STOCK PURCHASE AGREEMENT
 
by
 
RICCIARDI TECHNOLOGIES, INC.,
 
ITS OWNERS, INCLUDING
 
MICHAEL RICCIARDI AS THE OWNER REPRESENTATIVE
 
and
 
SCIENCE DYNAMICS CORPORATION

DATED AS OF SEPTEMBER 12, 2006

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STOCK PURCHASE AGREEMENT
 
THIS STOCK PURCHASE AGREEMENT (this “Agreement”) is dated as of September 12,
2006 by and among SCIENCE DYNAMICS CORPORATION, a Delaware corporation
(“Purchaser”), RICCIARDI TECHNOLOGIES, INC., a Virginia corporation (the
“Company”) and those other persons listed on Schedule O hereto (the “Owners”)
and Michael Ricciardi, one of the Owners and as a representative of all of the
Owners (the “Owner Representative”).
 
Preliminary Statements
 
WHEREAS, the Company is in the business of providing software consulting and
development services for the command and control of biological sensors and other
Department of Defense requirements to United States federal governmental
agencies either directly or through prime contractors of such governmental
agencies (the “Business”);
 
WHEREAS, the Owners own all of the outstanding capital stock of the Company;
 
WHEREAS, Purchaser is interested in acquiring all of the Company’s outstanding
capital stock; and
 
WHEREAS, the Owners are willing to sell, and Purchaser is willing to purchase,
all of the outstanding capital stock of the Company held by the Owners pursuant
to the terms and conditions hereof;
 
NOW, THEREFORE, in consideration of the foregoing and the mutual promises,
covenants and agreements contained in this Agreement, the parties, intending to
be legally bound, hereby agree as follows:
 
ARTICLE 1
CERTAIN DEFINITIONS
 
1.1 Defined Terms. As used in this Agreement, the following terms shall have the
meanings herein specified, unless the context otherwise requires: 
 
Affiliate means: (i) any Person that directly or indirectly through one or more
intermediaries controls, is controlled by or under common control with the
Person specified; (ii) any director, officer, or Subsidiary of the Person
specified; and (iii) the immediate family members of the Person specified. For
purposes of this definition and without limitation to the previous sentence, (a)
“control” of a Person means the power, direct or indirect, to direct or cause
the direction of management and policies of such Person, whether through
ownership of voting securities, by contract or otherwise, (b) any Person owning
more than ten percent (10%) or more of the voting securities or similar
interests of another Person shall be deemed to be an Affiliate of that Person,
and (c) “immediate family member” means a Person’s spouse, parents or siblings,
or lineal descendants of any of the foregoing (by blood, adoption or marriage).
 

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Books and Records means all records, documents, lists and files, relating to the
Business including, without limitation, price lists, lists of accounts,
customers, suppliers and personnel, all product, business and marketing plans,
historical sales data and all books, ledgers, files and business records
(including, without limitation, all financial records and books of account), in
any of the foregoing cases, whether in electronic form or otherwise.
 
Business Day shall mean any day that banks are opened for business in the
Commonwealth of Virginia, other than a Saturday or Sunday.
 
Cash means all cash, marketable securities and cash equivalents (including Tax
refunds) of the Company plus $100,000 from the Company's credit line with
Wachovia Bank.
 
Cash Deposit means One Hundred Thousand Dollars ($100,000).
 
Cause means (a) conviction of, or plea or nolo contendere to, a felony or other
crime involving moral turpitude; (b) fraud on or misappropriation of any funds
or property of the Company or any Affiliate, customer or vendor of the Company;
(c) personal dishonesty, willful misconduct, or breach of fiduciary duty against
the Company which involves personal profit; (d) material breach of any provision
of any employment, non-disclosure, non-competition, non-solicitation or other
similar agreement, executed by the employee for the benefit of the Company or
the Purchaser, as determined by the Company's or Purchaser's Board of Directors,
as applicable; or (e) a refusal to substantially perform the employee's written
and known duties (excluding death and disability of the employee); provided,
however, that in the case of clauses (d) and (e), it shall not constitute Cause
unless the Company or Purchaser, as the case may be, shall have provided the
employee with written notice of its alleged actions constituting Cause (which
notice shall specify in reasonable detail the particulars of such Cause) and the
employee has not cured any such alleged Cause or substantially commenced its
effort to cure such breach within thirty (30) days of the employee's receipt of
such written notice.

Change of Control of Purchaser or Company means: (1) the closing of a sale or
other conveyance of all or substantially all of the assets of Company or
Purchaser; or (2) the closing of a sale or other conveyance of all or
substantially all of the outstanding securities of Purchaser or Company
(including by merger, share exchange, consolidation, or other business
combination involving the Company or Purchaser, as the case may be).

Claim Notice has the meaning set forth in Section 10.3(b).
 
Closing has the meaning set forth in Section 8.1.
 
Closing Date has the meaning set forth in Section 8.1.
 
Closing Payment has the meaning set forth in Section 3.1(b).
 
Code means the Internal Revenue Code of 1986 and the rules and regulations
promulgated thereunder, as amended and supplemented from time to time.
 
Company Expenses means the following expenses of Company: (a) the cash
contribution to the ESOP for fiscal year ending March 31, 2006 and for the
partial fiscal year ending as of the Closing Date; (b) the redemption price for
the shares of Company common stock held by ESOP; (c) the aggregate amount of all
Company Taxes for all Tax periods ending on or prior to March 31, 2006 payable
by the Owners in accordance with Section 12.2(a); (d) commissions, fees and
other charges and expenses due to Company’s legal counsel and other service
providers in connection with the transactions contemplated by this Agreement,
including Holland & Knight LLP, Sheppard Mullin Richter & Hampton LLP and
Advanced Valuation Analytics, Ltd. not remitted by Company; and (e) any other
fees and expenses the Owner Representative is permitted to pay of the Purchase
Price in accordance with Section 14.12.
 
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Company Material Adverse Effect means any materially adverse change in or effect
on the financial condition, Business, operations, assets or properties of the
Company before the Closing and on the Business after the Closing, provided that
(i) changes in general industry conditions or general economic conditions,
consequences of acts of war or terrorism, (ii) adverse effects arising from the
announcement or consummation of the transactions contemplated under this
Agreement, or (iii) the loss of a re-compete of any Material Contract, the
failure of any Material Contract to be renewed or have an option elected, the
failure of the Company to be awarded any Contract in response to any bid or the
termination of any Material Contract for convenience shall not be deemed to
constitute a Company Material Adverse Effect.
 
Consents means any consents, waivers, approvals, authorizations, certifications
or exemptions from any Person under any Contract or Requirement of Law or
otherwise, as applicable.
 
Contracts means, with respect to any Person, any indentures, indebtedness,
contracts, leases, agreements, instruments, licenses, undertakings and other
commitments, whether written or oral, to which such Person or such Person’s
properties are bound, exclusive of Permits.
 
Conversion Shares shall have the meaning set forth in Section 5.4(b).
 
Earn-Out Payment shall have the meaning set forth in Section 3.2(a).
 
Earn-Out Period shall have the meaning set forth in Section 3.2(a).
 
Earn-Out Notice shall have the meaning set forth in Section 3.2(b).
 
EBITDA shall mean the consolidated earnings of the Company and Purchaser from
operations (including, without limitation, consolidated earnings of the Company
and Purchaser from the services division and the Company's SensorView product)
before interest, taxes, depreciation, amortization and extraordinary gains or
losses and excluding (1) Purchaser's Technology Division (the division providing
Purchaser’s technical products and services), (2) Purchaser's unallocated
corporate expenses, all as determined in accordance with GAAP, and as agreed to
by Owner Representative, and (3) earnings generated from additional acquisitions
or new product lines from such additional acquisitions by Purchaser.
 
Effective Time means 12:01 a.m. on the Closing Date.
 
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Employee Benefit Plan means any “employee benefit plan” (as such term is defined
in ERISA Section 3(3)) and any other deferred compensation, pension, profit
sharing, stock bonus, restricted stock, stock option, stock purchase, savings,
group insurance or retirement plan, and all vacation pay, severance pay, life,
health, disability, premium conversion, flexible spending, incentive
compensation, bonus and other employee benefit or fringe benefit plans or
arrangements (whether written or unwritten) maintained by the Company or any of
its ERISA Affiliates (including, without limitation, any benefit plan or
arrangement maintained for retirees) within the previous three plan years or
with respect to which contributions are or were (within such three year period)
made or required to be made by any the Company or any of its ERISA Affiliates or
with respect to which the Company or any of its ERISA Affiliates has any
liability.
 
Employment Agreement means the employment agreement by and between Purchaser and
Michael Ricciardi, in the form attached hereto as Exhibit I.
 
Encumbrances means, with respect to any asset, any security interests, liens,
encumbrances, pledges, trusts, charges, proxies, mortgages, conditional or
installment sales Contracts, title retention Contracts and transferability
restrictions.
 
ERISA means the Employment Retirement Income Security Act of 1974 and the rules
and regulations promulgated thereunder, as amended and supplemented from time to
time.
 
ERISA Affiliate means any Person that is included with the Company in a
controlled group or affiliated service group under Sections 414(b), (c), (m) or
(o) of the Code.
 
Escrow Agent means the meaning given to such term in the Escrow Agreement or the
Hold Back Escrow Agreement, as the case may be.
 
Escrow Agreement has the meaning set forth in Section 3.4(a).
 
Escrow Balance has the meaning set forth in Section 3.4(a).
 
Escrow Deposit has the meaning set forth in Section 3.4(a).
 
ESOP means the Ricciardi Technologies, Inc. Employee Stock Ownership Plan.
 
GAAP means generally accepted accounting principals applicable in the United
States of America.
 
Good Reason means any one of the following: (a) the Company’s (or its
Affiliates) willful material breach of any provision of an employee agreement by
and between employee and Company or Purchaser; (b) any material adverse change
in the employee's position (including status, offices, titles and reporting
requirements), authority, duties or responsibilities, or any other action by the
Company or Purchaser made without the employee's permission (other than a change
due to the employee's permanent disability or as an accommodation under the
Americans With Disabilities Act) or (c) Company (or its Affiliates) requiring
relocation of employee more than twenty-five (25) miles from Manassas, Virginia
without employee's consent; provided, however, that it shall not constitute Good
Reason unless the employee shall have provided the Company or Purchaser, as the
case may be, with written notice of its alleged actions constituting Good Reason
(which notice shall specify in reasonable detail the particulars of such Good
Reason) and the Company or Purchaser, as the case may be, has not cured any such
alleged Good Reason or substantially commenced its effort to cure such breach
within thirty (30) days of the Company's or Purchaser's, as the case may be,
receipt of such written notice.
 
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Governmental or Regulatory Authority means any court, tribunal, arbitrator,
authority, agency, commission, official or other instrumentality of the
government of the United States or of any foreign country, or of any state or
any political subdivision of any such government (whether state, provincial,
county, city, municipal or otherwise).
 
Historical Financial Statements has the meaning set forth in Section 4.12(a).
 
Indebtedness means, without duplication, (a) all indebtedness (including the
principal amount thereof and the amount of accrued and unpaid interest thereon)
of the Company, whether or not represented by bonds, debentures, notes or other
securities, for the repayment of money borrowed, (b) all deferred indebtedness
of the Company for the payment of the purchase price of property or assets
purchased, (c) all obligations of the Company to pay rent or other payment
amounts under a lease of real or personal property which is required to be
classified as a capital lease or a liability on the face of a balance sheet
prepared in accordance with GAAP, (d) any outstanding reimbursement obligation
of the Company with respect to letters of credit, bankers’ acceptances or
similar facilities issued for the account of the Company, (e) any payment
obligation of the Company under any interest rate swap agreement, forward rate
agreement, interest rate cap or collar agreement or other financial agreement or
arrangement entered into for the purpose of limiting or managing interest rate
risks, (f) all indebtedness for borrowed money secured by any Encumbrances
existing on property owned by the Company, whether or not indebtedness secured
thereby shall have been assumed, (g) all guaranties, endorsements, assumptions
and other contingent obligations of the Company in respect of, or to purchase or
to otherwise acquire, indebtedness for borrowed money of other Persons, and
(h) all premiums, penalties and change of control payments required to be paid
or offered in respect of any of the foregoing as a result of the consummation of
the transactions contemplated by this Agreement or otherwise, regardless if any
of such are actually paid.
 
Indemnifiable Losses means all losses, liabilities, obligations, claims,
demands, (including any governmental penalty or punitive damages), deficiencies,
interest, damages, penalties, settlements, causes of action, Taxes, costs and
expenses, including, without limitation, the actual reasonable costs paid in
connection with an Indemnified Party’s investigation and evaluation of any claim
or right asserted against such Indemnified Party and all reasonable attorneys’,
experts’ and accountants’ fees, expenses and disbursements and court costs
including, without limitation, those incurred in connection with the Indemnified
Party’s enforcement of this Agreement and the indemnification provisions of
Article 10 of this Agreement.
 
Indemnified Employees has the meaning set forth in Section 11.2(a).
 
Indemnified Party has the meaning set forth in Section 10.3(a).
 
Indemnifying Party has the meaning set forth in Section 10.3(a).
 
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Indemnity Notice has the meaning set forth in Section 10.3(a).
 
Intellectual Property means, with respect to any Person, all patents, patent
rights, patent applications, registered trademarks and service marks, trademark
rights, trademark applications, service mark rights, service mark applications,
trade names, fictitious names, registered copyrights, copyright rights
(including, without limitation, computer programming code) and all intellectual,
industrial or proprietary rights and trade secrets, technology and know-how in
which such Person has an ownership or licensed interest, in each case together
with any amendments, modifications and supplements thereto.
 
Interim Financial Statements has the meaning set forth in Section 4.12(b).
 
Inventory means, with respect to any Person, all inventory incremental or
relating to, or used in connection with such Person's business including,
without limitation, all raw materials, parts, accessories, upgrades, supplies,
packaging materials, finished goods and vehicles.
 
IRS means the Internal Revenue Service or any successor organization thereto.
 
Knowledge means with respect to any representation, warranty or statement of any
party in this Agreement that is qualified by such party’s “Knowledge,” the
actual knowledge of such party, and (a) in the case of the Company, the actual
knowledge of the Material Owners; and (b) in the case of Purchaser, the actual
knowledge of Purchaser’s officers, directors and managers.
 
Leased Real Property means all real property leased to Company.
 
Legal Proceeding means any action, suit, arbitration, claim or investigation by
or before any Governmental or Regulatory Authority, any arbitration or
alternative dispute resolution panel, or any other legal, administrative or
other proceeding.
 
Material Contracts has the meaning set forth in Section 4.13(a).
 
Material Owners means Michael Ricciardi, David Godso and Marie Ricciardi.
 
Neutral Auditor has the meaning set forth in Section 3.2(b).

Note has the meaning set forth in Section 3.1(a).

Noticed Party has the meaning set forth in Section 10.3(a).

Obligations and Liabilities and words of similar import include, without
limitation, any direct or indirect indebtedness, guaranty, endorsement, claim,
loss, damage, deficiency, cost, expense, obligation or responsibility, fixed or
unfixed, known or unknown, asserted or unasserted, choate or inchoate,
liquidated or unliquidated, secured or unsecured.
 
