Exhibit 10.3

ASSET PURCHASE AGREEMENT

BY AND BETWEEN

SYNNEX Corporation, as Acquirer

AND

New Age Electronics, Inc., as Company

Dated as of February 25, 2008

 

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TABLE OF CONTENTS

 

               Page ARTICLE 1 PURCHASE & SALE OF PURCHASED ASSETS    1    1.1   
Purchased Assets    1    1.2    No Other Assets    1    1.3    Assumption of
Liabilities    1    1.4    Purchase Price; Payment of Purchase Price    2    1.5
   Closing    5    1.6    Transfer Taxes    5 ARTICLE 2 REPRESENTATIONS AND
WARRANTIES OF THE COMPANY    5    2.1    Organization and Qualification    5   
2.2    Authority Relative to this Agreement    6    2.3    Equity Ownership    6
   2.4    Company Financial Statements    6    2.5    Books and Records;
Organizational Documents    7    2.6    No Undisclosed Liabilities    7    2.7
   Absence of Changes    8    2.8    Real Property    9    2.9    Valid Title   
10    2.10    Intellectual Property    10    2.11    Contracts    13    2.12   
Employees    15    2.13    Compliance, Licenses and Consents    18    2.14   
Substantial Customers and Suppliers    18    2.15    Accounts Receivable    19
   2.16    Inventory    19    2.17    Banks and Brokerage Accounts    19    2.18
   Warranty Obligations    19    2.19    Approvals    20    2.20    Tax    20   
2.21    Environmental Matters    21    2.22    Absence of Litigation    21   
2.23    Export Control Laws    22    2.24    Foreign Corrupt Practices Act    22
   2.25    Insurance Coverage    22    2.26    Related Party Transactions    22
   2.27    Brokers or Finders    23    2.28    Solvency    23    2.29    No
Conflict with Other Instruments    23    2.30    Disclosure    24 ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF ACQUIRER    24    3.1    Organization    24

 

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     3.2    Authority    24    3.3    No Conflict with Other Instruments    24
   3.4    Governmental Consents    25    3.5    Brokers or Finders    25    3.6
   Purchase Price    25    3.7    Disclosure    25 ARTICLE 4 CONDUCT PRIOR TO
THE CLOSING DATE    25    4.1    Conduct of Business of the Company    25    4.2
   No Solicitation    27 ARTICLE 5 ADDITIONAL AGREEMENTS    28    5.1    Access
to Information    28    5.2    Confidentiality    28    5.3    Approvals    29
   5.4    Notification of Certain Matters    30    5.5    Additional Documents
and Further Assurances; Cooperation    30    5.6    Expenses    30    5.7   
Public Disclosure    31    5.8    Termination of 401(k) Plans    31    5.9   
Takeover Statutes    31    5.10    Company Dissolution    31    5.11   
Company’s Auditors    31    5.12    Maintenance of Existence; Adequate Funds   
31    5.13    Credit for Prior Service    32

ARTICLE 6 SURVIVAL OF REPRESENTATIONS, WARRANTIES, COVENANTS AND AGREEMENTS;
INDEMNIFICATION HOLDBACK PROVISIONS

   32    6.1    Survival of Representations, Warranties, Covenants and
Agreements    32    6.2    Indemnification Provisions    32

ARTICLE 7 CONDITIONS TO THE CLOSING

   37    7.1    Conditions to Obligations of Each Party to Effect the Closing   
37    7.2    Additional Conditions to Obligations of the Company    37    7.3   
Additional Conditions to the Obligations of Acquirer    38 ARTICLE 8
TERMINATION, AMENDMENT AND WAIVER    40    8.1    Termination    40    8.2   
Effect of Termination    41    8.3    Amendment    41    8.4    Extension;
Waiver    41 ARTICLE 9 MISCELLANEOUS PROVISIONS    42    9.1    Disclosure
Supplement    42    9.2    Notices    42    9.3    Entire Agreement    43    9.4
   Remedies    43

 

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     9.5    Third Party Beneficiaries    43    9.6    Invalid Provisions    43
   9.7    Governing Law    44    9.8    Arbitration    44    9.9    Headings   
44    9.10    Counterparts    44    9.11    Specific Performance    45    9.12
   Allocation of Purchase Price    45    9.13    Assignment    45 ARTICLE 10
DEFINITIONS    45    10.1    Definitions    45

 

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Exhibits

 

Exhibit A   Excluded Assets Exhibit A-1   Specified Retained Liabilities
Exhibit B   Assumed Liabilities Exhibit C   Form of Assignment and Assumption
Agreement Exhibit D   Form of Acquirer Officers’ Certificate Exhibit E   Form of
the Company Officers’ Certificate Exhibit F   Form of the Company Secretary’s
Certificate Exhibit G   Form of Non-Competition Agreement Exhibit H   Form of
Bill of Sale Exhibit I   Form of Patent Assignment Exhibit J   Form of Trademark
Assignment Exhibit K   Form of Copyright Assignment

 

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EXECUTION COPY

ASSET PURCHASE AGREEMENT

THIS ASSET PURCHASE AGREEMENT is made and entered into as of February 25, 2008,
by and among SYNNEX Corporation, a Delaware corporation or its assigns
(“Acquirer”) and New Age Electronics, Inc., a California corporation (the
“Company”). Capitalized terms used and not otherwise defined herein have the
meanings set forth in Article 10.

RECITALS:

Subject to the terms and conditions set forth herein, the Company desires to
sell, convey, transfer, assign and deliver to Acquirer, and Acquirer desires to
purchase and acquire from the Company, all of Company’s right, title and
interest in and to all of the Purchased Assets (the “Acquisition”)

NOW, THEREFORE, in consideration of the covenants, promises, representations and
warranties set forth herein, and for other good and valuable consideration (the
receipt and sufficiency of which are hereby acknowledged by the parties),
intending to be legally bound hereby, the parties agree as follows:

ARTICLE 1

PURCHASE & SALE OF PURCHASED ASSETS

1.1 Purchased Assets. At the Closing, the Company shall sell, convey, transfer,
assign and deliver to Acquirer, and Acquirer shall purchase and acquire from the
Company, free and clear of all Liens (except for Permitted Liens), all of the
Company’s right, title and interest in and to substantially all of the assets
(collectively, the “Purchased Assets”) which the Company owns or in which the
Company has any right, title or interest other than those set forth on Exhibit
A.

1.2 No Other Assets. The Company shall only retain, and Acquirer shall not
purchase, the assets listed on Exhibit A (the “Excluded Assets”).

1.3 Assumption of Liabilities.

(a) Except as provided in Section 1.3(b), the Company shall retain, and Acquirer
shall not assume, or be responsible or liable with respect to, any liabilities
or obligations of the Company (the “Retained Liabilities,” which, in any case,
shall include the items set forth on Exhibit A-1 and all liabilities and
obligations, other than any and all payments of interest and principal
outstanding at Closing, under that certain Second Amended and Restated Loan and
Security Agreement, dated as of September 19, 2006, by and among the Company and
the lenders named therein and related notes, guarantees and security agreements,
as amended).

(b) Acquirer shall assume, at the Closing and effective as of the Closing Date,
and shall thereafter pay, perform and discharge as and when due:

(i) Those liabilities and obligations of Acquirer to the extent reflected on the
Interim Financials, relating to the Business as such liabilities and obligations
exist on the Closing Date;

 

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(ii) Those liabilities and obligations of the Company that arise in the ordinary
course of business after the date of the Interim Financials relating to the
Business and existing at the close of business on the Closing Date;

(iii) All liabilities and obligations of the Company arising under the assumed
Contracts after the Closing Date except to the extent any such liability or
obligation arises in connection with a breach of a representation or warranty
made by the Company in Article 2 herein in respect of an assumed Contract;

(iv) All liabilities and obligations of the Company under its Warranty
Obligations;

(v) All liabilities and obligations of the Company under the Second Amended and
Restated Loan and Security Agreement, dated as of September 19, 2006, by and
among New Age Electronics, Inc. and the lenders named therein; and

(vi) Those liabilities and obligations of the Company set forth on Exhibit B
attached hereto (Sections 1.3(b)(i) through (vi), collectively, the “Assumed
Liabilities”).

1.4 Purchase Price; Payment of Purchase Price.

(a) Final Purchase Price.

(i) The aggregate consideration for the Purchased Assets and the Company’s
Business related thereto shall be Forty-Three Million Two Hundred Fifty Thousand
Dollars ($43,250,000) (the “Base Payment”), plus or minus the Final Tangible Net
Worth Adjustment and plus any Earn-Out Payment earned pursuant to the Earn Out
Agreement (collectively with all paid installments of the Base Payment, as
adjusted by the Final Tangible Net Worth Adjustment, the “Final Purchase
Price”).

(ii) The Base Payment will be adjusted either up or down by the amount by which
the Tangible Net Worth of the Company as of the Closing exceeds or falls short
of the following targets: if the Closing occurs on or before February 29, 2008,
$15,333,982, and for each day after February 29 and before April 1, 2008 the
target shall increase by $4,933 (the “Target Tangible Net Worth”). If the
Closing occurs after March 31, 2008, the Target Tangible Net Worth will
thereafter remain fixed at $15,486,909; provided, however, that if the Closing
has not occurred by April 1, 2008 as a result of (A) the Company not having
completed the 2007 Financials, (B) the Company’s failure to deliver a pay-off
letter (the “Pay-Off Letter”) in respect of that certain Second Amended and
Restated Loan and Security Agreement, dated as of September 19, 2006, by and
among the Company and the lenders named therein to the Acquirer, (C) assuming
payment by Acquirer of the amounts set forth in the Pay-Off Letter, the
Company’s failure to deliver the Bank UCC Release or (D) the Company’s failure
to timely fulfill the Company HSR Delivery Requirements, for each day after
March 31, 2008, the Target Tangible Net Worth shall increase by $17,404 per day
until April 30, 2008.

 

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(iii) The Base Payment less the Holdback Amount, shall be paid by Acquirer to
the Company at the Closing, and such payment shall be made via wire transfer of
immediately available funds from Acquirer to an account specified by the
Company. The wire instruction details for such account shall be provided to
Acquirer no less than three (3) Business Days prior to the Closing.

(iv) Eight Million Five Hundred Thousand Dollars ($8,500,000) of the Base
Payment will be paid by the Acquirer to the Company on such date that is one
hundred twenty (120) days after the Closing Date, subject to any post-closing
purchase price adjustments made pursuant to Section 1.4(b).

(v) The final Three Million Two Hundred Fifty Thousand Dollars ($3,250,000) of
the Base Payment shall be paid by the Acquirer to the Company on such date that
is one hundred eighty days (180) days after the Closing Date, subject to any
post-closing purchase price adjustments made pursuant to Section 1.4(b).

(b) Post-Closing Purchase Price Adjustment.

(i) Not later than one hundred twenty (120) calendar days after the Closing
Date, Acquirer will, or will cause its independent accounting firm
(“Accountants”) to, prepare and deliver to the Company a statement (the
“Statement”) setting forth the Tangible Net Worth of the Business as of the
Closing Date, and the components and calculations thereof, including, but not
limited to, appropriate reserves for accounts receivable, amounts due from and
owing under vendor programs, and inventory (each, an “At Risk Item”) (the
“Closing Date Tangible Net Worth”), in each case determined in accordance with
the Accounting Procedures. If during any fiscal quarter, Acquirer collects on or
removes the reserve from any At Risk Item such that Acquirer benefits
financially from the At Risk Item in excess of such item net of the reserve
therefore, Acquirer shall promptly pay to the Company an amount equal to such
excess benefit.

(ii) If the Company has any objections to the calculation of the Closing Date
Tangible Net Worth as set forth on the Statement, the Company will deliver a
detailed statement (the “Statement of Objections”) describing the Company’s
objections to Acquirer within thirty (30) calendar days of the Company’s receipt
of the Statement from Acquirer; provided, however, that if Acquirer makes an
adjustment for an At Risk Item, the Company shall have thirty (30) calendar days
from the Company’s receipt thereof to deliver a Statement of Objections,
notwithstanding whether it has delivered a Statement of Objections in response
to the Statement. If the Company fails to notify Acquirer of any such objections
within such thirty-calendar-day period, the Statement delivered to the Company
will be deemed to be the “Final Statement”. The Company and Acquirer will use
their reasonable best efforts to resolve any such objections.

(iii) If a final resolution is not obtained within thirty (30) calendar days
after Acquirer has received the Statement of Objections, Acquirer and the
Company will mutually appoint an accounting firm (such accounting firm, the
“Accounting Referee”) to resolve any remaining objections, determined in
accordance with the Accounting Procedures. The Accounting Referee will address
only items disputed by the parties, and may not assign to any such disputed item
a value that is greater than the greatest amount for such item that is claimed
by a party or less than the smallest amount claimed by a party. Each party will
cooperate with the Accounting Referee and provide the Accounting Referee with
any information requested by it. The decision of the Accounting Referee will be
final and binding on all parties.

 

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(iv) Acquirer will revise the Statement as appropriate to reflect the resolution
of the Company’s objections (as agreed upon by the Company and Acquirer or as
determined by the Accounting Referee) and deliver it to the Company within
fifteen (15) calendar days after the resolution of such objections. Such revised
Statement will be the “Final Statement.” The Tangible Net Worth of the Business
set forth on the Final Statement will be the “Final Tangible Net Worth”.

(v) If Acquirer and the Company fail to select the Accounting Referee as
required by Section 1.4(b)(iii) within ten (10) Business Days after the
expiration of the 30-calendar day negotiation periods described therein, the
Company and Acquirer may resolve any remaining objections set forth in the
Statement of Objections in accordance with Section 9.8.

(vi) Except as provided in Section 1.4(b)(vii), Acquirer and the Company shall
bear equally the fees and expenses of the Accounting Referee and the fees of any
arbitrators appointed to resolve disputes under this Section 1.4(b).

(vii) The Accounting Referee shall be required by the parties to determine the
party (i.e., Acquirer or the Company) whose asserted position as to the
calculation of Closing Date Tangible Net Worth is furthest from the
determination by the Accounting Referee and such party shall be deemed to be the
“non-prevailing party.” Notwithstanding the provisions set forth in
Section 1.4(b)(vi), if Acquirer is the non-prevailing party and its asserted
position was lower by 10% or more of the Final Tangible Net Worth as determined
by the Accounting Referee, Acquirer will pay all of the fees and expenses of the
Accounting Referee and any arbitrators appointed to resolve disputes under this
Section 1.4(b). Notwithstanding the provisions set forth in Section 1.4(b)(vi),
if the Company is the non-prevailing party and its asserted position was higher
by 10% or more of the Final Tangible Net Worth as determined by the Accounting
Referee, the Company will pay all of the fees and expenses of the Accounting
Referee and any arbitrators appointed to resolve disputes under this
Section 1.4(b).

(viii) Each party will (A) provide the other party and its representatives with
full access during customary business hours to those books, records and
employees that are related to the preparation of Closing Date Tangible Net Worth
and (B) fully cooperate with all reasonable requests by a party in connection
with a party’s review of the Closing Date Tangible Net Worth, the Statement and
the Statement of Objections. Acquirer and the Company will make available to the
other party and its representatives (including auditors) any back-up materials
generated by them to support a position which is contrary to the position taken
by the other party.

(ix) The “Final Closing Purchase Price” will be the amount equal to all paid
installments of the Base Payment (A) plus the amount, if any, by which the Final
Tangible Net Worth exceeds the Target Tangible Net Worth, or (B) less the
amount, if any, by which the Target Tangible Net Worth exceeds the Final
Tangible Net Worth (the amount resulting from the adjustment, if any, caused by
(A) or (B) above, the “Final Tangible Net Worth Adjustment”).

 

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(x) In the event that the Final Closing Purchase Price, as determined in
accordance with the provisions of this Section 1.4,

(A) is greater than all paid installments of the Base Payment, Acquirer will pay
to the Company an amount equal to (i) the Final Closing Purchase Price, less
(ii) all paid installments of the Base Payment, via wire transfer of immediately
available funds from Acquirer to the account specified by the Company pursuant
to Section 1.4(a)(iii), not later than three Business Days after a Statement is
deemed a Final Statement; or

(B) is less than all paid installments of the Base Payment, the Company will pay
to Acquirer an amount equal to (i) all paid installments of the Base Payment,
less (ii) the Final Closing Purchase Price, via wire transfer of immediately
available funds, not later than three Business Days after a Statement is deemed
a Final Statement.

1.5 Closing. The consummation of the purchase and sale of the Purchased Assets
in accordance with this Agreement (the “Closing”) shall take place at 10:00
a.m., California time, at the offices of Jones Day, 555 S. Flower Street, Los
Angeles, California 90071, on the third (3rd) Business Day after all of the
conditions precedent to Closing hereunder shall have been satisfied or waived,
or at such other date, time and place as the Company and Acquirer shall mutually
agree upon. The date of the Closing shall be referred to as the “Closing Date.”
The Company and Acquirer hereby agree to deliver at the Closing such documents,
certificates of officers and other instruments as are set forth in Article 7
hereof and as may reasonably be required to effect the transfer by the Company
of the Purchased Assets pursuant to and as contemplated by this Agreement and to
consummate the Acquisition. All events which shall occur at the Closing shall be
deemed to occur simultaneously.

1.6 Transfer Taxes. Acquirer shall be responsible for the payment of any sales,
use, transfer or similar taxes arising out of or in connection with the
Acquisition.

ARTICLE 2

REPRESENTATIONS AND WARRANTIES OF THE COMPANY

Subject to the exceptions set forth in the Disclosure Schedule, the Company
hereby represents and warrants to Acquirer as follows. Any exception to or
disclosure in respect of any representation, warranty or covenant, and any other
information, which is disclosed in one section of the Disclosure Schedule shall
be deemed to have been disclosed in every other section of the Disclosure
Schedule only to the extent it is reasonably apparent that such exception is
applicable to such other representation, warranty or covenant. Neither Acquirer
nor any Affiliate of Acquirer has been given, or has relied upon or been induced
to enter into this Agreement by any representation or warranty, express or
implied, other than as expressly set forth in this Agreement.

