Exhibit 10.1

 

MEMBERSHIP INTEREST PURCHASE AGREEMENT

 

by and between

 

L-1 Investment Partners, LLC

 

“Buyer”

 

- and -

 

Integrated Biometric Technology, Inc.

 

“Seller”

 

-and-

 

Integrated Biometric Technology, LLC

 

“Subsidiary”

 

November 4, 2005

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MEMBERSHIP INTEREST PURCHASE AGREEMENT

 

THIS MEMBERSHIP INTEREST PURCHASE AGREEMENT (this “Agreement”) is made and
entered into effective as of November 4, 2005 (the “Effective Date”) by and
between Integrated Biometric Technology, Inc., a Delaware corporation (the
“Seller”), Integrated Biometric Technology, LLC, a Florida Limited Liability
Company (the “Subsidiary”), and L-1 Investment Partners, LLC, a Delaware limited
liability company (“Buyer” or “L-1”).

 

A. The Seller is a holding company that owns one hundred percent (100%) of
Subsidiary. Subsidiary is engaged in the business of providing biometric
technology, including automated electronic fingerprinting technology, to private
and governmental customers (the “Business”).

 

B. The Seller desires to sell to Buyer, and Buyer desires to purchase from the
Seller, fifty-seven percent (57%) of the issued and outstanding membership
interests of the Subsidiary, including all financial and governance rights
associated therewith (the “Membership Interests”) on the terms and conditions
set forth in this Agreement.

 

C. Simultaneously with closing of the transfer of the Membership Interests from
the Seller to the Buyer pursuant to the terms of this Agreement, the Buyer shall
contribute to the Subsidiary, in cash, as additional capital, a sum equal to the
outstanding borrowings of the Subsidiary at Closing in exchange for the issuance
to the Buyer by the Subsidiary of additional membership interests amounting to
three percent (3%) of the issued and outstanding membership interests of the
Subsidiary immediately after such issuance (“Additional Membership Interests”),
and the Subsidiary shall use the proceeds of such capital contribution to repay
in full all of the outstanding borrowings of the Subsidiary.

 

NOW, THEREFORE, in consideration of the mutual representations, warranties and
agreements set forth herein, and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
agree as follows:

 

1. Sale and Purchase.

 

1.1. Agreements to Sell and Purchase.

 

(a) On the Closing Date (as hereinafter defined) the Seller shall sell to Buyer,
and Buyer shall purchase from the Seller, the Membership Interests for the
Purchase Price set forth in Schedule 1.1 (a) hereof.

 

(b) On the Closing Date (as hereinafter defined) the Subsidiary shall sell to
Buyer, and Buyer shall purchase from the Subsidiary, the Additional Membership
Interests for the Additional Purchase Price set forth in Schedule 1.1
(b) hereof.

 

1.2. Closing. The closing of the sale and purchase of the Membership Interests
and the Additional Membership Interests (the “Closing”) will take place at the
offices of Boult, Cummings, Conners & Berry, PLC in Nashville, Tennessee, on or
before November 14, 2005, provided that all conditions set forth in Article 6
have either been satisfied or, in the case of conditions not satisfied, waived
in writing by the party entitled to the benefit of such conditions (the “Closing
Date”). At the Closing, the Seller shall deliver, or cause to be delivered, to
Buyer or its designees an assignment and bill of sale transferring to the Buyer
good title to the Membership Interests, free and clear of any liens, pledges,
options, security interests, trusts, encumbrances or other rights or interests
of any person or entity, together with any taxes, direct or indirect,
attributable to such transfer of the Membership Interests,

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and Buyer shall thereupon pay to Seller the Purchase Price (described in
Section 1.3). At the Closing, the Subsidiary shall deliver, or cause to be
delivered, to Buyer or its designees the Additional Membership Interests free
and clear of any liens, pledges, options, security interests, trusts,
encumbrances or other rights or interests of any person or entity, together with
any taxes, direct or indirect, attributable to such transfer of the Additional
Membership Interests, and Buyer shall thereupon pay to Subsidiary the Additional
Purchase Price (described in Section 1.3).

 

1.3. Purchase Price and Additional Purchase Price. The consideration to be paid
by Buyer for the Membership Interests (the “Purchase Price”) is described in
Schedule 1.1(a). The consideration to be paid by Buyer for the Additional
Membership Interests (the “Additional Purchase Price”) is described in
Schedule 1.1(b) The Purchase Price and the Additional Purchase Price shall be
made in cash (U.S. Dollars) via wire transfer, or in the alternative, such other
payment method as agreed to by the Buyer and Seller.

 

2. Representations and Warranties of the Seller.

 

Each representation and warranty contained in this Article 2 is qualified by the
disclosures made in the disclosure schedule attached hereto as Schedule 2 (the
“Disclosure Schedule”). This Article 2 and the Disclosure Schedule shall be read
together as an integrated provision. References in this Article 2 to the
Seller’s “knowledge” means, unless provided otherwise, the (i) the actual
knowledge of any of the following individuals: Charles Carroll, Ivan Tennyson,
Richard Spencer, Phillip Sandidge and Pat Haley and/or (ii) what any of such
named individuals would be reasonably expected to know upon the exercise of
reasonable due inquiry. The Seller and the Subsidiary represent and warrant to
Buyer that as of the date hereof and the Closing Date:

 

2.1. Organization and Good Standing.

 

(a) The Seller is a corporation duly organized, validly existing and in good
standing under the laws of the State of Delaware, with full corporate power and
authority to carry on the Business as it is now and has since its organization
been conducted, and to own, lease or operate its assets and properties. The
Subsidiary is a limited liability company duly organized, validly existing and
in good standing under the laws of the State of Florida, with full limited
liability company power and authority to carry on the Business as it is now and
has since its organization been conducting, and to own, lease or operate its
assets and properties. The Seller and the Subsidiary are each duly qualified to
do business and are in good standing in every jurisdiction in which the
character of the properties owned or leased by them or the nature of the
business conducted by them makes such qualification necessary, except where
failure to be so qualified would not have a Material Adverse Effect. For
purposes of this Agreement, the term “Material Adverse Effect” shall mean (a) a
material adverse effect on the financial condition, properties, business, or
results of operations of the Seller and/or the Subsidiary, taken as a whole, or
(b) a material adverse effect on the ability of the Seller and/or the Subsidiary
to perform its respective material obligations under this Agreement; provided,
however, that a Material Adverse Effect shall not include any event, changes,
effect, development, condition or occurrence arising out of or relating to
(i) general economic or political conditions in the United States of America and
(ii) conditions generally applicable to the industry in which the Seller or the
Subsidiary operates (except in the case of clauses (i) and (ii) above, if the
event, change, effect, development, condition or occurrence disproportionately
impacts the business, assets, or financial condition of the Seller and the
Subsidiary, taken as a whole). Schedule 2.1 lists all of the jurisdictions in
which the Seller and the Subsidiary are qualified to do business.

 

(b) The Seller and the Subsidiary have each obtained all licenses, permits,
easements, variances, exemptions, consents, certificates, orders, approvals,
franchises and other authorizations (collectively, the “Subsidiary Permits”) and
have taken all actions required by applicable

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law or regulations of any supra-national, national, state, municipal or local
government (including any subdivision, court, administrative agency, competent
authority, notified body or commission or other authority thereof) or any
quasi-governmental body exercising any regulatory, taxing, importing or other
governmental or quasi-governmental authority (each a “Governmental Entity,” and
collectively “Governmental Entities”) in connection with their Businesses as now
conducted (or to the extent such actions are currently required, in connection
with the Businesses reasonably anticipated to be conducted over the next twelve
months), except where the failure to obtain any such Subsidiary Permits or to
take any such action, individually or in the aggregate, does not and would not
reasonably be expected to have a Material Adverse Effect.

 

2.2. Ownership of Membership Interests.

 

(a) The Seller owns all of the outstanding membership interests of the
Subsidiary free and clear of all liens, encumbrances, security interests,
pledges, conditional or installment sale agreements, mortgages, charges and/or
any other claim of third parties of any kind (collectively “Liens”). The
Membership Interests and the Additional Membership Interests being purchased by
the Buyer for the Purchase Price and Additional Purchase Price will collectively
constitute 60% of the issued and outstanding membership interests in the
Subsidiary immediately after closing. The remaining 40% of the issued and
outstanding membership interests (the “Remaining Membership Interests”) shall
continue to be owned by the Seller immediately after consummation of the
transactions contemplated by this Agreement, subject to the terms of the Merger
Agreement described in Section 6.3(g) and the Deposit Agreement described in
Section 6.2(j). All of the membership interests of the Subsidiary have been, and
will be at the Closing, duly authorized, validly issued and outstanding, fully
paid and non-assessable. Neither the Seller nor the Subsidiary has granted,
issued or agreed to grant or issue and/or will grant, issue or agree to grant or
issue any other equity interest in the Subsidiary (except the Additional
Membership Interests) and/or the Seller and there are no, nor will there be at
the Closing, outstanding options, warrants, subscription rights, securities that
are convertible into or exchangeable for, or any other commitments of any
character relating to, any equity interest in the Subsidiary and/or the Seller
(collectively “Equity Rights”). No membership interests in the Subsidiary and/or
any capital stock or equity interests in the Seller are, or will be at the
Closing, subject to any right of first refusal, preemptive, subscription or
other similar right under any provision of applicable law or any agreement
(collectively “Preemptive Rights”). There are no voting restrictions or
restrictions on transfer of the Membership Interests, the Remaining Membership
Interests, the Additional Membership Interests and/or capital stock or equity
interests in the Seller (collectively “Restrictions”) except as set forth on
Schedule 2.2.

 

(b) There are no obligations, contingent or otherwise, of the Subsidiary to
repurchase, redeem or otherwise acquire any of the Membership Interests, the
Additional Membership Interests and/or the Remaining Membership Interests or to
make any investment (in the form of a loan, capital contribution or otherwise)
in any individual, corporation, company, partnership, trust, incorporated or
unincorporated association, joint venture or other entity of any kind
(collectively “Person”). The Subsidiary does not own or control any equity
security or other interest of any other Person. The Subsidiary is not a party to
any agreement (i) requiring it to acquire any securities or ownership interests
in any Person; and/or (ii) requiring it to make any investment in and/or to fund
in any manner any Person. Since its inception, the Subsidiary has not
consolidated or merged with, acquired all or substantially all of the assets of,
or acquired the stock of or any interest in any Person. There are no outstanding
membership interests held in the Subsidiary’s treasury.

 

(c) Upon consummation of the transactions contemplated hereby at the Closing,
the Buyer will own the Membership Interests and the Additional Membership
Interests free and clear of all Liens, Equity Rights, Preemptive Rights and/or
Restrictions. Upon consummation of the transactions contemplated hereby at the
Closing, the Buyer will own 60% of the outstanding membership interests of the
Subsidiary.

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(d) On the Effective Date, and on the Closing Date, Charles Carroll, Ivan
Tennyson, Richard Spencer and Phillip Sandidge own, and will own, 100% of the
issued and outstanding shares of the capital stock and equity interests of the
Seller in the respective amounts set forth on Schedule 2.2(d).

 

2.3. Authorization of Agreement.

 

The Seller and the Subsidiary have all requisite corporate and limited liability
company power and authority, respectively, to enter into this Agreement and to
consummate the transactions contemplated hereby. This Agreement and all other
agreements and instruments to be executed by the Seller and/or the Subsidiary in
connection herewith (together with all other documents to be delivered in
connection herewith or therewith, collectively the “Transaction Documents”) have
(except for Transaction Documents to be executed and delivered solely by Buyer)
been duly and validly approved by the Board of Directors of the Seller, the
shareholders of the Seller and the members of the Subsidiary (the “Authorizing
Parties”) and no other proceedings on the part of the Seller and/or the
Subsidiary are necessary to approve this Agreement and to consummate the
transactions contemplated hereby or thereby. This Agreement and the other
Transaction Documents to be delivered by the Seller and/or the Subsidiary have
been (or upon execution will have been) duly executed and delivered by the
Seller and the Subsidiary, have been effectively authorized by all necessary
action, corporate or otherwise, and constitute (or upon execution will
constitute) legal, valid and binding obligations of the Seller and the
Subsidiary, enforceable in accordance with their respective terms, except as
such enforceability may be limited by general principles of equity and
bankruptcy, insolvency and other similar laws relating to creditors’ rights (the
“Bankruptcy Exception.”)

 

2.4. Title to Assets.

 

(a) The Subsidiary is the lawful owner of each of the assets, whether real,
personal, mixed, tangible or intangible, comprising and employed in the
operation of or associated with the Business, including but not limited to the
Owned Intellectual Property as defined in Section 2.6(c) other than those Assets
which the Subsidiary leases, in which case the Subsidiary has a valid leasehold
interest in such Assets. The Assets owned and/or leased by the Subsidiary
(collectively the “Assets”) include all of the properties and other assets
necessary for the Subsidiary and the Seller to conduct the Business in the
manner presently conducted. The Assets are sufficient and adequate to conduct
the Business as presently conducted, and are free and clear of all liens,
mortgages, pledges, security interests, restrictions, prior assignments,
encumbrances and claims of any kind, except for (a) leases which apply to
certain assets which the Subsidiary leases from third parties, (b) security
interests and liens consented to in writing by Buyer, (c) any inchoate statutory
liens for real and personal property taxes not yet due or payable, and
(d) liens, security interests or other encumbrances which are described in
Schedule 2.4 (“Permitted Liens”). There are no outstanding agreements, options
or commitments of any nature obligating the (i) Subsidiary to transfer any of
the Assets of the Subsidiary or rights or interests therein to any party; and/or
(ii)Seller to transfer any of the assets of the Seller or rights or interests
therein to any party

 

2.5. Financial Condition and Accounting.

 

(a) Financial Statements. Schedule 2.5 sets forth true and complete copies of
(i) the balance sheet of the Subsidiary, as of the twelve month period ended
December 31, 2004 and the related statements of income and cash flows for the
year then ended, in each case audited by independent public accountants whose
reports are attached thereto (the “Audited Financial Statements”), (ii) the
unaudited

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balance sheet of the Subsidiary and the related statement of income for the stub
period from January 1, 2005 through August 31, 2005 (the “Unaudited Stub
Financial Statements”) and (iii) the unaudited balance sheets of the Subsidiary,
as of the twelve month periods ended December 31, 2003 and 2002 and the related
statements of income for the years then ended ( the “Unaudited Annual Financial
Statements”). The Audited Financial Statements, the Unaudited Stub Financial
Statements and the Unaudited Annual Financial Statements present fairly the
financial condition and position and operating results of the Subsidiary as of
the respective dates thereof and for the periods therein indicated. The Audited
Financial Statements, the Unaudited Stub Financial Statements and the Unaudited
Annual Financial Statements reflect the consistent application of accounting
principles throughout the periods incurred. The Audited Financial Statements
(i) were prepared in accordance with the books and records of the Subsidiary;
and (ii) were prepared in accordance with generally accepted accounting
principles (“GAAP”) consistently applied. The Unaudited Stub Financial
Statements and the Unaudited Annual Financial Statements (i) were prepared in
accordance with the books and records of the Subsidiary; and (ii) were prepared
in accordance with GAAP consistently applied other than required footnote
disclosures and the required statements of cash flows and certain year end
accruals and reserves. The books and records of the Subsidiary are being
maintained in accordance with applicable legal and accounting requirements as
necessary to permit the preparation of financial statements in accordance GAAP
and to maintain asset accountability The Audited Financial Statements, the
Unaudited Stub Financial Statements and the Unaudited Annual Financial
Statements are collectively referred to in this Agreement as the Financial
Statements.

 

(b) Absence of Certain Changes. Except as described in Schedule 2.5, since
December 31, 2004 there has not been any (i) change in the assets, liabilities,
financial condition, or operations of the Subsidiary, other than changes in the
ordinary course of business, which had or is reasonably expected to have a
Material Adverse Effect on such assets, liabilities, financial condition, or
operations; (ii) Material Adverse Change; and/or (iii), any event, action, or
circumstance of the kind described in Section 4.3. For purposes of this
Agreement, a “Material Adverse Change” means any event, circumstance, condition,
development or occurrence causing, resulting in, having, or that could
reasonably be expected to have, a Material Adverse Effect.

 

2.6. Certain Property of the Subsidiary and the Seller..

 

(a) Real Property. The Subsidiary does not own any real property.
Schedule 2.6(a) lists all real properties leased by the Subsidiary.

 

(i) The Subsidiary has good and valid title to the leaseholds in the real
properties set forth in Schedule 2.6(a) under written leases (each lease being
referred to herein as a “Real Property Lease,” and collectively the “Real
Property Leases”) and each Real Property Lease is a valid and binding obligation
of the Subsidiary, enforceable in accordance with its respective terms, except
as enforceability may be limited by the Bankruptcy Exception. The Seller has
provided to the Buyer true and complete copies of the Real Property Leases and
all other agreements and documents under which the Subsidiary leases any real
property ( collectively with the Real Property Leases the “Lease Documents”).
The Lease Documents are unmodified and in full force and effect, and there are
no other agreements, written or oral, with respect to any real property lease by
the Subsidiary other that the Lease Documents.

 

(ii) The Subsidiary is not, and neither the Subsidiary nor the Seller have any
knowledge that any other party to any Lease Documents, including but not limited
to the Real Property Leases, is in default with respect to any material term or
condition thereof, and no event has occurred which through the passage of time
or the giving of notice, or both, would constitute a default thereunder or would
cause the acceleration of any obligation of any party thereto or the creation of
a lien or encumbrance upon any asset of the Subsidiary.

