Exhibit 10.1

ASSET PURCHASE AGREEMENT

BETWEEN

CONTROL DYNAMICS INTERNATIONAL, L.P.

AND

ENGLOBAL AUTOMATION GROUP, INC.

Dated as of April 6, 2010
 
 
 
 
 

 
 

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TABLE OF CONTENTS

   
Page
           
ARTICLE 1  SALE AND PURCHASE OF ASSETS
1
     
1.1
General
1
1.2
Excluded Assets
3
     
ARTICLE 2  PURCHASE PRICE
 
4
     
2.1
Purchase Price
4
2.2
Liabilities
5
2.3
Allocation of Purchase Price
6
2.4
Purchase Price Adjustment Procedure
6
     
ARTICLE 3  REPRESENTATIONS AND WARRANTIES
6
     
3.1
Representations and Warranties
6
3.2
Purchaser’s Representations and Warranties
15
     
ARTICLE 4  ACTIONS BEFORE CLOSING
16
     
4.1
General Inspection and Tests
16
4.2
Interim Conduct of the Business
16
4.3
Liens
17
4.4
Notices of Certain Events
17
4.5
Lease Consent
17
     
ARTICLE 5  ADDITIONAL AGREEMENTS
17
     
5.1
Access to Information
17
5.2
Confidentiality
18
5.3
Public Disclosure
19
5.4
Further Assurances
19
5.5
Notification of Certain Matters
19
5.6
Business Disclosure Schedule
20
5.7
Preservation of Records
20
     
ARTICLE 6  CONDITIONS
20
     
6.1
Conditions Precedent to Purchaser’s Obligation and Closing
20
6.2
Conditions to Seller’s Obligations and Payments at Closing
21

 
 
 
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ARTICLE 7  CLOSING
22
     
7.1
The Closing
22
7.2
Time, Date and Place of Closing
22
7.3
Purchaser’s Obligations
22
7.4
Seller’s Obligations
22
7.5
Termination of Employment Agreements
23
7.6
Employees
23
7.7
Key Employees
24
7.8
Prorations and adjustments.
24
     
ARTICLE 8  ACTIONS AFTER CLOSING
24
     
8.1
Further Action
24
8.2
Further Consents to Assignment
24
8.3
Covenant Not to Complete and Non-Solicitation
24
8.4
Confidential Information
25
8.5
Accounts Receivable
26
     
ARTICLE 9  INDEMNIFICATION
26
     
9.1
Indemnification of Purchaser
26
9.2
Indemnification of Seller
27
9.3
Responsibility for Defense
27
9.4
Payment of Fees and Expenses
28
9.5
Right of Set-Off
28
9.6
Rights of Indemnitor and Exclusive Remedy
28
     
ARTICLE 10  AMENDMENT, WAIVER AND TERMINATION
29
     
10.1
Amendment
29
10.2
Waiver
29
10.3
Extension
29
10.4
Termination
29
10.5
Effect of Termination
30
     
ARTICLE 11  MISCELLANEOUS
30
     
11.1
Cooperation
30
11.2
Severability
30
11.3
Brokers: Expenses
30
11.4
Taxes
30
11.5
Notices
31
11.6
Assignment
31
11.7
No Third Parties
32
11.8
Incorporation by Reference
32

 
 
 
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11.9
Counterparts, Faxes and Electronic Signatures
32
11.10
Entire Agreement; Time is of the Essence
32
11.11
Interpretation
32
11.12
Survival of Representations and Covenants
32
11.13
Definition of Knowledge
32
11.14
Governing Law
33
     
EXHIBIT A
 
35
     
EXHIBIT B
 
36
     
EXHIBIT C
 
37
     

 
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ASSET PURCHASE AGREEMENT

This Agreement is made and entered into effective as of April 1, 2010 between
Control Dynamics International, L.P., a Texas Limited Partnership (“CDI” or
“Seller”) and ENGlobal Automation Group, Inc., a Texas Corporation (“ENG” or
“Purchaser”).

Background

Seller desires to sell and transfer to Purchaser, and Purchaser desires to
purchase and acquire from Seller, certain assets of Seller related to the
operation of Seller’s business of control systems engineering and manufacturing
serving the upstream, midstream, and downstream segments of the energy industry
(the “Business”). Purchaser wishes to effect the Purchase of such assets in a
manner that shall allow Purchaser to continue to operate the Business for profit
as it is currently operating, without being liable for, or being subject to, any
liabilities of either the Business or of the Seller other than any liabilities
specifically assumed by Purchaser in this Agreement.

Now, therefore, in consideration of the mutual promises and undertakings of the
parties hereto, Seller on the one hand, and Purchaser, on the other hand, hereby
agree as follows:

Article 1
Sale and Purchase of Assets

1.1           General.  On the terms and conditions set forth in this Agreement,
Seller agrees to sell, convey, transfer, assign, and deliver to Purchaser, and
Purchaser agrees to purchase from Seller, substantially all of the assets used
in connection with the Business of Seller, including but not limited to the
following described rights, assets, and properties and the commitment of the Key
Employee (as hereinafter defined) to continue to work in the Business and not to
compete (but excluding the Excluded Assets as hereafter defined and described):

(a)           Accounts receivable, inventory and work in progress of the
Business as of the Effective Date, rights to complete any work performed, any
rights under any Sales Contracts assigned to Purchaser the time of Closing,
including any described on Schedule 1.1(a) but excluding any described on
Schedule 1.2.

(b)           All furniture, fixtures, machinery, equipment, instruments,
supplies, tools, inventory, trade fixtures, signs and other tangible personal
property used in connection with the Business, specifically including, but not
necessarily limited to, any described on Schedule 1.1(b) but excluding any
described on Schedule 1.2;

(c)           All rights which may be assigned in and to any all permits,
approvals, qualifications, authorizations, licenses, consents, certifications or
clearances and the like held or used by Seller in the conduct of the Business
issued by any government or governmental unit, agency, board, body or
instrumentality, whether federal, state or local, and all applications therefore
(the “Permits”), all of which will (to the extent assignable) be transferred or
assigned to

 
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Purchaser at the Closing, including any described on Schedule 1.1(c) but
excluding any described on Schedule 1.2.  In the event any such licenses,
permits, certifications or the like are not transferable but are, in the good
faith, reasonable and informed discretion of Purchaser, necessary or
advantageous to the continuation of the Business or to the work in progress,
Seller shall reasonably cooperate in any pre-closing or post-closing actions or
applications to effect the assignment or transfer of same to Purchaser, or to
effect the qualification of Purchaser to acquire, such license(s), permit(s),
certification(s) or the like.  Any reasonable post-closing out of pocket costs
associated with such efforts of Seller shall be paid by Purchaser.

(d)           All rights in and to the name of “CDI” or “Control Dynamics
International” and all other product names, regardless of whether said product
names are under trademark protection, together with all logos, trademarks, trade
names, patents, patents pending, designs,  telephone numbers, post office boxes,
email addresses, web domain names, pictures, graphics and other intellectual
property used in connection with the Business, including specifically the
intellectual property rights described in Schedule 1.1(d).
 
(e)           All of the following (each a “Contract” and collectively, the
“Contracts”):

(i)           Purchase and Service Contracts.  Seller’s rights under those
certain orders, contracts and commitments for the purchase of goods or services
listed on Schedule 1.1(e)(i), including specifically but without limitation the
contracts for subcontracted services as described on Schedule 1.1(e)(i)
(collectively, the “Purchase Contracts”);

(ii)           Sales Contracts and Proposals.  Seller’s rights under orders,
contracts, in addition to those contracts set forth in Schedule 1.1(a),
proposals and commitments for sales of goods or providing of services including
specifically but without limitation all described or referred to on Schedule
1.1(e)(ii) (collectively, the “Sales Contracts and Proposals”);

                (iii)           General Contracts and
Commitments.  Confidentiality, non-disclosure and protective agreements;
software licenses; leases; licenses (including without limitation licenses under
sales agreements); warranties, arrangements, subscriptions and other contracts
and agreements with respect or related to the Business (the “General Contracts”)
including specifically but without limitation all described or referred to on
Schedule 1.1(e)(iii); and
 
               (iv)           Employment Agreements and Non-Compete
Agreements.  The commitment of the Key Employee employed by Seller to enter a
binding and enforceable Employment Agreement to be employed in the Business
post-Closing in substantially the same capacity and under substantially the same
terms and conditions as he had been employed by Seller and to enter into an
Agreement not to Compete with the Purchaser in the operation of the Business
after Closing or after termination of his Employment Agreement is terminated.

 
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(f)           Books and Records.  Seller’s business books and records or the
portions thereof which pertain to or are used for the operation of the Business,
including without limitation all original plans, drawings and specifica­tions,
and files, drawings, writings and software which embody, describe, analyze,
illustrate or otherwise pertain to work performed or to be performed for
clients; bid specifications; financial, operating and inventory records;
customer lists and records, subject to any and all confidentiality agreements
between Seller and said customers; potential customer lists and records;
supplier lists and records; business plans; sales and promotional literature;
correspondence; information describing or related to Intellectual Property and
Intangible Assets of the Business; and other records, files, and papers
pertaining to the Purchased Assets, to the extent necessary for Purchaser to
operate the Business (collectively the “Plans, Books and Records”).

(g)           Contracts of Insurance.  Seller’s rights under insurance policies
arising from or relating to the Purchased Assets (as defined below) or the
Assumed Liabilities (as defined in Section 2.2), but only to the extent of
benefits under such policies, including rights and proceeds, from claims arising
prior to Closing.  Copies of all Insurance Policies shall be subject to Section
5.7 (Preservation of Records);

(h)           Prepayments and Prepaid Accounts.  All prepaid expenses including
the deposits, deferred charges, advance payments, purchase rebates, product or
service deposits and similar items, whether paid or made by Seller to a third
party or by a third party to Seller, not including any deferred bonuses or
compensation or tax credits that may be extended to any employees of Seller,
which have not been fully earned by the holder thereof at the time of the
Closing or which remain subject to some rights of the depositor, including any
described on Schedule 1.1(h) but excluding any described on Schedule 1.2.

(i)           Real Property Interests.  Assignment of the office lease listed on
Schedule 3.1(w)(iii).

(j)           Working Capital.  Working capital (current assets to be acquired
less current liabilities to be assumed) of $268,420.00 the “Working Capital
Target”.  The working capital assigned is herein called the “Working Capital”.

As used in this Agreement, the term “Purchased Assets” means the assets,
properties, rights, interests, and privileges of every kind and description
wherever situated, that constitute the Business, or that are owned or used in
connection with the Business, all of which shall be transferred at the Closing
to Purchaser free and clear of any liens, encumbrances or rights in any other
party, including specifically but without limitation all assets described in
subparagraphs 1.1(a) through 1.1(j) above, but expressly excluding the Excluded
Assets as defined and described in Section 1.2 below.

1.2           Excluded Assets.  Notwithstanding the foregoing or anything herein
to the contrary, Cash accounts and the assets and property described on Schedule
1.2, if any, are not to be conveyed to Purchaser and are not included in the
Purchased Assets for purposes of this Agreement.

