms and conditions
satisfactory to the Purchaser in the Purchaser’s sole and absolute discretion,
all of the financing it needs in order to consummate the transactions
contemplated by this Agreement and to fund the working capital requirements of
the CSI and CCSI after the Closing;

 

(l)           RBSM, LLP shall have completed its Audit of CSI’s and CCSI’s 2012
and 2011 Annual Financial Statements and shall have reviewed CSI’s and CCSI’s
financial statements for the stub-period for the current fiscal year, the
results of which shall be satisfactory to Purchaser, in its sole discretion;

 

(m)         the Purchaser shall have completed its due diligence of CSI’s and
CCSI’s financial and legal documents, materials, books and records, which shall
be satisfactory to Purchaser in its sole discretion;

 

(n)          If required by Purchaser, and at its expense, NCSI and the
Shareholders shall have delivered to Purchaser an opinion of counsel to NCSI and
the Shareholders in form and substance and attached, hereto as Schedule 7.1(n);

 

(o)          NCSI shall have delivered to Purchaser signed UCC termination
statements by Simon Dealy, Margaret Gesualdi, and all other holders of Liens on
the Shares, the CCSI Shares and/or the assets of CSI and/or CCSI;

 

24

 

 

(p)          NCSI shall have satisfied its payment obligations, or made
arrangements satisfactory to Purchaser for the payment of amounts due under that
certain Settlement Agreement dated September 21, 2012 between NCSI and the other
parties, simultaneously with the Closing;

 

(q)          Seller shall have delivered a schedule which sets forth all third
party consents, authorizations, orders and approvals required to consummate this
transaction;

 

(r)           Seller shall have delivered copies of all material contracts to
which CSI is a party which requires third party consent (the “Consent”) pursuant
to this transaction;

 

(s)          Sellers shall have obtained all Consents; and

 

(t)           NCSI and the Shareholders shall have delivered to the Purchaser
such other documents, certificates and instruments as may be reasonably
requested by the Purchaser in connection with the consummation of the
transactions contemplated by this Agreement and the other Transaction Documents.

 

7.2          Conditions of NCSI and the Shareholders. The obligations of NCSI or
the Shareholders to consummate the transactions contemplated by this Agreement
and the other Transaction Documents shall be subject to the satisfaction, at or
prior to the Closing, of the following conditions, any of which may be waived in
whole or in part by NCSI and the Shareholders:

 

(a)          The Closing shall occur on the date that is 45 days from the date
of the completion of the Audit (or such other later date as mutually agreed to
by the Parties in writing);

 

(b)          the representations and warranties of the Purchaser in this
Agreement shall be true and correct in all material respects on and as of the
Closing Date with the same effect as if made on the Closing Date, and the
Purchaser shall have complied with all covenants and agreements and satisfied
all conditions on its part stated to be performed or satisfied under this
Agreement prior to the Closing Date;

 

(c)          the Purchaser shall have paid the Cash Portion of the Purchase
Price in immediately available funds, as required by Section 2.2(a) hereof; and
shall have duly executed and delivered to NCSI either (i) certificates
representing the Purchaser Shares or (ii) evidence reasonably satisfactory to
NCSI’s counsel that the Purchaser Shares have been duly issued to NCSI and that
NCSI is reflected as the owner thereof on the books and records of the
Purchaser;

 

(d)          Schedule 2.1(c) shall have been completed and finalized to the
satisfaction of NCSI and the Shareholders, in their sole discretion;

 

(e)          the Purchaser shall have delivered to NCSI and the Shareholders
such documents, certificates and instruments as may be reasonably requested by
NCSI or the Shareholders in connection with the consummation of the transactions
contemplated by this Agreement and the other Transaction Documents.

 

(f)           The Purchaser shall have signed and delivered to the Sellers, the
duly executed Consent Letter described in that certain Settlement Agreement
between NCIS and other parties dated September 21, 2012.

 

(g)          the Purchaser shall have the registration rights in the form
attached hereto as Schedule 7.2(f).

 

(h)          the Purchaser shall have delivered to each of the Shareholders his
or her respective Employment Agreement in the form attached hereto as Exhibit
XX, executed by the Purchaser in accordance with Section 2.3.

