EXHIBIT 10.11

STOCK PURCHASE AGREEMENT

by and between

The Stockholders and Optionholders of

Spring BioScience Corporation, as Sellers

and

Ventana Medical Systems, Inc., as Purchaser

Dated September 4, 2007

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TABLE OF CONTENTS

 

             Page

ARTICLE I          DEFINITIONS; PURCHASE AND SALE OF SHARES

   1   SECTION 1.01   Definitions    1   SECTION 1.02   Sale of Shares    7  
SECTION 1.03   Purchase Price    7   SECTION 1.04   Payment of the Purchase
Price    7   SECTION 1.05   Escrow    8   SECTION 1.06   Delivery of the Shares
   8   SECTION 1.07   Closing    8   SECTION 1.08   Purchase Price Adjustments
   8   SECTION 1.09   Exercise of Options    9   SECTION 1.10   Further
Assurances    10

ARTICLE II         REPRESENTATIONS AND WARRANTIES OF FOUNDING SELLERS

   10   SECTION 2.01   Authority Relative to Agreement    10   SECTION 2.02  
Capital Stock; Title    10   SECTION 2.03   Execution and Performance of
Agreement; Validity and Binding Nature    11   SECTION 2.04   Non-Contravention
   11   SECTION 2.05   Organization, Standing and Qualification    11   SECTION
2.06   Articles of Incorporation and By-Laws; No Subsidiaries    11   SECTION
2.07   Financial Statements    12   SECTION 2.08   Corporation Intellectual
Property    13   SECTION 2.09   Employee Plans    14   SECTION 2.10   Real
Property    16   SECTION 2.11   Personal Property and Sufficiency of Assets   
16   SECTION 2.12   Taxes    17   SECTION 2.13   Litigation    22   SECTION 2.14
  Contracts and Commitments    22   SECTION 2.15   Employees; Labor Relations   
23   SECTION 2.16   Insurance    24   SECTION 2.17   Conduct of Business and
Absence of Changes    24   SECTION 2.18   Officers and Directors    25   SECTION
2.19   Third Party Consents    25

 

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TABLE OF CONTENTS

(continued)

 

             Page   SECTION 2.20   Loans to or from Directors, Officers,
Shareholders or Employees    25   SECTION 2.21   Compliance with Laws    25  
SECTION 2.22   Regulatory Compliance    25   SECTION 2.23   Licenses    26  
SECTION 2.24   Customers    26   SECTION 2.25   Suppliers    26   SECTION 2.26  
Books and Records; Disclosure Controls    26   SECTION 2.27   Environmental   
27   SECTION 2.28   No Broker    28   SECTION 2.29   Disclosure    28   SECTION
2.30   Bankruptcy    29

ARTICLE III       REPRESENTATIONS AND WARRANTIES OF PURCHASER

   29   SECTION 3.01   Authority Relative to Agreement    29   SECTION 3.02  
Execution and Performance of Agreement; Validity and Binding Nature    29  
SECTION 3.03   Non-Contravention    29   SECTION 3.04   Organization, Standing
and Qualification    29   SECTION 3.05   Financial Condition    30   SECTION
3.06   Bankruptcy    30   SECTION 3.07   Litigation    30   SECTION 3.08   No
Broker    30   SECTION 3.09   Investment Experience; Due Diligence    30

ARTICLE IV       COVENANTS

   30   SECTION 4.01   Conduct of the Corporation’s Business    30   SECTION
4.02   Access to Information    31   SECTION 4.03   Consents    32   SECTION
4.04   Notification of Certain Matters    32   SECTION 4.05   Corporation
Employees    32   SECTION 4.06   Noncompetition/Nonsolicitation Obligations   
32   SECTION 4.07   Indemnification    33   SECTION 4.08   Defense of Claims   
35   SECTION 4.09   Distributions from the Escrow Fund    36

 

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TABLE OF CONTENTS

(continued)

 

             Page   SECTION 4.10   Limits on Indemnification    36  
SECTION 4.11   Use of Intellectual Property    36   SECTION 4.12   Schedules   
36   SECTION 4.13   Exclusivity    37   SECTION 4.14   Leases    37  
SECTION 4.15   Seller’s Post Closing Release    37   SECTION 4.16   Tax Receipts
   38   SECTION 4.17   Confidentiality    38

ARTICLE V         TAX MATTERS

   38   SECTION 5.01   Indemnification and Allocation of Liabilities    38  
SECTION 5.02   §338(h)(10) Election    41   SECTION 5.03   Timing and Treatment
of Payments    42   SECTION 5.04   Survival    43

ARTICLE VI       CONDITIONS TO CLOSING

   44   SECTION 6.01   Conditions to Each Party’s Obligation to Close    44  
SECTION 6.02   Conditions to the Obligation of Sellers    44   SECTION 6.03  
Conditions to the Obligation of Purchaser    45

ARTICLE VII     TERMINATION AND ABANDONMENT

   46   SECTION 7.01   Termination and Abandonment    46   SECTION 7.02   Effect
of Termination    46

ARTICLE VIII    MISCELLANEOUS

   46   SECTION 8.01   Seller Representatives    46   SECTION 8.02   Expenses   
48   SECTION 8.03   Press Releases and Public Announcements    48   SECTION 8.04
  Amendments    48   SECTION 8.05   Section Headings and Captions    48  
SECTION 8.06   Execution in Counterparts    48   SECTION 8.07   Notices    48  
SECTION 8.08   Waivers    49   SECTION 8.09   Entire Agreement    49  
SECTION 8.10   Applicable Law    50   SECTION 8.11   Binding Effect, Benefits   
50

 

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TABLE OF CONTENTS

(continued)

 

             Page   SECTION 8.12   Assignability    50

 

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TABLE OF CONTENTS

INDEX TO SCHEDULES

 

Schedules

 

Description

Schedule A   Seller Stockholders 1.01   Founding Shareholders 1.02   Number of
Shares 1.04   Sellers’ Accounts 1.05   Milestone Payments 1.08   Purchase Price
Adjustment 2.02   Sellers; Share Ownership 2.03   Execution and Performance of
Agreement; Validity and Binding Nature 2.04   Non-Contravention 2.05   States
and Jurisdictions of Qualification 2.07(b)   Liabilities 2.07(c)   Receivables
2.07(d)   Inventories 2.08(a)   Corporation Intellectual Property 2.08(c)  
Licensed Intellectual Property 208(d)   Rights to Corporation Intellectual
Property 208(e)   Employee and Consultant Confidentiality and Non-Compete
Agreement 2.09(a)   Employment Compensation Plans 2.09(d)   Acceleration of
Options 2.10(a)   Real Property Leases 2.10(b)   Exceptions to Leases 2.12(b)  
Tax Audits 2.13   Litigation 2.14   Contracts 2.15(b)   List of Employees and
Independent Contractors 2.15(c)   List of Employee and Independent Contractor
Agreements 2.16   Insurance 2.17   Conduct of Business 2.18   Officers and
Directors 2.19   Third Party Consents (Seller and the Corporation) 2.23  
Licenses 2.24   Customers 2.25   Suppliers 5.02(c)   Purchase Price Allocation
8.01   Seller Representatives

Exhibits

    Exhibit A   Form of Escrow Agreement

 

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STOCK PURCHASE AGREEMENT

THIS AGREEMENT (this “Agreement”) is made and entered into as of the 4th day of
September, 2007, among the stockholders and optionholders listed on Schedule A
(each a “Seller” and collectively the “Sellers”), and VENTANA MEDICAL SYSTEMS,
INC., a Delaware corporation (“Purchaser”).

WHEREAS, SPRING BIOSCIENCE CORPORATION, a California S-corporation
(the “Corporation”) conducts the business of developing, supplying and selling
reagents for the immunohistochemistry (IHC) market and for the life science
research market, including, but not limited to, bulk antibody reagents (the
“Business”).

WHEREAS, Sellers are the record and beneficial owners of all the issued and
outstanding shares of the common stock of the Corporation (the “Shares”), which
constitute all the issued and outstanding capital stock of the Corporation and
certain options to purchase Shares which will all be exercised in connection
with the transactions contemplated by this Agreement.

WHEREAS, Sellers desire to sell to Purchaser, and Purchaser desires to purchase
from Sellers, the Shares, upon the terms and subject to the conditions set forth
in this Agreement.

NOW, THEREFORE, in consideration of the respective representations, warranties,
covenants, agreements and conditions contained in this Agreement, and in order
to set forth the terms and conditions of the sale and purchase of the Shares,
the parties hereby agree as follows:

ARTICLE I

DEFINITIONS; PURCHASE AND SALE OF SHARES

SECTION 1.01 Definitions. The following terms when used in this Agreement have
the meanings set forth below:

“Affiliate” means (i) any corporation, limited liability company, partnership,
trust or other entity in control of, controlled by or under common control with
a Person, and (ii) any officer, director, manager, general partner, equity
holder or trustee of any corporation, limited liability company, partnership,
trust or other entity in control of, controlled by or under common control with
a Person.

“Affiliated Group” means any affiliated group within the meaning of Code
Section 1504(a) or any similar group defined under a similar provision of state,
local or foreign law of which the Corporation has been a member.

“Agreement” has the meaning set forth in the Preamble.

“Business” has the meaning set forth in the recitals.

“Closing” means the closing of the purchase and sale of the Shares.

“Closing Date” has the meaning set forth in Section 1.07.

“Code” means the Internal Revenue Code of 1986, as amended, or any corresponding
provision of any succeeding law.

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“Contract” and “Contracts” has the meaning set forth in Section 2.14.

“Control” (including the terms “controlling,” “controlled by” and “under common
control with”) means the possession, directly or indirectly, of the power to
direct or cause the direction of the management and policies of a Person,
whether through the ownership of voting securities, by contract, or otherwise.

“Corporation” has the meaning set forth in the recitals.

“Corporation Intellectual Property” means the Intellectual Property that is
owned or used by the Corporation.

“Corporation Premises” means all real property leased or subleased by the
Corporation or used or occupied by the Corporation, together with, all building
and other structures, facilities or improvements currently or hereafter located
thereon, all fixtures, systems, equipment and items of personal property of the
Corporation attached or appurtenant thereto and all easements, licenses, rights
and appurtenances relating to the foregoing.

“Damages” means actual losses, liabilities, damages, Taxes, or expenses,
including, without limitation, reasonable fees and expenses of experts and
counsel, exemplary, incidental, special or consequential damages, but shall not,
as between the parties hereto, include punitive damages, absent fraud.

“Drop Dead Date” means September 30, 2007.

“Employee Benefit Plans” means collectively the plans, programs, funds, or
arrangements identified on Schedule 2.09(b) to this Agreement.

“Employee Plan” means any employee benefit plan (within the meaning of
Section 3(3) of ERISA) and each other employment, fringe benefit, or other
retirement, bonus, deferred or incentive compensation plan, program, arrangement
or agreement sponsored, maintained or contributed to or required to be
contributed to by either Corporation or any ERISA Affiliate for the benefit of
any current or former Employee or director of either Corporation or any ERISA
Affiliate.

“Encumbrance” means any charge, claim, community property interest, condition,
equitable interest, lien, mortgage, option, pledge, security interest, right of
first refusal, or restriction of any kind, including any restriction on use,
voting, transfer, receipt of income, or exercise of any other attribute of
ownership.

“Environment” means soil, land surface or subsurface strata, surface waters
(including navigable waters, ocean waters, streams, ponds, drainage basins, and
wetlands), groundwaters, drinking water supply, stream sediments, ambient air
(including indoor air), plant and animal life, and any other environmental
medium or natural resource.

“Environmental, Health, and Safety Liabilities” means any cost, damages,
expense, liability, obligation, or other responsibility arising from or under
Environmental Law or Occupational Safety and Health Law and consisting of or
relating to (a) any environmental, health, or safety matters or conditions
(including on-site or off- site contamination, occupational safety and health,
and regulation of chemical substances or products); (b) fines, penalties,
judgments, awards, settlements, legal or administrative proceedings, damages,
losses, claims, demands and response, investigative, remedial, or inspection
costs and expenses arising under Environmental Law or Occupational Safety and
Health Law; (c) financial responsibility under Environmental Law or Occupational
Safety and Health Law for cleanup costs or

 

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corrective action, including any investigation, cleanup, removal, containment,
or other remediation or response actions (“Cleanup”) required by applicable
Environmental Law or Occupational Safety and Health Law (whether or not such
Cleanup has been required or requested by any Governmental Authority or any
other Person) and for any natural resource damages; or (d) any other compliance,
corrective, investigative, or remedial measures required under Environmental Law
or Occupational Safety and Health Law. The terms “removal,” “remedial,” and
“response action,” include the types of activities covered by the United States
Comprehensive Environmental Response, Compensation, and Liability Act, 42 U.S.C.
§ 9601 et seq., as amended (“CERCLA”).

“Environmental Law” means any Legal Requirement that requires or relates to
(a) advising appropriate authorities, employees, and the public of intended or
actual releases of pollutants or hazardous substances or materials, violations
of discharge limits, or other prohibitions and of the commencements of
activities, such as resource extraction or construction, that could have
significant impact on the Environment; (b) preventing or reducing to acceptable
levels the release of pollutants or hazardous substances or materials into the
Environment; (c) reducing the quantities, preventing the release, or minimizing
the hazardous characteristics of wastes that are generated; (d) assuring that
products are designed, formulated, packaged, and used so that they do not
present unreasonable risks to human health or the Environment when used or
disposed of; (e) protecting resources, species, or ecological amenities;
(f) reducing to acceptable levels the risks inherent in the transportation of
hazardous substances, pollutants, oil, or other potentially harmful substances;
(g) cleaning up pollutants that have been released, preventing the threat of
release, or paying the costs of such clean up or prevention; or (h) making
responsible parties pay private parties, or groups of them, for damages done to
their health or the Environment, or permitting self-appointed representatives of
the public interest to recover for injuries done to public assets.

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

“ERISA Affiliate” means any Person, trade or business, whether or not
incorporated, that together with the Corporation is or ever was deemed a “single
employer” within the meaning of Section 4001(b)(1) of ERISA or Section 414 of
the Code.

“Escrow Agent” means Thomas Title & Escrow, LLC.

“Escrow Agreement” has the meaning set forth in Section 1.05.

“Escrow Amount” means $11,700,000.

“Exclusivity Period” has the meaning set forth in Section 4.13.

“Facilities” means any real property, leaseholds, or other interests currently
or formerly owned or operated by the Corporation and any buildings, plants,
structures, or equipment (including motor vehicles, tank cars, and rolling
stock) currently or formerly owned or operated by the Corporation.

“Financial Statements” means, collectively, the unaudited balance sheets of the
Corporation as of December 31, 2006, December 31, 2005 and December 31, 2004,
the related unaudited statements of operations and retained earnings and cash
flows for the fiscal years then ended and accompanying notes and the unaudited
financial statement for the six months ended June 30, 2007 prepared by the
Corporation and delivered by Purchaser.

“Founding Shareholders” has the meaning set forth in Schedule 1.01.

 

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

“Governmental Authority” means any federal, national, supranational, state,
provincial, local, or similar government, governmental, regulatory or
administrative authority, agency or commission or any court, tribunal, or
judicial or arbitral body, including without limitation the Internal Revenue
Service or any taxing authority (whether domestic or foreign), including any
state, local or foreign government or any subdivision or taxing agency thereof
(including a United States possession).

“Gross-Up Amount” means that portion of the Purchase Price in excess of
$39,000,000, representing the agreed upon incremental Tax liability of Sellers’
resulting from the making of a §338(h)(10) Election in connection with the
transactions contemplated by this Agreement. If the IRS or a court of competent
jurisdiction, in an audit or administrative or judicial proceeding,
(i) reallocate the purchase price allocation as set forth in the Allocation
Schedule or IRS Form 8883, and (ii) as a result of such reallocation the
incremental income Tax liability of Sellers’ resulting from the making of a
§338(h)(10) Election in connection with the transactions contemplated by this
Agreement is greater than $1,600,000, then the Purchase Price shall be adjusted
accordingly.

“Hazardous Activity” means the distribution, generation, handling, importing,
management, manufacturing, processing, production, refinement, Release, storage,
transfer, transportation, treatment, or use (including any withdrawal or other
use of groundwater) of Hazardous Substances in, on, under, about, or from the
Facilities or any part thereof into the Environment, and any other act,
business, operation, or thing that increases the danger, or risk of danger, or
poses an unreasonable risk of harm to persons or property on or off the
Facilities, or that may affect the value of the Facilities or the Corporation.

“Hazardous Substance” means any hazardous waste, as defined by 42 U.S.C.
§6903(5), any hazardous substance as defined by 42 U.S.C. §9601(14), any
pollutant or contaminant as defined by 42 U.S.C. §9601(33) and any toxic
substance, oil or Hazardous Substance or other chemical or substance regulated
by any Environmental Laws.

“Indebtedness” means the aggregate amount of the principal of, and accrued and
unpaid interest and penalties on, whether or not contingent, all obligations for
borrowed money, or any portion thereof, and all costs, expenses and other
charges included therein that is due and payable on or after the Closing Date.

“Intellectual Property” means any or all of the following and all rights in,
arising out of, or associated therewith, including any licenses or grants:
(i) all patents, patent applications, and all inventions and discoveries that
may be patentable, or other invention disclosures; (ii) all computer software
(whether in source code or object code forms) and related documentation;
(iii) all copyrights, copyright registrations and copyright applications;
(iv) all trade names, logos, trademarks and service marks, source indentifiers,
common law marks and registrations and applications for trademarks and service
marks, and goodwill related thereto; (v) all web sites and domain names;
(vi) all know-how, trade secrets, proprietary information, customers lists,
data, databases and technical information, and related documentation; and (vii)
all licenses to any of the foregoing, and all claims against a third party
relating to unauthorized or infringing use of any of the foregoing .

“Interim Financial Statements” means the unaudited financial statement for the
six months ended June 30, 2007.

“IRS” means the Internal Revenue Service.

 

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“Inventories” means all inventory, merchandise, finished goods, and raw
materials, packaging, labels, supplies and other personal property maintained,
held or stored by or for the Corporation at the Closing Date, and any prepaid
deposits for any of the same.

“Knowledge” in the case of Sellers means the actual knowledge of the Founding
Shareholders, after reasonable inquiry, and in the case of Purchaser, means the
actual knowledge of Purchaser’s Chief Executive Office and Chief Financial
Officer, after reasonable inquiry.

“Legal Requirement” means any federal, state, local, municipal, foreign,
international, multinational or other statute, law, order, constitution, rule,
regulation, ordinance, principle of common law, treaty or other requirement of
any Governmental Authority.

“License” means any authorization, approval, license, or certification
applicable to or affecting the Corporation issued by any Governmental Authority
in the jurisdiction in which any such Business is located.