 
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Article 2
Purchase Price

2.1           Purchase Price.  The purchase price for the Purchased Assets (the
“Purchase Price”) shall equal TWO MILLION FIVE HUNDRED THOUSAND DOLLARS
($2,500,000.00), to be paid as the sum of the Cash Payment at Closing, and
Purchaser’s Deferred Payments, plus a contingent amount consisting of the Earn
Out Amount. The Purchase Price and Cash Payment will be increased or decreased
in an amount by which the Working Capital transferred at Closing exceeds or
falls short of the Working Capital Target by more than $25,000.00 (“Adjustment
Amount”).

(a)           Provided Seller has satisfied all conditions precedent to Closing,
Purchaser shall deliver to Seller as a Cash Payment, as adjusted herein, at
Closing of Two Million and no/100 Dollars ($2,000,000.00)

(b)           Purchaser’s unsecured Promissory Note in the principal amount of
Five Hundred Thousand Dollars ($500,000.00) bearing interest at 5% per
annum,  payable in two (2) annual principal installments of Two Hundred Fifty
Thousand and no/100ths Dollars ($250,000.00) each,  plus accrued interest, shall
be executed and delivered at Closing in the form attached as Schedule
2.1(b).  Seller shall be released from any and all obligations under any and all
agreements, including any and all non-compete agreements, between Seller and
Purchaser upon the default of any payment of the Promissory Note.

(c)           Bonus Payments.  Five bonus payments of $100,000.00 each will be
available to the Seller based upon the Business receiving its first five
purchase orders for a Universal Master Control System (“UMCS”). Only purchase
orders for a UMCS received on or prior to the date three (3) years following the
Closing Date shall qualify for the bonus payment.  Each bonus payment shall be
payable within fifteen (15) days of Purchaser receiving final payment for
completion of the UMCS.

(d)           The “Earn Out Amount” shall be an amount calculated from Gross
Revenues received by Purchaser from the Controls Business in the Earn Out
Period, all as herein defined.  The “Earn Out Period” shall be from the
Effective Date to December 31, 2010.  “Gross Revenues” shall mean gross revenues
calculated in accordance with United States generally accepted accounting
principles using Purchaser’s methods of accounting.  The calculation of the Earn
Out Amount shall be based upon Purchaser’s reviewed results for the periods of
the Earn Out Period.  Gross Revenues received by Purchaser from the Controls
Business means Gross Revenues from (i) any Upstream automation and controls
business of Purchaser after the Effective Date, plus (ii) any Midstream
automation and controls business of Purchaser after the Effective Date coming
from (a) customers for which Seller has performed services in the two years
preceding the Effective Date, and (b) Midstream automation and controls business
from customers which neither Seller nor Purchaser had performed automation and
controls business in the two years preceding the Effective Date.  Upstream means
revenue from systems related to the wellhead, whether drilling or production
systems and including any oilfield services related to wellheads.  This includes
either onshore or offshore wells.  Midstream means revenue from systems related
to oil and gas transportation and storage.

 
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The Earn Out Amount is a percentage of ONE MILLION DOLLARS ($1,000,000).  The
percentage is calculated by (i) the difference of Gross Revenues received by
Purchaser from the Controls Business in the Earn Out Period (up to a maximum of
$4,500,000) minus $3,250,000 divided by (ii) $1,250,000.  The Earn Out Amount
shall be a maximum of ONE MILLION DOLLARS ($1,000,000).  If the difference of
Gross Revenues received by Purchaser from the Controls Business in the Earn Out
Period minus $3,250,000 is a negative number, then there shall be no Earn Out
Amount paid.

The Earn Out Amount shall be paid in immediately available funds on March 15,
2011.

Purchaser shall provide Seller with written statements within 45 days following
the end of each calendar quarter as to the calculation of the Gross Revenues
received by Purchaser from the Controls Business in the Earn Out Period to the
end of such calendar quarter.  Such statements shall provide reasonable detail,
and Purchaser shall allow Seller’s representatives at Seller’s written request,
but subject to a reasonable confidentiality agreement, to review Purchaser
records related to the same.

As soon as practical after December 31, 2010, Purchaser shall provide Seller
with a calculation of the Earn Out Amount.  While Seller may object to such
calculation, any undisputed amount shall be paid no later than March 15,
2011.  Seller’s acceptance of the undisputed amount shall not waive any rights
to dispute the amount due.  Past due amounts shall bear interest at twelve
percent (12%) per annum.  Purchaser’s good faith nonpayment of an Earn Out
Amount ultimately deemed due shall not be deemed a default of this Agreement,
however, the prevailing party in any litigation concerning such matter shall be
entitled to recover its reasonable attorneys fees and reasonable costs.

Subject to Purchaser’s rights under the Executive Employment and Noncompetition
Agreement for Van Wilson, Purchaser will assign Van Wilson to have the title and
duties of Vice President of Operations with principal responsibilities in
Purchaser’s Upstream automation and controls business.

Notwithstanding the foregoing, if Purchaser’s corporate parent sells Purchaser
(or there occurs another type of transaction the result of which is that
Purchaser is directly controlled by an unrelated third party) or Purchaser sells
substantially all of its assets, then the Earn Out Amount shall be
$1,000,000.  Notwithstanding the provisions of this paragraph, a sale by
Purchaser’s corporate parent of substantially all its assets, including
Purchaser, shall not trigger the payment of the Earn Out Amount.

2.2           Liabilities.  Except for those listed on Schedule 2.2, Purchaser
does not hereby assume, and shall not assume, any obligation or liability of
Seller.  Such liabilities are herein called the “Assumed Liabilities.”

 
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2.3           Allocation of Purchase Price.   Purchaser and Seller agree that
the Purchase Price of the Business will be allocated to Working Capital
acquired, fixed assets acquired or intangible assets.  Such allocation is stated
on Exhibit A.

2.4           Purchase Price Adjustment Procedure.  Seller shall prepare a
balance sheet (“Closing Balance Sheet”) of Seller as of the Closing on the same
basis and applying the same accounting principles, policies and practices that
were used in preparing the balance sheet included in the Financial Information
(as defined in Section 3.1(e)).  Seller shall then determine the Working Capital
as of the Closing (the “Closing Working Capital”) based upon the Closing Balance
Sheet.  Seller shall deliver the Closing Balance Sheet and its determination of
the Closing Working Capital to Purchaser at the Closing, or if this is not
reasonably possible, then within thirty (30) days following the Closing Date.

If within thirty (30) days following delivery of the Closing Balance Sheet and
the Closing Working Capital calculation Purchaser has not given Seller written
notice of its objection as to the Closing Working Capital calculation (which
notice shall state with reasonable specificity the basis of Purchaser’s
objection), then the Closing Working Capital calculated by Seller shall be
binding and conclusive on the parties and be used in computing any Adjustment
Amount.

If Purchaser duly gives Seller such notice of objection, and if Purchaser and
Seller fail to resolve the issues outstanding with respect to the Closing
Balance Sheet and the calculation of the Closing Working Capital within thirty
(30) days of Seller’s receipt of Purchaser’s objection notice, Purchaser and
Seller shall submit the issues remaining in dispute to T. J. Hayes & Co., PLLC
616 FM 1960 W. Suite 310 Houston, Texas 77090, independent public accountants
(the “Independent Accountants”) for resolution applying the principles,
policies, and practices referred to in this Section 2.4.  If issues are
submitted to the Independent Accountants for resolution, (i) Seller and
Purchaser shall furnish or cause to be furnished to the Independent Accountants
such work papers and other documents and information relating to the disputed
issues as the Independent Accountants may request and are available to that
party or its agents and shall be afforded the opportunity to present to the
Independent Accountants any material relating to the disputed issues and to
discuss the issues with the Independent Accountants; (ii) the determination by
the Independent Accountants, as set forth in a notice to be delivered to both
Seller and Purchaser within sixty (60) days of the submission to the Independent
Accountants of the issues remaining in dispute, shall be final, binding and
conclusive on the parties and shall be used in the calculation of the Closing
Working Capital; and (iii) Seller and Purchaser will each bear fifty percent
(50%) of the fees and costs of the Independent Accountants for such
determination.

Upon a final resolution of the need to pay an Adjustment Amount, Purchaser or
Seller, as the case may be, shall pay the Adjustment Amount within ten (10) days
of the final resolution.

Article 3
Representations and Warranties

3.1           Representations and Warranties of Seller. Seller, to the best of
its knowledge and belief, after diligent investigation and inquiry as to all
material matters contained in Seller’s responses to Purchaser’s Due Diligence
Request, hereby represents, warrants and covenants to Purchaser that, both as of
the date hereof and as of the Closing Date:

 
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(a)           Authority.

(i)           Authority of Seller Regarding Agreement.  Seller has all requisite
power, authority and legal capacity to execute and deliver this Agreement and to
consummate the transactions contemplated hereby.  This Agreement has been duly
and validly executed and delivered by Seller and (assuming the due
authorization, execution and delivery by the other parties hereto) this
Agreement constitutes the legal, valid and binding obligation of Seller,
enforceable against Seller in accordance with its terms, subject to applicable
bankruptcy, insolvency, reorganization, moratorium and similar laws affecting
creditors’ rights and remedies generally, and subject to, as to enforceability,
to general principles of equity, including principles of commercial
reasonableness, good faith and fair dealing (regardless of whether enforcement
is sought in a proceeding at law or in equity).

(ii)           Authority of Seller Regarding Seller Documents.  Seller has all
requisite power, authority and legal capacity to execute and deliver each
agreement, document, or instrument or certificate to be executed by the Seller
in connection with the consummation of the transactions contemplated by this
Agreement (together with this Agreement, the “Seller Documents”) and to
consummate the transactions contemplated thereby.  Each of the Seller Documents
will be, at or prior to Seller’s execution and delivery thereof, duly and
validly executed and delivered by Seller and (assuming the due authorization,
execution and delivery by the other parties thereto) each of the Seller
Documents when so executed and delivered will constitute legal, valid and
binding obligations of Seller, enforceable against Seller in accordance with
their respective terms, subject to applicable bankruptcy, insolvency,
reorganization, moratorium and similar laws affecting creditors’ rights and
remedies generally, and subject, as to enforceability, to general principles of
equity,  including principles of commercial reasonableness, good faith and fair
dealing (regardless of whether enforcement is sought in a proceeding at law or
in equity).
 
(b)           General      
 
(i)           Seller has good and indefeasible title to the Purchased Assets,
free and clear of any lien, claim, charge, encumbrance or other right of any
third party except as disclosed on Schedule 1.1(b) and Permitted Encumbrances.

 
As used herein “Permitted Encumbrances” means (i) liens for current taxes and
assessments not yet due and payable, including, but not limited to, liens for
non-delinquent ad valorem or personal property taxes, non-delinquent statutory
liens arising other than by reason of any default on the part of Seller,
(ii) such encumbrances or minor imperfections of title as do not in any material
respect detract from the value, and do not interfere with the present use, of
the property subject thereto, (iii) liens, for which payment for the goods or
services is not past due, imposed by laws, such as carrier’s, warehousemen’s or
mechanic’s liens incurred in good faith in the ordinary course of business, and
(iv) liens and encumbrances related to any liability and/or obligation to be
assumed by Purchaser hereunder.

 
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(ii)           Assuming that all consents to assignment are obtained, the
Purchased Assets constitute all of the tangible assets reasonably necessary for,
and is adequate in all material respects for, the continued conduct of the
Business by Purchaser following the Closing in a manner consistent with the
historical practice of Seller in the conduct of the Business.

