Exhibit 10.1

 

PURCHASE AND SALE AGREEMENT

 

by and among

 

Everest/Sapphire Acquisition, LLC,

 

SIERRA BULLETS, L.L.C.,

 

BHH MANAGEMENT, INC.,

 

LUMBER MANAGEMENT, INC.

 

AND

 

BHH MANAGEMENT, INC.,

 

AS THE SELLERS’ REPRESENTATIVE

 

Dated as of AUGUST 21, 2017

 

 

 

 

Table of Contents

 

  Page     Article 1 PURCHASE AND SALE OF TRANSFERRED INTERESTS; CLOSING 1      
1.1 Closing 1           1.2 Purchase and Sale of the Transferred Interests 1    
      1.3 Closing Deliverables; Payments at Closing 1           1.4 Working
Capital Adjustment 3         Article 2 REPRESENTATIONS AND WARRANTIES RELATING
TO SELLERS 6       2.1 Organization and Good Standing 6           2.2 Power and
Authorization; Enforceability 6           2.3 No Violation or Conflict 6        
  2.4 Ownership of Transferred Interests 7           2.5 Consents 7          
2.6 Litigation 7           2.7 FIRPTA 7           2.8 Brokers and Finders 7    
    Article 3 REPRESENTATIONS AND WARRANTIES RELATING TO THE COMPANY 8       3.1
Organization and Good Standing 8           3.2 Power and Authorization;
Enforceability 8           3.3 No Violation or Conflict 8           3.4
Capitalization 9           3.5 Compliance with Laws 9           3.6 Litigation
10           3.7 Financial Statements; Undisclosed Liabilities; Books and
Records 10           3.8 Absence of Certain Changes and Events 11           3.9
Real Property 13           3.10 Material Contracts 15           3.11 Insurance
19           3.12 Permits 19           3.13 Tangible Personal Property 19      
    3.14 Intellectual Property 19           3.15 Labor Matters 22           3.16
Employee Benefits 23           3.17 Environmental Matters 24

 

-i-

 

 

Table of Contents

(continued)

 

      Page           3.18 Tax Matters 25           3.19 Customers and Suppliers
26           3.20 Inventory; Accounts Receivable 27           3.21 Related Party
Transactions 27           3.22 Brokers 28           3.23 Banking Relationships
28           3.24 Products; Product Liability 28           3.25 Propriety of
Past Payments 28           3.26 Personal Information Laws 29           3.27
International Trade Laws and Regulations 29           3.28 Internal Accounting
Controls 29           3.29 Conflict Minerals 30         Article 4
REPRESENTATIONS AND WARRANTIES OF BUYER 30       4.1 Organization and Good
Standing 30           4.2 Power and Authorization; Enforceability 30          
4.3 No Violation or Conflict 30           4.4 Compliance with Laws 31          
4.5 Litigation 31           4.6 Brokers 31           4.7 Investment 31          
4.8 Available Funds 31           4.9 Solvency 32           4.10 Tax and Legal
Matters 32         Article 5 CERTAIN COVENANTS OF THE PARTIES 32       5.1
Further Actions 32           5.2 Access to Information 32           5.3
Confidentiality; Books and Records 33           5.4 Restrictive Covenants 34    
      5.5 Tax Matters 36           5.6 Employee Matters 38           5.7
Directors’ and Officers’ Exculpation; Indemnification 40           5.8
Representation & Warranty Insurance Policy 40

 

-ii-

 

 

Table of Contents

(continued)

 

      Page         Article 6 INDEMNIFICATION 40       6.1 Indemnification by
Sellers 40           6.2 Indemnification by Buyer 41           6.3 Claims 42    
      6.4 Survival 44           6.5 Certain Limitations on Indemnification 44  
        6.6 Certain Other Restrictions on Indemnification 44           6.7
Calculation and Mitigation of Losses 46           6.8 Acknowledgment 46        
  6.9 Exclusive Remedy 46           6.10 Special Rule for Fraud 46        
Article 7 SELLERS’ REPRESENTATIVE 47       7.1 Sellers’ Representative
Appointment and Powers 47           7.2 Fees and Expenses 47           7.3
Liability of Sellers’ Representative 48           7.4 Resignation or Removal of
the Sellers’ Representative 48           7.5 Reliance 48         Article 8
MISCELLANEOUS 48       8.1 Fees and Expenses 48           8.2 Notices 49        
  8.3 Releases 50           8.4 Assignment and Benefit 51           8.5
Amendment, Modification and Waiver 51           8.6 Due Diligence Review; No
Additional Representations and Warranties 52           8.7 Disclaimer Regarding
Projections 52           8.8 Interpretation 52           8.9 Governing Law 53  
        8.10 Jurisdiction 54           8.11 Waiver of Jury Trial 54          
8.12 Conflicts and Privilege 55           8.13 Section Headings 55          
8.14 Severability 55

 

-iii-

 

 

Table of Contents

(continued)

 

      Page           8.15 Counterparts; Third-Party Beneficiaries 56          
8.16 Entire Agreement 56           8.17 Attorneys’ Fees 56           8.18
Specific Performance 56           8.19 Incorporation of Schedules and Exhibits
56           8.20 Termination of Operating Agreement 56

 

-iv-

 

 

Exhibits

 

A - Definitions

B - Disclosure Schedule

C - Estimated Closing Statement

D - Pro Rata Portion

E - Representation & Warranty Insurance Policy

 

-v-

 

 

PURCHASE AND SALE AGREEMENT

 

This PURCHASE AND SALE AGREEMENT (this “Agreement”) dated as of August 21, 2017
(the “Closing Date”) by and among Everest/Sapphire Acquisition, LLC, a Delaware
limited liability company (“Buyer”), Sierra Bullets L.L.C., a Delaware limited
liability company (the “Company”), BHH Management, Inc., a California
corporation (“BHH”), Lumber Management, Inc., a Delaware corporation (“LMI” and,
together with BHH, each a “Seller” and, collectively, the “Sellers”), and BHH,
in its capacity as the representative of Sellers (the “Sellers’
Representative”). Exhibit A contains definitions, or references to the
definitions, of the capitalized terms used in this Agreement. Sellers and Buyer
are each referred to herein individually as a “Party” and collectively as the
“Parties.”

 

BACKGROUND

 

A.BHH owns 86.49% of the limited liability company interests of the Company (the
“BHH Interest”) and LMI owns 13.51% of the limited liability company interests
of the Company (the “LMI Interest” and, together with the BHH Interest, the
“Transferred Interests”).

 

B.On the terms and subject to the conditions set forth in this Agreement and in
exchange for the consideration set forth in Section 1.3, (i) BHH desires to sell
assign, convey, and deliver to Buyer, and Buyer desires to purchase from BHH,
all right, title and interest in and to all of the BHH Interest, and (ii) LMI
desires to sell assign, convey, and deliver to Buyer, and Buyer desires to
purchase from LMI, all right, title and interest in and to all of the LMI
Interest (collectively, the “Transactions”).

 

C.Following the Closing, Buyer will own all of the Transferred Interests.

 

AGREEMENT

 

In consideration of the mutual covenants, conditions and agreements set forth in
this Agreement, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, it is agreed as follows:

 

Article 1

PURCHASE AND SALE OF TRANSFERRED INTERESTS; CLOSING

 

1.1Closing. The closing of the Transactions (the “Closing”) will take place on
the Closing Date simultaneously with the execution and delivery of this
Agreement.

 

1.2Purchase and Sale of the Transferred Interests. On the terms and subject to
the conditions set forth in this Agreement, at the Closing, (i) BHH will sell,
assign, convey, transfer, and deliver to Buyer, and Buyer will purchase from
BHH, all of the BHH Interests, free and clear of all Liens, for a portion of the
cash consideration described in Section 1.3; and (ii) LMI will sell, assign,
convey, transfer, and deliver to Buyer, and Buyer will purchase from LMI, all of
the LMI Interests, free and clear of all Liens, for a portion of the cash
consideration described in Section 1.3.

 

1.3Closing Deliverables; Payments at Closing.

 

1.3.1Seller Deliveries. At the Closing, the Sellers’ Representative is
delivering or causing to be delivered to Buyer:

 

 

 

 

(a)this Agreement, duly executed by the Company, each Seller and the Sellers’
Representative;

 

(b)(i) a certificate, dated the Closing Date, signed by the Secretary or any
Assistant Secretary of the managing member of the Company, attesting to: (a) the
completion of all necessary limited liability company action by the Company and
all necessary corporate action by BHH to execute and deliver this Agreement, the
other Seller Transaction Documents and the other Company Transaction Documents
and to consummate the Transactions, and including copies of the Company’s
Governing Documents and all resolutions required in connection with this
Agreement or any other Company Transaction Document and (b) the good standing
(or similar) certificates of the Company with respect to such entity’s
jurisdiction of organization, and (ii) a certificate, dated the Closing Date,
signed by an authorized officer of LMI, attesting to the completion of all
necessary corporate action by LMI to execute and deliver this Agreement and the
other Seller Transaction Documents and to consummate the Transactions;

 

(c)payoff letter(s) in form and substance reasonably satisfactory to Buyer (the
“Payoff Letters”), together with UCC-3 termination statements with respect to
the financing statements filed against the assets of the Company by the holders
of such Liens, in each case, in form and substance reasonably satisfactory to
Buyer relating to the payment of all Estimated Closing Indebtedness set forth in
the Estimated Closing Statement (the “Payoff Amounts”), which Payoff Letters
will contain customary lien releases;

 

(d)the consents set forth on Section 1.3.1(d) of the Disclosure Schedule, in
each case, in form and substance reasonably satisfactory to Buyer;

 

(e)a Notice of Non-U.S. Real Property Holding Corporation Status which meets the
requirements of Treasury Regulation Section 1.897-2(h) and is sufficient to
exempt the transactions contemplated by this Agreement from withholding pursuant
to the provisions of the Foreign Investment in Real Property Tax Act;

 

(f)evidence of binding director and officer insurance coverage;

 

(g)offer letters, duly executed by the Employees identified on Section 1.3.1(g)
of the Disclosure Schedule, pursuant to which such Employees agree to be bound
by Buyer’s terms and conditions of employment;

 

(h)resignations, in form and substance reasonably satisfactory to Buyer, of each
manager, director and executive officer of the Company, which will be effective
upon the Closing, except for such Persons as will have been designated in
writing prior to the Closing by Buyer to the Sellers’ Representative; and

 

(i)a DVD containing a copy of the information and documents set forth in the
Data Room.

 

1.3.2Buyer Deliveries. At the Closing, Buyer is delivering, or causing to be
delivered, and paying, or causing to be paid, by wire transfer in immediately
available funds (without any withholding or deduction of any kind except as
otherwise provided for in this Agreement or otherwise required by Law), the
following:

 

 - 2 - 

 

 

(a)this Agreement, duly executed by Buyer;

 

(b)a certificate, dated the Closing Date, signed by the Secretary or any
Assistant Secretary of Buyer, attesting to: (i) the completion of all necessary
corporate action by Buyer to execute and deliver this Agreement and the other
Buyer Transaction Documents and to consummate the Transactions, and including
copies of the Governing Documents of Buyer and resolutions required in
connection with this Agreement and any other Buyer Transaction Document and (ii)
the good standing (or similar) certificate of Buyer with respect to Buyer’s
jurisdiction of organization;

 

(c)evidence that Buyer (or one or more of its Affiliates) has entered into the
representation and warranty insurance policy attached hereto as Exhibit E (the
“Representation and Warranty Insurance Policy”) pursuant to Section 5.8;

 

(d)the Payoff Amounts to the accounts and in the amounts set forth in the Payoff
Letters, and the Estimated Closing Transaction Expenses to the accounts and in
the amounts set forth in the Estimated Closing Statement, in each case, to the
extent not paid by or on behalf of the Company and/or its Affiliates prior to
the Closing;

 

(e)to the Sellers’ Representative, for the benefit of Sellers, to the account
specified in writing by the Sellers’ Representative, the Sellers’ Representative
Amount, to be held and disbursed by the Sellers’ Representative in accordance
with the terms of this Agreement; and

 

(f)to Sellers, according to each Seller’s Pro Rata Portion, to the accounts
specified in writing by the Sellers’ Representative, the Estimated Closing Date
Purchase Price.

 

1.4Working Capital Adjustment.

 

1.4.1Estimated Closing Statement. Attached hereto as Exhibit C (which such
Exhibit C was delivered to Buyer prior to Closing) is a written statement (the
“Estimated Closing Statement”) reflecting Sellers’ good faith calculations, in
accordance with the Accounting Principles, of (a)(i) the Net Working Capital as
of 11:59 p.m. on the Business Day immediately prior to the Closing Date (the
“Estimated Closing Working Capital”), (ii) the Cash of the Company as of 11:59
p.m. on the Business Day immediately prior to the Closing Date (the “Estimated
Closing Cash”), (iii) the Indebtedness of the Company as of 11:59 p.m. on the
Business Day immediately prior to the Closing Date (the “Estimated Closing
Indebtedness”), and (iv) the Transaction Expenses of the Company (the “Estimated
Closing Transaction Expenses”), and (b) Sellers’ calculation of the Estimated
Closing Date Purchase Price.

 

 - 3 - 

 

 

1.4.2Closing Statement. As promptly as practicable, but no later than sixty (60)
days after the Closing Date, Buyer will cause to be prepared and delivered to
the Sellers’ Representative a written statement (the “Closing Statement”)
setting forth Buyer’s good faith calculations, in accordance with the Accounting
Principles, of (a)(i) the Net Working Capital as of 11:59 p.m. on the Business
Day immediately prior to the Closing Date (the “Closing Working Capital”), (ii)
the Cash of the Company as of 11:59 p.m. on the Business Day immediately prior
to the Closing Date (the “Closing Cash”), (iii) the Indebtedness of the Company
as of 11:59 p.m. on the Business Day immediately prior to the Closing Date (the
“Closing Indebtedness”), and (iv) the Transaction Expenses of the Company as of
the Closing Date (the “Closing Transaction Expenses”), and (b) Buyer’s
calculation of the Closing Date Purchase Price. Following delivery of the
Closing Statement, and upon reasonable request of the Sellers’ Representative,
Buyer and the Company will, upon reasonable notice, provide the Sellers’
Representative and its advisors with reasonable access to the Company’s
employees, books and records during normal business hours to the extent
reasonably related to the Sellers’ Representative’s evaluation of the Closing
Statement. If Buyer fails to deliver the Closing Statement within such sixty
(60)-day period, the Sellers’ Representative will deliver to Buyer its own
calculation of the Closing Working Capital, Closing Cash, the Closing
Indebtedness, the Closing Transaction Expenses and the Closing Date Purchase
Price, and the Sellers’ Representative’s calculation will be final and binding
upon the Parties.

 

1.4.3Dispute Notice. If the Sellers’ Representative disagrees with the
calculations set forth in the Closing Statement delivered by Buyer pursuant to
Section 1.4.2, the Sellers’ Representative may, within sixty (60) days after
receipt of the Closing Statement, deliver a written notice to Buyer (a “Dispute
Notice”) specifying in reasonable detail each item or amount that the Sellers’
Representative disputes (the “Disputed Items”), the amount in dispute for each
Disputed Item and the reasons supporting the Sellers’ Representative’s
positions. The Sellers’ Representative will be deemed to have agreed with all
other items and amounts contained in the Closing Statement that are not Disputed
Items. If the Sellers’ Representative fails to deliver a Dispute Notice within
such sixty (60)-day period, Buyer’s calculation of the Closing Working Capital,
the Closing Cash, the Closing Indebtedness, the Closing Transaction Expenses and
the Closing Date Purchase Price will be deemed accepted by Sellers and the
Sellers’ Representative and will be final, conclusive and binding on the
Parties.

 

1.4.4Resolution Period. If a Dispute Notice is duly delivered pursuant to
Section 1.4.3, Buyer and the Sellers’ Representative will, during the thirty
(30) days following such delivery (the “Resolution Period”), use commercially
reasonable efforts to reach agreement on the Disputed Items or amounts in order
to determine the amount of the Closing Working Capital, the Closing Cash, the
Closing Indebtedness, the Closing Transaction Expenses, and/or the Closing Date
Purchase Price, as applicable. If Buyer and the Sellers’ Representative are able
to reach agreement with respect to any Disputed Items, Buyer will promptly
revise the Closing Statement to reflect such agreement.

 

 - 4 - 

 

 

1.4.5Independent Accounting Firm. If, upon the conclusion of the Resolution
Period, or any mutually-agreed upon extension thereof, Buyer and the Sellers’
Representative are unable to reach agreement on all of the Disputed Items, they
will jointly engage and submit the unresolved Disputed Items (the “Unresolved
Items”) to the Independent Accounting Firm for resolution in accordance with the
terms of this Section 1.4.5. The Independent Accounting Firm (i) will act as an
arbitrator to determine, based solely on presentations by Buyer and the Sellers’
Representative and not by independent review, only the Unresolved Items, (ii)
will make a determination with respect to the Unresolved Items only and in a
manner consistent with this Section 1.4.5, (iii) will use the definitions set
forth herein with no consideration given to any modification of such
definitions, (iv) will be limited to those adjustments, if any, required to be
made for the Closing Statement to comply with the provisions of this Agreement
and (v) will make a determination of the Unresolved Items within the range of
Buyer’s and the Sellers’ Representative’s disagreement. Each Party will use
commercially reasonable efforts to furnish to the Independent Accounting Firm
such work papers and other documents and information pertaining to the
Unresolved Items as the Independent Accounting Firm may reasonably request and
will be afforded an opportunity to discuss the Unresolved Items with the
Independent Accounting Firm at such hearing as the Independent Accounting Firm
will request or permit; provided, that (y) each Party will provide the other
Party with a copy of all materials provided to, and communications with, the
Independent Accounting Firm and (z) no Party (or any of its Affiliates or
Representatives) will engage in any ex parte communication with the Independent
Accounting Firm at any time with respect to the Unresolved Items. The
Independent Accounting Firm will deliver to Buyer and the Sellers’
Representative as promptly as practicable, and will be instructed to deliver no
later than thirty (30) days after its engagement, a written report setting forth
such calculation. Such determination of the Independent Accounting Firm will be
final, binding and conclusive upon Buyer and Sellers (absent fraud or manifest
error) and Buyer will promptly revise the Closing Statement to reflect such
determination upon receipt of such report. The fees and expenses of the
Independent Accounting Firm will be borne pro rata as between Buyer, on the one
hand, and Sellers, on the other hand, based on the proportionate deviation of
the respective adjustment amounts for the Unresolved Items proposed by Buyer and
the Sellers’ Representative, as set forth in the Closing Statement in the case
of Buyer and the Dispute Notice in the case of the Sellers’ Representative, from
the determination of the final adjustment amounts made by the Independent
Accounting Firm. The date on which the Closing Working Capital, the Closing
Cash, the Closing Indebtedness, the Closing Transaction Expenses, and Closing
Date Purchase Price are finally determined in accordance with this Section 1.4
is referred to as the “Determination Date.”

 

1.4.6Adjustment to Purchase Price. The “Adjustment Amount” means the difference
between the Closing Date Purchase Price (as finally agreed upon or determined
pursuant to this Section 1.4) and the Estimated Closing Date Purchase Price. If
the Adjustment Amount is a positive amount, then promptly, and in any event
within five (5) Business Days following the Determination Date, Buyer will pay
or cause to be paid to Sellers, by wire transfer of immediately available funds
to the account or accounts designated in writing by the Sellers’ Representative,
each Seller’s Pro Rata Portion of the Adjustment Amount. If the Adjustment
Amount is a negative amount, then promptly, and in any event within five (5)
Business Days following the Determination Date, Sellers will pay or cause to be
paid to Buyer, by wire transfer of immediately available funds to an account
designated in writing by Buyer, an amount equal to the Adjustment Amount, with
each Seller being responsible for its Pro Rata Portion of such Adjustment
Amount.

 

 - 5 - 

 

 

1.4.7No Adverse Actions. Buyer and the Company agree that, following the Closing
and until the Adjustment Amount becomes final and binding upon the parties to
this Agreement, the Company will not take any actions with respect to the
accounting books and records of the Company as of the Closing Date on which the
Closing Statement is to be based that are not consistent with the Accounting
Principles.

 

Article 2

REPRESENTATIONS AND WARRANTIES RELATING TO SELLERS

 

Except as set forth in the Disclosure Schedule, which exceptions or disclosures
set forth therein will be deemed to be part of the representations and
warranties made hereunder, each Seller, severally and not jointly, solely with
respect to itself and not with respect to the other Seller, represents and
warrants to Buyer as set forth below as of the Closing Date:

 

2.1Organization and Good Standing. Such Seller has been duly formed and is
validly existing and in good standing under the Laws of its jurisdiction of
organization and has the requisite power and authority to own or lease its
properties and to conduct its business as it is now being conducted.

 

2.2Power and Authorization; Enforceability.

 

2.2.1Such Seller has all requisite right, power, authority and capacity to
execute and deliver this Agreement and the other Transaction Documents to which
it is, or is specified to be, a party (collectively, the “Seller Transaction
Documents”), to perform its obligations hereunder and thereunder and to carry
out the Transactions. All necessary action has been taken by such Seller to
authorize the execution, delivery and performance by it of this Agreement and
each other Seller Transaction Document, and no further action on the part of
such Seller is necessary to authorize such execution, delivery and performance.
Such Seller has duly executed and delivered this Agreement and, at or prior to
the Closing, will have duly executed and delivered each other Seller Transaction
Document.

 

2.2.2Assuming that this Agreement and each of the other Seller Transaction
Documents are valid and binding obligations of each of the other parties hereto
and thereto, this Agreement is, and each other Seller Transaction Document, when
duly executed and delivered at or prior to the Closing by such Seller will be,
the legal, valid and binding obligation of such Seller, enforceable against such
Seller in accordance with its respective terms, except as enforceability thereof
may be limited by the Remedies Exception.

 

2.3No Violation or Conflict. Neither the execution, delivery and performance by
such Seller of this Agreement and the other Seller Transaction Documents nor the
consummation of the Transactions (with or without the passage of time or the
giving of notice, or both) will (a) contravene, conflict with or result in a
violation or breach of, constitute a default under, or give a right to terminate
or cancel under, (A) the Governing Documents of such Seller or (B) any (1)
Judgments or (2) Laws, in each case, binding upon or applicable to such Seller
or any of its respective Affiliates or by which it or any of its respective
properties or assets are bound; (b) contravene, conflict with, result in a
violation or breach of, constitute a default under, or give a right to terminate
or cancel under, any of the terms or conditions of any Contract to which such
Seller is a party or by which it or any of its respective properties or assets
are bound; (c) result in the creation or imposition of any Lien upon any of the
assets of such Seller (including the Transferred Interests); or (d) cause a loss
or adverse modification of any material Governmental Authorization used or held
by such Seller or any of its respective Affiliates.

 

 - 6 - 

 

 

2.4Ownership of Transferred Interests. Such Seller is the beneficial and record
owner of the Transferred Interests set forth opposite such Seller’s name on
Section 3.4 of the Disclosure Schedule and has the sole right to vote or direct
the voting of such Transferred Interests, at its discretion, on any matter
submitted to a vote of the members of the Company. Such Seller’s Transferred
Interests constitute all of Equity Interests of the Company that are owned
legally, beneficially or of record by such Seller. The Company has no membership
interests or other Equity Interests other than the Transferred Interests. All of
the Transferred Interests of such Seller in the Company are owned directly by
such Seller free and clear of all Liens and free of any other restriction,
except for restrictions imposed by applicable securities Laws, and such Seller
has good and marketable title to the Transferred Interests free and clear of all
Liens. Such Seller has not granted or acknowledged to any Person any rights with
respect to any of such Seller’s Transferred Interests or any other Equity
Interests of the Company and such Seller has sole voting power and sole power to
issue instructions with respect to the matters set forth herein, sole power of
disposition, sole power of conversion, sole power to demand appraisal rights and
sole power to agree to all of the matters set forth in this Agreement, in each
case with respect to such Seller’s Transferred Interests and other Equity
Interests, with no limitations, qualifications or restrictions on such rights.
Such Seller does not have any claim against the Company or any of its officers,
managers or any other Person with respect to the issuance of any equity of the
Company or other Equity Interests. Such Seller has not commenced nor does such
Seller intend to commence a voluntary case or other proceeding, and no
involuntary case or other proceeding has been commenced against such Seller
seeking liquidation or other relief with respect to its debts under any
bankruptcy, insolvency or other similar Law. Upon the assignment of such
Seller’s Transferred Interests by such Seller to the Buyer, and upon such
Seller’s receipt of the Closing Date Purchase Price, good and marketable title
to such Seller’s Transferred Interests will pass to the Buyer, free and clear of
any Liens.

