Execution Copy

 

 
 

STOCK PURCHASE AGREEMENT

dated

February 14, 2008

by and among

Vector Intersect Security Acquisition Corporation, a Delaware corporation,

as the Parent,

Cyalume Acquisition Corp., a Delaware corporation,

as the Purchaser,

Cyalume Technologies, Inc.
a Delaware corporation,

as the Company,

and

GMS Acquisition Partners Holdings, LLC,

a Delaware limited liability company

as the Seller

 

 
 

 

 

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TABLE OF CONTENTS

 

 

 

 

 

Page

ARTICLE I

 

DEFINITIONS

 

1

1.1.

 

Definitions

 

1

ARTICLE II

 

PURCHASE AND SALE OF COMMON STOCK

 

13

2.1.

 

Sale of Common Stock

 

13

2.2.

 

Closing

 

13

2.3.

 

Payment of Estimated Purchase Price

 

13

ARTICLE III

 

REPRESENTATIONS AND WARRANTIES OF THE SELLER AND THE COMPANY

 

18

3.1.

 

Corporate Existence and Power

 

18

3.2.

 

Corporate Authorization

 

19

3.3.

 

Charter Documents; Legality

 

19

3.4.

 

Subsidiaries

 

20

3.5.

 

Capitalization and Ownership

 

20

3.6.

 

Transactions with Affiliates

 

20

3.7.

 

Assumed Names

 

20

3.8.

 

Governmental Authorization

 

21

3.9.

 

Consents

 

21

3.10.

 

Financial Statements; Undisclosed Liabilities

 

21

3.11.

 

Accounts Receivable

 

22

3.12.

 

Books and Records

 

22

3.13.

 

Absence of Certain Changes

 

22

3.14.

 

Real Property

 

24

3.15.

 

Tangible Personal Property

 

24

3.16.

 

Intellectual Property

 

25

3.17.

 

Relationships With Customers, Suppliers, Etc

 

26

3.18.

 

Litigation

 

27

3.19.

 

Contracts

 

28

3.20.

 

Licenses and Permits

 

29

3.21.

 

Compliance with Laws

 

29

3.22.

 

Intentionally omitted

 

29

3.23.

 

Employees

 

30

3.24.

 

Compliance with Labor Laws and Agreements

 

30

3.25.

 

Pension and Benefit Plans

 

30

3.26.

 

Tax Matters

 

32

3.27.

 

Fees

 

35

3.28.

 

Business Operations; Servers

 

35

3.29.

 

Powers of Attorney

 

36

3.30.

 

Certain Business Practices

 

36

3.31.

 

Money Laundering Laws

 

36

3.32.

 

No Other Representations or Warranties

 

38

 

 

1

 

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ARTICLE IV

 

REPRESENTATIONS AND WARRANTIES OF THE SELLER

 

38

4.1.

 

Ownership of Stock; Authority

 

38

4.2.

 

Approvals

 

39

4.3.

 

Non-Contravention

 

39

4.4.

 

Litigation and Claims

 

39

4.5.

 

Investment Representations

 

39

4.6.

 

Tax

 

43

4.7.

 

No Additional Representations

 

43

ARTICLE V

 

REPRESENTATIONS AND WARRANTIES OF PARENT AND PURCHASER

 

43

5.1.

 

Due Incorporation

 

43

5.2.

 

Corporate Authorization

 

44

5.3.

 

Governmental Authorization

 

44

5.4.

 

No Violation

 

44

5.5.

 

Consents

 

45

5.6.

 

Litigation

 

45

5.8.

 

Fees

 

45

5.9.

 

Charter Documents; Legality

 

46

5.10.

 

Capitalization and Ownership of the Parent

 

46

5.11.

 

SEC Filings; Financial Statements

 

46

5.12.

 

SEC Compliance

 

48

5.13.

 

Compliance with Laws

 

48

5.14.

 

Money Laundering Laws

 

48

5.15.

 

Ownership of Parent Common Stock

 

48

5.16.

 

Purchaser

 

48

5.17.

 

Financial Ability to Perform

 

49

5.18.

 

Absence of Certain Changes or Events

 

49

5.19.

 

Due Diligence Investigation

 

49

5.20.

 

Board Approval

 

49

5.21.

 

Trust Fund

 

50

5.22.

 

No Other Representations or Warranties

 

50

ARTICLE VI

 

COVENANTS OF THE COMPANY AND THE SELLER PENDING CLOSING

 

51

6.1.

 

Conduct of the Business

 

51

6.2.

 

Access to Information

 

53

6.3.

 

SEC Filings

 

54

6.4.

 

Exclusivity

 

55

6.5.

 

Reporting and Compliance With Law

 

55

ARTICLE VII

 

CONFIDENTIALITY AND NON-SOLICITATION COVENANTS

 

55

7.1.

 

Confidentiality

 

55

7.2.

 

Non-Solicitation

 

56

7.3.

 

Injunctive Relief

 

56

 

 

2

 

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ARTICLE VIII

 

COVENANTS OF ALL PARTIES HERETO

 

57

8.1.

 

Best Efforts; Further Assurances

 

57

8.3.

 

Reasonable Best Efforts to Obtain Consents

 

57

8.4.

 

Tax Matters

 

57

8.5.

 

Proxy Statement; Special Meeting

 

58

8.6.

 

Other Actions

 

60

8.7.

 

Access to Information

 

61

8.8.

 

Notices of Certain Events; Updated Disclosure Schedules

 

61

8.9.

 

Securities Law Compliance

 

62

8.10.

 

Employee Matters

 

62

8.11.

 

Indemnification; Directors’ and Officers’ Insurance

 

64

8.12.

 

Trust Fund Disbursement

 

65

8.13.

 

Prior Acquisition Dispute

 

65

8.14.

 

Exclusivity

 

65

8.14.

 

Ordinary Conduct of the Parent and the Purchaser

 

66

8.15.