(c)           Improvements, Fixtures and Equipment

(i)           Seller has good and indefeasible title to all of the items of
tangible personal property listed on Schedule 1.1(b), free and clear of any and
all liens except as disclosed on Schedule 1.1(b) and Permitted
Encumbrances.  The improvements, fixtures and equipment, excepting that which is
either obsolete or not currently in use, are sold in reasonably good operating
condition and repair and fit for the uses for which intended, ordinary wear and
tear excepted.

(ii)           Schedules 1.1(b) and 1.1(e)(iii) sets forth all leases of
personal property (“Personal Property Leases”) relating to personal property
used in the Business or to which the Business is a party or by which the
properties or assets of the Business is bound.  The Seller has delivered or
otherwise made available to Purchaser true, correct and complete copies of the
Personal Property Leases, together with all amendments, modifications or
supplements thereto.  The personal property which is subject to such Personal
Property Leases is provided AS IS.

(iii)           The Business has a valid leasehold interest under each of the
Personal Property Leases under which it is a lessee, subject to applicable
bankruptcy, insolvency, reorganization, moratorium and similar laws affecting
creditors’ rights and remedies generally and subject, as to enforceability, to
general principles of equity (regardless of whether enforcement is sought in a
proceeding at law or in equity), and there is no material default under any
Personal Property Lease by the Business or, to the knowledge of Seller, by any
party thereto, and no event has occurred that with the lapse of time or the
giving of notice or both would constitute a material default thereunder by
Seller.

(d)           Intellectual Property and Intangible Assets.  Schedules 1.1(d) and
1.1(e)(iii) together include all Intellectual Property used, incorporated in or
related to the Business.  Seller has ownership of and good and indefeasible
title to all of the Intellectual Property included in the Purchased Assets, free
and clear of all liens (subject to the rights of licensors and licensees under
software licenses), and Seller has (and after Closing Purchaser will have) the
right to use and exploit all Intellectual Property included in the Purchased
Assets without infringing upon or otherwise violating the rights of any other
person.  After Closing Purchaser will have the sole and exclusive right (except
as disclosed on Schedule 1.1 (d)) to use and exploit all Intellectual Property
listed as Seller Developed Software on Schedule 1.1 (d) without infringing upon
or otherwise violating the rights of any other person, and no consent, approval
or authorization of any other person will be required for the use or
exploitation by the Purchaser after Closing of the Seller Developed Software.
Each item of Intellectual Property included in the Purchased Assets is existing
and valid and all

 
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rights therein are enforceable in accordance with their respective terms,
subject to applicable bankruptcy, insolvency, reorganization, moratorium and
similar laws affecting creditors’ rights and remedies generally, and subject to,
as to enforceability, to general principles of equity, including principles of
commercial reasonableness, good faith and fair dealing (regardless of whether
enforcement is sought in a proceeding at law or in equity).  There is no claim
pending or, to the knowledge of Seller, threatened against Seller, and there are
no conditions or circumstances known to Seller, which draws or may draw into
question any right of Seller (and after Closing, of Purchaser) to use or exploit
the Intellectual Property included in the Purchased Assets, and Seller is not
aware of any basis for such a claim or of conditions or circumstances which may
be a basis for such a claim.  There is no license, assignment, agreement or
other instrument to which Seller is a party, other than the Contracts, or by
which it or the Purchased Assets are bound, relating to the ownership, use or
exploitation by it of any Intellectual Property used in connection with, or
otherwise directly related to, the Business.

(e)           Financial Information. Schedule 3.1(e) includes true, correct and
complete copies of Seller’s balance sheet as at December 31, 2009 and income
statement for the year then ended (the “Financial
Information”).  Schedule 3.1(e) includes Seller’s balance sheet and income
statement after making adjustments to correct errors discovered by the parties
in their due diligence.  Including such adjustments, the Financial Information
fairly presents the financial condition as of the date indicated and the results
of operations for any period included therein, and except as adjusted has been
prepared on a consistent basis throughout the period indicated.  In each case,
except as adjusted, the Financial Information has been prepared in accordance
with the Business’s historic accounting practices.

(f)           Accounts Receivable.  All accounts receivable reflected in the
Closing Balance Sheet (net of allowances for doubtful accounts as reflected
thereon) are or shall be valid receivables arising in the Ordinary Course of
Business.  Except as described in Schedule 3.1(f), no Person has any Lien on
such receivables or any part thereof, and no agreement for deduction, free
goods, discount or other deferred price or quantity adjustment has been made by
Seller with respect to any such receivables.
 
(g)           Contracts.

(i)           Schedule 1.1(e)(i) is a complete and accurate list of all Purchase
Contracts to be acquired by Purchaser.

(ii)           Schedule 1.1(e)(ii) is a complete list of all Sales Contracts and
Proposals to be acquired by Purchaser which have associated with them any
continuing obligation of performance or liability of either party thereto,
including, without limitation, any liability in the nature of continuing service
or warranty (whether express or implied) or arising by course of conduct or
business.  Each such order, contract or proposal is accurately identified and
categorized by customer and product.  Seller has no obligation for any amount
related to any warranty claims, actual or contingent, asserted or unasserted,
liquidated or unliquidated.  All such Sales Contracts and Proposals are on
commercially reasonable terms and conditions and provide for profit margins
estimated by Seller to be consistent with past practices of Seller.  The
Business has no liability arising out of any injury to individuals or property
or damages to business operations as a result of the ownership, possession or
use of any product manufactured, sold or delivered by the Business.

 
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(iii)           Schedule 1.1(e)(iii) is a complete and accurate list of the
General Contracts to be acquired by Purchaser under this Agreement.

(iv)           With respect to each Contract:

(a)           the Seller has delivered or made available to the Purchaser a
true, correct and complete copy of such Contract (including all amendments and
modifications thereto);

(b)           Such Contract is in full force and effect and constitutes a valid,
legal and binding obligation of Seller, enforceable against it in accordance
with its terms, except as limited by any applicable bankruptcy, liquidation,
conservatorship, moratorium, rearrangement, insolvency, reorganization or
similar laws as in effect from time to time affecting the rights or remedies of
the parties to contracts generally (hereafter “Debtor Relief Laws”) and
constitutes a valid, legal and binding obligation of each third party thereto,
enforceable against such third parties in accordance with its terms, except as
limited by Debtor Relief Laws;

(c)           except as described on Schedule 3.1(g)(iv)(c) neither Seller nor,
to Seller’s knowledge, any other party to such Contract is in breach or default
thereunder in any material respect, no notice of default, defense, set-off,
counterclaim, termination, cancellation or acceleration has been received by any
party with respect thereto, and to Seller’s knowledge, there exists no event or
condition that would constitute a breach or violation thereof, or a default
thereunder, or give rise to any right of set-off, counterclaim, termination,
cancellation or acceleration pursuant thereto, and the Seller does not know of
any threat to cancel, or not to renew or extend, any such Contract;

(d)           Seller has neither given nor received notice of repudiation of
such Contract and there are no disputes with respect to such Contract nor any
agreements or understandings (whether written or oral) in connection therewith;
and
 
(e)           such Contract, together with each other Contract, constitute
substantially all of the contracts, commitments and arrangements involved in or
necessary to the conduct of the Business as of the date of this Agreement.

(h)           Permits.  Except as described on Schedule 3.1(h), the Permits
include all permits, approvals, qualifications, authorizations, licenses,
consents, certifications or clearances and the like issued by any government or
governmental unit, agency, board, body or instrumentality, whether federal,
state or local, which is required for the conduct of the Business.  Seller is
not in material default, breach or noncompliance under any of the Permits and
there are no actions, proceedings, investigations or surveys pending or, to the
knowledge of Seller, threatened against the

 
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Business that could reasonably be expected to result in the suspension or
cancellation of any such Permits.  Seller does not warrant that its Permits may
be assigned to Purchaser.

(i)           Plans, Books and Records.  The Plans, Books and Records are
located at the business office of Seller and copies or excerpts from items
included within the Plans, Books and Records provided to Purchaser are true,
correct and (except as may be noted therein) complete copies of the originals.

(j)           Prepaid Items and Deposits.  Section 1.1(h) includes all prepaid
and similar items related to the Business, including, without limitation, all
prepaid expenses, deposits, deferred charges, advance payments, and other
prepaid items paid or received by Seller with respect to the Business.

(k)           Accounts Payable.  All Accounts Payable due prior to the date
hereof, including without limitation refunds, license fees, warranty claims or
service, royalties, accrued interest and other amounts owed in connection with
the Business have been made, and Seller is not in default with respect to any of
the Accounts Payable.  No obligee of any of the Accounts Payable has asserted,
or to the best of Seller’s knowledge has reason to assert, any default of any of
Seller’s obligations related to any of the Accounts Payable.

(l)           Liens and Encumbrances; Tax Matters.  Except as described on
Schedule 3.1(l), the Purchased Assets are, and immediately prior to the time of
Closing will be, owned by Seller free and clear of any and all liens, claims,
charges or encumbrances whatsoever and any right of any party other than Seller
other than Permitted Encumbrances.  Except for the Permitted Encumbrances, the
Purchased Assets are not in any manner encumbered by liens arising out of unpaid
taxes, governmental fees, levies or other governmental charges or assessments
which are due and payable nor shall any such lien arise on account of any taxes
due for any period prior to the Closing.  All tax returns, declarations of
estimated tax and tax reports  required to be filed by Seller have been filed in
timely fashion with the appropriate government agency, and all federal, state
and local income, profits, employment, franchise, sales, use, occupation,
property, excise or other taxes or charges, and all required estimated payments
in respect thereof, applicable to the Business have been paid when due and
Seller has withheld and paid to the appropriate taxing authority or jurisdiction
any and all amounts required by law or agreement to be withheld from the wages
or salaries of its employees.  There are no agreements by Seller for the
extension of the time for the assessment of any tax, and all Federal, foreign,
state, county and local taxes due and payable by Seller have been paid.  Seller
has provided Purchaser with a copy of any audit report resulting from any audit
performed with respect to any tax return filed or required to be filed by Seller
in the past five (5) years.

(m)           Environmental Matters. Neither Seller nor Seller’s General Partner
has received any notice from any governmental authority or other person
respecting or related to any actual, threatened or potential release of
Hazardous Materials, and no investigation or proceeding with respect to
Hazardous Materials or Hazardous Materials Contamination is
threatened,  anticipated or in existence with respect to the real property used
in operation of the Business or in any other manner otherwise related to the
operation of the Business.  As used herein, the term “Hazardous Materials” means
pollutants, contaminants, pesticides, petroleum and petroleum

 
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products, radioactive substances, solid wastes or hazardous or extremely
hazardous, special, dangerous or toxic wastes, substances, mold, asbestos,
chemicals or materials within the meaning of any Environmental Law, including
without limitation any (i) “hazardous substance” as defined in the Comprehensive
Environmental Response, Compensation and Liability Act, 42 U.S.C. § 9601, et.
seq., as amended and reauthorized (“CERCLA”), and (ii) any “hazardous waste” as
defined in the Resource Conservation and Recovery Act, 42 U.S.C., § 6902, et.
seq., as amended and reauthorized (“RCRA”).  As used herein, the term “Hazardous
Materials Contamination” shall mean contamination (whether presently existing or
hereafter occurring) of premises, buildings, facilities, soil, groundwater, air
or other elements as a result of Hazardous Materials.