“Material Adverse Effect” means any circumstance, change, effect, event,
occurrence, state of facts or development that, individually or in the aggregate
with all other circumstances is reasonably likely to be materially adverse,
(i) as to the Corporation, to the Business, assets, financial condition or
results of operations, customer or supplier relationships of the Corporation,
including the termination or resignation of employment by the Corporation of
Haiying Xia or Adam Huang or, (ii) as to a party to this Agreement, on the
ability of a party to this Agreement to consummate timely the transactions
provided for in this Agreement; provided, however, that none of the following
shall be deemed, either alone or in combination, to constitute, and none of the
following shall be taken into account in determining whether there has been or
shall be, a Material Adverse Effect: any adverse change, effect, event,
occurrence, state of facts or development attributable to or resulting from any
(A) announcement of the transactions contemplated by this Agreement;
(B) conditions affecting the industry in which the Corporation participates, the
United States economy as a whole or the capital markets in general or the
markets in which the Corporation operates; or (C) act of terrorism, or war or
hostilities (armed or otherwise) involving the United States.

“Net Working Capital Target” means Working Capital of $550,000 as of the Closing
Date.

“Occupational Safety and Health Law” means any Legal Requirement designed to
provide safe and healthful working conditions and to reduce occupational safety
and health hazards, and any program, whether governmental or private (including
those promulgated or sponsored by industry associations and insurance
companies), designed to provide safe and healthful working conditions.

“Option” has the meaning set forth in Section 1.09(a).

“Permitted Liens” means (i) statutory liens for Taxes and other governmental
charges and assessments which are not yet due and payable or are being contested
in good faith, (ii) mechanics, materialmen’s and similar liens that can be
satisfied by a payment of cash to the lienholders and that are attributable to
accounts payable in the Financial Statements, (iii) as to real property
interests, including leasehold interests, any easements, rights-of-way,
servitudes, permits, restrictions and minor imperfections or irregularities in
title which do not, individually or in the aggregate, interfere with the ability
to own, use or operate such real property, (iv) purchase money liens and liens
securing rental payments under any capital lease arrangements disclosed or
reflected in the Financial Statements, and (v) notice filings with respect to
equipment leases or other leases of personal property.

 

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“Person” means any individual, any entity or any unincorporated organization,
including, without limitation, a partnership, a corporation, a limited liability
company, an association, a joint stock company, a trust or a joint venture.

“Post-Closing Tax Period” means a taxable period that commences after the
Closing Date.

“Pre-Closing Tax Period” means a taxable period that ends on or before the
Closing Date.

“Purchase Price” means the aggregate purchase price for the Shares as set forth
in Section 1.03.

“Purchaser” has the meaning set forth in the Preamble.

“Purchaser Plans” means the employee benefit plans of Purchaser and its
Affiliates that provide employee benefits to employees of the Corporation after
the Closing.

“Receivables” means any and all accounts receivable, notes and other amounts
receivable from third parties, including customers and employees, arising from
the conduct of the Business before the Closing, whether or not in the ordinary
course, together with any unpaid financing charges accrued thereon.

“Required Consent Contract” means any Contract that requires the consent of
another party upon the consummation of the transactions contemplated by this
Agreement.

“Release” means any spilling, leaking, emitting, discharging, depositing,
escaping, leaching, dumping, or other releasing into the Environment, whether
intentional or unintentional.

“§338(h)(10) Election” is defined in Section 5.02(a).

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

“Shares” has the meaning set forth in the recitals.

“Sellers” has the meaning set forth in the Preamble.

“Sellers’ Accounts” has the meaning set forth in Schedule 1.04.

“Seller Representatives” has the meaning set forth in Section 8.01.

“Stock Option Plan” means the Corporation’s 2004 Stock Plan.

“Straddle Tax Period” means a taxable period that includes but does not end on
the Closing Date.

“Tax” or “Taxes” means any (a) federal, state, local or foreign income, gross
receipts, franchise, estimated, alternative minimum, add-on minimum, sales, use,
transfer, registration, value added, excise, natural resources, severance,
stamp, occupation, premium, windfall profit, environmental, customs, duties,
real property, personal property, capital stock, social security, unemployment,
disability, payroll, license, employee or withholding, or other tax, charge,
levy, assessment, or fee of any kind whatsoever, whether computed on a separate
or consolidated, unitary or combined basis or in any other manner, including any
interest, penalties, additions to tax, or additional amounts in respect of the
foregoing; (b) liability for the payment of any amounts of the type described in
clause (a) arising as a result of being (or ceasing to be) a member of any
Affiliated Group (or being included (or required to be included) in any

 

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Tax Return relating thereto); and (c) liability for the payment of any amounts
of the type described in clause (a) as a result of any express or implied
obligation, by contract or pursuant to Law, to indemnify or otherwise assume or
succeed to the liability of any other person.

“Tax Return” means any returns, protective filings, declarations, reports,
bills, claims for refund, information returns (including where permitted or
required, any consolidated, combined or unitary returns) or other documents
(including any related or supporting schedules, statements or information) filed
or required to be filed in connection with the determination, assessment or
collection of any Taxes or in connection with the administration of any
statutes, laws, rules, regulations, orders or awards of any Governmental
Authority relating to any Taxes.

“Taxing Authority” means the Internal Revenue Service or any other Governmental
Authority responsible for the collection or administration of any Tax.

“Threat of Release” means a substantial likelihood of a Release that may require
action in order to prevent or mitigate damage to the Environment that may result
from such Release.

“Threatened” means a claim, Proceeding, dispute, action, or other matter will be
deemed to have been “threatened” if any demand or statement has been made
(orally or in writing) or any notice has been given (orally or in writing), or
if any other event has occurred or any other circumstances exist, that would
lead a prudent Person to conclude that such a claim, Proceeding, dispute,
action, or other matter is likely to be asserted, commenced, taken, or otherwise
pursued in the future.

“Treasury Regulations” or “Regulation” means the temporary and final regulations
promulgated under the Code.

“Working Capital” means, as of any date, in accordance with GAAP and the
principles set forth on Schedule 1.08, (i) the amount of the current assets of
the Corporation as of such date (excluding any deferred Tax assets), minus
(ii) the amount of the current liabilities of the Corporation as of such date.

SECTION 1.02 Sale of Shares. Subject to the terms and conditions of this
Agreement, at the Closing, each Seller shall sell, assign, transfer and convey
to Purchaser the number of Shares set forth on Schedule 1.02 for such Seller,
and Purchaser shall purchase and acquire from each Seller such Shares, free and
clear of all Encumbrances, except restrictions under federal and state
securities laws. At Closing, in consideration for the sale of the Shares by each
Seller to Purchaser, each Seller shall receive their pro rata share of the
aggregate Purchase Price (minus any amounts to be held back pursuant to the
Escrow Agreement).

SECTION 1.03 Purchase Price. The “Purchase Price” shall be an amount up to
$40,600,000, to be paid by Purchaser in accordance with Section 1.04 below,
subject to adjustment pursuant to Section 1.08 or the Escrow Agreement.

SECTION 1.04 Payment of the Purchase Price. On the Closing Date, Purchaser shall
pay to the Sellers $28,900,000 (less applicable withholding taxes), which amount
is equal to the Purchase Price, less the Escrow Amount, by delivery of cash
payable by wire transfer of immediately available funds to the designated
account of a designated Seller Representative set forth on Schedule 1.04, which
shall be for the benefit of all the Sellers’ and will be promptly distributed by
such Seller Representative to the account of each Seller as set forth on
Schedule 1.04 (“Sellers’ Accounts”) in the amounts set out by the name of each
Seller set forth on Schedule 1.04. Seller Representatives shall deliver to
Purchaser a

 

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receipt for the Purchase Price less the Escrow Amount and each Seller shall
deliver to Purchaser their certificate(s) representing the Shares in accordance
with the terms of Section 1.06 hereof. At the Closing, Purchaser will wire to
the Corporation at the account designated on Schedule 1.04 the withholding
amounts attributable to the exercise of Options in the amounts set forth next to
the name of each Optionholder in Schedule 1.04. In connection herewith, each
Seller hereby authorizes Purchaser to transmit to the Corporation any and all
amounts that are required to be withheld by the Corporation pursuant to the
regulations of any applicable Taxing Authority in connection with the payment of
the Purchase Price (minus any amounts held back in connection with the Escrow
Amount), which is to be deemed for all purposes to have been made to the
Sellers. Purchaser shall cause the Corporation to remit such Tax withholdings to
the applicable Taxing Authorities promptly after receipt thereof from Purchaser.

SECTION 1.05 Escrow. Prior to the Closing, the Sellers and the Purchaser shall
enter into the escrow agreement with the Escrow Agent substantially in the form
of Exhibit A (the “Escrow Agreement”). In accordance with the terms of the
Escrow Agreement the Purchaser shall deposit the Escrow Amount in accordance
with the terms and conditions of the Escrow Agreement, to be managed and paid
out by the Escrow Agent in accordance with the terms and conditions thereof. As
more fully described in the Escrow Agreement, the Escrow Fund shall be available
to satisfy, to the extent still available, the payouts to the Sellers pursuant
to the milestones set forth on Schedule 1.05 (the “Milestone Payments”), or any
amounts owed to Purchaser pursuant to Section 4.07.

SECTION 1.06 Delivery of the Shares. At the Closing, each Seller shall deliver
to Purchaser the certificate(s) representing the Shares, each duly endorsed in
the name of Purchaser or accompanied by a duly executed stock power, all in good
form for transfer of valid title to the Shares to Purchaser, free and clear of
all Encumbrances, except restrictions on transfer under federal and state
securities laws.

SECTION 1.07 Closing. The Closing shall take place at the offices of Snell &
Wilmer L.L.P., One Arizona Center, 400 East Van Buren, Phoenix, Arizona 85004,
at 10:00 a.m. on the date on which the conditions of closing set forth in
Article VI shall be satisfied or waived by the party entitled to the benefit
thereof, or at such other location and on such other date to which the parties
may mutually agree (the “Closing Date”).

SECTION 1.08 Purchase Price Adjustments.

(a) As promptly as possible, but in any event within 30 days after the Closing
Date, Purchaser will deliver to the Seller Representatives (i) a balance sheet
of the Corporation as of the Closing Date calculated in accordance with Schedule
1.08 (the “Closing Balance Sheet”) and (ii) its calculation of the Working
Capital as of the Closing Date (the “Preliminary Working Capital Statement”)
based on the Closing Balance Sheet and calculated in accordance with Schedule
1.08. If the Seller Representatives have any objections to the Preliminary
Working Capital Statement, the Seller Representatives shall deliver to Purchaser
a statement setting forth in reasonable detail their objections thereto (an
“Objections Statement”). If an Objections Statement is not delivered to
Purchaser within 30 days after delivery of the Preliminary Working Capital
Statement, the Preliminary Working Capital Statement shall be final, binding and
non-appealable on the parties hereto. The Seller Representatives and Purchaser
shall negotiate in good faith to resolve any such objections, but if they do not
reach a final resolution within 30 days after the delivery of the Objections
Statement, the Seller Representatives and Purchaser shall submit such dispute to
a reputable firm of certified public accountants selected jointly by Seller
Representatives and Purchaser, and not employed by either of them during the two
years prior to the Closing Date (the “Neutral Accountant”). The Seller
Representatives and Purchaser shall use their commercially reasonable efforts to

 

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cause the Neutral Accountant to resolve all disagreements as soon as
practicable. The resolution of the dispute by the Neutral Accountant shall be
final, binding and non-appealable on the parties hereto. The fees and expenses
of the Neutral Accountant shall be apportioned between Sellers, on the one hand,
and Purchaser, on the other hand, by the Neutral Accountant based on the degree
to which each party’s claims were unsuccessful and shall be paid by the parties
in accordance with such determination. The Preliminary Working Capital
Statement, as revised, if at all, and as finally determined pursuant to this
Section 1.08(a), shall be referred to as the “Final Working Capital Statement”
and the Working Capital as set forth in the Final Working Capital Statement
shall be referred to as the “Final Working Capital.”

(b) If the Final Working Capital is greater than Net Working Capital Target,
Purchaser shall pay such excess (plus simple interest on such amount at the
Prime Rate, determined as of the date of final resolution, from the Closing Date
through the date of payment) to the Seller Representatives (on behalf of the
Sellers) by wire transfer of immediately available funds to an account or
accounts designated by the Seller Representatives.

(c) If the Final Working Capital is less than Net Working Capital Target, the
Escrow Agent, after a request by the Purchaser or the Seller Representatives,
shall pay out of the Escrow Amount such shortfall (plus simple interest on such
amount at the Prime Rate, determined as of the date of final resolution, from
the Closing Date through the date of payment) to the Purchaser by wire transfer
of immediately available funds to an account or accounts designated by the
Purchaser.

(d) In addition, to the extent the Purchaser is, 90 days after the Closing Date,
unable to collect, after a good faith effort (which shall not require Purchaser
to engage attorneys or collection agents), any amount of the Receivables listed
on Schedule 2.07(c) (except to the extent, if any, such Receivable is reserved
for on the Interim Financial Statements), the Purchaser shall assign at its
option such account(s) to the Seller Representatives (for the benefit of the
Sellers) and after written notice from the Purchaser or Seller Representatives,
the Escrow Agent shall pay the amount of such account(s) from the Escrow Amount
to the Purchaser.

(e) In addition, within a reasonable period of time following the Closing Date,
the Corporation, as directed by Purchaser, will hire an outside consultant to
conduct a valuation of the fair market value of the Corporation shares acquired
by Purchaser and an assessment of any and all amounts that were estimated to be
required to be withheld by the Corporation, pursuant to Section 8.01(d), in
connection with the regulations of any applicable Taxing Authority with respect
to the exercise of an Option pursuant to Section 1.09(a), including, without
limitation, FICA and Medicare and the Option holders withholding obligations. If
the Purchaser determines, based on such consultant’s recommendations and
findings, that any amount so withheld was inadequate to satisfy any obligations
to the applicable Taxing Authority under any applicable Taxing Authority rule or
regulation then, the Escrow Agent shall pay the amount of such account(s) from
the Escrow Amount to the Purchaser.

SECTION 1.09 Exercise of Options. As of the Closing Date, but deemed to occur on
the day prior to the Closing by virtue of the consummation of the transactions
contemplated by this Agreement and the receipt of a check from each Optionholder
for such Optionholder’s aggregate exercise price for their Shares:

(a) Each option or right to acquire Shares issued by the Corporation held by
Sellers (each an “Option”) which is outstanding, unexpired and unexercised as of
the Closing Date shall be exercised into Shares, equal to the number of Shares
for which such Option is then exercisable at an exercise price per share equal
to the per share Option exercise price then applicable to the Option and

 

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otherwise subject to the same terms and conditions of the Option as in effect
immediately prior to the Closing Date. Seller Representatives shall collect the
exercise price from each exercising Option holder and deliver all the monies
related to the exercise price at Closing to the Corporation. Any such Share
received pursuant to the exercise of an Option hereof shall be accounted for in
Schedule 1.04, for purposes of payment of the Purchase Price, as if such Share
existed as of the date of the signing of this Agreement.

(b) All Options exercised pursuant to Section 1.09(a) shall from and after the
Closing Date no longer be outstanding and shall cease to exist and each holder
of an Option which immediately prior to the Closing Date represented a right to
acquire Share shall cease to have any rights as an optionholder or shareholder
of the Corporation or any surviving entity thereto.

SECTION 1.10 Further Assurances. If, at any time after the Closing Date,
Purchaser shall reasonably determine that any deeds, assignments or assurances
or any other acts or things are necessary (a) to vest, perfect or confirm, of
record or otherwise, title to the Shares in Purchaser, or (b) otherwise to
consummate the transactions provided for in this Agreement, Sellers shall, at
Sellers’ expense, execute and deliver, in the name and on behalf of Sellers, all
such deeds, bills of sale, assignments and assurances and shall do, in the name
and on behalf of Sellers, all such other acts and things that are necessary to
vest, perfect or confirm title to the Shares in Purchaser and otherwise to
consummate the transactions provided for in this Agreement.

ARTICLE II

REPRESENTATIONS AND WARRANTIES OF FOUNDING SELLERS

Except for the representations in Sections 2.01, 2.03 and 2.30, which each
Seller is only making as to his, her, or itself, each Founding Shareholder
hereby represents and warrants to Purchaser, knowing and intending that
Purchaser is relying hereon in entering into the transactions provided for
herein, as follows, except as otherwise set forth in the written disclosure
schedules delivered to Purchaser (the “Disclosure Schedules”). The Disclosure
Schedules are numbered to correspond to the various sections and subsections of
this Article II setting forth certain exceptions to the representations and
warranties contained in this Article II and certain other information called for
by this Agreement. No disclosure made in any particular Disclosure Schedule
shall be deemed made in any other Disclosure Schedule unless expressly made
therein (by cross-reference or otherwise):

SECTION 2.01 Authority Relative to Agreement. Sellers have the requisite power
and authority to enter into and to perform their obligations under this
Agreement and the Escrow Agreement. The execution and delivery of this Agreement
and the Escrow Agreement by Sellers and the consummation by Sellers of the
transactions provided for in this Agreement have been duly authorized by all
necessary corporate action on the part of Sellers. Each Seller is the record and
beneficial owner of the number of Shares, as applicable, as set forth on
Schedule 2.02, in each case, free and clear of any and all Encumbrances, other
than applicable federal and state securities law restrictions or as set forth on
Schedule 2.02. On the Closing Date, each Seller shall transfer to Purchaser good
title to such Shares, free and clear of all Encumbrances, except applicable
federal and state securities law restrictions.

SECTION 2.02 Capital Stock; Title. The authorized capital stock of the
Corporation consists of 40,000,000 shares of common stock, of which 7,501,250
shares are issued and outstanding immediately prior to the Closing. The Shares
represent, collectively, all of the issued and outstanding shares of capital
stock or other equity interests in the Corporation. The Shares are fully paid
and

 

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nonassessable. The Corporation does not have any outstanding subscriptions,
warrants, convertible securities, obligations, options or rights entitling
others to acquire shares of capital stock of the Corporation, or any outstanding
securities, options, warrants, rights or other instruments convertible into or
exchangeable or exercisable for shares of capital stock of the Corporation.
Other than set forth on Schedule 2.02, no other Person has ever held any
beneficial or record ownership of any shares of the Corporation’s common stock
or options to purchase the Corporation’s common stock. Except as disclosed in
Schedule 2.02, neither the Corporation nor Sellers is a party to any
shareholders agreement, buy-sell or similar agreement, redemption or similar
agreement, proxy, voting trust or arrangement affecting the Shares. All the
Shares have been duly authorized and validly issued. All shares of the
Corporation’s common stock issued upon exercise of the options issued pursuant
to the Stock Option Plan in accordance therewith were duly authorized and
validly issued and fully paid and nonassessable. None of the Shares was issued
in violation of the Securities Act or any other legal requirement of any
Governmental Authority.

SECTION 2.03 Execution and Performance of Agreement; Validity and Binding
Nature. This Agreement has been duly executed and delivered by Sellers, and this
Agreement is, and each of the documents and agreements executed and delivered by
Sellers pursuant to the terms hereof, when duly executed and delivered by all
parties whose execution and delivery thereof is required, shall be, the legal,
valid and binding obligations of Sellers, enforceable against Sellers in
accordance with their respective terms, except to the extent that enforceability
may be limited by bankruptcy, receivership, moratorium, conservatorship,
reorganization or other laws of general application affecting the rights of
creditors generally or by general principles of equity.