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(b) Personal Property. All vehicles, furniture, fixtures, equipment and other
items of tangible personal property owned or leased by the Subsidiary and
material to the operation of the Business (the “Personal Property”) has been
maintained in accordance with the past practice of the Subsidiary and generally
accepted industry practice and is in good operating condition and repair (normal
wear and tear excepted) sufficient to enable the Subsidiary to operate the
Business as presently conducted. The Subsidiary holds valid leases in all of the
Personal Property leased by it, and the Subsidiary has not granted to any other
person or made in favor of any sublease, license or other agreement granting to
any person any right to use such property (each such lease, sublease, license or
other agreement, a “Personal Property Lease,” and collectively the “Personal
Property Leases”). The Seller has provided to the Buyer true and complete copies
of the Personal Property Leases and all other agreements and documents under
which the Subsidiary leases any personal property ( collectively with the
Personal Property Leases the “ Personal Lease Documents”). The Personal Lease
Documents are unmodified and in full force and effect, and there are no other
agreements, written or oral, with respect to any personal property lease by the
Subsidiary other than the Personal Lease Documents. The Subsidiary is not, and
neither the Subsidiary nor the Seller have any knowledge that any other party to
any Personal Lease Documents, including but not limited to the Personal Property
Leases, is in default with respect to any material term or condition thereof,
and no event has occurred which through the passage of time or the giving of
notice, or both, would constitute a default thereunder or would cause the
acceleration of any obligation of any party thereto or the creation of a lien or
encumbrance upon any asset of the Subsidiary..

 

(c) Intellectual Property.

 

(i) Schedule 2.6 (c)(i) sets forth a true and complete list of all (a) patents
and patent applications, trademarks, trademark registrations and trademark
applications, registered copyrights and copyright applications, domain names,
Software (as defined in this Section 2.6 (c)(i)) and other Intellectual Property
(as defined in this Section 2.6 (c)(i)) that are owned and/or partially owned by
the Subsidiary and/or the Seller (indicating the percentage of ownership) and
material to the business of the Subsidiary (collectively “Owned Intellectual
Property”) and (b) licenses or sublicenses of Intellectual Property to the
Subsidiary and/or the Seller, and licenses and sublicenses of Intellectual
Property by the Subsidiary or the Seller to any third party, in each case that
are material to the business of the Subsidiary (collectively “Licensed
Intellectual Property”). For purposes hereof, “Intellectual Property” means:
(i) United States, international, and foreign patents, patent applications and
statutory invention registrations, (ii) patentable inventions, discoveries,
improvements , ideas, know-how, formula, methodology, processes and technology,
(iii) trademarks, service marks, trade names including but not limited to the
name “Integrated Biometrics Technology, trade dress, slogans, logos, domain
names, and other source identifiers, including registrations and applications
for registration thereof, (iv) original works of authorship, copyrightable
subject matter, and copyrights, including copyright registrations and/or
applications for copyright registration, (v) confidential and/or proprietary
information, including trade secrets and/or know-how embodied in any invention,
work of authorship, customer list, database, business information, and/or
Software, and (vi) inventions, extensions, modifications, or enhancements of the
Software or related to the Software. For purposes hereof, “Software” means all
computer software developed by or on behalf of the Subsidiary and/or the Seller,
or used by the Subsidiary, including all computer software in any form (such as,
source code, object code, assembler code, microcode, etc.), libraries,
user-interfaces (including graphical user-interfaces, application programming
interfaces (APIs), and other software interfaces), and databases operated by the
Subsidiary or used by the Subsidiary in any way, including use in internal
Subsidiary operations, testing (including alpha and beta tests), licensing,
marketing, sales, and/or in connection with processing customer orders, storing
customer information, or storing and archiving data.

 

(ii) The use of the Owned Intellectual Property and the Licensed Intellectual
Property by the Subsidiary in the ordinary course of business does not conflict
with or infringe upon, violate or misappropriate the Intellectual Property
rights of any third party, and no claim has been asserted that the use of such
Intellectual Property in the ordinary course of business does or may conflict
with or infringe upon, violate or misappropriate the Intellectual Property
rights of any third party.

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(iii) The Subsidiary is the exclusive owner of the entire and unencumbered
right, title and interest in each item of Owned Intellectual Property in the
United States and worldwide (with the exception of the Owned Intellectual
Property covered by the Subsidiary’s agreements with Lockheed Martin Corporation
(“Lockheed”) which is 50% owned by the Subsidiary and 50% owned by Lockheed) ,
and the Subsidiary is entitled to use all such Owned Intellectual Property in
the ordinary course of business in the United States and worldwide, subject only
to the terms of the licenses of the Owned Intellectual Property granted by the
Subsidiary. The Subsidiary has the right to use each item of Licensed
Intellectual Property as provided in the license agreements therefore, and the
Subsidiary is entitled to use all such Licensed Intellectual Property in the
ordinary course of business, subject only to the terms of the licenses of the
Licensed Intellectual Property granted by the licensors thereof. The Seller has
provided to the Buyer true and complete copies of all agreements and documents
with respect to the Licensed Intellectual Property and the Owned Intellectual
Property.

 

(iv) The Owned Intellectual Property and the Licensed Intellectual Property
include all of the Intellectual Property and Software used in the Business and
the ordinary day-to-day operations of the Subsidiary, and there are no other
items of Intellectual Property or Software that are material to the Business
and/or such ordinary day-to-day operations. The Owned Intellectual Property and,
to the knowledge of the Seller and the Subsidiary, any Intellectual Property
licensed to the Subsidiary under the Licensed Intellectual Property, is
subsisting, valid and enforceable, and has not be adjudged invalid or
unenforceable in whole or part.

 

(v) No legal proceedings have been asserted, are pending, or, to the knowledge
of the Seller and/or the Subsidiary, threatened against the Subsidiary and/or
the Seller (i) based upon or challenging or seeking to deny or restrict the use
by the Subsidiary and/or the Seller of any of the Owned Intellectual Property or
Licensed Intellectual Property, (ii) alleging that any services provided by,
processes used by, or products manufactured or sold by the Subsidiary and/or the
Seller infringe upon or misappropriate any Intellectual Property right of any
third party, or (iii) alleging that any Intellectual Property licensed under the
Licensed Intellectual Property infringes upon any Intellectual Property right of
any third party or is being licensed or sublicensed in conflict with the terms
of any license or other agreement.

 

(vi) To the knowledge of the Seller and/or the Subsidiary , no person is
engaging in any activity that infringes upon the Owned Intellectual Property or
any Intellectual Property licensed to the Subsidiary and/or the Seller under the
Licensed Intellectual Property. Except as set forth in Schedule 2.6 (c)(vi), the
Subsidiary has not granted any license or other right to any third party with
respect to the Owned Intellectual Property or Licensed Intellectual Property.
The consummation of the transactions contemplated by this Agreement will not
result in the termination, cancellation and/or or impairment of any of the Owned
Intellectual Property and/or the Licensed Intellectual Property..

 

(vii) The Subsidiary has delivered or made available to the Buyer correct and
complete copies of all the licenses and sublicenses of the Licensed Intellectual
Property to which the Seller and/or the Subsidiary is a party. With respect to
each such license and sublicense:

 

(a) such license and sublicense is valid and binding and in full force and
effect and represents the entire agreement between the respective licensor and
licensee with respect to the subject matter of such license or sublicense;

 

(b) such license or sublicense will not cease to be valid and binding and in
full force and effect on terms identical to those currently in effect as a
result of the consummation of the

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transactions contemplated by this Agreement, nor will the consummation of the
transactions contemplated by this Agreement constitute a breach or default under
such license or sublicense or otherwise give the licensor or sublicensor a right
to terminate such license or sublicense;

 

(c) neither the Seller nor the Subsidiary (i) received any notice of termination
or cancellation under such license or sublicense; (ii) received any notice of a
breach or default under such license or sublicense, which breach has not been
cured, nor (iii) granted to any other third party any rights, adverse or
otherwise, under such license or sublicense that would constitute a breach of
such license or sublicense; and

 

(d) neither the Seller, the Subsidiary, nor, to the Sellers and/or Subsidiary’s
knowledge, any other party to such license or sublicense is in breach or default
in any material respect, and, to the Seller’s and/or the Subsidiary’s knowledge,
no event has occurred that, with notice or lapse of time would constitute such a
breach or default or permit termination, modification or acceleration under such
license or sublicense.

 

(viii) To the Seller’s knowledge, the Software is free of all viruses, worms,
Trojan horses and other material known contaminants, and does not contain any
bugs, errors, or problems of a material nature that disrupt its operation or
have an adverse impact on the operation of other software programs or operating
systems, and no rights in the Software have been transferred to any third party.

 

(ix) The Subsidiary has the right to use all software development tools, library
functions, compilers, and other third party software that is material to the
business of the Subsidiary, or that is required to operate or modify the
Software.

 

(x) The Seller and the Subsidiary have taken reasonable steps in accordance with
normal industry practice to maintain the confidentiality of its customer lists
and customer information, trade secrets and other confidential Intellectual
Property. To the knowledge of the Seller and the Subsidiary (a) there has been
no misappropriation of any material trade secrets or other material confidential
Intellectual Property of the Seller and/or the Subsidiary by any Person, (b) no
employee, independent contractor or agent of the Seller and/or the Subsidiary
has misappropriated any trade secrets of any other Person in the course of such
performance as an employee, independent contractor or agent and (c) no employee,
independent contractor or agent of the Seller and/or the Subsidiary is in
default or breach of any term of any employment agreement, non-disclosure
agreement, assignment of invention agreement or similar agreement or contract
relating in any way to the protection, ownership, development, use or transfer
of Intellectual Property.

 

(xi) No current and former employee, director, and/or officer of the Seller
and/or the Subsidiary has any rights whatsoever to any of the Owned Intellectual
Property and/or the Licensed Intellectual Property. Neither the Seller nor the
Subsidiary believes it is or will be necessary to utilize any inventions, trade
secrets or proprietary information of any of its employees made prior to their
employment by the Seller and/or the Subsidiary, except for inventions, trade
secrets or proprietary information that have been assigned to the Subsidiary.

 

(xii) Neither the execution, delivery nor consummation of this Agreement or the
transactions contemplated hereby, nor the carrying on of the Subsidiary’s
business after the Closing, will conflict with or result in a breach of the
terms, conditions or provisions of, or constitute a default under, any agreement
contract, license covenant or instrument under which any of the Owned and/or
Licensed Intellectual Property is owned, used and/or licensed by the Subsidiary
or the Seller, including but not limited to agreements and contracts with
Lockheed Martin Corporation (“Lockheed”). The Seller and the Subsidiary have
provided to the Buyer true and complete copies of all agreements, contracts
and/or licenses of any

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kind between the Seller and/or the Subsidiary and Lockheed (the “Lockheed
Agreements”).The Subsidiary and Lockheed jointly own all Intellectual Property
covered under the Lockheed Agreements (“Joint Intellectual Property”). The
Subsidiary has the right to utilize any such Joint Intellectual Property in any
server, hardware, application and/or any other product as well as modify the
Joint Intellectual Property without the permission of Lockheed and without the
payment of any consideration, royalties and/or fees of any kind to Lockheed,
except as may be required by the Lockheed Agreements.

 

(d) the Seller does not own, lease and/or license in any manner any assets, real
property, personal property and/or intellectual property of any kind, other than
100% of the issued and outstanding membership interests of the Subsidiary.

 

2.7. No Conflict or Violation.

 

Except as disclosed in Schedule 2.7, the execution, delivery and performance by
the Seller of this Agreement and the other Transaction Documents to be delivered
by the Seller and the consummation of the transactions contemplated hereby and
thereby do not and will not ( with or without notice or passage of time) :
(i) violate or conflict with any provision of the charter documents or bylaws of
the Seller or the Subsidiary; (ii) violate in any material respect any provision
or requirement of any domestic or foreign, federal, state, or local law,
statute, judgment, order, writ, injunction, decree, award, rule, or regulation
of any Governmental Entity applicable to the Seller, the Subsidiary and/or the
Business; (iii) violate in any material respect, result in a material breach of,
constitute (with due notice or lapse of time or both) a material default or
cause any material obligation, penalty, premium or right of termination to arise
or accrue under any Intellectual Property licenses or agreements and/or any
Contract (as hereinafter defined in Section 2.12); (iv) result in the creation
or imposition of any Lien of any kind whatsoever upon any of the Membership
Interests, the Additional Membership Interests, the Remaining Membership
Interests, properties and/or Assets of the Subsidiary or the Business; or
(v) result in the cancellation, modification, revocation or suspension of any
material license, permit, certificate, franchise, authorization or approval
issued or granted by any Governmental Entity (each a “License,” and
collectively, the “Licenses”).

 

2.8. Consents. Schedule 2.8 lists all consents and notices required to be
obtained or given by or on behalf of the Seller and/or the Subsidiary in
connection with the consummation of the transactions contemplated by this
Agreement and the Transaction Documents in compliance with all applicable laws,
rules, regulations, or orders of any Governmental Entity, the provisions of any
material Contract and/or any Intellectual Property license or agreement, and
except as set forth on Schedule 2.8 all such consents have been duly obtained
and are in full force and effect, except where the failure to obtain such
consent will not have a Material Adverse Effect

 

2.9. Labor and Employment Matters.

 

Except as identified on Schedule 2.9, there are no employment agreements,
collective bargaining agreements or other labor agreements to which the
Subsidiary is a party or by which it is bound. The Seller and the Subsidiary
have provided to the Buyer true and complete copies of all agreements identified
on Schedule 2.9. Schedule 2.9 also sets forth the name, position and salary of
all 13 individuals employed by the Subsidiary (exclusive of independent
contractors and consultants). The Seller has no employees. The Subsidiary is in
compliance, and at all times has complied, in all material respects with all
applicable laws, rules and regulations relating to the employment of labor,
including those related to wages, hours, collective bargaining, occupational
safety and health, and the payment and withholding of taxes and other sums as
required by appropriate Governmental Entities (“Employment Laws”) and has
withheld and paid to the appropriate Governmental Entities or are holding for
payment not yet due to such Governmental Entities, all amounts required to be
withheld from employees of the Subsidiary and are not liable for any arrears of
wages, taxes, penalties or other sums for failure to comply with any of the

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foregoing. There is no (i) unfair labor practice complaint against the
Subsidiary pending before the National Labor Relations Board or any state or
local agency and, to the knowledge of the Seller, no such complaint is
threatened; (ii) pending, or to the knowledge of the Seller, threatened labor
strike or other material labor trouble affecting the Subsidiary; (iii) material
labor grievance pending or, to the knowledge of the Seller, threatened against
the Subsidiary; (iv) pending or, to the knowledge of the Seller, threatened
representation respecting the employees of the Subsidiary by a labor union;
(v) pending or, to the knowledge of the Seller, threatened arbitration
proceedings arising out of or under any collective bargaining agreement to which
the Subsidiary is a party; and (vi) claim currently pending or, to the knowledge
of the Seller, threatened against the Subsidiary alleging the violation of any
Employment Laws, or any other asserted or threatened claim whatsoever, whether
based in tort, contract or law, arising out of or relating in any way to any
person’s employment (actual or alleged), application for employment or
termination of employment with the Subsidiary. The Seller and the Subsidiary
have complied with all laws, rules, statutes, ordinances, regulations and
requirements of all Governmental Entities (“Applicable Laws”), including, but
not limited to, Employment Laws, related to the use of independent contractors
and consultants in the conduct of the Business, except for such failures to
comply as will not have a Material Adverse Effect. For purposes of this
Section 2.9, “employees” includes employees, independent contractors, consulting
employees, and other persons filling similar functions. All employees of the
Subsidiary reside and perform their job duties solely within the United States,
and none of such employees perform services pursuant to a visa or similar
authorization.

 

2.10. Employee Plans.

 

(a) Except as disclosed on Schedule 2.10 hereto, all accrued obligations of the
Subsidiary, whether arising by operation of law, by contract or past custom, or
otherwise, for payments by the Subsidiary to trusts or other funds or to any
Governmental Entity, with respect to unemployment compensation benefits, social
security benefits or any other benefits or obligations, with respect to
employment of employees, independent contractors and/or consultants through the
date hereof have been paid or adequate accruals therefor have been made in the
Financial Statements, and payments or adequate accruals for all such obligations
will be made through the Closing Date. Except as disclosed on Schedule 2.10
hereto, all reasonably anticipated obligations of the Subsidiary with respect to
employees, independent contractors and/or consultants whether arising by
operation of law, by contract, by past custom, or otherwise, for salaries,
vacation and holiday pay, sick pay, bonuses and other forms of compensation
payable to employees in respect of the services rendered by any of them prior to
the date hereof have been or will be paid by the Subsidiary prior to the Closing
Date or adequate accruals therefor have been made in the Financial Statements,
and payments or adequate accruals for all such obligations will be made through
the Closing Date.