(n)           Employees.  Seller has provided Purchaser with a complete and
accurate listing of (i) all employees currently involved in the operation of the
Business and all contracts or other arrangements under which they are currently
employed, and (ii) all pension, retirement, profit-sharing, employee stock
option or stock purchase, bonus, deferred compensation, incentive compensation,
life insurance, health insurance, fringe benefit, or other employee benefit
plans of Seller, or applicable to the Business or its employees. The operation
of the Business is presently in compliance in all material respects with, and at
all times prior to the date of the Closing will have been in compliance in all
material respects with, any and all job safety requirements applicable thereto,
including without limitation any and all requirements of the Occupational Safety
and Health Act of 1970, as amended, and any other requirements of any
governmental authority with respect to the health or safety of workers.  In the
past five years, Seller has received no notice of any failure to comply with any
such law, order, rule or regulation, nor is any such complaint pending or
threatened from any other party.  Seller has provided Purchaser with a copy of
any report resulting from any audit, study or review performed with respect to
health or safety of workers employed by Seller.  In the past five years, Seller
has not entered into any agreements with respect to health or safety matters,
nor has Seller been subject to any complaint with respect to worker safety or
health, nor is Seller or any Shareholder aware of any fact or circumstance which
would give rise to any such claim.  Seller has no current obligations concerning
employees or employee’s safety in regard to any previous failure by it to comply
with any governmental law, order, rule or regulation.

(o)           Partnership Matters.  Seller is a Limited Partnership duly
organized, validly existing and in good standing under the laws of the State of
Texas.  Seller is not authorized to transact business in any state other than
the states of Texas and the nature and operation of its business does not
require it to be so authorized.

           (p)           Finders.  Except as disclosed in Section 11.3, Seller
has not engaged, nor is it directly or indirectly obligated to, anyone acting as
a broker, finder, or in any other similar capacity in connection with the
purchase of the Purchased Assets or any other transaction contemplated by this
Agreement.

(q)           No Material Events.  The Business has been conducted only in the
ordinary course since December 31, 2009, and (other than expenses of the
Business related to compensation and benefits to the Partners of the Company) no
event, condition, circumstance, or occurrence which has had or is likely to have
a material adverse effect on the Purchased Assets, the Business or its condition
(financial or otherwise) has occurred since that date.

 
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(r)           No Conflicts; Compliance and Consents.

(i)           No Conflict.  None of the execution and delivery by Seller of this
Agreement and the other Seller Documents to which Seller is a party, the
consummation of the transactions contemplated hereby and thereby, or the
compliance by Seller with any of the provisions thereof will (i) conflict with,
or result in the breach of, any provision of the certificate of partnership,
partnership agreement or comparable organizational documents of the Business;
(ii) except for rights of contract parties upon Seller’s assignment of that
contract and possible breach resulting from the assignment, conflict with,
violate, result in the breach or termination of, or constitute a default under
any note, bond, mortgage, indenture, license, agreement or other instrument or
obligation to which Seller or the Business is a party or by which any of them or
any of their respective properties or assets is bound; (iii) violate any
statute, rule, regulation, order or decree of any governmental body or authority
by which Seller or the Business is bound; or (iv) result in the creation of any
lien upon the properties or assets of Seller or the Business except, in case of
clauses (ii), (iii) and (iv), for such violations, breaches, terminations,
defaults or creations of liens as would not, individually or in the aggregate,
have a material adverse effect.

(ii)           Compliance.  All laws, rules, regulations and restrictions
affecting the Purchased Assets or the conduct of the Business as actually
conducted in the past or currently, have been complied with in all material
respects and all returns, reports and other information with respect to the
Purchased Assets have been filed as appropriate with any governmental authority
or any other person, as required by law, course of practice or custom.

(iii)           Third Party Consent.   Except as set forth in Schedule 3.1 (r)
(iii), Seller is not required to obtain the consent of, or give notice to, any
third party by reasons of the transactions contemplated by the Seller documents.

(s)           No Litigation.  Except as described in Schedule 3.1(s), there is
no litigation, proceeding, action, claim, or governmental investigation pending
or to Seller’s knowledge threatened against or relating to the Purchased Assets
which would, individually or in the aggregate, have a material or adverse effect
on the Business, and Seller does not have knowledge of any facts or
circumstances which could give rise to any such litigation, proceeding or
investigation.  Seller is not subject to any notice, writ, injunction, order, or
decree of any court, agency, or other governmental authority which would
materially or adversely affect the Business or the consummation of the
transaction contemplated hereby.

(t)           Restrictions on Business Activities.  There is no agreement,
judgment, order, writ, injunction or decree binding upon, or governmental or
regulatory action taken against or involving the Business or any of its assets,
properties or, to the knowledge of Seller, the employees of the Business, which
has had or could reasonably be expected to have the effect of prohibiting or
impairing any current or future business practice of the Business or Purchaser,
any acquisition of property by the Business or Purchaser, or the conduct of
business by the Business or Purchaser as currently conducted.

 
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(u)           True and Complete Copies.  Seller has delivered or made available
to Purchaser materially true, complete and accurate copies of all executory
contracts, agreements, Financial Information, Books and Records and other
documents deliverable to Purchaser under this Agreement or related to the
Business, together with all modifications thereof and amendments thereto.

(v)           Guaranties.  The Business is not a guarantor or otherwise liable
for any liability or obligation (including indebtedness) of any other person.

(w)           Real Property.

(i)           Schedule 3.1(w)(i) sets forth a complete list of all real property
and interests in real property leased by the Business as tenants (individually,
a “Real Property Lease” and a “Leased Property”).  The Business does not own in
fee any real property or other interest in real property.

(ii)           The Leased Property constitutes all interests in real property
currently used or currently held for use in connection with the Business and
which is necessary for the continued operation of the Business as the business
is currently conducted.  The Business has a valid and enforceable leasehold
interest under the Real Property Lease, subject to applicable bankruptcy,
insolvency, reorganization, moratorium and similar laws affecting creditors’
rights and remedies generally and subject, as to enforceability, to general
principles of equity (regardless of whether enforcement is sought in a
proceeding at law or in equity), and the Business has not received any written
notice if any default or event that with notice or lapse of time, or both, would
constitute a default by the Business under the Real Property Lease.  All of the
Leased Property, buildings, fixtures and improvements thereon leased by the
Business are provided AS IS.  Seller has delivered or otherwise made available
to Purchaser a true, correct and complete copy of the Real Property Lease,
together with all amendments, modifications or supplements, if any, thereto.

(iii)           The Business has all material certificates of occupancy and
material permits necessary for the current use and operation of the Leased
Property, and the Business has fully complied with all material conditions of
such permits which are applicable.  No default or violation, or event that with
the lapse of time or giving of notice or both would become a default or
violation, has occurred in the due observance of any material permit.  No
dispute currently exists with any governmental body having jurisdiction over the
Leased Property with respect to any real property law or the application thereof
to the Leased Property.

(iv)           To the knowledge of the Seller, there does not exist any actual
or threatened or contemplated condemnation or eminent domain proceedings that
affect the Leased Property or any part thereof, and Seller has not received any
notice, oral or written, of the intention of any governmental body or other
person to take or use all or any part thereof.

 
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(v)           Seller has not received any written notice from any insurance
company that has issued a policy with respect to the Leased Property requiring
performance of any structural or other repairs or alterations to such Leased
Property.

(vi)           Except for amounts as shown in Seller’s accounts payable, Seller
does not owe any money to any architect, contractor, subcontractor or
materialman for labor or materials performed, rendered or supplied to or in
connection with the Leased Property within the past nine months.

(x)           Disclosure.  Neither any representation or warranty contained
herein, nor any information contained in any Schedule or Exhibit to this
Agreement, taken as a whole, contain or shall contain an untrue statement of a
material fact, nor do the Financial Information, representations, warranties and
other information, taken as a whole, omit to state, nor will they omit to state,
any material fact necessary in order to make the statements made not misleading
in light of the circumstances in which they were made.   A fact shall be
considered material if there is a substantial likelihood that a reasonable
purchaser would consider it important in making an investment decision and the
purchaser relied on the fact in making its investment decision.

3.2           Purchaser’s Representations and Warranties.  Purchaser hereby
represents and warrants to Seller that, both as of the date hereof and as of the
time of Closing:

(a)           Organization and Existence.  Purchaser is a Texas corporation and
is duly organized, validly existing, and in good standing under the laws of the
State of Texas.

(b)           Power and Authority.  Purchaser has full corporate power and
authority to execute, deliver, and perform this Agreement.

(c)           Authorization.  The execution, delivery, and performance of this
Agreement has been duly authorized by all requisite corporate action on the part
of Purchaser.

(d)           Binding Effect.  This Agreement is a valid, binding and legal
obligation of Purchaser, enforceable in accordance with its terms, except as
limited by Debtor Relief Laws.

(e)           No Default.  Neither the execution and delivery of this Agreement
nor Purchaser’s performance of any of its obligations hereunder will violate or
breach, or otherwise give rise to a default under, the terms or provisions of
Purchaser’s governing documents, or any material contract, commitment,
instrument, notice, writ, injunction, order or decree of any court, agency, or
other governmental authority or other obligation binding on, applicable to or
enforceable against Purchaser.  Purchaser has no knowledge of any event or
circumstance which would make any representation or warranty of Seller as made
herein untrue in any material respect.

           (f)           Finders.  Except as disclosed in Section 11.3,
Purchaser has not engaged, nor is it directly or indirectly obligated to, anyone
acting as a broker, finder, or in any other similar capacity in connection with
the purchase of the Purchased Assets or any other transaction contemplated by
this Agreement.

 
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(g)           Source of Financing.  Purchaser has cash on hand and a fully
committed line of credit with more than adequate capacity to complete the
transactions contemplated in this Agreement.

(h)           Purchaser’s Knowledge.  Purchaser has no knowledge of any
inaccuracy or breach of any representation or warranty or violation of any
covenant by Seller contained in this Agreement or any of the documents herein
contemplated.

Article 4
Actions Before Closing

4.1           General Inspection and Tests.  Between the date hereof and the
Closing, unless this Agreement is sooner terminated, Seller will afford
Purchaser and Purchaser’s representatives full and free access, during normal
business hours, to all of Seller’s assets, properties, books, records, financial
statements, corporate documents, accountants’ work papers, contracts and
insurance policies related to the Business, to Seller’s personnel, accountants,
customers, clients, contractors and suppliers in connection with the Business,
provided that any such access must be used by Purchaser in a manner that does
not unreasonably disrupt the operation of the Business, and will furnish
Purchaser during such period with all such information concerning the Business
as Purchaser may reasonably request.  Access to Seller’s customers and clients
will be done in conjunction with Seller and with Seller’s input.  Seller will
use its commercially reasonable best efforts to arrange introductions to such
customers and clients as Purchaser specifies.