Order means any judgment, order, writ, decree, injunction or other determination
whatsoever of any Governmental or Regulatory Authority or any other entity or
body whose finding, ruling or holding is legally binding or is enforceable as a
matter of right (in any case, whether preliminary or final).
 
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Owner Representative has the meaning set forth in Section 14.12.
 
Payment Factor means a fraction, the numerator of which equals the aggregate
number of Transferred Shares being sold under this Agreement by an Owner as set
forth on Schedule O and the denominator equals the aggregate number of
Transferred Shares being sold by all Owners under this Agreement as set forth on
Schedule O.
 
Permits means all licenses, permits, certificates of authority, authorizations,
approvals, registrations, franchises, rights, orders, qualifications and similar
rights or approvals granted or issued by any Governmental or Regulatory
Authority relating to the Business.
 
Person means any natural person, corporation, general partnership, limited
partnership, limited liability company, proprietorship, joint venture, trust,
association, union, entity, or other form of business organization or any
Governmental or Regulatory Authority whatsoever. 
 
Pledge Agreement has the meaning set forth in Section 3.4(c).
 
Property Leases means the leases for real property of a Person.
 
Purchase Price has the meaning set forth in Section 2.1.
 
Purchaser Equity has the meaning set forth in Section 5.4.
 
Purchaser Common Shares has the meaning set forth in Section 2.1.
 
Purchaser Preferred Shares has the meaning set forth in Section 2.1.
 
Purchaser Shares has the meaning set forth in Section 2.1.
 
Receivables means, with respect to any Person and as of any date of
determination, such Person's (a) trade accounts receivable for work performed,
(b) rights to receive payment from banks, credit card organizations, and credit
card transaction processing services, with respect to the sale of Inventory by
such Person prior to such date, (c) notes receivable, (d) receivables from
vendors, manufacturers and other suppliers of the such Person or such Person's
business, (e) receivables related to repairs made under warranty; and (e) other
miscellaneous receivables of such Person or such Person's business at such date.
 
Regulatory Approvals means all Consents from all Governmental or Regulatory
Authorities.
 
Requirement of Law means, with respect to any Person, any provision of law,
statute, treaty, rule, regulation, ordinance, executive order or pronouncement
having the effect of law, whether domestic or foreign, or any Order, whether
domestic or foreign, to which, in each case, such Person or any of such Person’s
properties, operations, business or assets is bound or subject.
 
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Restated Charter means Purchaser's certificate of incorporation, as amended,
including as amended by the Statement of Designations.
 
Resolution Period has the meaning set forth in Section 3.2(b)
 
Securities Act means the Securities Act of 1933 and the rules and regulations
promulgated thereunder, all as amended and supplemented from time to time.
 
Statement of Designations is the statement of designations to Purchaser's
certificate of incorporation, in the form attached hereto as Exhibit H, and that
sets forth the rights, preferences, privileges and restrictions of the Purchaser
Preferred Shares.
 
Subsidiary means, with respect to any Person, any Person of which securities or
other ownership interests having ordinary voting power to select a majority of
the board of directors or other persons serving similar functions are at the
time directly or indirectly owned by such Person.
 
Taxes means (a) any tax, charge, fee, levy or other assessment including,
without limitation, any net income, gross income, gross receipts, sales, use, ad
valorem, transfer, franchise, profits, payroll, employment, social security,
withholding, unemployment, excise, estimated, stamp, occupancy, occupation,
property or other similar taxes, including any interest or penalties thereon,
and additions to tax or additional amounts imposed by any federal, state, local
or foreign Governmental or Regulatory Authority, domestic or foreign (a
“Taxing Authority”) or (b) any liability for the payment of any taxes, interest,
penalty, addition to tax or like additional amount resulting from the
application of Treasury Regulation §1.1502-6 or comparable Requirement of Law.
 
Tax Returns means any declaration, return, report, estimate, information return,
schedule, statements or other document filed or required to be filed with or,
when none is required to be filed with a Taxing Authority, the statement or
other document issued by, a Taxing Authority.
 
Territory shall mean the United States of America.
 
Transaction Documents means this Agreement and all other agreements executed in
connection with this Agreement to effectuate the transaction contemplated
hereby.
 
Transferred Shares has the meaning set forth in Section 2.2.
 
Transfer Taxes means any applicable documentary, sales, use, stamp, filing,
registration, transfer and similar Taxes (including penalties and interest)
payable as a result of the conveyance of the Transferred Shares contemplated by
this Agreement.
 
Treasury Regulations means the regulations promulgated under the Code.
 
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ARTICLE 2
PURCHASE OF TRANSFERRED SHARES
 
2.1. Purchase and Sale of the Shares. Subject to the terms and conditions set
forth in this Agreement, and in reliance upon the representations and warranties
made by the Company and the Owners to Purchaser and made by Purchaser to the
Owners and Company in this Agreement, as of the Effective Time, the Owners shall
sell, transfer and assign to Purchaser, and Purchaser shall purchase and acquire
from the Owners free and clear of all Encumbrances except the Encumbrances set
forth in the Pledge Agreement in accordance with Section 3.4(c) below, one
hundred percent (100%) of Owners’ shares of the Company’s outstanding common
stock in exchange for the payment by Purchaser to Owners of Four Million Dollars
($4,000,000), 50,000,000 shares of common stock of Purchaser ("Purchaser Common
Shares"), 1,000,000 shares of Series B Convertible Preferred Stock of Purchaser,
having the rights, preferences, privileges and restrictions set forth in the
Statement of Designations ("Purchaser Preferred Shares," and collectively with
the Purchaser Common Shares, "Purchaser Shares") and the Earn-Out Payment, if
any, free and clear of all Encumbrances as adjusted pursuant to Sections 3.2 and
3.4 (the "Purchase Price"). The Purchase Price is payable in accordance with
Section 3.1.
 
2.2. Delivery. The shares of Company capital stock being purchased pursuant to
Section 2.1 are collectively referred to in this Agreement as the “Transferred
Shares.” Upon consummation of the Closing, all of the Transferred Shares shall
have been sold, transferred and conveyed to Purchaser without any further action
by or documentation from the Owners; provided, however, but subject to
Section 3.4(c) below, each of the Owners shall deliver to Purchaser a
certificate or certificates, registered in the name of such Owner, properly
endorsed, representing all of the Transferred Shares held by such Owner. 
 
ARTICLE 3
CONSIDERATION
 
3.1. Consideration and Payment. The Purchase Price for the Transferred Shares
shall be paid as follows:
 
(a) On the Closing Date, in exchange for the Transferred Shares, Purchaser shall
deliver to Owners (i) 44,166,667 Purchaser Common Shares free and clear of all
Encumbrances except as set forth in the Registration Rights Agreement, attached
hereto as Exhibit A, (ii) $3,150,000 in cash in immediately available funds,
minus the Cash Deposit if paid by Purchaser to Owners pursuant to Section 8.1
below, (iii) a promissory note (“Note”) in the principal amount of $500,000.00,
the form of which is attached hereto as Exhibit B, and (iv) 1,000,000 Purchaser
Preferred Shares free and clear of all Encumbrances except as set forth in the
Registration Rights Agreement ((i), (ii), (iii) and (iv), collectively, the
"Closing Payment") and shall also pay the Escrow Deposit to the Escrow Agent.
The Purchaser Shares shall be made tradable in accordance with the Registration
Rights Agreement, attached hereto as Exhibit A.
 
(b) On the Closing Date, Purchaser shall deliver to Company’s employees two
million (2,000,000) incentive stock options to purchase Purchaser Common Shares,
priced at the greater of: (i) the closing market price and (ii) the
volume-weighted average price per share for the fifteen (15) days prior to the
Closing Date.. The granting of the options shall be made pursuant to allocations
determined by the Owner Representative, and shall be approved by Purchaser,
approval not to be unreasonably withheld. The options will have a ten (10) year
term, shall vest equally each year in three (3) years and such vesting shall
accelerate if (i) such employee is terminated without Cause or without Good
Reason or (ii) upon a Change of Control of Purchaser.
 
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(c) Over a two (2) year period, beginning on the Closing Date, Purchaser shall
deliver to Company’s employees Five Hundred Thousand (500,000) incentive stock
options each year for a total of One Million (1,000,000) incentive stock options
to purchase Purchaser Common Shares, priced at the greater of: (i) the closing
market price and (ii) the volume-weighted average price per share for the
fifteen (15) days prior to the date of each such grant. The granting of the
options shall be made pursuant to allocations determined by the Owner
Representative, and shall be approved by Purchaser, approval not to be
unreasonably withheld. The options will have a ten (10) year term and shall vest
equally in each year in three (3) years and such vesting shall accelerate if
(i) such employee is terminated without Cause or without Good Reason or
(ii) upon a Change of Control of Purchaser.
 
3.2. Earn-Out.
 
(a) Calculation of Earn-Out Payment. As part of the Purchase Price for the
Transferred Shares, the Purchaser shall pay to the Owners up to One Million Five
Hundred Thousand Dollars ($1,500,000) in cash as an earn-out payment (the
“Earn-Out Payment”). One half of the Earn-Out Payment shall be payable to Owners
if the total amount of the EBITDA for the twelve-month period ending on the one
year anniversary of the Closing Date (the “Earn-Out Period”) is equal to or
greater than $2,250,000 but less than $2,500,000 and the entire Earn Out Payment
shall be payable to Owners if the total amount of the EBITDA for the Earn-Out
Period is equal to or exceeds $2,500,000. The Purchaser shall pay the Earn-Out
Payment to the Owners in cash in accordance with Section 3.2(b) below.
 
(b) Payment and Dispute Procedures. Within thirty (30) days of completion of
Purchaser's audit for 2007, but in no event later than April 30, 2008, the
Purchaser will deliver to the Owner Representative a notice (the “Earn-Out
Notice”) setting forth Purchaser’s determination of the EBITDA for the Earn-Out
Period and stating whether the Owners are entitled to the Earn-Out Payment, in
whole or in part. If the Earn-Out Notice provides that the Owners are entitled
to all or half of the Earn-Out Payment, the Purchaser shall make the applicable
Earn-Out Payment no later than thirty (30) days following delivery of the
Earn-Out Notice. If the Earn-Out Notice provides that Owners are not entitled to
any or only half of the Earn-Out Payment, and the Owner Representative disagrees
with Purchaser’s determination, the Owner Representative shall notify the
Purchaser no later than 30 days after the Earn-Out Notice is delivered of its
objections and the basis therefor. If an objection is made, the Purchaser and
the Owner Representative will negotiate in good faith to reach an agreement
regarding the matters in dispute. Purchaser agrees to provide the Owner
Representative promptly upon request with all documents and work papers related
to Purchaser's determination of EBITDA for the Earn-Out Period. If the Purchaser
and the Owner Representative, notwithstanding such good faith effort, fail to
resolve all matters in dispute within 30 days after the Owner Representative
advises the Purchaser of its objections (the "Resolution Period"), then any
remaining disputed matters will be submitted by the Purchaser and the Owner
Representative to Grant Thornton or another mutually acceptable independent
accounting firm (the “Neutral Auditor”) for a determination resolving such
amounts and issues. Each party agrees to execute, if requested by the Neutral
Auditor, a reasonable engagement letter with respect to the determination to be
made by the Neutral Auditor. All fees and expenses relating to the work, if any,
to be performed by the Neutral Auditor shall be borne by the party that does not
prevail in such dispute (i.e., if the Owners are awarded any portion of the Earn
Out Payment not already paid by Purchaser then such fees and expenses will be
borne by the Purchaser, and if it is finally determined that the Owners are not
owed any, or any additional Earn-Out Payment, then such fees and expenses shall
be borne by the Owners pro rata based on the Payment Factor). Except as provided
in the preceding sentence, all other costs and expenses incurred by the parties
in connection with resolving any dispute hereunder before the Neutral Auditor
shall be borne by the party incurring such cost and expense. The Neutral Auditor
shall determine only those issues still in dispute at the end of the Resolution
Period and the Neutral Auditor’s determination shall be based upon and
consistent with the terms and conditions of this Agreement. The determination by
the Neutral Auditor shall be based solely on presentations with respect to such
disputed items by the Purchaser and the Owner Representative to the Neutral
Auditor and not on the Neutral Auditor’s independent review. The Purchaser and
the Owner Representative shall use their reasonable best efforts to make their
respective presentations as promptly as practicable following submission to the
Neutral Auditor of the disputed items, and each such party shall be entitled, as
part of its presentation, to respond to the presentation of the other party and
any questions and requests of the Neutral Auditor. In deciding any matter, the
Neutral Auditor (i) shall be bound by the provisions of this Section 3.2(b) and
(ii) may not assign a value to any item greater than the greatest value for such
item claimed by either the Purchaser or the Owner Representative or less than
the smallest value for such item claimed by the Purchaser or the Owner
Representative. The Neutral Auditor’s determination shall be made within 45 days
after its engagement (which engagement shall be made no later than five (5)
Business Days after the end of the Resolution Period), or as soon thereafter as
possible, shall be set forth in a written statement delivered to the Purchaser
and the Owner Representative and shall be final, conclusive, non-appealable and
binding for all purposes hereunder; provided that such determination may be
reviewed, corrected or set aside by a court of competent jurisdiction but only
if upon a finding that the Neutral Auditor committed manifest error with respect
to its determination. The determination of the Neutral Auditor shall not be
deemed an award subject to review under the Federal Arbitration Act or any other
statute.
 
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(c) Covenants Regarding Earn-Out. After the Closing and until the end of the
Earn-Out Period:
 
(i) Purchaser shall, and shall cause the Company, to operate their respective
businesses in a manner reasonably consistent with past practices of Purchaser
and Company, as applicable, but taking into account the acquisition of the
Company by the Purchaser as a wholly-owned subsidiary of the Purchaser, changes
in the administrative operations of the Company as a result of such acquisition,
and other changes reasonably related to the Company being a wholly-owned
subsidiary of the Purchaser; provided, however, that Purchaser shall not cause
the Company to pay a management fee or other payment to Purchaser or any
Affiliate of Purchaser unless such amount is excluded from the computation of
EBITDA. The Purchaser shall, and shall cause the Company to, remain in material
compliance with all applicable Laws (including but not limited to the Federal
Acquisition Regulations) and shall not take any action with the purpose or
effect of causing Purchaser to not be required to pay the Earn-Out Payment to
Owners.
 
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(ii) In the event, that during the Earn-Out Period, the Purchaser or the Company
determines to sell, transfer, assign or otherwise dispose of (directly or
indirectly) any assets used primarily in the businesses of Company and Purchaser
(other than any of Purchaser's Affiliates, in which event the EBITDA arising
from such assets shall be allocated to Company and Purchaser for purposes of
calculating whether the targets described in Section 3.2(a) were achieved), or
consummate a Change of Control, then the Purchaser shall pay to the Owners in
cash the full Earn-Out Payment.
 