SECTION 2.04 Non-Contravention. Neither the execution and delivery of this
Agreement or the Escrow Agreement nor the consummation of the transactions
provided for in this Agreement shall (a) violate, breach or be in conflict with
any provisions of the Articles of Incorporation or Bylaws of either the
Corporation or Sellers, as applicable, (b) result in the creation or imposition
of any Encumbrance upon any material property or assets of the Corporation,
(c) conflict with or violate any statute or law or any judgment, decree, order,
regulation or rule of any court or governmental or regulatory authority to which
the Corporation or Sellers are subject, or (d) conflict with, result in any
breach of, constitute a default (or event which with the giving of notice of
lapse of time, or both, would become a default) under, require any consent
under, or give to others any right of termination, amendment, acceleration,
suspension, revocation, or cancellation of, any note, bond, mortgage or
indenture, contract, agreement, lease, sublease, license, permit, franchise or
other instrument or arrangement to which the Corporation is a party or by which
any of the Shares or any of the Corporation’s assets or properties is bound or
affected.

SECTION 2.05 Organization, Standing and Qualification. The Corporation is a
corporation, duly organized, validly existing and in good standing under the
laws of the State of California and has the corporate power and lawful authority
to own and hold its properties and conduct the Business as now owned, held and
conducted in its state of incorporation and the states (or other jurisdictions)
in which it has qualified to do business. The Corporation is qualified and in
good standing in all states (or other jurisdictions) in which such qualification
is required by reason of the nature or extent of the Business conducted by the
Corporation therein, except where the failure to be so qualified would not
reasonably be expected to have a Material Adverse Effect on the Corporation.
Such states (and other jurisdictions) are disclosed in Schedule 2.05.

SECTION 2.06 Articles of Incorporation and By-Laws; No Subsidiaries.

 

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(a) True and complete copies of the Corporation’s Articles of Incorporation and
By-Laws (together with all amendments thereto) have been made available to
Purchaser.

(b) The Corporation does not own any capital stock or other equity securities of
or equity interest in any corporation, partnership, joint venture, or other
entity or business organization. The Corporation is not under any obligation to
acquire any securities from any Person.

(c) The Corporation does not currently have, nor has it ever had, any
subsidiaries.

SECTION 2.07 Financial Statements.

(a) Sellers have delivered the Financial Statements to Purchaser. The Financial
Statements have been prepared from the books and records of the Corporation as
prepared in the ordinary course of the Business. The Financial Statements
(i) have been prepared in manner consistent with past practice of the
Corporation, (ii) were prepared in accordance with the books of account and
other financial records of the Corporation, (iii) present fairly the financial
position of the Corporation as of their respective dates and the results of the
Corporation’s operations and cash flows for the periods covered thereby,
(iv) have been prepared by management on a basis consistent with the past
practices of the Corporation, and (v) include all adjustments (consisting only
of normal recurring accruals) that are necessary for a fair presentation of the
financial condition of the Corporation and the results of operations of the
Corporation as of the dates thereof or for the periods covered thereby. The
books of account and other financial records of the Corporation (i) reflect all
items of income and expense and all assets and liabilities required to be
reflected therein i on a basis consistent with the past practice of the
Corporation, (ii) are in all material respects complete and correct, and do not
contain or reflect any material inaccuracies or discrepancies and (iii) have
been maintained in accordance with good business and accounting practices.

(b) There are no obligations or liabilities relating to or affecting the
Corporation or the Business (whether accrued, absolute, contingent, liquidated,
unliquidated, or otherwise, whether due or to become due and regardless of when
asserted), except: (i) liabilities reflected or reserved against in the
Financial Statements or disclosed in the notes thereto, (ii) those liabilities
that have been incurred in the ordinary course of business and consistent with
past practice since the Interim Financial Statements, (iii) those liabilities
arising from the transaction contemplated in this Agreement, and
(iv) liabilities specifically disclosed in Schedule 2.07(b).

(c) Schedule 2.07(c) is an aged list of the Receivables, as of a date at least
10 business days prior to the Closing Date, showing separately those Receivables
that as of such date had been outstanding for (a) 29 days or less, (b) 30 to 59
days, (c) 60 to 89 days, (d) 90 to 119 days and (e) more than 119 days. Except
to the extent, if any, reserved for on the Interim Financial Statements, all
Receivables reflected on the Interim Financial Statements arose from, and the
Receivables existing as of the Closing will have arisen from, the sale of
Inventory or services to Persons not affiliated with the Corporation and in the
ordinary course of business consistent with past practice and, except as
reserved against on the Interim Financial Statements, constitute or will
constitute, as the case may be, only valid, undisputed claims of the Corporation
not subject to valid claims of setoff or other defenses or counterclaims other
than normal cash discounts accrued in the ordinary course of business consistent
with past practice.

(d) Subject to amounts reserved therefor on the Interim Financial Statements,
the values at which all Inventories are carried on the Interim Financial
Statements reflect the historical

 

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inventory valuation policy of the Corporation of stating such Inventories at the
lower of cost (determined on the last in, first out method) or market value. The
Corporation has good and marketable title to the Inventories free and clear of
all Encumbrances. The Inventories do not consist of, in any material amount,
items that are obsolete, damaged or slow-moving. The Inventories do not consist
of any items held on consignment. The Corporation is not under any obligation or
liability with respect to accepting returns of items of Inventory or merchandise
in the possession of their customers other than in the ordinary course of
business consistent with past practice. No clearance or extraordinary sale of
the Inventories has been conducted since the date of the Interim Financial
Statement. The Corporation has not acquired or committed to acquire or
manufacture Inventory for sale which is not of a quality and quantity usable in
the ordinary course of business within a reasonable period of time and
consistent with past practice, nor has the Corporation changed the price of any
Inventory except for (a) price reductions to reflect any reduction in the cost
thereof to the Corporation, (b) reductions and increases responsive to normal
competitive conditions and consistent with the Corporation’s past sales
practices, (c) increases to reflect any increase in the cost thereof to the
Corporation and (d) increases and reductions made with the written consent of
the Purchaser. Schedule 2.07(d) contains a complete list of the addresses of all
warehouses and other facilities in which the Inventories are located. The
Inventories are in good and merchantable condition in all material respects, are
suitable and usable for the purposes for which they are intended and are in a
condition such that they can be sold in the ordinary course of the Business
consistent with past practice.

SECTION 2.08 Corporation Intellectual Property.

(a) Schedule 2.08(a) sets forth a true and complete list of all domestic and
foreign registered patents and patent applications, registered marks (including
trademarks, service marks, and other registrable source identifiers) and mark
registration applications, material unregistered marks, registered trade names,
registered domain names, registered copyrights, copyright applications, software
programs (other than off-the-shelf software), all written Contracts relating to
the development, ownership or use of the Corporation Intellectual Property, and
all registered designs, that are owned or used by Corporation or any Affiliate
in connection with the Business (collectively, the “Registered Intellectual
Property”). With regard to the Registered Intellectual Property, all material
application, maintenance, renewal or other similar fees have been properly paid
and are current, and all registrations, applications and filings are valid and
remain in full force and effect.

(b) To the Knowledge of Founding Shareholders, the Corporation has sufficient
ownership or rights, free and clear of any Encumbrances, to the Corporation
Intellectual Property necessary for its Business as now conducted, and, giving
effect to any consents required under any Required Consent Contracts, the
execution, delivery and performance of this Agreement shall not adversely affect
the Corporation’s right to use the Corporation Intellectual Property in the
conduct of the Business as presently conducted. To the Knowledge of Founding
Shareholders, none of the Corporation Intellectual Property infringes upon the
Intellectual Property rights of any Person, and Sellers or Corporation have not
received any oral or written communication alleging such violation.

(c) Corporation has not licensed Corporation Intellectual Property to any
Person, and does not have any shared ownership interest with any Person in any
Corporation Intellectual Property, nor has it licensed or purchased any
Corporation Intellectual Property from any Person under any arrangement
requiring continuing royalty, license or other payments. Corporation has taken
commercially reasonable actions necessary to protect its Intellectual Property.

 

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(d) No contractor, former employee, or other Person other than Corporation
possesses any current or contingent rights to any Corporation Intellectual
Property, and the transactions contemplated by this Agreement will not result in
any third party gaining a right to access the Corporation Intellectual Property
(as the result of an escrow release or otherwise). To the Knowledge of Founding
Shareholders, no contractor, former employee, or other Person has
misappropriated or infringed, or is infringing, any of the Corporation
Intellectual Property, or has asserted any claim or challenged the validity,
enforceability, continuity or ownership of the Corporation Intellectual
Property.

(e) To the Knowledge of Founding Shareholders, Corporation’s employees are not
obligated under any contract (including licenses, covenants or commitments of
any nature), or subject to any judgment, decree or order of any court or
administrative agency, that would interfere with their duties to Corporation or
that would conflict with the Business as now conducted. Each employee and
consultant of Corporation who has made material contributions to the creation or
development of the Corporation Intellectual Property (or otherwise has made
contributions to the creation or development of the Corporation Intellectual
Property such that without such contributions any aspect of the Intellectual
Property would not function or operate, or could not be used as intended) has
executed a customary confidentiality, non-compete, and assignment of inventions
agreement, all of which have been provided to Purchaser’s legal counsel or has
otherwise assigned to Corporation all rights, title and interest in any
Intellectual Property developed by such employee or consultant during and within
the scope of his employment or consultancy with Corporation. To the Knowledge of
Founding Shareholders, no employees or consultants are in violation thereof.

(f) To the Knowledge of Founding Shareholders, none of the Corporation’s
employees or consultants is obligated under any contract (including licenses,
covenants or commitments of any nature) or other agreement, or subject to any
judgment, decree or order of any court or administrative agency, that would
materially interfere with such employee’s or consultant’s ability to promote the
interest of the Corporation or that would conflict with the Corporation’s
business. Neither the execution or delivery of this Agreement or the Escrow
Agreement, nor the carrying on of the Corporation’s business by the employees
and consultants of the Corporation, nor the conduct of the Corporation’s
business as now conducted and as presently proposed to be conducted, will, to
the Knowledge of Founding Shareholders, conflict with or result in a breach of
the terms, conditions, or provisions of, or constitute a default under, any
contract, covenant or instrument under which any such employee or consultant is
now obligated.

SECTION 2.09 Employee Plans.

(a) Schedule 2.09 sets forth a list of each Employee Plan. With respect to each
Employee Plan, Sellers have provided to Purchaser: a copy of each Employee Plan
(including all amendments thereto); a copy of the annual report and actuarial
report, if required under ERISA or the Code, with respect to each Employee Plan
for the last two (2) plan years ending prior to the date hereof; if the Employee
Plan is funded through a trust or any third party funding vehicle, a copy of the
trust or other funding contract (including all amendments thereto) and the
latest financial statements with respect to the last reporting period ended
immediately prior to the date thereof; a copy of the most recent “summary plan
description”, together with each “summary of material modifications”, if
required under ERISA, with respect to each Employee Plan; and the most recent
determination letter received from the IRS with respect to each Employee Plan
that is intended to be qualified under Code Section 401(a).

 

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(b) The Corporation or an ERISA Affiliate have never maintained, had an
obligation to contribute to, or actually made contributions to an Employee Plan
that is subject to the provisions of Title IV of ERISA.

(c) To the Knowledge of the Founding Shareholders, each Employee Plan has been
operated and administered in all material respects in accordance with its terms
and Applicable Law, including ERISA and the Code. There are no pending or, to
the Knowledge of the Founding Shareholders, threatened audits, investigations or
claims involving any Employee Plan by any Governmental Authority or other
Person, other than routine claims for benefits. Each Employee Plan that is
intended to be “qualified” within the meaning of Section 401(a) of the Code has
received a favorable determination letter from the IRS regarding its qualified
status, and no fact exists, including any amendment or failure to amend any
Employee Plan, that would cause the IRS to revoke such favorable determination
letter.

(d) Except (i) as may be provided in any employment Contract currently in effect
between Corporation and an Employee or former Employee, or (ii) as otherwise set
forth on Schedule 2.09(d), the consummation of the transaction contemplated
herein shall not (A) result in any payment becoming due, or increase the amount
of compensation due, to any Employee or former Employee or current or former
director of the Corporation, (B) increase any benefits payable under any
Employee Plan, or (C) accelerate the time of payment or vesting, or increase the
amount of, or otherwise enhance, any benefit due to any Employee or former
Employee or current or former director of the Corporation. No such payment will
result in the loss by reason of Section 280G of the Code, of any federal income
Tax deduction by Purchaser or by the Corporation.

(e) No Employee Plan provides benefits, including death or medical benefits
(whether or not insured), with respect to current or former Employees of
Corporation or current or former directors of Corporation after retirement or
other termination of service other than (i) coverage mandated by Sections
601-608 of ERISA and Section 4980B(f) of the Code, (ii) death benefits or
retirement benefits under any employee pension benefit plan (within the meaning
of Section 3(2) of ERISA), (iii) benefits the full cost of which is borne by the
current or former Employee or current or former director (or his or her
beneficiary), or (iv) severance or deferred compensation benefits properly
accrued as Liabilities on the books of either Corporation or an ERISA Affiliate.

(f) The Corporation has not made any representation or communication, oral or
written, with respect to the participation, eligibility for benefits, vesting,
benefit accrual or coverage under any Employee Plan to any Employee or any
former Employee or current or former director of Corporation which is not in
accordance with the terms and conditions of the Employee Plans.

(g) No “leased employee” (within the meaning of Section 414(n) of the Code)
performs (or during the preceding three years has performed) services for
Corporation. The Corporation has at all times been in material compliance with
Applicable Law regarding the classification of Employees and independent
contractors. No Person engaged by either Corporation as an independent
contractor, laborer, temporary Employee, or “leased employee” has ever been
improperly excluded from participation in a Employee Plan, nor has Corporation
used the services of any such individual to an extent that would reasonably be
expected to result in the disqualification of any of the Employee Plans or the
imposition of material penalties or excise Taxes with respect to the Employee
Plans by the IRS, the Department of Labor, the Pension Benefit Guaranty
Corporation or any other Governmental Authority.

 

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(h) The Corporation and each ERISA Affiliate has complied in all material
respects with the notice and continuation coverage requirements of Section 4980B
of the Code and the regulations thereunder with respect to each Employee Plan
that is, or was during any taxable year of either Corporation or any ERISA
Affiliate for which the statute of limitations on the assessment of federal
income Taxes remains open, by consent or otherwise, a group health plan within
the meaning of Section 5000(b)(1) of the Code.

(i) None of the Employee Plans, any trusts created thereunder, either
Corporation or any ERISA Affiliate, or any Employee of the foregoing, nor, to
the Knowledge of the Founding Shareholders, any trustee, administrator or other
fiduciary thereof, has engaged in a “prohibited transaction” (as such term is
defined in Section 4975 of the Code or Section 406 of ERISA). To the Founding
Shareholders’ Knowledge, no sponsor, trustee or administrator of any Employee
Benefit Plan has engaged in a transaction or has taken or failed to take any
action with respect to an Employee Benefit Plan that would be reasonably
expected to subject the Corporation or an ERISA Affiliate to a civil penalty
assessed pursuant to Section 502(i) of ERISA or a Tax imposed pursuant to
Section 4975 or 4980B of the Code.

(j) The Corporation and each ERISA Affiliate, and each Employee Benefit Plan has
complied in all material respects with the Health Insurance Portability and
Accountability Act of 1996, and the regulations issued thereunder.

(k) Each Employee Plan that is a “nonqualified deferred compensation plan” as
such term is defined in Section 409A of the Code has been operated in good faith
compliance with Code Section 409A for periods beginning after December 31, 2004.

(l) Set forth on Schedule 2.09 is a list of each individual who, as of a date
not more than five (5) days preceding the date of this Agreement, was a “M&A
qualified beneficiary” (as such term is defined in Treasury Regulations
Section 54.4980B-9 Q&A-4) and to whom the Corporation was providing continued
group health plan coverage under Section 4980B of the Code.

SECTION 2.10 Real Property.

(a) The Corporation owns no real property and has no fee simple ownership
interest in any real property. Schedule 2.10(a) contains a true and correct list
of all of the Corporation Premises and all leases, subleases or use or occupancy
agreements with respect to the Corporation Premises to which the Corporation is
a party and all monthly rental fees (and other recurring fees) related to such
leases.

(b) The Corporation has undisturbed possession of the Corporation Premises and
all leases, subleases or use or occupancy agreements with respect to the
Corporation Premises are in full force and effect, and the Corporation is not in
default thereunder (with or without notice or lapse of time), and to the
Knowledge of the Founding Shareholders, the other party is not in default
thereunder (with or without notice or lapse of time). The Corporation Premises
(including improvements thereon) are in good operating condition and repair
(ordinary wear and tear excepted) and are adequate in all material respects for
their present uses by the Corporation and are, as to the Corporation’s interest,
free and clear of all Encumbrances except Permitted Liens.

SECTION 2.11 Personal Property and Sufficiency of Assets.

 

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(a) (i) the Corporation has valid title to or the right to use all tangible
personal property material to the conduct of the Business as presently
conducted, and (ii) the tangible personal property owned by the Corporation is
owned free and clear of Encumbrances other than Permitted Liens.

(b) The equipment and other tangible assets material to the conduct of the
Business as presently conducted are in operating condition, ordinary wear and
tear excepted, and are suitable for their present use by the Corporation.

(c) The (i) building, structures, improvements, automobiles, equipment and other
tangible assets of the Corporation, and (ii) the Intellectual Property of the
Corporation and other intangible assets of the Corporation are, in the
reasonable judgment of the Founding Shareholders, sufficient for the continued
conduct of the business of the Corporation after the Closing in substantially
the same manner as conducted prior to the Closing. No Seller, nor any other
Person, owns or has the right to use any assets (whether tangible or intangible)
that are used in the conduct of the Business.

SECTION 2.12 Taxes. Sellers represent and warrant to Purchaser, as of the date
of this Agreement and as of the Closing:

(a) Copies of Tax Returns, Audit Reports, Other Relevant Tax Documents. The
Corporation has delivered or caused to be delivered to Purchaser complete and
correct copies of: (i) all federal and state Tax Returns filed by or in respect
of the Corporation relating to periods ending on or after December 31, 2001;
(ii) any and all other Tax Returns filed by or in respect of the Corporation
requested by Purchaser; (iii) any and all audit reports relating to Taxes and
issued by or with respect to the Corporation on or after December 31, 2001; and
(iv) any and all revenue agent examination reports, information document
requests, notices of proposed deficiencies, notices of deficiency, protests,
petitions, settlement agreements, closing agreements, private letter ruling
requests and technical advice memoranda received by, submitted by, or agreed to
by, or on behalf of, the Corporation in respect of taxable periods ending on or
after December 31, 2001, or to which the Corporation is subject;

(b) Filing of Tax Returns; Payment of Taxes; Related Matters.