 

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ARTICLE VIII

 

Indemnification

 

8.1          Survival of Representations and Warranties.

 

All representations and warranties of NCSI and the Shareholders in Article III
and Article IIIA shall survive the Closing and shall terminate four (4) years
from the Closing Date and thereafter shall be of no force or effect except for
any claim with respect to which notice has been given to the Party to be charged
prior to such expiration date; provided, however, that any indemnification
claims based on fraud shall not expire on such expiration date. All
representations and warranties of NCSI and the Shareholders contained in Article
IV this Agreement shall survive the Closing and shall terminate twelve (12)
months from the Closing Date and thereafter shall be of no force or effect,
except for any claim with respect to which notice has been given to the party to
be charged prior to such expiration date; provided, however, that any
indemnification claims based on fraud shall not expire on such expiration date;
and provided further, however, that representations of Section 4.10 (Income and
Other Taxes), Section 4.11 (Employee Benefit Matters) and Section 4.26
(Environmental Matters) shall expire upon the termination of any applicable
statutes of limitations.

 

8.2          Indemnification.

 

(a)          Subject to the terms of this Agreement, including without
limitation the floor and caps on indemnification set forth in Section 8.2(c),
NCSI and the Shareholders agree to indemnify, defend, save and hold harmless,
Purchaser, CSI, CCSI, their respective officers, directors, employees, agents,
and representatives from and against any loss, cost, expense, liability, claim
or legal damages (including, without limitation, reasonable fees and
disbursements of counsel) (collectively, “Damages”) arising out of or resulting
from: (i) any inaccuracy in or breach of any representation or warranty of NCSI
or any Shareholder (but only with respect to such Shareholder for
representations and warranties under Article IIIA) in this Agreement; (ii) any
Damages arising from or in connection with CSI and/or CCSI for the period prior
to the Closing Date, the Excluded Liabilities and/or the Excluded Assets; or
(iii) any failure of NCSI or any Shareholder (but only with respect to such
Shareholder) to perform or observe fully any covenant, agreement or provision to
be performed or observed by it pursuant to this Agreement.

 

(b)          Subject to the terms of this Agreement, including without
limitation the floor and the cap on indemnification set forth in Section 8.2(c),
the Purchaser agrees to indemnify, defend, save and hold harmless, NCSI and the
Shareholders and NCSI’s officers, directors, employees, agents, and
representatives from and against any Damages arising out of or resulting from:
(i) any inaccuracy in or breach of any representation or warranty of the
Purchaser in this Agreement; or (ii) any failure of the Purchaser to perform or
observe fully any covenant, agreement or provision to be performed or observed
by it pursuant to this Agreement.

 

(c)          Notwithstanding any other provision of this Agreement, (i) no claim
shall be made for indemnification under Section 8.2(a) or Section 8.2(b) unless
and until the Damages exceed $25,000 in the aggregate, in which event the Party
seeking indemnification hereunder (the “Indemnified Party”) shall be entitled to
indemnification from the Party obligated to provide indemnification hereunder
(the “Indemnifying Party”) for the entire amount of such Damages from the first
dollar; (ii) the aggregate amount of any claims for indemnification made by the
Purchaser under Section 8.2(a) shall not exceed the total of the Cash Portion of
the Purchase Price, plus $170,000 plus any Earn Out paid as of the date of such
claim; (iii) the aggregate amount of any claims for indemnification made by NCSI
and the Shareholders under Section 8.2(b) shall not exceed the Cash Portion of
the Purchase Price, plus $170,000 plus any Earn Out paid as of the date of such
claim; and (iv) with respect to each Shareholder, the amount of any
indemnification payable by such Shareholder individually shall not exceed the
product of the cap set forth in clause (iii) above multiplied by the percentage
ownership of NCSI’s shares held by the such Shareholder as of the Closing Date;
provided, however, that the floor and caps provided in the foregoing clauses
shall not apply to indemnification claims based on fraud and/or based on breach
of Section 4.10 (Income and Other Taxes). Any indemnification based on claims by
the Purchaser shall be paid first by deducting such amounts from any Earn Out,
if any, under this Agreement, then by returning and forfeiting the sufficient
number of Purchaser Shares (which shall be valued, for these purposes, at $1.50
per share) to Purchaser, and then by NCSI and Shareholders making direct
payments to the Purchaser.