3.3. Form of Payments. 
 
(a) All payments of cash under this Agreement and the Note shall be made in
United Stated Dollars by delivery to the recipient by depositing, by bank wire
transfer, the required amount (in immediately available funds) in an account of
the recipient, which account shall be designated by the recipient in writing at
least three (3) Business Days prior to the date of the required payment and all
payments of Purchaser Stock shall be made by delivery of a certificate
representing the number of Purchaser Shares to be received by each Owner to the
address designated by each Owner on Schedule O. In the case of all payments to
be made to the Owners under this Agreement or the Escrow Agreement, either cash
or Purchaser Shares, each Owner shall receive an amount equal to the aggregate
payment multiplied by the Payment Factor.
 
(b) The Owner Representative has established a separate bank account for the
Cash and the cash portion of any payments to be made to the Owners under this
Agreement. Prior to the distribution of the Cash and the cash portion of any
payments to be made to the Owners under this Agreement, the Owner Representative
shall pay from such amounts the Company Expenses, with each Owner receiving an
amount equal to the balance multiplied by the Payment Factor.
 
3.4. Escrow.
 
(a) To secure the indemnification obligations of Owners set forth in Article 10,
Purchaser and each Owner shall at the Closing execute an Escrow Agreement, a
form of which is attached to this Agreement as Exhibit D (the “Escrow
Agreement”), which provides for Three Hundred and Fifty Thousand Dollars
($350,000) and 5,833,333 Purchaser Common Shares to be held in escrow following
the Closing Date (the "Escrow Deposit"). Any balance of the Escrow Deposit
remaining and due to the Owners in accordance with this Agreement and the Escrow
Agreement, plus any interest or income earned on such Escrow Deposit that has
not been so paid, by the date that is eighteen (18) months after the Closing
Date, less any amounts necessary to secure any timely asserted and pending but
unresolved Purchaser claims for indemnification pursuant to Article 10 shall be
paid to the Owners within thirty (30) days of the date that is eighteen (18)
months after the Closing Date (the "Escrow Balance"). Each Owner shall be paid
an amount equal to the Escrow Balance, multiplied by the Payment Factor.
 
(b) Each Owner's aggregate Closing Payment to be received at Closing shall be
reduced by the amount equal to the Escrow Deposit multiplied by the Payment
Factor. 
 
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(c) To secure the payment obligations of Purchaser under the Note, Purchaser and
each Owner shall at the Closing execute a Pledge Agreement, a form of which is
attached to this Agreement as Exhibit E (the “Pledge Agreement”), which provides
for 3,050 of the Transferred Shares to be delivered to Michael J. Stutman, Esq.,
of Shaiman, Drucker, Beckman, Sobel & Stutman, LLP, to be held in escrow
following the Closing Date until payment in full by Purchaser of the Note.
 

3.5. Options. As soon as practicable following the date of this Agreement, each
holder of Company options outstanding as of the date hereof shall have the
option to exercise such option in full (contingent upon the consummation of the
transactions contemplated hereunder) and join in this Agreement as an Owner
hereunder and Schedule O shall be updated accordingly. Each Company option shall
terminate to the extent not exercised prior to the Effective Time.
 
3.6. Other Company Shareholders. As soon as practicable following the date of
this Agreement, the Company will solicit the consent and joinder in this
Agreement as an Owner hereunder of Thomas Aylesworth, Darrell Berger, Markus
Litscher and Lino Ricciardi and Schedule O shall be updated accordingly.
 
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF
THE COMPANY AND THE OWNERS
 
The Company and the Owners hereby jointly and severally represent and warrant to
Purchaser as of the date of this Agreement and as of the Closing Date except to
the extent that a representation, warranty or disclosure schedule expressly
states that such representation or warranty, or information in such disclosure
schedule, is current only as the date of this Agreement or of an earlier date as
follows:
 
4.1. Capacity. Each Owner has full capacity to execute and deliver this
Agreement and the Transaction Documents to be executed and delivered by such
Owner and to perform such Owner’s obligations under this Agreement and such
Transaction Documents to which such Owner is a party. The Agreement and the
Transaction Documents to which it is a party have been duly executed and
delivered by or on behalf of each Owner and constitute the legal, valid and
binding obligation of each Owner, enforceable against such Owner in accordance
with their terms except as enforceability may be limited by bankruptcy,
insolvency or other laws affecting creditors’ rights generally and the exercise
of judicial discretion in accordance with general equitable principles.
 
4.2. Noncontravention by the Owners. Except as set forth on Schedule 4.2 hereto,
the execution, delivery and performance of this Agreement and the Transaction
Documents by each of the Owners, and the consummation of the transactions
contemplated by this Agreement and the Transaction Documents by the Owners do
not (a) require any action by or in respect of, or filing with, any Governmental
or Regulatory Authority, (b) contravene, violate or constitute a breach or
default under, any Requirement of Law applicable to the Owners, or (c) result in
the creation of any Encumbrance on the Transferred Shares or any of the assets
of the Company.
 
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4.3. Organization; Qualification; Good Standing.
 
(a) The Company (i) is a corporation duly organized, validly existing and in
good standing under the laws of the Commonwealth of Virginia, (ii) has the power
and authority to own and operate its properties and assets and to transact its
business as currently conducted, and (iii) is duly qualified and authorized to
do business and is in good standing in all jurisdictions where such
qualification is required by Requirement of Law, which jurisdictions are listed
on Schedule 4.3(a), except for those jurisdictions in which failure to do so
would not have a Company Material Adverse Effect.
 
(b) There is no Legal Proceeding or Order pending or, to the Knowledge of the
Company, threatened against or affecting the Company revoking, limiting or
curtailing, or seeking to revoke, limit or curtail the Company’s power,
authority or qualification to own, lease or operate its properties or assets or
to transact the Business.
 
4.4. Authority; Binding Agreement. The execution, delivery and performance of
this Agreement and the Transaction Documents to which it is a party by the
Company have been duly authorized by all requisite action on the part of the
Company, and have been duly executed and delivered by or on behalf of the
Company and constitute the legal, valid and binding obligation of the Company,
enforceable against the Company in accordance with their terms, except as
enforceability may be limited by bankruptcy, insolvency or other laws affecting
creditors’ rights generally and the exercise of judicial discretion in
accordance with general equitable principles.
 
4.5. Noncontravention by Company. Except as set forth on Schedule 4.5, the
execution, delivery and performance of this Agreement and the other Transaction
Documents and the consummation of the transactions contemplated by this
Agreement and the Transaction Documents by the Company and the Owners do not,
with respect to the Company: (a) require any action by or in respect of, or
filing with, any Governmental or Regulatory Authority, (b) contravene, violate
or constitute a breach or default under any Requirement of Law applicable to the
Company or the Company’s properties or any Material Contract to which the
Company or the Company’s properties is bound or subject, (c) contravene, violate
or constitute, whether with or without the passage of time or the giving of
notice or both, a breach or default under, the Company’s certificate of
incorporation, bylaws or other governing documents, or any material Requirement
of Law applicable to the Company or any of its properties or any Material
Contract to which the Company or any of its properties is bound or subject, or
(d) other than as provided under the Transaction Documents, result in the
creation of any Encumbrance on the Company’s assets.
 
4.6. Capitalization.
 
The Owners are the beneficial and record owners of the Transferred Shares. All
of the issued and outstanding shares of capital stock of the Company are validly
issued, fully paid and non-assessable and have not been issued in violation of
any preemptive rights or other rights to subscribe for, purchase or otherwise
acquire securities. Except as set forth on Schedule 4.6(a), there are no
outstanding subscriptions, warrants, options, rights, agreements, convertible
securities or other commitments or instruments pursuant to which either Company
is or may become obligated to issue or sell shares of its capital stock.
 
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4.7. Title. Except as set forth in Schedule 4.7, Company is the sole and
exclusive owner of, and has good and marketable title to, all of the Company’s
assets, wherever located, free and clear of all Encumbrances of any kind or
nature whatsoever.
 
4.8. Legal Proceedings.
 
(a) Owners. There is no Legal Proceeding or Order pending against or, to the
Knowledge of the Company, threatened against or affecting, either of the Owners
or any of their respective properties or otherwise, that could adversely affect
or restrict the ability of the Owners to consummate fully the transactions
contemplated by this Agreement or that in any manner could draw into question
the validity of this Agreement.
 
4.9. Compliance with Laws. To the Company's Knowledge, Company at all times
since its incorporation has been operating, in all material respects, in
compliance with all Requirements of Law applicable to it or any of its
properties or to which it or its properties is bound or subject. The Company has
not received any written notice from any Person concerning alleged violations
of, or the occurrence of any events or conditions resulting in alleged
noncompliance with, any Requirement of Law applicable to the Company or any of
its properties are bound or subject. Neither the Company, nor, in connection
with the conduct at the Business, the Owners or any of their respective
Affiliates has made any illegal kickback, bribe, gift or political contribution
to or on behalf of any customer, or to any officer, director, employee of any
customer, or to any other Person.
 
4.10. Labor/Employee Matters.
 
(a) Schedule 4.10(a) attached hereto is a complete and accurate list of all
consulting or similar Contracts to which the Company is a party or may otherwise
be bound or subject, and the compensation to which each consultant is entitled
under its respective Contract. The Company delivered or caused to be delivered
to Purchaser true and complete copies of all such Contracts. No individuals
retained by the Company as an independent contractor or consultant would be
reclassified by the IRS, the U.S. Department of Labor or any other Governmental
or Regulatory Authority as an employee of the Company for any purpose
whatsoever.
 
(b) Schedule 4.10(b) hereto is a complete and accurate list of the name of each
employee of the Company, together with such employee’s current position or
function, the current rate of hourly, monthly or annual compensation (as the
case may be), and any compensation increase and bonuses since December 31, 2005,
none of which are outside of the ordinary course of business or inconsistent
with the normal course of business or past practices of Company.
Schedule 4.10(b) also identifies those employees with whom the Company has
entered into an employment Contract limiting, restricting or qualifying the
Company’s right to alter the terms and conditions of employment and terminate
employment at the Company’s will or a Contract obligating the Company to pay
severance or similar payments to any employee upon termination of employment for
any reason. Company has delivered to Purchaser true and complete copies of the
Contracts identified on Schedule 4.10(b).
 
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(c) To Company's Knowledge, there are no threatened or contemplated attempts to
organize for collective bargaining purposes any of the employees of, or other
Persons engaged by, the Company. The Company is not a party to or bound by any
collective bargaining agreement or similar Contract and no collective bargaining
agreement or similar Contract covering any of the Company’s employees or other
Persons engaged by Company is currently being negotiated.
 
(d) To the Knowledge of the Company, no employee of the Company is a party to
any Contract with any Person who is a former employer of such employee (other
than the Company), which Contract would limit or restrict the ability of such
employee to perform his or her duties for Purchaser in the ordinary course of
business.
 
(e) The Company has complied in all material respects with all applicable
Requirements of Law relating to the employment of its employees. The Company has
not received written notice of the intent of any Governmental or Regulatory
Authority responsible for the enforcement of Requirements of Law relating to
labor or employment matters to conduct an investigation with respect to or
relating to the Company and, to the Company's Knowledge, no such investigation
is in progress.
 
(f) The Company has taken commercially reasonable precautions to prevent
disclosure of its confidential and/or trade secret information.
 
4.11. Employee Benefit Plans.
 
(a) Schedule 4.11(a) hereto sets forth a complete and accurate list of the
Employee Benefit Plans. With respect to each Employee Benefit Plan, the Company
has made available to Purchaser true and complete copies of (i) the plan
document, trust agreement and any other document (including amendments thereto)
governing such Employee Benefit Plan, (ii) the summary plan description, (iii)
all Form 5500 annual reports and attachments filed within the past three years,
and (iv) the most recent IRS determination letter, if any, for such Employee
Benefit Plan.
 
(b) Each of the Employee Benefit Plans complies in form and has been operated
and administered in material compliance with their respective terms and all
applicable Requirements of Law including, without limitation, ERISA and the
Code.
 
(c) No Employee Benefit Plan (except statutory rights under COBRA) provides post
retirement medical benefits, post retirement death benefits or any post
retirement welfare benefits of any kind whatsoever.
 
(d) The Company has not, and will not, make or cause to be made to any current
employee, and there has not been made to any former employee of the Company, any
payment in the form of wages or other consideration pursuant to any employment
agreement or Employee Benefit Plan that was as of the Effective Time in the
aggregate an “excess parachute payment” (within the meaning of Section 280G(b)
of the Code) as a consequence in whole or in part of this Agreement, or
thereafter, as a consequence of any change in the ownership or effective control
of the Company or any change in the ownership of a substantial portion of the
Company’s assets.
 
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(e) The Company has not maintained and does not maintain any self-insured
health, medical, dental or similar plans except as set forth in Schedule 4.11(e)
hereto, and the Company has no, and will not have any, liabilities under such
fully or partially self-insured plans for any periods prior to the Effective
Time.
 
4.12. Financial Statements.
 
(a) True and correct copies of the Company’s balance sheets as of March 31,
2004, 2005 and 2006 and the related statements of operations, for the years then
ended, together with all proper exhibits, schedules and notes thereto
(collectively, the “Historical Financial Statements”) will be made available.
 
(b) True and correct copies of the Company’s internally prepared, unaudited
financial statements of the Company for each of the months April 2006 through
August 2006, consisting of a balance sheet and the related statements of
operations and cash flows (collectively, the “Interim Financial Statements”)
will be made available.
 
(c) Except as disclosed in the Interim Financial Statements or in
Schedule 4.12(c) hereto, since August 30, 2006:
 
(i) the Company has operated in the normal and ordinary course in a manner
consistent with past practices;
 
(ii) to the Company’s Knowledge, there has been no development, event,
condition, or circumstance that has had or could have a Company Material Adverse
Effect;
 
(iii) there has not been any change in the accounting methods or practices
followed by Company;
 
(iv) the Company has not sustained any material damage, destruction, theft, loss
or interference with the Company’s assets or its businesses, whether or not
covered by insurance;
 
(v) no development, event, condition or circumstance that constitutes, whether
with or without the passage of time or the giving of notice or both, a default
under any of the Company’s outstanding debt obligations has occurred;
 
(vi) the Company has not created, incurred, assumed or guaranteed any
indebtedness (except for the endorsement of negotiable instruments for deposit
or collection or similar transactions in the normal and ordinary course of
business or disclosed) other than for trade indebtedness incurred in the normal
and ordinary course of business;
 
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(vii) the Company has paid and discharged diligently, in accordance with past
practice and not less than on a timely basis, all of the Company’s payables and
other Obligations and Liabilities including, without limitation, all accrued
obligations to pay management or similar fees to any Person;
 
(viii) the Company has not entered into any Contract outside of the ordinary
course of business which involves either (A) a commitment of any of the
Company’s assets or the incurrence by the Company of liabilities in any one
transaction or series of related transactions in excess of $10,000, or (B)
involve a term of more than six (6) months;
 
(ix) the Company has not sold, leased, exchanged, transferred or otherwise
disposed of, or agreed to sell, lease, exchange, transfer or otherwise dispose
of, the Company’s assets with an individual fair market value of $10,000 or
more, except for the disposition of obsolete or worn-out equipment, or the sale
of Inventory, in the normal and ordinary course of business; and
 
(d) Except as set forth on Schedule 4.12(d), the Leased Real Property is
suitable to carry out the Business as conducted and intended to be conducted
thereon, adequately serviced by all utilities and services necessary for the
conduct of the Business, and, to the Company’s Knowledge, in compliance with all
applicable laws, rules and regulations.
 