 

Member Acknowledgements

 

67

ARTICLE IX

 

CONDITIONS TO CLOSING

 

67

9.1.

 

Condition to the Obligations of Parent, the Purchaser, the Seller and the
Company

 

67

9.2.

 

Conditions to Obligations of Parent and the Purchaser

 

67

9.3.

 

Conditions to Obligations of the Company and the Seller

 

69

ARTICLE X

 

RELIANCE ON REPRESENTATIONS AND WARRANTIES

 

71

10.1.

 

Reliance on Representations and Warranties of the Company and the Seller

 

71

10.2.

 

Reliance on Representations and Warranties of Parent and the Purchaser

 

71

ARTICLE XI

 

INDEMNIFICATION

 

71

11.1.

 

Indemnification of Parent, Purchaser

 

71

11.2.

 

Indemnification of Seller

 

72

11.3.

 

Procedure

 

72

11.4.

 

Insurance; Tax Benefits

 

74

11.5.

 

Limitations on Indemnification

 

74

11.6.

 

Survival of Indemnification Rights

 

75

11.7.

 

Offset

 

75

11.8.

 

Mitigation of Loss

 

76

11.9.

 

Exclusive Remedy

 

76

ARTICLE XII

 

DISPUTE RESOLUTION

 

77

12.1.

 

Arbitration

 

77

12.2.

 

Waiver of Jury Trial; Exemplary Damages

 

79

12.3.

 

Attorneys’ Fees

 

79

ARTICLE XIII

 

TERMINATION

 

80

13.1.

 

Termination Without Default

 

80

13.2.

 

Termination Upon Default

 

80

 

 

3

 

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13.3.

 

Effect of Termination

 

81

ARTICLE XIV

 

MISCELLANEOUS

 

81

14.1.

 

Notices

 

81

14.2.

 

Amendments; No Waivers

 

83

14.3.

 

Ambiguities

 

83

14.4.

 

Publicity

 

83

14.5.

 

Expenses

 

83

14.6.

 

Successors and Assigns

 

83

14.7.

 

Governing Law; Jurisdiction

 

83

14.8.

 

Counterparts; Effectiveness

 

84

14.9.

 

Entire Agreement

 

84

14.10.

 

Severability

 

84

14.11.

 

Captions

 

84

14.12.

 

Construction

 

84

14.13.

 

Enforcement of Certain Rights

 

85

 

 

4

 

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STOCK PURCHASE AGREEMENT

STOCK PURCHASE AGREEMENT, dated February 14, 2008 (this “Agreement”), by and
among Vector Intersect Security Acquisition Corporation, a Delaware corporation
(“Parent”), Cyalume Acquisition Corp., a Delaware corporation (“Purchaser”),
Cyalume Technologies, Inc., a Delaware corporation (the “Company”), and GMS
Acquisition Partners Holdings, LLC (“Seller”).

WITNESSETH:

WHEREAS, the Company is in the business of manufacturing and selling
chemiluminescent products, retroreflective products,
retroreflective/photoluminescent products, and other various products utilizing
the electromagnetic spectrum to commercial, industrial and governmental
customers (the “Business”);

WHEREAS, the Seller owns 100% of the issued and outstanding equity securities of
the Company (the “Shares”);

WHEREAS, Parent owns all of the issued and outstanding shares of equity
securities of Purchaser; and

WHEREAS, Purchaser desires to acquire the Shares in accordance with and subject
to the terms and conditions of this Agreement (the “Transaction”).

NOW, THEREFORE, in consideration of the foregoing and the representations,
warranties, covenants and agreements herein contained and other good and
valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the parties hereto hereby agree as follows:

ARTICLE I

 

DEFINITIONS

 

 

1.1.

Definitions. The following terms, as used herein, have the following meanings:

“1st Lien Secured Debt” means Indebtedness of the Company outstanding
immediately prior to the Closing Date pursuant to the First Lien Credit and
Guaranty Agreement, dated as of January 23, 2006 by and among the Company, the
Seller, Goldentree Asset Management LP, The Bank of New York and the other
lenders identified therein.

“2nd Lien Secured Debt” means Indebtedness of the Company outstanding
immediately prior to the Closing Date pursuant to the Second Lien Credit and
Guaranty Agreement, dated as of January 23, 2006 by and among the Company, the
Seller, Goldentree Asset Management LP, The Bank of New York and the other
lenders identified therein.

“Accounts Receivable” has the meaning set forth in Section 3.11.

 

 

1

 

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“Action” means any action, suit, investigation, hearing or proceeding, including
any audit for taxes or otherwise.

“Actual Adjustment” means (x) the Purchase Price as set forth on the Final
Statement of Purchase Price minus (y) the Estimated Purchase Price.

“Affiliate” means, with respect to any Person, any Person directly or indirectly
controlling, controlled by, or under common control with such other Person. With
respect to any natural person, the term Affiliate shall also include any member
of said person’s immediate family, any family limited partnership, limited
liability company or other entity in which said person owns any beneficial
interest and any trust, voting or otherwise, of which said person is a trustee
or of which said person or any of said person’s immediate family is a
beneficiary.

“Affiliated Members” has the meaning set forth in Section 9.2(l).

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

“Arbitrator” has the meaning set forth in Section 12.1(b).

“Authority” shall mean any governmental, regulatory or administrative body,
agency or authority, any court or judicial authority, any arbitrator, or any
public, private or industry regulatory authority, whether international,
national, federal, state, or local.

“Average Trading Price” means, as of the date of any determination, the average
per share closing price of the Parent Common Stock (as quoted on the OTC
Bulletin Board) for the twenty (20) consecutive trading days immediately prior
to the date of such determination. For purposes of the Actual Adjustment or the
payment of any indemnification obligation, the date of any determination shall
be the date that the Actual Adjustment or the amount of the indemnification
obligation, as applicable, is finally determined pursuant to this Agreement.