 

(b) Schedule 2.10(b) lists all bonus, pension, stock option, stock purchase,
benefit, welfare, profit-sharing, deferred compensation, retainer, consulting,
retirement, welfare, disability, vacation, severance, hospitalization,
insurance, incentive, deferred compensation and other similar fringe or employee
benefit plans, funds, programs or arrangements, whether written or oral, in each
of the foregoing cases which cover, are maintained for the benefit of, or relate
to any or all current or former employees, managers, members ,independent
contractors and/or consultants of the Subsidiary, and any other entity (“ERISA
Affiliate”) related to the Subsidiary under Section 414(b), (c), (m) and (o) of
the Internal Revenue Code of 1986, as amended (the “Code”) (all of the foregoing
are collectively the “Employee Plans”), together with all accrued liabilities
under such Employee Plans. Neither the Subsidiary nor any ERISA Affiliate of the
Subsidiary has any liability or contingent liability with respect to the
Employee Plans other than routine claims for benefits, nor will any of the
Subsidiary’s assets be subject to any lien, charge or claim relating to the
obligations of the Subsidiary with respect to employees or Employee Plans. No
party to any Employee Plan is in default with respect to any material term or
condition thereof, nor has any event occurred which through the passage of time
or the giving of notice,

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or both, would constitute a default thereunder or would cause the acceleration
of any obligation of any party thereto. The Seller and the Subsidiary have
provided to the Buyer true and complete copies of all Employee Plans.

 

(c) Each of the Employee Plans, and the administration thereof, is and has been
in material compliance with all Applicable Laws currently in effect, including,
without limitation, the Employee Retirement Income Security Act of 1974, as
amended (“ERISA”), and the Code, and, with respect to each Employee Plan, there
is no violation of any reporting or disclosure requirement imposed by any
Applicable Law including without limitation, ERISA or the Code. Each of the
Subsidiary and its ERISA Affiliates has made full and timely payment of all
amounts required to be contributed under the terms of each Employee Plan and
Applicable Laws or required to be paid as expenses or benefits under such
Employee Plan, and has made adequate provision for reserves on the Financial
Statements to satisfy contributions and payments not yet made because they are
not yet due under the terms of such Employee Plan. There is no pending claim,
action, suit or proceeding that has been asserted or instituted against any
Employee Plan, the assets of any Employee Plan, the Subsidiary or the plan
administrator or any fiduciary of any Employee Plan in respect of the operation
of such Employee Plan (other than routine, uncontested benefit claims) and no
Employee Plan is under audit or is the subject of any audit or investigation by
any Governmental Entity. No act or omission has occurred and no condition exists
with respect to any Employee Plan maintained by the Subsidiary or any ERISA
Affiliate that would subject the Subsidiary, any ERISA Affiliate or the Buyer to
any (i) fine, penalty, tax or liability imposed under ERISA or the Code (other
than liabilities incurred in the ordinary course of business that are consistent
with the Code and ERISA, including liabilities for benefits, contributions,
premiums and other similar costs), or (ii) contractual indemnification or
contribution obligation protecting any fiduciary, insurer or service provider
with respect to any Employee Plan. All amendments and actions required to bring
each of the Employee Plans into conformity in all material respects with all of
the applicable provisions of ERISA and other Applicable Laws have been made or
taken except to the extent that such amendments or actions are not required by
law to be made or taken until a date after the Closing and are disclosed on
Schedule 2.9(c). Each Employee Plan intended to be qualified under
Section 401(a) of the Code has received a determination letter from the Internal
Revenue Service to such effect, no such determination letter has been revoked
and revocation has not been threatened, and no such Employee Plan has been
amended or operated since the date of its most recent determination letter or
application therefor in any respect, and no act or omission has occurred, that
would adversely affect its qualification. All contributions or other payments
required to be made under the terms of each Employee Plan or otherwise have been
timely made. There are no unfunded obligations of any kind for which the
Subsidiary is responsible under any Employee Plan.

 

(d) Neither the Subsidiary nor any ERISA Affiliate sponsors or has sponsored,
maintained, contributed to, incurred an obligation to contribute to or withdrawn
from, any Multi-Employer Plan (as defined in Section 4000(a)(3) of ERISA) or any
Multiple Employer Plan (as defined in ERISA Sections 4063 or 4064 or Code
Section 413), whether or not terminated, for which any withdrawal or partial
withdrawal liability has been or could be incurred, whether or not any such
liability has been asserted by or on behalf of any such plan. Neither the
Subsidiary nor any ERISA Affiliate sponsors or has ever sponsored, maintained,
contributed to or incurred an obligation to contribute to any Employee Plan
subject to the provisions of Title IV of ERISA.

 

(e) There are no contracts, agreements, plans or arrangements covering any of
the Subsidiary’s employees with “change of control” or similar provisions. There
is no contract, agreement, plan or arrangement covering the Subsidiary or any
employee, that individually or collectively could give rise to the payment of
any amount that would not be deductible pursuant to the terms of Section 280G of
the Code. Neither the Subsidiary nor any of its ERISA Affiliates has incurred
any liability under the Worker Adjustment Retraining and Notification Act or any
similar state law relating to employment termination in connection with a mass
layoff, plant closing or similar event.

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(f) Other than routine claims for benefits, there is no claim pending or to the
knowledge of the Seller, threatened, involving any Employee Plan by any person
against such Employee Plan, the Subsidiary or any of its ERISA Affiliates. There
is no pending or, to the knowledge of the Seller, threatened, proceeding
involving any Employee Plan before the IRS, the United States Department of
Labor or any other governmental authority.

 

2.11. Litigation.

 

There are no claims, actions, suits, or proceedings of any nature pending or, to
the knowledge of the Seller and/or the Subsidiary, threatened by or against the
Seller, the Subsidiary, the managers, or members of the Subsidiary, or any of
their respective Affiliates, including without limitation those involving,
affecting or relating to (i) the Business, any Assets, properties, prospects
and/ or operations of the Subsidiary and/or the Seller, (ii) any Contracts,
(iii) any Owned Intellectual Property, (iv) any Licensed Intellectual Property,
and/or (v) the transactions contemplated by this Agreement (collectively
“Claims”). For purposes of this Agreement, “Affiliate” shall have the meaning
ascribed to such term in Rule 405 under the Securities Act. Neither the Seller
nor the Subsidiary is a party or subject to the provisions of any order, writ,
injunction, judgment or decree of any court or Governmental Entity. Neither the
Seller nor the Subsidiary has any knowledge that any Governmental Entity is
currently investigating or planning to investigate the Seller and/or the
Subsidiary. There is no action, suit, proceeding or investigation by the
Subsidiary and/or Seller currently pending against any third party or which the
Seller and/or the Subsidiary intends to initiate.

 

2.12. Certain Agreements.

 

(a) Schedule 2.12 lists all material contracts, subcontracts, agreements,
instruments, licenses, sublicenses, commitments, understandings, letters of
intent, term sheets and other arrangements to which the Subsidiary and/or the
Seller currently is a party relating to or affecting (i) the Business, (ii) any
of the Subsidiary’s Assets, properties, prospects and/or operations ,(iii) any
membership interests of the Subsidiary and/or (iv) any of the capital stock,
equity interests, rights and/or assets of the Seller, including, without
limitation, all written or oral (i) contracts, agreements, subcontracts,
memorandum of understanding, and commitments not made in the ordinary course of
business, (ii) contracts, agreements, subcontracts, memorandum of understanding,
and commitments, which by their terms require aggregate payments by or to the
Subsidiary and/or the Seller of an amount in excess of $75,000, (iii) service,
maintenance and other customer contracts, (iv) contracts, loan agreements,
letters of credit, repurchase agreements, mortgages, security agreements,
guarantees, pledge agreements, trust indentures, promissory notes and other
documents or arrangements relating to the borrowing of money or for lines of
credit, (v) tax sharing agreements, real property leases or any subleases
relating thereto, Personal Property Leases, any material agreement relating to
service agreements and insurance contracts, (vi) agreements and other
arrangements for(a) the purchase ,acquisitions, sale, lease ,disposition,
transfer, assignment, license and/or sublicense in any manner of any Assets,
property, rights other than in the ordinary course of business, or (b) for the
grant of any options or preferential rights to purchase any assets, property or
rights, (vii) documents pursuant to which the Subsidiary has granted any power
of attorney with respect to the affairs of the Subsidiary, (viii) suretyship
contracts, performance bonds, working capital maintenance or other forms of
guaranty agreements, (ix) contracts or commitments limiting or restraining the
Seller and/or the Subsidiary or any of its employees or Affiliates from engaging
or competing in any lines of business or with any person or entity, (x) agency,
brokerage, partnership or joint venture agreements, (xi) agreements relating to
the issuance of any securities of the Subsidiary and/or the Seller or the
granting of any voting, transfer, rights of first refusal, preemptive rights, co
sale rights, tag along rights drag along

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rights ,registration rights and/or any similar rights with respect thereto,(xii)
employment contracts or other contracts to or with individual current, former or
prospective employees, consultants or agents, (xiii) collective bargaining
agreements or other contracts to or with any labor unions or other employee
representatives, groups of employees, (xiv) joint ventures or other contracts
providing for payments based in any manner on the revenues or profits of the
Seller, Subsidiary and/or the Business, (xv) contracts, agreements and
commitments related to the purchase, acquisition, sale, lease, disposition,
assignment, transfer, license and/or sub license in any manner of any Owned
Intellectual Property and/or Leased Intellectual Property, (xvi) letters of
intent, term sheets, memorandums of understanding, contracts, agreements and/or
commitments related to the sale of the membership interests and /or any Assets
of the Subsidiary other than in the ordinary course, (xvii) letters of intent,
term sheets, memorandums of understanding contracts, agreements and/or
commitments related to the sale of any capital stock, equity interests or rights
and /or any assets of the Seller, (xviii) contracts, agreements and commitments
related to granting or restricting the development, manufacture, marketing,
sale, use or distribution of the Subsidiary’s and/or the Seller’s products or
services, (xix) contracts, agreements and commitments related to the
indemnification by the Seller and/or the Subsidiary with respect to
infringements of Intellectual Property and/or other rights, (xx) contracts,
agreements and commitments related to the sharing of revenues, profits, losses,
costs, or liabilities by the Seller and/or the Subsidiary with any other Person,
(xxi) contracts, agreements and commitments with any shareholder, officer,
director or consultant of the Seller and/or the Subsidiary (including any
Affiliate of any such person), (xxii) contracts, agreements and commitments
related to confidentiality or non disclosure requirements, (xxiii) term sheets,
letters of intent, memorandums of understanding, contracts, agreements and
commitments of any kind related to any actual or proposed recapitalization,
merger or similar transaction with respect to the Seller and/or the Subsidiary
which would effect a change in control of the Seller and/or the Subsidiary and
(xxiv) all amendments, modifications, extensions or renewals of any of the
foregoing (each a “Contract,” and collectively, the “Contracts”). The Seller and
the Subsidiary have delivered to the Buyer true and complete copies of all
Contracts. There are no renegotiations of, attempts to renegotiate, or
outstanding rights to renegotiate any material amounts payable by or to the
Seller and/or the Subsidiary under any Contract and to the knowledge of the
Seller and the Subsidiary, no oral or written demand for such renegotiation has
been made.

 

(b) Each Contract is valid, binding and enforceable against the Subsidiary
and/or the Seller, as the case may be, in accordance with its terms, except as
such enforceability may be limited by the Bankruptcy Exception, and is in full
force and effect on the date hereof. Upon consummation of the transactions
contemplated by this Agreement, each Contract shall continue to be valid,
binding ,enforceable and in full force and effect without penalty or other
adverse consequence. The Subsidiary and the Seller, as the case may be, has
performed all material obligations required to be performed by it under, and is
not in material default or breach of, any Contract, and no event has occurred
which, with due notice or lapse of time or both, would constitute such a
material default or breach by the Subsidiary and/or the Seller, as the case may
be.

 

(c) To the knowledge of the Seller and the Subsidiary , no other party to any
Contract is in material default or breach in respect thereof, and no event has
occurred which, with due notice or lapse of time or both, would constitute such
a material default or breach.

 

(d) Schedule 2.12(d) sets forth a complete and accurate list of all pending,
submitted responses to requests for proposals, submitted bids and other
agreements (including amendments and modifications thereto) which, if accepted,
would obligate the Subsidiary and/or the Seller to deliver any goods or services
(“Proposals”). The list includes the name of the potential customer, the
products and services proposed to be supplied, the price at which such products
and services will be supplied, the date the Proposal was submitted, and the
anticipated date that a response to the Proposal will be received. The Seller
and the Subsidiary have delivered to the Buyer true and complete copies of all
Proposals, including all amendments and modifications thereto.

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(e) Schedule 2.12 includes certain agreements, contracts, subcontracts,
schedules and statements of work with various suppliers and subcontractors to
the Subsidiary which have not been fully executed (the “Unexecuted Contracts”)
including, but not limited to, those with USIS, ALS, Logista and Comentix. The
Seller and Subsidiary confirm that the Unexecuted Contracts are being performed
by all parties in accordance with the terms specified therein. Neither the
Seller nor the Subsidiary is aware of any planned and/or proposed changes to any
of the material terms of the Unexecuted Contracts and/or any changes to the
current prices being charged by and/or paid to any such suppliers and
subcontractors by the Subsidiary. Neither the Seller nor the Subsidiary is aware
of any intention by any such subcontractor and/or supplier to stop performing
their respective services pursuant to and in accordance with the terms of the
Unexecuted Contracts. Neither the Seller nor the Subsidiary has been told that
any such supplier and/or subcontractor will not execute the Unexecuted Contracts
in due course.

 

2.13. Compliance with Applicable Law.

 

The Seller and the Subsidiary are not in violation of any Applicable Law that
would result in a Material Adverse Effect. The Business and the operations of
the Subsidiary and the Seller are being conducted in all material respects in
accordance with all Applicable Laws of all Governmental Entities having
jurisdiction over the Subsidiary or its Assets, properties or operations,
including, without limitation, all such Applicable Laws, orders and requirements
relating to the Business except in any case where the failure to so conduct its
operations would not have a Material Adverse Effect. Neither the Subsidiary nor
the Seller has received any notice of any violation of any Applicable Law ,
order or other legal requirement. Neither the Seller nor the Subsidiary is in
material default with respect to any order, writ, judgment, award, injunction or
decree of any Governmental Entity, applicable to the Seller, the Subsidiary, the
Business and/or any of its respective Assets, properties or operations.

 

2.14. Licenses.

 

(a) Schedule 2.14 lists all Licenses issued or granted to the Seller and/or the
Subsidiary, and all pending applications therefore (the “Licenses”).. The
Licenses constitute all material Licenses required, and consents, approvals,
authorizations and other requirements prescribed, by any law, rule or regulation
which must be obtained or satisfied by the Subsidiary and/or the Seller , in
connection with the Business or that are necessary for the execution, delivery
and performance by the Seller and/or the Subsidiary of this Agreement and the
other Transaction Documents. The Licenses are sufficient and adequate in all
material respects to permit the continued lawful conduct of the Business in the
manner now conducted and the ownership, occupancy and operation of the Seller’s
an Subsidiary’s properties for its present uses and the execution, delivery and
performance of this Agreement. No jurisdiction in which the Subsidiary and/or
the Seller is not qualified or licensed as a foreign business entity has
demanded or requested in writing that it qualify or become licensed as a foreign
business entity.

 

(b) Each License has been issued to, and duly obtained and fully paid for and is
valid, in full force and effect, enforceable in accordance with its terms
subject to the Bankruptcy Exception, and not subject to any pending or known
threatened administrative or judicial proceeding to suspend, revoke, cancel or
declare such License invalid in any respect. Neither the Seller nor the
Subsidiary is in violation in any material respect of any of the Licenses. The
Licenses have never been suspended, revoked or otherwise terminated, subject to
any fine or penalty, or subject to judicial or administrative review, for any
reason other than the renewal or expiration thereof.

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2.15. Accounts Receivable.

 

All Accounts Receivable reflected on the Unaudited Stub Financials of the
Subsidiary and those that exist as of the Closing Date (collectively “Accounts
Receivable”) will represent, valid obligations arising from sales actually made
or services actually performed in the ordinary course of business, and to the
knowledge of the Subsidiary and the Seller, are not subject to any valid
counterclaims or set-offs, disputes or contingencies. To Seller’s knowledge,
substantially all of the Accounts Receivable are fully collectible and due and
payable within 90 days after August 31, 2005.

 

2.16. Intercompany and Affiliate Transactions; Insider Interests.

 

(a) Except as disclosed on Schedule 2.16 hereto, there are no contracts,
transactions, agreements or arrangements, written or oral, of any kind, direct
or indirect, between (i) the Subsidiary and (a) Charles Carroll, (b) Ivan
Tennyson, (c) Pat Haley, (d) any manager, member, or officer of the Subsidiary,
(e) any officer, director, or shareholder of the Seller, and/or (f) any
Affiliate and/or any immediate family member of any of the foregoing persons;
and/or (ii) the Seller and (a) Charles Carroll, (b) Ivan Tennyson, (c) Pat
Haley, (d) any manager, member, or officer of the Subsidiary, (e) any officer,
director, or shareholder of the Seller, and/or (f) any Affiliate and/or any
immediate family member of any of the foregoing persons. All of the foregoing
contracts, transactions, agreements and arrangements are referred to as the
Related Party Agreements. The Related Party Agreements include, without
limitation, loans, guarantees and/or pledges to, by or for the Subsidiary and/or
the Seller as well as those from, to, by or for any of the foregoing persons,
that are currently in effect.