2.1 Organization and Qualification.

(a) The Company is a corporation duly organized, validly existing and in good
standing under the Laws of the jurisdiction of its incorporation, and each has
full corporate power and authority to (i) conduct its Business as now conducted,
(ii) to own, use, license and

 

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lease its Assets and Properties, and (iii) to perform its obligations under all
Contracts to which it is a party. The Company is duly qualified, licensed or
admitted to do business and is in good standing as a foreign corporation in each
jurisdiction in which the ownership, use, licensing or leasing of its Assets and
Properties, or the conduct or nature of its business, makes such qualification,
licensing or admission necessary, except for such failures to be so duly
qualified, licensed or admitted and in good standing that could not reasonably
be expected to have a material adverse effect on the Business or condition,
financial or otherwise, of the Company. Section 2.1 of the Disclosure Schedule
sets forth each jurisdiction where the Company is so qualified, licensed or
admitted to do business and separately lists each other jurisdiction in which
the Company owns, uses, licenses or leases its Assets and Properties, or
conducts business or has employees or engages independent contractors.

(b) The Company has never conducted any business under or otherwise used, for
any purpose or in any jurisdiction, any fictitious name, assumed name, trade
name or other name.

(c) Other than as listed on Section 2.1(c) of the Disclosure Schedule, the
Company has no subsidiaries, whether directly or indirectly, and owns no shares
of capital stock or any other ownership interest in any Person, and the Company
is not a partner (general or limited), joint venturer or participant in any
partnership, joint venture or other corporate entity.

2.2 Authority Relative to this Agreement. The Company has full corporate power
and authority to execute and deliver this Agreement and the other agreements
which are attached (or forms of which are attached) as exhibits hereto (the
“Ancillary Agreements”) to which the Company is a party, to perform its
obligations hereunder and thereunder and to consummate the transactions
contemplated hereby and thereby. This Agreement and the Ancillary Agreements to
which the Company is a party have been or will be, as applicable, duly and
validly executed and delivered by the Company and, assuming the due
authorization, execution and delivery hereof (and, in the case of the Ancillary
Agreements to which Acquirer is a party, thereof) by Acquirer, each constitutes
or will constitute, as applicable, a legal, valid and binding obligation of the
Company enforceable against the Company in accordance with its respective terms,
except as the enforceability thereof may be limited by bankruptcy, insolvency,
fraudulent conveyance, reorganization, moratorium or other similar Laws relating
to the enforcement of creditors’ rights generally and by general principles of
equity.

2.3 Equity Ownership. Section 2.3 of the Disclosure Schedule sets forth a list
of all of the holders of capital stock of the Company, indicating the name of
shareholder and the number of shares of capital stock such shareholder owns. The
list set forth at Section 2.3 of the Disclosure Schedule represents 100% of the
outstanding equity of the Company. Other than as set forth on Section 2.3 of the
Disclosure Schedule, there exists no: (i) outstanding subscription, option,
call, warrant or right (whether or not currently exercisable) to acquire any
equity interest in the Company; or (ii) outstanding security, instrument or
obligation that is or may become convertible into or exchangeable for any equity
interest in the Company.

2.4 Company Financial Statements.

(a) The audited financial statements of the Company at and for the periods ended
December 31, 2004, 2005, 2006 and 2007, including the notes therein (the
“Audited

 

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Financials”), and Interim Financials (the Interim Financials, collectively, with
the Audited Financials, the “Company Financials”), which statements are attached
hereto as Section 2.4(a) of the Disclosure Schedule, have been prepared in
accordance with GAAP applied on a basis consistent throughout the periods
indicated and consistent with each other (except that the unaudited financial
statements do not contain footnotes and are subject to normal and recurring
year-end audit adjustments). The Company Financials present fairly and
accurately, in all material respects, the financial condition and operating
results of the Company as of the dates and during the periods indicated therein.

(b) The Company has established and documented, and maintains, adheres to and
enforces a system of internal accounting controls which are effective in
providing reasonable assurance regarding the reliability of financial reporting
and the preparation of financial statements (including the Company Financials),
including policies and procedures that (a) require the maintenance of records
that in reasonable detail accurately and fairly reflect the transactions and
dispositions of the assets of the Company, (b) provide reasonable assurance that
transactions are recorded as necessary to permit preparation of true and correct
financial statements, and that receipts and expenditures of the Company are
being made only in accordance with appropriate authorizations of management and
the Board of Directors of the Company and (c) provide reasonable assurance
regarding prevention or timely detection of unauthorized acquisition, use or
disposition of the assets of the Company. Neither the management of the Company
nor the Company’s independent auditors has identified or been made aware of
(i) any significant deficiency or material weakness in the system of internal
accounting controls utilized by the Company, (ii) any fraud, whether or not
material, that involves the Company management or other employees who have a
role in the preparation of financial statements or the internal accounting
controls utilized by the Company or (iii) any claim or allegation regarding any
of the foregoing.

2.5 Books and Records; Organizational Documents. The minute books and stock
record books and other similar records of the Company have been provided or made
available to Acquirer or its counsel prior to the execution of this Agreement,
are complete and correct in all material respects and have been maintained in
accordance with the sound and prudent business practices customary for closely
held entities. Such minute books contain a true and complete record of all
actions taken at all meetings and by all written consents in lieu of meetings of
the directors, shareholders and committees of the board of directors of the
Company from the date of the Company’s organization through the date hereof. The
Company has prior to the execution of this Agreement delivered to Acquirer true
and complete copies of its Articles of Incorporation and Bylaws, both as amended
through the date hereof. The Company is not in violation of any provisions of
its Articles of Incorporation or Bylaws.

2.6 No Undisclosed Liabilities. Except as reflected or reserved against in the
Company Financials (including the notes thereto), there are no Liabilities of,
relating to or affecting the Company or any of the Company’s Assets and
Properties, other than Liabilities (i) on the Company Financials, (ii) incurred
in the ordinary course of business consistent with past practice since
January 31, 2008, (iii) incurred in connection with transactions contemplated by
the Agreement or (iv) set forth on Section 2.6 of the Disclosure Schedule.

 

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2.7 Absence of Changes.

(a) Except as set forth in Section 2.7 of the Disclosure Schedule, since
January 31, 2008:

(i) there has not been any material adverse change in the Company’s business,
assets, liabilities, operations or financial performance;

(ii) there has not been any material loss, damage or destruction to, or any
material interruption in the use of, any of the Company’s assets (whether or not
covered by insurance);

(iii) the Company has not sold, issued or authorized the issuance of any
instrument convertible into or exchangeable for any capital stock or other
security of the Company;

(iv) there has been no amendment to the Company’s Articles of Incorporation or
Bylaws, and the Company has not effected or been a party to any Business
Combination;

(v) the Company has not formed any subsidiary or acquired any equity interest or
other interest in any other Entity;

(vi) the Company has not made any capital expenditure which, when added to all
other capital expenditures made on behalf of the Company since January 31, 2008,
exceeds $25,000;

(vii) the Company has not (i) entered into or permitted any of its material
assets owned or used by it to become bound by any Contract or (ii) amended or
prematurely terminated, or waived any material right or remedy under, any
Contract;

(viii) the Company has not (i) acquired, leased or licensed any right or other
asset from any other Person, (ii) sold or otherwise disposed of, or leased or
licensed, any right or other asset to any other Person, or (iii) waived or
relinquished any right, except for immaterial rights or other immaterial assets
acquired, leased, licensed or disposed of in the ordinary course of business and
consistent with the Company’s past practices;

(ix) the Company has not written off as uncollectible, or established any
extraordinary reserve with respect to, any account receivable or other
indebtedness;

(x) the Company has not made any changes to the method or processes pursuant to
which it collects vendor receivables and has continued to accrue for such
receivables;

(xi) the Company has not made any pledge of any of its assets or otherwise
permitted any of its assets to become subject to any Liens, except for pledges
of immaterial assets made in the ordinary course of business and consistent with
the Company’s past practices;

(xii) the Company has not (i) lent money to any Person (other than pursuant to
routine travel advances made to employees in the ordinary course of business),
or (ii) incurred or guaranteed any indebtedness for borrowed money;

 

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(xiii) the Company has not (i) established or adopted any Plan, (ii) paid any
bonus or made any profit sharing or similar payment to, or increased the amount
of the wages, salary, commissions, fringe benefits or other compensation or
remuneration payable to, any of its directors, officers or employees, or
(iii) hired any new employee;

(xiv) the Company has not changed any of its methods of accounting or accounting
practices in any respect;

(xv) the Company has not commenced or settled any Legal Proceeding, or received
any notice, whether written or otherwise, that any Person was commencing or
threatening to commence a Legal Proceeding involving the Company;

(xvi) the Company has not entered into any material transaction or taken any
other material action outside the ordinary course of business inconsistent with
past practices;

(xvii) there has not occurred any increase in or modification of the
compensation or benefits payable or to become payable by the Company to any of
its directors, officers, employees or consultants (other than increases in the
base salaries of employees who are not officers in an amount that does not
exceed 10% of such base salaries), or any new loans or extension of existing
loans to any such Persons (other than routine expense advances to employees of
the Company consistent with past practice), and the Company has not entered into
any Contract to grant or provide (nor has granted any) severance, acceleration
of vesting or other similar benefits to any such Persons; and

(xviii) the Company has not agreed or committed to take any of the actions
referred to in clauses (iii) through (xvii) above.

(b) As of the date hereof, the Company is not in default under, or in breach of,
any of the material terms of any loan capital, borrowing, debenture or financial
facility of the Company.

(c) As of the date hereof, the Company is not, nor has the Company agreed to
become, bound by any guarantee, indemnity, surety or similar commitment which
has not been reflected in the Company Financials.

(d) As of the date hereof, except as set forth in Section 2.7(d) of the
Disclosure Schedule, the Company does not have any credit cards in issue in its
own name or that of any officer or employee of the Company or any person
connected with any officer or employee.

(e) The Company has not received any grants, allowances, loans or financial aid
of any kind from any government departmental or other board, body, agency or
authority which may become liable to be refunded or repaid in whole or in part.

(f) The Company has not engaged in financing of a type which is not required to
be, or has not been, shown or reflected in the Company Financials.

2.8 Real Property.

(a) The Company does not own any real property.

 

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(b) Section 2.8(b) of the Disclosure Schedule sets forth a list of all real
property currently leased, licensed or subleased by the Company or otherwise
used or occupied by the Company (the “Leased Real Property”). All documents
related to such lease, license, sublease, use or occupation (the “Lease
Documents”) are in full force and effect, are valid and effective in accordance
with their respective terms, and there is not, under any of the Lease Documents,
any material existing breach, default or event of default (or event which with
notice or lapse of time, or both, would constitute a default) by the Company or,
to the Company’s Knowledge, any third party under any of the Lease Documents, in
each case subject to applicable bankruptcy, insolvency, reorganization,
moratorium or other laws relating to or affecting the rights and remedies of
creditors generally and to general principles of equity. Except as set forth on
Section 2.8(b) of the Disclosure Schedule, (i) no parties other than the Company
have a right to occupy any material Leased Real Property, (ii) the Leased Real
Property is used only for the operation of the business of the Company,
(iii) the Leased Real Property and the physical assets of the Company situated
thereon are suitable for the Business as conducted by the Company.

(c) The Company has made available to Acquirer true, correct and complete copies
of all Lease Documents.

2.9 Valid Title. The Company has good, marketable and valid title to, or, in the
case of leased Assets and Properties, valid leasehold interests in, all of its
material tangible Assets and Properties, real, personal and mixed, reflected in
the latest Company Financials, free and clear of any Liens except (a) with
respect to Liens securing obligations reflected in the Company Financials,
(b) Permitted Liens and (c) such imperfections of title and Liens, if any, which
do not materially impair the continued use of the properties or assets subject
thereto or affected thereby, or otherwise materially impair business operations
at such properties. The Purchased Assets include all rights, properties and
assets necessary to permit the Acquirer to conduct the Business in all material
respects in the same manner as the Business has been conducted prior to the date
hereof.

2.10 Intellectual Property.

(a) Section 2.10(a) of the Disclosure Schedule lists (i) all Company Registered
Intellectual Property (including all trademarks and service marks that the
Company has used with the intent of creating or benefiting from any common law
rights relating to such marks), (ii) the jurisdiction in which such item of
Company Registered Intellectual Property has been registered or filed and the
applicable registration or serial number; (iii) any other Person that has an
ownership interest in such item of Company Registered Intellectual Property and
the nature of such ownership interest; and (iv) each product or service
identified in Section 2.10(b) of the Disclosure Schedule that embodies, utilizes
or is based upon or derived from (or, with respect to products and services
under development, that is expected to embody, utilize or be based upon or
derived from) such item of Company Registered Intellectual Property, and lists
any proceedings or actions pending as of the date hereof before any court or
tribunal (including the PTO or equivalent authority anywhere in the world)
related to any of the Company Registered Intellectual Property.

(b) Section 2.10(b) of the Disclosure Schedule lists each proprietary product or
service developed, manufactured, marketed, or sold in or as a part of the
Business at any time since September 30, 2005 and any proprietary product or
service currently under development by the Company.

 

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(c) The Company has all requisite right, title and interest in or valid and
enforceable rights under Contracts or Licenses to use all Company Intellectual
Property necessary to the conduct of its business as currently conducted.

(i) Except as set forth in Section 2.10(b)(i) of the Company Disclosure
Schedule, each item of Company Intellectual Property, including all Company
Registered Intellectual Property listed in Section 2.10(a) of the Disclosure
Schedule, is owned exclusively by the Company (excluding Intellectual Property
licensed to the Company under any License disclosed under Section 2.10(g) of the
Disclosure Schedule) and is free and clear of any Liens. Without limiting the
generality of the foregoing, the Company owns exclusively all trademarks,
service marks and trade names used by the Company in connection with the
operation or conduct of the business of the Company as currently conducted or as
currently contemplated to be conducted, including the sale of any products or
technology or the provision of any services by the Company; provided, however,
that the Company may use trademarks, service marks and trade names of third
parties which are licensed to the Company, as disclosed under Section 2.10(g) of
the Disclosure Schedule, or are in the public domain.

(ii) Without limiting the generality of the foregoing, the Company owns
exclusively, and has good title to, each copyrighted work that is a Company
product and each other work of authorship that the Company otherwise purports to
own or is used by the Company in connection with the operation or conduct of the
business of the Company as currently conducted or provision of services by the
Company, other than works disclosed under Section 2.10(g) of the Disclosure
Schedule.

(d) To the extent that any Company Intellectual Property has been developed or
created by any Person other than the Company, the Company has a written
agreement with such Person with respect thereto and the Company has either
(i) obtained ownership of, and is the exclusive owner of, all such Intellectual
Property by operation of law or by valid assignment of any such rights or
(ii) has obtained a License under or to such Intellectual Property as disclosed
under Section 2.10(g) of the Disclosure Schedule.

(e) Except pursuant to agreements described in Section 2.10(e) of the Disclosure
Schedule, the Company has not transferred ownership of any Intellectual Property
that is or was Company Intellectual Property, to any other Person.

(f) Except as set forth in Section 2.10(f) of the Disclosure Schedule, the
Company Intellectual Property constitutes all the Intellectual Property used in
the conduct of the Company’s Business as it currently is conducted.

(g) Section 2.10(g)(i) of the Disclosure Schedule lists all Contracts (including
all inbound Licenses) to which the Company is a party that grant licenses to
Intellectual Property, other than standard Licenses for off-the-shelf,
shrink-wrap software or “open source” code that is commercially available on
reasonable terms to any Person for a license fee of no more than $25,000
dollars. Except as set forth in Section 2.10(g)(ii) of the Disclosure Schedule,
the

 

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Company is not in breach of, nor has it failed to perform under any of the
foregoing Contracts and Licenses and, to the Company’s Knowledge, no other party
to such Contracts and Licenses is in material breach of or has materially failed
to perform thereunder.

(h) To the Knowledge of the Company, no Person is infringing or misappropriating
any trademark or logo owned by the Company, and the Company (i) has not asserted
or threatened in writing or orally any claim against any Person alleging any
infringement, misappropriation or violation of any Intellectual Property owned
by the company or (ii) is not aware of any facts or circumstances which could
give rise to such a claim.

(i) The Company has taken all commercially reasonable steps to protect the
Company’s rights in confidential information and trade secrets of the Company or
provided by any other Person to the Company subject to a duty of
confidentiality. Without limiting the generality of the foregoing, the Company
has, and enforces, a policy requiring each employee, consultant and independent
contractor to execute proprietary information, confidentiality and invention and
copyright assignment agreements substantially in the form set forth as
Attachment 2.10(i) to the Disclosure Schedule, and all current and former
employees, consultants and independent contractors of the Company, except as set
forth in Section 2.10(i) of the Disclosure Schedule, have executed such an
agreement and copies of all such agreements have been provided to Acquirer or
made available to Acquirer for review.

(j) Except as set forth in Section 2.10(j) of the Disclosure Schedule, no
(i) product, technology, service or publication of the Company, (ii) material
published or, to the Company’s Knowledge, distributed by the Company or
(iii) conduct or statement of Company constitutes obscene material, a defamatory
statement or material, false advertising or otherwise violates any Law.

(k) Neither this Agreement nor any transaction contemplated by this Agreement
will give to any third party the right to terminate, in whole or in part, any
Contracts or Licenses to which the Company is a party with respect to any
Intellectual Property, except for the Contracts or Licenses set forth in
Section 2.10(k) of the Disclosure Schedule.

(l) Section 2.10(l) of the Disclosure Schedule identifies each Contract pursuant
to which the Company has deposited with an escrow agent or any other Person, any
of its computer software and code, in a form other than object code form,
including related programmer comments and annotations, which may be printed out
or displayed in readily human readable form (“Source Code”). The execution of
this Agreement and the consummation of the transactions contemplated hereby will
not result in a release of any Source Code owned by the Company or the grant of
incremental rights to a Person with regard to such Source Code. The Company has
not taken any action that will, or would reasonably be expected to, result in
the disclosure or delivery of any Source Code owned by the Company under any
Contract. To the Company’s Knowledge, no event has occurred, and no circumstance
or condition exists, that (with or without notice or lapse of time, or both)
will, or would reasonably be expected to, result in the disclosure or delivery
by the Company or any Person acting on their behalf to any Person of any Source
Code owned by the under any Contract, and no such Source Code has been
disclosed, delivered or licensed to a third party.