(e) There are no condemnation, appropriation or other proceedings involving any
taking of the Leased Real Property pending, or to the Knowledge of the Company,
threatened, against any of the Leased Real Property.
 
(f) Except as set forth on Schedule 4.12(f), the current use of the Leased Real
Property is a permitted under the existing zoning and other laws, rules and
regulations.
 
(g) Each Property Lease (i) is in full force and effect, (ii) affords the
Company exclusive possession of the applicable Leased Real Property, and (iii)
constitutes a valid and binding obligation of, and is enforceable in accordance
with its terms against, the respective parties thereto, except as enforceability
may be limited by bankruptcy, insolvency or other laws affecting creditors’
rights generally and the exercise of judicial discretion in accordance with
general equitable principles. Notwithstanding the generality of the foregoing,
the Company has the current right under the Property Leases to the exclusive and
peaceful possession of the Leased Real Property and their use in the Business in
accordance with the terms and conditions of the applicable Property Lease.
 
4.13. Contracts.
 
(a) Schedule 4.13(a) is a complete and accurate list of each Contract, other
than such Contracts described on other Company disclosure schedules hereto,
described below to which the Company or any of its properties is party or is
otherwise bound or subject (each, a “Material Contract”):
 
(i) all Contracts relating to the performance of services or the sale of
products by the Company;
 
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(ii) all Contracts relating to the acquisition or the divestiture of fixed
assets, including intangible assets, physical fixed assets (with the exception
of real estate and real estate-like rights) and financial assets;
 
(iii) the Property Leases and all other lease or rental Contracts (whether for
real or personal property);
 
(iv) all Contracts that provide a license of Intellectual Property entered into
by the Company, whether as licensor or licensee, other than licenses to use
software available over the counter;
 
(v) all employment Contracts and all Contracts with advisors or consultants to
the extent that they involve annual payments exceeding $10,000;
 
(vi) all Contracts relating to fringe benefits, profit sharing, commissions, or
bonuses as well as similar agreements;
 
(vii) all Contracts that purport to or have the effect of limiting the Company’s
right to engage in, or compete with any Person in any business; and
 
(viii) all Contracts which have been entered into or assumed outside the
ordinary course of the Business.
 
4.14. Insurance. Schedule 4.14 hereto is a complete and accurate list of all
insurance policies held by the Company identifying all of the following for each
such policy: (a) the type of insurance; (b) the insurer; (c) the policy number;
(d) the applicable policy limits, (e) the applicable periodic premium; and (f)
the expiration date. Each such insurance policy is valid and binding and is and
has been in effect since the date of its issuance. All premiums due thereunder
have been paid or will be paid in the ordinary course of business, and neither
the Company nor either of the Owners has received any notice of any
cancellation, non-renewal or termination in respect of any such policy. The
Company is not in default under any such policy. To the Knowledge of the
Company, no such insurer is the subject of insolvency proceedings. The Company
has not received written notice that any insurer under any policy referred to in
this Section 4.14 is denying liability with respect to a claim thereunder or
defending under a reservation of rights clause. The Company has notified its
insurance carriers of all litigation, claims and facts which could reasonably
give rise to a claim, all of which are disclosed in Schedule 4.14.
 
4.15. Intellectual Property.
 
(a) Schedule 4.15(a) hereto is a complete and accurate list of all of the
Company’s registered patents, patent applications, copyright registrations,
copyright applications, trademark registrations and trademark applications, both
domestic and foreign, together with the: (i) applicable registration number;
(ii) filing, registration, issue or application date; (iii) record owner; (iv)
country; and (v) title or description.
 
(b) There is neither pending, nor to the Company’s Knowledge, threatened, any
Legal Proceeding against the Company contesting the validity or right of the
Company to register or use any of it's Intellectual Property, and the Company
has not received any written notice of infringement upon or conflict with any
asserted right of others nor, to the Company’s Knowledge, is there a valid basis
for such a notice.
 
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(c) Except as otherwise provided in the applicable Contracts that provide a
license of Intellectual Property identified as such in Schedule 4.15(a), the
Company has no obligation to compensate others for the use of any Intellectual
Property. In addition, except as otherwise provided on Schedule 4.15(a), the
Company has not granted to any other Person any license or other right to use,
in any manner, any of the Intellectual Property used by the Company in
connection with the Business, whether or not requiring the payment of royalties.
 
4.16. Taxes and Tax Returns. 
 
(a) The Company has duly and timely filed all Tax Returns required to be filed
by the Company. Each such Tax Return was true, correct and complete. The Company
has paid in full all Taxes due and payable, or asserted or claimed to be due and
payable by any Tax Authority from the Company, whether or not shown on any Tax
Return.
 
(b) The Company has complied with all applicable Requirements of Law relating to
the payment and withholding of Taxes (including, without limitation, withholding
of Taxes pursuant to Sections 1441 and 1442 of the Code, or similar provisions
under any foreign Requirements of Law) and has, within the time and in the
manner prescribed by applicable Requirements of Law, withheld from employee
wages and paid over, in a timely manner, to the proper Taxing Authorities all
amounts required to be so withheld and paid over under applicable Requirements
of Law.
 
(c) No deficiency for any Taxes has been proposed, asserted or assessed against
the Company that has not been resolved and paid in full or fully reserved for
and identified on the Company’s balance sheet included in the Interim Financial
Statements. The Company has not received any outstanding and unresolved written
notices from the IRS or any other Taxing Authority of any proposed examination
or of any proposed change in reported information relating to the Company.
Except as set forth in Schedule 4.16 attached hereto (which sets forth the
nature of the proceeding, the type of Tax Return, the deficiencies proposed or
assessed and the amount thereof, and the taxable year in question), no Legal
Proceeding or audit or similar foreign proceedings is pending with regard to the
Company’s Taxes or Tax Returns.
 
(d) No waiver, extension or comparable consent given by the Company regarding
the application of the statute of limitations with respect to any Taxes or Tax
Returns is outstanding, nor, to the Knowledge of the Company, is any request for
any such waiver, extension or consent pending.
 
(e) There are no Encumbrances of any kind for Taxes upon any of the Company’s
assets or properties other than for those Encumbrances for Taxes not yet due and
payable.
 
(f) The Company has not requested any extension of time within which to file any
Tax Return, which Tax Return has not since been filed.
 
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(g) The Company is not a party to any Contract providing for the allocation or
sharing of Taxes. The Company has not filed a consent under Section 341(f) of
the Code.
 
(h) The Company has not agreed to make, nor is it required to make, any
adjustment under Section 481(a) of the Code for any period ending after the
Effective Time by reason of a change in accounting method or otherwise and the
Company does not have any Knowledge that the IRS has proposed such adjustment or
change in accounting method.
 
(i) None of Company’s assets or properties is required to be treated as owned by
any other person pursuant to the “safe harbor lease” provisions of former
Section 168(f)(8) of the Code.
 
(j) The Company has no permanent establishment located in any tax jurisdiction
other than the United States, and is not liable for the payment of Taxes levied
by any jurisdiction located outside the United States.
 
(k) To the Company’s Knowledge, no state of facts exists or has existed that
would constitute grounds for the assessment of Tax liability with respect to
periods that have not been audited by the IRS or any other Taxing Authority.
 
(l) The unpaid Taxes of the Company (i) did not, as of March 31, 2006, exceed
the reserve for Tax liability (rather than any reserve for deferred Taxes) on
the most recent balance sheet included in the Interim Financial Statements, and
(ii) will not exceed the reserve as adjusted for the passage of time through the
Effective Time.
 
(m) All transactions that could give rise to an understatement of federal income
tax (within the meaning of Section 6662 of the Code) have been adequately
disclosed on the Company’s Tax Returns in accordance with Section 6662(d)(2)(B)
of the Code.
 
(n) No indebtedness of the Company is “corporate acquisition indebtedness”
within the meaning of Section 279(b) of the Code.
 
(o) The Company has no liability for the Taxes of any Person (other than the
Company) under Treasury Regulation Section 1.1502-6 (or any similar provision of
state, local or foreign law) as a transferee or successor, by Contract, or
otherwise.
 
4.17. Accounts. Schedule 4.17 herein completely and accurately states the names
and addresses of each bank, financial institution, fund, investment or money
manager brokerage house and similar institution in which the Company maintains
any account (whether checking, savings, investment, trust or otherwise), lock
box, or safe deposit box, and the account numbers and name of the persons having
authority to affect transactions with respect thereto or other access thereto. 
 
4.18. Receivables. Schedule 4.18 is a schedule of Company’s Receivables, updated
as of the Closing Date. Assuming reasonable commercial efforts by Purchaser to
collect such Company Receivables and Purchaser’s compliance with all applicable
contract terms with respect to each such Company Receivables. Except as set
forth on Schedule 4.18, the Company has not written-off any Company Receivables
since June 30, 2006. The Company Receivables arose from bona fide transactions
in the normal and ordinary course of the Business and reflect credit terms
consistent with the Company’s past practice. Assuming reasonable commercial
efforts by Purchaser to collect such Company Receivables and Purchaser’s
compliance with all applicable contract terms with respect to each such Company
Receivable, the Company Receivables will be collectible in accordance with their
terms in the aggregate amount shown, less any allowances for doubtful accounts
reflected therein, calculated in a manner consistent with the allowance
reflected in the Interim Financial Statements.
 
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4.19. Inventory. All Inventory reflected on the Company’s most recent balance
sheet in the Interim Financial Statements delivered to Purchaser and in the
Company’s Books and Records (a) was purchased or acquired and is maintained in
the normal and ordinary course of the Business, (b) has been reflected on such
Books and Records at a value equal to the wholesale market value thereof as of
the date of purchase.
 
4.20. Prepayment of Indebtedness. Except as set forth on Schedule 4.20, all
Obligations and Liabilities of the Company with respect to any outstanding
Indebtedness or other obligations may be prepaid by the Company at any time,
without any interest (other than accrued or unpaid interest on outstanding
principal at the non-default interest rate provided for in the Contract
governing such indebtedness or obligations), charge, penalty, premium, fee or
other amount.
 
4.21. No Other Agreements to Sell. Neither the Company nor any of the Owners has
granted, and there is not outstanding any option, right, agreement, Contract or
other obligation or commitment pursuant to which any other Person could claim a
right to acquire in any way any ownership or other material interest in the
Company or any of the Transferred Shares.
 
4.22. Directors and Officers. Schedule 4.22 hereto sets forth an accurate and
complete list of the Company’s directors and officers.
 
4.23. Disclosure Generally. The representations, warranties and disclosures
contained in this Article 4, as modified by the disclosure schedules to this
Article 4, do not contain any untrue statement of material fact or omit to state
any material fact necessary in order to make any such representations,
warranties or disclosures, in light of the circumstances in which they were
made, not misleading.
 
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ARTICLE 5
REPRESENTATIONS AND WARRANTIES OF PURCHASER
 
The Purchaser represents and warrants to the Company and the Owners as of the
date of this Agreement and as of the Closing Date except to the extent that a
representation, warranty or disclosure schedule expressly states that such
representation or warranty, or information in such disclosure schedule, is
current only as the date of this Agreement or of an earlier date as follows:
 
5.1. Organization.
 
(a) Purchaser i) is a corporation duly incorporated, validly existing and in
good standing under the laws of the State of Delaware, ii) has the corporate
power and authority to own and operate its properties and assets and to transact
its business as currently conducted, and iii) is duly qualified and authorized
to do business and is in good standing in all jurisdictions where the failure to
be duly qualified, authorized and in good standing would have a material adverse
effect upon Purchaser’s businesses, prospects, operations, results of
operations, assets, liabilities or condition (financial or otherwise).
 
(b) There is no Legal Proceeding or Order pending or, to the Knowledge of
Purchaser, threatened against or affecting Purchaser revoking, limiting or
curtailing, or seeking to revoke, limit or curtail Purchaser’s power, authority
or qualification to own, lease or operate its properties or assets or to
transact its business.
 
5.2. Authority; Binding Agreement. The execution, delivery and performance of
this Agreement and the Transaction Documents by the Purchaser have been duly
authorized by all requisite action on the part of the Purchaser, and have been
duly executed and delivered by or on behalf of the Purchaser and constitute the
legal, valid and binding obligation of the Purchaser, enforceable against the
Purchaser in accordance with their terms except as enforceability may be limited
by bankruptcy, insolvency or other laws affecting creditors’ rights generally
and the exercise of judicial discretion in accordance with general equitable
principles.
 
5.3. Noncontravention by Purchaser. Except as set forth on Schedule 5.3, the
execution, delivery and performance of this Agreement and the other Transaction
Documents and the consummation of the transactions contemplated by this
Agreement and the Transaction Documents by the Purchaser do not: (a) require any
action by or in respect of, or filing with, any Governmental or Regulatory
Authority, (b) contravene, violate or constitute a breach or default under any
Requirement of Law applicable to the Purchaser or the Purchaser's properties or
any Purchaser Material Contract to which the Purchaser or the Purchaser’s
properties is bound or subject, (c) contravene, violate or constitute, whether
with or without the passage of time or the giving of notice or both, a breach or
default under, the Purchaser’s certificate of incorporation, bylaws or other
governing documents, or any material Requirement of Law applicable to the
Purchaser or any of its properties or any Purchaser Material Contract to which
the Purchaser or any of its properties is bound or subject, or (d) other than as
provided under the Transaction Documents, result in the creation of any
Encumbrance on the Purchaser’s assets.
 
5.4. Capitalization.
 
(a) The outstanding capital stock of Purchaser prior to Closing consists of
113,980,767 Purchaser Common Shares, no Purchaser Preferred Shares and no other
series or class of Purchaser preferred stock. Schedule 5.4 sets forth, as of the
date hereof, all of the issued and outstanding capital stock, by class and/or
series, and all issued and outstanding options and warrants to purchase capital
stock of Purchaser (collectively, "Purchaser Equity") and the owners of record
of such Purchaser Equity. Except as set forth on Schedule 5.4, there are no
outstanding or authorized stock appreciation, phantom stock or similar rights
with respect to Purchaser, nor are there any voting trusts, proxies, shareholder
agreements or any other agreements or understandings with respect to the voting
of the Purchaser Equity. Except as set forth on Schedule 5.4, there are no
options, warrants or other rights to subscribe for or purchase any capital stock
or other equity interests of Company or securities convertible into or
exchangeable for, or that otherwise confer on the holder any right to acquire
any Purchaser Equity, or preemptive rights or rights of first refusal or first
offer nor are there any contracts, commitments, agreements, understandings,
arrangements or restrictions to which Purchaser is a party or by which Purchaser
is bound relating to any shares of Purchaser Equity, whether or not outstanding.
 