 

(b) Except as disclosed on Schedule 2.16, neither (i) Charles Carroll, (ii) Ivan
Tennyson, (iii) any manager, member, and/or officer of the Subsidiary, (iv) any
officer, director, and/or shareholder of the Seller, nor (v) any Affiliate
and/or any immediate family member of any of the foregoing persons, now has, or
within the last three (3) years had, either directly or indirectly:

 

(i) an equity or debt interest in any corporation, partnership, joint venture,
association, organization or other Person or entity which furnishes, sells
supplies, or during such period furnished, sold or supplied, services or
products to the Subsidiary and/or the Seller, or purchased, or during such
period purchased from the Subsidiary and/or the Seller, any goods or services,
or otherwise does, or during such period did, business with the Subsidiary
and/or the Seller;

 

(ii) a beneficial interest in any Contract, commitment or agreement to which the
Seller and/or the Subsidiary is or was a party or under which it was obligated
or bound or to which its properties may be or may have been subject ;

 

(iii) any rights in or to any of the Intellectual Property, Assets, properties
and/or rights owned or licensed by the Subsidiary and/or used by the Subsidiary
in the Business, including, but not limited to, any rights as a secured party,
lender and/or debt holder.

 

(iv) an equity or debt interest in any corporation, partnership, joint venture,
association, organization or other Person or entity which is directly or
indirectly in competition with the Seller and/or the Subsidiary and/or is
engaged in any manner in the field of biometrics.

 

(v) the right to receive any payments of any kind from the Subsidiary or the
Seller other than compensation pursuant to employment arrangements with the
Subsidiary or the Seller identified on Schedule 2.9.

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2.17. Insurance.

 

(a) Schedule 2.17(a) lists all liability, property, workers’ compensation,
directors’ and officers’ liability and other insurance policies of any nature
whatsoever that insure the business, operations or employees of the Subsidiary
or affect or relate to the ownership, use or operation of any of the assets of
the Subsidiary (the “Insurance Policies”) as well as all claims pending under
such Insurance Policies. The Seller and the Subsidiary have provided true and
complete copies of all Insurance Policies to the Buyer.

 

(b) The insurance coverage provided by any of the Insurance Policies will not
terminate or lapse by reason of the transactions contemplated by this Agreement
and the Transaction Documents, (ii) neither the Seller, nor the Subsidiary has
received notice that any insurer under any Insurance Policy is denying liability
with respect to a claim thereunder or defending under a reservation of rights
clause, or, to the knowledge of the Seller, indicated any intent to do so or not
to renew any such policy; (iii) the Insurance Policies are sufficient for
compliance with all applicable laws and Contracts to which the Subsidiary is a
party or by which it is bound; and do not provide for any retrospective premium
adjustment or other experienced-based liability on the part of the Subsidiary;
and (iv) no side agreements or other Contracts exist that alter the terms of the
Insurance Policies.

 

2.18. No Undisclosed Liabilities.

 

Except as and to the extent specifically reflected or reserved against in the
most recent Financial Statements and except as incurred in the ordinary course
of business since the date of the most recent Financial Statements and except
for obligations arising under those contracts and agreements to which the
Subsidiary is party as described in the Schedule 2.12 (none of which results
from, arises out of, relates to, is in the nature of, or was caused by any
breach of contract, breach of warranty, tort, infringement, or violation of
law), the Subsidiary has no material debt, liabilities or obligations of any
nature, whether absolute, accrued, contingent or otherwise, and whether due or
to become due (including, without limitation, any liability for taxes and
interest, penalties and other charges payable with respect to any such liability
or obligation), and to the knowledge of the Seller and the Subsidiary, no facts
or circumstances exist which, with notice or the passage of time or both, could
reasonably be expected to result in any material claims against or obligations
or liabilities of the Subsidiary.

 

2.19. Taxes.

 

(a) For purposes of this Agreement, the following terms shall have the meanings
specified hereinbelow:

 

(i) “Tax” or “Taxes” means all taxes, including, without limitation, all net
income, gross receipts, sales, use, withholding, payroll, employment, social
security, unemployment, excise, utility property and all other taxes applicable
to the Subsidiary and/or the Seller , plus applicable penalties and interest
thereon.

 

(ii) “Tax Liabilities” means all liabilities for Taxes.

 

(iii) “Tax Return” shall mean all reports and returns required to be filed with
respect to Taxes.

 

(b) Tax Returns, Tax Payments and Tax Audits. The Subsidiary and the Seller has
(i) timely filed or caused to be timely filed all Tax Returns, if any, required
to be filed as of the date hereof (after giving effect to any extension of time
to file such Tax Returns) and (ii) paid, when due, all

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Taxes due and payable, if any, for the tax periods relating to such Tax Returns
(whether or not shown on such Tax Returns). All such previously-filed Tax
Returns were complete and accurate in all material respects when filed. Schedule
2.20 (b) lists all Tax Returns filed by the Seller and the Subsidiary during the
past five years. The Seller and the Subsidiary have provided the Buyer with true
and complete copies of all filed Tax Returns during the last five years. With
respect to each such Tax Return, Schedule 2.20(b) also specifies (i) each such
Tax Return that (1) is currently being audited by a Tax authority, or (2) as to
which the Subsidiary and/or the Seller has received a written and/or oral notice
from a Tax authority that such Tax authority intends to commence an audit or
examination of such Tax Return, and (ii) each such Tax Return as to which the
Subsidiary and/or the Seller has given its consent to waive or extend the
applicable statute of limitations for such Tax Return or the assessment of Taxes
required to be reported thereon.

 

(c) Tax Sharing Agreements. Neither the Seller nor the Subsidiary is not a party
to any tax-sharing or tax-indemnity agreement and the Subsidiary has not
otherwise assumed by contract or otherwise the Tax Liability of any other
person.

 

(d) No Liens. None of the Assets of the Subsidiary are subject to any liens in
respect of Taxes (other than for current Taxes not yet due and payable). None of
the Assets of the Seller are subject to any liens in respect of Taxes (other
than for current Taxes not yet due and payable).

 

(e) S Corporation Election. The Seller is a valid and existing subchapter S
corporation under the Code. Schedule 2.20(e) are true and complete copies of all
elections and other documents filed by the Seller to achieve subchapter S
status.

 

2.20. Environmental Matters.

 

Notwithstanding anything to the contrary contained in this Agreement:

 

(a) The Seller, the Subsidiary and their respective operations comply in all
material respects with all Applicable Laws, regulations and other requirements
of Governmental Entities or duties under common law relating to toxic or
hazardous substances, wastes, pollution or to the protection of health, safety
or the environment (collectively, “Environmental Laws”) and the Subsidiary has
obtained and maintained in effect all licenses, permits and other authorizations
or registrations (collectively “Environmental Permits”) required under all
Environmental Laws and are in material compliance with all such Environmental
Permits.

 

(b) Neither the Seller nor the Subsidiary has performed, failed to perform or
suffered any act which could reasonably be expected to give rise to, or has
otherwise incurred, material liability to any person (governmental or not) under
the Comprehensive Environmental Response, Compensation and Liability Act, 42
U.S.C. § 9601 et seq. (“CERCLA”), or any other Environmental Laws, nor has it
received notice of any such liability or any claim therefor.

 

(c) Other than commonly used office or janitorial products, no hazardous
substance, hazardous waste, contaminant, pollutant or toxic substance (as such
terms are defined in or otherwise subject to any applicable Environmental Law
and collectively referred to herein as “Hazardous Materials”) has been released,
placed, disposed of or otherwise come to be located on, at, beneath or near any
of the assets or properties owned or leased by the Subsidiary and/or the Seller
at any time or any other property in material violation of any Environmental
Laws such that the Subsidiary and/or the Seller could be subject to material
liability under any Environmental Laws.

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(d) To the knowledge of the Seller and/or the Subsidiary, neither the Subsidiary
nor the Seller has exposed any employee or third party to any Hazardous
Materials or conditions that could subject it to any material liability under
any Environmental Laws.

 

(e) To the knowledge of the Seller, the Subsidiary does not own or operate
aboveground or underground storage tanks.

 

(f) To the knowledge of the Seller and/or the Subsidiary, there are no
asbestos-containing materials, urea formaldehyde insulation, polychlorinated
biphenyls or lead-based paints present at any properties owned and/or leased by
the Subsidiary and/or the Seller..

 

(g) There are no pending or, to the knowledge of the Seller and/or the
Subsidiary, threatened administrative, judicial or regulatory proceedings, or,
to the knowledge of the Seller and/or the Subsidiary, any threatened actions or
claims, or any consent decrees or other agreements in effect that relate to
environmental conditions in, on, under, about or related to the Seller, the
Subsidiary, their respective operations and/or the real properties leased or
owned by the Subsidiary and/or the Seller.

 

2.21. Brokers or Finders.

 

Except as set forth on Schedule 2.21, no agent, broker, finder, investment
banker, financial advisor or other person is entitled to any brokerage, finder’s
or other fee or commission in connection with any of the transactions
contemplated by this Agreement, based upon arrangements made by or on behalf of
the Seller (‘Seller’s Broker Fees”). The shareholders of the Seller individually
shall be solely responsible for the payment of any and all Seller’s Broker Fees
due any agent, broker, finder, investment banker, financial advisor or other
person in connection with the transactions contemplated by this Agreement.

 

2.22 Obligations of Management.

 

Except as disclosed in Schedule 2.22, each officer and key employee of the
Subsidiary, except Ivan Tennyson, is currently, and will be immediately after
the Closing, devoting substantially all of his or her business time to the
conduct of the business of the Subsidiary. No shareholder of the Seller, officer
and/or key employee of the Seller and/or Subsidiary is currently working or, to
the Seller’s and/or the Subsidiary’s knowledge, plans to work for a competitive
enterprise, whether or not such officer or key employee is or will be
compensated by such enterprise.

 

2.23 Rights and Voting Rights.

 

Except as contemplated by the Transaction Documents, neither the Subsidiary nor
the Seller is currently under any obligation, and has granted any rights, to
register any presently outstanding securities or any of its securities that may
hereafter be issued. To the Seller’s and the Subsidiary’s knowledge, except as
contemplated in the Transaction Documents or as set forth on Schedule 2.23, no
stockholder of the Seller and no member of the Subsidiary has entered into any
agreement with respect to the voting of equity securities of the Seller and/or
the Subsidiary.

 

2.24 Powers of Attorney.

 

There are no outstanding powers of attorney executed on behalf of the Seller
and/or the Subsidiary.

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2.25 Prepayments, Prebilled Invoices and Deposits.

 

Schedule 2.25(a) sets forth all prepayments, prebilled invoices and deposits
that have been received by the Subsidiary as of the date hereof from customers
for products to be shipped, or services to be performed, after the Closing. All
such prepayments, prebilled invoices and deposits are properly accrued for, or
will be properly accrued for, on the Subsidiary’s Financial Statements in
accordance with GAAP applied on a consistent basis.

 

Schedule 2.25(b) sets forth all prepayments, prebilled invoices and deposits
that have been made or paid by the Subsidiary as of the date hereof to vendors
or suppliers for products to be shipped, or services to be performed, after the
Closing. All such prepayments, prebilled invoices and deposits are properly
accrued for, or will be properly accrued for, on the Subsidiary’s Financial
Statements in accordance with GAAP applied on a consistent basis.

 

2.26 Warranties.

 

No product or service manufactured, sold, leased, licensed or delivered by the
Subsidiary is subject to any guaranty, warranty, right of return, right of
credit or other indemnity other than (a) the applicable standard terms and
conditions of sale or lease of the Subsidiary which are set forth on Schedule
2.26, and (b) manufacturers’ warranties for which neither the Subsidiary nor the
Seller has any liability. Schedule 2.26 also sets forth the aggregate expenses
incurred by the Subsidiary in fulfilling its obligations under its guaranty,
warranty, right of return and indemnity provisions during each of the fiscal
years and the interim period covered by the Financial Statements.

 

2.27 Inventories.

 

All inventory of the Subsidiary is good and marketable in the existing product
lines of the Subsidiary and is merchantable and fit for the particular purpose
for which it is intended.

 

2.28 Questionable Payments.

 

Neither the Seller, the Subsidiary, any director, officer, member, manager,
agent, consultant shareholder nor other person associated with or acting on
behalf of the Seller and/or the Subsidiary has, directly or indirectly (i) used
any Subsidiary and/or Seller funds for unlawful contributions, gifts,
entertainment or other unlawful payments to any domestic or foreign governmental
politicians, officials, employees or representatives or to any campaign;
(ii) violated any Applicable Law related to bribery, kickbacks, payoffs,
unlawful gifts or similar or comparable payments in connection with attempts to
or actually securing business, favorable treatment or special concessions of any
kind; or (iii) violated any provisions of the Foreign Corrupt Practices Act or
similar Applicable Laws.

 

2.29 Minute Books.

 

The minute books of the Seller made available to Buyer contain complete and
accurate copies of all meetings of directors and stockholders since the time of
incorporation of the Seller. The Subsidiary does not maintain a minute book. All
prior corporate and company actions on behalf of the Seller and the Subsidiary
have been properly authorized and ratified by the officers, directors, members
and/or shareholders of the Seller and the Subsidiary in accordance with
Applicable Laws and the charter, by-laws, operating agreements and governing
documents of the Seller and the Subsidiary.

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2.30 Seller.

 

The Seller has engaged in absolutely no business activities since its formation
on July 18, 2005. The Seller is strictly a holding company, whose sole asset and
business activity is the ownership of 100% of the issued and outstanding
membership interest in the Subsidiary. Upon the Closing the Seller will not
engage in any business activity other than the holding of 40% of the issued and
outstanding membership interests in the Subsidiary.

 

2.31 Change in Control Payments

 

Except for the obligations to Patrick Haley (“Haley”) under the employment
agreement dated May 3, 2005 between Haley and Integrated Biometric Technology
(the “Haley Obligations”), a copy of which employment agreement is attached
hereto as Schedule 2.31 and the Seller’s Broker’s Fees , there are no payments
and/or monetary obligations of any kind whatsoever that will become due and/or
payable by the Subsidiary and/or the Seller to any Person as a result of the
purchase of the Membership Interests, the Additional Interests, the consummation
of any transaction contemplated by this Agreement and/or the Merger Agreement .
The shareholders of the Seller individually shall be solely responsible for the
payment of the Haley Obligations and any other payments and/or monetary
obligations of any kind whatsoever that become due and/or payable by the
Subsidiary and/or the Seller to any Person as a result of the purchase of the
Membership Interests, the Additional Interests, the consummation of any
transaction contemplated by this Agreement and/or the Merger Agreement

 

3. Representations and Warranties of Buyer.

 

References in this Article 3 to the Buyer’s “knowledge” means, unless provided
otherwise, (i) the actual knowledge of the senior management personnel of Buyer
and (ii) what the senior management personnel of Buyer would reasonably be
expected to know upon the exercise of reasonable due inquiry. Buyer represents
and warrants to the Seller that as of the date hereof and the Closing Date:

 

3.1. Organization and Corporate Authority.

 

(a) The Buyer is a limited liability company duly organized, validly existing
and in good standing under the laws of the State of Delaware, with full limited
liability company power and authority to carry on its business as it is now and
has since its organization been conducted, and to own, lease or operate its
assets and properties. The Buyer is duly qualified to do business and is in good
standing in every jurisdiction in which the character of the properties owned or
leased by it or the nature of the business conducted by it makes such
qualification necessary, except where failure to be so qualified would not have
a Material Adverse Effect with respect to the Buyer and its operations

 

(b) The Buyer has all requisite limited liability company power and authority to
enter into this Agreement and to consummate the transactions contemplated
hereby. This Agreement and all other agreements and instruments to be executed
by the Buyer in connection herewith (together with all other documents to be
delivered in connection herewith or therewith, collectively the “Transaction
Documents”) have (except for Transaction Documents to be executed and delivered
solely by the Seller and/or the Subsidiary) been duly and validly approved by
the members of the Buyer and no other proceedings on the part of the Buyer are
necessary to approve this Agreement and to consummate the transactions
contemplated hereby or thereby. This Agreement and the other Transaction
Documents to be delivered by the Buyer have been (or upon execution will have
been) duly executed and delivered by the Buyer, have been effectively authorized
by all necessary action, corporate or otherwise, and constitute (or upon
execution will constitute) legal, valid and binding obligations of the Buyer,
enforceable in accordance with their respective terms, except as such
enforceability may be limited by general principles of equity and bankruptcy,
insolvency and other similar laws relating to creditors’ rights.

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3.2. No Conflict or Violation.

 

The execution, delivery and performance by Buyer of this Agreement and the other
Transaction Documents to be executed and delivered by Buyer and the consummation
of the transactions contemplated hereby and thereby, do not and will not:
(i) violate or conflict with any provision of the organizational documents of
Buyer; or (ii) to Buyer’s knowledge, violate in any material respect any
provision or requirement of any domestic or foreign, national, state or local
law, statute, judgment, order, writ, injunction, decree, award, rule, or
regulation of any Governmental Entity applicable to Buyer.

 

3.3. Litigation.

 

There are no material claims, actions, suits, or proceedings of any nature
pending or, to the knowledge of Buyer, threatened by or against Buyer, the
officers, directors, employees, agents of Buyer, or any of their respective
Affiliates involving, affecting or relating to any assets, properties or
operations of Buyer or any of its Affiliates or the transactions contemplated by
this Agreement. Buyer is not subject to any order, writ, judgment, award,
injunction or decree of any Governmental Entity.