 

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2.11 Contracts.

(a) Section 2.11(a) of the Disclosure Schedule (with paragraph references
corresponding to those set forth below) contains a true and complete list of
each of the following Contracts or other arrangements (true and complete copies
of which or, if none, reasonably complete and accurate written descriptions
thereof, together with all amendments and supplements thereto and all waivers of
any terms thereof, have been provided to Acquirer prior to the execution of this
Agreement), to which the Company is a party or by which any of its Assets and
Properties is bound:

(i)(A) all Contracts (excluding Plans) providing consulting or other employment
services for a specified or unspecified term, the name, position and rate of
compensation of each Person party to such a Contract and the expiration date of
each such Contract; and (B) any written or unwritten representations,
commitments, promises, communications or courses of conduct involving an
obligation of the Company to make payments (with or without notice, passage of
time or both) to any Person in connection with, or as a consequence of, the
transactions contemplated hereby or to any employee who is disclosed in
Section 2.11(a)(i) of the Disclosure Schedule, other than with respect to salary
or incentive compensation payments in the ordinary course of business consistent
with past practice;

(ii) all Contracts with any Person containing any provision or covenant
prohibiting or limiting the ability of the Company to engage in any business
activity or compete with any Person or prohibiting or limiting the ability of
any Person to compete with the Company or prohibiting or limiting disclosure of
confidential or proprietary information;

(iii) all partnership, joint venture, shareholders’ or other similar Contracts;

(iv) all Contracts relating to Indebtedness in an amount of $25,000 dollars or
more;

(v) any trust indenture, mortgage, promissory note, loan agreement or other
Contract for the borrowing of money, any currency exchange, commodities or other
hedging arrangement or any leasing transaction of the type required to be
capitalized in accordance with GAAP;

(vi) all Contracts entered into outside the ordinary course of business (A) with
independent contractors, distributors, dealers, manufacturers’ representatives,
sales agencies or franchisees, (B) with aggregators, manufacturers and equipment
vendors, and (C) with respect to the sale of services, products or both, to
customers;

(vii) all guarantees of any Indebtedness or of other obligations of any Person,
including, but not limited to, any agreement of guarantee, support,
indemnification, assumption or endorsement of, or any similar commitment with
respect to, the obligations, Liabilities or Indebtedness of any other Person;

(viii) all Contracts between or among the Company, on the one hand, and any
current or former officer, director, shareholder, Affiliate or Associate of the
Company or any Associate of any such officer, director, shareholder or
Affiliate, on the other hand;

 

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(ix) all collective bargaining or similar labor contracts;

(x) all Contracts other than those disclosed in Section 2.11(a)(v) of the
Disclosure Schedule that (A) limit or contain restrictions on the ability of the
Company to declare or pay dividends on, to make any other distribution in
respect of or to issue or purchase, redeem or otherwise acquire its capital
stock, to incur Indebtedness, to incur or suffer to exist any Lien, to purchase
or sell any Assets and Properties, to change the lines of business in which it
participates or engages, (B) require the Company to maintain specified financial
ratios or levels of net worth or other indicia of financial condition or
(C) require the Company to maintain insurance in certain amounts or with certain
coverages;

(xi) all Contracts that provide for continuing research and development and/or
design or other services after the Closing Date;

(xii) any Contract that expires, or may be renewed at the option of any Person
other than the Company so as to expire more than, one (1) year after the date of
this Agreement;

(xiii) any Contract that is not terminable by the Company upon thirty (30) days
(or less) notice by the Company without penalty or obligation to make payments
based on such termination and which (A) requires payments by the Company in
excess of $25,000 dollars (either alone or pursuant to a series of related
contracts), or (B) requires the provision of services to any Person after the
Closing;

(xiv) any Contract containing any covenant (A) limiting in any material respect
the right of the Company to engage or compete in any line of business which
covenant would apply to Acquirer after the Closing, (B) granting any exclusive
distribution rights, (C) providing “most favored nations” terms for Company
products or services, or (D) which otherwise adversely affects or would
reasonably be expected to adversely affect the right of the Company to sell,
distribute or manufacture any Company products or services or material
Intellectual Property owned by the Company or to purchase or otherwise obtain
any material software, components, parts or subassemblies;

(xv) all powers of attorney and comparable delegations of authority; and

(xvi) all other Contracts not otherwise required to be disclosed above in
Section 2.11(a) of the Disclosure Schedule which are material to the Company or
related to the Business.

(b) Each Contract required to be disclosed in Section 2.11(a) of the Disclosure
Schedule is in full force and effect and constitutes a legal, valid and binding
agreement, enforceable in accordance with its terms, and to the Knowledge of the
Company, each other party thereto.

(c) Except as set forth in Section 2.11(c) of the Disclosure Schedule:

(i) the Company has not violated or breached, or committed any default under,
any Contract to which it is a party, and, to the best of the Knowledge of the
Company, no other Person has violated or breached, or committed any default
under, any such Contract;

 

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(ii) to the Knowledge of the Company, no event has occurred, and no circumstance
or condition exists, that (with or without notice or lapse of time) will, or
could reasonably be expected to, (A) result in a material violation or breach of
any of the provisions of any Contract, (B) give any Person the right to declare
a default or exercise any remedy under any Contract, (C) give any Person the
right to accelerate the maturity or performance of any Company Contract, or
(D) give any Person the right to cancel, terminate or modify any Company
Contract;

(iii) since January 31, 2008, the Company has not have received any notice or
other communication regarding any actual or possible violation or breach of, or
default under, any Contract; and

(iv) the Company has not waived any of its material rights under any material
Contract.

(d) No Person is renegotiating, or has a right pursuant to the terms of any
Contract to renegotiate, any amount paid or payable under any material Contract
or any other term or provision of any material Contract.

(e) Except as disclosed in Section 2.11(e) of the Disclosure Schedule, the
Company has no Knowledge of any basis upon which any party to any Company
Contract may object to (i) the assignment to Acquirer of any right under such
Contract, or (ii) the delegation to or performance by Acquirer of any obligation
under such Contract.

(f) The Contracts identified in Section 2.11(a) of the Disclosure Schedule
collectively constitute all of the Contracts necessary to enable Acquirer to
conduct its business in the manner in which its business is currently being
conducted.

2.12 Employees.

(a) A complete and accurate list setting forth all employees, officers,
directors, contractors and consultants of the Company as of the date hereof,
together with their titles or positions, dates of hire, regular work location
and current compensation, current salary and benefits, age, notice period, and
all employment contracts or other agreements between the Company and any officer
or, employee or any other contractor, consultant or person relating to the
performance of services is included in Section 2.12(a) of the Disclosure
Schedule. Copies of all such agreements have been delivered to Acquirer. Except
as set forth in Section 2.12(a) of the Disclosure Schedule, the completion of
the transactions contemplated by this Agreement will not result in any payment
or increased payment becoming due to any current or former officer, director, or
employee of, or consultant to, the Company.

(b) There are no outstanding offers of employment or engagement made to any
person by the Company and there is no one who has accepted an offer of
employment or engagement made by the Company who has not yet taken up that
employment or engagement.

(c) Except as set forth in Section 2.12(c) of the Disclosure Schedule, as of the
date hererof, no employee, officer, director, contractor or consultant of the
Company:

(i) has given or received notice terminating his or her employment or engagement
or altering its terms, and no such person will be entitled as a result of the
entering into of this Agreement and the sale of the Company’s Assets and
Properties to Acquirer to give notice of termination or to claim for any payment
or benefit or to treat himself as being released from any obligation and no such
person is planning to terminate his or her employment as of or shortly after the
Closing; or

 

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(ii) is currently on sick leave which (as of the date of this Agreement) has
been for more than 14 consecutive days; or

(iii) is currently on sabbatical or parental leave.

(d) Since December 31, 2007, other than in the ordinary course of business
(i) no change has been made in the rate or basis of remuneration, fee or other
benefits provided for or paid to any employee, officer, director, consultant or
contractor of the Company, and (ii) no change has been made in any other terms
of employment or engagement of any such employee, officer, director, consultant
or contractor, except as otherwise reflected in Section 2.12(a) of the
Disclosure Schedule.

(e) The officers of the Company are not aware of any facts or matters affecting
any employee of the Company which might reasonably be considered grounds for
dismissing such employee or warning such employee that the continuation of any
conduct or behavior may lead to dismissal.

(f) No grievance or complaint of sex, race or disability discrimination, whether
formal or informal, is pending in an administrative or litigation proceeding nor
has been raised by any employee, director or consultant or former employee,
director or consultant of the Company in the twelve months prior to Closing.

(g) The Company has not made any loans to or entered into any credit transaction
with any of its directors or any employee or officer which has not been
reflected in the Company Financials.

(h) The Company has made available to Acquirer true and correct copies or
summaries of the most recent annual report filed with the IRS with respect to
each Plan (if any such report was required). Each Plan has been maintained,
funded, operated and administered in compliance in all material respects with
applicable laws, including, without limitation, ERISA and the Code. All Plans
required to have been approved by any non United States Governmental Entity (or
permitted to have been approved to obtain any beneficial tax or other status)
have been so approved or timely submitted for approval, no such approval has
been revoked (nor, as of the date of this Agreement, to the Knowledge of the
Company, has revocation been threatened) and no event has occurred since the
date of the most recent approval or application therefor relating to any such
Plan that is reasonably likely to affect any such approval relating thereto or
increase the costs relating thereto.

(i) There are no agreements and there have been no communications, written or
oral, that would prevent any Company plan or agreement that provides welfare
benefits (each a “Welfare Plan”) (including any Welfare Plan covering retirees
or other former employees) from

 

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being amended or terminated without material liability to the Company on or at
any time after the Closing. No Welfare Plan provides benefits after termination
of employment, except where the cost thereof is borne entirely by the former
employee (or his or her eligible dependents or beneficiaries) or as required by
Section 4980B(f) of the Code, ERISA or other applicable Law.

(j) Section 2.12(j) of the Disclosure Schedule identifies each Plan that is or
has ever been a “nonqualified deferred compensation plan” within the meaning of
Section 409A of the Code and associated Treasury Department guidance. Each such
nonqualified deferred compensation plan (i) since January 1, 2005, has been
operated in good faith compliance with Section 409A of the Code and associated
Treasury Department guidance, and (ii) in existence prior to January 1, 2005 has
not been “materially modified” within the meaning of Section 409A of the Code
and associated Treasury Department guidance, including IRS Notice 2005-1, Q&A
18.

(k) Except as expressly set forth in Section 2.12(k) of the Disclosure Schedule,
no persons will be entitled to any severance, change in control, termination,
bonus or other additional compensation or benefits from or on behalf of the
Company or any acceleration of the time of payment or vesting of any
compensation or benefits as a result of the Acquisition or any of the other
transactions contemplated by this Agreement (alone or in combination with any
other event) or any compensation or benefits related to or contingent upon, or
the value of which will be calculated on the basis of the Acquisition or any of
the other transactions contemplated by this Agreement (alone or in combination
with any other event). The execution and delivery of this Agreement, the
consummation of the Acquisition and the other transactions contemplated by this
Agreement (alone or in combination with any other event) and compliance by the
Company with the provisions of this Agreement do not and will not (A) trigger
any funding (through a grantor trust or otherwise) of, or increase the cost of,
or give rise to any other obligation under, any Plan or agreement, (B) trigger
the forgiveness of indebtedness owed by any persons to the Company or any of its
affiliates (C) result in any violation or breach of, or a default (with or
without notice or lapse of time or both) under, or limit to the Company’s
ability to amend, modify or terminate, any Plan or agreement or (D) result in
the imposition of any Taxes on any person under Section 4999 of the Code.

(l) The Company has not received written, or to the Knowledge of the Company,
oral notice of, and, to the Knowledge of the Company, there are no, pending
investigations by any Governmental or Regulatory Authority with respect to, or
pending termination proceedings or other claims (except claims for benefits
payable in the normal operation of the Plans), suits or proceedings against or
involving any Plan or asserting any rights or claims to benefits under, any
Plan.

(m) All contributions, premiums and benefit payments under or in connection with
the Plans that are required to have been made by the Company have been timely
made.

(n) No Plan is a plan subject to Title IV of ERISA. No Plan is a “multiemployer
plan” as defined in Sections 3(37) of ERISA and 414(f) of the Code, nor a
“multiple employer plan” as described in Sections 4063(a) of ERISA and 413 of
the Code, and neither the Company nor any Person which, together with the
Company, would be treated as a single employer under Sections 4001 of ERISA or
414 of the Code has ever contributed or had an obligation to contribute to any
such plans.

 

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(o) There are no controversies or labor or trade disputes or union organization
activities pending or, to the Knowledge of the Company, threatened between the
Company and any of its respective employees nor are there facts known to the
Company which might indicate that there may be any such dispute or activities.

(p) No collective agreements are binding on the Company as of the Closing Date.
As of the date hereof, none of the Company’s employees are employed by any other
employer. No employees in addition to the Key Employees are required for the
Company’s business operations to be carried out as currently operated. Each of
the Company’s employees has a permanent right to reside and work in the
jurisdiction in which they are employed.

(q) There are no existing or former employees or other persons that have a right
of employment or re-employment with the Company.

(r) The Company has no consultants and has not at any time had any consultant
which under labor laws or tax laws would be deemed as an employee.

(s) There is no pending or threatened (i) claim by, or outstanding settlement
with, any current or former Company director, officer, or employee or any other
affiliated person against the Company, (ii) labor or union litigation in
relation to former employees or officers, or (iii) strike.

(t) All accrued costs or pensions, holidays, overtime and bonuses accrued up to
the respective Company Financials date are set out in the respective Company
Financials.

2.13 Compliance, Licenses and Consents.

(a) The Company has maintained and is in compliance in all material respects
with the terms of all Permits required to be obtained by it in connection with
the conduct of the Business.

(b) The Company has not received any written notice that any material Permit is
likely to be revoked, suspended or cancelled.

(c) The Company has not (i) committed nor is it liable for, and to the Knowledge
of the Company, no claim has been made that it has committed or is liable for,
any criminal or illegal act, or (ii) received notice that it is in breach of any
obligation or duty pursuant to statute.

(d) The execution, delivery and performance of this Agreement and the
transactions contemplated hereby do not and will not require the Company to
obtain any consent, approval or action, or make any filings with or give notice
to any customer, supplier or landlord.

2.14 Substantial Customers and Suppliers. Section 2.14 of the Disclosure
Schedule lists the fifteen (15) largest customers of the Company, collectively,
on the basis of revenues collected or accrued for calendar years 2006 and 2007
and as of January 31, 2008, and lists such

 

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revenues. Section 2.14 of the Disclosure Schedule lists the fifteen (15) largest
suppliers of the Company on the basis of cost of goods or services purchased for
calendar years 2006 and 2007 and as of January 31, 2008 and lists such costs of
goods or services purchased. Except as disclosed in Section 2.14 of the
Disclosure Schedule, no such customer or supplier has ceased or materially
reduced its purchases from or sales or provision of services to the Company
since December 31, 2006 or, to the Knowledge of the Company, has threatened to
cease or materially reduce such purchases or sales or provision of services
after the date hereof. Except as disclosed in Section 2.14 of the Disclosure
Schedule, to the Knowledge of the Company, no such customer or supplier is
threatened with bankruptcy or insolvency. The Company currently enjoys a good
working relationship with each of its customers and suppliers, including, but
not limited to, Hewlett Packard Company, and, to the Knowledge of the Company,
there are no facts or circumstances, including the consummation of the
Acquisition, that will adversely effect such relationships.

2.15 Accounts Receivable. Except as set forth in Section 2.15 of the Disclosure
Schedule, the accounts and notes receivable of the Company reflected on the
Company Financials, and all accounts and notes receivable arising subsequent to
December 31, 2007, (a) arose from bona fide sales transactions in the ordinary
course of business, consistent with past practice, and are payable on ordinary
trade terms, (b) are legal, valid and binding obligations of the respective
debtors enforceable in accordance with their respective terms, (c) are not
subject to any valid set-off or counterclaim and (d) do not represent
obligations for goods sold on consignment, on approval or on a sale-or-return
basis or subject to any other repurchase or return arrangement, except in each
case as would not, individually or in the aggregate, have a material adverse
effect.

2.16 Inventory. All inventory of the Company reflected on the balance sheet
included in the Company Financials consisted, and all such inventory acquired
since January 31, 2008 consists, in all material respects, of a quality and
quantity usable and salable in the ordinary course of business as currently
conducted or as reasonably contemplated to be conducted.

2.17 Banks and Brokerage Accounts. Section 2.17 of the Disclosure Schedule sets
forth (a) a true and complete list of the names and locations of all banks,
trust companies, securities brokers and other financial institutions at which
the Company has an account or safe deposit box or maintains a banking,
custodial, trading or other similar relationship, (b) a true and complete list
and description of each such account, box and relationship, indicating in each
case the account number and the names of the respective officers, employees,
agents or other similar representatives of the Company having signatory power
with respect thereto and (c) a list of each Investment Asset, the name of the
record and beneficial owner thereof, the location of the certificates, if any,
therefor, the maturity date, if any, and any stock or bond powers or other
authority for transfer granted with respect thereto.

2.18 Warranty Obligations.

(a) True and correct copies of the Warranty Obligations have been delivered to
Acquirer prior to the execution of this Agreement.

 

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(b) Except as disclosed in Section 2.18(b) of the Disclosure Schedule, (i) there
have not been any material deviations from the Warranty Obligations, and no
salesperson, employee or agent of the Company is authorized to undertake
obligations to any customer or other Person in excess of such Warranty
Obligations and (ii) the balance sheet included in the Interim Financial
Statements reflects adequate reserves for Warranty Obligations. To the extent
the Company has Warranty Obligations with respect to any products sold by the
Company, such products satisfy such Warranty Obligations in all material
respects.