4.2           Interim Conduct of the Business.  From the date of this Agreement
to the Closing, Seller shall conduct the Business only in the ordinary and usual
course, using reasonable efforts to preserve intact business relationships with
suppliers, customers, employees, creditors and others having business dealings
with the Business in a manner consistent with the historical practice of Seller
in the conduct of the Business, preserving, protecting and maintaining the
Purchased Assets in a manner consistent with the historical practice of Seller
in the conduct of the Business, and continuing performance in the ordinary
course of its obligations under the contracts described or referred to in
Section 1.1(e). Pending Closing Seller shall not agree to any material changes
in the compensation of employees or officers, enter into any transactions with
affiliates of Seller or enter into any other material contract without first
consulting Purchaser. Pending Closing, Seller will not solicit from any other
person, firm or corporation any inquiries or proposals related to the
disposition of all or any significant portion of the Purchased Assets or the
Business or pursue or engage in discussions with respect thereto.  During this
period, Seller will also assist Purchaser as and to the extent (and only as and
to the extent) requested by Purchaser in negotiating agreements acceptable to
Purchaser with any customer of the Business.  As and to the extent that any
Contract is not assigned as a result of the same not being assignable, Seller
and Mr. Anthony George shall work with Purchaser following Closing to attempt to
obtain all such approvals and upon obtaining the same will immediately assign
Purchaser.  Pending such assignment, at Purchaser’s written election, Purchaser
shall perform and discharge fully all the obligations of Seller thereunder from
and after the date of Closing and indemnify Seller for all  costs, expenses, and
liabilities arising out of such performance by Purchaser.  In such instances,
Seller shall, without further consideration therefor, pay, assign, and remit to
Purchaser promptly all monies, rights, and other considerations received in
respect of such performance.  In such instances, Seller shall promptly exercise
or exploit its rights

 
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and options under all such contracts, agreements, and commitments only as
reasonably directed by Purchaser and at Purchaser’s expense, and if and when any
such consent shall be obtained or such contract shall otherwise become
assignable, Seller shall promptly assign all its rights and obligations
thereunder to Purchaser and Purchaser shall, without the payment of any further
consideration therefor, assume such rights and obligations.

4.3           Liens.  The Purchased Assets shall be subject to no liens or
encumbrances other than Permitted Encumbrances.  Any other liens and
encumbrances against the Purchased Assets shall be satisfied and Seller shall,
prior to Closing, file or cause to be filed with the Texas Secretary of State’s
office and any applicable local County Clerk, a termination statement for any
lien or encumbrance affecting any of the Purchased Assets not consented to by
Purchaser other than Permitted Encumbrances.

4.4           Notices of Certain Events.  Each of Purchaser and Seller shall
give prompt notice to the other of (i) any notice or other communication from
any person alleging that the consent of such person is or may be required in
connection with the purchase of the assets of the Business; (ii) any notice or
other communication from any governmental body in connection with the purchase
of the assets of the Business; (iii) any actions, suits, claims, investigations
or proceedings commenced or, to their knowledge, threatened against, relating to
or involving or otherwise affecting Purchaser, Seller or the Business, or that
relate to the consummation of the purchase of the assets of the Business; (iv)
the occurrence of a default or event that, with the giving of notice or lapse of
time or both, will become a default under any Contracts and would likely result
in a material adverse effect on the Business; and (v) any change that would have
a material adverse effect for Purchaser or Seller, or otherwise delay or impede
the ability of Purchaser, Seller or the Business to perform their respective
obligations pursuant to this Agreement and to effect the consummation of the
purchase of the assets of the Business.

4.5           Lease Consent.    Seller shall use reasonable commercial efforts
to obtain the consent of landlord to assign the Real Property Lease to
Purchaser.  Purchaser shall cooperate with Seller as is reasonably necessary to
assist Seller in obtaining the consent.

Article 5
Additional Agreements

5.1           Access to Information.  Seller shall afford Purchaser and its
representatives, specifically including but not limited to Gainer, Donnelly &
Desroches, LLP, full access during normal business hours, on reasonable advance
notice, during the period prior to the earlier of the Effective Date or the date
of termination of this Agreement in accordance with its terms, to (i) all of the
Business’s premises, properties, personnel, books, contracts, documents,
commitments and records (including tax records), and (ii) all other information
concerning the business, prospects, operations, properties, assets, taxes,
condition (financial or other), results of operations and personnel of the
Business as Purchaser may reasonably request.  Seller agrees to provide to
Purchaser and its representatives copies of internal financial statements
promptly upon request.

 
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5.2           Confidentiality.

(a)           Prior to the Effective Date, each of the parties shall, and shall
cause their representatives to, treat and hold as such all of the Confidential
Information (as defined below) of the other parties, and refrain from using such
Confidential Information except in connection with this Agreement and the
transactions contemplated herein.  In the event that any party or its
representatives are requested or required (by oral questions or request for
information or documents in any legal proceeding, interrogatory, subpoena, civil
investigative demand, or similar process, or pursuant to applicable stock
exchange rules and regulations) to disclose any Confidential Information, that
party will notify the party providing such Confidential Information (the
“Providing Party”) promptly of the request or requirement so that the Providing
Party may seek an appropriate protective order or waive compliance with the
provisions of this Section 5.2(a).  If, in the absence of a protective order or
the receipt of a waiver hereunder, any of the parties or their respective
representatives are, on the advice of counsel, compelled to disclose any
Confidential Information to any tribunal or stock exchange or else stand liable
for contempt; provided, however, that the disclosing party shall, and shall
cause its representatives to, use its commercially reasonable best efforts to
obtain an order or other assurance that confidential treatment will be accorded
to such portion of the Confidential Information required to be disclosed.

(b)           For purposes of this Agreement, “Confidential Information” means
any written or oral information and data of a confidential nature disclosed by
one party to the other(s), including but not limited to proprietary,
developmental, technical, marketing, sales, operating, performance, cost,
know-how, policy, business, and process information, computer programming
techniques, samples, models and prototypes, or parts thereof and any information
of a technical nature concerning research and development and engineering
activity disclosed by the disclosing party, without limitation, software or
firmware code, semiconductor or printed circuit board payout diagrams, product
designs or specifications, manufacturing know-how, and patent
applications.  Confidential Information shall also expressly include the terms
and conditions (but not the existence) of this Agreement.  Notwithstanding the
foregoing, the parties agree that Confidential Information shall expressly
exclude any information which (a) is already in the public domain through no
breach of this Agreement or any prior confidentiality agreement, provided,
however, that Confidential Information shall not be deemed to be in the public
domain merely because any part of the Confidential Information is embodied in
general disclosures or because individual features, components or combinations
thereof are now or become known to the public; (b) was lawfully in the
possession of the receiving party prior to receipt from the disclosing party;
(c) is received independently from a third party free to lawfully disclose such
information to the receiving party; or (d) is subsequently independently
developed by the receiving party, without use of the information received from
the receiving party, provided that the receiving party shall have the burden to
show such independent development.

(c)           In the event that this Agreement is terminated in accordance with
its terms, each party shall, and shall cause their respective representatives
to, promptly redeliver to the other or destroy (and confirm such destruction in
writing) all written Confidential Information and not retain any copies,
extracts or other reproductions in whole or in part of such written
material.  In such event all documents, memoranda, notes and other writings or
media prepared by Purchaser or any of its representatives or by Seller, the
Business or any of their representatives, based on the information in such
material shall, at the request of the other party, be destroyed, and such
destruction shall be confirmed in writing.

 
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(d)           Notwithstanding anything to the contrary herein, the receiving
party may disclose such Confidential Information as is reasonably necessary to
comply with any applicable federal and state securities or tax laws.  Public
disclosures required by any applicable federal or state securities laws shall be
made as contemplated in Section 5.3.

5.3           Public Disclosure.  Unless otherwise permitted by this Agreement,
Purchaser and Seller shall consult with each other before issuing any release or
otherwise making any public statement or making any other public (or
non-confidential) announcement or disclosure (whether or not in response to an
inquiry) regarding the terms of this Agreement and the transactions contemplated
hereby, and neither shall issue any such press release or make any such
statement or disclosure without the prior approval of the other (which approval
shall be unreasonably withheld or delayed); provided, however, that any party
may make any public disclosure it believes in good faith is required by
applicable law and, in the case of Purchaser, any listing or trading agreement
concerning the publicly-traded securities of ENGlobal Corporation (in which case
the disclosing party will use its reasonable best efforts to advise the other
party prior to making the disclosure).

5.4           Further Assurances.

(a)           Prior to the Closing, each of the parties to this Agreement shall
use its commercially reasonable efforts to effectuate the transactions
contemplated hereby and to fulfill and cause to be fulfilled the conditions to
Closing under this Agreement; provided, however, that Purchaser shall not be
obligated to consent to or accept any divestiture or operational limitation
imposed by any governmental agency or court in connection with the purchase of
the assets of the Business or to make any payment or commercial concession to
any third party as a condition to obtaining any required consent or approval of
any third party.  Each party hereto, at the reasonable request of another party
hereto, shall execute and deliver such other instruments and do and perform such
other acts and things as may be necessary or desirable for effecting completely
the consummation of this Agreement and the transactions contemplated hereby.

(b)           The Business shall use its commercially reasonable efforts to
cause any and all employees who develop or create intellectual property rights
in the course of performing activities for the Business to execute and deliver a
proprietary information and inventions agreement assigning any such intellectual
property rights to the Business.

5.5           Notification of Certain Matters.  Each of the Purchaser and Seller
agrees to give prompt notice to each other of, and to use their respective
commercially reasonable efforts to prevent or promptly remedy, (i) the
occurrence or failure to occur or the impending or threatened occurrence or
failure to occur, of any event which occurrence or failure to occur would be
likely to cause any of the representations or warranties in this Agreement to be
untrue or inaccurate in any material respect at any time from the date hereof to
the Effective Date, and (ii) any material failure on its part to comply with or
satisfy any covenant, condition or agreement to be complied with or satisfied by
it hereunder; provided, however, that the delivery of any notice pursuant to
this Section 5.5 shall not limit or otherwise affect the remedies available
hereunder to the party receiving such notice.

 
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5.6           Business Disclosure Schedule.  Seller will make available to
Purchaser a reasonable time prior to the Closing, copies of all items set forth
on the Disclosure Schedules and any and all other consents, documents or
agreements to be delivered hereunder which have not previously been delivered to
purchaser, which such other consents, documents or agreements shall be in form
and substance reasonable satisfactory to Purchaser.

5.7           Preservation of Records.  Seller and Purchaser agree that each of
them shall preserve and keep the records held by them relating to the Business
for a period of six years from the Closing Date and shall make such records
available to the other as may be reasonably required by such party in connection
with, among other things, any insurance claims by, legal proceedings against or
governmental investigations of Seller or Purchaser or in order to enable Seller
and Purchaser to comply with their respective obligations under this Agreement
and each other agreement, document or instrument contemplated hereby or
thereby.  In the event Seller or Purchaser wishes to destroy such records after
that time, such party shall first give ninety (90) days prior written notice to
the other and such other party shall have the right at its option and expense,
upon prior written notice given to such party within that ninety (90) day
period, to take possession of the records within one hundred and eighty (180)
days after the date of such notice.

Article 6
Conditions

6.1           Conditions Precedent to Purchaser’s Obligations and Closing.  The
following obligations and deliveries from Seller are express conditions
precedent to the obligation of Purchaser to consummate the transactions and
payments at Closing contemplated by this Agreement and are subject to the
satisfaction of the following conditions at or prior to the Closing:

(a)           Each representation and warranty of Seller contained in this
Agreement shall be certified by Seller as true, accurate and complete in all
material respects as of the date of this Agreement and shall be deemed to have
been remade as of the Closing Date to be true, accurate and complete in all
material respects as of the Closing Date.  If Seller provides updated Disclosure
Schedules as of the Effective Date at the Closing, changes to the Disclosure
Schedules must be reasonably acceptable to Purchaser.