“Books and Records” means all books and records, ledgers, employee records,
customer lists, files, correspondence, and other records of every kind (whether
written, electronic, or otherwise embodied) owned and used by the Company or any
of its Subsidiaries and in which the Company’s or such Subsidiaries’ assets,
business or transactions are otherwise reflected.

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

“Business Day” means any day other than a Saturday, Sunday or a legal holiday on
which commercial banking institutions in New York are not open for business.

“Cap” has the meaning set forth in Section 11.5(a).

“Charter Documents” has the meaning set forth in Section 3.3.

“Closing” has the meaning set forth in Section 2.2.

“Closing Date” has the meaning set forth in Section 2.2.

 

 

2

 

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“Closing Date Indebtedness” means the Indebtedness of the Company relating to
the 1st Lien Secured Debt, the 2nd Lien Secured Debt and the Senior Subordinate
Notes as of immediately prior to the Closing.

“Closing Form 8-K” has the meaning set forth in Section 8.5(a).

“Closing Press Release” has the meaning set forth in Section 8.5(a).

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

“Common Units” has the meaning set forth in the Operating Agreement.

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

“Company Consent” has the meaning set forth in Section 3.9.

“Company Employees” has the meaning set forth in Section 8.9(a).

“Company Indemnitees” has the meaning set forth in Section 11.2.

“Contracts” means any contract, agreement, commitment, indenture, mortgage,
lease, pledge, note, bond, license or permit.

“Cova” means Cova Small Cap Holdings, LLC, a member of Seller.

“Customer” has the meaning set forth in Section 3.17(a).

“D&O Indemnified Parties” has the meaning set forth in Section 8.10(a).

“December 2007 Balance Sheet” has the meaning set forth in Section 3.10(a).

“Deductible Amount” has the meaning set forth in Section 11.5(a).

“DGCL” means the Delaware General Corporation Law.

“Enterprise Value” means $120,000,000.

“Environmental Laws” has the meaning set forth in Section 3.32(c).

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

“Escrow Agreement” mean the escrow agreement to be entered into on the Closing
Date by Parent, Purchaser, Seller and American Stock Transfer & Trust Company,
as escrow agent, substantially in the form attached hereto as Exhibit A.

“Escrowed Stock” has the meaning set forth in Section 2.3(b).

 

 

3

 

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“Estimated Purchase Price” means a good faith estimate of the Purchase Price, as
determined by the Seller and approved by the Parent (such approval not to be
unreasonably withheld, delayed or conditioned). In connection with determining
the Estimated Purchase Price, the Seller shall apply the calculation provided
for in the definition of Purchase Price, and shall use (i) the Enterprise Value,
(ii) the amount of Closing Date Indebtedness, (iii) the amount of Unpaid Seller
Expenses, and (iv) an estimate of the Net Working Capital Adjustment in such
calculation.

“Exchange Act” means the Securities Exchange Act of 1934.

“Exchange Act Filings” means filings under the Exchange Act made by the Parent
prior to the Closing Date.

“Excluded Person” has the meaning set forth in Section 6.4.

“Final Release Date” means the date that is eighteen (18) months following the
Closing Date.

“Fundamental Representations” has the meaning set forth in Section 11.5(a).

“GAAP” means U.S. generally accepted accounting principles, consistently applied
and interpreted.

“Hazardous Substance” has the meaning set forth in Section 3.32(b).

“Indebtedness” includes with respect to any Person, (a) all obligations of such
Person for borrowed money, or with respect to deposits or advances of any kind
(including amounts by reason of overdrafts and amounts owed by reason of letter
of credit reimbursement agreements) including with respect thereto, all
interest, fees and costs, (b) all obligations of such Person evidenced by bonds,
debentures, notes, liens, mortgages or similar instruments, (c) all obligations
of such Person under conditional sale or other title retention agreements
relating to property purchased by such Person, (d) all obligations of such
Person issued or assumed as the deferred purchase price of property or services
(other than accounts payable to creditors for goods and services incurred in the
ordinary course of business), (e) all Indebtedness of others secured by (or for
which the holder of such Indebtedness has an existing right, contingent or
otherwise, to be secured by) any lien or security interest on property owned or
acquired by such Person, whether or not the obligations secured thereby have
been assumed, and (f) all guarantees by such Person.

“Indebtedness and Expense Payment Instruction Letter” has the meaning set forth
in Section 2.3(a).

“Indemnification Notice” has the meaning set forth in Section 11.3(a).

“Indemnified Parties” has the meaning set forth in Section 11.3(a).

“Indemnifying Party” has the meaning set forth in Section 11.3.

 

 

4

 

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“Intellectual Property” means any and all of the following, whether domestic or
foreign: (A) U.S., international and foreign patents, patent applications and
statutory invention registrations; (B) trademarks, licenses, inventions, service
marks, trade names, trade dress, slogans, logos and Internet domain names,
including registrations and applications for registration thereof; (C)
copyrights, including registrations and applications for registration thereof,
and copyrightable materials; (D) trade secrets, know-how and similar
confidential and proprietary information; (E) the additional names listed on
Schedule 3.7 and all derivations thereof; (F) u.r.l.s, Internet domain names and
Websites, and (G) any other type of intellectual property right to the extent
protectable under applicable Law.

“Investor Rights Agreement” means the Investor Rights Agreement by and between
the Parent and the Members in the form attached hereto as Exhibit B.

“Knowledge of the Company” means the actual knowledge of Michael Bielonko, Earl
Cranor and Thomas McCarthy, after reasonable inquiry.

“Law” means any domestic or foreign, federal, state, municipality or local law,
statute, ordinance, code, rule, guideline, or regulation or common law.

“Leases” has the meaning set forth in Section 3.14.

“Licensed Intellectual Property” has the meaning set forth in Section 3.16(c).

“Lien” means, with respect to any asset, any mortgage, lien, pledge, charge,
security interest or encumbrance of any kind in respect of such asset, including
any agreement to give any of the foregoing and any conditional sale and
including any voting agreement or proxy. For the avoidance of doubt, “Lien”
shall not include any license of Intellectual Property.