 

3.5. Investor Representations.

 

(a) This Agreement is made with the Buyer in reliance upon the Buyer’s
representation to the Seller and the Subsidiary, which by such Buyer’s execution
of this Agreement such Buyer hereby confirms, that the Membership Interests will
be acquired for investment for such Buyer’s own account, not as a nominee or
agent, and not with a view to the distribution of any part thereof, and that
such Buyer has no present intention of selling, granting any participation in,
or otherwise distributing the same. By executing this Agreement, the Buyer
further represents that such Buyer does not have any contract, undertaking,
agreement or arrangement with any person to sell, transfer or grant
participations to such person or to any third person, with respect to any of the
Membership Interests. Notwithstanding the foregoing the Seller and the
Subsidiary acknowledge that it is the Buyers intention to sell, transfer and
otherwise assign the Membership Interests to Viisage Corporation or a subsidiary
of Viisage (collectively “Viisage”) after the closing of the Buyer’s pending
transaction with Viisage in a transaction that does not require registration
under applicable Federal or state securities laws. In connection with such
intention the Buyer will deliver to Viisage copies of due diligence materials,
draft agreements and other information in connection with the transactions
contemplated by this Agreement. The Seller and the Subsidiary irrevocably agree
that the delivery of such due diligence documents, draft agreements and other
information to Viisage and the planned transfer, sale and assignment of the
Membership Interests to Viisage will not be deemed a breach of any
representation or warranty contained in this Agreement.

 

(b) The Buyer, and the equity owners of the Buyer, are investors in securities
of companies in the development stage and are able to fend for themselves, can
bear the economic risk of their investment in the Membership Interests, and have
such knowledge and experience in financial or business matters that they are
capable of evaluating the merits and risks of their investment in the Membership
Interests.

 

(c) The Buyer is an “accredited investor” within the meaning of SEC Rule 501 of
Regulation D, as presently in effect.

 

(d) The Buyer understands that the Membership Interests will be characterized as
“restricted securities” under the federal securities laws inasmuch as they are
being acquired from affiliates of the

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Subsidiary in a transaction not involving a public offering and that under such
laws and applicable regulations such securities may be resold without
registration under the Securities Act of 1933 (the “Act”), only in certain
limited circumstances. In this connection, the Buyer represents that it is
familiar with SEC Rule 144, as presently in effect, and understands the resale
limitations imposed thereby and by the Act.

 

(e) It is understood that the certificates, if any, evidencing the Membership
Interests may bear the following legend:

 

“These securities have not been registered under the Securities Act of 1933, as
amended. They may not be sold, offered for sale, pledged or hypothecated in the
absence of a registration statement in effect with respect to the securities
under such Act or an opinion of counsel satisfactory to the issuer that such
registration is not required or unless sold pursuant to Rule 144 of such Act.”

 

3.6. Consents.

 

Schedule 3.6 lists all consents and notices required to be obtained or given by
or on behalf of Buyer before consummation of the transactions contemplated by
this Agreement in compliance with all applicable laws, rules, regulations, or
orders of any Governmental Entity, or the provisions of any material contract of
which Buyer is a party to, and all such consents have been duly obtained and are
in full force and effect, except where the failure to obtain such consent will
not have a material effect on the operation of Buyer’s business.

 

3.7. Compliance with Applicable Law.

 

The operations of Buyer are, and have been, conducted in all material respects
in accordance with all applicable laws, regulations, orders and other
requirements of all Governmental Entities having jurisdiction over Buyer or its
assets, properties or operations, including, without limitation, all such laws,
regulations, orders and requirements relating to Buyer’s business except in any
case where the failure to so conduct its operations would not have a material
effect on the operation of Buyer’s business. Buyer has not received any notice
of any material violation of any such law, regulation, order or other legal
requirement, and is not in material default with respect to any order, writ,
judgment, award, injunction or decree of any Governmental Entity, applicable to
Buyer or any of its assets, properties or operations.

 

4. Covenants and Certain Understandings and Agreements of the Parties.

 

4.1. Access.

 

The Seller and the Subsidiary shall afford, to Buyer and Buyer’s accountants,
counsel and representatives, full access during normal business hours throughout
the period prior to the Closing Date (or the earlier termination of this
Agreement) to all of the Assets, Intellectual Property, properties, books,
Contracts and records of the Subsidiary and the Seller (including, without
limitation, the accounting records, tax records and all environmental studies,
reports and other environmental records) and, during such period, shall furnish
promptly to Buyer all information concerning the Seller, the Subsidiary, the
Business, Assets, Financial Statements, the Contracts, the properties,
liabilities and personnel as Buyer may reasonably request.

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4.2. Confidentiality.

 

For purposes hereof, the Seller will keep the matters contemplated herein and
all information provided by Buyer related to Buyer, confidential, and will not
provide information about such matters to any party or use such information
except to the extent necessary to effect the transactions contemplated hereby.
Buyer will keep the matters contemplated herein and all information provided by
the Seller and the Subsidiary related to the Seller, the Subsidiary or the
Business confidential, and will not provide information about such matters to
any party or use such information except to the extent necessary to effect the
transactions contemplated hereby or as required by applicable law. Buyer and the
Seller shall each cause their respective Affiliates, officers, directors,
employees, agents, and advisors to keep confidential all information received in
connection with the transactions contemplated hereby. If this Agreement
terminates without consummation of the Closing, the Seller and the Buyer shall,
and shall cause their Affiliates to, each maintain the confidentiality of any
information obtained from the other in connection with the transactions
contemplated hereby, and the Seller’s business plans (the “Information”),
provided that the confidentiality restrictions set forth herein shall not apply
to Information that (i) was in the public domain before the date of this
Agreement or subsequently came into the public domain other than as a result of
disclosure by the party to whom the Information was delivered; (ii) was lawfully
received by a party from a third party free of any obligation of confidence of
or to such third party; (iii) was already in the possession of the party prior
to receipt thereof, directly or indirectly, from the other party; (iv) is
required to be disclosed in a judicial or administrative proceeding after giving
the other party as much advance notice of the possibility of such disclosure as
practicable so that the other party may attempt to stop such disclosure; or
(v) is subsequently and independently developed by employees of the party to
whom the Information was delivered without reference to the Information. If this
Agreement terminates without consummation of the Closing, Buyer, on the one
hand, and the Seller, on the other hand, shall return to the other all material
containing or reflecting the Information provided by the other, shall not retain
any copies, extracts, or other reproductions thereof or derived therefrom, and
Buyer shall ensure the return of all such material from all other parties with
whom it has been shared, and shall thereafter refrain from using the Information
and shall maintain its confidentiality pursuant to this Agreement.

 

4.3. Certain Changes and Conduct of Business.

 

From and after the Effective Date and until the Closing (or the earlier
termination of this Agreement), the Seller and the Subsidiary shall cause the
Seller and the Subsidiary to conduct their operations and the Business in the
ordinary course consistent with past practices. During the period from the
Effective Date until the Closing, the Subsidiary and the Seller shall preserve
substantially intact the Business, use its best efforts to keep available the
services of its respective current employees, officers and consultants and
preserve its respective current relationships with customers, suppliers and
other persons with which the Subsidiary and/or the Seller has a significant
business relationship with. By way of amplification and not limitation, , except
in the ordinary course of business or as required or permitted pursuant to the
terms hereof, the Seller and the Subsidiary shall cause the Seller and the
Subsidiary to not:

 

(i) make any material change in the conduct of its business and operations or
enter into any transaction other than in the ordinary course of business
consistent with past practices;

 

(ii) make any change in the governing documents of the Seller and/or the
Subsidiary, issue any additional membership interests or equity securities or
grant any option, warrant or right to acquire any membership interests or equity
securities or issue any security convertible into or exchangeable for the
membership interests of the Subsidiary or equity interests in the Seller, alter
any term of any of the outstanding securities of the Subsidiary or the Seller ,
or make any change in the

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outstanding membership interests or in the capitalization, whether by reason of
a reclassification, recapitalization, split or combination, exchange, purchase,
redemption or readjustment of interests or otherwise;

 

(iii) (A) incur or assume any indebtedness for borrowed money, issue any notes,
bonds, debentures or other securities or grant any option, warrant or right to
purchase any of the foregoing, (B) issue any securities convertible or
exchangeable for debt securities of the Subsidiary and/or the Seller, or
(C) issue any options or other rights to acquire directly or indirectly any debt
securities of the Subsidiary and/or the Seller or any security convertible into
or exchangeable for such debt securities;

 

(iv) destroy, damage or lose any Assets of the Subsidiary and/or any assets of
the Seller or any part thereof, or make any sale, assignment, transfer, lease,
abandonment or other conveyance of any of the Assets of the Subsidiary and/or
assets of the Seller or any part thereof, except transactions required pursuant
to existing contracts of the Subsidiary and dispositions of inventory or worn
out or obsolete equipment for fair or reasonable value in the ordinary course of
business consistent with past practices;

 

(v) subject any of the Assets of the Subsidiary and/or any assets of the Seller
, or any part thereof, to any Lien, security interest, charge, interest or other
encumbrance, or suffer such to be imposed other than such Liens, security
interests, charges, interests or other encumbrances as may arise in the ordinary
course of business consistent with past practices;

 

(vi) enter into any new (or amend any existing) Employee Plan, program or
arrangement or any employment, severance or consulting agreement, or grant any
increase in the compensation or benefits payable or to become payable to (A) any
managers or executive level employees, or (B) any employees, except in
accordance with pre-existing contractual provisions applicable to such
non-executive level employees;

 

(vii) make or commit to make any capital expenditure or series of related
capital expenditures in excess of $50,000 or to invest, advance, loan, pledge or
donate any monies to any customers or other persons or entities or to make any
similar commitments with respect to outstanding bids or proposals;

 

(viii) sell, transfer, or lease any Assets of the Subsidiary to, or enter into
any agreement or arrangement with, the Seller, any Affiliate of the Seller
and/or any third party other than the Buyer;

 

(ix) guarantee any indebtedness for borrowed money or any other obligation;

 

(x) delay payment of payables or accelerate collection of receivables relative
to the historical practices regarding the timing of such payments and
collections;

 

(xi) declare or make any distributions or other payments to equity holders or
the Seller and/or the Subsidiary;

 

(xii) take any other action that would cause any of the representations and
warranties made by the Seller and/or the Subsidiary herein not to remain true
and correct in all material respects;

 

(xiii) agree to and/or enter into discussions regarding any (i) sale, transfer,
lease and/or disposition of the Subsidiary, the Business and/or its Assets;
(ii) sale, transfer, lease and/or disposition of the Seller, its business and/or
its assets; and/or (iii) merger, recapitalization or change in control of the
Seller and/or the Subsidiary, other than the transactions contemplated by this
Agreement.

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(xiv) implement or adopt any change in its accounting principles or accounting
practices, in all cases other than as may be required by a change in generally
accepted accounting principles or as recommended by the Subsidiary’s outside
auditors;

 

(xv) prepare or file any Tax Return inconsistent in any material respect with
past practice or, on any such Tax Return, take any position, make any election,
or adopt any method that is materially inconsistent with positions taken,
elections made or methods used in preparing or filing similar Tax Returns in
prior periods;

 

(xvi) enter into any contract, including but not limited to one that contains a
change of control provision, or take any action which would have a negative
affect on the consummation of the transactions contemplated by this Agreement;

 

  (xvii) terminate any member of senior management and/or any key employee;

 

(xviii) enter into any type of contract, agreement, arrangement or otherwise
commit to a transaction with (a) an Affiliate of the Seller and/or the
Subsidiary, (b) any officer director, shareholder, and/or member of the Seller
and/or the Subsidiary; and/or (c) any Affiliate of any of the foregoing Persons.

 

(xix) make any change in the assets, liabilities, financial condition or
operations of the Subsidiary from that reflected on the Financial Statements,
other than changes in the ordinary course of business, none of which (including
changes in the ordinary course of business) individually or in the aggregate has
had or is reasonably expected to have a Material Adverse Effect on such assets,
liabilities, financial condition or operations;

 

(xx) accept any resignation or termination of any officer, key employee or group
of employees of the Subsidiary and/or the Seller;

 

(xxi) make any material change in the contingent obligations of the Subsidiary
and/or the Seller by way of guaranty, endorsement, indemnity, warranty or
otherwise;

 

(xxii) cause any damage, destruction or loss, whether or not covered by
insurance, which would have a Material Adverse Effect on the Subsidiary and/or
the Seller;

 

(xxiii) make any waiver of a valuable right or of a material debt owed to the
Seller and/or the Subsidiary;

 

(xxiv) make any direct or indirect loans to any stockholder, employee, officer
or director, member of the Seller and/or the Subsidiary (including any Affiliate
thereof);

 

(xxv) make any material change in any compensation arrangement, severance
agreement or any other agreement with any member, employee, officer, director or
stockholders (including any Affiliate thereof)

 

(xxvi) enter into negotiations, contracts and/or agreements with any labor
organization activity related to the Subsidiary and/or the Seller;

 

(xxvii) incur any debt, obligation or liability incurred, assumed or guaranteed
by the Seller and/or Subsidiary, except those for immaterial amounts and for
current liabilities incurred in the ordinary course of business not in excess of
$50,000;

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(xxviii) enter into any negotiations for and/or enter into any contracts,
agreements, term sheets, letters of intent, memorandum of understandings and/or
any other arrangements or commitments of any kind for (a) any sale, assignment,
license, sublicense or transfer in any manner of any Owned Intellectual Property
and/or Licensed Intellectual Property; (b) any change in any Contract and/or
material agreement to which the Seller and/or the Subsidiary is a party or by
which it is bound which materially and adversely affects the Business, assets,
liabilities, financial condition, operations and/or prospects of the Subsidiary
and/or the Seller; (c) any other event or condition of any character that,
either individually or cumulatively, has or is reasonably likely to have a
Material Adverse Effect on the Subsidiary and/or the Subsidiary; (d) any change
in any Seller’s and/or Subsidiary’s authorized or issued securities and/or the
grant of any option or right to purchase securities of the Seller and/or the
Subsidiary; (e) any issuance of any security convertible into capital stock of
the Seller or membership interests of the Subsidiary; (e) any grant of any
registration rights; and/or (f) any purchase, redemption, retirement, or other
acquisition by securities of the Seller and/or the Subsidiary;

 

(xxiv) authorize and/or effect any amendment or modification to the charter ,
by-laws, operating agreement, and/or formation documents of the Seller and/or
the Subsidiary; and/or

 

(xxv) authorize and/or enter into any contract agreement, commitment and/or
arrangement of any kind to do any of the foregoing.

 

4.4. Cooperation in Litigation and Restatement of Financial Statements

 

Each party hereto will reasonably cooperate with the others in the defense or
prosecution of any litigation or proceeding already instituted or which may be
instituted hereafter against or by any party relating to or arising out of the
conduct of the Business prior to or after the Closing Date (other than
litigation between Buyer and/or its Affiliates or assignees, on the one hand,
and the Seller and/or its Affiliates or assignees, on the other, arising out of
the transactions contemplated by this Agreement). Subject to the provisions
hereof regarding payments by each party of its costs and payments or attorneys’
fees and costs, the party requesting such cooperation shall pay the
out-of-pocket expenses (including reasonable legal fees and disbursements) of
the party providing such cooperation and of its officers, directors, employees
and agents reasonably incurred in connection with providing such cooperation,
but shall not be responsible to reimburse the party providing such cooperation
for such party’s time spent in such cooperation or the salaries or costs of
fringe benefits or other similar expenses paid by the party providing such
cooperation to its officers, directors, employees and agents while assisting in
the defense or prosecution of any such litigation or proceeding. In the event
that it is determined by the Buyer and/or Viisage that the Financial Statements
require restatement in order to comply with the provisions of the Securities
Exchange Act of 1934, GAAP and/or any other accounting rule, regulation and/or
requirement, the Seller and the Subsidiary and their respective Affiliates shall
cooperate fully with the Buyer and Viisage in effecting such restatement on a
timely basis, including, but not limited to, providing the Buyer, Viisage and
their respective accountants and representatives, complete access to the
Subsidiary’s and the Seller’s books, records, documents and personnel at Buyer’s
expense.

 

4.5. Supplemental Disclosure.

 

At the Closing, the Seller shall supplement or amend each of the schedules
hereto with respect to any matter hereafter arising which, if existing or
occurring at or prior to the Effective Date, would have been required to be set
forth or listed in the schedules or which is necessary to complete, correct or
update any information in the schedules.

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4.6. HSR.

 

To the extent applicable, Buyer and the Seller shall cooperate in preparing and
delivering to the Department of Justice and the Federal Trade Commission
notification of the transactions contemplated hereby pursuant to, and shall use
their commercially reasonable best efforts to obtain early termination of the
waiting period under, the Hart-Scott-Rodino Antitrust Improvements Act of 1976
(the “HSR Act”), if applicable. Buyer shall pay all filing fees payable under
the HSR Act in connection with the transactions contemplated hereby, and Buyer
shall pay costs incurred in preparation of all reports and notifications
required under the HSR Act.

 

4.7. Reasonable Commercial Efforts.

 

Upon the terms and subject to the conditions of this Agreement, each of the
parties hereto shall use its reasonable commercial efforts (other than the
payment of money unreimbursed by the other party) to take, or cause to be taken,
all actions, and to do, or cause to be done, all things necessary, proper or
advisable consistent with applicable law to cause the fulfillment of the
conditions to Closing set forth herein and to consummate and make effective in
the most expeditious manner practicable the transactions contemplated hereby.

 

4.8. Further Assurances.

 

Upon the reasonable request of a party or parties hereto at any time after the
Closing Date, the other party or parties shall forthwith execute and deliver
such further instruments of assignment, transfer, conveyance, endorsement,
direction or authorization and other documents as the requesting party or
parties or its or their counsel may reasonably request in order to effectuate
the purposes of this Agreement. In addition, Seller, Carroll and Tennyson will
use their best efforts to have the Unexecuted Contracts signed within a
reasonable time after the Closing.