(b)           Seller shall have delivered all instruments and documents and
performed and complied with all agreements and conditions required by this
Agreement to be performed or complied with by Seller prior to or at the Closing
and shall have delivered to Purchaser all documents of conveyance and transfer,
business records of account, documents, certificates and instruments required to
be delivered under the terms of this Agreement.

(c)           Except for (i) customer and client consents, and (ii) those waived
by Purchaser in a writing signed by its agent with authority to do so, Seller or
Purchaser shall have obtained of all of the consents, approvals, modifications
or effective waivers thereof, reasonably requested by Purchaser, including
without limitation those referred to on Schedule 3.1 (r)(iii).

 
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(d)           There shall not have been issued and in effect any injunction or
similar legal order prohibiting or restraining consummation of any of the
transactions contemplated by this Agreement and no legal action or governmental
investigation which might reasonably be expected to result in any such
injunction or order shall be pending or threatened.

(e)           Purchaser shall have determined in Purchaser’s sole discretion
that there are no matters or events disclosed by Purchaser’s investigations
which, in Purchaser’s reasonable and good faith judgment, would have a material
adverse effect on the Purchased Assets.

(f)           There shall not have occurred, in Purchaser’s reasonable good
faith judgment, any material adverse change, or any event or circumstance which
could result in a material adverse change in the Business, its prospects, the
Purchased Assets or their value, or any development which materially and
adversely affects, or which could materially and adversely affect, as a result
of the consummation by Purchaser of the transactions contemplated hereby or
otherwise, the Purchased Assets, their value, the Business or its prospects.

(g)           Seller shall have provided to Purchaser evidence satisfactory to
Purchaser that the approval of any applicable governmental authority required in
order to consummate the transactions herein described has been obtained.

(h)           Anthony George shall have executed and delivered a Consulting
Agreement in the form attached as Exhibit B.

                                (i)           Van Wilson shall have executed and
delivered an Employment Agreement including a Covenant not to Compete where
necessary and appropriate and in the form attached as Exhibit C.

6.2           Conditions to Seller’s Obligations and Payments at Closing.  The
obligation of Seller to consummate the transactions contemplated by this
Agreement at Closing is subject to satisfaction of the following conditions at
or prior to Closing:

(a)           Each representation and warranty of Purchaser contained in this
Agreement shall be true, accurate, and complete in all material respects as of
the date hereof and as of the Closing and there has been no adverse material
change in the value of the Business and Assets, nor loss of any work in process.

(b)           Purchaser shall have performed and complied with all agreements
and conditions required by this Agreement to be performed or complied with by
Purchaser prior to or at the Closing, and Purchaser shall have delivered all
documents, certificates, and instruments required to be delivered by Purchaser
under the terms of this Agreement.

(c)           There shall not have been issued and in effect any injunction or
similar legal order prohibiting or restraining consummation of any of the
transactions contemplated by this Agreement and no legal action or governmental
investigation which might reasonably be expected to result in any such
injunction or order shall be pending.

 
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Article 7
Closing

7.1           The Closing.  As used in this Agreement, the term “Closing” means
the time at which the transactions contemplated hereby will be consummated after
satisfaction or waiver of the conditions set forth in Section 4.

7.2           Time, Date, and Place of Closing.  The Closing shall occur at the
office of Purchaser at 654 N. Sam Houston Parkway E., Suite 400, Houston, Texas
77060 on April 6, 2010 at 2:00 p.m. CDT (the “Closing Date”), to be effective
for all purposes as of 12:01 a.m. on April 1, 2010 or at such other time and
date as the parties may mutually agree upon in writing (the “Effective Date”).

7.3           Purchaser’s Obligations.  Provided and subject to Seller
satisfying all of its obligations and deliveries under Article 6, then and in
that event at the Closing:

(a)           Cash Payment at Closing.  Purchaser shall deliver to Seller a
cashier’s check or wire transfer in the amount of the $1,895,877.27 for the Cash
Payment required by Section 2.1(a) hereof as adjusted.

(b)           Purchaser shall adjust the Cash Payment to include its prorata
share of the Personal Property taxes for the tax year ending December 31, 2010
in the sum of $666.47.

(b)           Purchaser shall execute and deliver to Seller, the documentation
supporting the Deferred Payments in the form of Schedule 2.1 (b).

(c)           Guaranty of the obligations of Purchaser hereunder and under each
instrument and agreement contemplated hereby by ENGlobal Corporation
(“Guaranty”);

(d)           Employment Agreement by and between Purchaser and Van Wilson;

(e)           Shared Assets and Services Agreement between Purchaser and
Nautical Control Solutions, L.P.

(f)           Purchaser shall deliver such other documents, certificates, and
other items as may be reasonably required to be delivered by Purchaser pursuant
to the terms of this Agreement or as may be reasonably requested by Seller to
effectuate the transaction herein described.

7.4           Seller’s Obligations.  At the Closing:

(a)           Seller shall execute and deliver to Purchaser (i) the Bill of Sale
in the form of Schedule 7.4(a) and the Assignment, Assumption Consent and
release of Liability in the form of Schedule (a-2); and (ii) a Certificate,
including certification of  the existence and good standing of Seller, verifying
the accuracy of all representations and warranties of Seller, and the adoption
by the General and Limited Partners of Seller of resolutions authorizing and
approving the transaction.

 
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(b)           Seller shall deliver to Purchaser physical possession, instruments
of title where necessary, and a Bill of Sale transferring ownership of and title
to the Purchased Assets, free and clear of any and all liens, claims and
encumbrances.

(c)           Certificates setting forth the incumbency of the Partnership and
attaching the Certificate of Partnership and the Partnership Agreement.

(d)           Provide any lien terminations contemplated by Section 4.3.

(e)           Approval by Seller’s landlord of the transfer of Seller’s lease to
Purchaser.

(f)           Seller has prepared an Amendment to its Certificate of Partnership
changing its name from Control Dynamics International, LP to Angeo, LP.  Upon
consummation of this transaction, Seller will cause to be delivered to the
Secretary of State of Texas, the Amendment together with the applicable fee
necessary to change the name.  Seller shall also provide to Purchaser evidence
that Seller has abandoned any assumed name containing the words “CDI” or  any
word or words similar thereto.

(g)           Seller shall supply updated Disclosure Schedules, if required, to
reflect changes between the date hereof and the Effective Date.

(h)           Seller shall reduce the Cash Payment due in the sum of $24,250.20
the accrued and unused vacation and sick leave for any employees hired by
Purchaser in accordance with Section 7.6.

(i)           Seller shall reduce the Cash Payment due in the sum of $80,539.00
to reflect the estimated short fall in the Working Capital.  This number shall
be subject to increase or decrease in accordance with the post-closing Purchase
Adjustment Procedure in Section 2.4.

Seller further agrees to deliver such other documents, certificates, and other
items as may be required to be delivered pursuant to the terms of this Agreement
or as may be reasonably requested by Purchaser to effectuate the transaction
herein described.

7.5           Termination of Existing Employment Agreements.  Effective as of
the Effective Date, Seller shall take such actions as may be necessary to
terminate without liability any existing employment agreements currently in
effect with Seller (other than accrued payroll owed at and as of the time of the
Effective Date).

7.6           Employees.  Purchaser shall not be obligated to offer employment
to any of Seller’s employees, but may at its option offer to employ such of
Seller’s employees on such terms as Purchaser may determine in its sole
discretion, except that compensation levels will be at least equivalent to those
now in place as disclosed to Purchaser.  Any offer of employment which Purchaser
extends to Seller’s employees is conditioned upon the Closing.  Seller shall be
responsible for, and shall pay as of the time of the Effective Date all
obligations of Seller to all current and former employees of the Business for
accrued payroll, commissions and other

 
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compensation, and any and all termination pay, stay-on compensation, deferred
compensation, retirement, pension, profit sharing, vacation or sick leave rights
owed to current or former employees of the Business as of the Effective
Date.  At Closing, Seller shall be responsible for accrued and unused vacation
and sick leave for any employees hired by Purchaser that accrued while in the
employment of Seller.  Accrued vacation and sick leave shall be carried forward
and credited to each employee’s account.  Delays on the provision of employee
benefits shall be waived to the maximum extent possible.

7.7           Key Employee.  Purchaser has determined that Van K. Wilson is
vital to the viability and success of the Business is a Key Employee of Seller
(“Key Employee”) in which event such Key Employee shall be offered an Employment
Agreement on terms and conditions acceptable to Purchaser to be signed prior to
Closing as a condition of Closing, but which shall become effective only upon
Closing,

7.8           Prorations and adjustments.  At the Closing, the parties will
additionally prorate ad valorem taxes based on prior years’ taxes and will make
adjustments for deposits and other similar items as they may agree.

Article 8
Actions After Closing

8.1           Further Action.  After Closing, Seller will, without further cost
or expense to Purchaser, execute and deliver to Purchaser (or cause to be
executed and delivered to Purchaser) such additional instruments of conveyance
and transfer and take such other and further actions as Purchaser may reasonably
request to assign, transfer to and vest in Purchaser, and to put Purchaser in
possession and operating control of, all or any part of the Purchased Assets and
the Business.  No such instrument shall contain any representation, warranty, or
covenant not contained in this Agreement or any document delivered pursuant to
this Agreement or the transactions contemplated hereby.  No such instrument or
action may increase in any way the liability of Seller.

8.2           Further Consents to Assignment.  As and to the extent Seller shall
have failed to obtain prior to Closing the consent or approval (or an acceptable
effective waiver thereof) of any person or persons in respect of any item from
whom such consent is required pursuant to the terms hereof, or shall have failed
to obtain any other consent to the assumption of any contract included as a part
of the Purchased Assets, if Purchaser shall nonetheless have elected to proceed
to purchase the Purchased Assets, at the written request of Purchaser, Seller
shall continue to use reasonable efforts to obtain from such person or persons
the consents or approvals (or effective waivers thereof).  Purchaser shall use
reasonable efforts to assist Seller in obtaining consents.

8.3           Covenant Not to Compete and Non-Solicitation.  As further
consideration for the covenants and agreements herein contained and for the
purpose of inducing Purchaser to enter into the Purchase Documents, a
transaction that Anthony George acknowledges will benefit him individually,
Seller and Anthony George (as evidenced by his signature below, but Anthony
George shall be considered a party to this Agreement only for the purposes of
this Section 8.3 and Sections 8.4, 9.1, and 11.15) agree not to directly or
indirectly conduct any business in competition with the Business or its products
or services, both as conducted as of the Closing Date and as

 
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conducted thereafter substantially in accordance with Seller’s written business
plans of the Business as they exist as of the date of Closing, anywhere within
the states of Texas, for a period of  three (3) years following the date of
Closing.  This covenant is ancillary to the other commitments and agreements
herein contained, and Seller and Anthony George acknowledge that but for the
covenant contained in this Section, Purchaser would not enter into this
transaction.  In the event of a violation of this covenant, Purchaser shall be
entitled to an injunction restraining the breach of this covenant not to
compete, in addition to any and all other remedies available to Purchaser at law
or in equity for such breach.  Resort to any remedy provided for hereunder or
provided for by law shall not prevent Purchaser from seeking any other
appropriate remedy or remedies, or preclude the recovery by Purchaser of
monetary damages for such breach.  Seller or Anthony George shall be deemed to
be competing with Purchaser if Seller or Anthony George is conducting or
participating directly or indirectly in any business or businesses subject to
this restriction, whether for its/his own account or for that of any person.  In
the event that any provision of this Section shall be determined to be invalid,
ineffective or unenforceable, the remaining provisions of this Section shall
remain in full force and effect and the invalid, ineffective or unenforceable
provision shall, without further action, be automatically amended to effect the
original purpose and intent of the invalid, ineffective, or unenforceable
provision; provided, however, that such amendment shall only apply with respect
to the operation of such provision in the particular jurisdiction in which such
provision has been declared invalid, ineffective or unenforceable.