 

2.5Consents. No Consent of any Governmental Authority or any other Person is
required to be obtained, made or effected by such Seller in connection with the
execution and delivery of this Agreement and the other Seller Transaction
Documents or the performance of such Seller’s obligations hereby or thereby.

 

2.6Litigation. There are no Proceedings pending or threatened in writing, before
any Governmental Authority or arbitrator with respect to such Seller which seeks
to delay or prevent the consummation of the transactions contemplated by this
Agreement by such Seller or would, if successful, be reasonably expected to
adversely affect the ability of such Seller to perform its obligations under
this Agreement.

 

2.7FIRPTA. Such Seller is not a “foreign person” within the meaning of Section
1445 of the Code.

 

2.8Brokers and Finders. Except for Houlihan Lokey Capital, Inc., no broker,
investment banker, financial advisor, finder, agent or similar intermediary has
acted on such Seller’s behalf in connection with this Agreement or any of the
transactions contemplated hereby, and except for fees payable to Houlihan Lokey
Capital, Inc., there are no brokerage commissions, finders’ fees or similar fees
or commissions payable in connection therewith based on any Contract with such
Seller or any action taken by such Seller.

 

 - 7 - 

 

 

Article 3

REPRESENTATIONS AND WARRANTIES RELATING TO THE COMPANY

 

Except as set forth on the Disclosure Schedule, which exceptions or disclosures
set forth therein will be deemed to be part of the representations and
warranties made hereunder, Sellers hereby represent and warrant to Buyer as set
forth below as of the Closing Date:

 

3.1Organization and Good Standing. The Company is a limited liability company
duly organized, validly existing and in good standing under the Laws of the
State of Delaware, and has full limited liability company power to carry on its
business as presently conducted, and to own and lease the assets and properties
which it owns and leases. The Company is duly qualified or licensed to do
business as a foreign company and is in good standing (if applicable) in each
jurisdiction in which its ownership or leasing of assets or properties or the
nature of its activities requires such qualification. The Company has never
employed any Person in any jurisdiction outside of the United States.

 

3.2Power and Authorization; Enforceability.

 

3.2.1The Company has full right, power, and authority to execute and deliver
this Agreement and the other Transaction Documents to which it is, or is
specified to be, a party (collectively, the “Company Transaction Documents”), to
perform its obligations hereunder and thereunder, and to consummate the
Transactions. All necessary limited liability company action has been taken by
the Company to authorize the due and valid execution, delivery and performance
by the Company of this Agreement and each other Company Transaction Document.
The Company has duly executed and delivered this Agreement and, at or prior to
the Closing, will have duly executed and delivered each other Company
Transaction Document.

 

3.2.2Assuming that this Agreement and each of the other Company Transaction
Documents are valid and binding obligations of each of the other parties hereto
and thereto, this Agreement is, and each other Company Transaction Document,
when duly executed and delivered at or prior to the Closing by the Company, will
be, the legal, valid and binding obligation of the Company, enforceable against
it in accordance with its respective terms, except as enforceability of such
obligations may be limited by the Remedies Exception.

 

3.3No Violation or Conflict.

 

3.3.1Neither the execution, delivery and performance by the Company of this
Agreement or of the other Company Transaction Documents nor the consummation of
the Transactions (with or without the passage of time or the giving of notice,
or both) will:

 

(a)conflict with, or result in a breach of, the Governing Documents of the
Company;

 

(b)violate or conflict with any Judgments or Laws, in each case, binding upon or
applicable to the Company or by which the Company or any of its properties or
assets are bound or require the consent, approval or action of, filing with or
notice to any Governmental Authority or other Person;

 

 - 8 - 

 

 

(c)violate, or be in conflict with, or constitute a default (or an event which,
with notice or lapse of time or both, would constitute a default) under, or
result in, or provide the basis for, the termination of, or accelerate the
performance required by, or excuse performance by any Person of any of its
obligations under, or cause the acceleration of the maturity of any Indebtedness
or obligation pursuant to, or result in the creation or imposition of any Lien
upon any property or assets of the Company under, or any Material Contract to
which the Company is a party or by which it or any of its properties or assets
are bound;

 

(d)result in the creation or imposition of any Lien upon any of the Transferred
Interests; or

 

(e)cause a loss or adverse modification of any Governmental Authorization used
or held by the Company or any of its Affiliates.

 

3.3.2No consent or approval of or notice to any Governmental Authority or any
other Person is required to be obtained, made or effected by Company in
connection with the execution and delivery of this Agreement and the other
Transaction Documents or the performance of the Company’s obligations hereby or
thereby.

 

3.4Capitalization. Section 3.4 of the Disclosure Schedule sets forth a complete
and accurate list of (a) the Transferred Interests, which are the only
authorized, issued and outstanding equity securities of the Company and (b) the
record holders thereof. Other than as provided for in the Governing Documents of
the Company, no Rights in respect of any Equity Interests of the Company have
been granted by the Company or the Sellers. No Person, other than the Sellers,
has any interest or claim to any of the membership interests of the Company. All
of the Transferred Interests have been duly authorized and are validly issued.
The holders of the Transferred Interests have no obligation to make further
payments or contributions to the Company solely by reason of their ownership
thereof. All of the Transferred Interests have been offered, issued and
transferred without violation of any preemptive right or other right to purchase
and were issued and/or transferred in compliance with all applicable securities
Laws, other Laws, the operating agreement of the Company and the Contracts to
which the Company is a party or otherwise bound. Upon the consummation of the
transactions contemplated hereby, Buyer will be the sole owner, beneficially and
of record, of 100% of the issued and outstanding membership interests of the
Company, free and clear of any Liens. The Company does not control, directly or
indirectly, or have any direct or indirect Equity Interest in, any Person and
there is no other Person with respect to which (i) the Company may be deemed to
be in control because of factors or relationships other than the quantity of
stock or other interests owned in such Person (if any) or (ii) the Company may
be liable under any circumstances for the payment of additional amounts with
respect to its interest in such Person, whether in the form of assessments,
capital calls installment payments, general partner liability or otherwise.
There are no voting trusts, proxies or other similar commitments,
understandings, restrictions or arrangements relating to the Equity Interests in
or of the Company. There is no Voting Debt of the Company.

 

3.5Compliance with Laws. The Company has, during the five (5) years prior to the
date of this Agreement, complied in all material respects with, is not in
violation of, and has not received any written notices of violation with respect
to, any Law applicable to it or its Business, properties or assets. The Company
has previously provided or made available to the Buyer or its counsel true and
correct copies of all reports of inspections received by it with respect to the
Business under applicable Laws which occurred since January 1, 2014, and
resulted in or is reasonably likely to result in the imposition of a material
penalty or restriction. During the five (5) years prior to the date of this
Agreement, the Company has not received any written notice alleging that the
Company is in violation of any Law and, to the Company’s Knowledge, no
investigation, inspection, audit, or other proceeding by any Governmental
Authority involving an allegation of violation of any Law by the Company is
otherwise threatened or contemplated. The Company has not assumed by contract or
operation of Law any liability for violations by any other Person of any Law.

 

 - 9 - 

 

 

3.6Litigation. There are no Proceedings pending or, to the Company’s Knowledge,
threatened in writing which involve the Company, its businesses or assets. There
are no unsatisfied Judgments against the Company or any of its businesses,
properties or assets. There is no Proceeding pending or, to the Company’s
Knowledge, threatened in writing against the Company which questions or
challenges the validity of this Agreement or any action taken or to be taken by
the Company pursuant to this Agreement or in connection herewith or would
adversely affect the ability of the Company to consummate the Transactions.
There are no current, pending or, to the Company’s Knowledge, threatened claims
for against the Company in favor of the managers, officers, employees and agents
of the Company. To the Company’s Knowledge, there exist no facts or
circumstances creating any reasonable basis for the institution of any material
Proceedings. Section 3.6 of the Disclosure Schedule sets forth a complete and
correct list and description of all Proceedings since January 1, 2014 to which
the Company is or has been a party.

 

3.7Financial Statements; Undisclosed Liabilities; Books and Records.

 

3.7.1Financial Statements. The Company has provided Buyer with complete and
accurate copies of the following financial statements (collectively, the
“Financial Statements”): (i) the audited consolidated balance sheets of the
Company and its affiliate as of December 31, 2016 (the “Most Recent Fiscal Year
End”), December 31, 2015 and December 31, 2014 (including the notes thereto, if
any), and the related audited consolidated statements of income, shareholders’
equity and cash flows as of the fiscal years then ended; and (ii) the unaudited
balance sheet (the “Latest Balance Sheet”) of the Company as of June 30, 2017
(the “Latest Balance Sheet Date”) (including the notes thereto, if any) and the
related unaudited statements of income, shareholders’ equity and cash flows as
of and for the period from the Most Recent Fiscal Year End through such date
(the “Unaudited Financial Statements”). The Financial Statements (including the
notes thereto, if any) are consistent with the books and records of the Company,
fairly present in all material respects the consolidated (as applicable)
financial condition, cash flows and results of operations of the Company and, as
applicable, its affiliate as at the dates thereof and for the periods therein
referred to, in accordance with GAAP, subject, in the case of the Unaudited
Financial Statements, to the absence of footnote disclosure and changes
resulting from normal year-end adjustments.

 

3.7.2Undisclosed Liabilities. The Company does not have any direct or indirect
Indebtedness, liability, claim, loss, damage, deficiency, obligation or monetary
responsibility, whether matured or unmatured or fixed or contingent
(“Liabilities”), other than: (i) Liabilities which are adequately disclosed or
reserved against on the Latest Balance Sheet; (ii) Liabilities which have arisen
since the Latest Balance Sheet Date in the Ordinary Course; (iii) Liabilities
that, individually or in the aggregate, are not material in amount; and (iv)
Liabilities contemplated by this Agreement or the other Company Transaction
Documents.

 

 - 10 - 

 

 

3.7.3Governing Documents, Books and Records. True, correct and complete copies
of the Governing Documents, books of account, minute books, membership interest
record books and other records of the Company have heretofore been delivered or
made available to the Buyer or its counsel. The books and records of the Company
accurately reflect the assets, liabilities, business, financial condition and
results of operations of the Company and have been maintained in accordance with
good business and bookkeeping practices. On the Closing Date, such books and
records will be in the possession of the Company.

 

3.8Absence of Certain Changes and Events. Since the Most Recent Fiscal Year End,
the Company has conducted the Business in the Ordinary Course and, except as
expressly contemplated by this Agreement or any other Transaction Document,
there has not occurred any event or group of related events, condition,
occurrence, contingency or development that has had, or would reasonably be
expected to have, a Material Adverse Effect. Without limiting the generality of
the foregoing, since the Most Recent Fiscal Year End, there has not been any,
and/or the Company has not:

 

3.8.1change in the independent accountants of the Company or any change in the
accounting methods, principles or practices followed by the Company (except for
any such change required by reason of a concurrent change in GAAP or applicable
Law);

 

3.8.2with respect to any executive, manager, officer, employee, consultant or
contractor of the Company, (a) adoption or termination in any respect, amendment
or increase of the payments or benefits of any Employee Benefit Plan, (b) grant
of severance or termination pay, (c) increase in the compensation or payment of
any bonus or (d) change with respect to compensation or other benefits payable,
except, in each of clauses (a) through (d), in the Ordinary Course, as required
by Law or as required by any existing Contract;

 

3.8.3sale, assignment, transfer, hypothecation, conveyance, lease, or other
disposition of any asset or property of the Company, except in the Ordinary
Course, or mortgage, pledge, or imposition of any Lien on any asset or property
of the Company, except for Permitted Liens and except in the Ordinary Course;

 

3.8.4split, combined, classified, re-classified, varied the Rights attaching to,
or taken similar action with respect to any of the Transferred Interests or
other Equity Interests or proposed the issuance of any other securities in
respect of, in lieu of or in substitution for its authorized or issued equity or
other Equity Interests; granted any Rights to purchase its Equity Interests;
issued any Equity Interests; granted any registration rights; purchased,
redeemed, retired, or otherwise acquired any of its Equity Interests; or adopted
a plan of complete or partial liquidation or passed any resolutions providing
for or authorizing such liquidation or a dissolution, merger, consolidation,
restructuring, recapitalization or other reorganization of the Company or
declared or paid any dividend or other distribution or payment in respect of its
Equity Interests;

 

3.8.5amended its Governing Documents;

 

 - 11 - 

 

 

3.8.6damaged, destroyed or lost any material portion of the tangible assets or
properties of the Company, whether or not covered by insurance, in an amount in
excess of five thousand dollars ($5,000);

 

3.8.7except in the Ordinary Course, amended, renewed, failed to renew,
terminated (other than due to any scheduled expiration) or received written
notice of termination (other than due to any scheduled expiration) with respect
to any Material Contract or entered into any new Material Contract or taken any
action that would reasonably be expected to jeopardize the continuance of any of
its relationships with any of its Top Customers and/or Top Suppliers;

 

3.8.8(i) incurred or assumed any Indebtedness in excess of fifty thousand
dollars ($50,000) in the aggregate, (ii) assumed, guaranteed, endorsed or
otherwise became liable or responsible (whether directly, contingently or
otherwise) for the Liabilities of any other Person (other than the endorsements
of checks in the Ordinary Course) in excess of fifty thousand dollars ($50,000)
in the aggregate, or (iii) made any loans, advances or capital contributions to,
or investment in, any Person, in excess of fifty thousand dollars ($50,000) in
the aggregate, other than employee travel and expense advances in the Ordinary
Course;

 

3.8.9paid, discharged or satisfied any Liabilities, other than the payment,
discharge or satisfaction in the Ordinary Course Liabilities reflected or
reserved against in the Latest Balance Sheet or incurred in the Ordinary Course
since the Latest Balance Sheet Date;

 

3.8.10sold, disposed of or surrendered or disaggregated any material license or
any portion thereof;

 

3.8.11accelerated or delayed collection of notes or accounts receivable in
advance of or beyond their regular due dates or the dates when the same would
have been collected in the Ordinary Course;

 

3.8.12delayed or accelerated payments of any accounts payable or other liability
beyond or in advance of its due date or the date when such liability would have
been paid in the Ordinary Course;

 

3.8.13failed to replenish inventories and supplies of the Company in the
Ordinary Course or entered into any purchase commitment not in the Ordinary
Course;

 

3.8.14made any acquisition of all or any significant part of the assets, capital
stock, other Equity Interests, properties, securities or business of any other
Person;

 

3.8.15made any revaluation of any assets of the Business of the Company or write
down or write off of the value of any assets of the Business of the Company,
except in the Ordinary Course;

 

3.8.16entered into any collective bargaining Contract or any other Contract with
any labor union or association representing any group of employees, or been
subject to any strike, picket, work stoppage, work slowdown or labor dispute or
been subject to any application for certification or union organizing drive;

 

 - 12 - 

 

 

3.8.17made any capital expenditure or any other investment (or series of related
investments), or entered into any Contract or commitment therefor, excluding any
purchase of inventory in the Ordinary Course, in excess of fifty thousand
dollars ($50,000) in respect of any such individual investment or Contract or
seventy-five thousand dollars ($75,000) in the aggregate;

 

3.8.18written down the value of any inventory (including write downs by reason
of shrinkage or mark down) or written off as uncollectible any notes or accounts
receivable, except in the Ordinary Course;

 

3.8.19allowed any insurance policy naming the Company as beneficiary or loss
payee to be cancelled or terminated, or instructed any of the Company’s
insurance carriers to decrease any current policy coverage limits or materially
change the terms of such coverage; or

 

3.8.20agreement by the Company to do any of the foregoing.

 

3.9Real Property.

 

3.9.1Section 3.9.1 of the Disclosure Schedule sets forth the address and
description of each parcel of real property owned (in fee simple or pursuant to
an easement estate in perpetuity that runs with the land) by the Company (“Owned
Real Property”). With respect to each parcel of Owned Real Property, (a) the
Company has good, insurable and marketable fee simple title (or title by way of
an easement estate), free and clear of all Liens, except Permitted Liens, (b)
the Company has not leased or otherwise granted to any Person the right to use
or occupy such Owned Real Property or any portion thereof, and (c) there are no
outstanding options, rights of first offer or rights of first refusal to
purchase such Owned Real Property or any portion thereof or interest therein.

 

3.9.2Section 3.9.2 of the Disclosure Schedule sets forth the address of each
parcel of real property leased by the Company (the “Leased Real Property” and
together with the Owned Real Property, the “Real Property”), and a list of all
leases for such Leased Real Property (“Real Property Leases”). With respect to
each of the Real Property Leases, (a) such Real Property Lease is legal, valid,
binding, enforceable and in full force and effect and the Company is not in
default thereunder, and no condition or circumstance exists that, with the
giving of notice or passage of time, would constitute a default thereunder, (b)
the Company’s possession and quiet enjoyment of the Leased Real Property under
such Real Property Lease has not been disturbed and there are no disputes with
respect to such Real Property Lease, (c) the Company has not subleased, licensed
or otherwise granted any Person the right to use or occupy the Leased Real
Property or any portion thereof, (d) the Company has made available to Buyer
true, correct and complete copies of all Real Property Leases, and (e) the
Company has a valid and enforceable leasehold interest in each Leased Real
Property free and clear of all Liens other than Permitted Liens.

 

3.9.3No Person other than the Company has any right to use or occupy any part of
the Real Property.

 

 - 13 - 

 

 

3.9.4All buildings and all improvements located on the Real Property are in a
state of good maintenance and repair (normal wear and tear excepted) and in a
condition adequate and reasonably suitable for the conduct therein of the
Business. The heating, ventilation, air conditioning, plumbing and electrical
systems at the Real Property are in good working order and repair (normal wear
and tear excepted). The Company has not experienced any interruption in such
services provided to any of the premises located on the Real Property within the
last year.

 

3.9.5To the extent required by Law, the Company has obtained all permits,
licenses, franchises, approvals and authorizations (collectively, the “Real
Property Permits”) of (i) all Governmental Authorities having jurisdiction over
any of the premises comprising the Real Property and (ii) all insurance
companies and fire rating and other similar boards and organizations having
jurisdiction over any of the premises comprising the Real Property
(collectively, the “Insurance Organizations”). All such Real Property Permits
are set forth on Section 3.9.5 of the Disclosure Schedule and have been issued
to the Company to enable each of the premises comprising the Real Property to be
lawfully occupied and used by the Company for all of the purposes for which they
are currently occupied and used and are in full force and effect. The Company
has not received any written notice from any Governmental Authority having
jurisdiction over any premises comprising the Real Property, or from any
Insurance Organization, threatening a suspension, revocation, modification or
cancellation of any Real Property Permit or of any insurance policies, and there
exists no violation of a Real Property Permit. Each Real Property Permit is in
full force and effect.

 

3.9.6There is no pending or, to the Company’s Knowledge, threatened condemnation
or eminent domain proceeding with respect to or affecting any of the premises
comprising the Real Property or any part thereof. The Company has not received
any written, or, to the Company’s Knowledge, oral notice of any pending or
threatened condemnation or eminent domain proceeding with respect to or
affecting any of the premises comprising the Real Property or any part thereof
and, to the Company’s Knowledge, no such condemnations or proceedings have been
proposed. The Company has not received any written notice of any Environmental
Claims with respect to or affecting the Real Property.

 

3.9.7The Real Property comprises all of the real property used or intended to be
used in the Business, and, other than the Real Property Leases, the Company is
not a party to any other agreement which includes any option to purchase or
lease any real property or interest therein.

 

3.9.8The improvements on the Owned Real Property are located within the boundary
lines of such parcels and, to the Company’s Knowledge, all utility service lines
serving such Owned Real Property are located either within the boundary lines of
such property or within lands dedicated to public use or within recorded
easements for same.

 

3.9.9To the Company’s Knowledge, no portion of the Owned Real Property is
subject to any significant real property Tax increases or recapture of Taxes
occasioned by retroactive revaluation, special assessments, change in the land
usage, or loss of any exemption or benefit status.

 

 - 14 - 

 

 

3.9.10There are no encroachments upon the Owned Real Property from adjacent
properties nor encroachments of any improvement located on the Owned Real
Property upon adjoining land or upon easements encumbering the Owned Real
Property.

 

3.9.11The Company has not received any written notice of, and to the Company’s
Knowledge, no landlord of any Leased Real Property has any plans to make, any
material alterations to any of the Leased Real Property.

 

3.9.12All sums owed by any landlord to the Company under any Real Property Lease
have been paid, including, but not limited to, tenant improvement allowances.

 

3.9.13No underground tank or other underground storage receptacle used to
contain Hazardous Materials is currently located at any of the Owned Real
Property or, to the Company’s Knowledge, any of the Leased Real Property.

 

3.9.14The Company’s use of the Real Property does not violate the permitted use
of the easement set forth on Section 3.9.14 of the Disclosure Schedule.

 

3.10Material Contracts.

 

3.10.1Section 3.10.1 of the Disclosure Schedule lists the following Contracts in
effect on the date of this Agreement to which the Company is a party, has any
rights or Liabilities or is otherwise bound or to which the Company is not a
party that is used in connection with the Business (and in the case of oral
Contracts, summaries thereof), and pursuant to which the Company has obligations
(collectively, the “Material Contracts”):

 

(a)(i) each Contract that is executory in whole or in part and involves
performance of services (other than sale or purchase orders for goods or
materials) by or for the Company of an amount or value in excess of fifty
thousand dollars ($50,000), except for any such Contract entered into in the
Ordinary Course, and (ii) each Contract, that is executory in whole or in part
and involves the sale or purchase of goods or materials by the Company of an
amount or value in excess of fifty thousand dollars ($50,000), except for sales
of inventory in the Ordinary Course and sales of obsolete assets;

 

(b)each Contract that is executory in whole or in part and was not entered into
in the Ordinary Course that involves expenditures or receipts in excess of fifty
thousand dollars ($50,000) in respect of an individual Contract or fifty
thousand dollars ($50,000) in the aggregate for any number of Contracts entered
into for like services, goods or materials or with an individual party;

 

(c)each Contract with a Top Customer or Top Supplier, other than purchase orders
entered into in the Ordinary Course;

 

(d)each Contract granting an option or preferential rights to purchase, sell or
license any assets of the Company having a value in excess of twenty-five
thousand dollars ($25,000);

 

 - 15 - 

 

 

(e)each Contract that involves product development, product enhancement or
product customization obligations;

 

(f)each Contract that is for outstanding capital expenditures by the Company in
excess of fifty thousand dollars ($50,000);

 

(g)each Contract that relates to the acquisition of any business or Equity
Interests or assets of any other Person or any real property (whether by merger,
sale of Equity Interests, sale of assets or otherwise and whether or not
completed), in each case, involving aggregate consideration in excess of one
hundred thousand dollars ($100,000) (including any deferred purchase price,
earnout or other consideration);

 

(h)each Contract between or among the Company, on the one hand, and the Sellers,
any Affiliate of the Company or the Sellers, or any manager or officer of the
Company, the Sellers or any Affiliate of the Company or the Sellers, on the
other hand;

 

(i)each (i) Real Property Lease or sublease, rental or occupancy Contract,
license, installment and conditional sale Contract and (ii) other Contract
affecting the ownership of, leasing of, title to, use of, or any leasehold or
other interest in, any real or personal property, other than (A) Contracts for
services, repair, construction or maintenance with payment obligations not
exceeding fifty thousand dollars ($50,000) per Contract or fifty thousand
dollars ($50,000) in the aggregate for any number of Contracts entered into for
like services, goods or materials or with an individual party if such Contracts
were entered into in the Ordinary Course and (B) purchase orders entered into in
the Ordinary Course;

 

(j)each collective bargaining Contract and any other Contract with any labor
union, trade union or other employee representative, body or organization of a
group of employees of the Company;

 

(k)each joint venture, partnership, limited partnership or similar Contract
involving a sharing of profits, losses, costs or Liabilities by the Company with
any other Person;

 

(l)each Contract (i) containing outstanding covenants or other obligations
(other than customary confidentiality and non-disclosure obligations entered
into in the Ordinary Course) that restricts the business activity of the Company
or limits the freedom of the Company to engage in any line of business, to
compete (geographically or otherwise) with any Person or to solicit for hire or
employ any Person, (ii) granting any exclusive rights to make, sell or
distribute the Company’s products, (iii) granting any “most favored nations” or
similar rights or (iv) otherwise prohibiting or limiting the right of the
Company to make, sell or distribute any products or services;

 

(m)each Contract that is a confidentiality agreement or non-disclosure
agreement, other than (i) proprietary information and investment assignment
Contracts with current or former directors, officers, employee or consultants or
other services providers of the Company in the Ordinary Course and (ii) that
certain letter agreement dated December 16, 2016, between Houlihan Lokey
Capital, Inc. and the Company;

 

 - 16 - 

 

 

(n)each Contract relating to the Company providing for payments to or by any
Person based on sales, purchases, or profits, other than direct payments for
goods or services;

 

(o)each power of attorney that is currently effective and outstanding granted by
the Company;

 

(p)(i) each written warranty, guaranty, and/or other similar undertaking with
respect to a contractual performance of another Person extended by the Company
and (ii) each Contract pursuant to which the Company has agreed to indemnify
another Person or to share in or contribute to the Liability of any Person, in
each case other than Contracts in the Ordinary Course;

 

(q)each Contract that is a settlement agreement with respect to any pending or
threatened Proceeding entered into within three (3) years prior to the date of
this Agreement;

 

(r)each written or oral Contract with any employee, consultant, manager or
officer of the Company, including any employment or compensation agreements,
except for employment or consulting agreements entered into in the Ordinary
Course with a total value of less than fifty thousand ($50,000) on an individual
basis and offer letters for at-will employment which do not provide for
retention or severance payments or any other similar benefit;

 

(s)each written or oral Contract that provides for retention, severance,
termination or similar pay to any current or former employee, consultant,
manager or officer of the Company;

 

(t)each Contract with outstanding obligations or liability, contingent or
otherwise, to which the Company is a party or is otherwise bound relating to the
purchase, sale or lease of real property;

 

(u)each Contract imposing a Lien upon any asset of the Company, other than
Permitted Liens;

 

(v)each Contract related to Company Intellectual Property;

 

(w)each Contract by which the Company licenses any Person to manufacture or
reproduce any of the Company’s products, services or technology or any Contract
to sell or distribute any of the Company’s products, services or technology;

 

(x)each Contract providing for the payment of cash or other compensation or
benefits upon consummation of the transactions contemplated hereby;

 

(y)each sales distribution or franchise Contract that is (i) not terminable
without penalty on ninety (90) days’ notice or less and (ii) provides for
compensation at an amount or rate which is higher than is customary or usual in
the Business;

 

 - 17 - 

 

 

(z)each Contract entered into with any international or federal Governmental
Authority; or

 

(aa)each other Contract that is material to the Business or the operation of the
Company.