2.19 Approvals.

(a) Section 2.19(a) of the Disclosure Schedule contains a list of all material
Approvals of Governmental or Regulatory Authorities relating to the business
conducted by the Company which are required to be given to or obtained by the
Company from any and all Governmental or Regulatory Authorities in connection
with the consummation of the transactions contemplated by this Agreement and the
Ancillary Agreements (other than the required officers’ certificates, and such
consents, approvals, orders, authorizations, registrations, declarations and
filings as may be required under state or federal securities laws).

(b) Section 2.19(b) of the Disclosure Schedule contains a list of all material
Approvals which are required to be given to or obtained by the Company from any
and all third parties other than Governmental or Regulatory Authorities in
connection with the consummation of the transactions contemplated by this
Agreement and the Ancillary Agreements.

2.20 Tax.

(a) All Tax Returns required to be filed by or on behalf of the Company have
been duly filed on a timely basis and such Tax Returns were, when filed, true,
complete and correct. All Taxes shown to be payable on such Tax Returns or on
subsequent assessments with respect thereto, and all payments of estimated Taxes
required to be made by or on behalf of the Company under Section 6655 of the
Code or comparable provisions of state, local or foreign law, have been paid in
full on a timely basis, and no other Taxes are payable by the Company with
respect to items or periods covered by such Tax Returns (whether or not shown on
such Tax Returns). The Company has withheld and paid over all Taxes required to
have been withheld and paid over, and complied with all information reporting
and backup withholding in connection with amounts paid or owing to any employee,
creditor, independent contractor, or other third party. The Company has
received, from each employee who holds stock that is subject to a substantial
risk of forfeiture as of the date hereof, a copy of the election(s) made under
Section 83(b) of the Code with respect to all such shares. There are no liens on
any of the assets of the Company with respect to Taxes, other than liens for
Taxes not yet due and payable. The Company has not been at any time a member of
an affiliated group of corporations filing consolidated, combined or unitary
income or franchise tax returns other than as a member of a group of which the
Company is the ultimate parent for a period for which the statute of limitations
for any Tax potentially applicable as a result of such membership has not
expired.

(b) The amount of the Company’s liabilities for unpaid Taxes for all periods
through January 31, 2008 does not, in the aggregate, exceed the amount of the
liability accruals for Taxes reflected on the Company Financials, and the
Company Financials properly accrue in accordance

 

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with GAAP all liabilities for Taxes of the Company payable after January 31,
2008 attributable to transactions and events occurring prior to such date. No
liability for Taxes of the Company has been incurred or material amount of
taxable income has been realized (or prior to and including the Closing Date
will be incurred or realized) after January 31, 2008 other than in the ordinary
course of business.

(c) Acquirer has been furnished by the Company true and complete copies of
(i) all income tax audit reports, statements of deficiencies, closing or other
agreements received by or on behalf of the Company relating to Taxes, and
(ii) all federal, state and foreign income or franchise tax returns and state
sales and use Tax Returns for or including the Company for 2004, 2005, 2006,
2007 and to the date hereof for 2008.

(d) No audit of the Tax Returns of or including the Company by a government or
taxing authority is in process, threatened or, to the Company’s Knowledge,
pending (either in writing or orally, formally or informally). No deficiencies
exist or have been asserted in writing with respect to Taxes of the Company, and
the Company has not received written notice that it has not filed a Return or
paid Taxes required to be filed or paid. The Company is not a party to any
action or proceeding for assessment or collection of Taxes, nor has such event
been asserted or threatened in writing against the Company or any of its assets.
No waiver or extension of any statute of limitations is in effect with respect
to Taxes or Tax Returns of the Company.

(e) The Company is not (nor has it ever been) a party to any tax sharing
agreement. Since inception, the Company has not been a distributing corporation
or a controlled corporation in a transaction described in Section 355(a) of the
Code.

2.21 Environmental Matters. Except as set forth in Section 2.21 of the
Disclosure Schedule:

(a) The Company possesses any and all Environmental Permits necessary to or
required for the operation of their business as currently conducted.

(b) The Company is in material compliance with (i) all terms, conditions and
provisions of its Environmental Permits; and (ii) all Environmental Laws.

(c) Neither the Company nor any predecessor thereof nor any entity previously
owned thereby has received any written notice of alleged, actual or potential
responsibility for, or any inquiry regarding, (i) any Release or threatened or
suspected Release of any Hazardous Material, or (ii) any violation of
Environmental Law, and there is no outstanding civil, criminal or administrative
investigation, action, suit hearing or proceeding pending or threatened against
the Company pursuant to any Environmental Law.

2.22 Absence of Litigation.

(a) No litigation, arbitration, administrative or criminal proceedings by or
against the Company are pending or, to the Company’s Knowledge, threatened
against the Company. To the Company’s Knowledge, there are no facts or
circumstances which will give rise to any litigation, arbitration,
administrative or criminal proceedings against the Company.

 

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(b) The Company is not subject to any judgment, injunction or other judicial or
arbitral decision or award which in any material respect restricts the Company’s
Business.

2.23 Export Control Laws. The Company has at all times conducted their export
transactions materially in accordance with (i) all applicable U.S. export and
re-export controls, including the United States Export Administration Act and
Regulations and Foreign Assets Control Regulations and (ii) all other applicable
import/export controls in other countries in which the Company conducts
business. Without limiting the foregoing:

(a) The Company has obtained, and are in material compliance with, all export
licenses, license exceptions and other consents, notices, waivers, approvals,
orders, authorizations, registrations, declarations, classifications and filings
with any Governmental Entity required for (i) the export and re-export of
products, services, software and technologies and (ii) releases of technologies
and software to foreign nationals located in the United States and abroad
(“Export Approvals”);

(b) There are no pending or, to the Company’s Knowledge, threatened claims
against the Company with respect to such Export Approvals; and

(c) To the Company’s Knowledge, as of the date hereof, there are no actions,
conditions or circumstances pertaining to the Company’s export transactions that
have given rise to any material claims.

2.24 Foreign Corrupt Practices Act. To the Company’s Knowledge, the Company
(including any of their officers, directors, agents, distributors, employees or
other Person acting on behalf of the Company) have, directly or indirectly,
taken any action which would cause them to be in violation of the Foreign
Corrupt Practices Act of 1977, as amended, or any rules or regulations
thereunder or any similar anti-corruption or anti-bribery legal requirements
applicable to the Company or any of its subsidiaries in any jurisdiction other
than the United States (collectively, the “FCPA”), or, to the Company’s
Knowledge, used any corporate funds for unlawful contributions, gifts,
entertainment or other unlawful expenses relating to political activity, made,
offered or authorized any unlawful payment to foreign or domestic government
officials or employees, whether directly or indirectly, or made, offered or
authorized any unlawful bribe, rebate, payoff, influence payment, kickback or
other similar unlawful payment, whether directly or indirectly. The Company has
established reasonable internal controls and procedures intended to ensure
compliance with the FCPA.

2.25 Insurance Coverage. The Company has made available to Acquirer true,
correct and complete copies of all policies of insurance of the Company issued
at the request or for the benefit of the Company. To the Knowledge of the
Company, there are no circumstances that will (i) lead to a claim against such
insurance or (ii) lead to any such insurance being revoked, violated or not
renewed in the ordinary course. Section 2.25 of the Disclosure Schedule
identifies each insurance claim made by the Company with respect to any
insurance policy of the Company or any predecessor insurance policy in the last
two (2) years.

2.26 Related Party Transactions. Except as set forth in Section 2.26 of the
Disclosure Schedule: (a) no Related Party has any direct or indirect interest of
any nature in any of the

 

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Purchased Assets; (b) no Related Party is, or has at any time since December 31,
2005 been, indebted to the Company; (c) since December 31, 2005, no Related
Party has entered into, or has had any direct or indirect financial interest in,
any Company Contract, transaction or business dealing of any nature involving
the Company; (d) no Related Party is competing, or has at any time since
December 31, 2005 competed, directly or indirectly, with the Company; (e) no
Related Party has any claim or right against the Company or the Purchased
Assets; and (f) to the Knowledge of the Company, no event has occurred, and no
condition or circumstance exists, that might (with or without notice or lapse of
time) directly or indirectly give rise to or serve as a basis for any claim or
right in favor of any Related Party against the Company.

2.27 Brokers or Finders. Except as disclosed in Section 2.27 of the Disclosure
Schedule, no person is entitled to receive from the Company any finder’s fee,
brokerage or other commission in connection with this Agreement or the sale and
purchase of all or part of the Company’s Assets and Properties.

2.28 Solvency.

(a) The Company has never, at any time, (i) made a general assignment for the
benefit of creditors, (ii) filed, or had filed against it, any bankruptcy
petition or similar filing, (iii) suffered the attachment or other judicial
seizure of all or a substantial portion of its assets or (iv) admitted in
writing its inability to pay its debts as they become due.

(b) The Company is not now insolvent.

(c) Immediately after giving effect to the consummation of the Acquisition,
(i) the Company will be able to pay its Liabilities as they become due in the
usual course of its business, (ii) the Company will have assets (calculated at
fair market value) that exceed their Liabilities and (iii) taking into account
all pending and threatened litigation, final judgments against the Company in
actions for money damages are not reasonably anticipated to be rendered at a
time when, or in amounts such that, the Company will be unable to satisfy any
such judgments promptly in accordance with their terms as well as all other
obligations of the Company. Following the Closing, the cash available to the
Company, after taking into account all other anticipated uses of the cash, will
be sufficient to pay all such debts and judgments promptly in accordance with
their terms.

2.29 No Conflict with Other Instruments. The execution, delivery and performance
of this Agreement and the transactions contemplated hereby (a) will not result
in any violation of, conflict with, constitute a breach, violation or default
(with or without notice or lapse of time, or both) under, give rise to a right
of termination, cancellation, forfeiture or acceleration of any obligation or
loss of any benefit under, or result in the creation or encumbrance on any of
the properties or assets of the Company pursuant to (i) any provision of the
Company’s Articles of Incorporation, as amended, or Bylaws, or (ii) any
agreement, contract, understanding, note, mortgage, indenture, lease, franchise,
license, permit or other instrument to which the Company is a party or by which
the Assets and Properties of the Company is bound, except to the extent such
event of default is caused by the failure to obtain the consents set forth on
Section 2.29 of the Disclosure Schedule attached hereto, or (b) conflict with or
result in any breach or violation of or require any consent, approval or action
of, or require the Company or any shareholder to

 

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make any filing with or under any statute, judgment, decree, order, rule or
governmental regulation applicable to the Company or its properties or assets or
any governmental or regulatory agency, except to the extent such event of
default is caused by the failure to obtain the consents set forth on
Section 2.29 of the Disclosure Schedule attached hereto, and except, in the case
of clause (a)(ii) for any of the foregoing that would reasonably be expected not
to, individually or in the aggregate, have a material adverse effect on the
Company or that would reasonably be expected not to result in the creation of
any material lien, charge or encumbrance upon any assets of the Company or that
would not prevent, materially delay or materially burden the transactions
contemplated by this Agreement. As used in this Agreement, any reference to any
event, change or effect being “material” or “materially adverse” or having a
“material adverse effect” on or with respect to an entity (or group of entities,
taken as a whole) means such event, change or effect is material or materially
adverse, as the case may be, with respect to the assets, business, operation and
condition (financial or otherwise) of the affected Person, taken as a whole.

2.30 Disclosure. No representation, warranty or other statement by the Company
in this Agreement contains an untrue statement of a material fact or omits to
state a material fact necessary to make such statements not misleading.

ARTICLE 3

REPRESENTATIONS AND WARRANTIES OF ACQUIRER

Acquirer hereby represents and warrants as follows:

3.1 Organization. Acquirer is a corporation duly incorporated, validly existing
and in good standing under the laws of Delaware and has all requisite corporate
power and authority to own, lease and operate its properties and to carry on its
business as now being conducted.

3.2 Authority. Acquirer has all requisite corporate power and authority to enter
into this Agreement and to perform its obligations hereunder and consummate the
transactions contemplated hereby. The execution and delivery of this Agreement,
the performance by Acquirer of its obligations hereunder and the consummation of
the transactions contemplated hereby have been duly and validly authorized by
all necessary corporate action on the part of Acquirer. This Agreement is a
valid and binding obligation of Acquirer.

3.3 No Conflict with Other Instruments. The execution, delivery and performance
of this Agreement (a) will not result in any violation of, conflict with,
constitute a breach, violation or default (with or without notice or lapse of
time, or both) under, give rise to a right of termination, cancellation,
forfeiture or acceleration of any obligation or loss of any benefit under, or
result in the creation or encumbrance on any of the properties or assets of
Acquirer or any of its subsidiaries, pursuant to (i) any provision of Acquirer’s
Certificate of Incorporation or Bylaws, or (ii) any material agreement,
contract, understanding, note, mortgage, indenture, lease, franchise, license,
permit or other instrument to which Acquirer or any of its subsidiaries is a
party or by which the properties or assets of Acquirer or any of its
subsidiaries is bound, or (b) to the knowledge of Acquirer after reasonable
inquiry, conflict with or result in any breach or violation of any statute,
judgment, decree, order, rule or governmental regulation applicable to Acquirer
or any of its subsidiaries or their respective properties or assets, except, in
the case of

 

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clauses (a)(ii) and (b) for any of the foregoing that would not, individually or
in the aggregate, have a material adverse effect on Acquirer and its
subsidiaries, taken as a whole, or that would not result in the creation of any
material Lien, charge or encumbrance upon any assets of Acquirer or any of its
subsidiaries or that would not prevent, materially delay or materially burden
the transactions contemplated by this Agreement.

3.4 Governmental Consents. No consent, approval, order or authorization of, or
registration, declaration or filing with, any Governmental or Regulatory
Authority is required by or with respect to Acquirer in connection with the
execution and delivery of this Agreement by Acquirer or the consummation by
Acquirer of the transactions contemplated hereby, except for such consents,
approvals, orders, authorizations, registrations, declarations, qualifications
or filings as may be required under federal or state securities laws in
connection with the transactions set forth herein or which the failure to obtain
would not have a material adverse effect on the consummation by Acquirer of the
transactions contemplated hereby.

3.5 Brokers or Finders. Except as disclosed in Section 3.5 of the disclosure
schedule delivered by Acquirer, if any, to the Company, no person is entitled to
receive from Acquirer any finder’s fee, brokerage or other commission in
connection with this Agreement or the Acquisition.

3.6 Purchase Price. Acquirer will have (1) at each of the dates set forth in
Sections 1.4(a)(iii), 1.4(a)(iv) and 1.4(a)(v) sufficient cash available, lines
of credit or other sources of immediately available funds to remit the
respective payments set forth therein and any payment with respect to the
Tangible Net Worth, as applicable, and (2) when due and payable in 2009,
sufficient cash available to remit the Earn-Out Payment.

3.7 Disclosure. No representation, warranty or other statement by Acquirer in
this Agreement contains an untrue statement of a material fact or omits to state
a material fact necessary to make such statements not misleading.

ARTICLE 4

CONDUCT PRIOR TO THE CLOSING DATE

4.1 Conduct of Business of the Company. During the period from the date of this
Agreement and continuing until the earlier of the termination of this Agreement
and the Closing, the Company agrees (unless the Company is required to take such
action pursuant to this Agreement or Acquirer shall give its prior consent in
writing which consent shall not be unreasonably withheld) to carry on its
business in the usual, regular and ordinary course consistent with past practice
to pay its Liabilities and Taxes consistent with the Company’s past practices
(and in any event when due), to pay or perform other obligations when due
consistent with the Company’s past practices (other than Liabilities, Taxes and
other obligations, if any, contested in good faith through appropriate
proceedings), and, to the extent consistent with such business, to use all
commercially reasonable efforts to preserve its present business organization,
keep available the services of its present officers and key employees and
preserve its relationships with customers, suppliers, distributors, licensors,
licensees, independent contractors and other Persons having business dealings
with it, all with the express purpose and intent of

 

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preserving its goodwill and ongoing businesses at the Closing Date. In addition,
the Company shall, prior to the Closing, cooperate in good faith with Acquirer
to facilitate the transition of the Company’s customers and vendors, including,
but not limited to, obtaining assignments, consents, and assurances from such
customers and vendors with respect to the Acquisition. Except as expressly
contemplated by this Agreement, the Company shall not, without the prior written
consent of Acquirer, take or agree in writing or otherwise to take, any action
that would make any of its representations or warranties contained in this
Agreement untrue or incorrect in any material respect or prevent the Company
from performing or cause the Company not to perform its agreements and covenants
hereunder or knowingly cause any condition to Acquirer’s closing obligations in
Section 7.1 or Section 7.3 not to be satisfied. Without limiting the generality
of the foregoing, during the period from the date of this Agreement and
continuing until the earlier of the termination of this Agreement or the
Closing, (i) the Company shall cause its officers to report regularly (but in no
event less frequently than weekly) to Acquirer concerning the status of the
Company’s business, and (ii) except as set forth in the Disclosure Schedule or
as required or expressly permitted by this Agreement, the Company shall not do,
cause or permit any of the following, without the prior written consent of
Acquirer:

(a) Charter Documents: cause or permit any amendments to its Articles of
Incorporation or Bylaws;

(b) Contracts: other than Contracts in the ordinary course of business
consistent with past practice, enter into any Contract or commitment, or
violate, amend or otherwise modify or waive any of the terms of any of its
Contract or Contracts which involve total obligations of less than twenty-five
thousand dollars ($25,000), individually, and $250,000 in the aggregate, and
which are not otherwise material to the business of the Company;

(c) Intellectual Property: dispose of, license or transfer to any person or
entity any rights to any Intellectual Property of the Company other than
non-exclusive licenses in connection with the sale of Company products in the
ordinary course of business consistent with past practice;

(d) Exclusive Rights: enter into or amend any agreement pursuant to which any
other party is granted exclusive marketing or other exclusive rights of any type
or scope with respect to any of Company’s products or technology;

(e) Dispositions: sell, lease, license or otherwise dispose of or encumber any
of the Purchased Assets, except for sales of products in the ordinary course of
business consistent with past practice;

(f) Indebtedness: incur any Indebtedness, other than from current lenders for
working capital purposes, for borrowed money or guarantee any such Indebtedness
or issue or sell any debt securities or guarantee any debt securities of others
or assume or incur any long term liabilities;

(g) Capital Expenditures: make any capital expenditures, capital additions or
capital improvements in excess of $25,000, individually, and $250,000 in the
aggregate;

(h) Termination or Waiver: terminate or waive any right of value;

 

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(i) Employee Benefit Plans; New Hires; Pay Increases: adopt or amend (except as
may be required by applicable Law) any employee benefit or stock purchase or
option plan, or hire any new consultant or employee, pay any special bonus or
special remuneration to any employee, consultant or director or increase the
salaries, wage rates or compensation of any employee or consultant;

(j) Severance Arrangements: grant any severance or termination pay (i) to any
director, officer or consultant or (ii) to any other employee except payments
made pursuant to standard written agreements outstanding on the date hereof;

(k) Lawsuits: commence a lawsuit other than (i) for the routine collection of
bills, (ii) in such cases where it in good faith determines that failure to
commence suit would result in the material impairment of a valuable aspect of
its business, provided that it consults with Acquirer prior to the filing of
such a suit, or (iii) for a breach of this Agreement;

(l) Acquisitions: acquire or agree to acquire by merging or consolidating with,
or by purchasing a substantial portion of the assets of, or by any other manner,
any business or any corporation, partnership, association or other business
organization or division thereof;

(m) Revaluation: revalue any of its assets, including writing down the value of
inventory or writing off notes or accounts receivable; or

(n) Other: take or agree in writing or otherwise to take, any of the actions
described in Section 4.1(a) through Section 4.1(m) above, or any other action
that would prevent the Company from performing, or cause the Company not to
perform, its covenants and agreements hereunder.