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(b) All issued and outstanding shares of Parent have been duly authorized and
validly issued, are fully paid and nonassessable, and were issued in compliance
with all applicable Requirements of Law concerning the issuance of securities.
The Purchaser Shares to be issued to the Owners pursuant to this Agreement, and
the shares of common stock issuable upon conversion of the Purchaser Preferred
Shares (the "Conversion Shares") will be upon issuance or conversion, as the
case may be, duly authorized, validly issued, fully paid and nonassessable, free
and clear of all Encumbrances, and not subject to or issued in violation of any
purchase option, call option, right of first refusal, preemptive right,
subscription right or any similar right under any Requirement of Law or
Purchaser's certificate of incorporation, as amended.
 
(c) The rights, preferences, privileges and restrictions of the Purchaser Shares
and Conversion Shares are as stated in the Restated Charter. The Purchaser
Preferred Shares are convertible into common stock of Purchaser on a one (1) for
eight and one-thirds (8 1/3) basis as of the date hereof and the consummation of
the transactions contemplated hereunder will not result in any anti-dilution
adjustment or other similar adjustment to the outstanding shares of preferred
stock of Purchaser. The Conversion Shares have been duly and validly reserved
for issuance.
 
5.5. Title. Except as set forth in Schedule 5.5, Purchaser is the sole and
exclusive owner of, and has good and marketable title to, all of the Purchaser’s
assets, wherever located, free and clear of all Encumbrances of any kind or
nature whatsoever.
 
5.6. Legal Proceedings.
 
There is no Legal Proceeding or Order pending against or, to the Knowledge of
Purchaser, threatened against or affecting, Purchaser or its Affiliates, or any
of their respective properties or otherwise, that could adversely affect or
restrict the ability of Purchaser to consummate fully the transactions
contemplated by this Agreement or that in any manner could draw into question
the validity of this Agreement.
 
5.7. Compliance with Laws. To the Purchaser’s Knowledge, Purchaser and its
Affiliates at all times since their respective incorporation has been operating,
in all material respects, in compliance with all Requirements of Law applicable
to it or any of its properties or to which it or its properties is bound or
subject. Neither Purchaser nor any of its Affiliates has received any written
notice from any Person concerning alleged violations of, or the occurrence of
any events or conditions resulting in alleged noncompliance with, any
Requirement of Law applicable to the Purchaser or any of its Affiliates or any
of their respective properties are bound or subject. Neither the Purchaser nor
any of its Affiliates has made any illegal kickback, bribe, gift or political
contribution to or on behalf of any customer, or to any officer, director,
employee of any customer, or to any other Person.
 
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5.8. Taxes and Tax Returns.
 
(a)  The Purchaser has duly and timely filed all Tax Returns required to be
filed by the Purchaser. Each such Tax Return was true, correct and complete. The
Purchaser has paid in full all Taxes due and payable, or asserted or claimed to
be due and payable by any Tax Authority from the Purchaser, whether or not shown
on any Tax Return.
 
(b) The Purchaser has complied with all applicable Requirements of Law relating
to the payment and withholding of Taxes (including, without limitation,
withholding of Taxes pursuant to Sections 1441 and 1442 of the Code, or similar
provisions under any foreign Requirements of Law) and has, within the time and
in the manner prescribed by applicable Requirements of Law, withheld from
employee wages and paid over, in a timely manner, to the proper Taxing
Authorities all amounts required to be so withheld and paid over under
applicable Requirements of Law.
 
(c) No deficiency for any Taxes has been proposed, asserted or assessed against
the Purchaser that has not been resolved and paid in full or fully reserved for
and identified on the Purchaser’s balance sheet included in the Purchaser
Interim Financial Statements. The Purchaser has not received any outstanding and
unresolved written notices from the IRS or any other Taxing Authority of any
proposed examination or of any proposed change in reported information relating
to the Purchaser. Except as set forth in Schedule 5.14 attached hereto (which
sets forth the nature of the proceeding, the type of Tax Return, the
deficiencies proposed or assessed and the amount thereof, and the taxable year
in question), no Legal Proceeding or audit or similar foreign proceedings is
pending with regard to the Purchaser’s Taxes or Tax Returns.
 
(d) No waiver, extension or comparable consent given by the Purchaser regarding
the application of the statute of limitations with respect to any Taxes or Tax
Returns is outstanding, nor, to the Knowledge of the Purchaser, is any request
for any such waiver, extension or consent pending.
 
(e) There are no Encumbrances of any kind for Taxes upon any of the Purchaser’s
assets or properties other than for those Encumbrances for Taxes not yet due and
payable.
 
(f) The Purchaser has not requested any extension of time within which to file
any Tax Return, which Tax Return has not since been filed.
 
(g) The Purchaser is not a party to any Contract providing for the allocation or
sharing of Taxes. The Purchaser has not filed a consent under Section 341(f) of
the Code.
 
(h) The Purchaser has not agreed to make, nor is it required to make, any
adjustment under Section 481(a) of the Code for any period ending after the
Effective Time by reason of a change in accounting method or otherwise and the
Purchaser does not have any Knowledge that the IRS has proposed such adjustment
or change in accounting method.
 
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(i) None of Purchaser’s assets or properties is required to be treated as owned
by any other person pursuant to the “safe harbor lease” provisions of former
Section 168(f)(8) of the Code.
 
(j) The Purchaser has no permanent establishment located in any tax jurisdiction
other than the United States, and is not liable for the payment of Taxes levied
by any jurisdiction located outside the United States.
 
(k) To the Purchaser’s Knowledge, no state of facts exists or has existed that
would constitute grounds for the assessment of Tax liability with respect to
periods that have not been audited by the IRS or any other Taxing Authority.
 
(l) The unpaid Taxes of the Purchaser (i) did not, as of June 30, 2006, exceed
the reserve for Tax liability (rather than any reserve for deferred Taxes) on
the most recent balance sheet included in the Interim Financial Statements, and
(ii) will not exceed the reserve as adjusted for the passage of time through the
Effective Time.
 
(m) All transactions that could give rise to an understatement of federal income
tax (within the meaning of Section 6662 of the Code) have been adequately
disclosed on the Purchaser’s Tax Returns in accordance with
Section 6662(d)(2)(B) of the Code.
 
(n) No indebtedness of the Purchaser is “corporate acquisition indebtedness”
within the meaning of Section 279(b) of the Code.
 
(o) The Purchaser has no liability for the Taxes of any Person (other than the
Purchaser) under Treasury Regulation Section 1.1502-6 (or any similar provision
of state, local or foreign law) as a transferee or successor, by Contract, or
otherwise.
 
5.9. Regulatory Filings. The Purchaser has filed timely all registrations,
filings, reports, and submissions that are required by any Requirement of Law.
All such registrations, filings, reports and submissions were made in accordance
with applicable Requirements of Law when filed and all information contained in
such registrations, filings, reports and submissions was true and complete when
made. Since the date of any such filing, there has been no development, event,
condition or circumstance that would require the Purchaser to amend or
supplement any such registration, filing, report or submission or otherwise make
any additional registration, filing, report or submission. To Purchaser's
Knowledge, no deficiencies have been asserted by any Governmental or Regulatory
Authority with respect to any such registrations, filings, reports and
submissions that have not been finally resolved.
 
5.10. Inventory.  All Inventory reflected on the Purchaser's most recent balance
sheet in the Purchaser Interim Financial Statements delivered to Company and in
the Purchaser's Books and Records (a) was purchased or acquired and is
maintained in the normal and ordinary course of Purchaser's business, (b) has
been reflected on such Books and Records at a value equal to the wholesale
market value thereof as of the date of purchase.
 
5.11. Product Liability. The Purchaser has no liability (and, to the Purchaser’s
Knowledge, there is no basis for any present or future Legal Proceeding or Order
against the Purchaser giving rise to any liability) arising out of any injury to
individuals or property as a result of the ownership, possession or use of any
product sold or delivered by the Purchaser or its Affiliates.
 
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5.12. No Other Agreements to Sell. Except as set forth on Schedule 5.12, Neither
the Purchaser nor any Affiliate has granted, and there is not outstanding any
option, right, agreement, Contract or other obligation or commitment pursuant to
which any other Person could claim a right to acquire in any way any ownership
or other material interest in the Purchaser, any Affiliate or any of the capital
stock of Purchaser or its Affiliates.
 
5.13. Directors and Officers. Schedule 5.13 hereto sets forth an accurate and
complete list of the Purchaser’s directors and officers.
 
5.14. Disclosure Generally. The representations, warranties and disclosures
contained in this Article 5, as modified by the disclosure schedules to this
Article 5, do not contain any untrue statement of material fact or omit to state
any material fact necessary in order to make any such representations,
warranties or disclosures, in light of the circumstances in which they were
made, not misleading.
 
ARTICLE 6
GENERAL COVENANTS
 
6.1. Notice of Certain Events.
 
(a) The Company and the Owners shall promptly notify Purchaser of and Purchaser
shall promptly notify Company and the Owners 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 transactions
contemplated by this Agreement or the other Transaction Documents;
 
(ii) any notice or other communication from any Governmental or Regulatory
Authority in connection with the transactions contemplated by this Agreement or
the other Transaction Documents; and
 
(iii) any material claims or legal proceedings commenced or, to their Knowledge
threatened, relating to or involving or otherwise affecting the Company,
Purchaser or the Owners and which relates to the consummation of the
transactions contemplated by this Agreement.
 
(b) If the Company acquires Knowledge or the Purchaser acquires Knowledge after
the date of this Agreement of (i) any matter which, if existing, occurring or
known at the date of this Agreement would have been required to be disclosed to
Purchaser or Company and Owners, as the case may be, or (ii) the occurrence of
any event or the failure of any event to occur that may result in the failure to
satisfy any condition specified in Article 7 or the obligations of any party to
consummate the transactions contemplated by this Agreement, such party shall,
promptly after obtaining such Knowledge, notify Purchaser or Owner
Representative, as applicable,, in writing in sufficient detail to permit a
reasonable analysis thereof.
 
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6.2. Confidentiality.
 
(a) Prior to the Closing, Purchaser shall hold in confidence, and use its
commercially reasonable efforts to have all of the officers, managers,
independent contractors and employees hold in confidence, all knowledge and
information of a secret or confidential nature with respect to the Business and
shall not disclose, publish or make use of the same without the consent of
Company and the Owner Representative, except to the extent that such information
shall have become public knowledge other than by breach of this Agreement by
Purchaser and except and to the extent disclosure is required by applicable
Requirement of Law.
 
(b) The Owners shall hold in confidence all knowledge and information of a
secret or confidential nature with respect to the Business following the Closing
and shall not disclose, publish or make use of the same without the consent of
Purchaser, except to the extent that such information shall have become public
knowledge other than by breach of this Agreement by the Company or the Owners,
and except and to the extent disclosure is required by applicable Requirement of
Law.
 
(c) The parties agree that the remedy at law for any breach of this Section 6.2
would be inadequate and that the aggrieved party shall be entitled to injunctive
relief in addition to any other remedy it may have upon breach of any provision
of this Section 6.2.
 
6.3. Noncompetition. 
 
(a) Obligation. From and after the date of Closing, for a period of three (3)
years, each of the Material Owners agrees that such Material Owner will not,
directly or indirectly: 
 
(i) engage or participate in the Business in the Territory in direct competition
with Company or Purchaser;
 
(ii) become interested (as owner, stockholder, lender, partner, co-venturer,
director, shareholder, employee, agent, consultant or otherwise) in any portion
of the business of any person, firm, corporation, association or other entity
located or doing business in the Territory other than Purchaser and its
Affiliates where such portion of such business is in or competitive with the
Business; provided, however, notwithstanding the foregoing, each Material Owner
may hold not more than two percent (2%) of the outstanding securities of any
class of any publicly-traded securities of a company that is engaged in
activities referenced in this Section 6.3(a);
 
(iii) solicit, call on or transact or engage in any direct or indirect business
activity, for a purpose competitive with the Business in the Territory, with any
Person;
 
(iv) influence or attempt to influence any current customer or referral source
of the Company prior to the Closing to terminate or modify any written or oral
agreement with Purchaser or any of its Affiliates (including the Company after
the Closing); or
 
(v) influence or attempt to influence any person or entity, for a purpose
competitive with the Business, either (A) to terminate or modify an employment,
consulting, agency, distributorship or other arrangement with Purchaser or its
Affiliates, or (B) to employ or retain, or arrange to have any other person or
entity employ or retain, any person who is employed or retained by Purchaser or
its Affiliates.
 
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(b) Acknowledgments. Each Material Owner hereby acknowledges and agrees that:
 
(1) the rights, obligations and duties of such Material Owner under this
Section 6.3 are necessary for the protection of the legitimate business
interests of Purchaser at the times set forth in this Section 6.3;
 
(2) the agreements of the Material Owners set forth in this Section 6.3 are an
integral part of this Agreement, without which transactions contemplated in and
by this Agreement will not close;
 
(3) the scope of the obligations set forth in this Section 6.3 is reasonable in
time, geography and types and limitations of activities restricted; and
 
(4) the breach of this Section 6.3 will be such that the parties’ harmed by such
breach will not have an adequate remedy at law because of the unique nature of
the Business.
 
(c) Remedy. The parties acknowledge and agree that the rights of Purchaser
pursuant to Section 6.3(a) are of a specialized and unique character and that
immediate and irreparable damage will result to such parties if the obligated
parties under such sections fail to or refuse to perform their obligations
thereunder and, notwithstanding any election by Purchaser to claim damages from
as a result of any such failure or refusal, Purchaser may, in addition to any
other remedies and damages available, seek an injunction in a court of competent
jurisdiction to restrain any such failure or refusal. No single exercise of the
foregoing remedy shall be deemed to exhaust Purchaser’s right to such remedy,
but the right to such remedy shall continue undiminished and may be exercised
from time to time as often as such parties may elect.
 
(d) Early Termination. The restrictive covenants set forth in this Section 6.3
shall terminate automatically with respect to Michael Ricciardi and David Godso,
respectively, if such Owner is terminated from employment by Company and/or
Purchaser without Cause or such Owner terminates his employment with Company
and/or Purchaser with Good Reason.
 
6.4. Non-Disparagement. Neither the Owners nor any of their respective
Affiliates, on the one hand, nor Purchaser or any of Purchaser’s Affiliates, on
the other hand, will, directly or indirectly, disparage, deprecate or make any
negative comment or interfere in the business activities of the other or the
other’s stockholders, directors, managers, members, officers, employees,
independent contractors, or agents.
 
6.5. Further Assurances.
 
(a) Subject to the terms and conditions herein provided, each of the parties
hereto agrees, subject to its legal obligations, to use all reasonable
commercial efforts to take, or cause to be taken, all actions and to do, or
cause to be done, all things necessary, proper or advisable to consummate and
make effective the transactions contemplated by this Agreement and the other
Transaction Documents, including to use its commercially reasonable efforts to
rectify any event or circumstance which would impede the consummation of the
transactions contemplated hereby.
 
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(b) Except as required by law, no party will voluntarily cooperate with any
Person which may hereafter seek to restrain or prohibit or otherwise oppose the
transactions contemplated by this Agreement and each party will cooperate with
the other party to resist any such effort to restrain or prohibit or otherwise
oppose such transactions.
 