 

3.10.2The Company is in compliance with all Material Contracts. Neither the
Company nor, to the Company’s Knowledge, any other party to any Material
Contract is in default in respect of such Material Contract. Neither the Company
nor any Seller has received written notice or, to the Company’s Knowledge, oral
notice of an uncured breach or default or a pending or threatened cancellation,
revocation or termination of any Material Contract and no event has occurred and
no condition or state of facts exists which, with the passage of time or the
giving of notice or both, would constitute such a default or breach by the
Company or by any such other party.

 

3.10.3Each Material Contract is in full force and effect and constitutes a valid
and binding obligation of the Company and, to the Company’s Knowledge, the other
parties thereto, in accordance with its terms, except in each case as such
enforcement may be limited by the Remedies Exception, and is not subject to any
claims, charges, set-offs or defenses.

 

3.10.4The Company has delivered or otherwise made available to Buyer or its
counsel complete, true and correct copies of all of the written Material
Contracts (including all amendments, exhibits, attachments, extensions,
renewals, guaranties, modifications, waivers, supplements and other agreements,
if any, related thereto), or a written description of the material terms of any
oral Material Contract. The Company is not renegotiating any of the Material
Contracts.

 

3.10.5To the Company’s Knowledge, no employee or consultant or other independent
contractor of the Company is a party to, or is otherwise bound by, any Contract,
including any confidentiality, noncompetition or proprietary rights Contract,
with any other Person that adversely affects or will affect (i) the performance
of his or her duties for the Company, (ii) his or her ability to assign to the
Company rights to any invention, improvement, discovery or information relating
to the Business, or (iii) the ability of the Company to conduct the Business as
currently conducted.

 

3.10.6Section 3.10.6 of the Disclosure Schedule sets forth true, complete and
correct list of all forms of written customer Contracts currently used by the
Company with its twenty (20) largest customers (as measured by dollar volume of
sales) for the year ended December 31, 2016 (the “Customer Contract Forms”). The
Company has made available to the Buyer true, complete and correct copies of all
Customer Contract Forms.

 

 - 18 - 

 

 

3.11Insurance. Section 3.11 of the Disclosure Schedule contains a true and
complete list and description of all insurance policies, other insurance
arrangements and other Contracts owned by, or maintained for the benefit of, or
for the transfer or sharing of insurance risks by, the Company in force on the
date hereof with respect to the business or assets of the Company (the “Company
Insurance Policies”), together with the deductible and coverage limit of each
such Company Insurance Policy and a statement of the aggregate amount of claims
paid out, and claims pending, under each such Company Insurance Policy. The
Company Insurance Policies provide the type and amount of coverage customarily
carried by businesses of similar size in the same industry. Each Company
Insurance Policy is legal, valid, binding, enforceable and in full force and
effect with respect to the Company, as applicable, and, to the Company’s
Knowledge, with respect to the other parties thereto. The Company is not in
breach or default (including with respect to the payment of premiums or the
giving of notices) under any Company Insurance Policy, and no event has occurred
which, with notice or the lapse of time, would constitute such a breach or
default or permit termination, modification or acceleration, under any such
Company Insurance Policy. The Company has not received any written notice of
cancellation or non-renewal of any of the Company Insurance Policies nor, to the
Company’s Knowledge, is the termination of any of the Company Insurance Policies
threatened. There is no claim pending under any of the Company Insurance
Policies as to which coverage has been questioned, denied or disputed by the
underwriters of such policies. The Company has not received any written notice
from any of its insurance carriers that any insurance coverage presently
provided for in any Company Insurance Policy will not be available to the
Company in the future on similar terms as now in effect (excepting general
market pricing increases and coverage limitations). The Company does not
maintain any self-insurance. All premiums due and payable under all Company
Insurance Policies have been paid, the Company is not liable for any retroactive
premiums or similar payments, and the Company is otherwise in compliance with
the terms of such policies.

 

3.12Permits. The Company has obtained all Governmental Authorizations necessary
for the Company to own, lease and operate and to carry on the Business. All such
Governmental Authorizations are set forth on Section 3.12 of the Disclosure
Schedule, are in full force and effect, and no written or, to the Company’s
Knowledge, oral notice from any Governmental Authority of any pending violation,
removal, revocation or non-renewal has been received by the Company in respect
of any such Governmental Authorizations. To the Company’s Knowledge, the Company
does not have any Governmental Authorization that will not be renewed in the
ordinary course or will be revoked, terminated, suspended or impaired nor to the
Company’s Knowledge are there any circumstances that would or may reasonably be
expected to result in the same. The consummation of the transactions
contemplated hereunder and the operation of the business of the Company by the
Buyer in the manner in which the Company currently operates will not require or
result in the transfer of any Governmental Authorization that may not be
transferred without the consent or approval of any Governmental Authority or
other Person.

 

3.13Tangible Personal Property. The Company has good and valid title to, or a
valid leasehold interest in, the tangible personal property used in the conduct
of the Business, reflected on the Latest Balance Sheet or acquired since the
date thereof, free and clear of all Liens (except Permitted Liens), except
assets disposed of in the Ordinary Course since the Latest Balance Sheet Date.
The tangible personal property owned or used by the Company is in good operating
condition and repair, ordinary wear and tear excepted. Nothing in this Section
3.13 will apply to Intellectual Property matters, which are addressed in Section
3.14.

 

3.14Intellectual Property.

 

3.14.1The Company owns or has the valid right to use all Intellectual Property
used in connection with or necessary to conduct the Business of the Company as
presently conducted (such Intellectual Property, together with the Company Owned
Intellectual Property and the Company Licensed Intellectual Property, the
“Company Intellectual Property”).

 

 - 19 - 

 

 

3.14.2Set forth on Section 3.14.2 of the Disclosure Schedule is a complete and
accurate list (showing in each case, the registered owner, title, mark or name,
applicable jurisdiction, application number or registration number and date of
application, if any) of all United States, foreign and state (i) Patents and
Patent applications, (ii) Trademark registrations and applications and all
unregistered Trademarks, (iii) internet domain names, and (iv) Copyright
registrations and applications owned by the Company, in each case, that is owned
by the Company, but excluding any items that are abandoned, cancelled, expired,
withdrawn, or finally refused without right of appeal (together with all other
Intellectual Property owned by the Company, the “Company Owned Intellectual
Property”).

 

3.14.3Set forth on Section 3.14.3 of the Disclosure Schedule is a complete and
accurate list of (i) each Contract that is in effect pursuant to which the
Company uses the Intellectual Property owned by another Person in the conduct of
the Business, but excluding (A) software shrink-wrap, open source, click-through
or similar agreements, (B) non-disclosure agreements, and (C) agreements with
current and former employees, consultants, and independent contractors of the
Company entered into on the Company’s standard form(s) (or a substantially
similar form) (together with all other Intellectual Property owned by another
Person that is licensed to the Company and used in the conduct of the Business,
the “Company Licensed Intellectual Property”) and (ii) each Contract that is in
effect pursuant to which the Company grants to another Person the right to use
any Company Intellectual Property, but excluding agreements under which the only
right or license granted to another Person under Company Owned Intellectual
Property is for the purpose of such Person performing services for the sole
benefit of the Company (all Contracts required to be disclosed on Section 3.14.3
of the Disclosure Schedule, the “Company IP Agreements”).

 

3.14.4The Company is the sole and exclusive legal and beneficial owner of all
rights, title and interests in and to the Company Owned Intellectual Property.
Each of the Company Owned Intellectual Property registrations and applications
and common law Trademarks set forth on Section 3.14.2 of the Disclosure Schedule
are valid and subsisting, in full force and effect, and have not been cancelled,
expired, or abandoned and all renewal fees and other steps required for the
maintenance or protection of such rights have been paid on time or taken. No
facts or circumstances exist that would reasonably be expected to render any of
the Company Owned Intellectual Property invalid or unenforceable. There are no
pending or, to the Company’s Knowledge, threatened opposition, interference,
re-examination or cancellation proceedings or any similar proceedings before any
court or registration authority or other Governmental Authority in any
jurisdiction against the Company Owned Intellectual Property. The Company has
not received any written notice or, to the Company’s Knowledge, oral notice of
any pending or threatened opposition, interference, re-examination or
cancellation proceedings or any similar proceedings before any court or
registration authority or other Governmental Authority in any jurisdiction
against the Company Intellectual Property. There has been and is no Proceeding
or Law asserted, pending or, to Company’s Knowledge, threatened that prohibits
or restricts the Company from any use or any other exploitation of the Company
Owned Intellectual Property. No Person has any exclusive license under any of
the Company Intellectual Property.

 

 - 20 - 

 

 

3.14.5Neither the conduct of the Business nor the Company’s creation, use,
license or other transfer of the Company Intellectual Property or the Company’s
Products or services, or to the Company’s Knowledge, a Company customer’s use of
the Company’s Products or services as authorized by the Company, has infringed,
misappropriated or otherwise violated or infringes, misappropriates or otherwise
violates the Intellectual Property of any Person. The Company has not received
written notice, or, to the Company’s Knowledge, oral notification that the
conduct of the Business, the creation, use, license or other transfer of the
Company Intellectual Property or the Company’s or, to the Company’s Knowledge, a
Company customer’s use of the Company’s Products or services has infringed,
misappropriated or otherwise violated, or infringes, misappropriates or
otherwise violates, any Intellectual Property owned or controlled by any Person
(either directly or indirectly such as through contributory infringement or
inducement to infringe) or is defamatory or violative in any way of any
publicity, privacy, or other rights. The Company has not received any notice of
any pending or any written or, to the Company’s Knowledge, oral notification of
any pending or threatened claims or suits (i) alleging that the activities of
the Company or the conduct of its Business or the creation, use, license or
other transfer of the Company Intellectual Property or the Company’s use of the
Company’s Products or services infringes upon or constitutes the unauthorized
use of or otherwise violates the Intellectual Property of any Person, nor
alleging libel, slander, defamation, or other violation of a personal right, or
(ii) challenging the ownership, use, registration, validity or enforceability of
any Company Intellectual Property.

 

3.14.6To the Company’s Knowledge, no third party has disclosed in violation of
any confidentiality obligation, misappropriated, infringed, diluted, or
otherwise violated, or is currently using, disclosing in violation of any
confidentiality obligation, misappropriating, infringing, diluting, or otherwise
violating, any Company Owned Intellectual Property, and no such claims are
pending against any Person by the Company. The Company has not commenced or
threatened in writing any Litigation, or asserted any allegation or claim,
against any Person for infringement or misappropriation of the Company Owned
Intellectual Property or breach of any Contract involving the Company
Intellectual Property.

 

3.14.7No Proceedings are currently pending or, to the Company’s Knowledge,
threatened in writing, that the Company is infringing, violating, or
misappropriating any third-party Intellectual Property.

 

3.14.8The Company takes commercially reasonable actions to protect, preserve and
maintain all Trade Secrets and other confidential information included in the
Company Intellectual Property. The Company has taken commercially reasonable
steps necessary to comply with all duties of the Company to protect the
confidentiality of confidential information provided to the Company by any other
Person. To the Company’s Knowledge, none of the current or former employees,
consultants or other independent contractors of the Company has violated any
agreements under which the Company has agreed to keep confidential any
information of another Person.

 

 - 21 - 

 

 

3.15Labor Matters.

 

3.15.1There is no labor strike, sympathy strike, dispute, union disturbance,
corporate campaign, slowdown, sit-down, stay-in, sick-out, walk-out, work
stoppage or lockout, boycott or similar labor difficulty or other union
interference against or affecting the Company (all of the foregoing referred to
as “Work Interference”) and, to the Company’s Knowledge, no Work Interference is
threatened. Since January 1, 2014, no Work Interference has occurred or was
threatened.

 

3.15.2(i) The Company has not entered into and is not a party to, either
directly or by operation of law, any collective agreement, collective bargaining
contract, letters of understanding, letters of intent or other written
communication or Contract with any trade union, labor union or association or
organization that may qualify as a trade union, labor union or association,
contingent or otherwise, which would cover any employee of the Company (the
“Employees”); and (ii) the Employees are not subject to any collective
bargaining agreements or letters of understanding, letters of intent or other
written communication or Contract with any trade union, labor union or
association or organization that may qualify as a trade union, labor union or
association, contingent or otherwise, and are not, in their capacities as
Employees, represented by any trade union, labor union or association or
organization that may qualify as a trade union or association.

 

3.15.3(i) No labor representatives hold bargaining rights with respect to any
Employee of the Company by way of certification, interim certification,
voluntary recognition, designation or successor rights; (ii) no labor
representatives have applied to be certified as the bargaining agent of any
Employee of the Company; and (iii) no labor representatives have applied to have
the Company declared a related or successor employer. There are no
organizational efforts currently being made or, to the Company’s Knowledge,
threatened by or on behalf of, any trade union or association or organization
that may qualify as a trade union, labor union or association with respect to
the Employees and there have been no such organizing within the last three (3)
years.

 

3.15.4A true and complete copy of each current written employee policies,
employee manuals or other written statements of rules or policies as to working
conditions, vacation and sick leave, personnel policy, rule and procedure
applicable to the Employees has been delivered or made available to the Buyer or
its counsel and is listed on Section 3.15.4 of the Disclosure Schedule.

 

3.15.5The Company is in compliance, in all material respects, with all
applicable Laws respecting employment and employment practices, terms and
conditions of employment, wages, pay equity, hours of work and occupational
safety and health, and is not engaged in any unfair labor practices, as defined
in the National Labor Relations Act or other applicable Laws.

 

3.15.6The Company has not received written notice that an unfair labor practice
charge or complaint against the Company is pending before the National Labor
Relations Board or any similar state or foreign agency, nor, to the Company’s
Knowledge, has such a charge or complaint been threatened in writing.

 

 - 22 - 

 

 

3.15.7No charge with respect to or relating to the Company is pending before the
Equal Employment Opportunity Commission or any other agency responsible for the
prevention of discriminatory or other unlawful employment practices.

 

3.15.8Since January 1, 2014, (a) the Company has not effectuated a “plant
closing” (as defined in the WARN Act or any comparable provision of state, local
or foreign Law) affecting any site of employment or one or more facilities or
operating units within any site of employment or facility of the Company, (b)
there has not occurred a “mass layoff” (as defined in the WARN Act or any
comparable provision of state, local or foreign Law) affecting any site of
employment or facility of the Company, (c) the Company has not been affected by
any transaction or engaged in layoffs or employment terminations sufficient in
number to trigger application of any similar state, local or foreign “plant
closing” Law or regulation and (d) none of the Employees has suffered an
“employment loss” (as defined in the WARN Act or any comparable provision of
state, local or foreign Law) during the six month period prior to the date
hereof.

 

3.16Employee Benefits.

 

3.16.1Section 3.16.1 of the Disclosure Schedule contains a list of all “employee
benefit plans” within the meaning of Section 3(3) of the Employee Retirement
Income Security Act of 1974, as amended (“ERISA”), and all material bonus,
pension, profit sharing, deferred compensation, incentive compensation, stock
option, equity incentive, phantom stock, retirement, vacation, severance,
disability, death benefit, hospitalization, medical or other compensatory plan,
program or arrangement maintained by, or contributed to by, the Company or with
respect to which the Company has any liability (the plans so listed,
collectively, “Employee Benefit Plans”). Except as would not result in liability
to the Company, each Employee Benefit Plan has been administered in material
compliance with its terms and applicable Laws, including ERISA and the Code. The
Company has made available to Buyer true, complete and correct copies of (i) the
document, if any, constituting such Employee Benefit Plan, (ii) the most recent
annual report on Form 5500 filed with the Internal Revenue Service with respect
to each Employee Benefit Plan (if any such report was required), (iii) any
Internal Revenue Service or Department of Labor determination, opinion,
notification and advisory letters, and (iv) all correspondence to or from any
Governmental Authority relating to any Employee Benefit Plan received in the
last two (2) years prior to the date of this Agreement.

 

3.16.2No Employee Benefit Plan or other plan maintained, contributed to or
required to be contributed to by any ERISA Affiliate is a “multiemployer plan”
within the meaning of Section 4001(a)(3) of ERISA, and no Employee Benefit Plan
or other plan maintained, contributed to or required to be contributed to by any
ERISA Affiliate is subject to Title IV of ERISA or the minimum funding standards
of Section 412 of the Code. Except as would not result in liability to the
Company, no “Prohibited Transaction,” within the meaning of Section 4975 of the
Code or Sections 406 or 407 of ERISA and not otherwise exempt under Section 408
of ERISA, has occurred with respect to any Employee Benefit Plan.

 

 - 23 - 

 

 

3.16.3The execution and delivery by the Company of this Agreement does not and
the consummation of the Transactions and compliance with the terms hereof will
not either alone or in conjunction with any other event (other than any event
that independently triggers the results in the following clauses (i) - (ii) of
this Section 3.16.3), (i) entitle any current employee, officer or director of
the Company to severance pay, or (ii)  accelerate the time of payment or vesting
or trigger any payment or funding (through a grantor trust or otherwise) of
compensation or benefits under, increase the amount payable or trigger any other
obligation pursuant to, any Employee Benefit Plan. There is no contract, plan or
arrangement covering any current or former employee, director or consultant of
the Company that, individually or collectively, could give rise to the payment
as a result of the transactions contemplated by this Agreement of any amount
that would not be deductible by the Company by reason of Section 280G of the
Code.

 

3.16.4No Employee Benefit Plan is maintained outside the jurisdiction of the
United States, or covers any employee residing or working outside the United
States.

 

3.16.5No audit or investigation of an Employee Benefit Plan by a Governmental
Authority has occurred in the past three (3) years and there are no actions,
suits or claims (other than routine claims for benefits) pending or, to the
Company’s Knowledge, threatened in writing with respect to any Employee Benefit
Plan.

 

3.16.6Prior to the date hereof, the Buyer has been provided with a true and
complete list of the names, titles and current salaries of all full-time and
part-time employees and consultants of the Company. There is no employment
Contract, employee benefit or incentive compensation plan or program, severance
policy or program or any other plan or program to which the Company is a party
(i) that is or could, pursuant to its terms, be triggered or accelerated by
reason of or in connection with the execution of this Agreement or the
consummation of the transactions contemplated by this Agreement or (ii) which
contains “change in control” provisions pursuant to which the payment, vesting
or funding of compensation or benefits would be triggered or accelerated by
reason of or in connection with the execution of or consummation of the
transactions contemplated by this Agreement.

 

3.17Environmental Matters.

 

3.17.1The operations of the Company are in compliance with all Environmental
Permits applicable to the Business;

 

3.17.2The Company is not subject to any pending claim and has not received any
threat in writing alleging that the Company is in violation of any Environmental
Law or any Environmental Permit or has any liability under any Environmental
Law; and

 

3.17.3There are no Proceedings pursuant to Environmental Law pending or, to the
Company’s Knowledge, threatened in writing against the Company before any
Governmental Authority, and the Company is not subject under any Environmental
Law to any Judgment.

 

 - 24 - 

 

 

3.18Tax Matters.

 

3.18.1The Company has timely filed, or has caused to be timely filed on its
behalf, all federal, state, county and local Tax Returns required to be filed by
it (each a “Company Return” and collectively, the “Company Returns”), and all
such Tax Returns are true, complete and accurate. The Company has paid all Taxes
shown to be due by the Company in such Company Returns as well as all other
Taxes, assessments and governmental charges that have become due or payable,
including all Taxes that the Company is obligated to withhold or collect from
amounts owing to employees, creditors and third parties, which have been timely
withheld or collected, as the case may be, and to the extent required by
applicable Law, have been paid to the relevant Taxing Authority or Governmental
Authority.

 

3.18.2The Latest Balance Sheet contains an adequate accrual in accordance with
GAAP for all unpaid Taxes as of the Latest Balance Sheet Date. The Company has
not incurred any liability for Taxes subsequent to the Latest Balance Sheet Date
except in the Ordinary Course.

 

3.18.3No written claim has ever been made by any Governmental Authority in a
jurisdiction where the Company does not file Tax Returns that it is or may be
subject to taxation or to a requirement to file Tax Returns in such
jurisdiction, which claim has not be resolved.

 

3.18.4The Company has complied in all material respects with all applicable Laws
relating to the payment and withholding of Taxes from Employees and other
Persons.

 

3.18.5There are no Liens for Taxes (other than for current Taxes not yet due and
payable), whether imposed by a federal, state, county, or local Taxing
Authority, outstanding against the assets, properties or business of the Company
(other than Permitted Liens) on the assets and/or Equity Interests of the
Company.

 

3.18.6The Company is not a party to or bound by any Tax Agreement.

 

3.18.7The Company has not been the “distributing corporation” or the “controlled
corporation” (in each case, within the meaning of Section 355(a)(1) of the Code)
with respect to a transaction described in Section 355 of the Code (i) within
the two (2)-year period ending as of the date of this Agreement, or (ii) in a
distribution that could otherwise constitute part of a “plan” or “series of
related transactions” (within the meaning of Section 355(e) of the Code) that
includes the Transactions.

 

3.18.8The Company (i) has not been a member of any affiliated group filing a
consolidated Tax Return or of any affiliated, consolidated, combined, or unitary
group, as defined under applicable state, local or foreign Law, and (ii) does
not have any liability for the Taxes of any Person under Section 1.1502-6 of the
Treasury Regulations (or any similar provision of state, local or foreign Law),
or as a transferee or successor.

 

3.18.9No claim, deficiency, assessment for any income Taxes has been asserted
against the Company or any former Subsidiaries of the Company which has not been
resolved and/or paid in full.

 

 - 25 - 

 

 

3.18.10There are no pending Tax audits or examinations of any Tax Returns of the
Company. The Company has not waived any statute of limitations with respect to
Taxes or agreed to any extension of time with respect to a Tax assessment or
deficiency, which waiver is still outstanding.

 

3.18.11In the three (3) years prior to the date of this Agreement, the Company
has not engaged in a “reportable transaction,” as set forth in Treasury
Regulation Section 1.6011-4(b)(1).

 

3.18.12Notwithstanding any other provision of this Agreement, none of any Seller
or the Company is making or will be construed to have made any representation or
warranty as to (i) the amount or availability of any tax attribute of the
Company or (ii) any Tax position that Sellers or any of their respective
Affiliates (including the Company) may take in or in respect of a Post-Closing
Tax Period.