4.2 No Solicitation. Upon the signing of this Agreement, the Company will not
take, nor will the Company permit any of the Company’s Representatives to
(directly or indirectly), take any of the following actions with any Person
other than Acquirer and its designees: (a) solicit, encourage, initiate,
entertain, review or encourage any proposals or offers from, or participate in
or conduct discussions with or engage in negotiations with, any Person relating
to any offer, indication of interest or proposal, oral, written or otherwise,
formal or informal (a “Competing Proposed Transaction”), with respect to any
possible Business Combination with the Company or any of its subsidiaries
(whether such subsidiaries are in existence on the date hereof or are hereafter
organized), (b) provide information not customarily disclosed consistent with
the Company’s past practices with respect to the Company or any of its
subsidiaries (whether such subsidiaries are in existence on the date hereof or
are hereafter organized) to any Person, other than Acquirer or the Company’s
Representative, relating to (or which the Company believes or should reasonably
know would be used for the purpose of formulating an offer, indication of
interest or proposal with respect to), or otherwise assist, cooperate with,
facilitate or encourage any effort or attempt by any such Person with regard to,
any possible Business Combination with the Company (whether such subsidiary is
in existence on the date hereof or is hereafter organized), (c) agree to or
enter into a Contract with any Person, other than Acquirer, providing for or
approving a Business Combination with the Company or any Subsidiary (whether
such subsidiary is in existence on the date hereof or is hereafter organized),
(d) make or authorize any statement, recommendation, solicitation or endorsement
in support of any possible Business

 

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Combination with the Company or any Subsidiary (whether such subsidiary is in
existence on the date hereof or is hereafter organized) other than by Acquirer,
or (e) authorize or permit any of the Company’s Representatives to take any such
action. The Company shall immediately cease and cause to be terminated any such
contacts or negotiations with any Person relating to any such transaction or
Business Combination. In addition to the foregoing, if the Company receives
prior to the Closing or the termination of this Agreement any offer, indication
of interest or proposal (formal or informal, oral, written or otherwise)
relating to, or any inquiry or contact from any Person with respect to, a
Competing Proposed Transaction, the Company shall promptly notify Acquirer
thereof, such notice to include the identity of the Person or Persons making
such offer, indication of interest or proposal and the terms thereof, and will
keep Acquirer apprised on a current basis of the status of any such offer,
indication of interest or proposal and of any modifications to the terms
thereof; provided, however, that this provision shall not in any way be deemed
to limit the obligations of the Company and its Representatives set forth in the
second proceeding sentence. Each of the Company and Acquirer acknowledge that
this Section 4.2 was a significant inducement for Acquirer to enter into this
Agreement and the absence of such provision would have resulted in either (i) a
material reduction in the consideration to be paid to the shareholders of the
Company and the Acquisition or (ii) a failure to induce Acquirer to enter into
this Agreement.

ARTICLE 5

ADDITIONAL AGREEMENTS

5.1 Access to Information. Between the date of this Agreement and the earlier of
the Closing Date or the termination of this Agreement, upon reasonable notice
the Company shall (a) give Acquirer and its officers, employees, accountants,
counsel, financing sources and other agents and representatives reasonable
access to all buildings, offices, and other facilities and to all Books and
Records of the Company, whether located on the premises of the Company or at
another location; (b) permit Acquirer to make such inspections as it may
require; (c) cause its officers to furnish Acquirer such financial, operating,
technical and product data and other information with respect to the business
and Assets and Properties of the Company as Acquirer from time to time may
request, including financial statements and schedules; and (d) allow Acquirer
the opportunity to interview such employees and other personnel and Affiliates
of the Company with the Company’s prior written consent, which consent shall not
be unreasonably withheld or delayed; provided, however, that no investigation
pursuant to this Section 5.1 shall affect or be deemed to modify any
representation or warranty made by the Company herein. Materials furnished to
Acquirer pursuant to this Section 5.1 may be used by Acquirer only for strategic
planning purposes relating to evaluating and accomplishing the transactions
contemplated hereby.

5.2 Confidentiality. The parties acknowledge that Acquirer and the Company have
previously executed a non-disclosure agreement dated June 1, 2007 (the
“Confidentiality Agreement”), which Confidentiality Agreement shall continue in
full force and effect in accordance with its terms. Without limiting the
foregoing, all information furnished to Acquirer and its Representatives by the
Company including the any discussions, materials and data related to the
Agreement and the related transactions, and all information furnished to the
Company by Acquirer and its Representatives, shall be covered by the
Confidentiality Agreement, and Acquirer and the Company shall be fully liable
and responsible under the Confidentiality

 

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Agreement for any breach of the terms and conditions thereof by their respective
Subsidiaries and Representatives. Furthermore, without limiting the foregoing,
each of the parties hereto hereby agrees to keep the terms of this Agreement
(except to the extent contemplated hereby) and such information or knowledge
obtained in any investigation pursuant to Section 5.1, or pursuant to the
negotiation and execution of this Agreement or the effectuation of the
transactions contemplated hereby, confidential; provided, however, that the
foregoing shall not apply to information or knowledge which (a) a party can
demonstrate was already lawfully in its possession prior to the disclosure
thereof by the other party, (b) is generally known to the public and did not
become so known through any violation of Law, (c) became known to the public
through no fault of such party, (d) is later lawfully acquired by such party
without confidentiality restrictions from other sources not bound by applicable
confidentiality restrictions, (e) is required to be disclosed by order of court
or Governmental or Regulatory Authority with subpoena powers (provided that such
party shall have provided the other party with prior notice of such order and an
opportunity to object or seek a protective order and take any other available
action) or (f) which is disclosed in the course of any Action or Proceeding
between any of the parties hereto.

5.3 Approvals.

(a) The Company shall use commercially reasonable efforts to obtain all
Approvals from Governmental or Regulatory Authorities or under any of the
Contracts or other agreements as may be required in connection with the
Acquisition (all of which Approvals are set forth in the Disclosure Schedule) so
as to preserve all rights of and benefits to the Company thereunder and Acquirer
shall provide the Company with such assistance and information as is reasonably
required to obtain such Approvals.

(b) Without limiting the generality of the foregoing, the Company and Acquirer
shall, promptly after the date of this Agreement, prepare and file notifications
under the HSR Act in connection with the Acquisition and shall request early
termination of the waiting period thereunder. The Company and Acquirer shall
respond as promptly as practicable to: (i) any inquiries or requests received
from the Federal Trade Commission or the Department of Justice for additional
information or documentation; and (ii) any inquiries or requests received from
any state attorney general, foreign antitrust authority or other Governmental
Authority in connection with antitrust or related matters (each of inquiries or
requests referred to in clause (i) or (ii) being referred to herein as a “Second
Request”). The Company shall provide documents or information in connection with
the preparation and filing of a response to a Second Request requested by
Acquirer within a reasonable time, but in no case more than two (2) Business
Days of the request therefor (the “Company HSR Delivery Requirements”).

(c) Notwithstanding anything to the contrary contained in Section 5.3 or
elsewhere in this Agreement, neither Acquirer nor any of its Subsidiaries shall
have any obligation under this Agreement to (i) divest or agree to divest (or
cause any of its Subsidiaries or the Company to divest or agree to divest) any
of its respective businesses, product lines, assets, or capital stock or to take
or agree to take (or cause any of its Subsidiaries or the Company to take or
agree to take) any other action or agree (or cause any of its Subsidiaries or
the Company to agree) to any limitation or restriction on any of its respective
businesses, product lines, assets, or capital stock, or (ii) litigate or
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proceeding, whether judicial or administrative, brought by any Governmental
Authority (A) challenging or seeking to restrain or prohibit the consummation of
the Acquisition or any of the other transactions contemplated by this Agreement,
or seeking to obtain from Acquirer or any of its Subsidiaries any damages in
relation therewith; (B) seeking to prohibit or limit in any respect, or place
any conditions on, the ownership or operation by the Company, Acquirer or any of
their respective affiliates of all or any portion of the business or assets or
any product of the Company or Acquirer or its Subsidiaries or to require any
such person to dispose of, license (whether pursuant to an exclusive or
nonexclusive license) or hold separate all or any portion of the business or
assets or any product of the Company or Acquirer or its Subsidiaries, in each
case as a result of or in connection with the Acquisition or any of the other
transactions contemplated by this Agreement; or (C) seeking to (1) directly or
indirectly prohibit Acquirer or any of its affiliates from effectively
controlling in any respect any of the business or operations of the Company or
(2) directly or indirectly prevent the Company from operating any of its
business in substantially the same manner as operated by the Company immediately
prior to the date of this Agreement.

5.4 Notification of Certain Matters. The Company shall give prompt notice to
Acquirer, and Acquirer shall give prompt notice to the Company, of (a) the
occurrence or non-occurrence of any event, the occurrence or non-occurrence of
which is likely to cause any representation or warranty of the Company or
Acquirer, respectively, contained in this Agreement to be untrue or inaccurate
at or prior to the Closing Date and (b) any failure of the Company or Acquirer,
as the case may be, to comply with or satisfy any covenant, condition or
agreement to be complied with or satisfied by it hereunder; provided, however,
that the delivery of any notice pursuant to this Section 5.4 shall not limit or
otherwise affect any remedies available to the party receiving such notice.

5.5 Additional Documents and Further Assurances; Cooperation. Each party hereto,
at the request of the other party hereto, shall execute and deliver such other
instruments and do and perform such other acts and things (including all action
reasonably necessary (a) to carry out the purposes of this Agreement or to vest
Acquirer after the Closing Date with full right, title and possession to all
Purchased Assets and (b) to seek and obtain any and all consents, waivers and
approvals of any Governmental or Regulatory Authority or Person required in
connection with the Acquisition; provided, however, that Acquirer shall not be
obligated to consent to any divestitures or operational limitations or
activities in connection therewith) as may be necessary or desirable for
effecting completely the consummation of this Agreement and the transactions
contemplated hereby. Each party agrees to use commercially reasonable efforts to
cause the conditions set forth in Article 7 to be satisfied, where the
satisfaction of such conditions depends on action or forbearance from action by
such party.

5.6 Expenses. All fees and expenses incurred in connection with the Acquisition,
including all legal, accounting, financial advisory, consulting, fees paid under
the HSR Act and all other fees and expenses of third parties (“Third Party
Expenses”) incurred by a party in connection with the negotiation and
effectuation of the terms and conditions of this Agreement and the transactions
contemplated hereby, shall be the obligation of the respective party incurring
such fees and expenses.

 

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5.7 Public Disclosure. Unless otherwise required by Law (including federal and
state securities laws) or, as to Acquirer, by the rules and regulations of the
New York Stock Exchange, prior to the Closing Date, no public disclosure
(whether or not in response to any inquiry) of the existence of any subject
matter of, or the terms and conditions of, this Agreement shall be made by any
party hereto unless approved by Acquirer and the Company in writing prior to
release; provided, however, that such approval shall not be unreasonably
withheld or delayed.

5.8 Termination of 401(k) Plans.

(a) Unless Acquirer requests otherwise in writing, the board of directors of the
Company shall adopt resolutions terminating, effective as of the day prior to
the Closing Date, any Plan which is intended to meet the requirements of
Section 401(k) of the Code, and which is sponsored, or contributed to, by the
Company. At the Closing, the Company shall provide Acquirer (a) executed
resolutions of the board of directors of the Company authorizing such
termination and (b) an executed amendment to the 401(k) Plan sufficient to
assure compliance with all applicable requirements of the Code and regulations
thereunder so that the tax-qualified status of the 401(k) Plan will be
maintained at the time of termination.

(b) Following the Closing Date, Acquirer shall provide the Company with any
records in Acquirer’s possession that the Company requests to effectuate the
termination of the Company’s 401(k) Plan and distribute participant balances
from the plan, except where provision of such records would be in violation of
applicable Laws.

5.9 Takeover Statutes. If any Takeover Statute is or may become applicable to
the transactions contemplated hereby, the board of directors of the Company will
grant such approvals and take such actions as are necessary so that the
transactions contemplated by this Agreement and the Ancillary Agreements may be
consummated as promptly as practicable on the terms contemplated hereby and
otherwise act to eliminate the effects of any Takeover Statute on any of the
transactions contemplated hereby.

5.10 Company Dissolution. The Company hereby covenants that it will not, nor
will it permit its Representatives to, dissolve or take any measures to cause
the dissolution of the Company at any time prior to one year and one month after
the Closing Date.

5.11 Company’s Auditors. The Company will use commercially reasonable efforts
(a) to cause its management and its independent auditors to facilitate on a
timely basis the preparation of financial statements (including pro forma
financial statements if required; provided, however, that Acquirer shall pay all
costs and expenses of such independent auditors incurred by the Company in
connection with the preparation of such pro forma financial statements) as
required by Acquirer to comply with applicable SEC regulations, (b) the review
of any Company audit or review work papers, including the examination of
selected interim financial statements and data, and (c) to provide reasonable
access to the Company’s independent accountants as may be reasonably requested
by Acquirer or its accountants.

5.12 Maintenance of Existence; Adequate Funds. From and after the Closing,
Acquirer shall preserve, renew and keep in full force and effect its existence,
and shall not take any actions, including paying any dividends, that would
render or is reasonably likely to render Acquirer insolvent, or unable to pay
and discharge its obligations hereunder.

 

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5.13 Credit for Prior Service. All prior service with the Company by each
employee thereof who is hired by Acquirer as contemplated by Section 7.1(e)
shall be credited for purposes of eligibility and participation under any
employee benefit plan at any time established, maintained or assumed by Acquirer
and for purposes of vesting under Acquirer’s 401(k) plan, all to the extent
applicable, unless such credit is prohibited by applicable Law. All prior
service with the Company by each such employee shall also count toward the
service requirements of sick pay, paid time off and vacation accrual policies
and practices at any time established, maintained or assumed by Acquirer. To the
extent not prohibited by an insurer or service provider under Acquirer’s
applicable medical or health plans and the Law, Acquirer shall waive or cause to
be waived any preexisting condition exclusion or limitation in any medical or
health plan made available by Acquirer to any such employee to the extent such
exclusion or limitation did not apply to a preexisting condition with respect to
such employee under a similar or corresponding benefit plan of the Company.
Nothing in the foregoing or any other provision of this Agreement shall impose a
duty on Acquirer to assume the 401(k) plan or any other benefit plan of the
Company and Acquirer hereby specifically disclaims the assumption of such plans.

ARTICLE 6

SURVIVAL OF REPRESENTATIONS, WARRANTIES, COVENANTS AND

AGREEMENTS; INDEMNIFICATION HOLDBACK PROVISIONS

6.1 Survival of Representations, Warranties, Covenants and Agreements. Each
party shall have the right to rely fully upon the representations, warranties,
covenants and agreements of the other party contained in this Agreement or in
any instrument delivered pursuant to this Agreement. The representations,
warranties, covenants and agreements contained in this Agreement or in any
instrument delivered pursuant to this Agreement shall not be affected by any
investigation conducted for or on behalf of Acquirer with respect thereto or any
knowledge acquired by Acquirer or its officers, directors, employees or agents
as to the accuracy or inaccuracy of any such representation or warranty. Except
for Section 1.4(b)(i), the mechanisms set forth in Sections 6.2(d), (e) and
(f) with respect to claims then outstanding (which mechanisms shall survive
until the payment in full of all indemnification claims), and the Specified
Representations (which shall survive through the applicable statute of
limitations applicable to claims related thereto), all of the representations,
warranties, covenants and agreements of the parties contained in this Agreement
or in any instrument delivered pursuant to this Agreement shall survive, unless
terminated earlier or later by their terms, the Acquisition and continue for
twelve (12) months following the Closing Date (the “Expiration Date”). Any
claims based upon fraud or willful misrepresentation shall survive until the
applicable statute of limitations.

6.2 Indemnification Provisions.

(a) Establishment of the Indemnification Holdback. At the Closing, Eleven
Million Seven Hundred Fifty Thousand Dollars ($11,750,000) of the Base Payment
(the “Holdback “Amount”) will be held back by Acquirer, such hold back to
constitute the “Indemnification

 

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Holdback,” as partial security for the indemnification obligations of the
Company and the Shareholders under this Section 6.2. For purposes of this
Article 6, all references to the Company shall be deemed to include the
Shareholders.

(b) Right to Indemnification.