6.6. Distribution to Owners. Immediately prior, or simultaneously with Closing,
Company shall distribute to the Owners all of its Cash pro rata based on the
Payment Factor.
 
ARTICLE 7
CONDITIONS TO CLOSING
 
7.7. Conditions Precedent to Obligations of Purchaser. The obligations of
Purchaser to proceed with the Closing under this Agreement are subject to the
fulfillment prior to or at Closing of the following conditions (any one or more
of which may be waived in whole or in part by Purchaser in Purchaser’s sole
discretion):
 
(a) Bringdown of Representations and Warranties. The representations and
warranties of the Company and the Owners contained in this Agreement shall be
true and correct in all material respects (without regard, for purposes hereof,
of any materiality, material adverse effect or similar qualifications contained
in such representations and warranties) on and as of the time of Closing, except
for changes contemplated by this Agreement and those representations and
warranties which address matters only as of a particular date (which shall
remain true and correct as of such date), with the same force and effect as
though such representations and warranties had been made on, as of and with
reference to such time, and Purchaser shall have received a certificate to such
effect duly executed by the Company and the Owner Representative.
 
(b) Performance and Compliance. The Company and the Owners shall have performed,
in all material respects, all of the covenants and complied, in all material
respects, with all of the provisions required by this Agreement to be performed
or complied with by them on or before the Closing, and Purchaser shall have
received a certificate to such effect duly executed by the Company and the Owner
Representative.
 
(c) Satisfactory Instruments. All instruments and documents required on the
Company’s and the Owners’ part to effectuate and consummate the transactions
contemplated hereby, including those listed in Section 8.3 hereof, shall be
delivered to Purchaser and shall be substantially in the form of the Exhibits
attached hereto, when applicable.
 
(d) Required Consents. All Consents of third parties, including, without
limitation, all Governmental or Regulatory Authorities, necessary or appropriate
to consummate the transactions contemplated hereby and by the Transaction
Documents shall have been obtained and no such consent or approval (i) shall
have been conditioned upon the modification in any material respect,
cancellation or termination of any material lease, commitment, agreement,
easement, right, license, Permit or authorization of the Company; or (ii) shall
impose on Purchaser or the Company after the Closing, as applicable, any
material condition, provision or requirement not presently imposed upon it or
any condition that would be more restrictive on Purchaser or the Company after
the Closing, as applicable, after the Closing than the conditions presently
imposed on the Company or either of the Owners before the Closing, as
applicable.
 
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(e) Litigation. No order of any Governmental or Regulatory Authority shall be in
effect which restrains or prohibits the transactions contemplated hereby or
which would limit or adversely affect Purchaser’s ownership or control of the
Transferred Shares, and there shall not have been threatened, nor shall there be
pending, any action or proceeding by or before any court or Governmental or
Regulatory Authority, (i) challenging any of the transactions contemplated by
this Agreement or seeking monetary relief by reason of the consummation of such
transactions, or (ii) by any present or former owner of any capital stock or
equity interest in the Company (whether through a derivative action or
otherwise) against the Company or any officer, director, manager or member of
the Company in his capacity as such, or (iii) which might have a material
adverse effect on its business, prospects or condition (financial or
otherwise) of the Business as transacted prior to Closing.
 
(f) UCC Termination Statements. The Company shall have delivered to Purchaser
Uniform Commercial Code financing release or termination statements with respect
to all security interests in the Company’s assets, except for the security
interest held by Wachovia Bank.
 
(g) No Material Adverse Change. No Company Material Adverse Effect shall have
occurred since the date hereof.
 
(h) Joinder. Thomas Aylesworth, Darrell Berger, Markus Litscher, Lino Ricciardi
and each holder of Company options who exercised such options between the date
hereof and Closing and shall have all joined this Agreement as an Owner
hereunder.
 
7.2. Conditions Precedent to the Obligations of the Company and the Owners. The
obligations of the Company and the Owners to proceed with the Closing hereunder
are subject to the fulfillment prior to or at Closing of the following
conditions (any one or more of which may be waived in whole or in part by the
Owners in their sole discretion):
 
(a) Bringdown of Representations and Warranties. The representations and
warranties of Purchaser contained in this Agreement shall be true and correct in
all material respects (without regard, for purposes hereof, of any materiality,
material adverse effect or similar qualifications contained in such
representations and warranties) on and as of the time of Closing, except for
changes contemplated by this Agreement and those representations and warranties
which address matters only as of a particular date (which shall remain true and
correct as of such date), with the same force and effect as though such
representations and warranties had been made on, as of and with reference to
such time and Purchaser shall have delivered to the Company a certificate to
such effect.
 
(b) Performance and Compliance. Purchaser shall have performed all of the
covenants and complied, in all material respects, with all the provisions
required by this Agreement to be performed or complied with by it on or before
the Closing, and Purchaser shall have delivered to the Company and Owners a
certificate to such effect.
 
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(c) Litigation. No order of any Governmental or Regulatory Authority shall be in
effect which restrains or prohibits the transactions contemplated hereby.
 
(d) Satisfactory Instruments. All instruments and documents required on the part
of Purchaser to effectuate and consummate the transactions contemplated hereby
listed in Section 8.2 hereof shall be delivered to the Company and/or the Owners
and shall be substantially in the form of the Exhibits attached hereto, when
applicable.
 
(e) No Material Adverse Effect. No material adverse effect upon Purchaser’s
businesses, prospects, operations, results of operations, prospects, assets,
liabilities or condition (financial or otherwise) shall have occurred since the
date hereof.
 
(f) ESOP Valuation. The ESOP shall have received from Advanced Valuation
Analytics, Ltd. a valuation opinion dated as of the Closing Date, to the effect
that the consideration to be received by the ESOP for redemption of their shares
by Company immediately prior to Closing shall be at least equal to the fair
market value of the shares, and that the terms of the redemption are fair to the
ESOP from a financial point of view, all as required under the Company's ESOP
and applicable Department of Labor regulations.
 
(g) ESOP Trustee. The trustee of the ESOP shall have determined that the
redemption of the shares by Company of the Company capital stock held by the
ESOP does not violate ERISA.
 
(h) Filing of Statement of Designations. The Statement of Designations shall
have been filed with the Secretary of State of the State of Delaware and shall
continue to be in full force and effect as of the Closing Date.
 
(i) Joinder. Thomas Aylesworth, Darrell Berger, Markus Litscher, Lino Ricciardi
and each holder of Company options who exercised such options between the date
hereof and Closing and shall have all joined this Agreement as an Owner
hereunder.
 
ARTICLE 8
CLOSING
 
8.1. The Closing. The consummation of the transactions contemplated by this
Agreement (the “Closing”) shall take place in person at the offices of Shaiman,
Drucker, Beckman, Sobel & Stutman LLP, 1845 Walnut Street, 15th Floor,
Philadelphia, PA 19103, or by facsimile or other electronic means upon the
satisfaction of the conditions set forth in Section 7.1 and 7.2 which is
expected to occur on or before September 15, 2006 (the “Closing Date”) or such
other location or later date as the parties may agree. Subject to Section 13.2,
if the Closing does not occur by the 15th day subsequent from the date hereof,
Purchaser shall pay the Owners the nonrefundable Cash Deposit. 

8.2. Deliveries of Purchaser. At the Closing, Purchaser shall deliver to the
Owners:
 
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(a) the bring down certificate referenced in Section 7.2(a);
 
(b) the certificate referenced in Section 7.2(b);
 
(c) the Closing Payment, including the Note and certificates representing the
Purchaser Shares;
 
(d) the Employment Agreement;
 
(e) the Registration Rights Agreement;
 
(f) the Pledge Agreement;
 
(g) the Escrow Agreement and the Hold Back Escrow Agreement; and
 
(h) such other instruments or agreements as the Owner Representative may
reasonably require.
 
8.3. Deliveries of the Owners. On the Closing Date, the Owners shall deliver, or
caused to be delivered, to the Purchaser:
 
(a) Stock certificates representing the Transferred Shares, duly endorsed in
blank and accompanied by duly executed stock powers (provided that 3,050 of the
Transferred Shares to be delivered to Michael Stutman, Esq., of Drucker,
Beckman, Sobel & Stutman LLP pursuant to Section 3.4(c) and the Pledge
Agreement);
 
(b) the bring-down certificate referenced in Section 7.1(a);
 
(c) the certificate referenced in Section 7.1(b);
 
(d) the Registration Rights Agreement;
 
(e) the Employment Agreement;
 
(f) the Escrow Agreement and the Hold Back Escrow Agreement; and
 
(g) such other instruments or agreements as the Purchaser may reasonably
require.
 
ARTICLE 9
SURVIVAL; WAIVER OF INDEMNITY OR CONTRIBUTION
 
9.1. Survival of Representations and Warranties. The representations and
warranties of each Party hereunder:
 
(a) shall survive until eighteen months following the Closing, except for the
representations and warranties in Sections 4.15 and 5.14 which shall survive
until the expiration of the statute of limitations applicable to the subject
matter addressed there under;
 
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(b) any representation or warranty that would otherwise terminate in accordance
with Section 9.1(a) will continue to survive if an Indemnity Notice, a Claim
Notice or other written notice of facts that can reasonably be expected to give
rise to an indemnification claim under Article 10 shall have been given in good
faith on or prior to the date on which such representation or warranty would
have otherwise terminated, until the related claim for indemnification has been
satisfied or otherwise resolved as provided in Article 10; and
 
(c) any representation or warranty contained in this Agreement made by any party
or any information furnished by any party that was made by such party
fraudulently, shall indefinitely survive the Closing.
 
9.2. No Indemnity or Contribution; Waiver. 
 
(a) The Owners shall not be entitled to make any claim for indemnity or
contribution or any other similar claim against Purchaser or any of Purchaser’s
Affiliates (including, after the Closing, the Company), with respect to any
Indemnifiable Losses for which the Owners or their respective Affiliates are
liable under Article 10. To the extent that the Owners may now or in the future
have the right to assert any such claim against Purchaser or any of Purchaser’s
Affiliates (including, after the Closing, the Company), the Owners hereby waive
any such right and hereby release and forever discharge Purchaser and
Purchaser’s Affiliates (including, after the Closing, the Company) from any such
claim.
 
(b) The Purchaser shall not be entitled to make any claim for indemnity or
contribution or any other similar claim against the Owners or any of Owners’
Affiliates with respect to any Indemnifiable Losses for which the Purchaser
and/or their respective Affiliates are liable under Article 10. To the extent
that the Purchaser may now or in the future have the right to assert any such
claim against Owners or any of Owners’ respective Affiliates, the Purchaser
hereby waives any such right and hereby release and forever discharge Owners and
Owners’ Affiliates from any such claim.
 
ARTICLE 10
INDEMNIFICATION
 
10.1. The Owners’ Indemnification. From and after the Closing Date, the Owners
severally shall indemnify and hold harmless Purchaser and any of Purchaser’s
Affiliates (including, after the Closing, the Company), and each of their
respective directors, officers, employees, agents, successors and assigns and
legal representatives, from and against all Indemnifiable Losses that may be
imposed upon, incurred by or asserted against any of them resulting from,
related to, or arising out of:
 
(a) any misrepresentation or breach of any representation or warranty by the
Company or the Owners under this Agreement or any document, instrument,
certificate or other item furnished or to be furnished to Purchaser pursuant
hereto or thereto or in connection with the transactions contemplated by this
Agreement; and
 
(b) any breach or non-fulfillment of any covenant or agreement to be performed
by the Company or the Owners under this Agreement or any document, instrument,
certificate or other item furnished or to be furnished to Purchaser pursuant
hereto or thereto in connection with the transactions contemplated by this
Agreement.
 
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10.2. The Purchaser’s Indemnification. From and after the Closing Date, the
Purchaser shall indemnify and hold harmless each Owner and any Owner Affiliate,
and each of their respective directors, officers, employees, agents, successors
and assigns and legal representatives, from and against all Indemnifiable Losses
that may be imposed upon, incurred by or asserted against any of them resulting
from, related to, or arising out of:
 
(c) any misrepresentation or breach of any representation or warranty by the
Purchaser under this Agreement or any document, instrument, certificate or other
item furnished or to be furnished to the Company and/or Owners pursuant hereto
or thereto or in connection with the transactions contemplated by this
Agreement; and
 
(d) any breach or non-fulfillment of any covenant or agreement to be performed
by the Purchaser under this Agreement or any document, instrument, certificate
or other item furnished or to be furnished to the Company and/or Owners pursuant
hereto or thereto in connection with the transactions contemplated by this
Agreement.
 
10.3. Payment; Procedure for Indemnification.
 
(a) In the event that a Person shall suffer an Indemnifiable Loss and seek
indemnification under this Article (the “Indemnified Party”) he, she or it shall
give written notice to the Owners (the “Noticed Party,” and the party(ies) from
whom indemnification under this Article is sought, the “Indemnifying Party”) of
the amount of the Indemnifiable Loss, together with reasonably sufficient
information to enable the Noticed Party to determine the accuracy and nature of
the claimed Indemnifiable Loss (the “Indemnity Notice”). The failure of any
Indemnified Party to give the Noticed Party the Indemnity Notice promptly after
actual notice of the Indemnifiable Loss shall not release the Indemnifying Party
of liability under this Article; provided, however that the Indemnifying Party
shall not be liable for Indemnifiable Losses incurred by the Indemnified Party
that would not have been incurred but for the delay in the delivery of, or the
failure to deliver, the Indemnity Notice. Within 30 days after the receipt by
the Noticed Party of the Indemnity Notice, the Noticed Party shall do one of the
following and decide whether or not to raise any objection: (i) provide notice
to the Indemnifying Party directing the Indemnifying Party to pay to the
Indemnified Party an amount equal to the Indemnifiable Loss or (ii) object to
such claim, in which case the Noticed Party shall give written notice to the
Indemnified Party of such objection together with the reasons therefor, it being
understood that the failure of the Noticed Party to so object shall preclude the
Noticed Party from asserting any claim, defense or counterclaim relating to the
Indemnifying Party’s failure to pay any Indemnifiable Loss that was the subject
of such Notice. The Noticed Party’s objection shall not relieve the Indemnifying
Party from its obligations under this Article.
 