 

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(d)          The Indemnified Party shall deliver notice of any claim for
indemnity under Section 8.2(a) or Section 8.2(b), as applicable, in writing to
the Indemnifying Party promptly after a discovery by the Indemnified Party of
such claim, setting forth with reasonable specificity the amount claimed and the
underlying facts supporting such claim to the extent known by the Indemnifying
Party; provided however, that the failure of the Indemnified Party to so notify
the Indemnifying Party shall not relieve the Indemnifying Party of its
obligation to indemnify under this Agreement unless the claim arises from a
third party and the rights of the Indemnifying Party are thereby materially
prejudiced. The Indemnifying Party shall have fifteen (15) days to accept or
dispute such claim. Any undisputed claims shall be satisfied within such fifteen
(15) day period. Any disputes that the Parties are not mutually able to resolve
within fifteen (15) days after the Indemnifying Party has disputed the claim (or
the end of such fifteen (15) day period, whichever is earlier), shall be finally
settled by arbitration in New York, New York, in accordance with the Commercial
Arbitration Rules of the American Arbitration Association in force at such time,
and judgment on the award rendered by the arbitrator may be entered in any court
having jurisdiction thereof. This agreement to arbitrate shall be specifically
enforceable and following the Closing shall be the sole and exclusive remedy of
the Indemnified Party for the resolution of any disputes related to the subject
matter of this Agreement; provided however that such agreement to arbitrate,
such exclusive remedy or the limitations on liability set forth herein shall not
preclude the Indemnified Party from pursuing any claim for injunctive relief or
action to compel arbitration which the Parties may make in any court of
competent jurisdiction.

 

(e)          After receipt by the Indemnified Party of notice of the
commencement of any action or other claim by a third party that may give rise to
a claim of indemnity hereunder (a “third party claim”), the Indemnified Party
will, in a timely manner, notify the Indemnifying Party of the third party
claim, but the failure to notify Indemnifying Party shall not relieve the
Indemnifying Party of its obligation to indemnify under this Agreement unless
the lack of timeliness materially prejudices the Indemnifying Party’s ability to
defend against such third party claim. After receipt of such notice the
Indemnifying Party shall, in a timely manner, undertake the defense or
settlement of such third party claim with counsel reasonably satisfactory to the
Indemnified Party (who shall not, except with the consent of the Indemnified
Party, be counsel to the Indemnifying Party). The Indemnifying Party shall not
settle any such action without the consent of the Indemnified Party, which shall
not be unreasonably withheld.

 

ARTICLE IX

 

Termination, Amendment and Waiver

 

9.1          Termination. This Agreement may be terminated at any time on or
prior to the Closing Date:

 

(a)          by mutual agreement of the Parties hereto;

 

(b)          by any Party hereto if the Closing has not occurred on or before
the date that is 60 days after the date of completion of the Audit (or such
later Closing Date as may have been agreed to by the Parties in writing);

 

(c)          by the Purchaser if: (i) at any time there has been a material
misrepresentation, breach of warranty or breach of covenant by NCSI or the
Shareholders under this Agreement; or (ii) any condition precedent to Closing
set forth in Section 7.1 of this Agreement has not been met on the Closing Date,
and, in each case, Purchaser is not then in default of its obligations
hereunder; and

 

(d)          by NCSI or the Shareholders if: (i) at any time there has been a
material misrepresentation, breach of warranty or breach of covenant by
Purchaser under this Agreement; or (ii) any condition precedent to Closing set
forth in Section 7.2 of this Agreement has not been met on the Closing Date,
and, in each case, NCSI and the Shareholders are not then in default of their
obligations hereunder.

 

9.2          Effect. In the event of termination of this Agreement as provided
in Section 9.1 hereof, this Agreement shall forthwith become void and there
shall be no liability for any reason on the part of any Party hereto, or any
officer, director, employee, agent or representative of any Party hereto or any
person who Controls a Party hereto, except for willful breach.

 

9.3          Amendment. This Agreement may be amended at any time only by a
written instrument executed by the Purchaser, NCSI, and the Shareholders.

 

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9.4          Waiver. Compliance with or performance under any term or provision
of this Agreement may be waived in writing by mutual agreement of the Purchaser,
NCSI and the Shareholders.

 

ARTICLE X

 

General Provisions

 

10.1        Complete Agreement and other Matters. This Agreement (a) constitutes
the entire agreement and supersedes all other prior and contemporaneous
promises, covenants, understandings, representations, warranties, agreements and
undertakings, both written and oral, among the Parties hereto with respect to
the subject matter hereof; (b) is not intended to confer upon any person or
entity any rights or remedies hereunder or with respect to the subject matter
hereof except an specifically provided in this Agreement; (c) shall not be
assigned by operation of law or otherwise; (d) shall be governed by, and
construed in accordance with, the internal laws (and not the law of conflicts)
of the State of New York; (e) may be executed in two or more counterparts, each
of which shall be deemed to be an original, but all such counterparts together
shall constitute a single agreement; (f) may be executed by facsimile signature,
provided that the original thereof is provided to the other Parties promptly
thereafter; and (g) shall be construed without regard to headings or captions,
or gender, or whether a reference is to the singular or plural. NCSI, the
Shareholders and the Purchaser agree that service of process by registered or
certified mail, return receipt requested, at his, her or its address specified
in or pursuant to Section 10.5 is reasonably calculated to give actual notice.