(i) All Tax Returns required to be filed by or with respect to the Corporation
have been timely filed and all such Tax Returns are true, correct, and complete
in all material respects;

(ii) All Taxes due and payable by or attributable to the Corporation for any
period preceding the Closing Date, including, but not limited to any Tax due
arising out of the transactions contemplated by this Agreement, (whether or not
a Tax Return is due by the Closing Date), have been paid, properly accrued or
otherwise adequately reserved on the Financial Statements, or will be accrued on
the books and records of the Corporation from time to time, in accordance with
past custom and practice, through the Closing Date with statements thereof made
available to Purchaser on the Closing Date;

(iii) The Corporation has disclosed on each Tax Return filed by or in respect of
the Corporation all positions taken thereon that could give rise to a
substantial understatement penalty of federal income Taxes within the meaning of
Code Section 6662 or any similar provisions of any other Tax law;

(iv) The Corporation has timely paid all required current estimated payments of
Taxes in amounts sufficient to avoid interest charges and underpayment
penalties;

 

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(v) There are no Tax liens upon any assets of the Corporation, other than liens
for sales and payroll Taxes not yet due and payable and liens for non-delinquent
current real property taxes;

(vi) The Corporation is not currently the beneficiary of any extension of time
to file any Tax Return, and there are no outstanding waivers or agreements
extending the statute of limitations for any period with respect to any Tax to
which the Corporation may be subject or will cause Purchaser to be subject to;

(vii) The Corporation has complied with all requirements relating to the
withholding of Taxes (including withholding and reporting requirements under
Code Sections 1441 through 1464, 3401 through 3406, 6041, and 6049) and has
within the times and in the manner prescribed by law paid over such amounts to
the proper taxing authorities in connection with any amounts paid or owing to
any employee, independent contractor, creditor, stockholder or other third
party, and all Forms W-2 and 1099 (and state law counterparts thereof) required
with respect thereto have been properly completed and timely filed; and

(viii) The Corporation has not done business in or engaged in a trade or
business in any jurisdiction in which it has not filed all required Tax Returns,
and no written notice or inquiry has been received from any jurisdiction in
which Tax Returns have not been filed by the Corporation to the effect that the
filing of Tax Returns may be required;

(c) Audit Related Matters.

(i) There are no pending or threatened actions or suits, whether in the form of
an audit or an administrative, judicial or other proceeding, for the assessment
or collection of Taxes against the Corporation or (insofar as either relates to
the activities or income of the Corporation or could result in liability of the
Corporation on the basis of joint and/or several liability) any Person that was
included in the filing of a Tax Return with the Corporation on a consolidated,
combined or unitary basis;

(ii) No adjustment relating to the Tax Returns filed or to be filed by or with
respect to the Corporation (including, to the extent applicable, any
consolidated federal income Tax Return of the Corporation and any state, local
or other Tax Return that includes the Corporation on a consolidated, combined or
unitary basis) have been proposed in writing or, informally by any Governmental
Authority (insofar as either relates to the activities or income of the
Corporation or could result in liability of the Corporation on the basis of
joint and/or several liability) and no basis exists for any such adjustment;

(iii) The Corporation has not received from any taxing authority any (A) notice
indicating an intent to open an audit or other review, (B) request for
information relating to Taxes, or (C) notice of deficiency or proposed
adjustment for any amount of Tax proposed, asserted, or assessed against the
Corporation;

(iv) There are no outstanding agreements extending or waiving the statutory
period of limitation applicable to any claim for the collection or assessment or
reassessment of Taxes due from the Corporation for any taxable period;

(v) There is no power of attorney currently in force with respect to any matter
relating to Taxes of the Corporation; and

 

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(vi) With respect to any past audit, review or examination by any relevant
Governmental Authority of issues relating to Taxes of the Corporation, no issue
raised or addressed therein is reasonably expected to recur in a later taxable
period of the Corporation;

(d) General Tax Matters.

(i) Each of the Corporation and each of its affiliates has not made any
payments, is not obligated to make any payments, and is not a party to any
agreement that under certain circumstances could result, separately or in the
aggregate, in the actual or deemed payment by the Purchaser or the Corporation
of any payment that will not be deductible under Code Sections 162(a), 162(m),
280G (“excess parachute payments”), or 404 or that could give rise to any
amounts subject to excise tax under Code Section 4999, as such provisions are
currently written;

(ii) The Corporation has no obligation to pay compensation subject to Code
Section 409A pursuant to a deferred compensation plan that does not comply with
the requirements of Code Section 409A;

(iii) The Corporation has not been a United States real property holding
corporation within the meaning of Code Section 897(c)(2) during the applicable
period specified in Code Section 897(c)(1)(A)(ii), and, no Seller is a foreign
person within the meaning of Code Section 1445;

(iv) The Corporation has not distributed stock of another Person or had its
stock distributed by another Person in a transaction that was purported or
intended to be governed in whole or in part by Code Sections 355 or 361;

(v) The Corporation was not acquired in a qualified stock purchase under Code
Section 338(d)(3) and no elections under Code Section 338(g), protective
carryover basis elections, or offset prohibition elections are applicable to the
Corporation;

(vi) The Corporation has never been and is not a member of an Affiliated Group
filing a consolidated federal income Tax Return;

(vii) The Corporation (A) is not a party to, or bound by, any Tax allocation or
Tax sharing agreement or (B) has no current or potential obligation for the
Taxes of any Person under Treasury Regulations Section 1.1502-6(c), as a
transferee or successor, by contract or otherwise;

(viii) The Corporation (and any predecessor of the Corporation) is, has been
since incorporation, and will be up to and including the Closing Date, a validly
electing S corporation within the meaning of Code Sections 1361 and 1362, and
state law counterparts thereof;

(ix) Since incorporation, the Corporation has had only one class of stock within
the meaning of Section 1361(b)(1)(D) of the Code and the Treasury Regulations
thereunder, and each outstanding share of the Corporation’s common stock confers
identical rights to distributions and liquidation proceeds, taking into account
the corporate charter, certificate of incorporation, bylaws, applicable state
law, and binding agreements relating to distribution and liquidation proceeds;

(x) The Sellers will not take or allow any action that would result in the
termination of the Corporation’s status as a validly electing S corporation
within the meaning of Code Sections 1361 and 1362;

 

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(xi) The Corporation has not, in the past ten (10) years, (A) acquired assets
from another corporation in a transaction in which Corporation’s Tax basis for
the acquired assets was determined, in whole or in part, by reference to the Tax
basis of the acquired assets (or any other property) in the hands of the
transferor, or (B) acquired the stock of any corporation that is a qualified
subchapter S subsidiary;

(xii) The Corporation has no outstanding liabilities for Taxes under Code
Sections 1363(d), 1374, or 1375;

(xiii) The Corporation has neither issued nor assumed any indebtedness that is
subject to Code Section 279;

(xiv) The Corporation has not been at any time a member of any partnership or
joint venture or the holder of a beneficial interest in any trust for any period
for which the statute of limitations for any Tax has not expired;

(xv) The Corporation owns no stock, securities, partnership interests, limited
liability company interest, or other form of equity interest in any other
Person;

(xvi) There are no written proposed reassessments of any property owned by the
Corporation or other similar proposals that could increase the amount of any Tax
to which the Purchaser or the Corporation would be subject;

(xvii) Since the date set forth in the Interim Financial Statements, the
Corporation has incurred no liability for Taxes arising from any transactions
outside the ordinary course of business;

(xviii) The Corporation has not consummated, participated in, or served as
either a “tax shelter organizer” or a “tax shelter promoter” in respect of any
“tax shelter transaction” as such terms are defined in Code Sections 6011, 6111,
and 6662 prior to the amendment of the American Jobs Creation Act of 2004;

(xix) The Corporation (A) has not consummated, (B) has not “participated” or is
not currently “participating” in, or (C) is not or was not a “material advisor”
in respect of (x) a “tax shelter transaction”, (y) a “listed transaction” or
(z) a “reportable transaction”, as such terms are defined in Code Sections 6011,
6012, 6111, 6662, 6662A, or 6707A;

(xx) The Corporation has no elections in effect under Code Sections 108, 441,
472, 1017, 1033 or 4797;

(xxi) No income under any arrangement or understanding to which the Corporation
is a party will be attributed to the Corporation which is not represented by
income to which the Corporation is legally entitled;

(xxii) The Corporation is not subject to any accumulated earnings Tax, personal
holding company Tax or similar Tax;

(xxiii) The Corporation, has not, at any time (A) owned any assets outside of
the United States; (B) conducted a trade or business outside of the United
States, (C) owned an equity or creditor interest in any entity that either
(x) owned assets or (y) conducted a trade or business outside the

 

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United States; or (D) participated in or cooperated with an international
boycott within the meaning of Code Section 999;

(xxiv) The Corporation has:

(1) no income reportable for a period ending after the Closing but attributable
to a transaction (e.g., an installment sale) occurring in, or a change in
accounting method made for, a period ending on or prior to the Closing that
resulted in a deferred reporting of income from such transaction or from such
change in accounting method (other than a deferred intercompany transaction);

(2) not agreed to make and is not required to make any adjustment under Code
Section 481(a);

(3) no deferred gain or loss arising out of any deferred intercompany
transaction;

(4) no intercompany transaction or excess loss account described in Code
Section 1502 (or any corresponding or similar provision of state, local, or
foreign income Tax law);

(5) not and will not be required to include any item of income in, or exclude
any item of deduction from, taxable income for any taxable period (or portion
thereof) ending after the Closing Date as a result of (A) any closing agreement
described in Code Section 7121 executed on or before the Closing Date or (B) any
installment sale or open transaction disposition made on or before the Closing
Date.

(e) Schedule 2.12

(i) The Corporation does not have any subsidiary, including but not limited to
any subsidiary that is a “qualified subchapter S subsidiary” within the meaning
of Code Section 1361(b)(3)(B);

(ii) indicates the most recent Tax Return for each relevant jurisdiction for
which an audit has been completed;

(iii) indicates all Tax Returns that currently are the subject of audit,
examination, or review;

(iv) indicates the Tax basis in each asset of the Corporation;

(v) sets forth the amount of any (A) net operating loss, (B) net capital loss,
(C) accumulated earnings and profits, (D) unused investment, (E) unused foreign
tax or tax credit, (F) excess charitable contribution, or (G) other Tax credit,
allocable to the Corporation or the Corporation’s assets;

(vi) sets forth any applicable limitation on the use of any of the attributes
set forth in the preceding subsection (e.g., net operating loss, net capital
loss, etc.) whether by reason of Code Sections 269, 382, 383, or 384, state,
foreign, local law or otherwise; and

(vii) lists all material Tax elections currently in effect for the Corporation.

 

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SECTION 2.13 Litigation. There is no litigation, investigation, action, suit or
proceeding pending or, to the Knowledge of the Founding Shareholders,
threatened, by or before any court, arbitrator, administrative or governmental
body involving the Corporation or any Seller or any of their respective assets,
and (b) there are no outstanding orders or writs, injunctions or decrees of any
court, governmental body, or arbitration tribunal materially affecting or
materially limiting the conduct of the Corporation’s business or, in either
case, that are reasonably likely to prohibit or restrain the ability of any
Seller to enter into this Agreement or the Escrow Agreement or consummate the
transactions contemplated hereby or thereby.

SECTION 2.14 Contracts and Commitments.

(a) Schedule 2.14 lists all contracts, agreements, and commitments to which the
Corporation is a party, including oral agreements, that are material to the
conduct of the Business as presently conducted or presently contemplated or that
have material continuing obligations or rights after Closing (the “Contracts”).
For purposes of clarity, Schedule 2.14 includes, but is not limited to:

(i) any lease or sublease concerning the use, occupancy, management or operation
of any real property;

(ii) all agreements relating to the Intellectual Property of the Corporation and
Business;

(iii) any contracts or agreements relating to any License;

(iv) each contract, agreement, invoice, purchase order and other arrangement,
for the purchase of Inventory, spare parts, other materials or personal
property, with any supplier or for the furnishing of services to the Corporation
or otherwise related to the Business under the terms of which the Corporation:
(A) is likely to pay or otherwise give consideration of more than $25,000 in the
aggregate during the calendar year ended December 31, 2007, (B) is likely to pay
or otherwise give consideration of more than $25,000 in the aggregate over the
remaining term of such contract or (C) cannot be cancelled by the Corporation
without penalty or further payment and without more than 30 days’ notice;

(v) each contract, agreement, invoice, sales order and other arrangement, for
the sale of Inventory or other personal property, or for the furnishing of
services by the Corporation which: (A) is likely to involve consideration of
more than $25,000 in the aggregate during the calendar year ended December 31,
2007 (B) is likely to involve consideration of more than $25,000 in the
aggregate over the remaining term of the contract or (C) cannot be cancelled by
the Corporation without penalty or further payment and without more than 30
days’ notice;

(vi) all broker, distributor, dealer, manufacturer’s representative, franchise,
agency, sales promotion, market research, marketing, consulting and advertising
contracts and agreements to which the Corporation is a party;

(vii) all management contracts and contracts with independent contractors or
consultants (or similar arrangements) to which the Corporation is

 

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a party and which are not cancelable without penalty or further payment and
without more than 30 days’ notice;

(viii) all contracts and agreements relating to Indebtedness of the Corporation;

(ix) all contracts and agreements with any Governmental Authority to which the
Corporation is a party;

(x) all contracts and agreements that limit or purport to limit the ability of
the Corporation to compete in any line of business or with any Person or in any
geographic area or during any period of time;

(xi) all contracts and agreements between or among the Corporation, on one hand,
and the Sellers or any Affiliate of the Sellers, on the other hand;

(xii) all contracts and agreements providing for benefits under any Plan; and

(xiii) all other contracts and agreements, whether or not made in the ordinary
course of business, which are material to the Corporation or the conduct of the
Business, or the absence of which would have a Material Adverse Effect.

(b) There is no agreement, arrangement or commitment to which the Corporation is
party or otherwise binding on the Corporation or the Business that has the
effect of prohibiting or impairing the conduct of the Business in any geographic
area.

(c) Each Contract: (i) is valid and binding on the parties thereto and is in
full force and effect, (ii) is freely and fully assignable to the Purchaser
without penalty or other adverse consequences and (iii) upon consummation of the
transactions contemplated by this Agreement and the Escrow Agreement, except to
the extent that any consents set forth in Schedule 2.19 are not obtained, shall
continue in full force and effect without penalty or other adverse consequence.
The Corporation is not in breach of, or default under, any Contract.

(d) To the Knowledge of the Founding Shareholders, no other party to any
Contract is in breach thereof or default thereunder and none of the Founding
Shareholders nor the Corporation has received any notice of termination,
cancellation, breach or default under any Contract.

(e) The Corporation has made available to the Purchaser true and complete copies
of all Contracts.

(f) There is no contract, agreement or other arrangement granting any Person any
preferential right to purchase, other than in the ordinary course of business
consistent with past practice, any of the assets of the Business or Corporation
or any of the Shares.

SECTION 2.15 Employees; Labor Relations.

(a) There are no claims or charges by any employees or former employees of the
Corporation pending or, to the Knowledge of Founding Shareholders, threatened in
writing before the

 

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Equal Employment Opportunity Commission, or alleging discrimination, harassment
or wrongful termination. There are no collective bargaining agreements covering
any employees of the Corporation. The Business is not affected by any present
strike or other labor disturbance involving the Corporation’s employees nor, to
the Knowledge of Founding Shareholders, is any union attempting to represent, as
collective bargaining agent, any employees of the Corporation.

(b) Schedule 2.15(b) sets forth a complete and correct list of all employees of
Corporation including their names, job titles, compensation levels (including
base salary, commission, bonus and other incentive compensation), date and
amount of last compensation change, employment location, and date of hire.
Schedule 2.15(b) also sets forth a complete and correct list of all independent
contractors and other consultants engaged by Corporation including their names,
state or country of residence, payment arrangements and other material terms of
engagement.

(c) Schedule 2.15(c) sets forth a complete and correct list of all employment,
independent contractor, consulting or severance agreements between Corporation
and any current employee, independent contractor or other consultant of
Corporation (and any former employee, independent contractor or other consultant
of Seller to the extent that there are continuing obligations of Corporation
thereunder). Seller has delivered to Purchaser true, correct and complete copies
of each such agreement, as amended to date.

SECTION 2.16 Insurance. Schedule 2.16 hereto contains a list and description of
insurance policies maintained by the Corporation in respect of the Business.
Schedule 2.16 further lists all claims presently pending or, to the Knowledge of
Founding Shareholders, threatened which are covered by such policies. Neither
Founding Shareholders nor the Corporation has received written notice of
cancellation or non-renewal of any of such policies. All material assets,
properties and risks of the Corporation are, and for the past five years have
been, covered by valid and, except for insurance policies that have expired
under their terms in the ordinary course, currently effective insurance policies
or binders of insurance (including general liability insurance, property
insurance and workers’ compensation insurance) issued in favor of the
Corporation in each case with responsible insurance companies, in such types and
amounts and covering such risks as are consistent with customary practices and
standards of companies engaged in businesses and operations similar to those of
the Corporation.

SECTION 2.17 Conduct of Business and Absence of Changes. Since December 31,
2006, the Corporation has conducted the Business in the regular and ordinary
course and has not (a) suffered any Material Adverse Effect, (b) declared, set
aside, made or paid any cash or stock dividend or distribution, redeemed or
purchased, issued or sold any shares of its capital stock, (c) incurred any
Indebtedness in excess of $50,000 individually or in the aggregate or made any
loan to, or guarantee on behalf of, any person, (d) instituted any material
increase in the compensation payable or to become payable to any officers or
employees of the Corporation or any material changes in personnel policies or
employee benefits, except for increases in employee salaries in the ordinary
course of the Business, (e) entered into any agreements or commitments to merge
or consolidate with, or to purchase a substantial equity interest in or a
substantial portion of the assets of, or to acquire by any other manner, any
business entity or division thereof, (f) permitted or allowed any assets of the
Corporation to be subjected to any Encumbrance, (g) other than as disclosed in
writing to Purchaser, written down or written up the value of any Inventories or
Receivables or revalued any of the assets other than in the ordinary course of
business consistent with past practice of the Corporation, (h) made any change
in any method of accounting or accounting practice or policy used by the
Corporation, (i) waived any rights of substantial value to the Corporation or
terminated, cancelled, amended or compromised any material claims of the
Corporation, (j) made any material changes in the customary methods of
operations of the Corporation, including

 

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practices and policies relating to manufacturing, purchasing, Inventories,
marketing, selling and pricing, (k) made, revoked or changed any Tax election or
method of Tax accounting or settled or compromised any liability with respect to
Taxes of the Corporation, (l) granted any increase, or announced or promised any
increase, in the wages, salaries, compensation, bonuses, incentives, pension or
other benefits payable by the Corporation to any of its employees, including any
increase or change pursuant to the Stock Option Plan, (m) entered into any
agreement, arrangement or transaction with any of its directors, officers,
employees or stockholders (or with any relative, beneficiary, spouse of
Affiliate of such person); (n) disclosed any secret or confidential Intellectual
Property or permitted to lapse or become abandoned any Intellectual Property (or
any registration or grant thereof or any application relating thereto) to which,
or under which, the Corporation has any right, title, interest or license; or
(o) amended, modified or consented to the termination of any material contract
or the Corporation’s rights thereunder.

SECTION 2.18 Officers and Directors. Schedule 2.18 hereto sets forth the names
of all the officers and directors of the Corporation. All directors, officers,
management employees, consultants and technical and professional employees of
the Corporation are under written obligation to the Corporation to maintain in
confidence all confidential or proprietary information acquired by them in the
course of their employment and to assign to the Corporation all inventions made
by them within the scope of their employment during such employment and for a
reasonable period thereafter.