(i) Subject to the limitations set forth herein, the parties and their officers,
directors, employees, agents, and Affiliates (collectively, the “Indemnitees”)
shall be indemnified and held harmless by the other party (the “Indemnitor”)
hereto from and against any and all Losses incurred by the Indemnitees directly
or indirectly as a result of:

(A) any inaccuracy or breach of a representation or warranty of the Indemnitor
contained herein including, but not limited to, the representations and
warranties set forth in Sections 2.9 (Valid Title), excluding, however, the last
sentence thereof and 2.20 (Tax) (the “Specified Representations”) (provided,
that, in the event of any such breach or inaccuracy, for purposes of determining
the amount of any Losses, no effect will be given to any qualification as to
“materiality” or “Material Adverse Effect” contained therein);

(B) any failure by the Indemnitor to perform or comply with any covenant
contained herein;

(C) for a Company Indemnitee, any Assumed Liability;

(D) the Indemnitor’s failure to comply with any bulk sales or fraudulent
transfer laws that may be applicable to the Acquisition, any Taxes arising as a
result of the other party’s operation of the Business or ownership of the
Purchased Assets prior to the Closing, and any Taxes that will arise as a result
of or in connection with the consummation of the Acquisition; or

(E) for an Acquirer Indemnitee, any Liability arising out of the Retained
Liabilities.

(F) Any amount owed to either respective party under Section 1.4(b)(x), which is
not timely paid; or

(ii) Subject to the further limitations set forth in Section 6.2(b)(iv), the
Indemnification Holdback shall not be the sole remedy available to compensate
the Acquirer Indemnitees for any and all such Losses. The parties agree that any
Losses under this Article 6 shall be solely recoverable by an Acquirer
Indemnitee (A) first, by Acquirer withholding amounts from the Indemnification
Holdback and (B) second, by making claims against the Company for amounts in
excess of the Indemnification Holdback and (C) third, by making claims pro rata
against the Shareholders.

(iii) Except in the case of any claims under Section 6.2(b)(i)(E) or (F),
Acquirer may not make any claims against the Company Indemnitor unless the
aggregate Losses (each of which individually exceeds Two Thousand Dollars
($2,000)) incurred or sustained exceed Three Hundred Seventy-Five Thousand
Dollars ($375,000) (the “Basket”) (at which such time claims may be made for all
Losses incurred or sustained).

 

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(iv) Except as set forth in Section 6.2(b)(v), (A) during the period from the
Closing Date until Ninety (90) days thereafter (“Period 1”), the Company
Indemnitor shall not have Liability for indemnifiable Losses pursuant to this
Article 6 to the extent that the aggregate amount of such Losses exceeds
Seventeen Million Two Hundred Fifty Thousand Dollars ($17,250,000); (B) during
the period from the end of Period 1 until One Hundred Eighty (180) days after
the Closing Date (“Period 2”), the Company Indemnitor shall not have Liability
for indemnifiable Losses pursuant to this Article 6 claimed during Period 2 to
the extent that the aggregate amount of such Losses exceeds Twelve Million
Seventy-Five Thousand Dollars ($12,075,000); (C) during the period from the end
of Period 2 until one year after the Closing Date (“Period 3”), the Company
Indemnitor shall not have Liability for indemnifiable Losses pursuant to this
Article 6 claimed during Period 3 to the extent that the aggregate amount of
such Losses exceeds Six Million Nine Hundred Thousand Dollars ($6,900,000); and
(D) neither party shall have any Liability for indemnifiable Losses pursuant to
this Article 6 after one year from the Closing Date; and, provided, further, the
Company Indemnitor shall not have Liability for indemnifiable Losses pursuant to
this Article 6 to the extent that the aggregate amount of such Losses exceeds
Seventeen Million Two Hundred Fifty Thousand Dollars ($17,250,000) for claims
for Losses during the time spanned by Periods 1 through 3.

(v) Any limitations set forth in this Section 6.2(b) or otherwise shall not
apply to Losses as a result of fraud or willful misrepresentation or breaches of
any Specified Representations. With respect to actions grounded in fraud or
willful misrepresentation, (A) the right of a party to be indemnified and held
harmless pursuant to the indemnification provisions in this Agreement shall be
in addition to and cumulative of any other remedy of such party at law or in
equity and (B) no such party shall, by exercising any remedy available to it
under this Article 6, be deemed to have elected such remedy exclusively or to
have waived any other remedy, whether at law or in equity, available to it.

(c) Holdback Period; Distribution of Holdback Amount upon Termination of
Holdback Period. Subject to the following requirements, the Indemnification
Holdback Fund shall be in existence immediately following the Closing and shall
terminate at 5:00 p.m., Pacific Time, on the expiration of Period 2 (the period
of time from the Closing Date through and including the expiration of Period 2
is referred to herein as the “Holdback Period”); and all cash then remaining in
the Indemnification Holdback shall be distributed as set forth in this
Section 6.2(c). Subject to the following requirements, Acquirer shall release
eight million five hundred thousand dollars ($8,500,000) of the Holdback Amount
to the Company on the expiration of Period 1 and the balance on the expiration
of Period 2, in either event less (i) any amounts paid to Acquirer during such
period in accordance with this Article 6, and (ii) any amount that is reasonably
necessary, as reflected in documentation provided by Acquirer to the Company in
good faith, to satisfy any unsatisfied claims (including costs of defense)
concerning facts and circumstances existing prior to the release date which
claims are specified in any Officer’s Certificate delivered to the Company in
good faith prior to the Expiration Date.

(d) Claims Upon Indemnification Holdback. At any time on or before 5 p.m.,
California time, on the last day of the Holdback Period Acquirer may deliver to
the Company a certificate signed by any officer of Acquirer in good faith (an
“Officer’s Certificate”): (A) stating that Acquirer or another Acquirer
Indemnitee has paid or properly accrued or reasonably anticipates that it will
have to pay or accrue Losses and the amount thereof, and

 

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(B) specifying in reasonable detail the individual items of Losses included in
the amount so stated, the date each such item was paid or properly accrued, or
the basis for such anticipated liability, and the nature of the
misrepresentation, breach of warranty, agreement or covenant to which such item
is related and the relevant section number of this Agreement, and, subject to
the provisions of Section 6.2(d), deduct out of the Holdback Amount, cash held
in the Indemnification Holdback in an amount equal to such Losses and if such
amount exceeds the available Holdback Amount, pursue its rights and remedies
against the Company. Where the basis for a claim upon the Indemnification
Holdback by Acquirer is that Acquirer reasonably anticipates that it will incur
or pay a Loss (a “Contingent Loss”), no payment will be made from the
Indemnification Holdback for such Contingent Loss unless and until such
Contingent Loss is actually incurred or paid and a further Officer’s Certificate
with respect thereto is delivered to the Company; provided, however, that the
amount of such Contingent Loss shall not be released from the Indemnification
Holdback unless and until such Contingent Loss is incurred or paid or it is
conclusively determined that no actual Loss will be incurred or paid with regard
thereto.

(e) Objections to Claims.

(i) For a period of twenty (20) Business Days from and after delivery of any
Officer’s Certificate to the Company, Acquirer shall take no action regarding
the Indemnification Holdback unless Acquirer shall have received written
authorization from the Company to retain such portion of the Indemnification
Holdback. After the expiration of such twenty (20) Business Day period, Acquirer
shall retain the portion of the Indemnification Holdback in accordance with
Section 6.2(d) hereof and the Company shall no longer be entitled to receive
such amount hereunder, provided that no such retention may be made if the
Company shall object in a written statement to the claim made in the Officer’s
Certificate, and such statement shall have been delivered to Acquirer prior to
the expiration of such twenty (20) Business Day period.

(ii) In case the Company shall so object in writing to any claim or claims by
Acquirer made in any Officer’s Certificate, Acquirer shall have twenty
(20) Business Days to respond in a written statement to the objection of the
Company. If after such twenty (20) Business Day period there remains a dispute
as to any claims, the Company and Acquirer shall attempt in good faith for
thirty (30) Business Days to agree upon the rights of the respective parties
with respect to each of such claims. If the Company and Acquirer should so
agree, a memorandum setting forth such agreement shall be prepared by Acquirer
and signed by the Company and Acquirer. Acquirer shall be entitled to rely on
any such memorandum and shall retain or release the cash from the
Indemnification Holdback in accordance with the terms thereof.

(iii) Resolution of Conflicts. If no agreement can be reached after good faith
negotiation between the parties pursuant to Section 6.2(e)(ii), the Company and
Acquirer may initiate formal arbitration pursuant to Section 9.8 to resolve such
dispute. The decision of the arbitrator(s) as to the validity and amount of any
claim in such Officer’s Certificate shall be binding and conclusive upon the
parties to this Agreement, and notwithstanding anything in Article 6 hereof, the
parties shall be required to act in accordance with such decision and Acquirer
shall be required to make or withhold payments out of the Indemnification
Holdback in accordance therewith.

 

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(f) Third-Party Claims.

(i) In the event either party becomes aware of a third-party claim (a “Third
Party Claim”) regarding pre-Closing operations of the Business, such party shall
notify the other party of such claim, and the Company shall have the right (but
not the obligation) to assume the defense of such Third Party Claim and to
retain (at the Company’s expense) counsel of its choice, reasonably acceptable
to Acquirer, to represent Acquirer, provided, however, that this option shall
not be available to the Company for Third Party Claims (i) initiated by any of
the then fifteen major customers and suppliers of the Business, (ii) which may
result in criminal proceedings, injunctions or other equitable remedies in
respect of Acquirer or its Affiliates, or (iii) also involves Acquirer or its
Affiliates as a party and counsel to the Company determines in good faith that
joint representation would give rise to a conflict of interest, for which
defense shall be assumed by Acquirer with the right to retain (at the Company’s
expense) counsel of its choice, reasonably acceptable to the Company. The
Company shall have ten (10) days from the receipt of the Notice of Claim to
notify Acquirer whether or not it desires to defend such Third Party Claim
failing which the Company shall be deemed to have waived such option. The party
assuming defense of a Third Party Claim is hereinafter referred to as the
“Controlling Party” and the other party as the “Co-Party”.

(ii) In defending the Third Party Claim, the Controlling Party shall act in good
faith and use commercially reasonable means and defenses available to it given
due consideration to the interests of Acquirer. The Co-Party shall take such
actions as reasonably necessary or appropriate under the circumstances to
cooperate with the Controlling Party and its counsel in defending such Third
Party Claim. The Controlling Party shall keep the Co-Party reasonably informed
of the development of the underlying claim. In the case where the Acquirer is
the Co-Party, the Co-Party shall have the right to participate, at its sole cost
and expense in the defense of a Third Party Claim using its own counsel (unless
(x) the Controlling Party shall not have employed counsel in the defense of such
Claim after ten (10) days notice; or (y) such Co-Party shall have determined in
good faith that joint representation would give rise to a conflict of interest;
in any of the foregoing events such fees and expenses shall be borne by the
Controlling Party).

(iii) Neither the Co-Party nor the Controlling Party shall conclude any
settlements, compromises, agreements or withdrawals in response to any claims,
verifications, or legal or administrative proceedings in which it may be
involved without the prior written consent of the other party, which consent
shall not be unreasonably withheld, in particular with respect to the settlement
of disputes with customers, for which customary practice and the commercial
relationship shall be taken into account.

(g) Treatment of Payments. To the extent permitted by law, the parties agree to
treat payments made under this Article 6 as adjustments to the Final Purchase
Price.

 

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ARTICLE 7

CONDITIONS TO THE CLOSING

7.1 Conditions to Obligations of Each Party to Effect the Closing. The
respective obligations of each party to this Agreement to effect the Acquisition
shall be subject to the satisfaction at or prior to the Closing of the following
conditions:

(a) Governmental and Regulatory Approvals. Approvals from any Governmental or
Regulatory Authority (if any) necessary for consummation of the transactions
contemplated hereby shall have been timely obtained, except for any such
approvals the failure of which to obtain would not have a material adverse
effect on the business or condition of Acquirer or the Company; and any waiting
period applicable to the consummation of the Acquisition under the HSR Act or
similar antitrust regulations of any state or foreign Governmental or Regulatory
Authority shall have expired or been terminated.

(b) Consent of Hewlett Packard and Panasonic. Consent to the Acquisition by each
of Hewlett Packard Company and Panasonic Corporation of North America and the
assignment of any Contracts between either (or both) of such parties and the
Company to Acquirer shall have been obtained at least two (2) Business days
prior to Closing.

(c) No Injunctions or Regulatory Restraints; Illegality. No temporary
restraining order, preliminary or permanent injunction or other Order issued by
any court of competent jurisdiction or Governmental or Regulatory Authority or
other legal or regulatory restraint or prohibition preventing the consummation
of the Acquisition shall be in effect; nor shall there be any action taken, or
any Law or Order enacted, entered, enforced or deemed applicable to the
Acquisition or the other transactions contemplated by the terms of this
Agreement that would prohibit the consummation of the Acquisition or which would
permit consummation of the Acquisition only if certain divestitures were made or
if Acquirer were to agree to limitations on its business activities or
operations.

(d) Assignment and Assumption Agreement. Each party shall have executed and
delivered an Assignment and Assumption Agreement substantially in the form set
forth in Exhibit C.

(e) Hiring of Employees. The Company shall have terminated all Company employees
that Acquirer intends to hire as of the Closing and Acquirer shall have made
offers of employment to such individuals providing for the same or improved
benefits as offered to similarly-situated Acquirer employees (including salary)
(taking into account carrier-driven differences) and at same seniority level
enjoyed by such individuals as employees of the Company immediately prior to the
Closing Date, as contemplated in Section 5.13. Notwithstanding the foregoing,
this Section 7.1(e) shall not apply to salaries and bonuses offered to Lee
Perlman (if and as applicable), Adam Carroll or Fred Towns.

7.2 Additional Conditions to Obligations of the Company. The obligations of the
Company to consummate the Acquisition and the other transactions contemplated by
this Agreement shall be subject to the satisfaction at or prior to the Closing
of each of the following conditions, any of which may be waived, in writing,
exclusively by the Company:

(a) Representations and Warranties. The representations and warranties of
Acquirer contained in this Agreement shall be accurate in all material respects
as of the date of this Agreement and shall be accurate in all material respects
as of the Closing Date as if made on and as of the Closing Date (other than
representations and warranties which by their express terms are made solely as
of a specified earlier date, which shall be accurate as of such specified
earlier date); provided, however, that, for purposes of determining the accuracy
of such representations and warranties, all qualifications and exceptions
referring to a “material adverse change in the business or condition of
Acquirer” or a “material adverse effect on Acquirer” and other materiality
qualifications and materiality exceptions contained in such representations and
warranties shall be disregarded.

 

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(b) Performance. Acquirer shall have performed and complied with in all material
respects each agreement, covenant and obligation required by this Agreement to
be so performed or complied with by Acquirer at or before the Closing.

(c) Officers’ Certificates. Acquirer shall have delivered to the Company a
certificate, dated the Closing Date and executed by the Chief Operating Officer
or Secretary of Acquirer, substantially in the form set forth in Exhibit D
hereto, certifying that the matters set forth in Sections 7.2(a) and (b) have
been satisfied.

(d) Debt. The Company shall have received confirmation that the payment
obligations under that certain Second Amended and Restated Loan and Security
Agreement, dated as of September 19, 2006, by and among the Company and the
lenders named therein (the “Lenders”) have been satisfied.

(e) Shareholder Guarantees. The Company shall have received a fully executed
release of all shareholder guarantees of Company Indebtedness from the Lenders
to the satisfaction of the Company.

(f) Other Deliveries. Acquirer shall have delivered all other instruments and
documents reasonably required on the Acquirer’s part to effectuate and
consummate the transactions contemplated hereby in a form and substance
reasonably satisfactory to the Company and its counsel.

7.3 Additional Conditions to the Obligations of Acquirer. The obligations of
Acquirer to consummate the Acquisition and the other transactions contemplated
by this Agreement shall be subject to the satisfaction at or prior to the
Closing of each of the following conditions, any of which may be waived, in
writing, exclusively by Acquirer:

(a) Representations and Warranties. The representations and warranties of the
Company contained in this Agreement shall be accurate in all material respects
as of the date of this Agreement and shall be accurate in all material respects
as of the Closing Date as if made on and as of the Closing Date (other than
representations and warranties which by their express terms are made solely as
of a specified earlier date, which shall be accurate as of such specified
earlier date); provided, however, that, for purposes of determining the accuracy
of such

 

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representations and warranties, all qualifications and exceptions referring to a
“material adverse change in the business or condition of the Company” and other
materiality qualifications and exceptions contained in such representations and
warranties shall be disregarded.

(b) Performance. The Company shall have performed and complied with in all
material respects each agreement, covenant and obligation required by this
Agreement to be so performed or complied with by the Company on or before the
Closing Date.

(c) No Material Adverse Change. There shall have occurred no material adverse
change in the Business, financial condition or results of operations of the
Company or the Purchased Assets since the date of execution of the Agreement.

(d) Officers’ Certificates. The Company shall have delivered to Acquirer a
certificate, dated the Closing Date and executed by the President or Chief
Executive Officer of the Company, substantially in the form set forth in
Exhibit E hereto, certifying that the matters set forth in Section 7.3 (a),
(b) and (c) have been satisfied; and a certificate, dated the Closing Date and
executed by the Secretary of the Company, substantially in the form set forth in
Exhibit F hereto.

(e) Legal Proceedings. No Governmental or Regulatory Authority shall have
notified either party to this Agreement that such Governmental or Regulatory
Authority intends to commence proceedings to restrain or prohibit the
transactions contemplated hereby or force rescission, unless such Governmental
or Regulatory Authority shall have withdrawn such notice and abandoned any such
proceedings prior to the time which otherwise would have been the Closing Date.

(f) Non-Competition Agreements. Each of the Key Employees shall have executed
and delivered to Acquirer a Non-Competition Agreement substantially in the form
set forth in Exhibit G (each a “Non-Competition Agreement”) and all of the
Non-Competition Agreements shall be in full force and effect.

(g) Bill of Sale. The Company shall have executed and delivered a Bill of Sale
substantially in the form set forth in Exhibit H.

(h) Assignment of Intellectual Property.

(i) Arrangements satisfactory to Acquirer in its reasonable discretion shall
have been made to effect the assignment to the Acquirer of all Intellectual
Property created by the Company’s founders, employees and consultants, and to
obtain the full cooperation of such Persons to complete and prosecute all
appropriate U.S. and foreign patent filings related thereto.