 

4.9 Employment Offers and Agreements.

 

Prior to the Closing the Subsidiary shall extend offers to enter into employment
agreements (conditioned on consummation of the Closing) with the employees
listed on Schedule 4.9, which agreements shall include a two year non compete
agreement, a requirement to devote their full working time to the affairs of the
Subsidiary and such other terms acceptable to the Buyer (the “Employment
Agreements”). In addition Charles Carroll (“Carroll”) shall enter into an
employment agreement with the Subsidiary (the “Carroll Employment Agreement”)
containing non compete provisions acceptable to the Buyer, and providing that
Carroll will devote substantially all of his working time to the Business and
the operation of the Subsidiary as well as such other terms that are acceptable
to the Buyer. In addition Ivan Tennyson (“Tennyson”) will enter into a two year
non compete agreement in a form acceptable to the Buyer (the “Tennyson
Agreement”).

 

4.10 Payoff Letters

 

The Seller and the Subsidiary will obtain payoff letters from all lenders to the
Subsidiary so that all borrowing obligations owed by the Subsidiary, including
but not limited to those owed to Ivan Tennyson and the South Ottumwa Bank, can
be paid in full at the Closing.

 

4.11 Deposit Agreement

 

The Seller will agree at the Closing to deliver the Remaining Membership
Interests to a mutually agreeable escrow agent, to be held under the terms of a
Deposit Agreement. The Deposit Agreement shall

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grant the Buyer all voting rights over the Remaining Membership Interests and
prohibit their transfer once they are deposited with the escrow agent until such
time that the Merger Agreement with Viisage is consummated or the 100% of the
shares of common stock of the Seller is acquired by the Buyer pursuant to the
Merger Agreement (the “Deposit Agreement”). The parties will use their best
efforts to establish restrictions on voting and disposition of 100% of the
shares of common stock of the Seller on mutually agreeable terms.

 

4.12 No Shop Provision

 

The Seller, the Subsidiary, Charles Carroll (“Carroll”), and Ivan Tennyson
(“Tennyson”) agree that during the two year period commencing on execution of
this Agreement, they will not individually or jointly, cause or permit any of
their respective Affiliates and/or any of its or their directors, officers,
employees, agents or representatives to, (a) negotiate, authorize, recommend,
enter into or propose to enter into, with any person other than the Investor or
persons designated by the Investor, any transaction involving (directly or
indirectly) an issuance, sale or acquisition of 1% or more of any class or
series of securities of the Seller and/or Subsidiary, a sale or lease of
material assets of Seller and/or Subsidiary (other than in the ordinary course
of IBT business consistent with past custom and practice), and/or any merger,
recapitalization, business combination, strategic alliance, joint venture or
similar transaction involving the Seller or Subsidiary (a “Competing
Transaction”), (b) continue to engage in any pending discussions or negotiations
with any third party concerning any previously proposed Competing Transaction,
(c) encourage, solicit or initiate discussions, negotiations or submissions of
proposals, indications of interest or offers in respect of a Competing
Transaction, and/or (d) furnish or cause to be furnished to any person any
information in furtherance of a Competing Transaction (collectively the “No Shop
Agreement”). If the Seller and/or the Subsidiary receives any inquiry, proposal,
indication of interest or offer with respect to a Competing Transaction
(“Competing Proposal”), the Seller and the Subsidiary will promptly notify the
Buyer of the same and the terms thereof in writing. The Seller confirms that
prior to the execution of the Term Sheet, the Seller and the Subsidiary
delivered to the Buyer any Competing Proposals it has received from CrossMatch
after October 13, 2005. This No Shop Agreement may be terminated by Carroll,
Tennyson, the Seller and the Subsidiary in the event the Buyer refuses to close
on the transactions contemplated by this Agreement on or before November 14,
2005 (or, in the event of a delay described in clause (iii) below, within two
(2) business days after such delay has been remedied), provided that such
refusal is not the result of:

 

(i) any breach, untruth and/or or inaccuracy of any representation and/or
warranty made by the Seller and/or the Subsidiary in this Agreement, the
Schedules attached hereto and/or any certificate delivered by the Seller and/or
the Subsidiary pursuant to this Agreement ; or

 

(ii) the breach of any covenant, agreement or obligation of the Seller, the
Subsidiary, Carroll, Tennyson and/or their Affiliates contained in this
Agreement, the Schedules attached hereto and/or any certificate delivered by the
Seller and/or the Subsidiary pursuant to this Agreement; or

 

(iii) any delay caused by the Seller, the Subsidiary, Carroll Tennyson and/or
any of their Affiliates that was identified in writing with particularity by the
Buyer and delivered to the Seller no later than November 11, 2005.

 

4.13 Option and Lock-Up

 

During the two year period commencing on the execution of this Agreement, the
Seller, Carroll and Tennyson, jointly and severally, irrevocably agree that they
will reject any Competing Transaction and shall vote all of their respective
securities in the Seller and the Subsidiary against any Competing Transaction
and in favor of the transaction with the Buyer described in this Agreement. In
addition the

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Seller, Carroll and Tennyson shall not , at any time prior to the second
anniversary of the execution of this Agreement, directly or indirectly, except
to the Buyer (i) offer, pledge, sell, contract to sell, sell any option or
contract to purchase, purchase any option or contract to sell, grant any option
right or warrant to purchase, lend or otherwise transfer or dispose of, directly
or indirectly, any of the securities and/or assets of the Seller and/or the
Subsidiary (except in the ordinary course of business), and/ or (ii) enter into
any swap or other arrangement that transfers to another, in whole or in part,
any of the economic consequences of ownership of any of the securities and/or
assets of the Seller and/or the Subsidiary, except in the ordinary course of
business (the “Lock-Up”). The Seller irrevocably grants to the Buyer the option
to purchase 100% of the securities and assets of the Subsidiary for $60,000,000
in cash (subject to requirement that the Buyer deliver an additional $10,000,000
in the event the Subsidiary reports annual revenues of $75,000,000 for the year
ended December 31, 2006) (the “Subsidiary Option”). The Subsidiary Option shall
be exercisable by the Buyer during the two year period commencing on the
execution of this Agreement. In addition Carroll and Tennyson, jointly and
severally, irrevocably grant to the Buyer the option to purchase 100% of the
capital stock and assets of the Seller for $60,000,000 in cash (subject to
requirement that the Buyer deliver an additional $10,000,000 in the event the
Subsidiary reports annual revenues of $75,000,000 for the year ended
December 31, 2006) (the “Seller Option”). The Seller Option shall be exercisable
by the Buyer during the two year period commencing on the execution of this
Agreement. The Lock-Up, the Subsidiary Option and the Seller Option may be
terminated by Carroll, Tennyson, the Seller and the Subsidiary in the event the
Buyer refuses to close on the transactions contemplated by this Agreement, on or
before November 14, 2005 (or, in the event of a delay described in clause
(iii) below, within two (2) business days after such delay has been remedied),
provided that such refusal is not the result of:

 

(i) any breach, untruth and/or or inaccuracy of any representation and/or
warranty made by the Seller and/or the Subsidiary in this Agreement, the
Schedules attached hereto and/or any certificate delivered by the Seller and/or
the Subsidiary pursuant to this Agreement ; or

 

(ii) the breach of any covenant, agreement or obligation of the Seller, the
Subsidiary, Carroll, Tennyson and/or their Affiliates contained in this
Agreement, the Schedules attached hereto and/or any certificate delivered by the
Seller and/or the Subsidiary pursuant to this Agreement; or

 

(iii) any delay caused by the Seller, the Subsidiary, Carroll Tennyson and/or
any of their Affiliates that was identified in writing with particularity by the
Buyer and delivered to the Seller no later than November 11, 2005.

 

4.14 Violation of the No Shop Agreement, Lock-Up, Subsidiary Option, Seller
Option.

 

The parties agree that breach of the No Shop Agreement, Lock-Up, the Subsidiary
Option and/or the Seller Option by the Seller, the Subsidiary, Carroll, Tennyson
and/or their Affiliates will entitle the Buyer to injunctive relief to prevent
such breach and to specific performance as well as all monetary and other
damages allowed by law. The Buyer will not be required to post any bond or
undertaking to obtain any such relief. In addition to the foregoing rights of
the Buyer and not in limitation thereof, should the Seller, the Subsidiary,
Carroll, Tennyson and/or their Affiliates breach the No Shop Agreement, Lock-Up
the Subsidiary Option and/or the Seller Option and in the further event that a
Competing Transaction is accepted by the Seller, the Subsidiary, Carroll,
Tennyson and/or a majority of shareholders of the Seller and/or a majority of
the members of the Subsidiary at any time during the two year period commencing
on the date of the execution of this Agreement, the parties agree that the Buyer
shall be paid the sum of $20,000,000, jointly and/or severally by the
Subsidiary, the Seller, prior to the closing of such Competing Transaction as
compensation for the loss of the Buyers business opportunity as contemplated by
this Agreement and for the value of its time, resources and expenses incurred in
connection with evaluating, reviewing and attempting to close on this Agreement.
The Seller, the Subsidiary, Carroll, Tennyson

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and/or their Affiliates acknowledge that the provisions of the No Shop
Agreement, Lock-Up, the Subsidiary Option and/or the Seller Option are an
integral part of the transactions contemplated by this Agreement and that
without these provisions the Buyer would not enter into this Agreement and/or
agree to pay the Purchase Price as set forth herein. The parties understand and
agree that Carroll, Tennyson, Richard Spencer and Phillip Sandidge own all of
the outstanding securities of the Seller and the Seller owns all of the Voting
securities of the Subsidiary and that all parties agree that the $20,000,000 is
a fair and equitable amount to compensate the Buyer for the loss of the business
opportunity hereunder and for the value of its time, resources and expenses
incurred in connection with evaluating, reviewing and attempting to close on
this Agreement. In the event a court of competent jurisdiction determines that
the $20,000,000 payment is not enforceable or allowable, the parties agree that
the Court shall establish the maximum amount of payment that would be
enforceable or allowable under applicable law as it is the parties intention
that the Investor receive such maximum amount in the event of such a breach.
Moreover in the event any provision of Section 4.12, 4.13 and/or 4.14 shall be
invalid, illegal or unenforceable, the validity, legality and enforceability of
the remaining provisions of such Sections shall not in any way be affected or
impaired thereby.

 

5. Survival; Indemnification.

 

5.1. Survival.

 

The representations and warranties made in this Agreement shall survive any
investigation made by any party hereto and the Closing of the transactions
contemplated hereby until the fifteen month anniversary of the Closing Date,
except those representations and warranties contained in (i) Sections 2.19
(Taxes), 2.11 (Litigation), and 2.2 (Ownership of Membership Interests) which
will survive until the expiration of the applicable statute of limitations. As
to any matter or claim which is based upon fraud, consisting of an intentional
misrepresentation or intentional concealment of a material fact known to the
indemnifying party, the representations and warranties set forth in this
Agreement shall expire only upon expiration of the applicable statute of
limitations. No party will be liable to another under any warranty or
representation after the applicable expiration of such warranty or
representation.

 

5.2 Escrow Fund.

 

At the Closing, Buyer, the Seller, the Subsidiary and the Escrow Agent (to be
mutually selected by the Buyer and the Seller) shall execute and deliver the
Escrow Agreement attached hereto as Exhibit 5.2. $750,000 in cash shall be
deposited with the Escrow Agent (the “Escrow Fund”). The Escrow Fund shall be
available only for the purpose of satisfying indemnity obligations under
Section 5.3 hereof and other obligations of the Seller and/or the Subsidiary
identified in this Agreement. The Escrow Fund shall be held as a trust fund and
shall not be subject to any lien, attachment, trustee process or any other
judicial process of any creditor of any party, and shall be held and disbursed
solely for the purposes and in accordance with the terms of this Agreement and
the Escrow Agreement.

 

5.3. Indemnification by the Seller.

 

Subject to the limits set forth in this Article 5, the Seller, the Subsidiary
and their Affiliates and its successors and assigns shall, jointly and
severally, indemnify, defend, reimburse and hold harmless Buyer and its
Affiliates (including wholly-owned business entities of Buyer) and their
successors and assigns (“Buyer Indemnified Persons”), and the officers,
directors, employees and agents of any of them, from and against any and all
claims, losses, damages, liabilities, obligations, assessments, penalties and
interest, demands, actions and expenses, whether direct or indirect, known or
unknown, absolute or contingent (including, without limitation, settlement costs
and any legal, accounting and other expenses

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for investigating or defending any actions or threatened actions) (“Losses”)
reasonably incurred by any such indemnitee, arising out of or in connection with
any of the following:

 

(a) any breach, untruth and/or or inaccuracy of any representation or warranty
made by the Seller and/or the Subsidiary in this Agreement, the Schedules
attached hereto and/or any certificate delivered by the Seller and/or the
Subsidiary pursuant to this Agreement; and/or

 

(b) the breach of any covenant, agreement or obligation of the Seller, the
Subsidiary ,Carroll, Tennyson and/or their Affiliates contained in this
Agreement, the Schedules attached hereto and/or any certificate delivered by the
Seller and/or the Subsidiary pursuant to this Agreement; and/or

 

(c) any liability to the extent arising out of the ownership or operation of the
Subsidiary prior to the Closing, including, but not limited to, those related to
legal actions, claims, suits, proceedings or investigations.

 

5.4. Indemnification by Buyer.

 

Subject to the limits set forth in this Article 5, Buyer and its successors and
assigns shall indemnify, defend, reimburse and hold harmless the Seller and its
successors and assigns from and against any and all Losses reasonably incurred
by any such Seller arising out of or in connection with any of the following:

 

(a) any untruth or inaccuracy of any representation or warranty made by Buyer in
this Agreement, the Schedules attached hereto and/or any certificates delivered
by Buyer pursuant to this Agreement; and

 

(b) the breach of any covenant, agreement or obligation of Buyer contained in
this Agreement, the Schedules attached hereto and/or any certificates delivered
by Buyer pursuant to this Agreement.

 

5.5. Indemnification Procedure.

 

(a) Whenever the Buyer seeks indemnification for any losses described in
Section 5.3(provided the Escrow Agent is holding Escrow Funds) , the Buyer shall
provide notice of such claim to the Escrow Agent pursuant to the terms of the
Escrow Agreement and the Escrow Agent shall disburse the Escrow Fund to the
Buyer in accordance with the terms of the Escrow Agreement. The terms of the
Escrow Agreement shall substantially provide that :

 

If the Escrow Agent receives written instructions signed by both the Buyer and
the Seller directing disbursement of the Escrow Funds in the Escrow Account, the
Escrow Agent shall disburse such funds in accordance with such instructions
within 5 days after receiving such instructions. If prior to fifteen months
after the Closing the Buyer simultaneously delivers to Seller and the Escrow
Agent a written notice signed by the Buyer (the “Distribution Notice”) stating
that the Buyer or any Buyer Indemnified Person as defined in Section 5.3 of this
Agreement is entitled to indemnification under Section 5.3 of this Agreement,
and stating the amount of the funds in the Escrow Account to be distributed to
Buyer to satisfy such indemnification obligations (such notice to specify in
reasonable detail the basis for Buyer’s claim and the basis for the calculation
of the amount of the claim), then unless the Escrow Agent receives a written
objection from the Seller (an “Objection”) within fifteen business days after
the Seller received such Distribution Notice, the Escrow Agent shall
(i) promptly notify the Buyer and the Seller that no Objection was received from
the Seller within such fifteen-day period and

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(ii) promptly transfer and deliver (in no event later than 2 business days
thereafter) to Buyer the portion of the funds in the Escrow Account specified in
such Distribution Notice (for distribution by the Buyer to the relevant Buyer
Indemnified Person(s)).If within fifteen business days after the date upon which
Seller and the Escrow Agent have received a copy of a timely Distribution
Notice, the Escrow Agent receives an Objection from Seller, the Escrow Agent
shall (i) promptly notify the Buyer of its receipt of the Objection and provide
Buyer with a copy thereof, and (ii)promptly transfer and deliver (in no event
later than 2 business days thereafter) to Buyer such portion of the funds in the
Escrow Account as is necessary to satisfy the amount, if any, described in the
Distribution Notice that is not stated to be the subject of the Objection. The
Escrow Agent shall not transfer and deliver to Buyer any amounts described in
the Distribution Notice to which Seller has objected in the Objection until the
earlier to occur of (i) Seller and the Buyer directing the Escrow Agent in a
writing signed by both of them to transfer and deliver a particular amount of
the funds in the Escrow Account to Buyer and/or Seller, or (ii) the Escrow Agent
having received an original, signed copy of a final nonappealable judicial
determination with respect to the disposition of the Objection which requires
the delivery of a particular amount of the funds in the Escrow Account to Buyer
and/or the Seller. Upon receipt of either a jointly signed direction or an
original, signed copy of such determination, the Escrow Agent shall promptly
take the action as set forth therein. Any funds, and interest thereon, that
remains in the Escrow Account two years after the Closing and, provided that
they are not subject to a pending Distribution Notice and/or Objection, shall be
delivered by the Escrow Agent to Buyer. If, on such date, there are one or more
outstanding Distribution Notices and/or Objections, the Escrow Agent shall
distribute to the Buyer only an amount equal to the amount by which the Escrow
Account the aggregate amount of the Distribution Notices and the remaining
amount will continue to be held until the earlier to occur of (i) Buyer and
Seller directing the Escrow Agent in a writing signed by both of them to
transfer and deliver a particular amount of the funds in the Escrow Account as
directed by the Buyer and Seller, or (ii) the Escrow Agent having received an
original, signed copy of a judicial determination with respect to the
disposition of the Objection which requires the delivery of a particular amount
of the funds in the Escrow Account Buyer and/or Seller. If any funds remain in
the Escrow Account after the resolution and payment provided for in the
immediately preceding sentence, the Escrow Agent shall release and pay such
remainder to the Buyer.