SECTION 2.19 Third Party Consents. No consent or approval under any Contract and
no consent or approval from, or filing or declaration with, any governmental or
regulatory authority is required to be obtained or made by Sellers or the
Corporation in connection with the execution, delivery or performance by Sellers
of this Agreement or of any other agreement, document or instrument to be
executed and delivered by Sellers pursuant hereto or in connection herewith or
the consummation of the transactions provided for in this Agreement, except any
such consent or approval which, if not obtained, would not reasonably be
expected to cause a Material Adverse Effect on Sellers or the Corporation. The
Founding Shareholders know of no reason why all the consents, approvals and
authorizations necessary for the consummation of the transactions contemplated
by this Agreement will not be received.

SECTION 2.20 Loans to or from Directors, Officers, Shareholders or Employees.
The Corporation does not have outstanding any loans, advances or other
Indebtedness incurred by any director, officer, shareholder or employee of the
Corporation or Sellers, and there are no loans or advances made to the
Corporation by, or Indebtedness incurred by the Corporation to, any director,
officer, shareholder or employee of the Corporation or Sellers.

SECTION 2.21 Compliance with Laws. The Corporation is and has been in
compliance, in all material respects, with all statutes, laws, rules,
regulations, judgments, orders, decrees, governmental permits and other
governmental authorizations or approvals applicable to the conduct of the
Business as presently conducted, including, without limitations, laws and
regulations pertaining to safety, environmental matters, and improper payments,
unless specifically disclosed herein.

SECTION 2.22 Regulatory Compliance.

(a) The Corporation does not have any biological and drug products being
manufactured, distributed, or developed by the Corporation that are subject to
the jurisdiction of the United States Food and Drug Administration (“FDA”) and
are required to be manufactured, labeled, stored, tested, distributed, and
marketed in compliance with all applicable requirements under the Federal Food,
Drug and Cosmetic Act of 1938, as amended, (the “FDCA”), the Public Health
Service Act, and their applicable implementing regulations.

 

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(b) Neither the Corporation, nor any of its Affiliates, have received any notice
since March 20, 2001 that the FDA or any other Governmental Authority has
commenced, or threatened to initiate, any action to withdraw approval, place
marketing or sale restrictions, or request the recall of any product of the
Corporation, or commenced, or threatened to initiate, any action to enjoin or
place restrictions on the production, sale, marketing or reimbursement of any
product of the Corporation.

(c) The Corporation has not committed any act, made any statement or failed to
make any statement that would reasonably be expected to provide a basis for the
FDA to invoke its policy with respect to “Fraud, Untrue Statements of Material
Facts, Bribery, and Illegal Gratuities” set forth in 56 Fed. Reg. 46191
(September 10, 1991) and any amendments thereto. Additionally, the Corporation,
nor to the Knowledge of the Founding Shareholders, nor any officer, employee or
agent of the Corporation has been convicted of any crime or engaged in any
conduct that would reasonably be expected to result in (i) debarment under 21
U.S.C. Section 335a or any similar state law or regulation or (ii) exclusion
under 42 U.S.C. Section 1320a-7 or any similar state law or regulation.

SECTION 2.23 Licenses. Schedule 2.23 lists each License held by the Corporation
necessary for the operation of the Business. Except as indicated in the notes to
Schedule 2.23, the Corporation has delivered or made available to Purchaser true
and complete copies of all Licenses held by the Corporation. Except as disclosed
in Schedule 2.23 the Licenses disclosed in Schedule 2.23 are, and have at all
relevant times been, in full force and effect, and no proceeding for the
suspension, limitation, revocation, termination or cancellation of any of them
is pending or, to the Knowledge of Founding Shareholders, threatened.

SECTION 2.24 Customers. Listed in Schedule 2.24 the ten most significant
customers (by revenue) of the Business for the twelve-month period ended
December 31, 2006 and the six month period ended June 30, 2007 and the amount
for which each such customer was invoiced during such period. None of the
Founding Shareholders nor the Corporation has received any notice or has any
reason to believe that any significant customer of the Business has ceased, or
will cease, to use the products, equipment, goods or services of the
Corporation, or has substantially reduced, or will substantially reduce, the use
of such products, equipment, goods or services at any time.

SECTION 2.25 Suppliers. Listed in Schedule 2.25 are the names and addresses of
each of the ten most significant suppliers of raw materials, supplies,
merchandise and other goods for the Business for the twelve-month period ended
December 31, 2006 and the six month period ended June 30, 2007 and the amount
for which each such supplier invoiced the Corporation during such period. None
of the Founding Shareholders nor the Corporation has received any notice or has
any reason to believe that any such supplier will not sell raw materials,
supplies, merchandise and other goods to the Corporation at any time after the
Closing on terms and conditions substantially similar to those used in its
current sales to the Business, subject only to general and customary price
increases. None of the raw materials, supplies, merchandise or other goods
supplied to the Business are such that they are not generally available in the
market from more than one source.

SECTION 2.26 Books and Records; Disclosure Controls.

(a) The books of account, minute books, stock record books, and other records of
the Corporation, all of which have been made available to Purchaser, are
complete and correct and have been maintained in accordance with sound business
practices including the maintenance of an adequate system of internal controls.
At the Closing, all of those books and records will be in the possession of the
Corporation.

 

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(b) The minute books of the Corporation contain accurate and complete records of
all meetings held of, and corporate action taken by, the shareholders and the
Board of Directors of the Corporation, and no meeting of any such shareholders
or Board of Directors has been held for which minutes have not been prepared and
are not contained in such minute books. At the Closing, all of those books and
records will be in the possession of the Corporation. Since inception of the
Corporation, the Board of Directors has not had any committees or committee
meetings.

SECTION 2.27 Environmental.

(a) The Corporation is and at all times has been, in compliance in all material
respects with, and has not been and is not in violation of or liable under, any
Environmental Law. The Corporation has not received and, to the Knowledge of the
Founding Shareholders, no other Person for whose conduct it is or may be held to
be responsible has received, any alleged, actual or Threatened order, notice, or
other communication from any Person, including without limitation, any
Governmental Authority (i) of any alleged, actual or potential violation or
failure by the Corporation or such Person to comply with any Environmental Law,
(ii) in connection with the Release of Hazardous Substance by the Corporation or
such Person, (iii) in connection with any remedial investigation, removal or
response action pursuant to any Environmental Law, or (iv) of any actual or
potential obligation to undertake or bear the cost of any Environmental, Health,
and Safety Liabilities with respect to any of the Facilities in which the
Corporation has or had an interest, or with respect to any property or Facility
at, from or to which Hazardous Substances were generated, manufactured, refined,
transferred, received, imported, used, transported, treated, stored, handled,
disposed, recycled, or processed by the Corporation or any other Person for
whose conduct the Shareholder is or may be held responsible.

(b) There are no pending or, to the Knowledge of the Founding Shareholders,
Threatened, claims, Encumbrances, or other restrictions of any nature, resulting
from any Environmental, Health, and Safety Liabilities or arising under or
pursuant to any Environmental Law, with respect to or affecting any of the
Facilities or any other properties or assets (whether real, personal, or mixed)
of the Corporation.

(c) There are no pending or, to the Knowledge of the Founding Shareholders,
Threatened Environmental, Health, and Safety Liabilities with respect to the
Facilities or with respect to any other properties and assets (whether real,
personal, or mixed) in which the Corporation (or any predecessor) has or had an
interest, or at any property geologically or hydrologically adjoining the
Facilities or any such other property or assets and to the Knowledge of the
Founding Shareholders no other Person for whose conduct it is or may be held
responsible has any Environmental, Health, and Safety Liabilities.

(d) There are no Hazardous Substances present on or in the Environment at the
Facilities or at any geologically or hydrologically adjoining property,
including any Hazardous Substances contained in barrels, above or underground
storage tanks, landfills, land deposits, dumps, equipment (whether moveable or
fixed) or other containers, either temporary or permanent, and deposited or
located in land, water, sumps, or any other part of the Facilities or such
adjoining property, or incorporated into any structure therein or thereon.
Neither the Corporation, nor any other Person for whose conduct it is or may be
held responsible, nor to the Knowledge of the Founding Shareholders any other
Person, has permitted or conducted, or is aware of, any Hazardous Activity
conducted with respect to the Facilities or any other properties or assets
(whether real, personal, or mixed) in which the Corporation has or had an
interest except in full compliance with all applicable Environmental Laws.

 

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(e) There has been no Release or, to the Knowledge of the Founding Shareholders,
Threat of Release, of any Hazardous Substances at or from the Facilities or at
any other locations where any Hazardous Substances were generated, manufactured,
refined, transferred, produced, imported, used, stored, or processed from or by
the Facilities, or from or by any other properties and assets (whether real,
personal, or mixed) in which the Corporation has or had an interest, or any
geologically or hydrologically adjoining property, whether by the Corporation,
or, to the Knowledge of the Founding Shareholders, any other Person.

(f) The Corporation has delivered to Purchaser true and complete copies and
results of any reports, studies, analyses, tests, or monitoring possessed or
initiated by the Corporation or any of the Shareholders pertaining to Hazardous
Substances or Hazardous Activities in, on, or under the Facilities, or
concerning compliance by the Corporation, or any other Person for whose conduct
it is or may be held responsible, with Environmental Laws.

(g) The Corporation possesses all licenses, permits, franchises, approvals,
authorizations, consents or orders of, or filings with, any Governmental
Authority or any other Person, necessary for the conduct of, or relating to the
operation of the Corporation required under Environmental Laws for its
operations as currently conducted.

(h) Neither this Agreement nor the consummation of the transactions contemplated
hereby will result in any obligations for site investigation or cleanup, or
notification to or consent of any Governmental Authority or third parties under
any Environmental Laws (including any so called “transaction-triggered” or
“responsible property transfer” laws and regulations).

(i) To the Knowledge of the Founding Shareholders, no real property that is or
has been owned or leased by the Corporation is currently listed on the National
Priorities List or the Comprehensive Environmental Response, Compensation and
Liability Information System, both promulgated under CERCLA, or on any analogous
state list

(j) To the Knowledge of the Founding Shareholders, no off site location at which
the Corporation or any other Person for whose conduct the Corporation may be
responsible has disposed or arranged for the disposal of any waste is listed on
the National Priorities List or on any analogous state list.

(k) There are no Encumbrances arising under any Environmental Laws on any
Facility arising as a result of any actions taken or omitted to be taken by the
Corporation or any other Person for whose conduct the Corporation may be
responsible, or any of their predecessors and no actions have been taken by any
Governmental Authority with respect to any Facility to impose an environmental
Encumbrance with respect to such Facility as a result of any such actions

SECTION 2.28 No Broker. No agent, broker, investment banker or other Person
acting on behalf of Sellers, the Corporation or any of its or their respective
directors or officers is or shall be entitled to any broker’s or finder’s fee or
any other commission or similar fee, directly or indirectly, from any of the
parties hereto in connection with any of the transactions provided for in this
Agreement.

SECTION 2.29 Disclosure. Neither this Agreement nor any of the Schedules hereto
contains any untrue statement of a material fact or, to the Knowledge of
Founding Shareholders and the Corporation, omits to state a material fact
necessary to make the statements contained herein or therein, in light of the
circumstances in which they were made, not misleading. The Founding Shareholders
are not

 

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aware of any facts pertaining to the Corporation which have not been disclosed
in this Agreement nor any of the Schedules hereto which could a Material Adverse
Effect.

SECTION 2.30 Bankruptcy. Sellers are not involved in any proceedings by or
against it or any of them in any court under any bankruptcy law or any other
insolvency or debtor’s relief law, whether federal, state or foreign, or for the
appointment of a trustee, receiver, liquidator, assignee, sequestrator or other
similar official.

ARTICLE III

REPRESENTATIONS AND WARRANTIES OF PURCHASER

Purchaser represents and warrants to Sellers, knowing and intending that Sellers
are relying hereon in entering into the transactions provided for in this
Agreement, as follows:

SECTION 3.01 Authority Relative to Agreement. Purchaser has the requisite
corporate power and authority to enter into and to perform its obligations under
this Agreement and the Escrow Agreement. The execution and delivery of this
Agreement and the Escrow Agreement by Purchaser and the consummation by
Purchaser of the transactions provided for in this Agreement have been duly
authorized by all necessary corporate action on the part of Purchaser.

SECTION 3.02 Execution and Performance of Agreement; Validity and Binding
Nature. This Agreement and the Escrow Agreement has been duly executed and
delivered by Purchaser, and this Agreement is, and each of the documents and
agreements executed and delivered by Purchaser pursuant to the terms hereof,
when duly executed and delivered by all parties whose execution and delivery
thereof is required, shall be, the legal, valid and binding obligations of
Purchaser, enforceable against Purchaser in accordance with their respective
terms, except to the extent that enforceability may be limited by bankruptcy,
receivership, moratorium, conservatorship, reorganization or other laws of
general application affecting the rights of creditors generally or by general
principles of equity.

SECTION 3.03 Non-Contravention. Neither the execution and delivery of this
Agreement or the Escrow Agreement, nor the consummation of the transactions
provided for in this Agreement shall (a) violate, breach or be in conflict with
any provisions of the Certificate of Incorporation or Bylaws of either the
Purchaser, (b) conflict with or violate any statute or law or any judgment,
decree, order, regulation or rule of any court or governmental or regulatory
authority to which the Purchaser is subject, or (c) conflict with, result in any
breach of, constitute a default (or event which with the giving of notice of
lapse of time, or both, would become a default) under, require any consent
under, or give to others any right of termination, amendment, acceleration,
suspension, revocation or cancellation of, any note, bond, mortgage or
indenture, contract, agreement, lease, sublease, license, permit, franchise or
other instrument or arrangement to which the Purchaser is a party, which would
adversely affect the ability of the Purchaser to carry out its obligations
under, and to consummate the transaction contemplated by, this Agreement and the
Escrow Agreement.

SECTION 3.04 Organization, Standing and Qualification. Purchaser is a Delaware
corporation duly organized, validly existing and in good standing under the laws
of the State of Delaware and has the corporate power and lawful authority to own
and hold its properties and conduct its business as now owned, held and
conducted in its state of Delaware and the states (or other jurisdictions) in
which it is required to qualify to do business, except where the failure to so
qualify would not have a material adverse effect on its business.

 

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SECTION 3.05 Financial Condition. Purchaser has, and shall have on the Closing
Date, cash (on hand or on deposit) sufficient in all respects to satisfy all of
its obligations pursuant to this Agreement. Purchaser’s obligations hereunder
are not contingent in any respect upon the obtaining or funding of any financing
for the payment of the Purchase Price hereunder by Purchaser.

SECTION 3.06 Bankruptcy. Neither Purchaser nor any of its Affiliates is involved
in any proceedings by or against it or any of them in any court under any
bankruptcy law or any other insolvency or debtor’s relief law, whether federal,
state or foreign, or for the appointment of a trustee, receiver, liquidator,
assignee, sequestrator or other similar official.

SECTION 3.07 Litigation. There is no litigation, investigation, action, suit or
proceeding pending or, to the Knowledge of Purchaser, threatened in writing by
or before any court, arbitrator or administrative or governmental agency
involving Purchaser, any Affiliate of Purchaser, or any of their respective
assets, which, if decided adversely to Purchaser or any Affiliate of Purchaser,
would result in a Material Adverse Effect on Purchaser. There are no outstanding
orders, writs, injunctions or decrees of any court, governmental body or
arbitration tribunal which have had or would have a Material Adverse Effect on
Purchaser.

SECTION 3.08 No Broker. No agent, broker, investment banker or other Person
acting on behalf of Purchaser or any of its Affiliates or any of its or their
directors or officers is or shall be entitled to any broker’s or finder’s fee or
any other commission or similar fee, directly or indirectly, from Sellers,
including, without limitation, the Corporation, in connection with any of the
transactions provided for in this Agreement.

SECTION 3.09 Investment Experience; Due Diligence. The Buyer (i) has had an
opportunity to ask questions and receive answers from the Corporation regarding
the business, properties, prospects and financial condition of the Corporation,
and (ii) is capable of evaluating the risks and merits of the purchase of the
Corporation and of protecting its own interests in connection with the purchase
of the Shares.

ARTICLE IV

COVENANTS

SECTION 4.01 Conduct of the Corporation’s Business. Sellers covenant and agree
that, prior to the Closing Date, unless Purchaser shall otherwise consent in
writing or as otherwise contemplated by this Agreement:

(a) the Business shall be conducted by the Corporation only in, and the
Corporation shall not take any action in respect of the Business that is not in,
the ordinary course consistent with the Corporation’s past practice (including
the timely payment of all expenses and not discounting or reducing any account
receivables), and the Business shall be conducted by the Corporation in material
compliance with all laws and requirements applicable to the conduct of the
Business as presently conducted, including without limitation all laws,
regulations and requirements applicable to the Corporation’s Licenses;

(b) the Corporation shall not, directly or indirectly, do any of the following:
(i) sell, pledge, dispose of or encumber any material assets of the Corporation,
except in the ordinary course of the Business; (ii) amend or propose to amend
its Articles of Incorporation or By-Laws; (iii) split, combine or reclassify any
outstanding shares of its capital stock; (iv) redeem, purchase, acquire or offer
to acquire

 

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any shares of its capital stock; (v) issue, sell, pledge or dispose of, or agree
to issue, sell, pledge or dispose of, any additional shares of, or securities
convertible into or exchangeable for, or any options, warrants or rights of any
kind to acquire any shares of, its capital stock of any class or other property
or assets; (vi) acquire (by merger, consolidation or acquisition of stock or
assets) any corporation, partnership or other business organization or division
thereof; or (vii) enter into any contract, agreement or commitment with respect
to any of the matters set forth in this Section 4.01(b);

(c) the Corporation shall not grant any material increase in the salary or other
compensation of its employees except in the ordinary course of the Business and
consistent with past practice, or pursuant to the terms of employment agreements
in effect on the date hereof or Employee Benefit Plans, or enter into any
employment agreement or make any loan to any employee of the Corporation (other
than student loans in the ordinary course of the Business);

(d) the Corporation shall not take any action to institute any new severance or
termination pay practices with respect to any directors, officers or employees
of the Corporation or to increase the benefits payable under its severance or
termination pay practices to the extent that the same would be obligations of
the Corporation after the Closing;

(e) the Corporation shall not adopt or amend, in any material respect, except as
provided for in this Agreement or as may be required by applicable law or
regulation, any, bonus, profit sharing, compensation, stock option, restricted
stock, pension, retirement, deferred compensation, employment or other employee
benefit plan, agreement, trust, fund, plan or arrangement for the benefit or
welfare of any directors, officers or employees;

(f) the Corporation shall maintain its books, accounts and records in the usual,
regular and ordinary manner in accordance with its past practice and shall
comply in all material respects with all federal, state, local or foreign laws,
rules, regulations, permits and licenses applicable to it and to the conduct of
the Business as presently conducted; and

(g) Sellers shall not sell, transfer, pledge, dispose of or otherwise encumber
any of the Shares.

SECTION 4.02 Access to Information.