“Loss(es)” has the meaning set forth in Section 11.1.

“Material Adverse Change” means a material adverse change in the business,
assets, condition (financial or otherwise), liabilities, results of operations
or prospects of the Company and its Subsidiaries, taken as a whole; provided,
that none of the following shall be deemed, either alone or in combination, to
constitute, and no change arising from, attributable to or relating to, any of
the following shall be taken into account in determining whether there has been
a Material Adverse Change: (i) changes in general economic, regulatory or
political conditions, or in the industry in which the Company or any Subsidiary
primarily operates, in each case so long as such changes do not
disproportionately impact the Company or any Subsidiary relative to other
Persons principally engaged in the same or substantially similar industry as the
Company or any Subsidiary, (ii) the execution, delivery, public announcement or
pendency of this Agreement or any of the transactions contemplated herein, or
any actions taken in compliance herewith or with the consent of the Parent or
Purchaser, including the impact solely from the factors listed above in this
clause (ii) on the relationships of the Company or any Subsidiary with
customers, suppliers, consultants or employees, (iii) any breach by Parent or
Purchaser of this Agreement, (iv) any change in GAAP or applicable Laws, (v) any
natural disaster, sabotage, military action or war (whether or not declared) or
any escalation or worsening thereof, and (vi) any failure in and of itself (as
distinguished from any change or effect giving rise to or contributing to such
failure) by the Company or any Subsidiary to meet any projections or forecasts
for any period.

 

 

5

 

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“Material Adverse Effect” means a material adverse effect on the business,
assets, condition (financial or otherwise), liabilities, results of operations
or prospects of the Company and its Subsidiaries, taken as a whole; provided,
that none of the following shall be deemed, either alone or in combination, to
constitute, and no effect arising from, attributable to or relating to, any of
the following shall be taken into account in determining whether there has been
a Material Adverse Effect: (i) changes in general economic, regulatory or
political conditions, or in the industry in which the Company or any Subsidiary
primarily operates, in each case so long as such changes do not
disproportionately impact the Company or any Subsidiary relative to other
Persons principally engaged in the same or substantially similar industry as the
Company or any Subsidiary, (ii) the execution, delivery, public announcement or
pendency of this Agreement or any of the transactions contemplated herein, or
any actions taken in compliance herewith or with the consent of the Parent or
Purchaser, including the impact solely from the factors listed above in this
clause (ii) thereof on the relationships of the Company or any Subsidiary with
customers, suppliers, consultants or employees, (iii) any breach by Parent or
Purchaser of this Agreement, (iv) any change in GAAP or applicable Laws, (v) any
natural disaster, sabotage, military action or war (whether or not declared) or
any escalation or worsening thereof, and (vi) any failure in and of itself (as
distinguished from any change or effect giving rise to or contributing to such
failure) by the Company or any Subsidiary to meet any projections or forecasts
for any period.

“Material Contracts” has the meaning set forth in Section 3.19(b).

“Members” means the members of Seller as of the Closing Date.

“Money Laundering Laws” has the meaning set forth in Section 3.31

“Net Working Capital” means, with respect to the Company and its Subsidiaries,
the net book value of those current assets of the Company and its Subsidiaries,
on a consolidated basis, as of immediately prior to the Closing that are
included in the line item categories of current assets specifically identified
on Exhibit C attached hereto, less the net book value of those current
liabilities of the Company and its Subsidiaries, on a consolidated basis, as of
immediately prior to the Closing that are included in the line item categories
of current liabilities specifically identified on Exhibit C attached hereto, in
each case, without duplication, and as determined (A) in a manner strictly
consistent with the principles and methodologies used by the Company in the
preparation of its financial statements (the “Accounting Principles”) and
calculated using the same calculation method (the “Calculation Method”) used in
calculating the amounts set forth in clauses (i) and (ii) of the definition of
Net Working Capital Adjustment and (B) without giving effect to the transactions
contemplated by this Agreement. To the extent the Calculation Method differs
from the Accounting Principles, the Calculation Method shall control.
Notwithstanding the foregoing, “Net Working Capital” shall not include any
Indebtedness or Unpaid Seller Expenses.

“Net Working Capital Adjustment” means (i) the amount by which the Net Working
Capital as of immediately prior to the Closing exceeds $9,000,000 or (ii) the
amount

 

 

6

 

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by which Net Working Capital as of immediately prior to Closing is less than
$7,000,000; provided that (A) any amount which is calculated pursuant to clause
(i) above shall be deemed to be a positive number for the purposes of
calculating Purchase Price and (B) any amount which is calculated pursuant to
clause (ii) above shall be deemed to be a negative number for the purposes of
calculating Purchase Price.

“Offices” has the meaning set forth in Section 3.1.

“Operating Agreement” means the Amended and Restated Operating Agreement of GMS
Acquisition Partners Holdings, LLC, dated as of April 13, 2007 and as amended
from time to time.

“Order” means any decree, order, judgment, writ, award, injunction, rule or
consent of or by an Authority.

“Outside Closing Date” has the meaning set forth in Section 13.1.

“Owned Intellectual Property” has the meaning set forth in Section 3.16(a).

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

“Parent Charter Documents” has the meaning set forth in Section 5.8.

“Parent Common Stock” means the Common Stock, $.001 par value per share, of
Parent.

“Parent Financial Statements” has the meaning set forth in Section 5.10(a).

“Parent Indemnitees” has the meaning set forth in Section 11.1.

“Parent SEC Reports” ha the meaning set forth in Section 5.10(a).

“Parent Stockholder Approval” has the meaning set forth in Section 8.4(a).

“Parent Warrants” has the meaning set forth in Section 5.9.