(b) In the event the facts giving rise to the claim for indemnification under
this Article shall involve any action or threatened claim or demand by any third
party against the Indemnified Party, the Indemnified Party, within the earlier
of, as applicable, 10 days after receiving a written notice of the filing of a
lawsuit or 30 days after receiving notice of the existence of a claim or demand
giving rise to the claim for indemnification, shall send written notice of such
claim to the Noticed Party (the “Claim Notice”). The failure of the Indemnified
Party to give the Noticed Party the Claim Notice shall not release the
Indemnifying Party of liability under this Article; provided, however, that the
Indemnifying Party shall not be liable for Indemnifiable Losses incurred by the
Indemnified Party that would not have been incurred but for the delay in the
delivery of, or the failure to deliver, the Claim Notice. Except for claims
resulting from, relating to, or arising out of any dispute with the Company’s
customers or suppliers, the Indemnifying Party shall be entitled to defend such
claim in the name of the Indemnified Party at the Indemnifying Party’s own
expense and through counsel of the Indemnifying Party’s own choosing; provided,
that if the applicable claim or demand is against, or if the defendants in any
such Legal Proceeding shall include, both the Indemnified Party and the
Indemnifying Party and the Indemnified Party reasonably concludes that there are
defenses available to it that are different or additional to those available to
the Indemnifying Party or if the interests of the Indemnified Party may be
reasonably deemed to conflict with those of the Indemnifying Party, then the
Indemnified Party shall have the right to select separate counsel and to assume
and control the defense of such claim, demand or Legal Proceeding, with the
reasonable fees, expenses and disbursements of such counsel to be reimbursed by
the Indemnifying Party as incurred. The Indemnifying Party shall give the
Indemnified Party notice in writing within 10 days after receiving the Claim
Notice from the Indemnified Party in the event of litigation, or otherwise
within 30 days, of its intent to defend such claim. In the case of any claim
resulting from, relating to or arising out of any dispute with any of the
Company’s customers or suppliers, Purchaser shall have the sole right to control
the defense thereof. Whenever the Indemnifying Party is entitled to defend any
claim under this Section 10.2(b), the Indemnified Party may elect, by notice in
writing to the Noticed Party, to continue to participate through its own
counsel, at the Indemnified Party’s expense, but the Indemnifying Party shall
have the right to control the defense of the claim or the litigation. The
Indemnified Party shall cooperate with the Indemnifying Party in the defense of
any claim, demand or Legal Proceeding that the Indemnifying Party has and for
which the Indemnifying Party has elected to defend pursuant to this
Section 10.2(b).
 
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(c) Notwithstanding any other provision contained in this Agreement, the party
controlling the defense of the claim or the litigation shall not settle any such
claim or litigation without the prior written consent of the Noticed Party for
the other party, which consent shall not be unreasonably withheld; provided,
that if the Indemnified Party is controlling the defense of the claim or the
litigation and shall have, in good faith, negotiated a settlement thereof, which
proposed settlement contains terms that are reasonable under the circumstances,
then the Noticed Party for the Indemnifying Party shall not withhold or delay
the giving of such consent. In the event that the Indemnifying Party is
controlling the defense of the claim or the litigation and shall have negotiated
a settlement thereof, which proposed settlement is substantively final and
unconditional as to the parties thereto (other than the consent of the Noticed
Party for the Indemnified Party required under this Section 10.2(c)) and
contains an unconditional release of the Indemnified Party and does not include
the taking of any actions by, or the imposition of any restrictions on the part
of, the Indemnified Party and the Noticed Party for the Indemnified Party shall
unreasonably refuse to consent to such settlement, the liability of the
Indemnifying Party under this Article, upon the ultimate disposition of such
litigation or claim, shall be limited to the amount of the proposed settlement;
provided, however, that in the event the proposed settlement shall require that
the Indemnified Party make an admission of liability, a confession of judgment,
or shall contain any other non-financial obligation which, in the reasonable
judgment of the Indemnified Party, renders such settlement unacceptable, then
the Indemnified Party’s failure to consent shall not give rise to the foregoing
limitation of the Indemnifying Party’s liability as provided for in this
Section 10.2(c), and the Indemnifying Party shall continue to be liable to the
full extent of such litigation or claim.
 
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(d) The party controlling the defense of the claim or the litigation shall
provide to the non-controlling party a report as to the status of each claim for
indemnification pursuant to this Article no less frequently than once every
three months so long as such claim is outstanding.
 
(e) The non-controlling party in the defense of the claim or the litigation
shall have the right to consult with the controlling party and the controlling
party shall facilitate such consultation with respect to the conduct and results
of the proceeding and the strategy of the controlling party for addressing the
matters that are the basis of such claim. Upon reasonable request by the
non-controlling party, the controlling party shall provide the notice, copies,
access and right of consultation provided for herein with respect to any claim
for indemnification pursuant to this Agreement.
 
(f) Notwithstanding any indemnification or defense arrangement between the
parties to this Agreement to the contrary, the parties agree to cooperate with
each other in pursuing any claims against any Person who may be liable for any
Losses or Liabilities which are the subject of an Indemnity Notice, and in
pursuing any available claims against insurers who may have provided insurance
coverage for any such Losses or Liabilities.
 
10.4. Limitations. The Owners' indemnification obligations under Section 10.1(a)
shall not arise unless the aggregate amount of Indemnifiable Losses for which
the Owners are so required to indemnify exceeds $25,000, but in such event, the
Owners shall be required to indemnify the Indemnified Party for all
Indemnifiable Losses, including the initial $25,000 of Indemnifiable Losses up
to a cap of $700,000, the first half of which shall be payable in Purchaser
Shares valued at the greater of: (i) the closing market price and (ii) the
volume-weighted average price per share for the fifteen (15) days prior to the
indemnification event and the second half of which shall be payable in cash.
Notwithstanding any other provision herein, no Owner shall have any
indemnification payment obligation for any Indemnifiable Losses under this
Article 10 in excess of the aggregate Purchase Price received by such Owner from
Purchaser for such Owner's Transferred Shares sold hereunder; and provided,
further the Owners aggregate indemnification obligation under Section 10.1 shall
be limited to the Escrow Deposit.

10.5. Payment. Upon the determination of the liability under this Article 10,
the Indemnifying Party shall pay to the Indemnified Party within 10 Business
Days after such determination, the amount of any claim for indemnification made
hereunder.  
 
10.6. Non-Impairment of Indemnity. 
 
(a) The results of Purchaser’s due diligence investigation and examination of
the Company and the Owners is for Purchaser’s sole benefit, and shall not (i)
impair or reduce any representation or warranty made by the Company and/or the
Owners in this Agreement, (ii) relieve the Company or the Owners from its or
their obligations with respect to such representations and warranties
(including, without limitation, the indemnification obligations under this
Article), or (iii) mitigate any of the Company’s or the Owners’ obligations to
disclose all material facts to Purchaser with respect to the Company and the
Business.
 
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(b) The results of Company's and/or Owners due diligence investigation and
examination of the Purchaser is for Company's and the Owners' sole benefit, and
shall not (i) impair or reduce any representation or warranty made by the
Purchaser in this Agreement, (ii) relieve the Purchaser from its obligations
with respect to such representations and warranties (including, without
limitation, the indemnification obligations under this Article), or (iii)
mitigate any of the Purchaser's obligations to disclose all material facts to
the Company and Owners with respect to the Purchaser and its business.
 
10.7. Subrogation. Upon making an indemnity payment pursuant to this Agreement,
the Indemnifying Party will, to the extent of such payment, be subrogated to all
rights of the Indemnified Party against any third party in respect of the
damages to which the payment related. Without limiting the generality of any
other provision hereof, each such Indemnified Party and Indemnifying Party will
duly execute upon request all instruments reasonably necessary to evidence and
perfect the above described subrogation rights.
 
10.8. Exclusive Remedies. The remedies provided for in this Agreement shall be
the sole and exclusive remedies of the parties and their respective officers,
directors, employees, affiliates, agents, representatives, successors and
assigns for any breach of or inaccuracy in any representation, warranty or
covenant contained in this Agreement or any certificate delivered at Closing;
provided, however, that nothing herein is intended to waive any claims for fraud
or waive any equitable remedies to which a party may be entitled.
 
10.9. No Double Recovery; Use of Insurance. Notwithstanding anything herein to
the contrary, no party shall be entitled to indemnification or reimbursement
under any provision of this Agreement for any amount to the extent such party or
its Affiliate has been indemnified or reimbursed for such amount under any other
provision of this Agreement, the Exhibits or Disclosure Schedules attached
hereto, or any document executed in connection with this Agreement or otherwise.
Furthermore, in the event any Indemnifiable Losses related to a claim by
Purchaser are covered by insurance, Purchaser agrees to use commercially
reasonable efforts to seek recovery under such insurance and Purchaser shall not
be entitled to recover from the Owners(and shall refund amounts received up to
the amount of indemnification actually received) with respect to such damages to
the extent Purchaser recovers the insurance payment specified in the policy.
 
10.10. Treatment of Indemnity Payments Between the Parties. Unless otherwise
required by applicable Requirements of Law, all indemnification payments shall
constitute adjustments to the Purchase Price for all Tax purposes, and no party
shall take any position inconsistent with such characterization.
 
10.11. Mitigation. Each party agrees to use reasonable efforts to mitigate any
loss, liability or damage which forms the basis of a claim hereunder.
 
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ARTICLE 11
POST-CLOSING COVENANTS
 
11.1. Further Cooperation. 
 
(a) From and after the Closing Date, at Purchaser’s request from time to time,
the Owners shall execute and deliver to Purchaser such further endorsements,
assignments and instruments of transfer and conveyance and take such other
actions as Purchaser reasonably requests to transfer, vest or perfect
Purchaser’s rights in and to the Transferred Shares, free and clear of all
Encumbrances and to consummate the transactions contemplated by this Agreement.
 
(b) From and after the Closing Date, at an Owner's request from time to time,
the Purchaser shall execute and deliver to such Owner such further endorsements,
assignments and instruments of transfer and conveyance and take such other
actions as such Owner reasonably requests to transfer, vest or perfect the
Owner's rights in and to the Purchaser Shares, free and clear of all
Encumbrances and to consummate the transactions contemplated by this Agreement.
 
11.2. Director and Officer Indemnification and Insurance.
 
(a) Indemnification. Purchaser agrees that it shall cause, for a period of six
(6) years after the Closing, all rights to indemnification existing immediately
prior to the Closing in favor of the current directors (both in their capacity
as directors and officers of Company) of Company at or prior to the Closing and
the officers of Company listed on Schedule 11.2(a) (“Indemnified Employees”) as
provided for in Company’s Bylaws as of the date hereof to continue (without
amendment or modification in any way unless required by law or regulation) in
full force. Subject to the foregoing, Purchaser may, from and after the Closing,
cause Company to merge, dissolve or reorganize.
 
(b) For a period of four (4) years after the Closing, Purchaser shall maintain
or cause Company to maintain fiduciary liability insurance with coverage in
respect of periods prior to the Closing in amount and scope substantially
identical to that provided to Company under its policy no. 42 3467765 with
Hartford.
 
(c) This Section 11.2 shall be binding on all successors and assigns of Company
and Purchaser. In the event that Purchaser or Company or any of their respective
successors or assigns consummates a Change of Control, then and in each such
case, proper provision shall be made so that such successors and assigns shall
assume all obligations set forth in this Section 11.2. The provisions of this
Section 11.2 are intended to be for the benefit of, and shall be enforceable by,
each Indemnified Employee, his or her heirs, and his or her representatives or
assigns.
 
11.3. Termination of ESOP. Company, Owner Representative and ESOP shall take all
appropriate action to terminate ESOP simultaneously with the Closing, it being
under that the ESOP Trust must continue as required by the ESOP, ERISA and
applicable Department of Labor regulations.
 
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ARTICLE 12
CERTAIN TAX MATTERS
 
12.1. Transfer Taxes. The Purchaser shall be responsible for the payment of all
Transfer Taxes, if any, which may be payable with respect to the sale and
transfer of the Transferred Shares and the Purchaser Shares. The Owners shall,
at their own expense, file all necessary Tax Returns and other documentation
with respect to all such Transfer Taxes and, if required, by any applicable
Requirement of Law, Purchaser will, and will cause the Company to, join in an
execution of any such Tax Returns and other documentation.
 
12.2. Other Tax Returns.
 
(a) Tax Periods Ending on or Before March 31, 2006. Owner Representative shall
prepare or cause to be prepared and file or cause to be filed in a timely manner
all federal and state income Tax Returns for the Company for all Tax periods
ending on or prior to March 31, 2006 which are filed after the Closing Date and
the Owners shall pay all Taxes payable by the Company reflected on such Tax
Returns or due for Tax periods covered by such Tax Returns. The Purchaser shall
and, following the Closing Date, shall cause the Company to, cooperate with any
commercially reasonable request of the Owners to permit the Owners to comply
with their obligations under this Section 12.2(a). The Owners shall be entitled
to receive, pro rata based on the Payment Factor, all Company Tax refunds for
all Tax periods ending on or prior to March 31, 2006.
 
(b) Tax Periods Beginning After March 31, 2006. Purchaser shall prepare or cause
to be prepared and file or cause to be filed any Tax Returns of the Company for
Tax periods which begin after March 31, 2006, and Purchaser shall pay all Taxes
payable by the Company reflected on such Tax Returns or due for Tax periods
covered by such Tax Returns, up to a maximum of Two Hundred Thousand Dollars
($200,000.00). Notwithstanding the foregoing, Owners shall pay all Taxes payable
by the Company reflected on such Tax Returns or due for Tax periods covered by
such Tax Returns, in excess of Two Hundred Thousand Dollars ($200,000.00)
(except for any portion of such Tax liability that might arise as a result of
Company converting from cash to accrual reporting of its Taxes). If such Tax
Returns show a Tax liability in excess of Two Hundred Thousand Dollars
($200,000.00) Purchaser shall permit Owner Representative to review and comment
on each such Tax Return described in the preceding sentence prior to filing and
shall make such revisions to such Tax Returns as are reasonably requested by
Owner Representative.
 
(c) Cooperation on Tax Matters.
 
(i) Purchaser, the Company, and the Owners shall cooperate fully, as and to the
extent reasonably requested by the other party, in connection with the filing of
Tax Returns pursuant to this Section 12.2 and any audit, litigation or other
proceeding with respect to Taxes. Such cooperation shall include the retention
and (upon the other party’s request) the provision of records and information
which are reasonably relevant to any such audit, litigation or other proceeding
and making employees available on a mutually convenient basis to provide
additional information and explanation of any material provided hereunder. The
Company and the Owners agree (A) to retain all Books and Records with respect to
Tax matters pertinent to the Company relating to any Tax period beginning before
the Closing Date until the expiration of the statute of limitations (and, to the
extent notified by Purchaser or the Owners, any extensions thereof) of the
respective Tax periods, and to abide by all record retention agreements entered
into with any taxing authority, and (B) to give the other party reasonable
written notice prior to transferring, destroying or discarding any such Books
and Records and, if the other party so requests, the Company or the Owners, as
the case may be, shall allow the other party to take possession of such Books
and Records.
 
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(ii) Purchaser and the Owners further agree, upon request, to use their
commercially reasonable efforts to obtain any certificate or other document from
any Governmental or Regulatory Authority or any other person as may be necessary
to mitigate, reduce or eliminate any Tax that could be imposed (including, but
not limited to, with respect to the transactions contemplated hereby).
 
(iii) Following the Closing, the Company shall not take any action which would
be reasonably likely to have an adverse Tax impact upon the Company or the
Owners for any period ending prior to the date of Closing unless the Company,
after consultation with its Tax advisors, determines that a Tax position of the
Company for any period ending prior to the date of Closing was illegal.
 
(iv) Any adverse Tax consequences upon the Company or the Owners for any period
ending prior to the Closing Date as a result of Company converting from cash to
accrual reporting of its Taxes shall be the responsibility of Purchaser.
 