(a) Sellers shall cause the Corporation and its officers, directors, employees,
representatives and agents to afford, from the date hereof to the Closing Date,
the officers, employees, accountants, attorneys and other representatives and
agents of Purchaser reasonable access, upon reasonable prior written notice,
during regular business hours, to the Corporation’s premises and designated
officers, employees and agents, properties, books, records and work papers, and
shall furnish Purchaser all financial, operating and other information and data,
as Purchaser, through its officers, accountants, attorneys and other employees
or agents, may reasonably request, all subject to any confidentiality provisions
set forth in any contracts or agreements by which Sellers or the Corporation are
bound, and any other confidentiality agreement between the parties to this
Agreement.

(b) No investigation pursuant to this Section 4.02 shall affect or add to any
representations or warranties of the parties hereto or the conditions to the
obligations of the parties hereto to consummate the transactions provided for in
this Agreement.

 

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SECTION 4.03 Consents. Sellers shall use commercially reasonable efforts to
obtain, or to cause the Corporation to obtain, the consents required under
Required Consent Contracts, and Purchaser shall cooperate with Sellers and the
Corporation in connection therewith, except that if neither Sellers nor the
Corporation is able to obtain the consent required under any Required Consent
Contract prior to the Closing, or if the consent required under a Required
Consent Contract cannot be obtained without unreasonable effort or expense by
Sellers or the Corporation, the parties shall: (i) cooperate in any reasonable
arrangement designed to provide, after the Closing, the Corporation or Purchaser
the benefits under any such Required Consent Contract; and (ii) use commercially
reasonable efforts to cooperate to obtain the consent required under such
Required Consent Contract as promptly as reasonably possible after the Closing
Date.

SECTION 4.04 Notification of Certain Matters. Sellers shall give prompt notice
to Purchaser, and Purchaser shall give prompt notice to Sellers, of (a) the
occurrence, or failure to occur, of any event that such party believes would be
likely to cause any of its representations or warranties contained in this
Agreement to be untrue or inaccurate in any material respect at any time from
the date hereof to the Closing Date, and (b) any material failure of Sellers or
Purchaser, as the case may be, or any officer, director, employee or agent
thereof, to comply with or satisfy any covenant, condition or agreement to be
complied with or satisfied by it hereunder; provided, however, that failure to
give such notice shall not constitute a waiver of any defense that may be
validly asserted. Sellers shall provide, twice per month, operating updates,
including the status of employee terminations and hiring.

SECTION 4.05 Corporation Employees.

(a) As soon as administratively practicable after the Closing Date, the
employees of the Corporation shall cease participation in any and all Employee
Benefit Plans of the Corporation and from and after the Closing Date, Purchaser
shall provide to each employee of the Corporation employee benefits and
incentives that are the same or similar in all material respects to the benefits
and incentives that are currently provided by Purchaser or its Affiliates to its
similarly-situated employees; provided, however, that as required by law, the
Corporation’s employees will continue to participate in the Corporation’s SIMPLE
IRA Plan through and including December 31, 2007 and will not be eligible to
participate in Purchaser’s qualified 401(k) Plan until January 1, 2008.

(b) For purposes of each Purchaser Plan providing medical, dental,
pharmaceutical and/or vision benefits to any employee of the Corporation,
Purchaser shall cause each employee of the Corporation as of October 1, 2007 to
be eligible and to participate, without any waiting period or break in coverage,
in each such Purchaser Plan to the extent that coverage under such Purchaser
Plan replaces coverage under a comparable Employee Benefit Plan for such
employee.

SECTION 4.06 Noncompetition/Nonsolicitation Obligations.

(a) Noncompetition. Each Founding Shareholder expressly covenants and agrees
that for a period of three years following the Closing Date (the “Restricted
Period”), he or she will not, directly or indirectly on behalf of any other
person, firm, limited liability company, partnership or corporation, as owner,
employee, creditor, consultant or otherwise, engage in any business in the
United States that manufactures, produces or supplies products or services of
the kind manufactured, produced or supplied (or contemplated to be manufactured,
produced or supplied) by the Corporation as of the Closing Date.

 

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(b) Customer Non-Solicitation. Each Seller expressly agrees that during the
Restricted Period, he or she will not solicit, divert, take away, or interfere
with, or attempt to solicit, divert, take away or interfere with, any of the
Corporation’s customers or the business or patronage of any such customers,
either for himself or on behalf of any other person, firm, partnership, limited
liability company or corporation within the United States.

(c) Employee Non-Solicitation. Each Seller expressly agrees that during the
Restricted Period, he or she will not solicit or recruit any employees,
officers, representatives or agents of the Corporation or its Affiliates, either
for himself or on behalf of any other person, firm, partnership, limited
liability company or corporation or interfere with or attempt to interfere with
any employment or consultant arrangement of the Corporation; provided, however,
that the foregoing will not prohibit a general solicitation to the public of
general advertising.

(d) Enforcement.

(i) Reasonableness of Restrictions. Each Seller acknowledges that compliance
with this Section 4.06, is reasonable and necessary to protect Purchaser and
Corporation’s legitimate business interests, including but not limited to
Purchaser and Corporation’s goodwill.

(ii) Irreparable Harm. Each Seller acknowledges that a breach of his obligations
under this Section 4.06 will result in great, irreparable and continuing harm
and damage to the Purchaser and Corporation for which there is no adequate
remedy at law.

(iii) Injunctive Relief. Each Seller agrees that in the event he breaches this
Section 4.06, Purchaser and the Corporation shall be entitled to seek, from any
court of competent jurisdiction, preliminary and permanent injunctive relief to
enforce the terms of this Section 4.06, in addition to any and all monetary
damages allowed by law, against him.

(iv) Extension of Covenants. In the event that a court determines that a Seller
violates any one or more of the covenants contained in this Section 4.06, the
Seller agrees that the time periods set forth in this Section 4.06 are suspended
during any period in which the Seller is breaching such covenants and the
Restricted Period shall be extended by the length of any such period of breach.

(v) Judicial Modification. The parties expressly agree that the character,
duration and geographical scope of such provisions in this Agreement are
reasonable in light of the circumstances as they exist on the date upon which
this Agreement has been executed. The parties have attempted to limit each
Founding Shareholder’s right to compete only to the extent necessary to protect
Purchasers and the Corporation’s goodwill and other business interests. The
parties recognize, however, that reasonable people may differ in making such a
determination. Consequently, the parties hereby agree that a court having
jurisdiction over the enforcement of this Section 4.06 shall exercise its power
and authority to reform the Founding Shareholders’ covenants under this
Section 4.06 to the extent necessary to cause the limitations contained therein
as to time, geographic area and scope of activity to be restrained to be
reasonable and to impose a restraint that is not greater than necessary to
protect Purchaser and Corporation’s goodwill and other business interests.

SECTION 4.07 Indemnification.

(a) Subject to the provisions of this Section 4.07 and the indemnification
obligations section forth in Article V, effective as of and after the Closing
Date, Sellers shall, jointly and severally,

 

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indemnify, defend and hold harmless Purchaser and its Affiliates, and their
respective stockholders, members, partners, managers, officers, directors,
employees, representatives, controlling persons, counsel, agents, successors and
assigns (“Purchaser Indemnified Party”), from and against all Damages, whether
involving a third party claim or between the parties to this Agreement, that any
Purchaser Indemnified Party may suffer or become subject to, as and when
incurred by such Purchaser Indemnified Party, as a result of (i) any inaccuracy
of any representation or warranty of Sellers and the Corporation contained in
this Agreement or any other documents relating to the transaction contemplated
herein (including all schedules, exhibits and annexes hereto and thereto),
(ii) any breach of any covenant or agreement of Sellers contained in this
Agreement or any other documents relating to the transaction contemplated
herein, and (iii) to the extent not covered by the Corporation’s general
liability insurance policy, any product shipped or manufactured by, or any
services provided by, the Corporation prior to the Closing Date.

(b) Subject to the provisions of this Section 4.07, effective at and after the
Closing Date, Purchaser shall indemnify, defend and hold harmless Sellers, and
their respective stockholders, members, partners, managers, officers, directors,
employees, representatives, controlling persons, counsel, agents, successors and
assigns (“Seller’s Indemnified Party”), from and against all Damages, whether
involving a third party claim or between the parties to this Agreement, that any
Seller’s Indemnified Party may suffer or become subject to, as and when incurred
by such Seller’s Indemnified Party, as a result of (i) any inaccuracy of any
representation or warranty made by Purchaser in this Agreement or any other
documents relating to the transaction contemplated herein (including all
schedules, exhibits and annexes hereto and thereto), (ii) any breach of any
covenant or agreement of Purchaser contained in this Agreement or any other
documents relating to the transaction contemplated herein, and (iii) all
liability for Taxes of Purchaser and taxes owed by the Corporation for all Tax
periods (and portions thereof) beginning after the Closing Date.

(c) The representations and warranties made herein shall survive the Closing
until the second anniversary of the Closing Date, except that (i) the
representations and warranties contained in Sections 2.01, 2.02, 2.03 and 2.05
shall survive indefinitely, (ii) the representations and warranties in
Section 2.12 and Article V, dealing with Tax matters, shall survive as provided
in Section 5.04; (iii) insofar as any claim is made by the Purchaser for the
breach of any representation or warranty of Founding Shareholders or the
Corporation contained herein relating to environmental matters, such
representation and warranty shall, for purposes of such claims by the Purchaser,
survive the Closing until the tenth anniversary of the Closing; (iv) the
representations and warranties which are the basis for claims asserted under
this Agreement prior to the expiration of such applicable time periods shall
survive until the final resolution of those claims and (v) insofar as any breach
of any representation or warranty is the result of fraud or intentional
misrepresentation then such representation or warranty shall survive the Closing
without limitation.

(d) The right to indemnification, payment of Damages and other remedies based on
representations, warranties, covenants and obligations in this Agreement shall
not be affected by any investigation conducted or any knowledge acquired (or
capable of being acquired) at any time, whether before or after the execution
and delivery of this Agreement or the Closing Date, with respect to the accuracy
or inaccuracy of or compliance with any such representation, warranty, covenant
or obligation.

(e) In the event that an Indemnifying Party shall be obligated to indemnify
Purchaser Indemnified Party or Seller’s Indemnified Party as the case may be,
pursuant to this Section 4.07, the Indemnifying Party shall, upon payment in
full of such indemnity, be subrogated to all rights of the Indemnified Party
with respect to claims to which such indemnification relates. Without limiting
the

 

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foregoing, if at any time subsequent to the receipt by an Indemnified Party of
an indemnity payment hereunder, such Indemnified Party (or any Affiliate of such
Indemnified Party) receives any recovery, settlement or other similar payment
with respect to any Damage incurred by Sellers or Purchaser, as the case may be,
for which such Indemnified Party received such indemnity payment, such
Indemnified Party shall promptly pay to the Indemnifying Party an amount equal
to the amount of such payment, less any expense incurred by such Person in
connection with such payment; provided that nothing herein shall require
Purchaser to submit or seek recovery under Purchaser’s insurance policies for
any Damages for which Seller is required to indemnify Purchaser hereunder.

(f) For the purpose of determining the amount of any Damages that are the
subject matter of a Claim for indemnification hereunder, each representation and
warranty contained in this Agreement shall be read without regard and without
giving effect to any “materiality” or “Material Adverse Effect” standard or
qualification contained in such representation or warranty.

SECTION 4.08 Defense of Claims. If a claim for Damages (a “Claim”) is to be made
by a Purchaser Indemnified Party or a Seller Indemnified Party (an “Indemnified
Party”), such Indemnified Party shall give notice (a “Claim Notice”) to
(i) Seller Representatives, in the case of an indemnification claim pursuant to
Section 4.07(a) or (ii) Purchaser, in the case of an indemnification claim
pursuant to Section 4.07(b) (“Indemnifying Party”), in either case as soon as
practicable after such Indemnified Party becomes aware of any fact, condition or
event which may reasonably give rise to Damages for which indemnification may be
sought under this Section 4.08; however, the failure of any Indemnified Party to
give timely notice hereunder shall not affect rights to indemnification
hereunder, except to the extent such Indemnified Party is actually prejudiced by
such failure (to the extent determined by a court of competent jurisdiction). If
any proceeding is filed or instituted making a claim against any Indemnified
Party with respect to a matter subject to indemnity hereunder, notice thereof
shall be given to the Indemnifying Party as promptly as practicable; however,
the failure of any Indemnified Party to give timely notice hereunder shall not
affect rights to indemnification hereunder, except to the extent such
Indemnified Party is actually prejudiced by such failure (to the extent
determined by a court of competent jurisdiction). After receipt of such a notice
of a proceeding, the Indemnifying Party shall have the right to defend the
Indemnified Party against the proceeding at the Indemnifying Party’s expense
with counsel of its choice satisfactory to the Indemnified Party, unless the
nature of the claim creates an ethical conflict or otherwise makes it
inadvisable for the same counsel to represent the Indemnified Party and the
Indemnifying Party, so long as (a) the Indemnifying Party notifies the
Indemnified Party in writing within fifteen (15) days after the Indemnified
Party has given notice of the claim or proceeding that the Indemnifying Party
will indemnify the Indemnified Party from and against the entirety of any
Damages the Indemnified Party may suffer resulting from, arising out of,
relating to, in the nature of, or caused by the claim or raised in the
proceeding, (b) the Indemnifying Party provides the Indemnified Party with
evidence reasonably acceptable to the Indemnified Party that the Indemnifying
Party will have the financial resources to defend against the proceeding and
fulfill its indemnification obligations hereunder, (c) the proceeding involves
only a claim for money damages and no other relief and (d) the Indemnifying
Party conducts the defense of the proceeding actively and diligently. The
Indemnifying Party shall not compromise or settle any such proceeding without
the prior written consent of the Indemnified Party or enter into any settlement
negotiations in connection with such proceeding without giving prior written
notice to the Indemnified Party. In all other cases the Indemnified Party may
defend the claim or proceeding with counsel of its choosing at the expense of
the Indemnifying Party. The Indemnified Party may, at its own cost, participate
in the investigation, trial and defense of any such proceeding defended by the
Indemnifying Party and any appeal arising therefrom and employ its own counsel
in connection therewith. The parties shall cooperate with each other in
connection with any defense in any notifications to insurers. If the
Indemnifying Party fails to promptly and diligently assume the defense of such

 

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proceeding after receipt of notice hereunder, the Indemnified Party against
which such claim has been asserted shall (upon delivering notice to such effect
to the Indemnifying Party) have the right to undertake the defense, compromise
or settlement of such proceeding with counsel of its own choosing at the expense
of the Indemnifying Party and the Indemnifying Party shall have the right to
participate therein at its own cost.

SECTION 4.09 Distributions from the Escrow Fund. In the event that (a) the
Seller Representatives shall not have objected to the amount claimed by the
Purchaser for indemnification with respect to any Damages in accordance with the
procedures set forth in the Escrow Agreement, or (b) the Seller Representatives
shall have delivered notice of their disagreement as to the amount of any
indemnification requested by the Purchaser and either (i) the Seller
Representatives and the Purchaser shall have, subsequent to the giving of such
notice, mutually agreed that the Sellers are obligated to indemnify the
Purchaser for a specified amount and shall have so jointly notified the Escrow
Agent or (ii) a final nonappealable judgment shall have been rendered by the
court having jurisdiction over the matters relating to such claim by the
Purchaser for indemnification from the Sellers and the Escrow Agent shall have
received, in the case of clause (i) above, written instructions from the Seller
Representatives and the Purchaser or, in the case of clause (ii) above, a copy
of the final nonappealable judgment of the court, the Escrow Agent shall deliver
to the Purchaser from the Escrow Fund any amount determined to be owed to the
Purchaser under this Section 4.09, in accordance with the Escrow Agreement.
Pursuant to the Escrow Agreement, in the event that one or more of the
Milestones set forth in Schedule 1.05 are not fully achieved by the end of 24
months from the date hereof, the Escrow Agent shall return all remaining amounts
in the Escrow Fund to Purchaser and the Seller Representatives will provide
written instructions directing the Escrow Agent to make such distribution.

SECTION 4.10 Limits on Indemnification. Notwithstanding anything to the contrary
contained in this Agreement, except with respect to claims relating to Taxes as
set forth in Article V: (a) an Indemnifying Party shall not be liable for any
claim for indemnification pursuant to Section 4.07, unless and until the
aggregate amount of indemnifiable Damages which may be recovered from the
Indemnifying Party equals or exceeds $75,000, after which the Indemnifying Party
shall be liable only for those Damages in excess of $75,000; and (b) the maximum
amount of indemnifiable Damages which may be recovered from an Indemnifying
Party (i) arising out of or resulting from the causes set forth in
Section 4.07(a) shall be an amount equal to his or her pro rata portion of the
Purchase Price as indicated by the number of Shares held by such Seller as set
forth on Schedule 1.02 and (ii) if arising out of or resulting from the causes
set forth in Section 4.07(b) shall be an amount equal to the pro rata portion of
the Purchase Price received by such Seller seeking indemnification under
Section 4.07(b) as indicated by the number of Shares held by such Seller as set
forth on Schedule 1.02. The provisions of this Section 4.10 shall not apply with
respect to indemnification for (i) Taxes, including any representations or
warranties made in Section 2.12 or Article V, (ii) the representations and
warranties contained in Sections 2.01, 2.02, 2.03, 2.05, or 2.28, or (iii) any
breach of any representation or warranty as a result of fraud or intentional
misrepresentation.

SECTION 4.11 Use of Intellectual Property. The Sellers acknowledge that from and
after the Closing Date, the name of the Corporation and all similar or related
names, marks and logos (all of such names, marks and logos being the
“Corporation Marks”) shall be owned by the Corporation, that neither the Sellers
nor any of their Affiliates shall have any rights in the Corporation Marks and
that neither the Sellers nor any of their Affiliates will contest the ownership
or validity of any rights of the Purchaser or the Corporation in or to the
Corporation Marks.

SECTION 4.12 Schedules.

 

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(a) The parties shall promptly revise or supplement their respective Schedules
hereto upon the occurrence of any event or change in condition that would render
any Schedule hereto incorrect or incomplete as of the Closing Date to reflect
information learned of or that came into existence after the date hereof and
that would have been required to be disclosed on one or more Schedules hereto if
such information was known or in existence on the date hereof.

(b) The disclosure of any matter, event, condition or state of facts in any
Schedule to this Agreement, as may be amended or supplemented prior to the
Closing shall expressly not be deemed to constitute an admission by Sellers, the
Corporation or Purchaser, or to otherwise imply, that any such matter is
material for the purposes of this Agreement. Any updates shall not serve as a
basis to qualify the Sellers’ representations or warranties unless accepted by
Purchaser.

(c) In the event of any inconsistency between the statements in the body of this
Agreement and any Schedule (other than an exception expressly set forth as such
in such Schedule with respect to a specifically identified representation or
warranty), the statements in the body of this Agreement will control.

SECTION 4.13 Exclusivity. Beginning on the date of the execution of this
Agreement through September 30, 2007 (“Exclusivity Period”), Sellers will not,
and Sellers will cause Corporation, and all the respective officers, directors,
employees, agents, stockholders or representatives of such parties, not to,
directly or indirectly, encourage, solicit, initiate or participate in
discussions or negotiations with, or provide any information to, and cease all
discussions and negotiations with, any third party (other than Purchaser)
concerning, or otherwise facilitate, any acquisition, merger or business
combination or the sale or license of all or any material portion of the
Corporation’s assets, securities, or other similar transaction or any sale of
debt or equity securities involving the Corporation.