“Permitted Liens” means (a) mechanics, materialmen’s, carrier’s, repairer’s and
other Liens arising or incurred in the ordinary course of business or that are
not yet delinquent or are being contested in good faith; (b) Liens for Taxes,
assessments or other governmental charges not yet due and payable or which are
being contested in good faith, and for which appropriate reserves have been
established; (c) encumbrances and restrictions on any Real Property of the
Company or its Subsidiaries (including easements, conditions, covenants, rights
of way and similar restrictions of record) that do not materially interfere with
the present uses of such Real Property; (d) zoning, building codes and other
land use laws regulating the use or occupancy of the Real Property or the
activities conducted thereon which are imposed by any Authority having
jurisdiction over such Real Property and which do not materially impair the use
or occupancy of such Real Property in the operation of the business of the
Company or any of its Subsidiaries; (e) Liens described on Schedule 1.1; and (f)
Liens securing the obligations of the Company and its Subsidiaries under the 1st
Lien Secured Debt and the 2nd Lien Secured Debt, all of which will be released
at the Closing.

 

 

7

 

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“Permits” has the meaning set forth in Section 3.20.

“Person” means an individual, a corporation, a partnership, a limited liability
company, an association, a trust or other entity or organization, including a
government, domestic or foreign, or political subdivision thereof, or an agency
or instrumentality thereof.

“Pre-Closing Period” means any Tax period that ends on or before the Closing
Date, or in the case of a Tax period that includes (but does not end on) the
Closing Date, the portion of such period through and including the Closing Date.

“Proceeding” has the meaning set forth in Section 3.26(b).

“Proxy Statement” has the meaning set forth in Section 8.4(a).

“Purchase Price” means (i) the Enterprise Value, plus (ii) the Net Working
Capital Adjustment (which may be a negative number), minus (iii) the amount of
Closing Date Indebtedness, minus (iv) the amount of Unpaid Seller Expenses.

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

“Real Property” means, collectively, all real properties and interests therein
(including the right to use), together with all buildings, fixtures, trade
fixtures, plant and other improvements located thereon or attached thereto; all
rights arising out of the use thereof (including air, water, oil and mineral
rights); and all subleases, franchises, licenses, permits, easements and
rights-of-way which are appurtenant thereto.

“Rebate Obligations” has the meaning set forth in Section 3.28(d).

“Reg. D” has the meaning set forth in Section 4.5(a).

“Retained Amount” has the meaning set forth in Section 2.3(b).

“SEC” means the Securities and Exchange Commission.

“Restrictive Covenants” has the meaning set forth in Section 7.3.

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

“Senior Subordinate Notes” means the Indebtedness of the Company outstanding
immediately prior to the Closing Date pursuant to the Senior Subordinated Loan
Agreement, dated as of January 23, 2006 by and among the Company, the Seller and
Deerfield Triarc Capital LLC.

“Series A Preferred Units” has the meaning set forth in the Operating Agreement.

 

 

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“Series A Preferred Value” means, with respect to each Member, the sum of the
liquidation preference of the Series A Preferred Units (as set forth in the
Operating Agreement), plus all accrued and unpaid dividends thereon as of the
Closing Date, in each case, with respect to all Series A Preferred Units held by
such Member as of the Closing Date.

“Series B Preferred Units” has the meaning set forth in the Operating Agreement.

“Series B Preferred Value” means, with respect to each Member, the sum of the
liquidation preference of the Series B Preferred Units (as set forth in the
Operating Agreement), plus all accrued and unpaid dividends thereon as of the
Closing Date, in each case, with respect to all Series B Preferred Units held by
such Member as of the Closing Date.

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

“Signing Form 8-K” has the meaning set forth in Section 8.5(a).

“Signing Press Release” has the meaning set forth in Section 8.5(a).

“Software” has the meaning set forth in Section 3.16(b).

“Special Meeting” has the meaning set forth in Section 8.4(a).

“Subsidiary” or “Subsidiaries” with respect to any specified Person, any other
Person (i) whose board of directors or a similar governing body, or a majority
thereof, may presently be directly or indirectly elected or appointed by such
specified Person, (ii) whose management decisions and corporate actions are
directly and indirectly subject to the present control of such specified Person
or (iii) whose voting securities are more than fifty percent (50%) owned,
directly or indirectly by such specified Person.

“Supplier” has the meaning set forth in Section 3.17.

“Tangible Assets” means all tangible personal property of the Company and its
Subsidiaries, or interests therein, including, without limitation, inventory,
machinery, computers and accessories, furniture, office equipment and
communications equipment.

“Tax” has the meaning set forth in Section 3.26(d).

“Tax Liability” has the meaning set forth in Section 3.26(b).

“Tax Return” has the meaning set forth in Section 3.26(d).

“Third Party Claim” has the meaning set forth in Section 11.3(a).

“Transaction” has the meaning set forth in the Recitals.

“Trust Agreement” has the meaning set forth in Section 5.20.

 

 

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“UCC” shall mean the Uniform Commercial Code of the State of New York, or any
corresponding or succeeding provisions of Laws of the State of New York, or any
corresponding or succeeding provisions of Laws, in each case as the same may
have been and hereafter may be adopted, supplemented, modified, amended,
restated or replaced from time to time.

“Unpaid Seller Expenses” means all out-of-pocket costs and expenses incurred by
the Company or its Subsidiaries or on behalf of the Seller in connection with
the consummation of the transactions contemplated hereby that have not been paid
by the Company or its Subsidiaries immediately prior to the Closing; provided,
that for purposes of clarity, any severance payable by the Company or any of its
Subsidiaries on or after the Closing Date shall not be included in the
calculation of Unpaid Seller Expenses.

“Updated Schedules” has the meaning set forth in Section 8.7(b).

“Website(s)” shall mean all of the internet domain names for the Company set
forth on Schedule 3.16(a).

ARTICLE II

PURCHASE AND SALE OF COMMON STOCK

2.1. Sale of Common Stock. Subject to the terms and conditions herein stated,
the Seller agrees to sell, assign, transfer and deliver to Purchaser on the
Closing Date, and Purchaser agrees to purchase from Seller on the Closing Date,
free and clear of all Liens (other than Permitted Liens), the Shares, which
Shares represent all of the issued and outstanding ownership interests in the
Company.