 

The parties agree that in the event judicial proceedings are instituted in
connection with a dispute regarding distribution of the Escrow Fund by the
Escrow Agent should judicial proceeding, the losing party in such judicial
proceeding shall be liable for all attorneys fees, costs, expert fees and other
costs, fees and expenses of the winning party in connection with such judicial
proceeding.

 

(b) In the event the Escrow Agent is no longer holding Escrow Funds and/or in
all other cases other than those covered by Section 5.5 (a) whenever any claim
shall arise for indemnification or other claim hereunder (a “Claim”), the party
seeking indemnification or making any other claim under this Agreement (the
“Indemnitee”) shall promptly give written notice to the party which is or may be
obligated to provide indemnity or other recovery (the “Indemnitor”) with respect
to the Claim after the receipt by the Indemnitee of reliable information of the
facts constituting the basis for the Claim; but the failure to timely give such
notice shall not relieve the Indemnitor from any obligation under this
Agreement, except to the extent, if any, that the Indemnitor is materially
prejudiced thereby. If a Claim is made hereunder, the Indemnitor shall make
prompt payment of such Claim to the Indemnitee subject to the terms and
limitations set forth herein, provided however, if an Indemnitor disputes all or
any portion of the Claim or related Losses, any dispute related thereto shall be
resolved pursuant to the arbitration provisions of Section 7.13

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(c) In the case of any claim, action, or proceeding made or instituted by a
third-party (a “Third Party Claim”), the Indemnitee shall promptly notify the
Indemnitor of such Third Party Claim for which indemnification or other recovery
will be sought under this Section 5 or for any other breach of this Agreement,
and the Indemnitor will have the right at its expense to assume the defense
thereof using counsel reasonably acceptable to the Indemnitee. The Indemnitee
shall have the right to participate, at its own expense, with respect to any
such Third Party Claim. In connection with any such Third Party Claim, the
Seller and the Buyer shall cooperate with each other and provide each other with
access to relevant books and records in their possession. No such Third Party
Claim shall be settled without the prior written consent of the Indemnitee. If
(A) a firm written offer is made to settle any such Third Party Claim; (B) the
proposed settlement amount is less than the Indemnity Cap; (C) the indemnifying
party proposes to accept such settlement; and (D) the Indemnitee refuses to
consent to such settlement, then: (i) the Indemnitor shall be excused from, and
the Indemnitee shall be solely responsible for, all further defense of such
Third Party Claim; and (ii) the maximum liability of the Indemnitor relating to
such Third Party Claim, shall be the amount of the proposed settlement if the
amount thereafter recovered from the Indemnitee on such Third Party Claim is
greater than the amount of the proposed settlement.

 

(d) Any disputes between the Indemnitor and Indemnitee concerning their
respective rights and obligations under this Article 5 shall be resolved in
accordance with Section 7.13.

 

(e) Subject to the limitations set forth herein, the obligation of the
Indemnitor to indemnify the Indemnitee against Losses arising under this
Agreement shall be in addition to any other obligations the Indemnitor might
otherwise have and any other rights the Indemnitee might otherwise have.

 

5.6. Limitations.

 

(a) Notwithstanding any provision of this Agreement to the contrary, no party
shall have any obligation to indemnify any person entitled to indemnity under
this Article 5 or to pay damages in respect of contract or other claims arising
under this Agreement or any other Transaction Document unless the persons so
entitled to indemnity or recovery thereunder have suffered Losses in an
aggregate amount attributable to all Indemnification Claims and obligations in
excess of Fifty Thousand Dollars ($50,000) (the “Threshold”). Once the aggregate
amount of Losses (that are individually below the Threshold) exceeds the
Threshold, persons entitled to recovery shall be entitled to recover the full
amount of all such Losses, regardless of the Threshold. No person shall be
entitled to indemnification under this Article 5 for Losses directly or
indirectly caused by a breach by such person of any representation, warranty,
covenant or other agreement set forth in this Agreement or any duty to the
potential Indemnitor.

 

(b) The maximum aggregate liability of the Seller to Buyer, and Buyer to the
Seller, for all claims arising under this Agreement and the other Transaction
Documents shall equal One Million Five Hundred Thousand Dollars ($1,500,000)
(the “Indemnity Cap”), provided, however, that there shall be no limitation in
the event that a court of competent jurisdiction determines that there has been
any act of fraud and/or intentional misrepresentation or omission by the Seller
and/or the Subsidiary in any representation, warranty or covenant contained in
this Agreement, the Schedules attached hereto and/or any certificate delivered
by the Seller and/or the Subsidiary pursuant to this Agreement.

 

(c) The rights to indemnification set forth in this Agreement shall be the sole
and exclusive remedy to each party for matters covered by such indemnification
rights.

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6. Conditions to Closing.

 

6.1. Conditions to Obligations of Each Party.

 

The obligations of the Seller, on the one hand, and Buyer, on the other hand, to
consummate the transactions contemplated hereby are subject to the fulfillment,
at or before the Closing Date, of the conditions set forth in this Section 6.1,
any one or more of which may be waived in writing by the party entitled to the
benefit of such condition.

 

(a) No Action or Proceeding. No preliminary or permanent injunction or other
order issued by any Governmental Entity that declares this Agreement invalid in
any material respect or prevents or would be violated by the consummation of the
transactions contemplated hereby, or which materially adversely affects the
assets, properties, operations, net income or financial condition of the
Subsidiary, is in effect; and no action or proceeding has been instituted or
threatened by any Governmental Entity, other person, or entity which seeks to
prevent or delay the consummation of the transactions contemplated by this
Agreement or which challenges the validity or enforceability of this Agreement,
the result of which could constitute a Material Adverse Change.

 

(b) Compliance with Law. There shall have been obtained all permits, approvals,
and consents of all Governmental Entities that counsel for Buyer or for the
Seller may reasonably deem necessary or appropriate so that consummation of the
transactions contemplated by this Agreement will be in compliance with
applicable laws, including, without limitation, expiration or termination of the
waiting period prescribed by the HSR Act, if applicable, the failure of which to
obtain could constitute a Material Adverse Effect.

 

6.2. Conditions to Obligations of Buyer.

 

The obligations of Buyer to consummate the transactions contemplated hereby are
subject to the fulfillment to Buyer’s satisfaction, at or before the Closing
Date, of the conditions set forth in this Section 6.2, any one or more of which
may be waived by Buyer in writing in its discretion; provided however, such
waiver will not waive or diminish Buyer’s right to indemnification pursuant to
Article 5, unless so stated:

 

(a) Representations and Warranties True. The representations and warranties of
the Seller and the Subsidiary contained in this Agreement, the Schedules
attached hereto, any certificate delivered by the Seller and/or the Subsidiary
pursuant to this Agreement and/or in any other Transaction Document shall be
true and correct in all material respects as of the date hereof and on the
Closing Date, and at the Closing the Seller and the Subsidiary shall have
delivered to Buyer a certificate dated the Closing Date to such effect signed by
the President and the Secretary of the Seller and the managing member of the
Subsidiary in substantially the form attached hereto as Exhibit A.

 

(b) Performance of the Seller. The Seller, the Subsidiary, Carroll, Tennyson and
their Affiliates shall have performed, satisfied and complied in all material
respects with all obligations and covenants required to be performed by each of
it under this Agreement on or before the Closing Date, and at the Closing the
Seller, and the Subsidiary shall each have delivered to Buyer a certificate to
such effect dated the Closing Date and signed by the President and the Secretary
of the Seller, Carroll, Tennyson and the managing members in substantially the
form attached hereto as Exhibit A.

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(c) Additional Closing Documents of the Seller. Buyer has received, or is
receiving at the Closing, all of the following, each duly executed by the
parties thereto (other than Buyer) and dated the Closing Date (or an earlier
date satisfactory to Buyer), in form and substance satisfactory to Buyer:

 

(i) Copies, certified by the Secretary of the Seller and the of resolutions of
the Board of Directors authorizing the execution, delivery and performance of
this Agreement and the other Transaction Documents to be delivered by the Seller
and the consummation of the transactions contemplated hereby and thereby, to the
extent applicable, and certification as to the Certificate of Authority and the
Operating Agreement of the Subsidiary authorizing the execution, delivery and
performance of this Agreement and the other Transaction Documents to be
delivered by the Subsidiary and the consummation of the transactions
contemplated hereby and thereby,, in the form of Officer’s Certificate attached
hereto as Exhibit 6.2 (c) ;

 

(ii) A certificate of existence/good standing issued by the Secretary of State
of Delaware as of a recent date prior to Closing for the Seller; and

 

(iii) Such other documents as Buyer may reasonably request, including, but not
limited to, the written approval of the transactions contemplated by this
Agreement and the Merger Agreement executed by all shareholders of the Seller..

 

(d) Additional Closing Documents. Buyer has received, or is receiving at the
Closing such other duly executed certificates, instruments and documents in
confirmation of the representations and warranties of the Seller or in
furtherance of the transactions contemplated by this Agreement and the other
Transaction Documents as Buyer or its counsel may reasonably request.

 

(e) Consents and Approvals. All required consents, waivers, authorizations and
approvals of any Governmental Entity, and of any other Person or entity,
required under the Contracts, Licenses, or otherwise in connection with the
execution, delivery and performance of this Agreement, the absence of which
could result in material liability to Buyer or a Material Adverse Change, or the
cancellation or adverse change in terms of, or payments under, any Contract,
shall have been duly obtained in form reasonably satisfactory to Buyer, shall be
in full force and effect on the Closing Date and the original executed copies
shall have been delivered to Buyer on or before the Closing Date, provided,
however, that receipt of the consent of Lockheed and/or TSA is not a condition
of Closing.

 

(f) No Adverse Changes. Between the date of this Agreement and the Closing Date
there shall not have occurred any (i) Material Adverse Change or any event or
circumstance that would reasonably be expected to result in a Material Adverse
Change; and/or (ii) event set forth in Section 4.3

 

(g) Delivery of Employment Agreements. The Employment Offers, the Carroll
Employment Agreement and the Tennyson Agreement have been executed on terms and
conditions acceptable to the Buyer.

 

(h) Satisfaction of Debt. At the Closing the Subsidiary will utilize the
Additional Purchase Price received for the Additional Membership Interests to
satisfy all outstanding borrowing obligations owed by the Subsidiary as of the
Closing (collectively “Debts”).

 

(i) Minimum Equity. At the closing after the Buyer’s investment in the
Subsidiary, the payoff of all borrowings and the delivery of the Purchase Price
to the Seller and the Additional Purchase Price to the Subsidiary, the
membership equity of the Subsidiary shall be at a minimum of $2,663,000 and the
shareholders equity of the Seller shall be at a minimum of $2,663,000, both of
which figures shall be calculated in accordance with GAAP and in a manner
consistent with the Financial Statements and based on the adjustments set forth
on Schedule 6.2(j). The Purchase Price payable to the Seller for the Membership
Interests will be reduced on a dollar-for-dollar basis for each one dollar that
the Subsidiary’s membership equity and/or the Seller’s shareholders equity (but
not both) is below the minimum figures set forth in the preceding sentence for
such categories.

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(j) Deposit Agreement The Deposit Agreement, in a form reasonably acceptable to
the Buyer, is executed by the Seller and the Remaining Membership Interests are
delivered to the escrow agent in accordance with the terms of the Deposit
Agreement.

 

(k) Amended Operating Agreement The entry into an amended operating agreement
for the Subsidiary by the Seller and the Buyer pursuant to which amended
operating agreement the Buyer, or its designee, is appointed the sole managing
member of the Subsidiary with full power and authority to act on behalf on the
Subsidiary in any and all matters. The amended operating agreement shall
(i) provide that all officers and persons with authority to bind the Subsidiary
shall be appointed by Buyer, , (i) provide that the Seller shall not be entitled
to share in any profits or distributions of the Subsidiary, and (iii) contain
such other terms and provisions that are acceptable to Buyer in its sole
discretion. The resignation of the existing managing member and all other
officers and persons with authority to bind the Subsidiary shall be delivered to
the Buyer at the Closing.

 

(l) Amended By-Laws The By Laws of the Seller shall be modified to provide that
the Board of Directors of the Seller shall consist of six (6) directors. Robert
LaPenta, or his designee, shall be appointed as the Chairman of the Board of
Directors of the Seller and the Buyer shall designate the other five
(5) remaining Board Members. The resignation of all existing Board Members will
be delivered at the Closing.

 

(m) Legal Opinion. Delivery of a favorable opinion of Seller’s and Subsidiary’s
counsel, dated as of the Closing Date in the form attached hereto as Schedule
6.2(m).

 

(n) General Releases Delivery of general release in favor of the Subsidiary and
the Seller executed by Carroll, Tennyson and all other shareholders of the
Seller releasing the Subsidiary and the Seller from all claims except those that
may be made as a result of the violation of this Agreement and any claims for
accrued but unpaid salaries and benefits.

 

(o) The individual shareholders of the Seller shall have paid and satisfied in
full the Haley Obligation, the Seller’s Brokers Fees and any other payments
and/or monetary obligations of any kind whatsoever that become due and/or
payable by the Subsidiary and/or the Seller to any Person as a result of the
purchase of the Membership Interests, the Additional Interests, the consummation
of any transaction contemplated by this Agreement and/or the Merger Agreement.

 

6.3. Conditions to Obligations of the Seller.

 

The obligations of the Seller to consummate the transactions contemplated hereby
are subject to the fulfillment, at or before the Closing Date, of the conditions
set forth in this Section 6.3, any one or more of which may be waived by the
Seller in writing in its discretion; provided however, such waiver will not
waive or diminish the right of the Seller to indemnification pursuant to
Article 5, unless so stated:

 

(a) Representations and Warranties True. The representations and warranties of
Buyer contained in this Agreement or in any other Transaction Document shall be
true and correct in all material respects on the date hereof and on the Closing
Date, and at the Closing Buyer shall have delivered to the Seller a certificate
to such effect dated the Closing Date, signed by an authorized manager of Buyer
in substantially the form attached hereto as Exhibit B.

 

(b) Performance of Covenants. Buyer shall have performed, satisfied and complied
in all material respects with all obligations and covenants required to be
performed by Buyer under this Agreement on or before the Closing Date, and at
the Closing Buyer shall have delivered to the Seller a certificate to such
effect dated the Closing Date signed by an authorized officer of Buyer in
substantially the form attached hereto as Exhibit B.

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(c) Additional Closing Documents of Buyer. Buyer has executed and delivered, or
is executing and delivering at the Closing copies, certified by an authorized
officer of Buyer, of resolutions of its board of directors authorizing the
execution and delivery of this Agreement and the other Transaction Documents to
be delivered by Buyer and the consummation of the transactions contemplated
hereby.

 

(d) The Cash Payment. The Seller shall have received all of the Purchase Price,
as described in Section 1.3.

 

(e) Consents and Approvals. All required consents, waivers, authorizations and
approvals of any Governmental Entity, and of any other person or entity, needed
by the Buyer in connection with the execution, delivery and performance of this
Agreement, the absence of which could result in material liability to the
Subsidiary or a Material Adverse Change, , shall have been duly obtained in form
reasonably satisfactory to the Seller, shall be in full force and effect on the
Closing Date and the original executed copies shall have been delivered to the
Seller on or before the Closing Date.

 

(f) No Adverse Changes. Between the date of this Agreement and the Closing Date
there shall not have occurred any material adverse change or any event or
circumstance that would reasonably be expected to result in a material adverse
change in Buyer.

 

(g) Merger Agreement. The Buyer shall have delivered to the Seller a Merger
Agreement in form and substance satisfactory to the Seller providing, in part,
that the Buyer shall use its best efforts to cause Viisage to enter into and
close a merger agreement with the Seller pursuant to which Viisage will exchange
5,000,000 shares of common stock of Viisage (adjusted for forward and reverse
stock splits, stock dividends, recapitalizations and similar transactions
occurring after the date hereof) for 100% of the outstanding shares of stock of
the Seller, in a tax free reorganization. The Merger Agreement shall also
provide that if Viisage does not enter into and close such Merger Agreement on
or before January 30, 2006 then the Buyer shall purchase at the Buyer’s option,
either the Remaining Membership Interests owned by the Seller in the Subsidiary
or 100% of the issued and outstanding capital stock of the Seller for an
aggregate price of $25,000,000 and shall receive the binding commitment of the
Buyer to deliver an additional $10,000,000 in the event that revenues of the
Subsidiary, calculated in accordance with GAAP, for the year ended December 31,
2006 exceed $75 million. Robert LaPenta, at the Closing, shall deliver his
personal guarantee, in the form attached hereto as Schedule 6.3 (g), guarantying
to the Seller that the Buyer will meet the foregoing commitment on the failure
of Viisage to close on the Merger Agreement. Such Merger Agreement shall further
provide that if the merger with Viisage closes, the shareholders of the Seller
shall have the right and option to receive, for each share of Viisage common
stock delivered to the shareholders of the Seller pursuant to the Merger
Agreement, the difference between $5.00 ($7.00 in the event that revenues of the
Subsidiary, calculated in accordance with GAAP, for the year ended December 31,
2006 exceed $75 million) and the average of the closing bid prices of Viisage’s
common stock as reported on NASDAQ Stock Market during the month February 2007
(the “Average Price”).. The difference shall, at the option of the shareholder,
be paid to the Seller in common stock of Viisage and/or in cash. The difference
will be paid only in the event the Average Price is lower than $5.00 per share (
$7.00 in the event that revenues of the Subsidiary, calculated in accordance
with GAAP, for the year ended December 31, 2006 exceed $75 million). The per
share prices set forth above shall be adjusted for forward and reverse stock
splits, recapitalizations and similar transactions occurring after the date
hereof (h) Legal Opinion. Delivery of a favorable opinion of Buyer’s counsel,
dated as of the Closing Date in the form attached hereto as Schedule 6.3(h).