SECTION 4.14 Leases. Prior to the Closing, Sellers shall use reasonable
commercial efforts where necessary to enter into amendments to its leases or
obtain landlords consents related to the change in control of the Corporation
contemplated by this Agreement; provided that Sellers shall be responsible for
all expenses associated with the leases in excess of the rental and other fees
set forth on Schedule 2.10(a) resulting from lease amendments referred to
herein.

SECTION 4.15 Seller’s Post Closing Release. Effective as of the Closing Date,
and subject to the payment of all amounts due Sellers from Purchaser hereunder,
each Seller hereby releases and discharges the Corporation and any of its
affiliates (whether in such Seller’s capacity as a shareholder, director,
officer, employee or otherwise) from any and all claims, demands and causes of
action, whether known or unknown, liquidated or contingent, relating to, arising
out of or in any way connected with the dealings of the Corporation or its
affiliates, and such Seller from the beginning of time through the Closing, it
being understood, however, that such release shall not operate to release the
Corporation or Purchaser from any obligations under this Agreement. Each Seller
acknowledges that the Legal Requirements of many states provide substantially
the following: “A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR
DOES NOT KNOW OR SUSPECT TO EXIST IN HIS OR HER FAVOR AT THE TIME OF EXECUTING
THE RELEASE, WHICH IF KNOWN BY HIM OR HER MUST HAVE MATERIALLY AFFECTED HIS OR
HER SETTLEMENT WITH THE DEBTOR.” Each Seller acknowledges that such provisions
are designed to protect a party from waiving claims which it does not know exist
or may exist. Nonetheless, each Seller agrees that, effective as of the Closing,
such Seller shall be deemed to waive any such provision. Each Seller further
agrees that such Seller shall not (i) institute any action, arbitration, audit,
hearing, investigation, litigation, or suit (whether civil, criminal,
administrative, investigative, or informal) commenced, brought, conducted, or
heard by or

 

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before, or otherwise involving, any governmental body or arbitrator
(“Proceeding”) based upon, arising out of, or relating to any of the released
claims, (ii) participate, assist, or cooperate in any such Proceeding, or
(iii) encourage, assist and/or solicit any third party to institute any such
Proceeding.

SECTION 4.16 Tax Receipts. Sellers Representatives shall assist Purchaser in
obtaining a receipt or certificate for the Corporation from each state in which
the Corporation files Tax Returns showing that all state and local Taxes have
been paid by Corporation.

SECTION 4.17 Confidentiality.

(a) For purposes of this Agreement, “Confidential Information” includes, but is
not limited to, the following information, which is the confidential,
proprietary information, and trade secrets of the Corporation: (1) customer
lists, consultant lists, and customer information as compiled by the
Corporation, including customer orders, product usage, product volumes, pricing,
customer technology, sale and contract terms, contract expiration dates, and
other compiled customer information; (2) the Corporation’s own internal
practices and procedures, compensation and payroll information, and personnel
data; (3) the Corporation’s financial condition and financial results of
operations; (4) supply of materials information, including sources and costs;
(5) information relating to designs, formula, developmental or experimental
work, know-how, products, processes, computer programs, source codes, data
bases, designs, schematics, inventions, creations, original works of authorship,
or other subject matter relating to the Corporation’s research and development,
strategic planning, manufacturing, engineering, purchasing, finance, marketing,
promotion, distribution, licensing, and selling activities; (6) all information
which Seller has a reasonable basis to consider confidential or which is treated
by the Corporation as confidential; and (7) any and all information, whether in
oral or written form, having independent economic value to the Corporation that
is not generally known to, and not readily ascertainable by proper means by a
person who can obtain economic value from its disclosure or use. Confidential
Information shall also include information which, though not specifically
disclosed to Seller by the Corporation, is made available to Seller through
Seller’s access to or inspection of the Corporation’s facilities or products.
Excluded from this paragraph is information that is already disclosed to third
parties by proper means and is in the public domain.

(b) Seller shall not directly or indirectly disclose, utilize, or authorize any
disclosure of Confidential Information to any third person or party.

ARTICLE V

TAX MATTERS

SECTION 5.01 Indemnification and Allocation of Liabilities.

(a) Tax Indemnification. Sellers shall indemnify and hold harmless the
Purchaser, its successors, heirs and assigns, and affiliates, subsidiaries,
stockholders, officers and directors of each, from and against, without
duplication, on an after-tax basis, all losses or liabilities incurred by it or
them directly and indirectly with respect to, in connection with, or arising
from:

 

  (i) any and all Taxes (or the non-payment thereof) of Sellers and the
Corporation for all Pre-Closing Tax Periods, and the portion of any Straddle
Period that ends on the Closing Date, as determined in Section 5.01(c);

 

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  (ii) any breach of any representation, warranty, or covenant relating to or
with respect to Taxes which includes but is not limited to the provisions set
forth in Section 2.12 and this Article V;

 

  (iii) any and all Taxes (or the non-payment thereof) of any Person (other than
the Corporation) imposed on the Sellers or the Corporation as a transferee or
successor by contract or pursuant to any Law, rule or regulation, which Taxes
relate to an event or transaction occurring on or before the Closing Date; and

 

  (iv) subject to the limitation on liability set forth in Section 5.04(b), a
reduction of Tax attributes of the Corporation (as owned by Purchaser) as a
result of any action or inaction involving the Sellers.

(b) Procedure for Reimbursement. The Sellers shall fully reimburse the Purchaser
for any Taxes or other amounts of the Purchaser or the Corporation, which are
the responsibility of the Seller pursuant to this Article V pursuant to the
provisions set forth in Section 5.03 (“Timing and Treatment of Payments”).

(c) Straddle Period. For purposes of this Article V, whenever it is necessary to
determine the amount of Taxes (or the non-payment thereof) of the Corporation
for a Straddle Tax Period, the determination of the Taxes for the portion of the
Straddle Tax Period (1) beginning prior to the Closing Date and ending on the
Closing Date, and (2) beginning the day after the Closing Date, shall be
determined:

 

  (i) in the case of Taxes that are either (x) based upon or related to income
or receipts, or (y) imposed in connection with any distribution, sale or other
transfer or assignment of property, by assuming that the Corporation had a
taxable year or period which ended at the close of the Closing Date and closing
the books of the Corporation as of such date (and for such purpose the taxable
period of any partnership, joint venture or other pass-through entity in which
the Corporation holds a beneficial interest shall be deemed to terminate at such
time), except that exemptions, allowances or deductions that are calculated on
an annual basis, such as the deduction for depreciation, shall be apportioned on
a time basis; and

 

  (ii)

in the case of Taxes not described in clause (i) that are imposed on a periodic
basis and measured by the level of any item, shall be deemed to be the amount of
such Taxes (including any minimum) for the entire period (or, in the case of
such Taxes determined on an arrears basis, the amount of such Taxes for the
immediately preceding period) multiplied by a fraction the numerator of which is
the number of calendar days in the period determined in clause (1) above and the
denominator of which is the number of calendar days in the entire Straddle Tax
Period. In the case of any Tax based upon or measured by capital (including net
worth or long-term debt) or intangibles, any amount thereof required to be
allocated under this subsection shall be computed by reference to the level of
such items on the Closing Date. All determinations necessary to

 

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effect the foregoing allocations shall be made in a manner consistent with prior
practice of the Corporation.

 

  (iii) Subject to the limitations on liability provided in Section 5.04, for
the avoidance of doubt, any Taxes (including but not limited to those arising
under Code §1374) resulting from a §338(h)(10) Election shall be the
responsibility of Sellers; and neither Corporation nor Purchaser shall be liable
for any such Tax.

(d) S Corporation Status. Corporation and Sellers shall not revoke Corporation’s
election to be taxed as an S corporation within the meaning of Code Sections
1361 and 1362. Corporation and Sellers shall not intentionally take or
intentionally allow any action that would result in the termination of
Corporation’s status as a validly electing S corporation within the meaning of
Code Sections 1361 and 1362.

(e) Tax Periods Ending on or before Closing Date. Purchaser shall prepare or
cause to be prepared and file or cause to be filed all Tax Returns for
Corporation for all periods ending on or prior to the Closing Date that are
filed after the Closing Date. With respect to Corporation’s short-year income
Tax Return, Purchaser and Seller Representatives shall mutually agree to such
return prior to filing, provided that any comments to such return submitted by
Seller Representatives are permitted by law. If Purchaser and
Seller Representatives are unable to mutually agree on such return, then the
Parties shall refer any dispute to an independent national accounting firm,
whose decision shall be binding on both Parties. To the extent permitted by
applicable law, Purchaser shall report on the Corporation’s short-year income
Tax Return and allocate to the Sellers individual K-1s the compensation
deduction attributable to the exercise of Sellers’ options. Further, to the
extent permitted by applicable law, Sellers shall include any income, gain,
loss, deduction or other Tax items for such periods on their Tax Returns in a
manner consistent with the Schedule K-1’s furnished by Corporation to Sellers
for such periods.

(f) Cooperation on Tax Matters.

 

  (i) Purchaser, Corporation and Sellers shall cooperate fully, as and to the
extent reasonably requested by the other party, in connection with the filing of
Tax returns and any audit, litigation, or other proceeding with respect to
Taxes. Such cooperation shall include the retention and (upon the other party’s
request) the provision of records and information reasonably relevant to any
such audit, litigation, or other proceeding and making employees available on a
mutually convenient basis to provide additional information and explanation of
any material provided hereunder. Corporation, Sellers and Purchaser agree (A) to
retain all books and records with respect to Tax matters pertinent to
Corporation relating to any taxable period beginning before the Closing Date
until expiration of the statute of limitations (and, to the extent notified by
Purchaser or Sellers, any extensions thereof), of the respective taxable
periods, and to abide by all record retention agreements entered into with any
taxing authority, and (B) to give the other party reasonable written notice
prior to transferring, destroying, or discarding any such books and records and,
if the other party so requests, Corporation or Sellers, as the case may be,
shall allow the other party to take possession of such books and records.

 

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  (ii) Purchaser and Sellers further agree, upon request, to use their best
efforts to obtain any certificate or other document from any governmental
authority or any other Person as may be necessary to mitigate, reduce or
eliminate any Tax that could be imposed (including with respect to the
transactions contemplated hereby).

 

  (iii) Except as otherwise required by Law, or with the consent of the
Purchaser, the Sellers covenant and agree that they shall not file or amend any
Tax Return, file any claim for refund, change any method of Tax accounting,
surrender any right to claim a refund of Taxes, consent to any extension or
waiver of the limitation period applicable to any Tax claim or assessment
relating to the Corporation, enter into any closing agreement, settle or
compromise any federal, state, local or foreign Tax liability or claim regarding
the Corporation, or make or change any Tax election with respect to any Tax
period, in each case that may result in any increased Tax liability of, or loss
of Tax benefits by, the Purchaser or the Corporation. Nothing in this Article
shall prohibit Purchaser (or the Corporation, if directed by Purchaser) to
amend, refile, or otherwise modify (or grant an extension of any statute of
limitations with respect to) any Tax Return relating in whole or in part to the
Corporation with respect to any taxable year or period ending on or before the
Closing Date or with respect to any Straddle Period provided such amendment,
refiling, modification, or extension will (i) be mutually agreed upon by
Purchaser and a Seller Representative prior to filing so long as any comments to
such return submitted by Seller Representative are permitted by law, and
(ii) not have an adverse affect on the liability of the Sellers or the
Corporation for which Sellers are liable pursuant to this Agreement.

(g) Tax-Sharing Agreements. All tax-sharing agreements or similar agreements
with respect to or involving the Corporation shall be terminated as of the
Closing Date and, after the Closing Date, Corporation shall not be bound thereby
or have any liability thereunder.

(h) Certain Taxes. All transfer, documentary, sales, use, stamp, registration
and other such Taxes and fees (including any penalties and interest) incurred in
connection with this Agreement shall be paid by Sellers when due, and Sellers
shall, at their own expense, file all necessary Tax Returns and other
documentation with respect to all such transfer, documentary, sales, use, stamp,
registration, and other Taxes and fees, and, if required by applicable law,
Purchaser shall, and shall cause its affiliates to, join in the execution of any
such Tax Returns and other documentation.

(i) Filings. Purchaser and Sellers agree, upon request, to provide the other
Party with all information that either Party may be required to report pursuant
to Code Section 6043, Code Section 6043A, or any other Section of the Code and
all Treasury Regulations promulgated thereunder.

SECTION 5.02 §338(h)(10) Election.

(a) Election. At Purchaser’s option, Purchaser and Sellers shall join in making
an election under Code Section 338(h)(10) (and any corresponding election under
state, local, or foreign tax law), with respect to the purchase and sale of the
Corporation’s stock hereunder (collectively,

 

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a “§338(h)(10) Election”). Sellers shall include any income, gain, loss,
deduction, or other tax item resulting from the §338(h)(10) Election on their
Tax Returns to the extent required by applicable law and will pay any Tax
attributable to the making of a §338(h)(10) Election. Sellers shall also pay any
Tax imposed on Corporation attributable to the making of the §338(h)(10)
Election , including (i) any Tax imposed under Code §1374, (ii) any tax imposed
under Treas. Reg. §1.338(h)(10)-1(e)(5), or (iii) any state, local or foreign
Tax imposed on the Corporation’s gain; provided, however, that all such taxes
are included in the Gross-Up Amount and paid by Purchaser to Sellers as provided
herein. The obligation of Purchaser to pay the Gross-Up Amount to Sellers is
intended to equal the amount of incremental Taxes owed by Sellers resulting from
making the §338(h)(10) Election, so that Sellers’ incremental Tax liability
resulting from such election is, by way of the Gross-Up Amount, borne by
Purchaser.

(b) Form 8023. Within ninety (90) days following the Closing Date, Purchaser
shall prepare Form 8023 and submit the form to the Sellers for their approval,
which shall not be unreasonably withheld. If Purchaser has failed to provide
Form 8023 to Sellers (or Sellers’ representative for distribution to Sellers)
within ninety (90) days of the Closing Date, then Sellers may (but shall have no
obligation to) prepare such form and submit such form to Purchaser for its
approval, which shall not be unreasonably withheld. If submitted by either
party, all Sellers shall timely execute and file the Form 8023.

(c) Allocation of Purchase Price. The Parties agree that the Purchase Price and
the liabilities of the Corporation (plus other relevant items) will be allocated
to the assets of the Corporation for all purposes (including Tax and financial
accounting purposes) as shown on the allocation scheduled (the “Allocation
Schedule”) attached hereto as Schedule 5.02(c), which was agreed to by the
Parties and prepared in a manner consistent with Code Sections 338 and 1060, and
the Treasury Regulations thereunder. Any subsequent adjustments pursuant to this
Agreement to the sum of the Purchase Price and liabilities shall be reflected in
the Allocation Schedule in a manner consistent with Sections 338 and 1060, and
the Treasury Regulations thereunder. Purchaser, Corporation and Sellers shall
timely file all Tax Returns (including Form 8883, amended returns and claims for
refund) and information reports in a manner consistent with this Agreement
including the Allocation Schedule, as amended, and none of them will take any
position inconsistent therewith in any Tax Return, in any refund claim, in any
litigation, or otherwise. If, pursuant to this Agreement, the amount allocated
to any asset is increased or decreased after the filing of the Form 8883, then
the parties shall timely file a supplemental Form 8883 in a manner consistent
with this Agreement, Code Sections 338, 1060, and the Treasury Regulations
thereunder.

(d) Valid §338(h)(10) Election. Without limiting the obligations of Sellers
pursuant to this Article V, if a §338(h)(10) Election is made with respect to
the acquisition of the stock of the Corporation, then Purchaser and Sellers
acknowledge that if Purchaser had purchased the assets of the Corporation
directly, rather than its outstanding stock, and Purchaser had neither assumed
nor purchased such assets “subject to” any Tax obligations of the Corporation or
Sellers, then Purchaser would not have any obligation for the Taxes of the
Corporation or Sellers for the period ending as of the Closing. Purchaser and
Sellers intend and agree that the Tax indemnification obligations of Sellers set
forth in this Article V shall be applied to indemnify and hold Purchaser and
Corporation harmless, at a minimum, from the same Taxes that would have remained
the obligation of Sellers, if the Parties had effected the transactions
contemplated by this Agreement as a direct purchase of the Corporation’s assets
by Purchaser, and the Corporation had been liquidated, with Seller succeeding to
the Corporation’s pre-Closing Tax liabilities, including the Tax liabilities
arising from such sale and liquidation.

SECTION 5.03 Timing and Treatment of Payments.

 

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(a) Payment by the Sellers of any amounts due under this Article V shall be made
at the earlier of (a) at least three Business Days before the due date of the
applicable Tax Return required to be filed by the Purchaser for which the
Sellers are responsible under this Article V, (b) within three Business Days
following earlier of the establishment of the Sellers’ responsibility that an
indemnity amount is payable to the Purchaser pursuant to this Article V, or
following the payment of Taxes by the Purchaser or the Corporation.

(b) Notwithstanding subsection (a) above, if liability under this Article V is
in respect of costs or expenses other than Taxes, payment by the Sellers of any
amounts due under this Article V shall be made within five Business Days after
the date when the Sellers have been notified by the Purchaser that the Sellers
have a liability for a determinable amount under this Article V and is provided
with calculations or other materials supporting such liability.

(c) Purchaser and Sellers agree that any payments made under this Article will
be treated by the parties on their Tax Returns as an adjustment to the Purchase
Price.

SECTION 5.04 Survival.

(a) General. Notwithstanding any provisions of this Agreement to the contrary,
this Article V and the representations and warranties set forth in Section 2.12,
shall survive and shall remain in effect until 90 days after the expiration of
all applicable statute of limitations and shall survive any death, corporate
reorganization, dissolution or liquidation of the Sellers, the Purchaser or the
Corporation. Notwithstanding anything to the contrary in this Agreement, the Tax
indemnification obligations of the Sellers are not subject to any threshold
requirement relating to the amount to be reimbursed or, except as set forth in
Section 5.04(b), any ceiling on the maximum amount subject to indemnification,
and Purchaser shall not be treated as having assumed the risk of any Taxes by
reason of the closing of the transaction or by reason of any knowledge that the
Purchaser had or should have had about the Sellers’ or the Corporation’s Tax
obligations, notwithstanding any other provision of this Agreement to the
contrary.

(b) §338(h)(10) Limitation. If the transactions contemplated by this Agreement
are not consummated in conjunction with the §338(h)(10) Election contemplated by
Section 5.02, then Sellers and Purchaser agree as follows:

(i) Covenant to Inform Others. If any of Sellers, Sellers’ Representatives,
Corporation, Purchaser or any of their affiliates is notified, in writing or
otherwise, that the §338(h)(10) Election will not apply to the transactions
contemplated by this Agreement, then such Person covenants to immediately inform
all Sellers, Sellers’ Representatives, Corporation and Purchaser of such
information.