2.2. Closing. The closing of the transactions contemplated by this Agreement
(the “Closing”) shall take place at the offices of Loeb & Loeb LLP, 345 Park
Avenue, New York, New York 10154, at 10:00 A.M. local time, three (3) Business
Days after all conditions to the Closing set forth in ARTICLE IX hereof have
been satisfied or waived, or such other place, time or date as Purchaser and
Seller agree in writing. The date of the Closing shall be referred to herein as
the “Closing Date”. In addition to those obligations set forth in ARTICLE IX, at
the Closing:

(a) the Purchaser shall deliver the Estimated Purchase Price (as set forth in
Section 2.3 below); and

(b) the Seller shall deliver to the Purchaser stock certificate(s) evidencing
the Shares, together with duly executed stock powers which shall be executed in
favor of Purchaser.

2.3. Payment of Estimated Purchase Price.

(a) No later than three (3) Business Days prior to the Closing, the Company
shall deliver to Parent and Purchaser a payment instruction letter setting forth
the respective amounts, payees and wiring instructions relating to the payment
of the Closing Date

 

 

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Indebtedness and the Unpaid Seller Expenses (the “Indebtedness and Expense
Payment Instruction Letter”). On the Closing Date, Purchaser shall pay the
Closing Date Indebtedness and the Unpaid Seller Expenses in the amounts and in
accordance with the instructions provided in the Indebtedness and Expense
Payment Instruction Letter.

(b) On the Closing Date, Purchaser shall deposit 1,505,646 shares of Parent
Common Stock (the “Escrowed Stock”) into an escrow account (the “Escrow
Account”), which shall be established pursuant to the Escrow Agreement. Subject
to the terms of the Escrow Agreement, the Escrowed Stock in the Escrow Account
shall be distributed and released by the Escrow Agent as follows: (i) from time
to time prior to the Final Release Date, the Escrowed Stock in the Escrow
Account shall be distributed and released by the Escrow Agent (A) to the
Purchaser to the extent required under Section 2.4(e)(ii), and/or (B) to any
Parent Indemnitee to the extent required under Section 11.7, (ii) on the date
that is six (6) months following the Closing Date, the Escrow Agent shall
distribute and release to the Seller (or its designee) for distribution to those
Members who held Common Units as of the Closing Date, as set forth in a written
notice by Seller to Purchaser and the Escrow Agent at least two (2) Business
Days prior to such release date, the number of shares of Escrowed Stock that has
a value (based on the Average Trading Price as of the date of such distribution)
equal to $6,000,000 and (iii) on the Final Release Date, the Escrow Agent shall
distribute and release to the Seller (or its designee) for distribution to those
Members who held Common Units as of the Closing Date, as set forth in a written
notice by Seller to Purchaser and the Escrow Agent at least two (2) Business
Days prior to the Final Release Date, the balance, if any, of the Escrowed
Stock, unless one or more claims for indemnification of the Parent Indemnitees
are pending as of such date, in which case the Escrow Agent shall (x) retain in
the Escrow Account the number of shares of Parent Common Stock having a value
(based on the Average Trading Price as of the Final Release Date) as would be
necessary to satisfy the amount of such claim(s), as determined in accordance
with this Agreement (the “Retained Amount”) and (y) release and distribute to
the Seller (or its designee) for distribution to those Members who held Common
Units as of the Closing Date, as set forth in a written notice by Seller to
Purchaser and the Escrow Agent at least two (2) Business Days prior to such
release date, the remaining Escrowed Stock, if any. Upon resolution of any such
pending claim, and payment and satisfaction thereof in accordance with Article
II of this Agreement, the parties hereto hereby agree to jointly instruct the
Escrow Agent to release to the Seller (or its designee) for distribution to
those Members who held Common Units as of the Closing Date, as set forth in a
written notice by Seller to Purchaser and the Escrow Agent at least two (2)
Business Days prior to such release date, the balance, if any, of the Retained
Amount. To the extent that any Escrowed Stock is released to Seller (or its
designee) hereunder, Seller (or its designee) shall distribute such amounts to
its Members who held Common Units as of the Closing Date on a pro rata basis
(based on the number of Common Units held by each Member as of the Closing
Date).

(c) On the Closing Date, Purchaser shall pay, on behalf of and at the direction
of Seller, the Estimated Purchase Price to the Members in the following order
and priority:

(i) payment in cash by Purchaser by wire transfer of immediately available
funds, to an account or accounts designated by Seller, for payment to those
Members who hold Series B Preferred Units as of the Closing Date (on a pro rata
basis based on each

 

 

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Member’s Series B Preferred Value) in an amount equal to the aggregate Series B
Preferred Value of all Members, in each case as set forth in a written notice by
Seller to Purchaser at least two (2) Business Days prior to the Closing Date;

(ii) payment in cash by Purchaser by wire transfer of immediately available
funds, to an account or accounts designated by Seller, for payment to those who
hold Series A Preferred Units of Seller as of the Closing Date (on a pro rata
basis based on each Member’s Series A Preferred Value), in the amount of
$15,000,000 in the aggregate, as set forth in a written notice by Seller to
Purchaser at least two (2) Business Days prior to the Closing Date;

(iii) payment in shares of Parent Common Stock for those Members who hold Series
A Preferred Units as of the Closing Date (on a pro rata basis based on each
Member’s Series A Preferred Value) in an amount equal to the number of shares of
Parent Common Stock obtained by dividing (x) the difference between (1) the
aggregate Series A Preferred Value of all Members and (2) $15,000,000 divided by
(y) $7.97, in each case as set forth in a written notice by Seller to Purchaser
at least two (2) Business Days prior to the Closing Date; and

(iv) payment in shares of Parent Common Stock for those Members who hold Common
Units as of the Closing Date (on a pro rata basis based on the number of Common
Units held by each Member as of immediately prior to the Closing) equal to the
number of shares of Parent Common Stock obtained by the difference between (x)
the quotient of (1) Estimated Purchase Price minus the aggregate amount paid
under clauses (i), (ii) and (iii) of this Section 2.3(c), divided by (2) $7.97
less (y) the number of Escrowed Shares in each case as set forth in a written
notice by Seller to Purchaser at least two (2) Business Days prior to the
Closing Date.