 

3.19Customers and Suppliers.

 

3.19.1Section 3.19.1 of the Disclosure Schedule sets forth the twenty (20)
largest customers (as measured by dollar volume of sales) of the Company (the
“Top Customers”) for both of the years ended December 31, 2016 and December 31,
2015 and includes the actual amount for which each such Top Customer was
invoiced by the Company during such periods. Since the Most Recent Fiscal Year
End, the Company has not received any written or, to the Company’s Knowledge,
oral notice from any Top Customer to the effect that such customer is
terminating its business relationship with the Company and will stop purchasing
products from the Company prior to the termination of any existing agreement
with such Top Customer. There are no pending disputes or controversies between
the Company and any of the Top Customers and, to the Company’s Knowledge, none
of the Top Customers (i) has or is contemplating terminating or materially
diminishing its business or relationship with the Company or (ii) has
experienced any material work stoppage or other material adverse circumstances
or conditions that is reasonably likely to jeopardize or materially adversely
affect the future relationships of the Company with such Person. To the
Company’s Knowledge, there is no fact, condition or event which would adversely
affect the relationship of the Company with any of its Top Customers.

 

3.19.2Section 3.19.2 of the Disclosure Schedule sets forth the twenty (20)
largest suppliers (as measured by dollar volume of purchases) of the Company
(the “Top Suppliers”), for both of the years ended December 31, 2016 and
December 31, 2015 and includes the actual amount the Company purchased from each
such supplier during such period (treating affiliated suppliers as a single
supplier). Since the Most Recent Fiscal Year End, the Company has not received
any written or, to the Company’s Knowledge, oral notice from any Top Supplier to
the effect that such Top Supplier is terminating its business relationship with
the Company and will stop providing products or services to the Company, prior
to the termination of any existing agreement with such Top Supplier. There are
no pending disputes or controversies between the Company and any of the Top
Suppliers and, to the Company’s Knowledge, none of the Top Suppliers (i) has or
is contemplating terminating or materially diminishing its business or
relationship with the Company or (ii) has experienced any material work stoppage
or other material adverse circumstances or conditions that is reasonably likely
to jeopardize or materially adversely affect the future relationships of the
Company with such Person. To the Company’s Knowledge, there is no fact,
condition or event which would adversely affect the relationship of the Company
with any of its Top Suppliers.

 

 - 26 - 

 

 

3.20Inventory; Accounts Receivable.

 

3.20.1All of the inventories of stock in trade, work in progress and finished
goods of the Company consist of a quality and quantity usable and salable in the
Ordinary Course, except for obsolete, damaged or defective inventory and
materials of below-standard quality, all of which items have been written off or
written down on the books and records of the Company to fair market value or for
which adequate reserves have been provided therein. All inventories not written
off have been priced at the lower of cost or realizable market value. All
inventories disposed of subsequent to the Most Recent Fiscal Year End have been
disposed of only in the Ordinary Course. The quantities of each type of
inventory (whether raw materials, work-in-process, or finished goods) are not
excessive, but are reasonable and warranted according to the normal purchasing
and sales patterns of the Company and are adequate for the purposes of
fulfilling the Company’s current business and order requirements. All work in
process and finished goods inventory held by the Company is free of any Defect
or other material deficiency.

 

3.20.2Section 3.20.2 of the Disclosure Schedule contains a list of the aged
trade accounts receivable of the Company as of June 30, 2017 (“Receivables”).
Such Receivables arose in the Ordinary Course for goods sold and delivered or
services provided by the Company as to which full performance by the Company has
been fully rendered, constitute valid obligations owed to the Company and are
collectible in the Ordinary Course, subject to customary reserves. The Company
has not received any written notice from or on behalf of any account debtor
asserting any defense to payment, counterclaim or right of setoff with respect
to any Receivable of the Company in excess of amounts reserved on the Financial
Statements in respect of the applicable period(s). All Receivables are recorded
and booked on the books and records of the Company in accordance with GAAP. No
Receivables are subject to prior assignment or Lien (other than Permitted
Liens). Except as set forth in the Financial Statements, the Company does not
have any liability for any refunds, liability allowances or returns in respect
of products developed, manufactured, processed, distributed or sold by or for
the account of the Company on or prior to the Closing Date in excess of the
amounts specifically reserved against in calculating the Estimated Closing
Working Capital. Where Receivables arose out of secured transactions, all
financing statements and other instruments required to be filed or recorded to
perfect the title or security interest of the Company have been properly filed
or recorded by the Company.

 

3.21Related Party Transactions. None of the Sellers or any current manager,
officer or Affiliate of any of the Sellers or the Company: (a) is, or owns,
directly or indirectly, any interest in any Person which is, (i) a competitor of
the Company, (ii) a supplier of the Company, or (iii) a customer of the Company
or a distributor of the Products (except as an owner of two percent (2%) or less
of the stock of any Person listed on a national securities exchange or traded in
the over-the-counter market); (b) owns, directly or indirectly, in whole or in
part, any property, asset or right, real, personal or mixed, tangible or
intangible (including, but not limited to, any of the intangible property), of
the Company, which is utilized in the operation of the Business; (c) has an
interest in or is, directly or indirectly, a party to any Material Contract
pertaining or relating to the Company, except for employment, consulting or
other personal service Contracts that may be in effect and which are set forth
on Section 3.21 of the Disclosure Schedule; or (d) has any Proceeding against,
or owes any amount to, the Company.

 

 - 27 - 

 

 

3.22Brokers. Except for Houlihan Lokey Capital, Inc., no investment banker,
broker, finder or other intermediary has acted on the Company’s behalf in
connection with this Agreement and the Transactions and except for fees payable
to Houlihan Lokey Capital, Inc., there are no brokerage commissions, finders’
fees or similar fees or commissions payable in connection therewith based on any
Contract with the Company or any action taken by the Company or based upon
arrangements or agreements made by or on behalf of the Company.

 

3.23Banking Relationships. Section 3.23 of the Disclosure Schedule sets forth
(a) the names and locations of the banking and lock box accounts of the Company
and any safe deposit boxes of the Company and (b) the credit card issuers with
whom the Company has an account and, in each case, the names of all Persons
authorized to use such accounts or who have access thereto. There are no
automatic, periodic or scheduled withdrawals or debits with respect to any of
the bank accounts required to be set forth on Section 3.23 of the Disclosure
Schedule.

 

3.24Products; Product Liability. There are not presently pending, or, to the
Company’s Knowledge, threatened Proceedings relating to any alleged hazard or
alleged Defect in design, manufacture, materials or workmanship, including any
failure to warn or alleged breach of express or implied warranty or
representation, relating to any Product. Except as may be set forth in the
Material Contracts, the Company has not extended to any of its customers any
written, non-uniform product warranties, indemnifications or guarantees. True,
correct and complete copies of all material correspondence received or sent by
or on behalf of the Company since January 1, 2014, from or to any Governmental
Authority with respect to a contemplated or ongoing actual recall, withdrawal,
or suspension from the market of any Product have previously been made available
to the Buyer. There are no Defects in the designs, specifications, or processes
as currently in effect with respect to any Product sold or otherwise distributed
by the Company that would reasonably be expected to result in a liability to the
Company. The Company is not currently investigating or considering a recall,
withdrawal or suspension from the market of any Product.

 

3.25Propriety of Past Payments. In the past five (5) years, none of the Sellers
nor any manager, officer, employee or, to the Company’s Knowledge, agent of the
Company or any other Person associated with or acting for or on behalf of the
Company has, directly or indirectly, on behalf of the Company, made any illegal
contribution, gift, bribe, rebate, payoff, influence payment, kickback or other
payment to any Person, private or public, regardless of form, whether in money,
property or services, (i) to obtain favorable treatment for the Company or any
Affiliate of the Company in securing business, (ii) to obtain favorable
treatment for business secured for the Company, or any Affiliate of the Company,
(iii) to obtain or retain special concessions for or in respect of the Company
or any Affiliate of the Company or (iv) otherwise for the benefit of the
Company, or any Affiliate of the Company in violation of any Law, (including
existing site plan approvals, zoning or subdivision regulations or urban
redevelopment plans relating to Real Property) to which the Company is subject.
During the past five (5) years, no notice has been received alleging that the
Company or any owner, officer, manager, employee, agent or other Person (in
connection with actions on behalf or for the benefit of the Company), has made,
given or offered, directly or indirectly, any unlawful financial or other
advantage, contribution, gift, bribe, payoff, kickback or unlawful payment to
any employee or official of any Governmental Authority in any jurisdiction, or
taken any other action, in violation of the United States Foreign Corrupt
Practices Act of 1977, the U.K. Bribery Act 2010, the OECD Convention on
Combating Bribery of Foreign Public Officials in Business Transactions of 1997
(the “OECD Convention”) and any law implementing the OECD Convention, or any
other applicable anti-bribery or anti-corruption law. None of the Company’s
owners, officers, managers, employees or, to the Company’s Knowledge, agents are
agents, employees, officers or representatives of, or otherwise affiliated with,
any Government Authority or agency or other instrumentality of any Government
Authority. The Company’s books and records accurately reflect the nature of all
expenditures related to anything of value provided to a Government Authority.

 

 - 28 - 

 

 

3.26Personal Information Laws. The Company is in material compliance with the
requirements of all applicable Laws, and the Company’s written policies and
practices relating to the collection, access, use, disclosure, storage and
disposal of Personal Information, including the Health Insurance Portability and
Accountability Act. The Company has taken commercially reasonable steps to
ensure that personal information is protected against unauthorized use,
transfer, modification, disclosure or other misuse, including implementation of
technical, physical, and operational security measures and an ongoing process to
monitor compliance. No complaint relating to the Company’s alleged
non-compliance with any such applicable Law has been found by any Governmental
Authority to be well-founded, no order or judgment has been made against the
Company by any Governmental Authority based on any finding of non-compliance
with any such applicable Law, no unresolved complaint, investigation or other
proceeding relating to any such alleged non-compliance is now pending by or
before any Governmental Authority and the Company has otherwise never received
any complaints related to data protection or the handling of Personal
Information.

 

3.27International Trade Laws and Regulations. Within the past five (5) years:
(a) the Sellers and the Company, in each case in respect of the Business, are in
material compliance with all applicable embargoes and sanctions imposed by any
foreign Governmental Authority against a country, political organization or
other Person (other than those, the compliance with which would constitute a
violation of the Laws of the United States); (b) neither the Company, nor, in
respect of the Business, the Sellers holds any unlawful contracts with a party
in or from Cuba, Iran, North Korea, Sudan or Syria nor do they otherwise provide
any services, products or technology directly or indirectly to Persons in these
countries; (c) all activities of the Company and, in respect of the Business,
the Seller including all exports, re-exports, sales or transfers of products,
technology, software or services, have been effected in material compliance with
all applicable export control and trade control (arms trafficking and brokering)
rules; (d) the Company and, in respect of the Business, the Sellers are in
material compliance with all other aspects of applicable International Trade
Laws and Regulations; and (e) neither the Company, nor, in respect of the
Business, the Sellers has conducted or initiated any internal investigation or
made a voluntary disclosure to any government or Government Authority with
respect to any alleged act or omission arising under the aforementioned laws. To
the Company’s Knowledge, no government or Government Authority has initiated or
given written notice threatening to initiate any investigation, audit, review or
prosecution of the Company, or, in each case in respect of the Business, the
Sellers with respect to non-compliance with such laws.

 

3.28Internal Accounting Controls. The Company maintains a system of internal
accounting controls sufficient to provide reasonable assurance in accordance
with customary business practices for non-public companies that (i) transactions
are executed in accordance with management’s general or specific authorizations,
(ii) transactions are recorded as necessary to permit preparation of financial
statements in conformity with GAAP, (iii) access to assets is permitted only in
accordance with management’s general or specific authorization and (iv) the
recorded accountability for assets is compared with the existing assets at
reasonable intervals and appropriate action is taken with respect to any
differences.

 

 - 29 - 

 

 

3.29Conflict Minerals. The Company has not manufactured, contracted to have
manufactured for, or sold any product that contains a “conflict mineral” (as
such term is defined in Section 1502 of the Dodd-Frank Wall Street Reform and
Consumer Protection Act).

 

Article 4

REPRESENTATIONS AND WARRANTIES OF BUYER

 

Buyer hereby represents and warrants to the Company and Sellers as set forth
below as of the date hereof and as of the Closing Date.

 

4.1Organization and Good Standing. Buyer is a corporation duly organized,
validly existing and in good standing under the Laws of the State of Delaware,
and has full corporate power and authority to carry on its business as presently
conducted, and to own and lease the assets and properties which it owns and
leases.

 

4.2Power and Authorization; Enforceability.

 

4.2.1Buyer has all requisite right, power, authority and capacity to execute and
deliver this Agreement and the other Buyer Transaction Documents, to perform its
obligations hereunder and thereunder and to consummate the Transactions. All
necessary corporate action has been taken by Buyer to authorize the execution,
delivery and performance by Buyer of this Agreement and each other Buyer
Transaction Document. Buyer has duly executed and delivered this Agreement and,
at or prior to the Closing, will have duly executed and delivered each other
Buyer Transaction Document.

 

4.2.2Assuming that this Agreement and each of the other Buyer Transaction
Documents are valid and binding obligations of each of the other parties hereto
and thereto, this Agreement is, and each other Buyer Transaction Document, when
duly executed and delivered at or prior to the Closing by Buyer, will be, the
legal, valid and binding obligation of Buyer, enforceable against Buyer in
accordance with its respective terms, except as enforceability of such
obligations may be limited by the Remedies Exception.

 

4.3No Violation or Conflict.

 

4.3.1Neither the execution, delivery and performance by Buyer of this Agreement
or of the other Buyer Transaction Documents nor the consummation of the
Transactions (with or without the passage of time or the giving of notice, or
both) will:

 

(a)conflict with, or result in a breach of, the Governing Documents of Buyer;

 

(b)violate or conflict with any Judgments or Laws, in each case, binding upon or
applicable to Buyer or by which it or any of its properties or assets are bound
or require the consent, approval or action of, filing with or notice to any
Governmental Authority or other Person; or

 

 - 30 - 

 

 

(c)violate, or be in conflict with, or constitute a default (or an event which,
with notice or lapse of time or both, would constitute a default) under, or
result in, or provide the basis for, the termination of, or accelerate the
performance required by, or excuse performance by any Person of any of its
obligations under, or cause the acceleration of the maturity of any Indebtedness
or obligation pursuant to, or result in the creation or imposition of any Lien
upon any property or assets of Buyer under, any material Contract to which Buyer
is a party or by which it or any of its properties or assets are bound;

 

except, in each case of clauses (a) through (c), where the failure of any of the
above to be true would not reasonably be expected to impair, prevent or delay
the consummation of the transactions contemplated by this Agreement.

 

4.4Compliance with Laws. Buyer is in material compliance with all applicable
Laws and Governmental Authorizations, except where the failure to comply would
not reasonably be expected to impair, prevent or delay the consummation of the
transactions contemplated by this Agreement.

 

4.5Litigation. There are no unsatisfied Judgments against Buyer or any of its
business properties or assets that would reasonably be expected to affect the
ability of Buyer to perform its obligations under this Agreement. There is no
Proceeding pending or, to the knowledge of Buyer, threatened in writing against
Buyer which seeks to delay or prevent the consummation of the transactions
contemplated by this Agreement by Buyer or would, if successful, be reasonably
expected to adversely affect the ability of Buyer to perform its obligations
under this Agreement.

 

4.6Brokers. Except for Kanders & Company, Inc., no broker, investment banker,
financial advisor, finder, agent or other intermediary has acted on Buyer’s
behalf in connection with this Agreement or any of the transactions contemplated
hereby, and except for fees payable to Kanders & Company, Inc., there are no
brokerage commissions, finders’ fees or similar fees or commissions payable in
connection therewith based on any Contract with Buyer or any action taken by
Buyer.

 

4.7Investment. Buyer is acquiring the Transferred Interests for its own account,
for investment only, and not with a view to any resale or public distribution
thereof. Buyer has sufficient knowledge and experience in financial and business
matters so as to be capable of evaluating the merits and risks of its investment
in the Transferred Interests and is capable of bearing the economic and other
risks of such investment. Buyer acknowledges that (a) such Transferred Interests
have not been registered under the Securities Act of 1933, as amended, or any
state securities laws, (b) there is no public market for such Transferred
Interests and there can be no assurance that a public market will develop, and
(c) it must bear the economic risk of its investment in such Transferred
Interests for an indefinite period of time. As of the Closing, Buyer will be an
“Accredited Investor” within the meaning of the Securities and Exchange
Commission Rule 501 of Regulation D of the Securities Act of 1933, as presently
in effect. Buyer is not acting as agent or representative of another party, and
has no current plan or intention to resell any of the Transferred Interests or
the assets or business of the Company to another Person.

 

4.8Available Funds. The obligations of Buyer under this Agreement are not
contingent on the availability of financing. Buyer has cash, available credit
facilities or other sources of available funds in an aggregate amount sufficient
to consummate the Transactions and will have immediately available cash,
available credit facilities or other immediately available funds at the time of
the Closing to consummate the Transactions.

 

 - 31 - 

 

 

4.9Solvency. Immediately after giving effect to the Transactions, Buyer will be
Solvent (as defined below). No transfer of property is being made, and no
obligation is being incurred, in connection with the Transactions with the
intent to hinder, delay or defraud either present or future creditors of Buyer.
For purposes of this Section 4.9, “Solvent” means that, as of any date of
determination, (a) the Present Fair Salable Value (as defined below) of the
assets of Buyer will, as of such date, exceed all of its probable liabilities or
its existing debts as they become absolute and matured, as of such date, (b)
Buyer will not have, or have access to, as of such date, an unreasonably small
amount of capital for the business in which it is engaged or will be engaged and
(c) Buyer will be able to pay its liabilities as they become absolute and
mature, in the Ordinary Course, taking into account the timing of and amounts of
Cash to be received by it and the timing of and amounts of Cash to be payable on
or in respect of its Indebtedness, in each case after giving effect to the
Transactions. The term “Solvency” will have a correlative meaning. “Present Fair
Salable Value” means the amount that may be realized if the aggregate assets
(including goodwill) of Buyer are sold as an entirety with reasonable promptness
in an arm’s-length transaction under then-present conditions for the sale of
comparable business enterprises.

 

4.10Tax and Legal Matters. Buyer has reviewed with Buyer’s own tax advisors and
legal counsel the tax and other consequences of the Transactions and the legal
effects thereof before Buyer’s execution and delivery of this Agreement and each
other Buyer Transaction Document. Buyer has relied solely on its own advisors
and not on any statements or representations by Sellers, the Sellers’
Representative, the Company, or any of their respective Representatives, except
for the representations and warranties of Sellers in Article 2 and Article 3.
Buyer understands that it (and not Sellers, or the Seller’s Representative) will
be responsible for its own legal or Tax Liabilities that may arise as a result
of the Transactions. Buyer agrees that it has been advised to consult with its
own tax and legal counsel in connection with the foregoing.

 

Article 5

CERTAIN COVENANTS OF THE PARTIES

 

5.1Further Actions. From and after the Closing, each Seller and Buyer agrees to,
from time to time, execute and deliver such other documents, certificates,
agreements, and other writings as any other Party reasonably requests, and to
take such other actions, as may be reasonably necessary, proper, or advisable in
order to consummate or implement expeditiously the Transactions. Notwithstanding
the foregoing in this Section 5.1, none of Sellers, Buyer or any of their
respective Affiliates will be obligated to make any payments, or otherwise pay
any consideration, to any third party to obtain any applicable consent, waiver
or approval.

 

5.2Access to Information.

 

5.2.1From and after the Closing, Sellers and Buyer will promptly afford the
other Party and its Affiliates and their respective Representatives reasonable
access to their respective properties, information, data, books, records,
employees and auditors to the extent relating to the Company to the extent
necessary or useful for the Party requesting such access in connection with any
Proceeding (other than any Proceeding in connection with this Agreement, the
other Transaction Documents or the Transactions). In addition, from and after
the Closing Date, Buyer will, and will cause its Affiliates to, upon reasonable
notice by Sellers or their respective Affiliates to Buyer, (a) provide to
Sellers and their respective Affiliates and their respective Representatives
reasonable access during reasonable working hours to their properties,
information, data, books, records, employees and auditors to the extent relating
to the Company with respect to any Pre-Closing Period or matter occurring prior
to the Closing, (b) permit Sellers and their respective Affiliates and their
respective Representatives to make such copies and inspections of any such
information, data, books and records as any of them may reasonably request
during reasonable hours to the extent reasonably required by the Sellers, (c)
make reasonably available to Sellers and their respective Affiliates and their
respective Representatives, the officers, employees and other Representatives of
the Company and to provide reasonable assistance and cooperation in the review
of information described in this Section 5.2.1 and (d) cooperate with Sellers
and their respective Affiliates and their respective Representatives to the
extent reasonably necessary or appropriate in connection with any Proceeding
arising out of the Business, in each case other than with respect to any
Proceeding involving disputes (y) between Buyer, on the one hand, and Sellers,
on the other hand or (z) for which Buyer seeks indemnification hereunder.

 

 - 32 - 

 

 

5.2.2Anything to the contrary in Section 5.2.1 notwithstanding, (a) access
rights pursuant to Section 5.2.1 will be exercised in such manner as not to
interfere unreasonably with the conduct of the Business or any other business of
the Party granting such access, (b) the Party granting access may withhold any
document (or portions thereof) or information (i) that is subject to the terms
of a non-disclosure agreement with a third party, (ii) that may constitute
privileged attorney-client communications or attorney work product and the
transfer of which, or the provision of access to which, as reasonably determined
in writing by such Party’s counsel, constitutes a waiver of any such privilege
or (iii) if the provision of access to such document (or portion thereof) or
information, as reasonably determined in writing by such Party’s counsel, would
reasonably be expected to conflict with applicable Laws or agreements with
Governmental Authorities, (c) no Seller or any of its respective Affiliates or
their respective Representatives will have any obligation to provide Buyer, its
Affiliates or their respective Representatives access to any personnel records
of Sellers or the Company relating to individual performance or evaluation
records, medical histories, or other information in personnel records to the
extent that providing such access would constitute a breach of Law by any of
Sellers or the Company, and (d) the Party requesting access pursuant to Section
5.2.1 will reimburse the other Party promptly for all reasonable and documented
out-of-pocket costs and expenses incurred by the other Party in connection with
any such request made after the Closing.

 

5.3Confidentiality; Books and Records.

 

5.3.1The Confidentiality Agreement will automatically terminate as of the
Closing.

 

5.3.2From and after the Closing, (a) Sellers and Buyer will, and will cause
their respective Affiliates and Representatives to, maintain in confidence this
Agreement and the other Transaction Documents and any written, oral or other
information related to the negotiation hereof and thereof, (b) Sellers will, and
will cause their respective Affiliates and Representatives to, maintain in
confidence any written, oral or other information relating to the Company
obtained by virtue of Sellers’ ownership of the Company prior to the Closing and
(c) Buyer will, and will cause its Affiliates and Representatives to, maintain
in confidence any written, oral or other information of or relating to Sellers
or their respective Affiliates obtained by virtue of Buyer’s or Sellers’
ownership, management or provision of services to the Company from and after the
Closing, except, in each case, to the extent that the applicable Party is
required to disclose such information by judicial or administrative process or
pursuant to applicable Law or such information can be shown to have been in the
public domain through no fault of the applicable Party.

 

 - 33 - 

 

 

5.3.3Subject to Sections 5.3.1 and 5.3.2, Sellers, their respective Affiliates
and their respective Representatives will have the right to retain copies of all
books, data, files, information and records in any media (including, for the
avoidance of doubt, Tax returns and other information and documents relating to
Tax matters) of the Company relating to periods ending on or prior to the
Closing Date or any Straddle Period (a) relating to information (including
employment and medical records) regarding the Continuing Employees, (b) as may
be required by any Governmental Authority, including pursuant to any applicable
Law or regulatory request or (c) as may be necessary for Sellers or their
respective Affiliates to perform their respective obligations pursuant to this
Agreement or any other Transaction Document, in each case subject to compliance
with all applicable privacy Laws. Buyer agrees that, with respect to all
original books, data, files, information and records of the Company existing as
of the Closing Date, it will (x) comply in all material respects with all
applicable Laws relating to the preservation and retention of records, (y) apply
preservation and retention policies that are no less stringent in the aggregate
than those generally applied by Buyer to its own books and records and (z) until
the later of seven (7) years after the Closing Date or the date on which Taxes
may no longer be assessed under the applicable statutes of limitation, including
any waivers or extensions thereof, preserve and retain all such original books,
data, files, information and records.