(ii) Covenant to File Tax Return. If the §338(h)(10) Election will not apply to
the transactions contemplated by this Agreement, then Purchaser shall timely
notify each Seller that they should file an amended income Tax Return in order
to claim a refund for their share of the Gross Up Amount. Purchaser, at its own
cost and expense, shall hire a certified public accounting firm to prepare the
amended returns on behalf of each Seller, and each seller hereby names and
appoints Purchaser its attorney-in fact, with full power of substitution, to act
for and file such amended returns on behalf of Seller and Seller further agrees
to otherwise cooperate in all reasonable respects with Purchaser in preparing
such Seller’s amended Tax Return. Purchaser shall be solely responsible for the
preparation and filing of all Seller amended income Tax Returns. Upon the actual
receipt of any Tax refund resulting form the filing of the amended Tax Returns,
such Seller shall promptly remit such payment or refund to Purchaser.

 

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(iii) Acknowledgement. Notwithstanding anything to the contrary contained
herein, Purchaser acknowledges that Sellers only liability arising from the
failure of the §338(h)(10) Election shall be to (x) remit to Purchaser any Tax
refund received by Sellers under this Section 5.04(b), and (y) remit to
Purchaser any portion of the Gross-Up Amount received by Sellers, which were not
paid or otherwise remitted with respect to Sellers Tax Returns. The exception
provided in (y) is intended to cover situations where the Gross-Up Amount did
not go to pay a Seller’s taxes. For example, if a Seller has a tax loss
carryforward and uses that tax loss carryforward to offset the income resulting
from the §338(h)(10) Election then they will not have to use the Gross-Up amount
to pay taxes.

ARTICLE VI

CONDITIONS TO CLOSING

SECTION 6.01 Conditions to Each Party’s Obligation to Close. The respective
obligations of each party to consummate the transactions provided for in this
Agreement shall be subject to the fulfillment, on or prior to the Closing Date,
of the following conditions:

(a) no preliminary or permanent injunction or other order, decree or ruling
issued by any court of competent jurisdiction nor any statute, rule, regulation
or order entered, promulgated or enacted by any governmental, regulatory or
administrative agency or authority shall be in effect that would prevent the
consummation of the transactions provided for in this Agreement;

(b) there shall not be pending nor shall there have been threatened, any
litigation, investigation, action, suit or proceeding by or before any court,
arbitrator or administrative or governmental body challenging the lawfulness of
or seeking to prevent or delay any aspect of the transactions provided for in
this Agreement or seeking monetary or other relief by reason of the consummation
of any of such transactions; and

(c) all governmental and regulatory consents and approvals which are required to
be obtained prior to the Closing and which are necessary to permit the
consummation of the transactions provided for in this Agreement, and all third
party consents which are required by this Agreement to be obtained prior to the
Closing (other than consents which the Corporation and Sellers are unable to
obtain, or which cannot be obtained without unreasonable effort or expense by
the Corporation or Sellers, the failure or inability of which to obtain would
not or is reasonably likely not to result in a Material Adverse Effect on the
Corporation) shall have been received, and no such approvals or consents shall
impose any condition or limitation that would result or be reasonably likely to
result in a Material Adverse Effect on the Corporation.

SECTION 6.02 Conditions to the Obligation of Sellers. The obligation of Sellers
to consummate the transactions provided for in this Agreement shall be subject
to the fulfillment, on or prior to the Closing Date, of the following additional
conditions:

(a) Purchaser shall have performed and complied in all material respects with
all obligations and agreements required to be performed and complied with by it
under this Agreement on or prior to Closing Date;

(b) the representations and warranties of Purchaser contained in this Agreement
shall be true and correct in all material respects on and as of the Closing Date
as if made at and as of such date,

 

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except that any representations and warranties that are qualified by standards
of materiality shall be true and correct on and as of the Closing Date;

(c) Sellers Representatives shall have received a certificate signed by a senior
executive officer of Purchaser, dated as of the Closing Date, to the effect that
the conditions set forth in Section 6.02(a) and Section 6.02(b) above have been
satisfied; and

(d) Purchaser shall have executed and delivered the Escrow Agreement to Seller
Representatives and Escrow Agent.

SECTION 6.03 Conditions to the Obligation of Purchaser. The obligation of
Purchaser to consummate the transactions provided for in this Agreement, shall
be subject to the fulfillment, on or prior to the Closing Date, of the following
additional conditions:

(a) Sellers shall have performed and complied in all material respects with all
obligations and agreements required to be performed and complied with by it
under this Agreement on or prior to the Closing Date;

(b) the representations and warranties of Sellers contained in this Agreement
shall be true and correct in all material respects on and as of the Closing Date
as if made at and as of such date;

(c) Purchaser shall have received a certificate signed by Seller
Representatives, dated as of the Closing Date, to the effect that the conditions
set forth in Section 6.03(a) and Section 6.03(b) above have been satisfied;

(d) Sellers shall have delivered to Purchaser the certificate(s) representing
the Shares, duly endorsed for transfer to Purchaser in accordance with the terms
of Section 1.06 hereof and in form satisfactory to the Purchaser;

(e) Purchaser shall have received the resignations, effective as of the Closing
Date, of all of the directors of the Corporation, except for such persons as
shall have been designated in writing to remain on the Corporation’s Board of
Directors following the Closing Date;

(f) Purchaser shall have received (i) a copy of the Articles of Incorporation,
as amended, of the Corporation, certified by the Secretary of State of
California, as of a date not earlier than 10 business days prior to the Closing
Date and accompanied by a certificate of the Secretary of the Corporation, dated
as of the Closing Date, stating that no amendments have been made to such
Articles of Incorporation since such certified date, (ii) the By-laws of the
Corporation, certified by the Secretary of the Corporation; and (iii) good
standing certificates for the Corporation from the Secretary of State of
California and from the Secretary of State in each other jurisdiction in which
the operation of the Business in such jurisdiction requires the Corporation to
qualify to do business as a foreign corporation, in each case as of a date not
earlier than five business days prior to the Closing Date;

(g) There shall not have occurred any Material Adverse Effect as to the
Corporation;

(h) The Stock Option Plan shall be terminated and all employee (or other)
options issued thereunder shall be exercised or cancelled prior to the Closing;
and

 

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(i) Sellers Representatives shall have executed and delivered the Escrow
Agreement to Purchaser and Escrow Agent.

ARTICLE VII

TERMINATION AND ABANDONMENT

SECTION 7.01 Termination and Abandonment. This Agreement may not be terminated
or rescinded after completion of the Closing. This Agreement may be terminated
and the transactions provided for in this Agreement may be abandoned at any time
prior to completion of the Closing only in accordance with the following:

(a) by mutual agreement of Purchaser and Seller Representatives;

(b) by Seller Representatives, if all of the conditions set forth in
Section 6.03 shall have been complied with and performed and one or more of the
conditions set forth in Section 6.01 and Section 6.02 shall not have been
complied with or performed in any material respect and such noncompliance or
nonperformance shall not have been cured or eliminated (or by its nature cannot
be cured or eliminated) by Purchaser on or before the Drop Dead Date, subject to
Sellers’s right to extend the Drop Dead Date for up to two successive 30-day
periods; or

(c) by Purchaser, if all of the conditions set forth in Section 6.02 shall have
been complied with and performed and one or more of the conditions set forth in
Section 6.01 and Section 6.03 shall not have been complied with or performed in
any material respect and such noncompliance or nonperformance shall not have
been cured or eliminated (or by its nature cannot be cured or eliminated) by
Sellers on or before the Drop Dead Date, subject to Purchaser’s right to extend
the Drop Dead Date for up to two successive 30-day periods.

SECTION 7.02 Effect of Termination. Except as provided in Section 4.06 with
respect to the non-solicitation of customers and employees, and except as
provided in Section 8.02 hereof with respect to expenses, in the event of the
termination of this Agreement and the abandonment of the transactions provided
for in this Agreement pursuant to Section 7.01, this Agreement shall thereafter
become void and have no effect, and no party hereto shall have any liability to
any other party hereto or its shareholders or directors or officers in respect
thereof, except that nothing herein shall relieve any party from liability for
willful breach hereof or for fraud with respect hereto.

ARTICLE VIII

MISCELLANEOUS

SECTION 8.01 Seller Representatives.

(a) Sellers hereby designate the individuals set forth on Schedule 8.01 as the
Sellers representatives (individually, a “Seller Representative” and
collectively, the “Seller Representatives”), to represent Sellers, their
successors and assigns following the Closing Date as agent and attorney-in-fact
in all matters relating to this Agreement and the transactions contemplated
under this Agreement, including without limitation, (i) accepting the Purchase
Price on behalf of the Sellers as provided in Section 1.04 from Purchaser and
distributing the applicable amounts to each Seller; (ii) determining whether the
conditions to Closing in Article VI have been satisfied and supervising the
Closing, including

 

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waiving any such condition if any Sellers Representative, in his or her sole and
absolute discretion, determines that such waiver is appropriate; (iii) accepting
notices on behalf of any and all Sellers in accordance with this Agreement;
(iv) negotiating and entering into the Escrow Agreement on behalf of Sellers and
taking any and all actions that may be necessary or desirable in connection
therewith, as determined by a Sellers Representative in his or her sole and
absolute discretion, (v) granting any consent or approval on behalf of any and
all Sellers under this Agreement; and (vi) taking any and all other actions and
doing any and all other things provided in or contemplated by this Agreement to
be performed by a Sellers Representative on behalf of any and all Sellers. Any
Seller Representative shall have full power and authority to take any and all
actions and make any and all decisions required or permitted to be taken or made
by Sellers under this Agreement and the Escrow Agreement following the execution
of this Agreement, including related to any indemnification matters hereunder,
which power and authority shall include, without limitation, full power and
authority to agree to, negotiate, enter into settlements and compromises of and
demand arbitration, and comply with orders of a court and awards of arbitrators
with respect to (i) any claim for Damages by Purchaser against Sellers, and
(ii) any claim for Damages by Sellers; provided that the Seller Representatives
shall have no authority to take or agree to any action which would have the
effect of increasing the maximum liability of any Seller or changing any
Seller’s proportionate share of the liability without the prior written consent
of such Seller. All actions taken by the Seller Representatives which they deem
necessary or appropriate shall, subject to the proviso of the preceding
sentence, be binding upon each Seller and his, her or its successors, heirs,
representatives and assigns as if expressly confirmed and ratified in writing by
such Seller, and each Seller hereby ratifies and confirms all that the Seller
Representatives shall do or cause to be done in accordance with the authority
granted hereby. Notwithstanding the foregoing, in the event that no Seller
Representative acts with respect to an action or a decision required or
permitted to be taken then each Seller shall be entitled to negotiate, enter
into a settlement or compromise any claim, including a claim for Damages, that
covers the respective pro rata share for each Seller.

(b) Any Seller Representative may be changed from time to time upon not less
than 30-days prior written notice to Purchaser. Any vacancy in the position of a
Seller Representative may be filled by approval of a majority-in-interest of the
Sellers based upon their percentage of ownership of the Shares at the time of
Closing.

(c) The Sellers’ Representative identified on Schedule 1.04 shall provide wire
instructions to a designated bank account at an FDIC insured financial
institution for the purposes of (i) receiving the Purchase Price (less
applicable withholding taxes) specified in Section 1.04 on behalf of the Sellers
and (ii) distributing such Purchase Price in the appropriate proportions, to
each Seller in accordance with Schedule 1.04. At the Closing, the Sellers
Representative designated on Schedule 1.04 shall distribute, by wire transfer of
immediately available funds, the Purchase Price in her possession to each Seller
in an amount set forth opposite such Seller’s name on Schedule 1.04. The above
distributions shall be subject to the provisions of Section 8.01(d).

(d) Payment to the Sellers Representative designated in Schedule 1.04 of the
Purchase Price or any other amount payable hereunder by Purchaser to Sellers,
and delivery by Purchaser to such Sellers Representative of any notice under
this Agreement, shall constitute proper payment or proper delivery of notice (as
applicable) by Purchaser to all of Sellers. Except as otherwise provided in this
Agreement, Purchaser shall have no obligation to distribute, or liability with
respect to the distribution of, the Purchase Price or any other payment, or any
notice among Sellers other than to the Sellers Representative designated on
Schedule 1.04. Each Seller agrees that Purchaser shall be entitled to rely on
any act or omission by such Sellers Representative as an act or omission
authorized by and made on behalf of Sellers (each, an “Authorized Action”),
without any obligation on the part of Purchaser to

 

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investigate or verify that Sellers Representative is authorized to undertake
such Authorized Action. Each Authorized Action undertaken by the Sellers
Representative shall be binding on each Seller as fully as if such Seller had
directly undertaken such Authorized Action.

SECTION 8.02 Expenses. Except as otherwise provided herein, each of the Sellers
and Purchaser will bear its own costs and expenses (including legal fees and
expenses) incurred in connection with this Agreement and the transactions
contemplated hereby.

SECTION 8.03 Press Releases and Public Announcements. Other than a press release
by Purchaser announcing the closing of the transactions contemplated hereby, no
party shall issue any press release or make any public announcement relating to
the subject matter of this Agreement without the prior written approval of the
other parties; provided, however, that any party may make any public disclosure
it believes in good faith is required by applicable law or listing requirements
(in which case the disclosing party shall use reasonable efforts to advise the
other parties and provide them with a copy of the proposed disclosure at a
reasonable time prior to making the disclosure).

SECTION 8.04 Amendments. This Agreement may be modified, amended or supplemented
at any time by action of Seller Representatives and Purchaser. Without limiting
the generality of the foregoing, this Agreement may only be amended, varied or
supplemented by an instrument in writing that is signed by Seller
Representatives and Purchaser, consistent with Section 8.01 hereto, except that
the parties may revise or supplement their respective Schedules as provided in
Section 4.12 without the necessity of a signed writing.

SECTION 8.05 Section Headings and Captions. The section headings and the
captions of the Articles in this Agreement are solely for convenient reference
and shall not be deemed to affect the meaning or interpretation of this
Agreement.

SECTION 8.06 Execution in Counterparts. For the convenience of the parties, this
Agreement may be executed in one or more counterparts, each of which shall be
deemed an original, but all of which together shall constitute one and the same
instrument.

SECTION 8.07 Notices. All notices that are required or may be given pursuant to
the terms of this Agreement shall be in writing and shall be sufficient if given
in writing and delivered by hand or national overnight courier service,
transmitted by telecopy or mailed by registered or certified mail, postage
prepaid, as follows:

If to Sellers or Seller Representatives, to:

Spring Bioscience, Inc.

46755 Fremont Boulevard

Fremont, California 94538

Telephone No.:                 

Facsimile No.:                 

Attention: Haiying Xia

with a copy to:

Brian Fraser, Esq.

6144 LaSalle Avenue

 

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Suite 646

Oakland, CA 94611

Telephone No.:(510) 655-2122

Facsimile No.: (510) 655-5748

If to Purchaser, to:

Ventana Medical Systems, Inc.

1910 East Innovation Park Drive

Oro Valley, Arizona 85755

Telephone No.: (520) 229-4180

Facsimile No.: (520) 229-4216

Attention: Mark Tucker

with a copy to:

Snell & Wilmer, L.L.P.

One Arizona Center

400 East Van Buren

Phoenix, AZ 85004-2202

Telephone No.: (602) 382-6206

Facsimile No.: (602) 382-6070

Attention: Daniel M. Mahoney, Esq.

or such other address or addresses as any party hereto shall have designated by
notice in writing to the other parties hereto.

SECTION 8.08 Waivers. Seller Representatives (on behalf of the Sellers), on the
one hand, and Purchaser, on the other hand, may, by written notice to the other:
(a) extend the time for the performance of any of the obligations or other
actions of the other under this Agreement; (b) waive any inaccuracies in the
representations or warranties of the other contained in this Agreement or in any
document delivered pursuant to this Agreement; (c) waive compliance with any of
the conditions of the other contained in this Agreement; or (d) waive
performance of any of the obligations of the other under this Agreement. Except
as provided in the preceding sentence, no action taken pursuant to this
Agreement, including, without limitation, any investigation by or on behalf of
any party, shall be deemed to constitute a waiver by the party taking such
action of compliance with any representations, warranties, covenants or
agreements contained in this Agreement. The waiver by any party hereto of a
breach of any provision of this Agreement shall not operate or be construed as a
waiver of any subsequent breach.

SECTION 8.09 Entire Agreement. This Agreement, its Schedules and the documents
executed on the Closing Date in connection herewith, including, without
limitation, the documents included as exhibits hereto, constitute the entire
agreement among the parties hereto with respect to the subject matter hereof and
supersede all prior agreements and understandings, oral and written, among the
parties hereto with respect to the subject matter hereof. No representation,
warranty, promise, inducement or statement of intention has been made by any
party that is not embodied in this Agreement or such other documents, and none
of the parties shall be bound by, or be liable for, any alleged representation,
warranty, promise, inducement or statement of intention not embodied herein or
therein.

 

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SECTION 8.10 Applicable Law. This Agreement shall be governed by and construed
in accordance with the laws of the State of Delaware without regard to
principles of conflict of laws. Each of the parties hereto hereby waives to the
fullest extent permitted by applicable law any right it may have to a trial by
jury with respect to any litigation directly or indirectly arising out of, under
or in connection with this Agreement or the transactions contemplated by this
Agreement. Each of the parties hereto hereby (a) certifies that no
representative, agent or attorney of the other party has represented, expressly
or otherwise, that such other party would not, in the event of litigation, seek
to enforce the foregoing waiver and (b) acknowledges that it has been induced to
enter into this Agreement and the transactions contemplated by this Agreement,
as applicable, by, among other things, the mutual waivers and certifications in
this Section 8.10.

SECTION 8.11 Binding Effect, Benefits. This Agreement shall inure to the benefit
of and be binding upon the parties hereto and their respective legal
representatives and permitted successors and assigns. Except as expressly set
forth herein, nothing in this Agreement is intended to confer on any Person
other than the parties hereto, or their respective permitted successors and
assigns, any rights, remedies, obligations or liabilities under or by reason of
this Agreement.

SECTION 8.12 Assignability. This Agreement and the rights hereunder shall not be
assignable by any Sellers. The parties agree that Purchaser may assign this
Agreement and the rights hereunder to an Affiliate of Purchaser.

 

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IN WITNESS WHEREOF, the parties have executed and delivered this Stock Purchase
Agreement as of the day and year first above written.

 

SELLERS:   By:  

/s/ HAIYING XIA

    Haiying Xia   By:  

/s/ DAN BORDERS

    Dan Borders   By:  

/s/ DELIA YUEN

    Delia Yuen   By:  

/s/ KEN TSEUNG

    Ken Tseung   By:  

/s/ JEFF KIRKENDALL

    Jeff Kirkendall   By:  

/s/ ZHIDA HUANG

    Zhida Huang   By:  

/s/ YONGMEI MENG

    Yongmei Meng   By:  

/s/ ZAOYUAN PENG

    Zaoyuan Peng   By:  

/s/ MARC KEY

    Marc Key   By:  

/s/ HUI ZHANG

    Hui Zhang   By:  

/s/ YANLING XU

    Yanling Xu   By:  

/s/ YANI CHEN

    Yani Chen   By:  

/s/ WEIWEI CAI

    Weiwei Cai  

 

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PURCHASER: VENTANA MEDICAL SYSTEMS, INC. By:  

/s/ LAWRENCE MEHREN

  Lawrence Mehren Title:  

Senior Vice President, Chief Financial Officer

and Secretary

 

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