2.4. Preparation of the Final Statement of Purchase Price.

(a) As soon as practicable, but no later than 45 days after the Closing Date,
Parent shall prepare and deliver to the Seller (A) a proposed calculation of the
Net Working Capital as of immediately prior to the Closing (the “Proposed
Closing Date Statement of Net Working Capital”), and (B) a proposed calculation
of the Purchase Price (the “Proposed Purchase Price Calculation”) and, in each
case, the components thereof. The Proposed Closing Date Statement of Net Working
Capital and the Proposed Purchase Price Calculation shall collectively be
referred to herein from time to time as the “Proposed Closing Date
Calculations.”

(b) If Seller does not give written notice of dispute (a “Purchase Price Dispute
Notice”) to the Parent within 30 days of receiving the Proposed Closing Date
Calculations, the Parent and the Seller agree that (A) the Proposed Closing Date
Statement of Net Working Capital shall be deemed to set forth the Net Working
Capital as of immediately prior to the Closing and (B) the Proposed Purchase
Price Calculation shall be deemed to set forth the Purchase Price. If, within
such 30-day period, the Seller gives a Purchase Price Dispute Notice to the
Parent (which Purchase Price Dispute Notice must set forth the items and amounts
in dispute), the Seller and the Parent will use commercially reasonable efforts
to

 

 

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resolve the dispute during the 30-day period commencing on the date the Parent
receives the applicable Purchase Price Dispute Notice from the Seller. If a
timely Purchase Price Dispute Notice is received by the Parent, then the
Proposed Closing Date Calculations (as revised pursuant to clause (x) or (y)
below) shall become final and binding upon the parties on the earlier of (x) the
date the parties hereto resolve in writing any differences they have with
respect to any matter specified in the Purchase Price Dispute Notice or (y) the
date any matters properly in dispute are finally resolved in writing by the
Accounting Firm; provided, that any items that are not so disputed shall be
deemed to have become final and binding upon delivery of the Purchase Price
Dispute Notice or, if no such notice is delivered, upon the expiration of such
30-day period within which such Purchase Price Dispute Notice was to be
delivered. If the Seller and the Parent do not obtain a final resolution within
such 30-day period, then the items remaining in dispute (including such party’s
proposed resolution thereof and resulting value of the Purchase Price) shall be
submitted in writing immediately by the Seller and the Parent to a
nationally-recognized, independent accounting firm reasonably acceptable to the
Seller and the Parent (the “Accounting Firm”). The terms of appointment and
engagement of the Accounting Firm shall be as agreed upon between the Seller and
the Parent, and any associated engagement fees shall be borne 50% by the Seller
and 50% by the Parent; provided, that such fees shall ultimately be allocated in
accordance with Section 2.4(d). The Accounting Firm shall be required to render
a determination of the applicable dispute within 30 days after referral of the
matter to the Accounting Firm, which determination must be in writing, must be
based solely on presentations by the Seller and the Parent (and not by
independent review) and must set forth, in reasonable detail, the basis
therefor. The determination of the Accounting Firm shall be conclusive,
non-appealable and binding upon the Seller, the Parent and the other parties
hereto. The Accounting Firm (i) shall be bound by the principles and
methodologies set forth in this Section 2.4(b) and in the definition of “Net
Working Capital” and (ii) shall not assign a value to any item greater than the
greatest value for such item claimed by either party or less than the smallest
value for such item claimed by either party. In connection with the resolution
of any dispute, the Accounting Firm shall have access to all documents, records,
work papers, facilities and personnel necessary to make its determination. The
Parent will revise the Proposed Closing Date Calculations as appropriate to
reflect the resolution of any objections thereto pursuant to this
Section 2.4(b). The “Final Statement of Purchase Price” shall mean the Proposed
Purchase Price Calculation together with any revisions thereto pursuant to this
Section 2.4(b).

(c) The Company will, and will cause its Subsidiaries to, make its financial
records available to the Seller and its accountants and other representatives at
reasonable times during the preparation and/or review by Seller of, and the
resolution of any objections with respect to, the Proposed Closing Date
Calculations.

(d) In the event Seller and Parent submit any unresolved objections to the
Accounting Firm for resolution as provided in Section 2.4(b), the responsibility
for the fees and expenses of such Accounting Firm shall be as follows:

(i) if such Accounting Firm resolves all of the remaining objections in favor of
the Parent’s position (the Purchase Price so determined is referred to herein as
the “Low Value”), then all of the fees and expenses of such Accounting Firm
shall be paid by Seller;

 

 

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(ii) if such Accounting Firm resolves all of the remaining objections in favor
of Seller’s position (the Purchase Price so determined is referred to herein as
the “High Value”), then all of the fees and expenses of such Accounting Firm
shall be paid by Parent; and

(iii) if such Accounting Firm neither resolves all of the remaining objections
in favor of Parent’s position nor resolves all of the remaining objections in
favor of Seller’s position (the Purchase Price so determined is referred to
herein as the “Actual Value”), then that fraction of the fees and expenses of
the Accounting Firm equal to (x) the difference between the High Value and the
Actual Value over (y) the difference between the High Value and the Low Value
shall be paid by Seller, and Parent will be responsible for the remainder of the
fees and expenses of the Accounting Firm.

(e) Adjustment to Estimated Purchase Price.

(i) If the Actual Adjustment is a positive amount, Parent shall promptly pay the
amount of the Actual Adjustment by issuing shares of Parent Common Stock, with
an aggregate value (based on the Average Trading Price as of the date of
determination of the Actual Adjustment) equal to the Actual Adjustment, to those
Members who held Common Units as of the Closing Date (on a pro rata basis based
on the number of Common Units held by each Member as of immediately prior to the
Closing), as set forth in a written notice by Seller.