 

10.2        Expenses. All costs and expenses incurred in connection with this
Agreement and the transactions contemplated hereby shall be paid by the Party or
Parties incurring the same, it being expressly understood by the Parties hereto
that NCSI, and not the Shareholders, shall be liable for the costs and expenses
of the Shareholders and their counsel and other advisors in connection with this
Agreement and the transactions contemplated hereby. Notwithstanding the
foregoing, the Parties agree that (i) NCSI will pay, regardless of whether or
not the Closing occurs, the lesser of $22,500 or 50% of the fees for the Audit,
and (ii) Purchaser will pay the excess of the fees for the Audit for which NCSI
is not responsible pursuant to clause (i).

 

10.3        Broker’s Fees. Each of the Purchaser and NCSI agree to pay the fees
of any broker hired by it and to indemnify and hold the other Parties harmless
from any claim by any broker, finder, banker or intermediary hired or claiming
to have been hired by it.

 

10.4        Further Action. Subject to the terms and conditions provided in this
Agreement, each of the Parties hereto agrees to use all reasonable efforts to
take, or cause to be taken, all action, and to do, or cause to be done, all
things necessary, proper or advisable under applicable laws and regulations to
consummate and make effective the transactions contemplated by this Agreement.
If at any time after the Closing Date any further action is necessary to carry
out the purposes of this Agreement, the Shareholders or Purchaser, as the case
may be, shall take, or cause to be taken, all such necessary action.

 

10.5        Notice. All notices, requests, demands, claims, and other
communications hereunder will be in writing. Any notice, request, demand, claim,
or other communication hereunder shall be deemed duly given: (a) upon receipt if
delivered personally; (b) one (1) Business Day following the date sent when sent
by reputable overnight courier (such as FedEx) and (c) three (3) Business Days
following the date mailed when mailed by registered or certified mail, return
receipt requested and postage prepaid, at the following addresses:

 

(a)         As to Purchaser: Staffing 360 Solutions, Inc.     641 Lexington
Avenue   Suite 1526   New York, NY  10022   Attention: A.J. Cervantes       With
a copy to: Ellenoff Grossman & Schole LLP     150 East 42nd Street, 11th Floor  
New York, NY 10017     Attention:  Barry I. Grossman, Esq.  

 

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(b)         As to Shareholders and NCSI:       If to Simon Dealy Mr. Simon Dealy
  36 West St.   Reading, MA 02472     If to Margaret Gesualdi: Ms. Margaret
Gesualdi   22 Oakdene Ave.   Cliffside Park, NJ 07010     If to Charlie Cooper
Mr. Charles Cooper   101 Colorado St. Apt 2904   Austin, TX  78701     If to
NCSI: NewCSI, Inc.   101 Colorado St. Apt 1805 With a Copy to: Austin, TX  78701
      Each of the Shareholders

 

or to such other address, or to such other authorized recipient of any notice
hereunder, as any Party shall in writing deliver to all other Parties in
accordance with this Section 10.5.

 

10.6        Right of Set-Off. Purchaser shall have the right to set-off against
and apply the Earn-Out, if any, against any and all other amounts, payments and
charges determined , pursuant to Section 8.2(D) to be owing by NCSI and/or the
Shareholders to Purchaser under this Agreement.

 

10.7        Survival. The covenants and agreements of the Parties shall survive
the Closing indefinitely.

 

[Signature page follows]

 

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IN WITNESS WHEREOF, each of the Parties hereto has executed this Agreement, or
has caused this Agreement to be executed on its behalf by a representative duly
authorized, as an instrument under seal, all as of the date first above set
forth.

 

  PURCHASER:       Staffing 360 Solutions, Inc.         By /s/ Allan Hartley    
Name: Allan Hartley     Title: Chief Executive Officer       SHAREHOLDERS:      
/s/ Simon Dealy   Simon Dealy       /s/ Margaret Gesualdi   Margaret Gesualdi  
    /s/ Charles Cooper   Charles Cooper       NCSI:       NewCSI, Inc.       By
/s/ Simon Dealy     Name: Simon Dealy     Title: CEO & President

 

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