If Company defaults on the Deferred Payments, a bonus payment under Section
2.1(c), fails to satisfy an Assumed Liability or indemnity obligation, except a
default timely cured under the Guaranty, then the obligations of Seller and
Anthony George under this Section 8.3 shall expire 30 days following Seller or
Anthony George giving Purchaser written notice of such default if such default
is not fully cured prior to the expiration of such 30 day period.

           8.4           Confidential Information.  Seller and Anthony George
hereby acknowledge that the Purchaser would be irreparably damaged if any
proprietary or confidential information concerning the Business or the Purchased
Assets (except for information that is or becomes generally known to the public,
otherwise than through a breach of this Agreement) were disclosed to or used by
any person engaged in competition with Purchaser.  Seller and Anthony George
hereby covenant and agree that they shall not use or disclose any such
confidential or proprietary information, except as expressly permitted hereunder
or under any other agreement between Seller and Purchaser.  If Seller and
Anthony George is requested or required by any governmental authority to
disclose any of such proprietary or confidential information, then Seller or
Anthony George shall provide Purchaser with prompt written notice of such
request or requirement unless prohibited by law.  Purchaser may then either seek
appropriate protective relief from all or part of such request or requirement or
waive Seller’s or Anthony George’s compliance with the provisions of this
Section with respect to all or part of such request or requirement.  Seller and
Anthony George shall cooperate with Purchaser, at Purchaser’s reasonable
expense, in attempting to obtain any reasonable protective relief that Purchaser
chooses to seek.  If, after Purchaser has had a reasonable opportunity to seek
such relief, Purchaser fails to obtain such relief, then Seller and Anthony
George may disclose only that portion of such proprietary or confidential
information which legal counsel advises it is compelled to
disclose.  Notwithstanding the foregoing, the parties agree that such
proprietary or confidential information shall expressly exclude any information
which in the public domain through no breach of this Agreement or any prior
confidentiality agreement, provided, however, that proprietary or confidential
information shall not be deemed to be in the public domain merely because any
part of the proprietary or confidential information is embodied in general
disclosures or because individual features, components or combinations thereof
are now or become known to the public.

 
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8.5           Accounts Receivable.    In the event that Seller shall receive
remittance from or on behalf of any account debtor with respect to the accounts
receivable reflected in the Closing Balance Sheet, Seller shall endorse without
recourse such remittance to the order of Purchaser and forward such remittance
to Purchaser promptly upon receipt thereof.

Article 9
Indemnification

9.1           Indemnification of Purchaser.

(a)           From and after the Effective Date, Seller and Anthony
George hereby agree, jointly and severally, to indemnify, defend, and hold
harmless Purchaser and its partners, officers, employees, advisors, affiliates,
agents, representatives and assigns (the “Purchaser Indemnitees”) from and
against any and all liabilities, penalties, damages, losses, claims, costs, and
expenses (including reasonable attorneys fees and expenses for the defense of
any claim which, if proved, would give rise to an obligation of indemnity
hereunder, notwithstanding that such claim may be settled prior to final
judgment) BUT EXCLUDING INCIDENTAL, CONSEQUENTIAL AND/OR PUNITIVE DAMAGES,
AND/OR OTHER FORMS OF ECONOMIC LOSSES AS TO CLAIMS MADE BY PURCHASER BUT NOT BY
THIRD PARTIES arising out of or resulting directly or indirectly from (a)
breach, falsity, or inaccuracy of any warranty, representation or covenant by
Seller contained in this Agreement; (b) failure of Seller fully to pay, satisfy,
perform or discharge, or cause to be paid, satisfied, performed or discharged,
any liabilities not expressly assumed by Purchaser pursuant to the terms hereof;
(c) nonperformance of any obligations or covenants on the part of Seller under
this Agreement; (d) the presence of any Hazardous Material or Hazardous Material
Contamination upon or about the real property upon which the Business has
heretofore been operated during Seller’s occupancy and prior to the Effective
Date; or (e) the conduct of the Business or of Seller’s employees, agents, or
contractors prior to the Effective Date (other than liabilities expressly
assumed by Purchaser pursuant to the terms hereof), including, without
limitation, any violation of laws occurring or alleged to have occurred prior to
the Effective Date or arising from, related to, or connected with the Business
prior to the Effective Date; or (f) any loss to Purchaser due on account of a
material breach or early termination of an employment agreement with Seller
(each hereafter a “Claim”).

(b)           Notwithstanding anything herein to the contrary, the sole remedy
for Purchaser under this indemnity for any Claim, except for a breach or
non-performance of a covenant contained in this Agreement or any instrument
herein contemplated to be executed and delivered by the parties hereto and as
provided in Section 9.6, shall be offset against the Deferred Payments and the
maximum amount that the Seller and Anthony George shall be obligated to pay in
respect of any and all obligations of indemnity under this Section 9.1 shall be
equal to the remaining amounts due, both principal and interest, of the Deferred
Payments.  In addition, a Claim shall not be brought by Purchaser under or
pursuant to this Section 9.1, unless either (i) the amount of that Claim exceeds
$50,000, or (ii) the aggregate amount of all Claims (whether reimbursed or
unreimbursed, and including both those theretofore made and any Claims then
being made) exceeds $75,000.

 
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           9.2           Indemnification of Seller.

(a)           From and after the Effective Date, Purchaser hereby agrees to
indemnify, defend, and hold harmless Seller and its general partner and their
respective equityholders, managers, officers, employees, advisors, affiliates,
agents, representatives and assigns (the “Seller Indemnitees”) from and against
any and all liabilities, penalties, damages, losses, claims, costs, and expenses
(including reasonable attorneys fees and expenses for the defense of any claim
which, if proved, would give rise to an obligation of indemnity hereunder,
notwithstanding that such claim may be settled prior to final judgment) BUT
EXCLUDING INCIDENTAL, CONSEQUENTIAL AND/OR PUNITIVE DAMAGES, AND/OR OTHER FORMS
OF ECONOMIC LOSSES AS TO CLAIMS MADE BY SELLER BUT NOT BY THIRD PARTIES arising
out of or resulting directly or indirectly from (i) breach, falsity, or
inaccuracy of any warranty, representation or covenant by Purchaser contained in
this Agreement; (ii) nonperformance of any obligations or covenants on the part
of Purchaser under this Agreement; or (iii) the conduct of Purchaser’s
employees, agents or contractors, or of the Business, or any condition, event or
activity relating to the Business, on or after the Effective Date (each also
hereafter a “Claim”).

(b)           Notwithstanding anything herein to the contrary, the maximum
amount that the Purchaser, shall be obligated to pay in respect of any and all
obligations of indemnity for a Claim under this Section 9.2 except for a breach
or non-performance of a covenant contained in this Agreement or any instrument
herein contemplated to be executed and delivered by the parties hereto, shall be
equal to the remaining amounts due, both principal and interest, of the Deferred
Payments.  In addition, a Claim shall not be brought by Seller under or pursuant
to this Section 9.2, unless either (i) the amount of that Claim exceeds $50,000,
or (ii) the aggregate amount of all Claims (whether reimbursed or unreimbursed,
and including both those theretofore made and any Claims then being made)
exceeds $75,000.

9.3           Responsibility for Defense.  The following procedures shall be
applicable with respect to indemnification for claims by any person that is not
a party to this Agreement or an affiliate of a party to this Agreement arising
in connection with any provision of this Agreement.

(a)           Promptly after receipt by a Purchaser Indemnitee or a Seller
Indemnitee seeking indemnification hereunder (an “Indemnitee”) of written notice
of the assertion or the commencement of any Claim by a third party, whether by
legal process or otherwise, with respect to any matter within the scope of this
Section, the Indemnitee shall give written notice thereof (the “Notice”) to the
party from whom indemnification is sought pursuant hereto (the “Indemnitor”).

(b)           Within thirty (30) days after receipt of any notice of a Claim,
Indemnitor will, by giving written notice to Indemnitee, have the right to
assume responsibility for the defense of the Claim in the name of Indemnitee or
otherwise as Indemnitor may elect; provided that Indemnitor also acknowledge in
writing its responsibility to indemnify Indemnitee with respect to such Claim;
and provided further that failure of Indemnitor to exercise its right to assume

 
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responsibility for the defense of any Claim shall not restrict the ability of
Indemnitee to subsequently join Indemnitor as a party in any litigation
respecting such Claim nor shall Indemnitee be obligated to permit Indemnitor to
assume or to continue responsibility for the defense if Indemnitee believes its
rights, including without limitation, its right to be fully protected and paid
under the indemnification, are or may become impaired or jeopardized.  In such
event, Indemnitee shall have the right to defend the Claim and shall be
automatically deemed to have reserved all of its rights against Indemnitor.

(c)           Notwithstanding Indemnitor’s responsibility for the defense of a
Claim, Indemnitee shall have the right to participate, at its own expense and
with its own counsel, in the defense of a Claim and Indemnitor will consult with
Indemnitee from time to time on matters relating to the defense of such Claim
and will provide such information and assistance as Indemnitee deem reasonably
necessary to defend the Claim.  Indemnitee will provide Indemnitor with copies
of all pleadings and correspondence relating to the Claim and will keep
Indemnitee appraised of proposed adjustments, compromises and
settlements.  Notwithstanding anything herein to the contrary, Indemnitor shall
not be entitled to compromise or settle any such action without the prior
written consent of Indemnitee.

9.4           Payment of Fees and Expenses.  If either party is entitled under
this Section to indemnification for fees and expenses, such party shall be
entitled to current reimbursement thereof upon the submission to the other party
of a request for reimbursement setting forth in reasonable detail such costs and
expenses to be reimbursed.

9.5           Right of Set-Off.  Upon written notice to Seller specifying in
reasonable detail the basis for such set-off, Purchaser may set off any amount
to which it may be entitled under this Article 9 against the Deferred
Payments.  In the event that Seller does not agree to the proposed set-off,
Seller shall within ninety (90) days of receipt of the written notice from
Purchaser apply to the American Arbitration Association for the appointment of
an arbitrator to be selected from a list of three (3) arbitrators supplied by
the American Arbitration Association to both parties at the same time.  For a
period of five (5) days after the list is delivered to it, each of Purchaser and
Seller shall have the right to strike one name from the list of arbitrators, and
the arbitrator not stricken shall be the arbitrator hereunder.  Any party unable
or unwilling to so strike a name within the period required shall forfeit its
right to participate in the selection of the arbitrator.  The arbitrator so
selected shall then diligently conduct an arbitration proceeding, and the
decision of the arbitrator shall be final and conclusive upon the parties
hereto.  Judgment upon the award rendered by the arbitrator may be entered in
any court having jurisdiction.  All statutes of limitation that would otherwise
be applicable shall apply to any arbitration proceeding.  Notwithstanding
anything to the contrary contained in this Agreement, the exercise of such right
of set-off by Purchaser in good faith, whether ultimately determined to be
justified, will not constitute an event of default under any Agreements between
the parties.  Neither the exercise of nor the failure to exercise such right of
set-off will constitute an election of remedies or limit the Purchaser in any
manner in the enforcement of any other remedies that may be available to
Purchaser except as specified otherwise in this Agreement.