 

5.4Restrictive Covenants. The Parties agree that Buyer is relying on the
covenants and agreements set forth in this Section 5.4, that without such
covenants Buyer would not enter into this Agreement or consummate the
Transactions and that the purchase price is sufficient consideration to make the
covenants and agreements set forth herein enforceable.

 

5.4.1Non-Competition by Sellers. During the Restriction Period, Sellers will
not, directly or indirectly, and shall cause their respective Affiliates not to,
directly or indirectly, as an employee, employer, consultant, agent, principal,
partner, stockholder, officer, director, investor, lender, financier or broker,
or in any other individual or representative capacity, engage or participate or
plan or prepare to engage or participate in the Business or assist any Person in
engaging or participating or planning or preparing to engage or participate in
the Business, in each case in the United States of America, Europe, Mexico,
Canada or any other geographic area where the Company is engaging in the
Business immediately prior to the Closing or in which the Products are marketed
immediately prior to the Closing or through the investment of capital, lending
of money or property, rendering of services or capital, or otherwise, in any
enterprise engaging in a business competitive with the Business or otherwise
compete with the Company (the “Prohibited Activities”); provided, however, that
nothing in this Section 5.4.1 will prohibit any Seller from:

 

(a)performing duties as an employee or consultant of the Buyer; or

 

 - 34 - 

 

 

(b)owning two percent (2%) or less of the stock of any Person listed on a
national securities exchange or traded in the over-the-counter market.

 

5.4.2Non-Solicitation by Sellers. During the Restriction Period, no Seller nor
any of its respective Affiliates will, directly or indirectly, hire, recruit or
solicit any officers, directors, senior executives or other employees of the
Company to become employed or engaged by any other Person or to terminate any
such Person’s employment or consulting relationship with Buyer or, after the
Closing, the Company; provided, however, that the foregoing will not prohibit
any general advertisements or solicitations of employment by Sellers or their
respective Affiliates not specifically directed to officers, managers, employees
or contractors of the Company, Buyer or their respective Affiliates and the
hiring of any Person as a result of such general advertisement or solicitation
not specifically directed to officers, managers, employees or contractors of the
Company, Buyer or their respective Affiliates.

 

5.4.3Blue-Pencil. If any court of competent jurisdiction will, at any time, deem
the term of any particular restrictive covenant contained in this Section 5.4
too lengthy or the scope too broad, the other provisions of this Section 5.4
will nevertheless stand, and the covenant, as determined by a court of competent
jurisdiction, will be deemed reformed such that the term will be deemed to be
the longest period permissible by Law under the circumstances and the scope will
be as broad as permissible by Law under the circumstances. The court of
competent jurisdiction in each case will reduce the term and/or scope covered to
permissible duration or breadth.

 

5.4.4Remedies. Sellers represent that they are familiar with the covenants not
to solicit contained herein and are fully aware of their respective obligations
hereunder. Sellers further agree that the length of time and scope are
reasonable given the benefits they have received hereunder. Sellers further
acknowledge and agree that the covenants set forth in this Section 5.4 are
necessary for the protection of Buyer’s business interests, including the
goodwill and confidential information being transferred by reason of the
Transactions, that irreparable injury will result to Buyer if Sellers breach any
of the terms of this Section 5.4, and that in the event of an actual or
threatened breach by Sellers of any of the provisions contained in this Section
5.4, Buyer will have no adequate remedy at Law. Sellers accordingly agree that
in the event of any actual or threatened breach by any Seller of any of the
provisions contained in this Section 5.4, Buyer will be entitled to seek
injunctive and other equitable relief without the necessity for showing
irreparable harm as a remedy for any such breach or threatened breach, and
Sellers further agree to waive any requirement for the posting of any bond or
other security in connection with such remedy. Such remedy shall not be deemed
to be the exclusive remedy for breach of the provisions contained in this
Section 5.5 but shall be in addition to all other remedies available at law or
in equity to Buyer. Nothing contained herein will be construed as prohibiting
Buyer from pursuing any other remedies available to it for such breach or
threatened breach, including the recovery of any damages that it is able to
prove. Sellers will be liable for any breach by their respective Affiliates of
this Section 5.4.

 

 - 35 - 

 

 

5.5Tax Matters.

 

5.5.1Tax Returns.

 

(a)The Company, under the direction of the Sellers’ Representative, will be
responsible for preparing any Company Returns for any Pre-Closing Tax Period
(other than a Straddle Period) that is required to be filed after the Closing
Date and will prepare such Company Returns in accordance with past practices of
the Company.

 

(b)Buyer will be responsible for preparing any Company Returns for any Straddle
Period and will prepare such Company Returns in accordance with past practices
of the Company. No later than thirty (30) days prior to the due date for filing
such Company Returns for any Straddle Period, taking into account any extensions
of such filing date, Buyer will make such Company Returns available for review
and approval by the Sellers’ Representative. The Sellers’ Representative shall
have the right to object to such Return within ten (10) days of receipt of such
Return. If the Sellers’ Representative objects to a Return, the Sellers’
Representative and the Buyer agree to use their best efforts to resolve the
dispute. Any dispute not resolved within twenty (20) days after an objection
shall be submitted to the Independent Accounting Firm. The Independent
Accounting Firm’s review shall be limited to the disputed item and the parties
shall direct the Independent Accounting Firm to conclude its review within ten
(10) days of submission of the objection to the Independent Accounting Firm. The
fees and expenses of the Independent Accounting Firm shall be borne equally by
the Buyer, on the one hand, and the Sellers, on the other hand.

 

(c)After the Closing Date, without the prior written consent of the Sellers’
Representative, none of the Company or Buyer will amend any Company Return
relating to a Pre-Closing Tax Period.

 

5.5.2Tax Contests. Buyer, on behalf of the Company, will promptly notify the
Sellers’ Representative in writing upon receipt by Buyer or the Company of
notice of any Tax audits, examinations or assessments with respect to Taxes of
the Company that pertain to a Pre-Closing Tax Period or Straddle Period or that
could give rise to indemnification under Article 6. The Sellers’ Representative
will control the portion of any such audit, examination or proceeding that
relates to any Pre-Closing Tax Period and Buyer and the Sellers’ Representative
will jointly control with respect to any Straddle Period; provided, however,
that with respect to any audit, examination or proceeding that relates to either
a Pre-Closing Tax Period or Straddle Period, each of Buyer and the Sellers’
Representative will be entitled to participate in the defense of such claim to
the extent it could adversely affect that party and to employ counsel of its
choice for such purpose, the fees and expenses of which separate counsel will be
borne solely by that party.

 

5.5.3Tax Refunds. Any refund of Taxes received by the Company relating to a
Pre-Closing Tax Period (or any election to apply the right to such a refund as a
payment of, or a credit against, future Taxes) (a “Pre-Closing Tax Refund”),
will be credited to Sellers. Buyer will promptly pay, or cause to be paid, the
amount of any such Pre-Closing Tax Refund, including the amount of interest
actually received thereon, to Sellers upon receipt (or use) of such Pre-Closing
Tax Refund by the Company or any of its Affiliates (it being understood that in
the case of an election to use any such refund as a payment of, or a credit
against, future Taxes, such refund will be considered to be used at the time
such election is made).

 

 - 36 - 

 

 

5.5.4Books and Records; Cooperation. Buyer and Sellers will, and will cause
their respective Representatives to, (a) provide the other Party and its
Representatives with such assistance as may be reasonably requested in
connection with the preparation of any Tax Return or any audit or other
examination by any Taxing Authority or Proceeding relating to Taxes with respect
to the Company and (b) retain (until the expiration of the statute of
limitations of the taxable periods to which the Tax Returns relate), and provide
the other Party and its Representatives with reasonable access to, all records
or information that may be relevant to such Tax Return (including analysis
regarding any Tax refunds or Tax benefits), audit, examination or proceeding,
provided, that the foregoing will be done at the expense of the Party making
such request and in a manner so as not to interfere unreasonably with the
conduct of the business of the Parties.

 

5.5.5Straddle Period. For purposes of this Agreement, the portion of Tax with
respect to the income, property or operations of the Company that is
attributable to any Tax period that begins on or before the Closing Date and
ends after the Closing Date (a “Straddle Period”) will be apportioned between
the portion of the Straddle Period that extends before the Closing Date through
the Closing Date (the “Pre-Closing Straddle Period”) and the portion of the
Straddle Period that extends from the day after the Closing Date to the end of
the Straddle Period (the “Post-Closing Straddle Period”). The portion of such
Tax attributable to the Pre-Closing Straddle Period will (a) in the case of any
Taxes other than sales or use taxes, value-added taxes, employment taxes,
withholding taxes, and any Tax based on or measured by income, receipts or
profits earned during a Straddle Period, be deemed to be the amount of such Tax
for the entire taxable period multiplied by a fraction, the numerator of which
is the number of days in the Pre-Closing Straddle Period and denominator of
which is the number of days in the Straddle Period and (b) in the case of any
sales or use taxes, value-added taxes, employment taxes, withholding taxes, and
any Tax based on or measured by income, receipts or profits earned during a
Straddle Period, be deemed equal to the amount that would be payable if the
Straddle Period ended on and included the Closing Date. The portion of Tax
attributable to a Post-Closing Straddle Period will be calculated in a
corresponding manner.

 

5.5.6Transfer Taxes. All transfer, documentary, sales, use, stamp, registration,
value added and other such Taxes and fees (including any penalties and interest)
imposed in connection with the Transactions (“Transfer Taxes”) will be borne and
paid equally by the Buyer, on the one hand, and the Sellers, on the other hand,
including, without limitation, any Transfer Taxes attributable to the deemed
sale or transfer of the Owned Real Property or Leased Real Property, if any.

 

5.5.7Tax Treatment. The Parties acknowledge that for United States federal and
state income Tax purposes, the Transactions will be treated under Revenue Ruling
99-6 as if (i) each Seller had sold all of its respective Transferred Interests
to Buyer, (ii) the Buyer had purchased all of the assets of the Company, and
(iii) the Company’s classification as a partnership terminated as of the Closing
Date.

 

 - 37 - 

 

 

5.5.8Purchase Price Allocation. To the extent relevant to the preparation of Tax
Returns of Buyer, the Company, Sellers, and/or the shareholders of Sellers,
including without limitation for purposes of (i) adjusting the Tax basis of the
Company’s assets after the Closing Date, and (ii) computing the amount of gain,
if any, described in Section 751 of the Code with respect to Sellers’ sale of
the Transferred Interests, the purchase price and any Company liabilities and
other amounts deemed to be paid for the Company’s assets shall be allocated
among the assets of the Company based upon their relative fair market values.
Such fair market values shall be determined using the agreed upon values and
valuation methodology set forth on Section 5.5.8 of the Disclosure Schedule,
which values may be adjusted as reasonably determined by Sellers with the
consent of Buyer, such consent not to be unreasonably withheld, conditioned or
delayed, to reflect a review of the assets of the Company completed prior to the
date hereof, and such adjusted values will be provided to Buyer no later than
sixty (60) days after the Closing Date (as adjusted, the “Allocation Schedule”).
Any post-Closing adjustments to the purchase price pursuant to this Agreement
shall be allocated in a manner consistent with the Allocation Schedule. Buyer,
the Company and Sellers shall file all Tax Returns (including amended returns
and claims for refund) and information reports in a manner consistent with the
Allocation Schedule and will not take any position inconsistent therewith in
connection with any examination of any such Tax Returns or in any administrative
or judicial proceedings relating to such Tax Returns, unless required by a
determination of the applicable Taxing Authority that is final.

 

5.6Employee Matters.

 

5.6.1Employment Terms and Benefits. With respect to the employees of the Company
who are employed by the Company as of the Closing Date (the “Continuing
Employees”), for a period extending until the earlier of the termination of a
Continuing Employee’s employment by the Buyer or its Affiliates or one (1) year
following the Closing Date (or, with respect to continuation of bonus or
commission opportunity, until the end of calendar 2017), Buyer agrees that each
Continuing Employee will be provided with compensation and benefits that are
substantially comparable in the aggregate to the compensation and benefits
provided to each such Continuing Employee immediately prior to the Closing Date.
Nothing in this Agreement shall change the “at-will” status of any at-will
Employee or otherwise require Buyer or the Company to continue to employ any
particular Employee of the Company following the Closing Date.

 

 - 38 - 

 

 

5.6.2Service Credit. Buyer will ensure that, as of the Closing Date, each
Continuing Employee receives full credit (for all purposes, including
eligibility to participate, vesting, vacation entitlement and severance
benefits, but excluding benefit accrual under any defined-benefit pension plan),
for service with Sellers, the Company or any Affiliates (or predecessor
employers to the extent such past service credit is provided under the
applicable Employee Benefit Plans) under each of the comparable employee benefit
plans of the Company, Buyer or its Affiliates in which such Continuing Employee
becomes a participant; provided, however, that no such service recognition will
result in any duplication of benefits. As of the Closing Date, Buyer or its
Affiliates will assume the amount of vacation time that each Continuing Employee
had accrued under any applicable employee benefit plan as of the Closing Date.
With respect to each health or welfare benefit plan maintained by Buyer or its
Affiliates for the benefit of any Continuing Employee, subject to any required
approval of the applicable insurance provider, if any, which Buyer will use
commercially reasonable efforts to procure, Buyer will (a) cause to be waived
any eligibility waiting periods, any evidence of insurability requirements and
the application of any pre-existing condition limitations under such plan and
(b) cause each Continuing Employee to be given credit under such plan for all
amounts paid by such Continuing Employee under any similar employee benefit plan
for the plan year that includes the Closing Date for purposes of applying
deductibles, co-payments and out-of-pocket maximums as though such amounts had
been paid in accordance with the terms and conditions of the applicable plan
maintained by the Company, Buyer or its Affiliates for the plan year in which
the Closing Date occurs.

 

5.6.3COBRA. Buyer or its Affiliates will bear and be responsible for all
liabilities and obligations to provide any former employees of the Company or
any Continuing Employees who terminate employment after the Closing Date with
COBRA continuation coverage in accordance with the requirements of Section 4980B
of the Code and any applicable state Law.

 

5.6.4BHH Plans. Effective as of the Closing Date, except with respect to the BHH
Management, Inc. 401(k) Profit Sharing Plan as contemplated below, the Company
will cease to be a participating employer in any Employee Benefit Plans
sponsored by BHH, and the Continuing Employees will have no further rights to
participate in such BHH Employee Benefit Plans as active employees after the
Closing Date. Effective as of the Closing Date, Buyer and its Affiliates shall
have no liability under any such Employee Benefit Plans sponsored by BHH, are
not adopting, assuming or maintaining any Employee Benefit Plan sponsored by BHH
and shall, subject to Article 6, be indemnified and held harmless by Sellers
against and in respect of any and all Losses arising out of the Employee Benefit
Plans sponsored by BHH. The Parties hereby agree that the BHH Management, Inc.
401(k) Profit Sharing Plan will be adopted and assumed by the Company effective
as of the Closing Date, and will not be considered an Employee Benefit Plan
sponsored by BHH for purposes of this Section 5.6.4.

 

5.6.5Miscellaneous. Nothing contained in this Agreement, whether express or
implied, will (a) be treated as an amendment of any Employee Benefit Plan or
other benefit plan maintained by Sellers, Buyer or any of their respective
Affiliates, or will be construed to prohibit Sellers, Buyer or any of their
respective Affiliates from amending or terminating any such Employee Benefit
Plan or other benefit plan, (b) limit the right of Sellers, Buyer or any of
their respective Affiliates to terminate the employment of any Person, (c)
provide any Person with any right to continued employment or (d) create any
third party beneficiary rights in any Person who is not a party to this
Agreement.

 

 - 39 - 

 

 

5.7Directors’ and Officers’ Exculpation; Indemnification.

 

5.7.1Buyer will cause the Company to assume, and the Company hereby assumes the
obligations with respect to all rights to indemnification and exculpation from
liabilities for acts or omissions occurring at or prior to the Closing Date in
favor of the members of the Company as of immediately prior to the Closing (the
“Members”) and the current or former directors, managers, officers or other
employees or agents of the Company or the Members currently indemnified by the
Company (collectively, the “Covered Persons”) as provided in the Governing
Documents of the Company as in effect immediately prior to the Closing, and such
obligations will survive the consummation of the Transactions and will continue
in full force and effect in accordance with their terms for not less than six
(6) years from the Closing Date.

 

5.7.2This Section 5.7 is (a) intended to be for the benefit of, and will be
enforceable by, each Covered Person and such Covered Person’s heirs, legatees,
representatives, successors and assigns, it being expressly agreed that such
Covered Persons will be third party beneficiaries of this Section 5.7, and (b)
in addition to, and not in substitution for, any other rights to indemnification
or contribution that any such Covered Person may have by contract or otherwise
as set forth on Section 5.7.2 of the Disclosure Schedule.

 

5.7.3If all or substantially all of the business or assets of the Company are
sold, whether by merger, consolidation, sale of assets or securities or
otherwise, in one transaction or a series of transactions, then Buyer and the
Company will, and in each such case, cause their respective successors and
assigns to assume the obligations set forth in this Section 5.7. This Section
5.7 will apply to all such successors and assigns.

 

5.8Representation & Warranty Insurance Policy. Buyer (or one or more of its
Affiliates) has entered into the Representation and Warranty Insurance Policy.
Buyer will not (and will cause its Affiliates to not) amend, modify, terminate
or waive any provision concerning the rights of subrogation contained in the
Representation and Warranty Insurance Policy or any other provision thereof in a
manner materially adverse to Sellers without the prior written consent of the
Sellers’ Representative.

 

Article 6

INDEMNIFICATION 

 

6.1Indemnification by Sellers. Subject to the terms of this Article 6, each
Seller will, severally and not jointly with any other Person, based on each such
Seller’s Pro Rata Portion (provided that each Seller will be liable for the full
amount of any indemnification obligations arising from a breach of any covenant
or obligation of such Seller under this Agreement or any other Transaction
Document, and the non-breaching Seller will have no liability for such amount),
indemnify and hold Buyer and its Affiliates (including, after the Closing, the
Company) and each of their respective officers, directors, shareholders,
managers, members, employees, agents, Representatives, successors and permitted
assigns (each a “Buyer Indemnified Party” and, collectively, the “Buyer
Indemnified Parties”) harmless against and in respect of any and all Losses,
which such Buyer Indemnified Party has suffered, incurred or become subject to
arising out of, based upon or otherwise in respect of:

 

6.1.1any breach or non-fulfillment of any covenant or obligation of the Company
or such Seller under this Agreement or of any Transaction Document;

 

 - 40 - 

 

 

6.1.2any Closing Indebtedness or Closing Transaction Expenses, to the extent
such amounts have not been paid pursuant to Section 1.3 or included in the
calculation of Closing Date Purchase Price;

 

6.1.3any claim for payment of fees and/or expenses as a broker or finder in
connection with the origin, negotiation or execution of this Agreement or the
other Transaction Documents or the consummation of the Transactions based upon
any agreement, arrangement or understanding between the claimant and any Seller
or any of its respective agents or Representatives or, prior to the Closing, the
Company or any of its agents or Representatives;

 

6.1.4any Taxes of the Company or the non-payment thereof for any taxable period
ending on or prior to the Closing Date or any portion of the Pre-Closing Tax
Period through the end of the Closing Date; and

 

6.1.5any claim related to any failure of the BHH Management, Inc. 401(k) Profit
Sharing Plan to be administered, maintained, funded and sponsored in compliance
with its terms and applicable Laws, including ERISA and the Code, at any time
prior to the Closing Date.

 

For the avoidance of doubt, Sellers will not indemnify the Buyer Indemnified
Parties for any breach of any representation or warranty made by the Sellers in
Article 2 or Article 3 of this Agreement or of any Transaction Documents. The
Representation & Warranty Insurance Policy will be Buyer’s sole and exclusive
remedy for any and all claims for breach of any representation or warranty made
by the Sellers in Article 2 or Article 3 of this Agreement or of any Transaction
Documents.

 

6.2Indemnification by Buyer. Subject to the terms of this Article 6, Buyer and,
after the Closing, the Company, will jointly and severally indemnify and hold
Sellers and their respective Affiliates, and each of their respective officers,
directors, shareholders, managers, members, trustees, employees, agents,
Representatives, successors and permitted assigns (each a “Seller Indemnified
Party” and, collectively, the “Seller Indemnified Parties”) harmless against and
in respect of any and all Losses which such Seller Indemnified Party has
suffered, incurred or become subject to arising out of, based upon or otherwise
in respect of:

 

6.2.1any breach of any representation or warranty made by Buyer in Article 4 of
this Agreement;

 

6.2.2any breach or non-fulfillment of any covenant or obligation of Buyer or,
after the Closing, the Company, under this Agreement; and

 

6.2.3any claim for payment of fees and/or expenses as a broker or finder in
connection with the origin, negotiation or execution of this Agreement or the
other Transaction Documents or the consummation of the Transactions based upon
any agreement, arrangement or understanding between the claimant and Buyer or
any of its agents or Representatives.

 

 - 41 - 

 

 

6.3Claims.

 

6.3.1Inter-Party Claims. In order for a Buyer Indemnified Party or a Seller
Indemnified Party (each, an “Indemnified Party”) to be entitled to any
indemnification pursuant to this Article 6, the Indemnified Party will notify
the other Party or Parties from whom such indemnification is sought (the
“Indemnifying Party”) in writing promptly after becoming aware of the facts or
circumstances giving rise to such Indemnified Party’s claim for indemnification,
specifying in reasonable detail the basis of such claim (an “Inter-Party
Claim”); provided, however, that failure to give such notification will not
affect the indemnification provided hereunder except to the extent the
Indemnifying Party will have been actually prejudiced as a result of such
failure.

 

6.3.2Third Party Claims.

 

(a)In order for an Indemnified Party to be entitled to any indemnification
provided for under this Agreement in respect of, arising out of or involving a
claim made by any Person (other than by an Indemnified Party, which claims are
addressed in Section 6.3.1) against the Indemnified Party (a “Third Party
Claim”), such Indemnified Party must notify the Indemnifying Party in writing of
the Third Party Claim (which notice will specify in reasonable detail the events
giving rise to such Third Party Claim) promptly after receipt by such
Indemnified Party of notice of the Third Party Claim; provided, however, that
failure to give such notification will not affect the indemnification provided
hereunder except to the extent the Indemnifying Party will have been actually
prejudiced as a result of such failure. Thereafter, the Indemnified Party will
deliver to the Indemnifying Party, promptly following the Indemnified Party’s
receipt thereof, copies of all notices and documents (including court papers)
received by the Indemnified Party relating to the Third Party Claim. If a Third
Party Claim is made, the Indemnifying Party will be entitled to participate in
the defense thereof. The Indemnifying Party may also assume the defense of any
Third Party Claim with counsel selected by the Indemnifying Party, at such
party’s sole expense (without prejudice to the right of the Indemnified Party to
participate at its own expense through counsel of its own choosing); provided
that if the Indemnifying Party desires to assume control of the defense,
settlement, adjustment or compromise of any Third Party Claim, with counsel
reasonably acceptable to the Indemnified Party, the Indemnifying Party must give
written notice to the Indemnified Party of its intention to do so no later than
twenty (20) days following receipt of notice of claims by an Indemnified Party
or such shorter time period as required so that the interests of the Indemnified
Party would not be materially prejudiced as a result of the failure to have
received such notice; provided, however, that the Indemnifying Party may only
assume control of such defense if it acknowledges in writing to the Indemnified
Party that any Losses that are assessed against the Indemnified Party in
connection with such Third Party Claim constitute Losses for which the
Indemnified Party shall be fully indemnified pursuant to, but subject to the
limitations of, this Article 6. If the Indemnified Party reasonably concludes
that separate counsel is required because either (i) a conflict of interest
would otherwise exist or (ii) the Third Party Claim and any claims that may be
related thereto could reasonably be likely to exceed the amount of
indemnification available to the Indemnified Party (either pursuant to the terms
of this Article 6 or as a result of the Indemnifying Party(ies) available
financial resources), the Indemnified Party shall have the right to select
separate counsel to participate in the defense of such action on its behalf, at
the expense of the Indemnifying Party, and in such case the Indemnifying Party
and Indemnified Party shall use all reasonable efforts to cooperate in such
defense. Notwithstanding anything else to the contrary contained herein, the
Indemnifying Party may not control the defense of a Third Party Claim
(A) involving criminal liability, (B) in which any relief other than monetary
damages is sought against the Indemnified Party, (C) in which an adverse
judgment, in the reasonable and good faith judgment of the Indemnified Party is
likely to establish a precedential custom or practice adverse to the business
interests or reputation of the Buyer or any of its Affiliates, (D)  the defense
of which the insurer under the Representation & Warranty Insurance Policy elects
to assume control, (E) that is covered by the Representation & Warranty
Insurance Policy, (F) with respect to which the Indemnified Party reasonably and
in good faith determines that the conduct of the defense or any proposed
settlement of any such Third Party Claim by the Indemnifying Party might be
expected to adversely affect the ability of the Indemnified Party to conduct its
business (including, relationships with Governmental Authorities, employees,
customers, suppliers or other Persons with whom the Indemnified Party conducts
business) or (G) the defense, settlement, adjustment or compromise of which the
Indemnifying Party is not actively and diligently pursuing.