(ii) The Company shall have executed and delivered assignments of all Company
Intellectual Property, including, but not limited to, the Patent Assignment in
the form attached hereto as Exhibit I, the Trademark Assignment in the form
attached hereto as Exhibit J, and the Copyright Assignment in the form attached
hereto as Exhibit K.

(i) 2007 Audited Financial Statements. The Company shall have submitted to
Acquirer its unqualified audited financial statements at and for the period
ended December 31, 2007 as prepared and completed by Ernst & Young and in
accordance with the Accounting Procedures at least two (2) Business Days prior
to the Closing Date (the “2007 Financials”).

 

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(j) Tangible Net Worth. The Tangible Net Worth of the Company shall have been at
least $15,265,138 as of December 31, 2007.

(k) Satisfaction of Lenders. The Pay-Off Letter shall provide, in a manner
reasonably satisfactory to Acquirer, that all outstanding Liens held by the
Lenders against the Purchased Assets will be released (the “Bank UCC Release”)
at Closing.

(l) Other Deliveries. The Company shall have delivered all other instruments and
documents reasonably required on the Company’s part to effectuate and consummate
the transactions contemplated hereby in a form and substance reasonably
satisfactory to Acquirer and its counsel.

ARTICLE 8

TERMINATION, AMENDMENT AND WAIVER

8.1 Termination. Except as provided in Section 8.2, this Agreement may be
terminated and the Acquisition abandoned at any time prior to the Closing Date:

(a) by mutual agreement of the Company and Acquirer;

(b) by either party if: (i) the Closing has not occurred before 5:00 p.m.
(Pacific Time) on April 30, 2008 (provided, however, that the right to terminate
this Agreement under this Section 8.1(b)(i) shall not be available to any party
whose failure to fulfill any obligation hereunder has been the cause of, or
resulted in, the failure of the Closing to occur on or before such date);
(ii) there shall be a final nonappealable order of a federal or state court in
effect preventing consummation of the Acquisition; or (iii) there shall be any
statute, rule, regulation or order enacted, promulgated or issued or deemed
applicable to the Acquisition by any Governmental or Regulatory Authority that
would make consummation of the Acquisition illegal;

(c) by Acquirer if there shall be any action taken, or any Law or Order enacted,
promulgated or issued or deemed applicable to the Acquisition, by any
Governmental or Regulatory Authority, which would (A) prohibit Acquirer’s
ownership or operation of all or any portion of the business of the Company or
(B) compel Acquirer to dispose of or hold separate all or any portion of the
Assets and Properties of the Company as a result of the Acquisition;

(d) by either party if Acquirer receives a Second Request;

(e) by Acquirer if it is not in material breach of its representations,
warranties, covenants and agreements under this Agreement which are capable of
being cured and there has been a breach of any representation, warranty,
covenant or agreement contained in this Agreement on the part of the Company and
(i) the Company is not using its reasonable efforts to cure such breach, or has
not cured such breach within thirty (30) days, after notice of such breach to
the Company (provided, however, that, no cure period shall be required for a
breach which by

 

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its nature cannot be cured) and (ii) as a result of such breach any of the
conditions set forth in Section 7.1 or Section 7.2, as the case may be, would
not be satisfied prior to the Closing Date; and

(f) by either party, if the Company accepts an Acquisition Proposal before
April 30, 2008;

(g) by the Company if it is not in material breach of its representations,
warranties, covenants and agreements under this Agreement which are capable of
being cured and there has been a breach of any representation, warranty,
covenant or agreement contained in this Agreement on the part of Acquirer and
(i) Acquirer is not using its reasonable efforts to cure such breach, or has not
cured such breach within thirty (30) days, after notice of such breach to
Acquirer (provided, however, that no cure period shall be required for a breach
which by its nature cannot be cured), and (ii) as a result of such breach any of
the conditions set forth in Section 7.1 or Section 7.3, as the case may be,
would not be satisfied as of the Closing Date.

8.2 Effect of Termination.

(a) Obligations Upon Termination. Other than as set forth in this Section 8.2,
in the event of a valid termination of this Agreement as provided in
Section 8.1, this Agreement shall forthwith become void and there shall be no
liability or obligation on the part of Acquirer or the Company, or their
respective officers, directors or shareholders or Affiliates or Associates;
provided, however, the provisions of Sections 5.2, 5.6, 8.2 and Article 9 and
the applicable definitions set forth in Article 10 shall remain in full force
and effect and survive any termination of this Agreement.

(b) Payment Upon Certain Termination. If this Agreement is terminated pursuant
to Section 8.1(f), within thirty (30) days of such termination, the Company
shall pay to Acquirer Three Million Dollars $3,000,000 (the “Termination Fee”)
via wire transfer of immediately available funds to an account and using wire
instructions specified by Acquirer. A termination of this Agreement pursuant to
Section 8.1(f) shall not be and shall not be deemed to be a breach of
Section 4.2 herein, and no liability or obligation on the part of Acquirer or
the Company, or their respective officers, directors or shareholders or
Affiliates or Associates shall arise out of such termination or of the Company’s
acceptance of such Acquisition Proposal, other than in respect of the Company’s
obligation to pay the Termination Fee.

8.3 Amendment. Except as is otherwise required by applicable law after the
shareholders of the Company approve the Acquisition, this Agreement may be
amended by the parties hereto at any time by execution of an instrument in
writing signed on behalf of each of the parties hereto.

8.4 Extension; Waiver. At any time prior to the Closing Date Acquirer and the
Company may, to the extent legally allowed, (a) extend the time for the
performance of any of the obligations of the other party hereto, (b) waive any
inaccuracies in the representations and warranties made to such party contained
herein or in any document delivered pursuant hereto, and (c) waive compliance
with any of the agreements, covenants or conditions for the benefit of such
party contained herein. Any agreement on the part of a party hereto to any such
extension or waiver shall be valid only if set forth in an instrument in writing
signed on behalf of such party.

 

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ARTICLE 9

MISCELLANEOUS PROVISIONS

9.1 Disclosure Supplement. From time to time prior to the Closing, the Company
may supplement or amend the Disclosure Schedule with respect to any matter
(i) which may arise hereafter and which, if existing or occurring at or prior to
the date hereof, would have been required to be set forth or described in the
Disclosure Schedule, or (ii) which makes it necessary to correct or update any
information in the Disclosure Schedule or in any representation and warranty of
the Company which has been rendered inaccurate thereby. Any such supplements or
amendments to the Disclosure Schedule after the date hereof and prior to the
Closing which, in the aggregate, have a material adverse effect, may, at
Acquirer’s option, be declared by Acquirer within five (5) Business Days after
such supplement or amendment to be a breach of this Agreement; provided,
however, that, notwithstanding anything to the contrary, Acquirer’s sole and
exclusive remedy for such breach shall be to terminate this Agreement and
Acquirer shall be deemed to have waived actual or other monetary damages in
connection with such breach; provided, further, notwithstanding any such
supplements or amendments to the Disclosure Schedule to this Agreement, if
Acquirer does not terminate and proceeds with the Closing, then the Disclosure
Schedule and the related representations and warranties shall be deemed modified
as of the Closing to the extent set forth in such supplements or amendments and
Acquirer shall be deemed to have waived any and all claims for Losses in respect
of such supplements or amendments.

9.2 Notices. All notices, requests and other communications hereunder must be in
writing and will be deemed to have been duly given only if delivered personally
against written receipt or by facsimile transmission against facsimile
confirmation or mailed by internationally recognized overnight courier prepaid,
to the parties at the following addresses or facsimile numbers:

 

If to Acquirer to:   

SYNNEX Corporation

44201 Nobel Drive

Fremont, CA 94538

Telephone No.: (510) 668-3668

Facsimile No.: (510) 668-3707

Attn: General Counsel

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

Pillsbury Winthrop Shaw Pittman LLP

2475 Hanover Street

Palo Alto CA 94304

Telephone No.: (650) 233-4500

Facsimile No.: (650) 233-4545

Attn: Allison Leopold Tilley, Esq.

 

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If to the Company to:   

New Age Electronics, Inc.

21950 Arnold Center Road

Carson, CA 90810

Telephone No.: (310) 549-0000

Facsimile No.: (310) 549-6931

Attn: Chief Financial Officer and Chief Executive Officer

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

Jones Day

555 S. Flower Street

Los Angeles, CA 90071

Telephone No.: (213) 243-2409

Facsimile No.: (213) 243-2539

Attn: James F. Childs, Jr., Esq.

All such notices, requests and other communications will (a) if delivered
personally to the address as provided in this Section 9.2, be deemed given upon
delivery, (b) if delivered by facsimile transmission to the facsimile number as
provided for in this Section 9.2, be deemed given upon facsimile confirmation,
and (c) if delivered by overnight courier to the address as provided in this
Section 9.1, be deemed given on the earlier of the first Business Day following
the date sent by such overnight courier or upon receipt (in each case regardless
of whether such notice, request or other communication is received by any other
Person to whom a copy of such notice is to be delivered pursuant to this
Section 9.1). Any party from time to time may change its address, facsimile
number or other information for the purpose of notices to that party by giving
notice specifying such change to the other party hereto.

9.3 Entire Agreement. This Agreement and the Exhibits and Schedules hereto,
including the Disclosure Schedule, constitute the entire Agreement among the
parties with respect to the subject matter hereof and supersede all prior
agreements and understandings, both written and oral, among the parties with
respect to the subject matter hereof , except for the Confidentiality Agreement,
which shall continue in full force and effect and shall survive any termination
of this Agreement or the Closing in accordance with its terms.

9.4 Remedies. All remedies, either under this Agreement or by Law or otherwise
afforded, will be cumulative and not alternative.

9.5 Third Party Beneficiaries. The terms and provisions of this Agreement are
intended solely for the benefit of each party hereto and their respective
successors or permitted assigns, and it is not the intention of the parties to
confer third-party beneficiary rights, and this Agreement does not confer any
such rights, upon any other Person other than any Person entitled to indemnity
under Article 6.

9.6 Invalid Provisions. If any provision of this Agreement is held to be
illegal, invalid or unenforceable under any present or future Law, and if the
rights or obligations of any party hereto under this Agreement will not be
materially and adversely affected thereby, (a) such

 

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provision will be fully severable, (b) this Agreement will be construed and
enforced as if such illegal, invalid or unenforceable provision had never
comprised a part hereof, (c) the remaining provisions of this Agreement will
remain in full force and effect and will not be affected by the illegal, invalid
or unenforceable provision or by its severance herefrom and (d) in lieu of such
illegal, invalid or unenforceable provision, there will be added automatically
as a part of this Agreement a legal, valid and enforceable provision as similar
in terms to such illegal, invalid or unenforceable provision as may be possible.

9.7 Governing Law. This Agreement, the Ancillary Agreements and any other
closing documents shall be governed by and construed in accordance with the
domestic laws of the State of California, without giving effect to any choice of
law or conflict of law provision or rule (whether of the State of California or
any other jurisdiction) that would cause the application of the laws of any
jurisdiction other than the State of California.

9.8 Arbitration.

(a) Any dispute, controversy or claim arising out of or in connection with this
Agreement, or the breach, termination or invalidity thereof, shall be finally
settled by arbitration in accordance with the rules then effect of the Judicial
Arbitration and Mediation Services, Inc. The arbitration tribunal shall be
composed of three arbitrators. The place of arbitration shall be in California.

(b) In arbitral proceedings, Acquirer and the Company each shall appoint one
arbitrator and the two arbitrators so selected shall select a third arbitrator.
The third arbitrator shall adjudicate the arbitration. Where there are multiple
parties on either side, the multiple parties, jointly, shall appoint one
arbitrator. If such multiple parties are respondent and would fail to make such
joint appointment within thirty (30) days from receipt of the notice with
request for arbitration, the Judicial Arbitration and Mediation Services, Inc.
shall make the appointment for that side.

(c) Unless otherwise required by law (including, without limitation, securities
laws) or, as to Acquirer, the rules and regulations of the New York Stock
Exchange, the parties to this Agreement undertake and agree that all arbitral
proceedings conducted with reference to this arbitration clause will be kept
strictly confidential. This confidentiality undertaking shall cover all
information disclosed in the course of such arbitral proceedings, as well as any
decision or award that is made or declared during the proceedings. Subject to
the limitations described in this Section 9.8(c), information covered by the
confidentiality undertaking in this Section 9.8(c) may not, in any form, be
disclosed by either party to a third party without the prior written consent of
the other party.

9.9 Headings. The table of contents and headings contained in this Agreement are
for reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.

9.10 Counterparts. This Agreement may be executed in any number of counterparts,
each of which will be deemed an original, but all of which together will
constitute one and the same instrument.

 

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9.11 Specific Performance. The parties hereto agree that irreparable damage may
occur in the event that any of the provisions of this Agreement were not
performed in accordance with their specific terms or were otherwise breached.
Except where this Agreement specifically provides for arbitration, it is agreed
that the parties shall be entitled to seek an injunction or injunctions to
prevent breaches of this Agreement and to enforce specifically the terms and
provisions hereof in any court of the United States or any state having
jurisdiction, this being in addition to any other remedy to which they are
entitled at law or in equity.

9.12 Allocation of Purchase Price. Following the Closing, Acquirer and the
Company shall agree as to the allocation of the Final Purchase Price pursuant to
Section 1060 of the Code and the treasury regulations promulgated thereunder.
Acquirer and the Company agree to reflect such allocation on IRS Form 8594:
Asset Acquisition Statement under Section 1060, including any required
amendments or supplements thereto (“Form 8594”). Form 8594 shall be prepared
jointly by Acquirer and the Company and shall be signed by the parties following
the Closing. The parties hereto further agree that: (a) the agreed upon
allocation of Final Purchase Price shall be used in filing all required forms
under Section 1060 of the Code and all Tax Returns; and (b) they will not take
any position inconsistent with such allocation upon any examination of any such
Tax Return, in any refund claim or in any tax litigation.

9.13 Assignment. This Agreement shall be binding upon and inure to the benefit
of the successors and assigns of each Party hereto, but, no rights, obligations
or liabilities hereunder shall be assignable by any Party without the prior
written consent of the other Party, and any purported assignment in violation of
this Section 9.13 shall be null and void ab initio; provided, however, Acquirer
may transfer or otherwise assign its rights to receive indemnification under
this Agreement for the benefit of any direct or indirect lender or holder of
debt securities that has as a source of security having financed or refinanced
all or part of the transactions contemplated hereby; provided, further, prior to
the Closing, Acquirer may elect (upon written notice sent to Seller) to assign
its rights and obligations under this Agreement to any Affiliate of Acquirer
(including a subsidiary formed for such purpose) and to cause such Affiliate to
perform the obligations of Acquirer under this Agreement; provided, further,
that no such assignment shall otherwise vary or diminish any of Acquirer’s
obligations under this Agreement to the extent its Affiliate fails to duly
perform the obligations of Acquirer under this Agreement

ARTICLE 10

DEFINITIONS

10.1 Definitions. As used in this Agreement, the following defined terms shall
have the meanings indicated below:

“2007 Financials” has the meaning ascribed to it in Section 7.3(i).

“Acquirer” has the meaning ascribed to it in the forepart of this Agreement.

“Accounting Procedures” means accounting procedures based on the Books and
Records of the Company in accordance with GAAP and consistent with the Company’s
past practices.

 

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“Acquisition Proposal” means a bona fide, unsolicited written proposal from an
unaffiliated third party proposing a Business Combination.

“Actions or Proceedings” means any action, suit, complaint, petition,
investigation, proceeding, arbitration, litigation or Governmental or Regulatory
Authority investigation, audit or other proceeding, whether civil or criminal,
in law or in equity, or before any arbitrator or Governmental or Regulatory
Authority.

“Affiliate” means, as applied to any Person, (a) any other Person directly or
indirectly controlling, controlled by or under common control with, that Person,
(b) any other Person that owns or controls (i) ten percent (10%) or more of any
class of equity securities of that Person or any of its Affiliates or (ii) ten
percent (10%) or more of any class of equity securities (including any equity
securities issuable upon the exercise of any option or convertible security) of
that Person or any of its Affiliates, or (c) as to a corporation, each director
and officer thereof, and as to a partnership, each general partner thereof, and
as to a limited liability company, each managing member or similarly authorized
person thereof (including officers), and as to any other entity, each Person
exercising similar authority to those of a director or officer of a corporation.
For the purposes of this definition, “control” (including with correlative
meanings, the terms “controlling,” “controlled by,” and “under common control
with”) as applied to any Person, means the possession, directly or indirectly,
of the power to direct or cause the direction of the management and policies of
that Person, whether through ownership of voting securities or by contract or
otherwise.

“Agreement” means this Agreement, including (unless the context otherwise
requires) the Exhibits and the Disclosure Schedules and the certificates and
instruments delivered in connection herewith, or incorporated by reference, as
the same may be amended or supplemented from time to time in accordance with the
terms hereof.

“Ancillary Agreements” has the meaning ascribed to it in Section 2.2.

“Approval” means any approval, authorization, consent, permit, qualification or
registration, or any waiver of any of the foregoing, required to be obtained
from or made with, or any notice, statement or other communication required to
be filed with or delivered to, any Governmental or Regulatory Authority or any
other Person.

“Assets and Properties” of any Person means all assets and properties of every
kind, nature, character and description (whether real, personal or mixed,
whether tangible or intangible, whether absolute, accrued, contingent, fixed or
otherwise and wherever situated), including the goodwill related thereto,
operated, owned, licensed or leased by such Person, including cash, cash
equivalents, Investment Assets, accounts and notes receivable, chattel paper,
documents, instruments, general intangibles, real estate, equipment, inventory,
goods and Intellectual Property.

“Associate” means, with respect to any Person, any corporation or other business
organization of which such Person is an executive officer or partner or is the
beneficial owner, directly or indirectly, of ten percent (10%) or more of any
class of equity securities, any trust or estate in which such Person has a
substantial beneficial interest or as to which such Person serves as a trustee
or in a similar capacity and any relative or spouse of such Person, or any
relative of such spouse, who has the same home as such Person.

 

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“Assumed Liabilities” has the meaning ascribed thereto in Section 1.3(b).