ARTICLE 13
TERMINATION
 
13.1. Termination Events. This Agreement may be terminated at any time prior to
the Closing Date as follows:
 
(a) By the mutual written consent of the Owner Representative and Purchaser;
 
(b) iv) By Purchaser if there has been a material breach of any representation
or warranty set forth in this Agreement on the part of the Company and/or the
Owners which is incapable of being, or is not, cured within 10 Business Days
after written notice from Purchaser to the Company and the Owner Representative
of such breach (or in any event prior to the date of Closing), and (ii) by the
Owner Representative if there has been a material breach of any representation
or warranty set forth in this Agreement on the part of Purchaser which is
incapable of being, or is not, cured within 10 Business Days after notice from
the Owner Representative to Purchaser of such breach (or in any event prior to
the date of Closing).
 
(c) (i) By Purchaser if there has been a material breach of any covenant or
agreement set forth in this Agreement on the part of the Company and/or the
Owners, which is incapable of being, or is not, cured (other than by mere
disclosure of the breach) within 10 Business Days after written notice from
Purchaser to the Company and the Owner Representative of such breach (or in any
event prior to the date of Closing), and (ii) by the Owner Representative if
there has been a material breach of any covenant or agreement set forth in this
Agreement on the part of Purchaser, which is incapable of being, or is not,
cured (other than by mere disclosure of the breach) within 10 Business Days
after written notice from the Owner Representative or Company to Purchaser of
such breach (or in any event prior to the date of Closing);
 
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(d) (i) By Purchaser if any of the conditions specified in Section 7.1 hereof
shall not have been fulfilled by the time required and shall not have been
waived by Purchaser; and (ii) by the Owner Representative if any of the
conditions specified in Section 7.2 hereof shall not have been fulfilled by the
time required and shall not have been waived by the Owners;
 
(e) By Purchaser if the transactions contemplated by this Agreement have not
been consummated on or before ninety (90) days following the date hereof;
provided, that, Purchaser may terminate this Agreement pursuant to this
subsection (e) only if Closing shall not have occurred by such date for a reason
other than Purchaser’s failure to satisfy the conditions to Closing of Owners
set forth in Section 7.2 hereof;
 
(f) By the Owner Representative if the transactions contemplated by this
Agreement have not been consummated on or before forty-five (45) days following
the date hereof; provided, that, Owners may terminate this Agreement pursuant to
this subsection (f) only if Closing shall not have occurred by such date for a
reason other than Owners’ failure to satisfy the conditions to Closing of
Purchaser set forth in Section 7.1 hereof; 
 
(g) By Purchaser or the Owners if any permanent injunction or final
non-appealable order or decree of any court of competent jurisdiction and
authority is in effect which would prevent the consummation of the transactions
contemplated by this Agreement.
 
13.2. Liabilities in Event of Termination. In the event of any termination of
this Agreement pursuant to Section 13.1, this Agreement shall terminate and
there shall be no liability on the part of any party hereto except:
 
(h)  if this Agreement is terminated pursuant to Section 13.1(a), 13.1(b)(i),
13.1(c)(i) or 13.1(d)(i), then the Cash Deposit shall be returned within three
(3) Business Days thereafter to Purchaser;
 
(i) if this Agreement is terminated for any reason other than pursuant to
Section 13.1(a), 13.1(b)(i), 13.1(c)(i) or 13.1(d)(i), then the Company shall be
entitled to keep the Cash Deposit; and
 
(j)  for liabilities arising from a willful breach of this Agreement prior to
such termination; provided, however, that the terms and conditions of Article 1,
Sections 6.2, 6.4, this Article 13 and Article 14 shall survive such
termination.
 
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ARTICLE 14
MISCELLANEOUS
 
14.1. Notices. All notices required to be given to any of the parties to this
Agreement shall be in writing and shall be deemed to have been sufficiently
given, subject to the further provisions of this Section 14.1, for all purposes
when presented personally to such party or sent by certified or registered mail,
return receipt requested, with proper postage prepaid, or any national overnight
delivery service, with proper charges prepaid, to such party at its address set
forth below:
 
If to the
Owner Representative:
 
 
Mr. Michael Ricciardi
5704 Old Clifton Road
Clifton, VA 20124
   
With a copy to:
Holland & Knight LLP
1600 Tysons Boulevard, Suite 700
McLean, Virginia 22102
Attention: William J. Mutryn
(Fax) 703/720-8610
   
If to the Company (pre-Closing):
Ricciardi Technologies, Inc.
8306 Rugby Road
Manassas, VA 20111
Facsimile: 703/365-9818
   
With a copy to:
Holland & Knight LLP
1600 Tysons Boulevard, Suite 700
McLean, Virginia 22102
Attention: William J. Mutryn
(Fax) 703/720-8610
   
If to Purchaser:
Science Dynamics Corporation.
7150 N. Park Drive, Suite 500
Pennsauken, New Jersey 08109
Attention: Mr. Paul Burgess
Facsimile: __________________
   
With a copy to:
Shaiman, Drucker, Beckman, Sobel & Stutman LLP
1845 Walnut Street, 15th Floor
Philadelphia, PA 19103
Attention: Michael J. Stutman, Esquire
Facsimile: 215.972.0048

 
Such notice shall be deemed to be received when delivered if delivered
personally, the next business day after the date sent if sent by a national
overnight delivery service, or three (3) business days after the date mailed if
mailed by certified or registered mail. Any notice of any change in such address
shall also be given in the manner set forth above. Whenever the giving of notice
is required, the giving of such notice may be waived in writing by the party
entitled to receive such notice.
 
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14.2. No Third Party Beneficiaries. Except as is otherwise expressly provided in
this Agreement, this Agreement is not intended to, and does not, create any
rights in or confer any benefits upon anyone other than the parties hereto.
 
14.3. Schedules and Exhibits. All schedules and exhibits attached to this
Agreement are incorporated by reference into this Agreement for all purposes.
 
14.4. Expenses. Purchaser, on the one hand, and the Owners, on the other hand,
shall pay their own expenses incident to the preparation, negotiation and
execution of this Agreement including, without limitation, all fees and costs
and expenses of their respective legal counsel and advisors.
 
14.5. Entire Agreement; Amendment. This Agreement and the Transaction Documents
and any other documents, instruments or other writings delivered or to be
delivered pursuant to this Agreement constitute the entire agreement among the
parties with respect to the subject matter hereof and thereof and supersede all
prior agreements, understandings, and negotiations, whether written or oral,
with respect to the subject matter hereof and thereof. None of the terms and
provisions contained in this Agreement can be changed without a writing signed
by all parties hereto.
 
14.6. Public Statements. The Owners and Purchaser agree to consult with each
other before issuing any press release or otherwise making any public statement
with respect to the transactions contemplated hereby, and shall not issue any
such press release or make any such public statement prior to such consultation,
except as may be required by a Requirement of Law.
 
14.7. No Waiver of Rights. No waiver of any rights of the Owners, on the one
hand, or Purchaser, on the other hand, under this Agreement shall be effective
unless it is in writing and executed by a duly authorized representative of the
party against whom enforcement of any such waiver is sought. No failure or delay
on the part of any party in the exercise of any power or right under this
Agreement shall operate as a waiver thereof, nor shall any single or partial
exercise of any such power or right. The waiver by any party of a breach of any
provision of this Agreement shall not operate or be construed as a waiver of any
other or subsequent breach under this Agreement.
 
14.8. Section and Paragraph Titles. The section and paragraph titles used in
this Agreement are for convenience only and are not intended to define or limit
the contents or substance of any such section or paragraph.
 
14.9. Binding Effect. This Agreement shall be binding upon and inure to the
benefit of each of the parties to this Agreement and their respective heirs,
personal representatives, and successors (including any entity into which such
party may be converted) and permitted assigns. The Owners, on the one hand, and
Purchaser, on the other hand, shall not have the right to assign this Agreement
without the prior written consent of the other, provided, that (a) Purchaser may
assign any or all of its rights and interests under this Agreement to one or
more of Purchaser’s Affiliates; and (b) any or all of the rights and interests
of Purchaser under this Agreement (i) may be assigned to any Purchaser of
substantially all of the assets of Purchaser or any of Purchaser’s Affiliates,
(ii) may be assigned as a matter of law to the surviving entity in any merger,
consolidation, share exchange or reorganization involving Purchaser, and (iii)
may be assigned as collateral security to any lender or lenders (including any
agent for any such lender or lenders) providing financing in connection with the
transactions contemplated by this Agreement, or to any assignee or assignees of
such lender, lenders or agent (it being understood that in any or all of the
cases described in clauses (a) and (b) above Purchaser nonetheless shall remain
responsible for the performance of all of its obligations under this Agreement).
 
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14.10. Counterparts. This Agreement may be executed in any number of
counterparts, and each such counterpart shall be deemed to be an original
instrument, but all such counterparts together shall constitute one and the same
instrument.
 
14.11. Severability. Any provision of this Agreement that is prohibited or
unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective
to the extent of such prohibition or unenforceability without invalidating the
remaining provisions of this Agreement or such provision, and any such
prohibition or unenforceability in any jurisdiction shall not invalidate or
render unenforceable such provision in any other jurisdiction.
 
14.12. Owner Representative.
 
(a) By the execution and delivery of this Agreement, including counterparts
hereof, each Owner hereby irrevocably constitutes and appoints Michael Ricciardi
as the true and lawful agent and attorney-in-fact (the “Owner Representative”)
of such Owner with full powers of substitution to act in the name, place and
stead of such Owner with respect to the performance on behalf of such Owner
under the terms and provisions of this Agreement, as the same may be from time
to time amended, and to do or refrain from doing all such further acts and
things, and to execute all such documents on such Owner’s behalf, as the Owner
Representative shall deem necessary or appropriate in connection with any of the
transactions contemplated under this Agreement, including:
 
(i) to receive all payments made by the Purchaser to the Owners under this
Agreement;
 
(ii) to agree upon or compromise any matter related to the calculation of any
adjustments to the Purchase Price pursuant to Article 3 or otherwise or other
payments to be made;
 
(iii) to act for the Owners with respect to all indemnification matters referred
to in this Agreement, including the right to compromise on behalf of the Owners
any indemnification claim made by or against the Owners;
 
(iv) to terminate, amend, or waive any provision of this Agreement; provided
that any such action, if material to the rights and obligations of the Owners in
the reasonable judgment of the Owner Representative, shall be taken in the same
manner with respect to all Owners, unless otherwise agreed by each Owner who is
subject to any disparate treatment of a potentially adverse nature;
 
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(v) to employ and obtain the advice of legal counsel, accountants and other
professional advisors as the Owner Representative, in his sole discretion, deems
necessary or advisable in the performance of his duties as the Owner
Representative and to rely on their advice and counsel;
 
(vi) to incur and pay out of the Purchase Price expenses, including fees of
attorneys and accountants incurred pursuant to the transactions contemplated
hereby, and any other fees and expenses allocable or in any way relating to such
transaction or any indemnification claim, whether incurred prior or subsequent
to Closing;
 
(vii) to retain a portion of the Purchase Price as a reserve against the payment
of expenses incurred in his capacity as Owner Representative; and
 
(viii) to do or refrain from doing any further act or deed on behalf of the
Owners which the Owner Representative deems necessary or appropriate in his sole
discretion relating to the subject matter of this Agreement as fully and
completely as any of the Owners could do if personally present and acting.
 
(b) The appointment of the Owner Representative shall be deemed coupled with an
interest and shall be irrevocable, and any other person may conclusively and
absolutely rely, without inquiry, upon any actions of the Owner Representative
as the acts of the Owners in all matters referred to in this Agreement. Each of
the Owners hereby ratifies and confirms all that the Owner Representative shall
do or cause to be done by virtue of such Owner Representative’s appointment as
Owner Representative of such Owner. The Owner Representative shall act for the
Owners on all of the matters set forth in this Agreement in the manner the Owner
Representative believes to be in the best interest of the Owners, but the Owner
Representative shall not be responsible to any Owners for any loss or damage any
Owners may suffer by reason of the performance by the Owner Representative of
such Owner Representative’s duties under this Agreement, other than loss or
damage arising from willful misconduct in the performance of such Owner
Representative’s duties under this Agreement.
 
(c) Each of the Owners hereby expressly acknowledges and agrees that the Owner
Representative is authorized to act on behalf of such Owner notwithstanding any
dispute or disagreement among the Owners, and that any person shall be entitled
to rely on any and all action taken by the Owner Representative under this
Agreement without liability to, or obligation to inquire of, any of the Owners.
If the Owner Representative resigns or ceases to function in such capacity for
any reason whatsoever, then the successor Owner Representative shall be the
person which the Owners which held a majority of the Transferred Shares at
Closing appoint; provided, however, that if for any reason no successor has been
appointed within thirty (30) days, then any Owner shall have the right to
petition a court of competent jurisdiction for appointment of a successor Owner
Representative. The Owners do hereby jointly and severally agree to indemnify
and hold the Owner Representative harmless from and against any and all
liability, loss, cost, damage or expense (including without limitation
attorneys’ fees) reasonably incurred or suffered as a result of the performance
of such Owner Representative’s duties under this Agreement except for any such
liability arising out of the willful misconduct of the Owner Representative.
 
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14.13. Waiver of Jury Trial. EACH PARTY TO THIS AGREEMENT HEREBY IRREVOCABLY AND
UNCONDITIONALLY WAIVES, TO THE FULLEST EXTENT SUCH PARTY MAY LEGALLY AND
EFFECTIVELY DO SO, TRIAL BY JURY IN ANY SUIT, ACTION OR PROCEEDING ARISING UNDER
THIS AGREEMENT.
 
14.14. Governing Law. This Agreement shall be governed and construed as to its
validity, interpretation and effect by the laws of the Commonwealth of Virginia
notwithstanding the choice of law rules of Virginia or any other jurisdiction.
In addition, in the case of any dispute under or in connection with this
Agreement, each of the parties hereby consents to the exclusive jurisdiction and
venue of the courts of the Commonwealth of Virginia or the Federal District
Courts for such state, provided that such Federal court has subject matter
jurisdiction over such dispute, and each of the parties hereby waives any claim
such party may have at any time as to forum non conveniens with respect to such
venue. Notwithstanding anything to the contrary set forth in the preceding
sentence, any of the parties hereto shall have the right to institute any legal
action against the other party arising out of or relating to this Agreement in
any appropriate court and in any jurisdiction where Company and/or the Owners
are subject to personal jurisdiction and where venue is proper.
 
 
[signature page follows]
 
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IN WITNESS WHEREOF, the Company, the Owners and Purchaser have caused this Stock
Purchase Agreement to be duly executed as of the date first written above.
 

       
Purchaser:
 
  SCIENCE DYNAMICS CORPORATION  
   
   
    By:      
 
Name: 

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Paul Burgess   Title:    

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Company:
 
  RICCIARDI TECHNOLOGIES, INC.  
   
   
    By:       Name:

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    Title:

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Owners:    
 
 
 

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David Godso

 

       
 
 
 

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Domenico Ricciardi

 

       
 
 
 

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Marie Ricciardi

       
 
 
 

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Michael Ricciardi, as an Owner and as the Owner Representative

 

       
 
 
 

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Michele Ricciardi

 
{Stock Purchase Agreement Signature Page}
 

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