 

 - 42 - 

 

 

(b)The party controlling the defense (the “Controlling Party”) shall keep the
party not controlling the defense (the “Non-Controlling Party”) reasonably
advised from time-to-time of the status of the Third Party Claim. The
Non-Controlling Party shall furnish the Controlling Party with such information
as it may have with respect to the Third Party Claim and proceedings related
thereto (including copies of any summons, complaint or other pleading which may
have been served on such party and any written claim, demand, invoice, billing
or other document evidencing or asserting the same) and shall otherwise
cooperate with and assist the Controlling Party in the defense of the Third
Party Claim. If the Indemnifying Party does not choose to assume control of the
defense, settlement, adjustment or compromise of any such Third Party Claim for
which any Indemnified Party would be entitled to indemnification hereunder or if
the Indemnifying Party is not entitled pursuant to Section 6.3.2 to defend such
Third Party Claim, then (i) the reasonable fees and expenses of one outside
counsel (and not any fees and expenses allocated to any internal counsel) to the
Indemnified Party shall be considered “Losses” for purposes of this Agreement
and (ii) the Indemnifying Party shall have the right to elect to join in the
defense, settlement, adjustment or compromise of any such Third Party Claim, and
to employ counsel to assist such Indemnifying Party in connection with the
handling of such claim, at the sole expense of the Indemnifying Party, and no
such claim shall be settled, adjusted or compromised, or the defense thereof
terminated by the Indemnified Party, without the prior written consent of the
Indemnifying Party (which consent shall not be unreasonably withheld or delayed)
unless and until the Indemnifying Party shall have failed, after the lapse of a
reasonable period of time, but in no event more than ten (10) days after written
notice to it of the Third Party Claim, to join in the defense, settlement,
adjustment or compromise of the same.

 

(c)No Indemnifying Party may settle, compromise or consent to the entry of any
judgment in any Third Party Claim without the prior written consent of each
Indemnified Party, which consent shall not be withheld or delayed if such
settlement, compromise or consent (i) is for money damages only, (ii) obligates
the Indemnifying Party to assume complete financial responsibility for such
settlement, compromise or consent (and the Indemnifying Party demonstrates to
the Indemnified Party that it has available all required financial resources
therefor), (iii) could not otherwise be likely to cause a material adverse
effect on the Indemnified Party and (iv) includes an express, unconditional
release of the Indemnified Party and its directors, managers, officers, agents,
shareholders, members, consultants, employees and controlling Persons from all
Liabilities and obligations arising therefrom.

 

 - 43 - 

 

 

6.4Survival. The respective representations, warranties, covenants and
agreements of the Parties contained in this Agreement, and the rights of the
Parties to seek indemnification with respect to such covenants and agreements,
will survive the Closing; provided, however, that, (a) except in respect of any
claims for indemnification as to which written notice will have been duly given
pursuant to Section 6.3 prior to the date that is 36 months after the Closing
Date (the “General Indemnification Period”), and subject to the other provisions
of this Article 6, such representations, warranties, covenants and agreements,
and the rights of the parties to seek indemnification with respect to such
covenants and agreements, will expire at the end of the General Indemnification
Period, except that the Fundamental Representations will survive for 72 months
and (b) this Section 6.4 will not limit any covenant or agreement of the Parties
that, by its terms, requires performance after the General Indemnification
Period, which covenant or agreement will survive the General Indemnification
Period in accordance with its terms only for such period as is required for the
respective Party to perform under such covenant or agreement. If proper notice
of an indemnification claim is given in accordance with this Article 6 before
expiration of the applicable covenant or agreement, then notwithstanding the
expiration thereof, any claim based on such covenant or agreement shall survive
until, but only for purposes of, the resolution of such claim. Nothing in this
Article 6 shall limit or prohibit the rights of the Buyer to pursue recoveries
under the Representation & Warranty Insurance Policy.

 

6.5Certain Limitations on Indemnification.

 

6.5.1Notwithstanding anything to the contrary in this Agreement, the amount of
Losses (except for Losses described in Section 6.10) that may be recovered by
the Buyer Indemnified Parties pursuant to any and all claims for indemnification
made under Section 6.1 will be limited, individually and in the aggregate, to
the Indemnification Cap. Nothing in this Article 6 will be deemed to limit or
prohibit any rights of the Buyer Indemnified Parties as against any insurer
under the Representation & Warranty Insurance Policy.

 

6.5.2Sellers will have no obligation to indemnify the Buyer Indemnified Parties
against Losses under this Agreement, unless the aggregate amount of Losses is
greater than the Threshold, in which case the Buyer Indemnified Party will,
subject to Section 6.5.1 hereof, be entitled to indemnification for all Losses
including those that are less than the Threshold; provided, however, that the
Threshold will not apply to Losses based on a breach of the Fundamental
Representations and/or claims for indemnification made under Sections 6.1.3,
6.1.4 and/or 6.1.5, for which there will be no minimum threshold before
recovery.

 

6.6Certain Other Restrictions on Indemnification.

 

6.6.1Notwithstanding anything contained in this Agreement to the contrary, no
Buyer Indemnified Party will have any right to indemnification under this
Agreement with respect to any Losses to the extent (and only to the extent) such
Losses (i) constitute liabilities in the amounts reserved or accrued for
(whether in whole or in part) in the calculation of the Closing Working Capital
(as finally agreed upon or determined pursuant to Section 1.4), (ii) arise
solely out of changes after the Closing Date in applicable Law or
interpretations or applications thereof, or (iii) are duplicative of Losses that
have previously been recovered hereunder.

 

 - 44 - 

 

 

6.6.2Upon payment in full of any Inter-Party Claim pursuant to Section 6.3.1 or
the payment of any Judgment with respect to a Third Party Claim pursuant to
Section 6.3.2, the Indemnifying Party will be subrogated to the extent of such
payment to the rights of the Indemnified Party against any Person with respect
to the subject matter of such Inter-Party Claim or Third Party Claim, unless the
Indemnified Party has a continuing commercial relationship with the counterparty
to the Third Party Claim or Inter-Party Claim (other than any insurance company
that has issued an insurance policy that is applicable to such Third Party Claim
or Inter-Party Claim). The Indemnified Parties will assign or otherwise
reasonably cooperate with the Indemnifying Parties, at the cost and expense of
the Indemnified Parties, to pursue any claims against, or otherwise recover
amounts from, any Person liable or responsible for any Losses for which
indemnification has been received pursuant to this Agreement.

 

6.6.3No Buyer Indemnified Party will have any right to assert any claim against
any Indemnifying Party with respect to any Loss, cause of action or other claim
to the extent such Loss is a Loss, cause of action or claim with respect to
which such Buyer Indemnified Party or any of its Affiliates has taken action (or
caused action to be taken) with the primary intent of accelerating the time
period in which such matter is asserted or payable in order to cause a claim to
be made prior to the applicable expiration date set forth in Section 6.4.

 

6.6.4To the extent an Indemnified Party or its Affiliates recognizes any net
Indemnification Tax Benefits (as defined below) as a result of any Losses, such
Indemnified Party will pay the amount of such Indemnification Tax Benefits to
the Indemnifying Party within sixty (60) days of such Indemnification Tax
Benefits being recognized by the Indemnified Party (to the extent such
Indemnification Tax Benefits are recognized prior to the payment of the Losses,
the amount of the Losses will be reduced by the amount of Indemnification Tax
Benefits actually recognized). For this purpose, the Indemnified Party will be
deemed to recognize a tax benefit (an “Indemnification Tax Benefit”) with
respect to a taxable year if, and to the extent that, the Indemnified Party’s
liability for Taxes for such taxable year, calculated by excluding any Tax items
attributed to the Losses, exceeds the Indemnified Party’s actual liability for
Taxes for such taxable year, calculated by taking into account any Tax items
attributed to the Losses.

 

6.6.5Notwithstanding any other provision of this Agreement, Sellers will have no
obligation to indemnify the Buyer Indemnified Parties for any Taxes arising in a
Post-Closing Tax Period.

 

6.6.6Buyer and Sellers agree to treat any indemnification payments received
pursuant to this Agreement for all Tax purposes as an adjustment to the Closing
Date Purchase Price to the extent permitted by applicable Law.

 

 - 45 - 

 

 

6.6.7Under no circumstances will the maximum aggregate amount of indemnifiable
Losses (except for Losses described in Section 6.10) which may be recovered by
the Seller Indemnified Parties for indemnification pursuant to this Article 6 be
greater than the Indemnification Cap.

 

6.7Calculation and Mitigation of Losses.

 

6.7.1The amount of any Losses for which indemnification is provided under this
Article 6 will be net of any amounts recovered by such Indemnified Party under
insurance policies or other collateral sources with respect to such Losses in
excess of the sum of (i) reasonable, out-of-pocket costs and expenses relating
to collection under such policies or other collateral sources, and (ii) the
deductible associated therewith to the extent actually paid. The Indemnified
Parties will use their commercially reasonable efforts to pursue such insurance
policies or collateral sources (which efforts will not require the initiation of
litigation), and in the event the Indemnified Parties receive any recovery, the
amount of such recovery will be applied first, to refund any payments made by
the Indemnifying Parties in respect of indemnification claims pursuant to this
Article 6 which would not have been so paid had such recovery been obtained
prior to such payment, and second, any excess to the Indemnified Parties. If a
Buyer Indemnified Party fails to pursue recoveries under any “occurrence” based
insurance policies or other collateral sources, then Sellers will have the right
of subrogation to pursue such insurance policies or other collateral sources and
may take any reasonable actions necessary to pursue such rights of subrogation
in their name or the name of the party from whom subrogation is obtained. Buyer
will reasonably cooperate, and cause its Representatives and Affiliates
(including, after the Closing, the Company) to reasonably cooperate, with
Sellers to pursue any such subrogation claim.

 

6.7.2Each Party’s right to indemnification hereunder will be subject to its
obligations under applicable Law, including under common law, to mitigate
damages.

 

6.8Acknowledgment. For purposes of Section 6.1, any inaccuracy in, or breach of
any statement, or nonfulfillment, nonperformance or other breach of any covenant
or agreement by any Sellers or the Company, and the amount of any Losses
associated therewith, will be determined without regard for any materiality,
material adverse effect or similar qualification.

 

6.9Exclusive Remedy. The Parties acknowledge, on behalf of themselves and on
behalf of the other Indemnified Parties that, from and after the Closing, except
as provided in Sections 1.4, 6.10 and 8.18, their sole and exclusive remedy with
respect to the subject matter of this Agreement will be pursuant to the
indemnification provisions set forth in this Article 6. In furtherance of the
foregoing, each Party hereby waives, on behalf of itself and each of the other
Indemnified Parties, to the fullest extent permitted under applicable Law, any
and all rights, claims and causes of action it may have against any other
Parties arising under or based upon any applicable Law or otherwise (except
pursuant to the indemnification provisions set forth in this Article 6 or as
provided in Section 6.10), including, but not limited to, its right to pursue
any action or claim other than as expressly stated in this Agreement.

 

6.10Special Rule for Fraud. Nothing in this Article 6 will operate to limit the
common law liability of a Party (the “Liable Party”) to another Party for Losses
arising from the fraud of such Liable Party if such Liable Party is finally
determined by a court of competent jurisdiction to have willfully and knowingly
committed fraud against such other Party, with the specific intent to deceive
and mislead such other Party, regarding the representations and warranties made
by (i) if a Seller is the Liable Party, such Seller in Article 2 or Article 3 or
(ii) if Buyer is the Liable Party, Buyer in Article 4.

 

 - 46 - 

 

 

Article 7
SELLERS’ REPRESENTATIVE

 

7.1Sellers’ Representative Appointment and Powers. The Sellers’ Representative
(or any successor thereto appointed in accordance with Section 7.4) will serve
as representative of Sellers with full power and authority to take all actions
under this Agreement and the other Transaction Documents on behalf of Sellers.
Each Seller, by executing this Agreement, hereby irrevocably confirms,
designates and appoints the Sellers’ Representative as the agent, proxy and
attorney-in-fact for such Seller for all purposes of this Agreement and the
other Seller Transaction Documents, including full and exclusive power and
authority on such Seller’s behalf (a) to consummate the Transactions, (b) to
communicate to, and receive all communications and notices from Buyer, (c) to
execute and deliver on behalf of such Seller any amendment or waiver of this
Agreement or the other Seller Transaction Documents, (d) to take all other
actions to be taken by or on behalf of such Seller in connection herewith, (e)
to incur fees and expenses as determined by the Sellers’ Representative, (f) to
agree to, negotiate, enter into settlements and compromises of, and commence,
prosecute, defend, participate in, settle, dismiss or otherwise terminate, as
applicable, any Proceeding relating to the Company, any Seller, this Agreement,
any of the Transaction Documents or the Transactions, and to comply with orders
of courts and awards of courts, mediators and arbitrators with respect to such
Proceeding and (g) to make, execute, acknowledge and deliver all such other
agreements, guarantees, orders, receipts, endorsements, notices, requests,
instructions, certificates, stock powers, letters and other writings, and in
general, to do any and all things and to take any and all actions that the
Sellers’ Representative, in its sole discretion, may consider necessary or
proper or convenient in connection with or to carry out the Transactions. The
Sellers’ Representative will for all purposes be deemed the sole authorized
agent of Sellers until the agency has terminated. Each Seller agrees that such
agency and proxy are coupled with an interest, are therefore irrevocable without
the consent of the Sellers’ Representative and will survive the death,
incapacity or bankruptcy of any Seller and will be binding upon the executors,
heirs, legal representatives and successors of each Seller. All actions and
decisions of the Sellers’ Representative will be binding upon each Seller, and
no Seller will have the right to object, dissent, protest or otherwise contest
such actions or decisions. Neither the Sellers’ Representative nor any agent
employed by it will incur any liability to any Person relating to the
performance of its duties hereunder except for actions or omissions constituting
fraud, bad faith, gross negligence or willful misconduct.

 

7.2Fees and Expenses. Any expenses or liabilities incurred by the Sellers’
Representative in connection with the performance of its duties in such capacity
under this Agreement or the other Transaction Documents will be reimbursed to
the Sellers’ Representative from the Sellers’ Representative Amount. At such
time as the Sellers’ Representative Amount has been exhausted, all additional
fees, expenses and liabilities incurred by the Sellers’ Representative in
connection with the performance of its duties hereunder will be paid severally
by Sellers in proportion to their Pro Rata Portion. No Seller will seek
reimbursement or indemnification for such fees, expenses or liabilities or
otherwise from any of the Company or Buyer or any of their respective
Affiliates. In addition to any other rights or remedies, the Sellers’
Representative may, upon prior or contemporaneous written notice, offset any
amounts determined by it to be owed to the Sellers’ Representative against the
Sellers’ Representative Amount and against any amounts to be paid to Sellers.
The Sellers’ Representative will distribute any portion of the Sellers’
Representative Amount that has not been utilized by it to satisfy its
liabilities or expenses as the Sellers’ Representative or other obligations of
Sellers hereunder based on their respective Pro Rata Portions (net of any
amounts owed by any Seller to the Sellers’ Representative) at such time or times
as the Sellers’ Representative may determine in its reasonable discretion.

 - 47 - 

 

 

7.3Liability of Sellers’ Representative. Each Seller will severally, but not
jointly, based on such Seller’s Pro Rata Portion, indemnify and hold harmless,
the Sellers’ Representative from any and all losses, liabilities and expenses
(including the reasonable fees and expenses of counsel) arising out of or in
connection with the Sellers’ Representative’s execution and performance (solely
in its capacity as the Sellers’ Representative and not in its capacity as a
Seller) of this Agreement and the other Transaction Documents, except for fraud,
bad faith, gross negligence or willful misconduct by the Sellers’
Representative. This indemnification obligation will survive the termination of
this Agreement and the other Transaction Documents. The Sellers’ Representative
may, in all questions arising under this Agreement, rely on the advice of
counsel, and for anything done, omitted or suffered in good faith by the
Sellers’ Representative in accordance with such advice, the Sellers’
Representative will not be liable to Sellers or any other Person. In no event
will the Sellers’ Representative (solely in its capacity as the Sellers’
Representative and not in its capacity as a Seller) be liable hereunder or in
connection herewith to any Seller for any indirect, punitive, special or
consequential damages.

 

7.4Resignation or Removal of the Sellers’ Representative. Sellers who,
immediately prior to Closing, are entitled in the aggregate to receive more than
fifty percent (50%) of the Estimated Closing Date Purchase Price may, from time
to time upon advance written notice to Buyer, (a) remove the Sellers’
Representative and appoint a new Sellers’ Representative or (b) appoint a new
Sellers’ Representative upon the death, incapacity or resignation of the
Sellers’ Representative and such substituted representative will be deemed to be
the Sellers’ Representative for all purposes under this Agreement. Subject to
the appointment and acceptance of a successor Sellers’ Representative as
provided below, the Sellers’ Representative may resign at any time thirty (30)
days after giving notice thereof to Sellers. If no successor Sellers’
Representative will have been appointed by Sellers and accepted such appointment
within twenty (20) days after the retiring Sellers’ Representative’s giving of
notice of resignation or Sellers’ removal of the Sellers’ Representative, then
the retiring or removed Sellers’ Representative may, on behalf of Sellers,
appoint a successor. Upon the acceptance of any appointment as the Sellers’
Representative hereunder, such successor Sellers’ Representative will thereupon
succeed to and become vested with all the rights, powers, privileges and duties
of the retiring or removed Sellers’ Representative, and the retiring or removed
Sellers’ Representative will be discharged from its duties and obligations
hereunder. After any retiring or removed Sellers’ Representative’s resignation
or removal, as applicable, hereunder as the Sellers’ Representative, this
Article 7 will continue in effect for such retiring Sellers’ Representative’s
benefit in respect of any actions taken or omitted to be taken by it while it
was acting as the Sellers’ Representative.

 

7.5Reliance. Buyer is entitled to rely conclusively upon any document delivered
by the Sellers’ Representative as (a) being genuine and correct and (b) having
been duly signed or sent by the Sellers’ Representative.

 

Article 8

MISCELLANEOUS

 

8.1Fees and Expenses. Except as expressly set forth in this Agreement, each
Party will pay all fees and expenses incurred by it incident to preparing for,
entering into and performing its obligations under this Agreement and the
consummation of the Transactions, whether or not the Transactions are
consummated.

 

 - 48 - 

 

 

8.2Notices. All notices or other communications permitted or required under this
Agreement will be in writing and will be sufficiently given if and when hand
delivered to the Persons set forth below or if sent by documented overnight
delivery service or registered or certified mail, postage prepaid, return
receipt requested, or by facsimile or email, receipt acknowledged, addressed as
set forth below or to such other Person or Persons and/or at such other address
or addresses as will be furnished in writing by any Party to the other Parties.
Any such notice or communication will be deemed to have been given as of the
date received, in the case of personal delivery, or on the date shown on the
receipt or confirmation therefor in all other cases.

 

If to Buyer or, following the Closing, the Company:

 

Clarus Corporation

2084 E 3900 S

Salt Lake City, Utah 84124

Attn: Aaron J. Kuehne

Email: akuehne@bdel.com

 

With a copy (which will not constitute notice) to:

 

Kane Kessler, P.C.

666 Third Avenue
New York, New York 10017

Attn.: Robert L. Lawrence, Esq.

Email: rlawrence@kanekessler.com

 

If to any Seller, the Sellers’ Representative or, prior to the Closing, the
Company:

 

BHH Management, Inc.

445 South Figueroa Street, Suite 3250

Los Angeles, CA 90071

Attn: Stephen F. Hinchliffe, Jr.

Email: shinchliffe@bhhmgmt.com

 

With a copy (which will not constitute notice) to:

 

O’Melveny & Myers LLP

400 South Hope St., 18th Floor

Los Angeles, CA 90071

Attention: John A. Laco, Esq.

Email: jlaco@omm.com

 

Any Party may at any time change the address to which notices may be sent under
this Section 8.2 by the giving of notice of the change to the other Parties in
the manner set forth in this Section 8.2.

 

 - 49 - 

 

 

8.3Releases.

 

8.3.1All Contracts between and among the Company, on the one hand, and any
Seller or any of its Affiliates (other than the Company), on the other hand,
will be terminated in their entirety upon the Closing by the parties thereto and
will be deemed voided, cancelled and discharged in their entirety and the
Company will not have any liability in respect of such Contracts or the
termination thereof.

 

8.3.2Effective as of the Closing, each Seller, on behalf of itself and each of
its Affiliates, the officers, directors, employees, investors, shareholders,
members or partners of such Seller, agents in their capacity as an agent of such
Seller, successors, permitted assigns, the executors or administrators of such
Seller (each, a “Seller Releasing Party” and, collectively, the “Seller
Releasing Parties”), hereby releases, acquits and forever discharges the
Company, its Affiliates, parent and subsidiary companies, predecessors,
successors and permitted assigns (including Buyer and its Affiliates), and their
respective former, present and future officers, directors, employees,
shareholders, members, managers, partners and agents (collectively, the “Buyer
Released Parties”) of and from any and all manner of action or inaction, cause
or causes of action, Proceedings, debts, Liens, Contracts, Taxes, promises,
liabilities, claims, demands, damages (whether for compensatory, special,
incidental or punitive damages, equitable relief or otherwise), Losses, fees,
costs or expenses, of any kind or nature whatsoever, past, present, or future,
at law, in equity or otherwise (including with respect to conduct which is
negligent, grossly negligent, willful, intentional, with or without malice, or a
breach of any duty, Law or rule), existing or occurring prior to the Closing,
whether known or unknown, whether fixed or contingent, whether concealed or
hidden, whether disclosed or undisclosed, whether liquidated or unliquidated,
whether foreseeable or unforeseeable, whether anticipated or unanticipated,
whether suspected or unsuspected, which the Seller Releasing Parties, or any of
them, ever have had or ever in the future may have against the Buyer Released
Parties, or any of them, arising by virtue of or in connection with any actions
or inactions with respect to the Company or its affairs on or before the Closing
Date; provided, however, that the foregoing release will not release, impair or
diminish, and will not include, in any respect, any rights of such Seller or any
other Seller Indemnified Party under this Agreement, any other Transaction
Document or any other Contract entered into pursuant to this Agreement or in
connection with the transactions contemplated hereby. Notwithstanding the
foregoing, nothing in this Agreement will be interpreted to release Buyer from
any of its obligations to Sellers under this Agreement, any other Transaction
Document or any other Contract entered into pursuant to this Agreement or in
connection with the transactions contemplated hereby.

 

 - 50 - 

 

 

8.3.3Effective as of the Closing, Buyer, on behalf of itself and each of its
Affiliates (including the Company), the officers, directors, employees,
investors, shareholders, members or partners of Buyer and each of its
Affiliates, agents in their capacity as an agent of Buyer and each of its
Affiliates, successors, permitted assigns, the executors or administrators of
Buyer and each of its Affiliates (each, a “Buyer Releasing Party” and,
collectively, the “Buyer Releasing Parties” and, together with the Seller
Releasing Parties, the “Releasing Parties”), hereby releases, acquits and
forever discharges each Seller and its Affiliates, parent and subsidiary
companies, predecessors, successors and assigns, and their respective former,
present and future officers, directors, employees, shareholders, members,
managers, partners, agents and attorneys (including, without limitation, OMM)
(collectively, the “Seller Released Parties” and, together with the Buyer
Released Parties, the “Released Parties”) of and from any and all manner of
action or inaction, cause or causes of action, Proceedings, debts, Liens,
Contracts, Taxes, promises, liabilities, claims, demands, damages (whether for
compensatory, special, incidental or punitive damages, equitable relief or
otherwise), Losses, fees, costs or expenses, of any kind or nature whatsoever,
past, present, or future, at law, in equity or otherwise (including with respect
to conduct which is negligent, grossly negligent, willful, intentional, with or
without malice, or a breach of any duty, Law or rule), existing or occurring
prior to the Closing, whether known or unknown, whether fixed or contingent,
whether concealed or hidden, whether disclosed or undisclosed, whether
liquidated or unliquidated, whether foreseeable or unforeseeable, whether
anticipated or unanticipated, whether suspected or unsuspected, which the Buyer
Releasing Parties, or any of them, ever have had or ever in the future may have
against the Seller Released Parties, or any of them, arising by virtue of or in
connection with any actions or inactions with respect to the Company or its
affairs on or before the Closing Date; provided, however, that the foregoing
release will not release, impair or diminish, and will not include, in any
respect any rights of Buyer under this Agreement, any other Transaction Document
or any other Contract entered into pursuant to this Agreement or in connection
with the transactions contemplated hereby. Notwithstanding the foregoing,
nothing in this Agreement will be interpreted to release Sellers from any of
their respective obligations to Buyer under this Agreement, any other
Transaction Document or any other Contract entered into pursuant to this
Agreement or in connection with the transactions contemplated hereby.