“Audited Financial Statements” means the audited consolidated balance sheets of
the Company as of each of the fiscal years ended December 31, 2004 through
December 31, 2007, respectively, and the related audited consolidated income
statement and statement of cash flows for each of the fiscal years then ended,
in each case, including the notes thereto together with the notes thereto and
the unqualified report of the Company’s independent accountants with respect
thereto.

“Bank UCC Release” has the meaning ascribed to it in Section 7.3(k).

“Basket” has the meaning ascribed to it in Section 6.2(b).

“Books and Records” means all files, documents, instruments, papers, books and
records relating to the business or condition, financial or otherwise, of a
Person, including financial statements, internal reports, Tax Returns and
related work papers and letters from accountants, budgets, pricing guidelines,
ledgers, journals, deeds, title policies, minute books, stock certificates and
books, stock transfer ledgers, Contracts, Licenses, customer lists, computer
files and programs (including data processing files and records), retrieval
programs, operating data and plans and environmental studies and plans.

“Business” means the Company’s business as currently conducted including the
provision of solution and logistics analysis of delivery supply chain management
models to consumer technology retailers and vendors and implementation thereof.

“Business Combination” means, with respect to any Person, (a) any merger,
consolidation or other business combination transaction to which such Person is
a party, (b) any sale, dividend or other disposition of all or a material or
significant portion of the Assets and Properties of such Person, (c) any tender
offer, exchange offer, recapitalization or other extraordinary transaction, or
(d) the entering into of any agreement or understanding, the granting of any
rights or options, with respect to any of the foregoing.

“Business Day” means a day other than Saturday, Sunday or any day on which banks
located in San Francisco, California are authorized or obligated to close.

“California Code” means the California Corporations Code and all amendments
thereto.

“Closing” means the closing of the transactions contemplated by Section 1.1.

“Closing Date” has the meaning ascribed to it in Section 1.5.

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

“Company” shall mean New Age Electronics, Inc., a California corporation.

 

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“Company Financials” has the meaning ascribed to it in Section 2.4.

“Company HSR Delivery Requirements” has the meaning ascribed to it in
Section 5.3(b).

“Company Intellectual Property” shall mean any Intellectual Property that (a) is
owned by; (b) is licensed to; (c) was developed or created by or for the Company
or (d) is used in or necessary for the conduct of the business of the Company as
presently or heretofore conducted or as proposed to be conducted, including any
Intellectual Property created by any of the Company’s founders, employees,
independent contractors or consultants for or on behalf of the Company.

“Company Registered Intellectual Property” means all Registered Intellectual
Property owned by, filed in the name of, assigned to or applied for by, the
Company.

“Competing Proposed Transaction” has the meaning ascribed to it in Section 4.2.

“Contract” means any legally binding agreement, lease, evidence of Indebtedness,
mortgage, indenture, security agreement or other contract or business
arrangement (whether written or oral).

“Controlled Group” has the meaning ascribed to it under the term “Plan” in this
Section 10.1.

“Disclosure Schedule” means the schedules delivered to Acquirer by or on behalf
of the Company, containing all lists, descriptions, exceptions and other
information and materials as are required to be included therein in connection
with the representations and warranties made by the Company in Article 2 or
otherwise.

“Environment” means air, surface water, ground water, or land, including land
surface or subsurface, and any receptors such as persons, wildlife, fish, biota
or other natural resources.

“Environmental Law” means any federal, state, local or foreign environmental,
health and safety or other Law relating to of Hazardous Materials, including the
Comprehensive, Environmental Response Compensation and Liability Act, the Clean
Air Act, the Federal Water Pollution Control Act, the Solid Waste Disposal Act,
the Federal Insecticide, Fungicide and Rodenticide Act, and the California Safe
Drinking Water and Toxic Enforcement Act.

“Environmental Permit” means any permit, license, approval, consent or
authorization required under or in connection with any Environmental Law and
includes any and all orders, consent orders or binding agreements issued by or
entered into with a Governmental or Regulatory Authority.

“ERISA” means the Employee Retirement Income Security Act of 1974, as amended,
and the rules and regulations promulgated thereunder.

“Excluded Assets” has the meaning ascribed to it in Section 1.2.

“Expiration Date” has the meaning ascribed to it in Section 6.1.

 

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“GAAP” means generally accepted accounting principles in the United States, as
in effect from time to time.

“Governmental or Regulatory Authority” means any court, tribunal, arbitrator,
authority, agency, bureau, board, commission, department, official or other
instrumentality of the United States, any foreign country or any domestic or
foreign state, county, city or other political subdivision, and shall include
any stock exchange, quotation service and the NASDAQ Stock Market.

“Holdback Amount” has the meaning ascribed to it in Section 6.2(a).

“Holdback Period” has the meaning ascribed to it in Section 6.2(c).

“Hazardous Material” means (a) any chemical, material, substance or waste
including, containing or constituting petroleum or petroleum products, solvents
(including chlorinated solvents), nuclear or radioactive materials, asbestos in
any form that is or could become friable, radon, lead-based paint, urea
formaldehyde foam insulation or polychlorinated biphenyls, (b) any chemicals,
materials, substances or wastes which are now defined as or included in the
definition of “hazardous substances,” “hazardous wastes,” “hazardous materials,”
“extremely hazardous wastes,” “restricted hazardous wastes,” “toxic substances,”
“toxic pollutants” or words of similar import under any Environmental Law; or
(c) any other chemical, material, substance, pollutant or waste which is
regulated by any Governmental or Regulatory Authority or which could constitute
a nuisance.

“HSR Act” means the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as
amended.

“Indebtedness” of any Person means all obligations of such Person (a) for
borrowed money, (b) evidenced by notes, bonds, debentures or similar
instruments, (c) for the deferred purchase price of goods or services (other
than trade payables or accruals incurred in the ordinary course of business),
(d) under capital leases or (e) in the nature of guarantees of the obligations
described in clauses (a) through (d) above of any other Person.

“Indemnification Holdback” has the meaning ascribed to it in Section 6.2(a).

“Indemnitees” has the meaning ascribed to it in Section 6.2(b).

“Intangible Assets” means the value of the Company Intellectual Property,
goodwill and other non-physical assets (not including financial assets), each as
measured at the date of measurement in accordance with GAAP and consistent with
past practices.

“Intellectual Property” means all trademarks and trademark rights, trade names
and trade name rights, service marks and service mark rights, service names and
service name rights, patents and patent rights, utility models and utility model
rights, copyrights, mask work rights, brand names, trade dress, product designs,
product packaging, business and product names, logos, slogans, rights of
publicity, trade secrets, inventions (whether patentable or not), invention
disclosures, improvements, processes, formulae, industrial models, processes,
designs, specifications, technology, methodologies, computer software (including
all source code and object code),

 

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firmware, development tools, flow charts, annotations, all Web addresses, sites
and domain names, all data bases and data collections and all rights therein,
any other confidential and proprietary right or information, whether or not
subject to statutory registration, and all related technical information,
manufacturing, engineering and technical drawings, know-how and all pending
applications for and registrations of patents, utility models, trademarks,
service marks and copyrights, and the right to sue for past infringement, if
any, in connection with any of the foregoing, and all documents, disks, records,
files and other media on which any of the foregoing is stored.

“Interim Financials” means the audited balance sheet of the Company as of
December 31, 2007, the related audited income statement and statement of cash
flows for December 31, 2007, and the unaudited balance sheet of the Company as
of February 29, 2008, the related unaudited income statement and statement of
cash flows for February 29, 2008.

“Investment Assets” means all debentures, notes and other evidences of
Indebtedness, stocks, securities (including rights to purchase and securities
convertible into or exchangeable for other securities), interests in joint
ventures and general and limited partnerships, mortgage loans and other
investment or portfolio assets owned of record or beneficially by the Company.

“IRS” means the United States Internal Revenue Service or any successor entity.

“Key Employees” means Lee Perlman and Adam Carroll.

“Knowledge” means, as to the Company, the actual knowledge of the Company’s
Chief Executive Officer, President, Chief Financial Officer and Controller after
reasonable investigation of the Company’s Books and Records and inquiries of the
Company’s senior management.

“Law” or “Laws” means any law, statute, order, decree, consent decree, judgment,
rule, regulation, ordinance or other pronouncement having the effect of law
whether in the United States, any foreign country, or any domestic or foreign
state, county, city or other political subdivision or of any Governmental or
Regulatory Authority.

“Legal Proceeding” means any action, suit, litigation, arbitration, proceeding
(including any civil, criminal, administrative, investigative or appellate
proceeding), hearing, inquiry, audit, examination or investigation commenced,
brought, conducted or heard by or before, or otherwise involving, any court or
other Governmental or Regulatory Authority or any arbitrator or arbitration
panel.

“Liabilities” means all Indebtedness, obligations and other liabilities of a
Person, whether absolute, accrued, asserted or unasserted, contingent (or based
upon any contingency), known or unknown, fixed or otherwise, or whether due or
to become due.

“License” means any Contract that grants a Person the right to use or otherwise
enjoy the benefits of any Intellectual Property (including any covenants not to
sue with respect to any Intellectual Property).

 

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“Liens” means, except for Permitted Liens, any mortgage, pledge, assessment,
security interest, lease, lien, easement, license, covenant, condition,
restriction, adverse claim, levy, charge, option, equity, adverse claim or
restriction or other encumbrance.

“Loss(es)” means any and all damages, fines, fees, Taxes, penalties,
deficiencies, losses (but not consequential damages) and expenses, including
interest, reasonable expenses of investigation, court costs, reasonable fees and
expenses of attorneys, accountants and other experts or other expenses of
litigation or other proceedings or of any claim, default or assessment (such
fees and expenses to include all fees and expenses, including fees and expenses
of attorneys), provided that such losses are net of any Tax benefit actually
received, any insurance proceeds actually received (without any adverse effect
on the premiums paid for such insurance) or any proceeds received by virtue of
third party indemnification.

“Non-Competition Agreement” has the meaning ascribed to it in 7.3(f).

“Officer’s Certificate” has the meaning ascribed to it in Section 6.2(d)

“Permits” means all licenses, permits, approvals, authorizations, variances,
waivers or consents issued to the Company.

“Permitted Liens” means (i) statutory liens for Taxes or other payments that are
not yet due and payable; (ii) statutory liens to secure obligations to
landlords, lessors or renters under leases or rental agreements; (iii) deposits
or pledges made in connection with, or to secure payment of, workers’
compensation, unemployment insurance or similar programs mandated by Law;
(iv) statutory liens in favor of carriers, warehousemen, mechanics and
materialmen, to secure claims for labor, materials or supplies and other like
liens; (v) liens related to the Second Amended and Restated Loan and Security
Agreement, dated as of September 19, 2006, by and among New Age Electronics,
Inc. and the lenders named therein; and (vi) statutory purchase money liens.

“Person” means any natural person, corporation, general partnership, limited
partnership, limited liability company or partnership, proprietorship, other
business organization, trust, union, association or Governmental or Regulatory
Authority.

“Plan” means each employee benefit or compensation plan, agreement, policy,
program or arrangement covering present or former employees, officers and
directors of, and advisors and consultants to, the Company, including but not
limited to “employee benefit plans” within the meaning of Section 3(3) of ERISA,
stock purchase, stock option or any other stock-based award, profit sharing,
fringe benefit, post-retirement health, health, life, vision and/or dental
insurance coverage (including any self-insured arrangement), disability benefit,
supplemental unemployment benefit, vacation benefit, change in control,
retention, severance, termination pay, bonus and deferred compensation plans,
agreements or funding arrangements (collectively, the “Plans”), whether written
or oral and whether sponsored, maintained or contributed to by (i) the Company
or (ii) any other organization that is a member of a controlled group of
organizations (within the meaning of Sections 414(b), (c), (m) or (o) of the
Code) of which the Company is a member (the “Controlled Group”).

“PTO” means the United States Patent and Trademark Office.

 

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“Order” means any writ, judgment, decree, injunction or similar order of any
Governmental or Regulatory Authority (in each such case whether preliminary or
final).

“Registered Intellectual Property” shall mean all United States, international
and foreign: (a) patents and patent applications (including provisional
applications); (b) registered trademarks and service marks, applications to
register trademarks and service marks, intent-to-use applications, other
registrations or applications to trademarks or service marks, or trademarks or
service marks in which common law rights are owned or otherwise controlled;
(c) registered copyrights and applications for copyright registration; (d) any
mask work registrations and applications to register mask works; and (e) any
other Intellectual Property that is the subject of an application, certificate,
filing, registration or other document issued by, filed with, or recorded by,
any state, government or other public legal authority.

“Related Party” means (a) each individual who is, or who has at any time been,
an officer of the Company; (b) each member of the family of each of the
individuals referred to in clause “(a)” above; and (c) any Entity (other than
the Company) in which any one of the individuals referred to in clauses “(a)”
and “(b)” above holds or held (or in which more than one of such individuals
collectively hold or held), beneficially or otherwise, a controlling interest or
a material voting, proprietary or equity interest.

“Release” means any spilling, leaking, pumping, pouring, emitting, emptying,
discharging, injecting, escaping, leaching, dumping or disposing of a Hazardous
Material into the Environment.

“Relevant Group” means any subsidiary or an affiliated, consolidated, combined,
unitary or similar group of which the Company is or was a member.

“Representatives” means officers, directors, employees, shareholders, attorneys,
accountants, investment advisors, agents, representatives, lenders, Affiliates
or Associates.

“SEC” means the Securities and Exchange Commission or any successor entity.

“SEC Documents” means, with respect to any Person, each report, schedule, form,
statement or other document filed or required to be filed with the SEC by such
Person pursuant to Section 13(a) of the Exchange Act.

“Shareholders” shall mean all holders of capital stock of the Company as of
Closing.

“Specified Representation” has the meaning ascribed to it in
Section 6.2(b)(i)(A).

“Subsidiary” means any Person in which the Company, directly or indirectly
through subsidiaries or otherwise, beneficially owns at least twenty percent
(20%) of either the equity interest in, or the voting control of, such Person,
whether or not existing on the date hereof.

“Takeover Statute” means a “fair price,” “moratorium,” “control share
acquisition” or other similar anti-takeover statute or regulation enacted under
state or federal laws in the United States, including Chapter 13 of the
California Code.

 

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“Tangible Net Worth” means the value of the Company’s total assets, less the
value of all of the Company’s liabilities (each as measured at the date of
measurement based on the Books and Records of the Company in accordance with
GAAP and consistent with the Company’s past practices), less the value of all of
the Company’s Intangible Assets at the Closing Date which are transferred to or
assumed by Acquirer.

“Taxes” means all taxes, however denominated, including any interest, penalties
or other additions to tax that may become payable in respect thereof,
(a) imposed by any federal, territorial, state, local or foreign government or
any agency or political subdivision of any such government, which taxes shall
include, without limiting the generality of the foregoing, all income or profits
taxes (including but not limited to, federal, state and foreign income taxes),
payroll and employee withholding taxes, unemployment insurance contributions,
social security taxes, sales and use taxes, ad valorem taxes, excise taxes,
franchise taxes, gross receipts taxes, withholding taxes, business license
taxes, occupation taxes, real and personal property taxes, stamp taxes,
environmental taxes, transfer taxes, workers’ compensation, Pension Benefit
Guaranty Corporation premiums and other governmental charges, and other
obligations of the same or of a similar nature to any of the foregoing, which
are required to be paid, withheld or collected, (b) any liability for the
payment of amounts referred to in (a) as a result of being a member of any
affiliated, consolidated, combined or unitary group, or (c) any liability for
amounts referred to in (a) or (b) as a result of any obligations to indemnify
another person or as a result of being a successor in interest or transferee of
another person.

“Tax Returns” means all reports, estimates, declarations of estimated tax,
information statements and returns required to be filed in connection with any
Taxes, including information returns with respect to backup withholding and
other payments to third parties.

“Third Party Claim” has the meaning ascribed to it in Section 6.2(f)(i).

“Third Party Expenses” has the meaning ascribed to it in Section 5.6.

“Warranty Obligation” means all forms of warranties, guarantees and warranty
policies of the Company in respect of any of the Company’s products or services,
which are currently in effect.

 

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EXECUTION COPY

IN WITNESS WHEREOF, Acquirer and the Company have caused this Agreement to be
signed by their duly authorized representatives, all as of the date first
written above.

 

NEW AGE ELECTRONICS, INC.     SYNNEX CORPORATION By  

/s/ Lee Perlman

    By  

/s/ Simon Y. Leung

Name  

Lee Perlman

    Name   Simon Y. Leung Title  

Chairman, CEO

    Title   General Counsel and Secretary

AGREED AND ACCEPTED:

 

SHAREHOLDERS By  

/s/ Lee Perlman

    By  

/s/ Adam Carroll

  Lee Perlman       Adam Carroll

SYNNEX/NEW AGE

ASSET PURCHASE AGREEMENT

SIGNATURE PAGE

--------------------------------------------------------------------------------

EXHIBIT A

EXCLUDED ASSETS

 

A-1

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EXHIBIT A-1

SPECIFIED RETAINED LIABILITIES

 

A-1

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EXHIBIT B

ASSUMED LIABILITIES

 

B-1

--------------------------------------------------------------------------------

EXHIBIT C

FORM OF ASSIGNMENT AND ASSUMPTION AGREEMENT

 

C-1

--------------------------------------------------------------------------------

EXHIBIT D

FORM OF ACQUIRER OFFICERS’ CERTIFICATE

 

D-1

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EXHIBIT E

FORM OF THE COMPANY OFFICERS’ CERTIFICATE

 

E-1

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EXHIBIT F

FORM OF THE COMPANY SECRETARY’S CERTIFICATE

 

F-1

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EXHIBIT G

FORM OF NON-COMPETITION AGREEMENT

 

G-1

--------------------------------------------------------------------------------

EXHIBIT H

FORM OF BILL OF SALE

 

H-1

--------------------------------------------------------------------------------

EXHIBIT I

FORM OF PATENT ASSIGNMENT

 

I-1

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EXHIBIT J

FORM OF TRADEMARK ASSIGNMENT

 

J-1

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EXHIBIT K

FORM OF COPYRIGHT ASSIGNMENT

 

K-1