9.6           Rights of Indemnitor and Exclusive Remedy.  Upon the payment in
full of any claim, the person making payment shall be subrogated to the rights
of the indemnitee against any person with respect to the subject matter of such
claim.  After the Effective Date and except for claims based on fraud or failure
of Seller to provide Purchaser with 

 
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Good Title, the indemnification provided under Section 9.1 and Section 9.2, will
be the exclusive remedy of the parties.  It is expressly understood and agreed
that, except by virtue of the indemnification provisions set forth in
Section 9.1 and Section 9.2, none of the parties are or will be entitled to any
adjustment, reduction, set-off, damages, or the like in connection with the
transactions contemplated by this Agreement.

Article 10
Amendment, Waiver and Termination

10.1          Amendment.  This Agreement may be amended at any time only by
written instrument executed by both Seller and Purchaser.

10.2          Waiver.  Either party may at any time waive compliance by the
other of any covenant or condition contained in this Agreement, but only by
written instrument executed by the party waiving such compliance.  No such
waiver, however, shall be deemed to constitute the waiver of any such covenant
or condition in any other circumstance or the waiver of any other covenant or
condition.  The failure of either party to enforce at any time or for any period
of time any of the provisions of this Agreement shall not constitute a waiver of
such provisions.

10.3          Extension.  At any time prior to the Closing any party hereto may,
to the extent legally allowed, extend the time for the performance of any of the
obligations or other acts of the other parties hereto.

10.4          Termination.  This Agreement may be terminated without breach by
the terminating party as follows.

(a)           Termination by Purchaser.  Purchaser may terminate this Agreement:
(1) if any representation or warranty of Seller in this Agreement is untrue or
inaccurate, (2) if Seller has breached, in any material respect, any of its
obligations under this Agreement, or (3) if Purchaser determines, in its
reasonable and good faith judgment, that any condition to its obligation to
close the purchase of the Purchased Assets will not be satisfied on or before
the Closing Date.

(b)           Termination by Seller.  Seller may terminate this Agreement if:
(1) any representation or warranty of Purchaser in this Agreement is untrue,
incomplete, misleading or inaccurate, (2) Purchaser has breached, in any
material respect, any of its obligations under this Agreement, or (3) Seller
determines, in its reasonable and good faith judgment, that any condition to its
obligation to close the sale of the Purchased Assets will not be satisfied as of
Closing.

(c)           Termination by Either Party.  This Agreement may be terminated by
either party if the Closing does not occur within seven (7) days of the stated
Closing Date, provided that a party then in material breach of this Agreement
may not exercise such right.

(d)           Termination by Agreement.  This Agreement may be terminated at any
time prior to the Closing by written agreement signed by both parties.

 
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(e)           Termination by Order.  This Agreement may be terminated by Seller
or Purchaser if there shall be in effect a final nonappealable order of a
governmental body of competent jurisdiction restraining, enjoining or otherwise
prohibiting the consummation of the transactions contemplated hereby; it being
agreed that the parties hereto shall promptly appeal any adverse determination
which is not nonappealable (and pursue such appeal with reasonable diligence).

10.5          Effect of Termination.  In the event of termination of this
Agreement pursuant to this Section, this Agreement shall terminate and there
shall be no further liability on the part of Seller or Purchaser under this
Agreement; provided, however, that the provisions of Section 5.2
(Confidentiality), Section 5.3 (Public Disclosure), and this Section 10.5 shall
remain in full force and effect and survive any termination of this Agreement;
and provided further, that nothing in this Section 10.5 shall relieve the
Purchaser or Seller of any liability for a breach of this Agreement.  Nothing in
this Section shall relieve a breaching or defaulting party from liability
arising from any breach or default of this Agreement prior to termination.  If
this Agreement is terminated as provided herein each party shall redeliver all
documents, work papers and other material of any other party relating to the
transactions contemplated hereby, whether so obtained before or after the
execution hereof, to the party furnishing the same or destroy such documents,
work papers and other material and confirm such destruction in writing.

Article 11
Miscellaneous

11.1          Cooperation.  Purchaser and Seller will use reasonable efforts to
cooperate with each other, at the other party’s request and expense, in
furnishing information, testimony, and other assistance in connection with any
actions, proceedings, arrangements, and disputes with other persons, or
governmental inquiries or investigations involving Seller or Purchaser’s conduct
of the Business or the transactions contemplated hereby.

11.2          Severability.  If any term or provision of this Agreement or the
application thereof to any person or circumstance shall, to any extent, be
invalid or unenforceable, the remainder of this Agreement or the application of
such term or provision to persons or circumstances other than those as to which
it is invalid or unenforceable shall not be affected thereby, and each term and
provision of this Agreement shall be valid and enforceable to the extent
permitted by law.

11.3          Brokers; Expenses.  Purchaser has engaged Mills and Stowell and
Seller has engaged Crutchfield Capital Corporation.  Each party agrees to hold
the other harmless from any claims by a broker or finder claiming by, through or
under the indemnifying party.  Each party will bear its own expenses incurred in
connection with this Agreement and the transaction contemplated hereby, whether
or not such transaction shall be consummated except as otherwise expressly
provided in this Agreement.

11.4          Taxes.  Seller will bear any state, federal or foreign transfer,
sales or use taxes, if any, which may result from the transfer of the Acquired
Assets from Seller to Purchaser.

 
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11.5          Notices.  All notices required or permitted to be given under this
Agreement shall be in writing and may be delivered by personal delivery, by
nationally recognized private courier, by PDF/email, or by United States mail.
Notices delivered by mail shall be deemed given five business days after deposit
in the United States mail, postage prepaid, registered or certified mail, return
receipt requested. Notices delivered by personal delivery, PDF/email, or by
nationally recognized private courier shall be deemed given on the first
business day following receipt. However, a notice delivered by PDF/email shall
only be effective upon electronic confirmation of receipt and must be confirmed
by a mailed copy of the notice using United States mail, postage prepaid,
registered or certified mail, return receipt requested, mailed either on the
same day or the first business day after the PDF/email is sent.  All notices
shall be addressed as follows:                                             
          
 

                if to the Purchaser, to:  ENGlobal Automation Group, Inc.   
ATTN:  Corporate Secretary    654 N. Sam Houston Parkway E., Suite 400   
Houston, Texas 77060    Email address: corpsec@englobal.com       with a copy
to:        ENGlobal Legal    ATTN: Katrina Hamrick    654 N. Sam Houston Parkway
E., Suite 400    Houston, Texas 77060     Email address: katrina.hamrick@
englobal.com     
                if to the Seller, to:
Control Dynamics International, L.P.
 
c/o Anthony George
 
6 East Sienna Place,
 
The Woodlands, TX 77384 
 
Email: ageorge4@sbcglobal.net
   
 
with a copy to:
   
 
Dayle C. Pugh
 
Bateman│Pugh, PLLC
 
909 Fannin St., Suite 1800
 
Houston, Texas 77010
   
 
Email: dcp@bpattorneys.com
   

Either party may change its address for notice hereunder by notice to the other
party.
 
11.6            Assignment.  This Agreement and the rights, obligations and
liabilities hereunder shall be binding upon and inure to the benefit of the
successors and assignees of each of the parties hereto, but no rights,
obligations or liabilities hereunder shall be assignable or delegable by any
party without the prior written consent of the other party hereto.

 
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11.7            No Third Parties.  This Agreement is not intended to, and shall
not, create any rights in or confer any benefits upon any person other than the
parties hereto and the Purchaser Indemnitees and the Seller Indemnitees.

11.8            Incorporation by Reference.  All Schedules and Exhibits to this
Agreement constitute integral parts of this Agreement and are incorporated
herein by this reference for all relevant purposes.  The Schedules have been
separately compiled, and initialed by the undersigned representatives of Seller
and Purchaser.

11.9            Counterparts, Faxes and Electronic Signatures.  This Agreement
may be executed in two or more counterparts, each of which shall be deemed an
original, and it shall not be necessary in making proof of this Agreement to
produce or account for more than one counterpart.  A signature transmitted by
facsimile or electronically shall have the same force and effect as an original
signature.

11.10           Entire Agreement; Time is of the Essence.  This Agreement,
together with the Schedules and Exhibits attached hereto, constitutes the entire
agreement between the parties with respect to the subject matter hereof and
supersedes any contemporaneous or prior oral or written agreement or
understanding, including the letter of intent, which shall terminate
immediately, and be of no further force and effect, upon execution and delivery
of this Agreement by the parties hereto.  Time is of the essence of this
Agreement.

11.11           Interpretation.  The headings in this Agreement are for
convenience of reference only and shall not define or limit any of the terms or
provisions hereof.  All pronouns shall be deemed to refer to the masculine,
feminine, neuter, singular or plural as the identity of the person or persons
referred to may require.  Each defined term identified herein with initial
capital letters shall have the meaning ascribed to such term herein.  Each party
agrees that the language and all parts of this Agreement shall be construed as a
whole according to its fair meaning, and irrespective of any party or its
counsel’s role in drafting this Agreement shall not be strictly construed for or
against any party.  The parties acknowledge that each has reviewed this
Agreement and has had the opportunity to have it reviewed by its attorney and
that any rule of construction to the effect that ambiguities are to be resolved
against the drafting party shall not apply in the interpretation of this
Agreement or any part thereof or attachment thereto.

11.12           Survival of Representations and Covenants. All representations,
warranties, covenants and agreements made in this Agreement shall survive the
execution and delivery of this Agreement and the Closing of the transaction
herein described until the expiration of two years following the date of
Closing.  All statements contained in any certificate or other instrument
delivered by or on behalf of Seller pursuant to this Agreement or in connection
with the transactions contemplated hereby shall be deemed representations and
warranties by Seller hereunder.

11.13           Definition of Knowledge.   Seller will be deemed to have
knowledge of a particular fact or other matter if any individual who is serving,
or who has at any time served, as a limited liability company manager, officer,
or partner or officer of Seller or its general partner has, or at any time had,
knowledge of that fact or other matter.

 
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11.14           GOVERNING LAW.  All disputes relating to the execution,
interpretation, construction, performance or enforcement of this Agreement and
the rights and obligations of the parties hereto shall governed by the laws of
the State of Texas, excluding it conflicts of laws provisions, and resolved in
the State and Federal courts in Harris County, Texas.  Seller and Purchaser
hereby consent to and waive any objections to venue and jurisdiction in such
courts.

[Signature pages follow.]

 
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EXECUTED by the duly authorized representatives of the parties to be effective
as of the date first set forth above.

 
SELLER:
 
Control Dynamics International, L.P.
 
By CDI GP, LLC, its General Partner
     
By: /s/ George Anthony                     
 
George Anthony, CEO
         
PURCHASER:
 
ENGlobal Automation Group, Inc.
         
By: /s/ William A. Coskey               _ 
 
William A. Coskey, CEO

 
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EXHIBIT A

to the

Asset Purchase Agreement

Allocation of Purchase Price

Furniture, Fixtures and Equipment:

Intangibles and Goodwill: $

 
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EXHIBIT B

to the

Asset Purchase Agreement

Consulting Agreement

See Attached.

 
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EXHIBIT C

to the

Asset Purchase Agreement

Employment Agreement

See Attached.

 
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