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(h) Legal Opinion. Delivery of a favorable opinion of Buyer’s counsel, dated as
of the Closing Date in the form attached hereto as Schedule 6.3(h)

 

7. Miscellaneous.

 

7.1. Termination.

 

(a) This Agreement and the transactions contemplated hereby may be terminated
(a) by Buyer, if (i) the Seller, the Subsidiary, Carroll ,Tennyson and/or their
Affiliates fail to comply in any material respect with any of its covenants,
obligations or agreements contained and/or referred to herein, or (ii) any of
the representations and warranties of the Seller and/or the Subsidiary is
breached and/or or is inaccurate and/or untrue in any material way; or (b) by
the Seller if (i) Buyer fails to comply in any material respect with any of its
covenants or agreements contained herein, or (ii) any of the representations and
warranties of Buyer is breached or is inaccurate in any material way; or (c) by
the Seller or the Buyer if (i) a Governmental Entity has issued a non-appealable
order, decree or ruling or taken any other action (which order, decree or ruling
the parties hereto have used their best efforts to lift), which permanently
restrains, enjoins or otherwise prohibits the transactions contemplated by this
Agreement; or (ii) a condition to its performance hereunder has not been
satisfied or waived prior to November 14, 2005. Notwithstanding the foregoing, a
party may not terminate this Agreement if the event giving rise to the
termination right results from the willful failure of such party to perform or
observe any of the covenants or agreements set forth herein to be performed or
observed by such party or if such party is, at such time, in material breach of
this Agreement

 

(b) In the event of termination of this Agreement pursuant to this Section 7.1,
written notice shall be given forthwith by the terminating party to the other
parties, and this Agreement will terminate and the transactions contemplated
hereby will be abandoned, without further action by any party.

 

(c) Notwithstanding anything to the contrary herein, in the event of the breach
of any covenant, agreement or obligation of either party (a “Breaching Party”)
contained in this Agreement, the Schedules attached hereto and/or any
certificate delivered by the Breaching Party pursuant to this Agreement, the
non-Breaching Party will be entitled to obtain injunctive relief to prevent such
breach and to specific performance as well as all monetary and other damages
allowed under this Agreement. The non-Breaching Party will not be required to
post any bond or undertaking to obtain any such relief. The foregoing rights
shall be in addition to any other rights exercisable under this Agreement and
not in limitation thereof.

 

7.2. Notices.

 

All notices, requests, demands and other communications hereunder shall be in
writing and shall be deemed given upon personal delivery or three (3) calendar
days after being mailed by certified or registered mail, postage prepaid, return
receipt requested, or one (1) business day after being sent via a nationally
recognized overnight courier service if overnight courier service is requested
from such service or upon receipt of electronic or other confirmation of
transmission if sent via facsimile, to the parties, their successors in interest
or their assignees at the following addresses and telephone numbers, or at such
other addresses or telephone numbers as the parties may designate by written
notice in accordance with this Section 7.2:

 

If to Buyer:

 

L-1 Investment Partners LLC

177 Broad Street

12th Floor

Stamford, CT 06901

Attention: Jim DePalma

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With a copy to:

 

McManus, Collura & Richter, P.C.

48 Wall Street

New York, NY 10005

Attention: Anthony M. Collura

 

If to the Seller:

 

Integrated Biometric Technology, Inc.

25 Century Boulevard

Suite 210

Nashville, TN 37214

Attention: Charles R. Carroll

 

With a copy to:

 

Boult, Cummings, Conners & Berry, PLC

Suite 700

1600 Division Street

Nashville, TN 37203

Attention: Bill Earthman

 

7.3. Assignability and Parties in Interest.

 

This Agreement and the rights, interests or obligations hereunder may not be
assigned by any of the parties hereto without the prior written consent of the
other party hereto. This Agreement shall inure to the benefit of and be binding
upon Buyer and the Seller and their respective permitted successors and assigns.
Nothing in this Agreement will confer upon any person or entity not a party to
this Agreement, or the legal representatives of such person or entity, any
rights or remedies of any nature or kind whatsoever under or by reason of this
Agreement except in connection with permitted assignments as provided above.
Notwithstanding the foregoing, the Buyer may assign its rights and/or interests
to a wholly-owned subsidiary or a wholly-owned limited liability company of
Viisage or to an Affiliate of Buyer, provided that such assignment shall not
relieve the Buyer from any obligations hereunder or under any of other documents
to be delivered by the Buyer hereunder, including the Merger Agreement, which
obligations and/or delivery Viisage or the Affiliate of Buyer fails to comply
with.

 

7.4. Governing Law.

 

This Agreement shall be governed by, and construed and enforced in accordance
with, the laws of the State of Delaware, without regard to its conflicts-of-law
principles.

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7.5. Counterparts.

 

Facsimile transmission of any signed original document and/or retransmission of
any signed facsimile transmission will be deemed the same as delivery of an
original. At the request of any party, the parties will confirm facsimile
transmission by signing a duplicate original document. This Agreement may be
executed in counterparts, each of which shall be deemed an original, but all of
which shall constitute but one and the same instrument.

 

7.6. Publicity.

 

Prior to the Closing Date, no party may, nor may it permit its Affiliates to,
issue or cause the publication of any press release or other public announcement
with respect to this Agreement or the transactions contemplated hereby without
the prior written consent of Buyer and the Seller.

 

7.7. Complete Agreement.

 

This Agreement, the exhibits and schedules hereto, and the other Transaction
Documents contain or will contain the entire agreement between the parties
hereto with respect to the transactions contemplated herein and therein and
shall supersede all previous oral and written and all contemporaneous oral
negotiations, commitments, and understandings.

 

7.8. Modifications, Amendments and Waivers.

 

No supplement, modification, or amendment of this Agreement will be binding
unless executed in writing by all of the parties hereto. At any time prior to
the Closing Date or termination of this Agreement, any party may, (a) waive any
inaccuracies in the representations and warranties of any other party contained
in this Agreement or in any other Transaction Document; and (b) waive compliance
by any other party with any of the covenants or agreements contained in this
Agreement,. No waiver of any of the provisions of this Agreement will be
considered, or will constitute, a waiver of any of the rights or remedies, at
law or equity, of the party entitled to the benefit of such provisions unless
made in writing and executed by the party entitled to the benefit of such
provision. No waiver of any of the provisions of this Agreement shall constitute
a waiver of any other provision, whether or not similar.

 

7.9. Headings; References.

 

The headings contained in this Agreement and the other Transaction Documents are
for reference purposes only and shall not affect in any way the meaning,
construction or interpretation of this Agreement and the other Transaction
Documents. References herein to Articles, Sections, Schedules and Exhibits refer
to the referenced Articles, Sections, Schedules or Exhibits hereof unless
otherwise specified.

 

7.10. Severability.

 

Any provision of this Agreement which is invalid, illegal, or unenforceable in
any jurisdiction shall, as to that jurisdiction, be ineffective to the extent of
such invalidity, illegality, or unenforceability, without affecting in any way
the remaining provisions hereof in such jurisdiction or rendering that or any
other provision of this Agreement invalid, illegal, or unenforceable in any
other jurisdiction.

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7.12. Expenses of Transactions.

 

All fees, costs and expenses incurred by Buyer, in connection with the
transactions contemplated by this Agreement shall be borne by Buyer, and all
fees, costs and expenses incurred by the Seller in connection with the
transactions contemplated by this Agreement shall be borne by the shareholders
of the Seller.

 

7.13. Arbitration.

 

(a) (i) Any controversy or claim arising out of or relating to this Agreement,
other than those with respect to matters that occur prior to the Closing and/or
disputes regarding payment to the Buyer for indemnification claims under
Section 5.5 (a) from the Escrow Fund (“Arbitration Excluded Claims”), shall be
solely and finally settled by arbitration administered by the American
Arbitration Association (the “AAA”) in accordance with its Commercial
Arbitration Rules as then in effect (the “Rules”), except to the extent such
Rules vary from the following provisions. Notwithstanding the previous sentence,
the parties hereto may seek provisional remedies in courts of appropriate
jurisdiction, and such request shall not be deemed a waiver of the right to
compel arbitration of a dispute hereunder. Arbitration Excluded Claims shall be
presented in any Federal Court possessing jurisdiction over such matters.

 

(ii) The arbitration shall be conducted by one independent and impartial
arbitrator, appointed by the AAA; provided however, if the claim and any
counterclaim, in the aggregate exceed One Hundred Thousand Dollars ($100,000)
(the “Arbitration Threshold”), exclusive of interest and attorneys’ fees, the
dispute shall be heard and determined by three (3) arbitrators as provided
herein (such arbitrator or arbitrators are hereinafter referred to as the
“Arbitrator”). The judgment of the award rendered by the Arbitrator may be
entered in any court having jurisdiction thereof. The arbitration proceedings
shall be held in Wilmington, Delaware unless the parties to the arbitration
agree to another location.

 

(b) If a party hereto determines to submit a dispute for arbitration pursuant to
this Section 7.13, such party shall furnish the other party with whom it has the
dispute with a notice of arbitration as provided in the Rules (an “Arbitration
Notice”) which, in addition to the items required by the Rules, shall include a
statement of the nature, with reasonable detail, of the dispute. A copy of the
Arbitration Notice shall be concurrently provided to the AAA, along with a copy
of this Agreement, and if pursuant to Section 7.13(a) one (1) Arbitrator is to
be appointed, a request to appoint the Arbitrator. If a party has a counterclaim
against the other party, such party shall furnish the party with whom it has the
dispute a notice of such claim as provided in the Rules (a “Notice of
Counterclaim”) within ten (10) calendar days of receipt of the Arbitration
Notice, which, in addition to the items required by the Rules, shall include a
statement of the nature, with reasonable detail, of the dispute. A copy of the
Notice of Counterclaim shall be concurrently provided to the AAA. If the claim
set forth in the Notice of Counterclaim causes the aggregate amount in dispute
to exceed the Arbitration Threshold, the Notice of Counterclaim shall so state.
If pursuant to Section 7.13(a) three (3) Arbitrators are to be appointed, within
fifteen (15) calendar days after receipt of the Arbitration Notice or the Notice
of Counterclaim as applicable, each party shall select one person to act as
Arbitrator and the two (2) selected shall select a third arbitrator within ten
(10) calendar days of their appointment. If the Arbitrators selected by the
parties are unable or fail to agree upon the third arbitrator within such time,
the third arbitrator shall be selected by the AAA. Each arbitrator shall have
served previously as an arbitrator and shall be a practicing attorney or a
retired or former judge and have at least fifteen (15) years experience with and
knowledge of securities laws, complex business transactions, and mergers and
acquisitions.

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(c) Once an Arbitrator is assigned to hear the matter, the Arbitrator shall
schedule a pre-hearing conference to reach agreement on procedural and
scheduling matters, arrange for the exchange of information, obtain stipulations
and attempt to narrow the issues.

 

(d) At the pre-hearing conference, the Arbitrator shall have the discretion to
order, to the extent the Arbitrator deems relevant and appropriate, that each
party may (i) serve a maximum of one set of no more than twenty (20) requests
for production of documents and one set of ten (10) interrogatories (without
subparts) upon the other parties; and (ii) depose a maximum of five
(5) witnesses. All objections to discovery are reserved for the arbitration
hearing except for objections based on privilege and proprietary or confidential
information. The responses to the document demand, the documents to be produced
thereunder, and the responses to the interrogatories shall be delivered to the
propounding party thirty (30) calendar days after receipt by the responding
party of such document demand or interrogatory. Each deposition shall be taken
on reasonable notice to the deponent, and must be concluded within eight
(8) hours and all depositions must be taken within forty-five (45) calendar days
following the pre-hearing conference. Any party deposing an opponent’s expert
must pay the expert’s fee for attending the deposition. All discovery disputes
shall be decided by the Arbitrator.

 

(e) The parties must file briefs with the Arbitrator pursuant to a schedule
established by the Arbitrator, specifying the facts each intends to prove and
analyzing the applicable law. The parties have the right to representation by
legal counsel throughout the arbitration proceedings. Oral evidence given at the
arbitration hearing shall be given under oath. Any party desiring a stenographic
record may secure a court reporter to attend the arbitration proceedings. The
party requesting the court reporter must notify the other parties and the
Arbitrator of the arrangement in advance of the hearing, and must pay for the
cost incurred.

 

(f) The Arbitrator’s award shall be in writing, signed by the Arbitrator and
shall contain a concise statement regarding the reasons for the disposition of
any claim.

 

(g) To the extent permissible under applicable law, the award of the Arbitrator
shall be final. It is the intent of the parties that the arbitration provisions
hereof be enforced to the fullest extent permitted by applicable law.

 

7.14. Submission to Jurisdiction.

 

All actions or proceedings arising in connection with this Agreement for
preliminary or injunctive relief or matters not subject to arbitration, if any,
shall be tried and litigated exclusively in the state or federal courts located
in the State of Tennessee, or such other venue as may be mutually agreed to by
the parties. The aforementioned choice of venue is intended by the parties to be
mandatory and not permissive in nature, thereby precluding the possibility of
litigation between the parties with respect to or arising out of this Agreement
in any jurisdiction other than that specified in this paragraph. Each party
hereby waives any right it may have to assert the doctrine of forum non
conveniens or similar doctrine or to object to venue with respect to any
proceeding brought in accordance with this paragraph, and stipulates that the
State and Federal courts located in the State of Tennessee shall have in
personam jurisdiction over each of them for the purpose of litigating any such
dispute, controversy, or proceeding. Each party hereby authorizes and accepts
service of process sufficient for personal jurisdiction in any action against it
as contemplated by this Section by registered or certified mail, return receipt
requested, postage prepaid, to its address for the giving of notices as set
forth in Section 7.2. Nothing herein shall affect the right of any party to
serve process in any other manner permitted by law.

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7.15. Attorneys’ Fees

 

If Buyer or any of its Affiliates, successors or assigns brings any action,
suit, counterclaim, cross-claim, appeal, arbitration, or mediation for any
relief against the Seller or any of its Affiliates, successors or assigns, or if
the Seller or any of its Affiliates, successors or assigns, his or her heirs,
Affiliates or assigns brings any action, suit, counterclaim, cross-claim,
appeal, arbitration, or mediation for any relief against Buyer or any of its
Affiliates, successors or assigns, declaratory or otherwise, to enforce the
terms hereof or to declare rights hereunder (collectively, an “Action”), in
addition to any damages and costs which the prevailing party otherwise would be
entitled, the non-prevailing party shall pay to the prevailing party a
reasonable sum for attorneys’ fees and costs (at the prevailing party’s
attorneys’ then-prevailing rates) incurred in bringing and prosecuting such
Action and/or enforcing any judgment, order, ruling, or award (collectively, a
“Decision”) granted therein, all of which shall be deemed to have accrued on the
commencement of such Action and shall be paid whether or not such action is
prosecuted to a Decision. Any Decision entered in such Action shall contain a
specific provision providing for the recovery of attorneys’ fees and costs
incurred in enforcing such Decision.

 

For the purposes of this Section, attorneys’ fees shall include, without
limitation, fees incurred in the following: (1) postjudgment motions and
collection actions; (2) contempt proceedings; (3) garnishment, levy and debtor
and third party examinations; (4) discovery; and (5) bankruptcy litigation.

 

For purposes of this paragraph, “prevailing party” includes, without limitation,
a party who agrees to dismiss an action on the other party’s payment of the sum
allegedly due or performance of the covenants allegedly breached, or who obtains
substantially the relief sought by it. If there are multiple claims, the
prevailing party shall be determined with respect to each claim separately. The
prevailing party shall be the party who has obtained the greater relief in
connection with any particular claim, although, with respect to any claim, it
may be determined that there is no prevailing party.

 

[SIGNATURES ON FOLLOWING PAGE]

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IN WITNESS WHEREOF, each of the parties hereto has executed this Membership
Interest Purchase Agreement as of the date first above written.

 

L-1 INVESTMENT PARTNERS, LLC “Buyer” By:  

/s/ James DePalma

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Name:   James DePalma Title:   Partner INTEGRATED BIOMETRIC TECHNOLOGY, INC.
“Seller” By:  

/s/ Charles R. Carroll

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Name:   Charles R. Carroll Title:   President INTEGRATED BIOMETRIC TECHNOLOGY,
LLC. “Subsidiary” By:  

/s/ Charles R. Carroll

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Name:   Charles R. Carroll Title:   CEO

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By:  

/s/ Charles R. Carroll

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Name:   Charles Carroll By:  

/s/ Ivan Tennyson

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Name:   Ivan Tennyson By:  

/s/ Richard Spencer

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Name:   Richard Spencer By:  

/s/ Phillip Sandidge

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Name:   Phillip Sandidge