 

8.3.4Each Releasing Party hereby irrevocably covenants to refrain from, directly
or indirectly, asserting any claim or commencing, instituting or causing to be
commenced any Proceeding of any kind against any Released Party based upon any
matter purported to be released hereby.

 

8.4Assignment and Benefit. Neither this Agreement nor any of the rights,
interests or obligations hereunder may be assigned, by operation of Law or
otherwise, by any Party to any other Person without the prior written consent of
the other Party, and any such attempted assignment will be null and void;
provided, however, that (a) Buyer may assign its rights and obligations under
this Agreement in whole or in part to any of its Affiliates and/or, to the
extent granting a security interest, to any financing sources without the prior
written consent of Sellers (provided, that Buyer will remain primarily liable
hereunder following any such assignment and will be deemed to have
unconditionally guaranteed the performance of its obligations hereunder by any
such assignee) and (b) any Seller may assign its rights and obligations under
this Agreement to any of its Affiliates without the prior written consent of
Buyer (provided, that such Seller will remain primarily liable hereunder
following any such assignment and will be deemed to have unconditionally
guaranteed the performance of its obligations hereunder by any such assignee).
The assigning Party will provide the other Party written notice of any such
assignment within ten (10) Business Days following the date of the assignment.
Subject to the foregoing, this Agreement and the rights and obligations in this
Agreement will inure to the benefit of, and be binding upon, the Parties and
each of their respective permitted successors, heirs and assigns.

 

8.5Amendment, Modification and Waiver. Any provision of this Agreement may be
amended, modified, extended or waived, but only by a written instrument signed
by Buyer and the Sellers’ Representative. The waiver by a Party of any breach of
any provision of this Agreement will not constitute or operate as a waiver of
any other breach of such provision or of any other provision hereof, nor will
any failure to enforce any provision hereof operate as a waiver of such
provision or of any other provision hereof.

 

 - 51 - 

 

 

8.6Due Diligence Review; No Additional Representations and Warranties. Buyer is
an informed and sophisticated purchaser, and, together with Buyer’s
Representatives, is experienced in the evaluation and purchase of businesses
such as the Company. Buyer acknowledges and agrees, on behalf of itself and its
Affiliates, that (a) Buyer has completed to its satisfaction its own due
diligence investigation, and based thereon, formed its own independent judgment,
with respect to the execution, delivery, and performance of this Agreement and
the Transaction Documents, (b) Buyer has been furnished with, or given full
access to, such documents and information about Sellers and the Company as Buyer
and its Representatives have deemed necessary to enable Buyer to make an
informed decision with respect to the execution, delivery, and performance of
this Agreement and the Transaction Documents, (c) in entering into this
Agreement, Buyer has relied solely upon its own investigation and analysis and
the representations and warranties by Sellers and the Company expressly set
forth in Article 2and Article 3, respectively, (d) except as expressly set forth
in Article 2 and Article 3, no representation or warranty has been or is being
made by any Person as to the accuracy or completeness of any information
provided or made available to Buyer or its Representatives and (e) none of
Sellers, the Company or any other Person will have or be subject to any
liability to Buyer or any other Person resulting from the distribution to Buyer
and its Representatives and Affiliates, or Buyer’s or any of its
Representatives’ or Affiliates’ use, of any written or oral information, and any
information, documents or material made available to Buyer and its
Representatives in any form (including any Projections (as defined below)),
other than, in each case, the Transaction Documents. Buyer acknowledges that it
and its Representatives have been provided access to the Data Room and have
reviewed the materials contained therein.

 

8.7Disclaimer Regarding Projections. In connection with Buyer’s investigation of
the Company, Buyer and its Representatives have received from Sellers (directly
or through its Representatives) certain projections, estimates and other
forecasts and certain business plan information (collectively, the
“Projections”). Buyer acknowledges that there are uncertainties inherent in
attempting to make the Projections, that it is familiar with such uncertainties,
that it is making its own evaluation of the adequacy and accuracy of all the
Projections so furnished to it and any use of, or reliance by, it on the
Projections will be at its sole risk, and without limiting any other provisions
of this Agreement, that it will have no claim against anyone with respect to the
Projections; provided, however, that the foregoing will not be interpreted to
waive any rights that Buyer has with respect to recovery for breaches of
representations and warranties made by Sellers in Article 3.

 

8.8Interpretation.

 

8.8.1Except as otherwise provided or unless the context otherwise requires,
whenever used in this Agreement, (a) any noun or pronoun will be deemed to
include the plural and the singular, (b) the use of masculine pronouns will
include the feminine and neuter, (c) the terms “include” and “including” will be
deemed to be followed by the phrase “without limitation,” (d) the word “or” will
be inclusive and not exclusive, (e) all references to Sections or Articles refer
to the Sections or Articles of this Agreement, all references to Schedules refer
to the Schedules attached to or delivered with this Agreement, as appropriate,
and all references to Exhibits refer to the Exhibits attached to this Agreement,
each of which is made a part of this Agreement for all purposes, (f) each
reference to “herein” means a reference to “in this Agreement,” (g) each
reference to “$” or “dollars” will be to United States dollars, (h) each
reference to “days” will be to calendar days, and (i) unless otherwise
specified, each reference to any Contract or Law will be to such Contract or Law
as amended, supplemented, waived (in the case of Contracts) or otherwise
modified from time to time.

 

 - 52 - 

 

 

8.8.2The provisions of this Agreement will be construed according to their fair
meaning and neither for nor against any Party irrespective of which Party caused
such provisions to be drafted. Accordingly, any rule of law or legal decision
that would require interpretation of any ambiguities in this Agreement against
the Party that drafted it is of no application and is hereby expressly waived.
Each Party acknowledges that it has been represented by an attorney in
connection with the preparation and execution of the Transaction Documents.

 

8.8.3Unless otherwise expressly provided in this Agreement, the measure of a
period of one (1) month or one (1) year for purposes of this Agreement will be
that date of the following month or year corresponding to the starting date;
provided, however, that if no corresponding date exists, the measure will be
that date of the following month or year corresponding to the next day following
the starting date. For example, one (1) month following February 18th is March
18th, and one (1) month following March 31 is May 1.

 

8.8.4The Disclosure Schedule is hereby incorporated into this Agreement to the
same extent as though fully set forth in this Agreement (provided, that in no
event will any information or disclosures therein be deemed or interpreted to
broaden or otherwise amplify the representations and warranties in this
Agreement). The Disclosure Schedule is arranged in sections corresponding to the
numbered and lettered sections and subsections contained in this Agreement, and
the disclosures in any section or subsection of the Disclosure Schedule will
qualify each other section and subsection in this Agreement to the extent it is
reasonably apparent from a reading of the text of the disclosure that such
disclosure is applicable to such other section and subsection. Information in
the Disclosure Schedule under any particular schedule or section therein will be
deemed disclosed with respect to all other schedules or sections therein and any
representations, warranties or covenants therein of the Company, Sellers or
Buyer where the applicability of such information to such other schedules or
sections or representations, warranties or covenants is readily apparent,
regardless of whether a cross-reference to the applicable section or schedule is
actually made. Any matter disclosed in any of the Disclosure Schedule will not
be deemed an admission or representation as to the materiality of the item so
disclosed, and matters disclosed in the Disclosure Schedule are not necessarily
limited to matters required by this Agreement to be disclosed in the Disclosure
Schedule. Nothing in the Disclosure Schedule constitutes an admission of any
liability or obligation of the Company, any Seller or the Buyer, as the case may
be, to any third party or will confer or give to any third party any remedy,
claim, liability, reimbursement, cause of action or other right.

 

8.9Governing Law. This Agreement is made pursuant to, and will be construed and
enforced in accordance with, the laws of the State of Delaware, irrespective of
the principal place of business, residence or domicile of the Parties, and
without giving effect to otherwise applicable principles of conflicts of Law
that would give effect to the Laws of another jurisdiction.

 

 - 53 - 

 

 

8.10Jurisdiction. Each party to this Agreement, by its execution hereof, hereby
(a) irrevocably submits, and agrees to cause each of its Affiliates to submit,
to the exclusive jurisdiction of the Court of Chancery of the State of Delaware
or, to the extent the Court of Chancery of the State of Delaware does not have
subject matter jurisdiction, any federal court within the State of Delaware for
the purpose of any action, claim, cause of action or suit (in contract, tort or
otherwise) arising out of or based upon this Agreement, any Transaction Document
(unless otherwise set forth therein) or relating to the subject matter hereof or
thereof, (b) waives, and agrees to cause each of its Affiliates to waive, to the
extent not prohibited by applicable Law, and agrees not to assert, and agrees
not to allow any of its Affiliates to assert, by way of motion, as a defense or
otherwise, in any such action, any claim that it is not subject personally to
the jurisdiction of the above-named courts, that its property is exempt or
immune from attachment or execution, that any such proceeding brought in one of
the above-named courts is improper, or that this Agreement, any Transaction
Document (unless otherwise set forth therein) or the subject matter hereof or
thereof may not be enforced in or by such court and (c) agrees not to commence
or to permit any of its Affiliates to commence any action, claim, cause of
action or suit (in contract, tort or otherwise) arising out of or based upon
this Agreement or relating to the subject matter hereof other than before one of
the above-named courts nor to make any motion or take any other action seeking
or intending to cause the transfer or removal of any such action, claim, cause
of action or suit (in contract, tort or otherwise) to any court other than one
of the above-named court whether on the grounds of inconvenient forum or
otherwise. NOTWITHSTANDING THE FOREGOING, (I) THE SEEKING OF INJUNCTIVE RELIEF
(INCLUDING, WITHOUT LIMITATION, FOR SPECIFIC PERFORMANCE) SHALL BE SUBJECT TO
THE PROVISIONS OF SECTION 8.18 HEREOF AND (II) THE EXCLUSIVE CHOICE OF FORUM SET
FORTH ABOVE SHALL NOT BE DEEMED TO PRECLUDE THE ENFORCEMENT OF ANY JUDGMENT
OBTAINED IN SUCH FORUM OR THE TAKING OF ANY ACTION UNDER THIS AGREEMENT TO
ENFORCE THE SAME IN ANY APPROPRIATE JURISDICTION.

 

8.11Waiver of Jury Trial. EACH PARTY HEREBY WAIVES AND COVENANTS THAT IT WILL
NOT ASSERT (WHETHER AS PLAINTIFF, DEFENDANT OR OTHERWISE), TO THE FULLEST EXTENT
PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN RESPECT
TO ANY PROCEEDING DIRECTLY OR INDIRECTLY ARISING OUT OF, UNDER OR IN CONNECTION
WITH THIS AGREEMENT, THE OTHER TRANSACTION DOCUMENTS OR ANY TRANSACTIONS
CONTEMPLATED HEREBY OR THEREBY WHETHER NOW EXISTING OR HEREAFTER ARISING, AND
WHETHER SOUNDING IN CONTRACT, TORT OR OTHERWISE. EACH PARTY (A) CERTIFIES THAT
NO REPRESENTATIVE OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE,
THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF ANY PROCEEDING, SEEK TO ENFORCE
THE FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HAVE
BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL
WAIVERS AND CERTIFICATIONS IN THIS SECTION 8.11. EACH OF THE PARTIES MAY FILE A
COPY OF THIS PARAGRAPH WITH ANY COURT AS WRITTEN EVIDENCE OF THE KNOWING,
VOLUNTARY AND BARGAINED-FOR AGREEMENT AMONG THE PARTIES TO IRREVOCABLY WAIVE
THEIR RESPECTIVE RIGHT TO A TRIAL BY JURY IN ANY PROCEEDING WHATSOEVER BETWEEN
THEM RELATING OT THIS AGREEMENT OR ANY OTHER TRANSACTION AGREEMENT OR ANY OF THE
TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY.

 

 - 54 - 

 

 

8.12Conflicts and Privilege. The Company, Buyer and Sellers agree that,
notwithstanding any current or prior representation of any Seller or its
Affiliates by O’Melveny & Myers LLP (“OMM”), OMM will be allowed to represent
Sellers or any of their respective Affiliates (which will no longer include the
Company after the Closing) in any matters and disputes, including in any matter
or dispute adverse to Buyer and its Affiliates (excluding, after the Closing,
the Company) that either is existing on the date hereof or that arises in the
future (provided that this waiver will not extend to any such future matter or
dispute to the extent such future matter or dispute is unrelated to this
Agreement and the Transactions), and Buyer does hereby, and agrees to cause its
Affiliates (including, after the Closing, the Company) to, (a) waive any claim
they have or may have that OMM has a conflict of interest or is otherwise
prohibited from engaging in such representation and (b) agree that, in the event
of such a matter or dispute, OMM may represent Sellers or such Affiliate in such
dispute even though the interests of Sellers or such Affiliate may be directly
adverse to Buyer or its Affiliates (including the Company) and even though OMM
may have represented the Company in a matter substantially related to such
dispute, or may be handling ongoing matters for Buyer or the Company. Buyer
further agrees, and agrees to cause its Affiliates (including, after the
Closing, the Company) to agree, that, as to all communications among OMM and
Sellers and their respective Affiliates (including, prior to the Closing, the
Company) and any files of OMM that relate in any way to the Transactions
contemplated by this Agreement, the attorney-client privilege, the expectation
of client confidence and any attorney work product belongs to, and may be
controlled by, Sellers and will not pass to or be claimed by Buyer or its
Affiliates (including, after the Closing, the Company). Accordingly, none of
Buyer or its Affiliates (including the Company) will have access to such
communications or to the files of OMM relating to the Transactions from and
after the Closing. Notwithstanding the foregoing, if a dispute arises between
Buyer or its Affiliates (including the Company) and a third party other than a
Party to this Agreement after the Closing, the Company will give prompt notice
to Sellers and OMM and assert the attorney-client privilege to prevent
disclosure of confidential communications by OMM and any files of OMM to such
third party, and in such case, Buyer and its Affiliates (including the Company)
shall have access to such communications or files, provided they arise from
OMM’s representation of the Company (and, for the avoidance of doubt, do not
exclusively arise from OMM’s representation of parties other than the Company);
provided, however, that the Company may not waive such privilege or other
protection, and Buyer and its Affiliates (including the Company) shall not have
such access, without the prior written consent of the Sellers’ Representative,
which consent shall not be unreasonably withheld, delayed or conditioned.
Sellers agree that, as to all communications between OMM and the Company prior
to the Closing that do not relate in any way to the Transactions contemplated by
this Agreement, the attorney-client privilege, the expectation of client
confidence and any attorney work product belongs to, and may be controlled by,
Buyer and passes to Buyer (including, after the Closing, the Company).
Accordingly, from and after the Closing, Buyer (and, after the Closing, the
Company) will have access to such communications and to the files of OMM
relating to OMM’s representation of the Company other than with respect to the
Transactions. Nothing herein is intended to waive OMM’s rights to protect its
own work product.

 

8.13Section Headings. The section headings of this Agreement are for reference
purposes only and will not in any way affect the meaning or interpretation of
this Agreement.

 

8.14Severability. If any provision of this Agreement (or portion thereof) or the
application of any such provision (or portion thereof) to any Person or
circumstance is determined by a court of competent jurisdiction to be invalid,
illegal or incapable of being enforced pursuant to any applicable Law or public
policy, all other provisions of this Agreement (or remaining portion of such
provision) will nevertheless remain in full force and effect. Upon such
determination by a court of competent jurisdiction that any provision (or
portion thereof) of this Agreement is invalid, illegal or incapable of being
enforced, the Parties will negotiate in good faith to modify this Agreement so
as to effect the original intent of the Parties as closely as possible in an
acceptable manner, to the end that the Transactions as originally contemplated
are fulfilled to the extent possible.

 

 - 55 - 

 

 

8.15Counterparts; Third-Party Beneficiaries. This Agreement may be executed in
one or more counterparts, including by facsimile or PDF transmission, each of
which will be deemed an original, but all of such counterparts together will be
deemed to be one and the same agreement. This Agreement will be binding upon and
inure solely to the benefit of each Party, and, except as set forth in Section
5.7 or Article 6, nothing in this Agreement, express or implied, is intended to
or will confer upon any other Person (other than OMM) any right, benefit or
remedy of any nature whatsoever under or by reason of this Agreement.

 

8.16Entire Agreement. This Agreement, together with the Disclosure Schedule and
the other Transaction Documents, constitute the entire agreement among the
Parties with respect to the Transactions and supersede all prior and
contemporaneous agreements and understandings, both written and oral, with
respect to the subject matter hereof. There are no warranties, representations,
or other agreements between the Parties hereto, or on which any of them has
relied in connection with the subject matter hereof, except as specifically set
forth in this Agreement or in the other Transaction Documents.

 

8.17Attorneys’ Fees. Subject to the limitations set forth in this Agreement, in
the event of any dispute related to or based upon this Agreement, the prevailing
Party will be entitled to recover from the other Party its reasonable attorneys’
fees and costs.

 

8.18Specific Performance. Each Party acknowledges and agrees that the other
Parties would be damaged irreparably if any of the provisions of this Agreement
were not performed in accordance with their specific terms or otherwise were
breached or violated. Accordingly, each Party agrees that, without posting bond
or other undertaking, the other Parties will be entitled to an injunction or
injunctions to prevent breaches or violations of this Agreement and to enforce
specifically this Agreement in any claim, action, cause of action or suit
(whether in Contract or tort or otherwise), litigation (whether at law or in
equity, whether civil or criminal), controversy, assessment, arbitration,
investigation, hearing, charge, complaint, demand, notice or proceeding to,
from, by or before any Governmental Authority having jurisdiction over the
Parties and the matter in addition to any other remedy to which it may be
entitled, at law or in equity, and that Party agrees to cooperate fully in any
attempt by the other Parties in obtaining any such equitable remedy. Each Party
further agrees that, in the event of any action for specific performance in
respect of such breach or violation, it will not assert the defense that a
remedy at law would be adequate or that the consideration reflected in this
Agreement was inadequate or that the terms of this Agreement were not just and
reasonable.

 

8.19Incorporation of Schedules and Exhibits. The Schedules and Exhibits
identified in this Agreement are incorporated herein by reference and made a
part of this Agreement.

 

8.20Termination of Operating Agreement. Each Seller agrees that the Limited
Liability Company Agreement of the Company dated as of December 15, 1995 (the
“Operating Agreement”), will be of no further force and effect from and after
the Closing, and hereby waives any and all (a) notice requirements and (b)
rights or restrictions with respect to the transfer of the capital stock,
membership interests or other Equity Interests of the Company set forth in the
Operating Agreement. Effective upon such termination of the Operating Agreement,
each of the Sellers hereby waives any and all rights under the Operating
Agreement and, except for the continuing obligations provided for in this
Agreement or the other Transaction Documents, releases all other parties to the
Operating Agreement from all obligations, commitments, liabilities or claims
arising thereunder.

 

[Remainder of Page Intentionally Left Blank]

 

 - 56 - 

 

 

IN WITNESS WHEREOF, each Party has duly executed this Agreement, or has caused
this Agreement to be duly executed on its behalf by a duly authorized
Representative, all as of the date first set forth above.

 

  “COMPANY”      

Sierra Bullets, L.L.C.,

a Delaware limited liability company

      By: BHH Management, Inc., its Managing Member       By: /s/ Stephen F.
Hinchliffe, Jr.   Name: Stephen F. Hinchliffe, Jr.   Title: President and
Secretary

 

[Signatures Continue on Next Page]

 

Signature Page to Purchase and Sale Agreement

 

 

 

 

  “BHH”      

BHH Management, Inc.,

a California corporation

      By: /s/ Stephen F. Hinchliffe, Jr.   Name: Stephen F. Hinchliffe, Jr.  
Title: President and Secretary

 

[Signatures Continue on Next Page]

 

Signature Page to Purchase and Sale Agreement

 

 

 

 

  “LMI”      

Lumber Management, Inc.,

a Delaware Corporation

      By: /s/ George D. Herrmann, Jr.   Name: George D. Herrmann, Jr.   Title:
Chairman and Chief Executive Officer

 

[Signatures Continue on Next Page]

 

Signature Page to Purchase and Sale Agreement

 

 

 

 

  “SELLERS’ REPRESENTATIVE”      

BHH Management, Inc.,

a California corporation

      By: /s/ Stephen F. Hinchliffe, Jr.   Name: Stephen F. Hinchliffe, Jr.  
Title: President and Secretary

 

[Signatures Continue on Next Page]

 

Signature Page to Purchase and Sale Agreement

 

 

 

 

  “BUYER”      

Everest/Sapphire Acquisition, LLC

a Delaware limited liability company

          By: /s/ Aaron J. Kuehne   Name: Aaron J. Kuehne   Title: Secretary and
Treasurer

 

Signature Page to Purchase and Sale Agreement

 

 

 

 

EXHIBIT A

 

DEFINITIONS

 

“Accounting Principles” means GAAP, as applied using the same accounting
methods, policies, principles, practices and procedures (including
classifications, judgments and estimation methodologies) as were used in the
preparation of the Financial Statements, in each case subject to the specific
methods, policies, principles, practices and procedures used in the preparation
of the Estimated Closing Statement pursuant to Section 1.4.1 and Exhibit C.

 

“Affiliate” means, with respect to any Person, any other Person controlling,
controlled by, or under common control with such other Person. For purposes of
this definition, “control,” when used with respect to any Person, means the
power to direct the management and policies of such Person, directly or
indirectly, whether through the ownership of voting securities, by Contract or
otherwise, and the terms “controlling” and “controlled” have correlative
meanings. Notwithstanding the foregoing, for purposes of this Agreement, the
Company will not be considered an Affiliate of any Seller.

 

“Base Purchase Price” means an amount in cash equal to seventy-nine million
dollars ($79,000,000).

 

“Bonus Payments” means, collectively (i) a payment to Patrick Daly in the amount
of one million eight hundred ninety-two thousand eight hundred ninety-five
dollars ($1,892,895) in accordance with that certain Bonus Agreement dated as of
July 1, 2014, between Patrick Daly and the Company, and (ii) a payment to Roy
Douglas Wickham in the amount of one million eight hundred ninety-two thousand
eight hundred ninety-five dollars ($1,892,895) in accordance with that certain
Bonus Agreement dated as of July 1, 2014, between Roy Douglas Wickham and the
Company.

 

“Business” means the business and operations of the Company, as conducted as of
the Closing Date.

 

“Business Day” means a day, other than Saturday, Sunday or other day on which
commercial banks in the State of Delaware are authorized or required by law to
close.

 

“Buyer Transaction Documents” means those Transaction Documents to which Buyer
is or, as of the Closing, will be, a party.

 

“Cash” means the aggregate cash and cash equivalents (including bank account
balances and deposits in transit or not yet recorded), including any evidences
of short-term, highly liquid investments with original maturities of ninety (90)
days or less, calculated in accordance GAAP.

 

“Closing Date Purchase Price” means an amount equal to

 

(i)the sum of the following amounts, without duplication:

 

(A)the Base Purchase Price;

 

(B)the Closing Cash;

 

(C)an amount equal to the absolute value of the Closing Working Capital less the
Target Working Capital, if a positive number; and

 

Exhibit A-1 

 

 

(ii)less the sum of the following amounts, without duplication:

 

(A)the Closing Indebtedness;

 

(B)the Closing Transaction Expenses;

 

(C)the Sellers’ Representative Amount; and

 

(D)an amount equal to the absolute value of the Closing Working Capital less the
Target Working Capital, if a negative number.

 

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

 

“Company’s Knowledge” with respect to the Company means the actual knowledge,
after due inquiry, of each of the Key Employees and the Sellers.

 

“Confidentiality Agreement” means that certain Confidentiality Agreement, dated
March 23, 2017, between the Company and Clarus Corporation (formerly known as
Black Diamond, Inc.).

 

“Consent” means any consent, approval, authorization, notice, waiver, filing or
notification required to be obtained by any Seller or the Company from, filed by
any Seller or the Company with, or delivered by any Seller or the Company to,
any Person in connection with the consummation of the Transactions.

 

“Contract” means any legally binding contract, lease or other property
agreement, license, indenture, note, bond, agreement, undertaking, arrangement,
indemnity, lease, permit, concession, franchise, commitment, purchase order,
mortgage, partnership or joint venture agreement, instrument or other legally
binding agreement whether in writing or not.

 

“Copyrights” means all copyrightable works of authorship (whether published or
unpublished), all registered or unregistered copyrights, all copyright
registrations, applications for registration and renewals, extensions, and all
rights corresponding to the foregoing throughout the world, including rights to
prepare, reproduce, perform, display, and distribute copyrighted works and
copies, unregistered copyrightable works and works of authorship, compilations
and derivative works thereof.

 

“Data Room” means the electronic data room as of the Closing Date with
Intralinks entitled “Project Emerald”.

 

“Defect” means a defect or impurity, whether in design, manufacture, processing,
or otherwise, including any dangerous propensity associated with any reasonably
foreseeable use of a Product, or the failure to warn of the existence of any
defect, impurity, or dangerous propensity.

 

“Disclosure Schedule” means the schedules attached hereto as Exhibit B.

 

“Environmental Claim” means any and all administrative, regulatory or judicial
orders, suits, demands, demand letters, directives, claims, liens,
administrative proceedings, or written notices of noncompliance or violation, by
any Person (including, without limitation, any Governmental Authority) alleging
liability or potential liability (including, without limitation, potential
responsibility for or liability for enforcement, investigatory costs, cleanup
costs, governmental response costs, removal costs, remedial costs, natural
resources damages, closure costs, supplemental environmental projects, property
damages, personal injuries, penalties, and leaking underground storage tanks)
arising out of, based on or resulting from (a) the presence, or Release or
threatened Release, of any Hazardous Materials at the Real Property, or (b)
circumstances forming the basis of any violation or alleged violation of any
Environmental Law, or (c) any and all claims by any third party seeking damages,
contribution, indemnification, cost recovery, compensation or injunctive relief
resulting from the presence or Release of any Hazardous Materials.

 

Exhibit A-2 

 

 

“Environmental Law” means any applicable Law relating to the pollution or the
protection of the environment or natural resources, including the Comprehensive
Environmental Response, Compensation and Liability Act (42 U.S.C. §§ 9601 et
seq.) (“CERCLA”), the Hazardous Materials Transportation Act (49 U.S.C. §§ 5101
et seq.), the Resource Conservation and Recovery Act (42 U.S.C. §§ 6901 et
seq.), the Clean Water Act (33 U.S.C. §§ 1251 et seq.), the Clean Air Act (42
U.S.C. §§ 7401 et seq.), the Toxic Substances Control Act (15 U.S.C. §§ 2601 et
seq.), and the Federal Insecticide, Fungicide, and Rodenticide Act (7 U.S.C. §§
136 et seq.) and the regulations promulgated pursuant thereto.

 

“Environmental Permits” means the Governmental Authorizations required under
applicable Environmental Laws reasonably necessary to operate the Business.

 

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

 

“ERISA Affiliate” means any Person that, together with the Company, would be
deemed a “single employer” within the meaning of Sections 414(b), (c), (m) or
(o) of the Code.

 

“Estimated Closing Date Purchase Price” means an amount equal to

 

(i)the sum of the following amounts, without duplication:

 

(A)the Base Purchase Price;

 

(B)the Estimated Closing Cash;

 

(C)an amount equal to the absolute value of the Estimated Closing Working
Capital less the Target Working Capital, if a positive number; and

 

(ii)less the sum of the following amounts, without duplication:

 

(A)the Estimated Closing Indebtedness;

 

(B)the Estimated Closing Transaction Expenses;

 

(C)the Sellers’ Representative Amount; and

 

(D)an amount equal to the absolute value of the Estimated Closing Working
Capital less the Target Working Capital, if a negative number.

 

“Equity Interests” means, with respect to any Person, (a) the capital stock,
partnership interests, membership interests, beneficial interests or any other
equity or ownership interests in such Person or (b) any instruments convertible
into or exchangeable for, or whose value is determined by reference to, any such
interests.

 

“Fundamental Representations” means (i) with respect to each Seller, the
representations of such Seller set forth in Sections 2.1 (Organization and Good
Standing), 2.2 (Power and Authorization; Enforceability), 2.4 (Ownership), as
applicable, Sections 3.1 (Organization and Good Standing), 3.2 (Power and
Authorization; Enforceability), 3.4 (Capitalization), 3.17 (Environmental
Matters), 3.18 (Tax Matters) and 3.22 (Brokers) and (ii) with respect to Buyer,
the representations and warranties of Buyer set forth in Sections 4.1
(Organization and Good Standing), 4.2 (Power and Authorization; Enforceability)
and 4.6 (Brokers).

 

Exhibit A-3 

 

 

“GAAP” means United States generally accepted accounting principles as in effect
on the Closing Date.

 

“Governing Documents” means, with respect to any Person, (a) the articles of
incorporation, certificate of incorporation, certificate of formation or
memorandum or articles of association (or the equivalent organizational
documents) of such Person, (b) the bylaws or operating agreement (or the
equivalent governing documents) of such Person and (c) any document setting
forth the designation, amount or relative rights, limitations and preferences of
any class or series of such Person’s authorized stock or other Equity Interests.

 

“Governmental Authority” means (i) the United States federal government or the
government of any other country, (ii) the government of any state, commonwealth,
province, county, city, territory, or possession or (iii) any quasi-government,
municipality, political subdivision, courts, departments, commissions, boards,
bureaus, tribunals, agencies, arbitrator, mediator or other instrumentalities of
any of the foregoing in subparts (i) and (ii).

 

“Governmental Authorization” means any approval, consent, license, permit or
other authorization issued, granted, given or otherwise made available by or
under the authority of any Governmental Authority or pursuant to any Laws.

 

“Hazardous Material” means petroleum, petroleum by-products, polychlorinated
biphenyls, friable asbestos, radon, radioactive materials or wastes, lead or
lead-containing materials, urea formaldehyde foam insulation, and any other
chemicals, materials, substances or wastes which are, as of the date of this
Agreement or the Closing Date, defined or regulated as “hazardous substances,”
“hazardous materials,” “hazardous wastes,” “extremely hazardous wastes,”
“restricted hazardous wastes,” “toxic substances,” “toxic pollutants,” “toxic
air pollutants,” “hazardous air pollutants,” “pollutants,” or “contaminants”
under any Environmental Law or that is hazardous, acutely hazardous, toxic, or
words of similar import or regulatory effect under Environmental Laws.

 

“Indebtedness” means, with respect to any Person, at a particular time, the sum
of all of the following without duplication, whether or not included as
indebtedness in accordance with the Accounting Principles: (a) all obligations
of such Person for borrowed money, whether secured or unsecured, and all
obligations of such Person evidenced by bonds, debentures, notes, loan
agreements or similar debt instruments; (b) all obligations (contingent or
otherwise) of such Person to pay the deferred purchase price of any property or
services (including the maximum potential amount payable with respect to
earn-outs, purchase price adjustments or other payments related to acquisitions)
(other than accrued expenses and accounts payable in the Ordinary Course and
reflected as a current liability in the calculation of Closing Working Capital);
(c) all obligations of such Person in respect of any lease of (or other
arrangements conveying the right to use) real or personal property, or a
combination thereof, which obligations are required to be classified and
accounted for under the Accounting Principles as a capital lease; (d) all
liabilities under any swap, future or option agreement or other similar
Contracts, instruments or derivatives designed to protect the Company against
fluctuations in interest rates, foreign exchange or other capital market risks;
and (e) all indebtedness referred to in the foregoing clauses (a) through (d)
which is directly or indirectly guaranteed by such Person.

 

“Indemnification Cap” means an amount equal to ten percent (10%) of the Base
Purchase Price.

 

Exhibit A-4 

 

 

“Independent Accounting Firm” means Ernst & Young or, if Ernst & Young is
unavailable or unwilling to serve, a mutually acceptable nationally recognized
firm of independent certified public accountants that has not provided services
to either Sellers or Buyer and its Subsidiaries in the preceding two (2) years;
provided, that if Buyer and the Sellers’ Representative are unable to select
such firm or expert within sixty (60) days after delivery of written notice of a
disagreement, either Buyer or the Sellers’ Representative may request the
American Arbitration Association to appoint, within twenty (20) Business Days
from the date of such request, an independent accounting firm meeting the
requirements set forth above or a neutral and impartial certified public
accountant with significant arbitration experience related to purchase price
adjustment disputes relating to transactions of a similar nature.

 

“Intellectual Property” means all United States, foreign, international and
state: (i) Patents, (ii) Trademarks, (iii) Internet domain names, (iv)
Copyrights, including in computer software and databases, (v) registrations and
applications for any of the foregoing (i) through (iv), (vi) Trade Secrets;
(vii) uniform resource locators and Internet domain names and related
registrations and applications and any and all renewals or extensions; (viii)
moral rights associated with any of the foregoing; (ix) rights of privacy and
publicity, including the names, likenesses, voices and biographical information
of real persons; (x) other intellectual property rights, in each case whether
registered or unregistered and including any and all applications (or rights to
apply) for, and renewals or extensions of, such rights and all similar or
equivalent rights or forms of protection which subsist or will subsist now or in
the future or in any part of the world; and (xi) all other intellectual property
and proprietary rights.

 

“Judgment” means any judgment, decision, order, decree, writ, injunction or
ruling entered or issued by any Governmental Authority.

 

“Key Employees” means Patrick Daly and Roy Douglas Wickham.

 

“Laws” means any federal, national, provincial, state, local, United States,
foreign or other law (both common and statutory law and civil and criminal law),
statute, rule, regulation, treaty, ordinance, convention, rule, code, decree,
Judgment, writ, regulatory code (including statutory instruments, guidance
notes, circulars, directives, decisions, rules, regulations or restrictions) or
other order, or other requirement or rule of law of any Governmental Authority.

 

“Lien” means any mortgage, deed of trust, hypothecation, pledge, lien (statutory
or otherwise), security interest, charge or encumbrance of any kind, whether
voluntary or involuntary (including any conditional sale or other title
retention agreement, any lease in the nature thereof and any agreement to give
any security interest) and, with respect to capital stock, any option or other
right to purchase or any restriction on voting or other rights.

 

“Losses” means any and all direct and actual losses, damages, penalties, fines,
amounts paid in settlement, costs and expenses (including settlement and court
costs and reasonable attorneys’ fees and expenses) net of any corresponding
insurance proceeds of any of the foregoing, but excluding any punitive damages.
For the avoidance of doubt, Losses shall include the reasonable fees and
disbursements of one firm of counsel to an Indemnified Party incurred in
connection with a claim brought against an Indemnifying Party pursuant to
Article 6 whether or not such claim is a Third Party Claim.

 

“Material Adverse Effect” means a material adverse effect on (i) the Company or
the assets, results of operations or financial condition thereof, taken as a
whole, or (ii) the ability of Sellers to consummate the Transactions; provided,
that any such change or effect resulting from any of the following, individually
or in the aggregate, will not be considered when determining whether a Material
Adverse Effect has occurred for purposes of clause (i) above: (A) any change in
economic conditions generally or capital and financial markets generally,
including changes in interest or exchange rates, (B) any change in the industry
in which the Company operates, (C) any change in Laws or accounting standards,
or the enforcement or interpretation thereof, applicable to the Company, (D)
conditions caused by acts of war, sabotage, terrorism or military actions, or
any escalation or worsening of any of the foregoing, (E) any hurricane, flood,
tornado, earthquake or other natural disaster or (F) the failure in and of
itself of the Company to achieve any financial projections or forecasts (but not
the underlying cause of such failure); provided, that any adverse effects
resulting from matters described in any of the foregoing clauses (A), (B), (C),
(D) or (E) may be taken into account in determining whether there is or has been
a Material Adverse Effect to the extent, and only to the extent, that they have
a disproportionate effect on the Company relative to other participants in the
industries in which the Company operates.

 

Exhibit A-5 

 

 

“Net Working Capital” means (without duplication), with respect to the Company
at any given time, the current assets of the Company less the current
liabilities of the Company, in each case, as calculated in accordance with the
Accounting Principles.

 

“Ordinary Course” means in the ordinary course of the Business, consistent with
past practices.

 

“Patents” means all patents and patent applications, patentable inventions and
improvements, and provisionals, non-provisionals, continuations, continuations
in part, reissues, reexaminations, divisions, renewals, extensions, or
disclosures relating to any of the foregoing, industrial designs, industrial
design registrations and applications for industrial design registrations,
certificates of invention, utility models and any and all other rights to
inventions.

 

“Permitted Liens” means (i) Liens for Taxes and other governmental charges and
assessments that are not yet due and payable, and Liens for current Taxes and
other charges and assessments of any Governmental Authority that may thereafter
be paid without penalty or that are being contested in good faith by appropriate
proceedings, in each case for which adequate reserves are being maintained in
accordance with the Accounting Principles, (ii) Liens of landlords, lessors,
carriers, warehousemen, employees, mechanics and materialmen and other like
Liens arising in the Ordinary Course, (iii) all restrictions of record
identified in any title reports obtained by or made available to Buyer; provided
same do not prohibit the use of any Real Property as it is currently being used
by the Company, (iv) all non-exclusive licenses to Intellectual Property, (v)
all local and other Laws, including building and zoning Laws, now or hereafter
in effect relating to or affecting any real property, provided same do not
impair the use and operation of such real property for the Business conducted
thereon (vi) Liens of lenders incurred in deposits made in the Ordinary Course
in connection with maintaining bank accounts, and (vii) deposits or pledges to
secure the payment of workers’ compensation, unemployment insurance, social
security benefits or obligations arising under similar Laws, or to secure the
performance of public or statutory obligations, surety or appeal bonds, and
other obligations of a like nature.

 

“Person” means an individual, corporation (including any non-profit
corporation), general or limited partnership, limited liability company, joint
venture, estate, trust, unincorporated organization, association, organization
or other entity or form of business enterprise or Governmental Authority.

 

“Personal Information” means any information that alone or in combination with
other information held by the Company can be used, directly or indirectly, to
specifically identify an individual, other than their business contact
information when used or disclosed for the purpose of contacting such individual
in that individual’s capacity as an employee or an official of an organization
and for no other purpose.

 

“Post-Closing Tax Period” means any period (or portion thereof) beginning after
the Closing Date.

 

“Pre-Closing Tax Period” means any period (or portion thereof) ending on or
prior to the Closing Date.

 

Exhibit A-6 

 

 

“Pro Rata Portion” means with respect to each Seller, the percentage of the
Estimated Closing Date Purchase Price of such Seller set forth opposite such
Seller’s name on Exhibit D attached hereto under the heading “Pro Rata Portion”
(which percentages will be provided by the Company (with a copy to the Sellers’
Representative) on behalf of Sellers pursuant to Section 1.3).

 

“Proceeding” means any action, arbitration, audit, hearing, investigation,
litigation or suit (whether civil, criminal, administrative, investigative or
informal) commenced, brought, conducted or heard by or before, or otherwise
involving, any Governmental Authority or arbitrator.

 

“Product” means any product designed, manufactured, sold, distributed and/or
otherwise introduced into the stream of commerce, by or on behalf of the
Company, including any product sold by the Company as the distributor, agent, or
pursuant to any other contractual relationship with a manufacturer.

 

“Release” has the meaning set forth in CERCLA.

 

“Remedies Exception” means applicable bankruptcy, insolvency, reorganization,
moratorium and other similar existing or future Laws relating to or limiting
creditors’ rights generally, and general principles of equity relating to the
availability of specific performance and injunctive and other forms of equitable
relief.

 

“Representative” or “Representatives” means, with respect to a particular
Person, any director, manager, member, limited or general partner, officer,
employee, agent, consultant, advisor or other representative of such Person,
including outside legal counsel, accountants and financial advisors.

 

“Restriction Period” means the period beginning on the Closing Date and ending
upon the fifth (5th) anniversary of the Closing Date.

 

“Rights” means any subscriptions, options, warrants, rights (including phantom
equity or equity appreciation rights), preemptive rights, voting, approval or
proxy rights, or right of registration, conversion or exchange with respect to
any of the Equity Interests of the Company, or any Contract obligating the
Company, or any Affiliate of the Company, to issue, sell, purchase or register
any Equity Interests of the Company or to grant, extend or enter into any
Contract with respect to the Equity Interests of the Company.

 

“Sellers’ Representative Amount” means an amount in cash equal to five hundred
thousand dollars ($500,000).

 

“Step-down Date” means the date which is the twelve (12) month anniversary of
Closing.

 

“Subsidiary” means, with respect to any specified Person, any corporation,
partnership, limited liability company, or other entity of which more than fifty
percent (50%) of the outstanding capital stock or other ownership interests
having ordinary voting power to elect a majority of the board of directors or
other managers of such corporation, partnership, limited liability company, or
other entity is at the time directly or indirectly owned by, or the management
is otherwise controlled by, such Person (irrespective of whether, at the time,
capital stock or other ownership interests of any other class or classes of such
corporation, partnership, limited liability company, or other entity have or
might have voting power by reason of the happening of any contingency).

 

Exhibit A-7 

 

 

“Target Working Capital” means ten million four hundred thousand dollars
($10,400,000).

 

“Tax” or “Taxes” means all federal, state, local or foreign income taxes
(including any tax on or based upon net income, gross income, or income as
specially defined, or earnings, profits, or selected items of income, earnings
or profits) and all gross receipts, sales, use, ad valorem, transfer, franchise,
license, capital stock, withholding, social security, unemployment, disability,
or windfall profit taxes, alternative or add-in minimum taxes, together with any
interest and any penalties and additions to tax.

 

“Tax Agreement” means an agreement the principal purpose of which is the sharing
or allocation of, or indemnification for, Taxes.

 

“Tax Return” means all federal, state, local, provincial and foreign return,
declaration, report, or information return or statement relating to Taxes,
including any schedules and amendments thereto.

 

“Taxing Authority” means any Governmental Authority responsible for the
assessment, imposition or collection of any Tax.

 

“Threshold” means $800,000 in the aggregate until the Step-down Date. After the
Step-down Date the Threshold shall be reduced to the lesser of (i) $400,000 in
the aggregate and (ii) the difference of (x) $800,000, minus (y) the total
amount of Losses then incurred or reasonably expected to be incurred by the
Buyer Indemnified Parties that are not excluded under the Representation and
Warranty Insurance Policy, resulting from claims noticed to the insurer under
the Representation and Warranty Insurance Policy on or prior to the Step-down
Date.

 

“Trademarks” means all trademarks, service marks, certification marks, corporate
names, trade names, trade dress, fictitious names, assumed names, logos,
slogans, other indicia of commercial source or origin, general intangibles of
like nature, and any and all registrations and applications for any of the
foregoing, together with all goodwill related to the foregoing.

 

“Trade Secrets” means all non-public technology, inventions, invention
disclosures, trade secrets and know-how and other proprietary information,
including proprietary processes, formulae, algorithms, models and methodologies;

 

“Transaction Documents” means this Agreement, the Disclosure Schedule and the
other agreements, certificates, schedules and other documents contemplated by or
delivered or executed by the Parties in connection with this Agreement,
including, but not limited to, the Buyer Transaction Documents, the Company
Transaction Documents and the Seller Transaction Documents.

 

“Transaction Expenses” means, without duplication, the sum of any fees, costs
and expenses incurred or payable by the Company or Sellers in connection with
the drafting, negotiation, execution and delivery of this Agreement and the
other Transaction Documents and the consummation of the Transactions, including,
without limitation, all Bonus Payments and any sale bonus, success, retention,
change of control or similar payment, severance or other payment incurred or
payable by the Company as a result of the consummation of the Transactions
(including any such payments under any Benefit Plan), together with all payroll,
employment or similar Taxes imposed with respect to any such payment, but
excluding the Sellers’ Representative Amount.

 

“Voting Debt” means Indebtedness having general voting rights and debt
convertible into securities having such rights.

 

“WARN Act” means the Worker Adjustment and Retraining Notification Act of 1988.

 

Exhibit A-8 

 

 

Other capitalized terms defined elsewhere in the Agreement and not defined in
this Exhibit A will have the meanings assigned to such terms in this Agreement
in the sections referenced below.

  

Term Section Agreement Introduction Allocation Schedule Section 5.5.8 BHH
Introduction BHH Interest Background Paragraph A Buyer Introduction Buyer
Indemnified Parties Section 6.1 Buyer Indemnified Party Section 6.1 Buyer
Released Parties Section 8.3.2 Buyer Releasing Parties Section 8.3.3 Buyer
Releasing Party Section 8.3.3 Closing Section 1.1 Closing Cash Section 1.4.2
Closing Date Introduction Closing Indebtedness Section 1.4.2 Closing Statement
Section 1.4.2 Closing Transaction Expenses Section 1.4.2 Company Introduction
Company Insurance Policy Section 3.11 Company IP Agreements Section 3.14.3
Company Licensed Intellectual Property Section 3.14.3 Company Owned Intellectual
Property Section 3.14.2 Company Returns Section 3.18.1 Company Transaction
Documents Section 3.2.1 Continuing Employees Section 5.6.1 Controlling Party
Section 6.3.2(b) Covered Person Section 5.7.1 Customer Contract Forms Section
3.10.6 Determination Date Section 1.4.5 Disputed Items Section 1.4.3 Employee
Benefit Plans Section 3.16.1 Employees Section 3.15.2 ERISA Section 3.16.1
Estimated Closing Cash Section 1.4.1 Estimated Closing Indebtedness Section
1.4.1 Estimated Closing Statement Section 1.4.1 Estimated Closing Transaction
Expenses Section 1.4.1 Estimated Closing Working Capital Section 1.4.1 Financial
Statements Section 3.7.1 General Indemnification Period Section 6.4
Indemnification Tax Benefit Section 6.6.4 Indemnified Party Section 6.3.1
Indemnifying Party Section 6.3.1 Insurance Organizations Section 3.9.5
Inter-Party Claim Section 6.3.1 Latest Balance Sheet Section 3.7.1

 

Exhibit A-9 

 

 

Latest Balance Sheet Date Section 3.7.1 Leased Real Property Section 3.9.2
Liabilities Section 3.7.2 Liable Party Section 6.10 LMI Introduction LMI
Interest Background Paragraph A Material Contracts Section 3.10.1 Members
Section 5.7.1 Most Recent Fiscal Year End Section 3.7.1 OECD Convention Section
3.25 OMM Section 8.12 Operating Agreement Section 8.20 Owned Real Property
Section 3.9.1 Non-Controlling Party Section 6.3.2(b) Parties Introduction Party
Introduction Payoff Amounts Section 1.3.1(c) Payoff Letters Section 1.3.1(c)
Post-Closing Straddle Period Section 5.5.5 Pre-Closing Straddle Period Section
5.5.5 Pre-Closing Tax Refund Section 5.5.3 Present Fair Salable Value Section
4.9 Prohibited Activities Section 5.4.1 Projections Section 8.7 Real Property
Section 3.9.2 Real Property Leases Section 3.9.2 Real Property Permits Section
3.9.5 Receivables Section 3.20.2 Registered Owned Intellectual Property Section
3.14.1 Released Parties Section 8.3.3 Releasing Parties Section 8.3.3
Representation and Warranty Insurance Policy Section 1.3.2(c) Resolution Period
Section 1.4.4 Seller Indemnified Parties Section 6.2 Seller Indemnified Party
Section 6.2 Seller Released Parties Section 8.3.3 Seller Releasing Parties
Section 8.3.2 Seller Releasing Party Section 8.3.2 Seller Transaction Documents
Section 2.2.1 Sellers Introduction Sellers’ Representative Introduction Solvency
Section 4.9 Solvent Section 4.9 Straddle Period Section 5.5.5 Third Party Claim
Section 6.3.2 Threshold Section 6.5.2 Top Customers Section 3.19.1 Top Suppliers
Section 3.19.2 Transactions Background Paragraph B Transfer Taxes Section 5.5.6
Transferred Interests Background Paragraph A

 

Exhibit A-10 

 

 

Unaudited Financial Statements Section 3.7.1 Unresolved Items Section 1.4.5 Work
Interference Section 3.15.1

 

Exhibit A-11