(ii) If the Actual Adjustment is a negative amount, then Seller shall promptly
pay Parent the amount of the Actual Adjustment by instructing the Escrow Agent
to deliver to Parent such number of shares of Escrowed Stock that has an
aggregate value (based on the Average Trading Price as of the date of
determination of the Actual Adjustment) equal to the Actual Adjustment.

ARTICLE III

REPRESENTATIONS AND WARRANTIES OF

THE COMPANY

The Company hereby represents and warrants to Parent and Purchaser that:

3.1. Corporate Existence and Power. The Company is a corporation duly formed,
validly existing and in good standing under and by virtue of the Laws of the
State of Delaware, and has all power and authority, corporate and otherwise, and
all material governmental licenses, franchises, permits, authorizations,
consents and approvals required to own and operate its properties and assets and
to carry on its business as now conducted and as proposed to be conducted. Each
Subsidiary is duly formed, validly existing and in good standing under and by
virtue of the Laws of the State of its organization, and has all power and
authority, corporate and otherwise, and all material governmental licenses,
franchises, permits, authorizations, consents and approvals required to own and
operate its properties and assets and to carry on its business as now conducted
and as proposed to be conducted. Each of the Company and its Subsidiaries is
qualified to do business as a foreign corporation in any jurisdiction wherein
the character of the property owned or leased by the Company or any Subsidiary
or the nature of its activities make qualification of the Company or any
Subsidiary in

 

 

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any such jurisdiction necessary, except where the failure to so qualify would
not have a Material Adverse Effect. The only offices, warehouses or business
locations of the Company and its Subsidiaries are listed on Schedule 3.1 (the
“Offices”). Neither the Company nor any Subsidiary has taken any action, adopted
any plan, or entered into an agreement in respect of any merger, consolidation,
sale of all or substantially all of its respective assets, reorganization,
recapitalization, dissolution or liquidation, except as explicitly set forth in
this Agreement.

3.2. Corporate Authorization. The execution, delivery and performance by the
Company of this Agreement and the consummation by the Company of the
transactions contemplated hereby are within the corporate powers of the Company
and have been duly authorized by all necessary action on the part of the
Company, including the approval of the Seller. This Agreement, upon its
execution and delivery by the Company (and assuming that this Agreement has been
duly and validly authorized, executed and delivered by the Purchaser and
Parent), constitutes a valid and legally binding agreement of the Company,
enforceable against the Company in accordance with its terms, except as the
enforceability hereof may be limited by (i) applicable bankruptcy, insolvency,
reorganization, moratorium or other similar Laws affecting the enforcement of
creditors’ rights generally or (ii) rules of law governing specific performance,
injunctive relief or other equitable remedies.

3.3. Charter Documents; Legality. The Company has previously delivered to Parent
true and complete copies of its Certificate of Incorporation and By-Laws, minute
books and stock books, as in effect on the date hereof (the “Charter
Documents”). The execution, delivery, and performance by the Company of this
Agreement has not violated and will not violate, and the consummation by the
Company of the transactions contemplated hereby or thereby will not contravene
any provision contained in the Charter Documents or violate any Law to which the
Company is subject.

3.4. Subsidiaries. Schedule 3.4 sets forth each of the Company’s Subsidiaries.
The Company has previously delivered to Parent true and complete copies of the
Charter Documents for each Subsidiary, as in effect on the date hereof. The
Company is not a party to any agreement relating to the formation of any joint
venture, association or other Person.

3.5. Capitalization and Ownership. Schedule 3.5 sets forth, with respect to the
Company and each Subsidiary, (i) such company’s authorized capital, (ii) the
number of such company’s securities that are outstanding, (iii) each stockholder
owning such company’s securities and the number of shares of such securities
owned by such stockholder, and (iv) each security convertible into or
exercisable or exchangeable for such company’s securities, the number and type
of securities such security is convertible into, the exercise or conversion
price of such security and the holder of such security. Except as set forth on
Schedule 3.5, no Person other than the Seller or the Company owns any securities
of the Company or the Subsidiaries. Except as set forth on Schedule 3.5, there
are no outstanding obligations of the Company or any of its Subsidiaries to (1)
issue, or grant any right to acquire, any securities of the Company or any
Subsidiary, or any securities exercisable or exchangeable for or convertible
into, the capital stock or membership interest of the Company or any Subsidiary
or (2) to merge, consolidate, dissolve, liquidate, restructure, or recapitalize
the Company or any Subsidiary. The Shares and the securities of each Subsidiary
(a) have been duly authorized and validly issued and are fully paid and
nonassessable, and (b) were issued in compliance with all applicable federal and
state securities laws.

 

 

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3.6. Transactions with Affiliates. Schedule 3.6 lists each agreement (other than
employment agreements and severance agreements entered into the ordinary course
of business) between the Company and its Affiliates. Except as disclosed in
Schedule 3.6, neither the Seller nor any Affiliate of the Seller (other than the
Company or any of its Subsidiaries) owns, directly or indirectly, in whole or in
part, any material tangible or intangible property (including Intellectual
Property rights) used by the Company or any of its Subsidiaries for the conduct
of the Business.

3.7. Assumed Names. Schedule 3.7 is a complete and correct list of all assumed
or “doing business as” names currently or formerly used by the Company or any
Subsidiary, including names on any Websites. Neither the Company nor any
Subsidiary has used any name other than the names listed on Schedule 3.7 to
conduct its business. The Company and each Subsidiary have filed appropriate
“doing business as” certificates in all applicable jurisdictions. Other than as
set forth on Schedule 3.7, all Websites are in good working order.

3.8. Governmental Authorization. None of the execution, delivery or performance
by the Company of this Agreement requires any consent, approval, license or
other action by or in respect of, or registration, declaration or filing with,
any Authority, except for (i) as set forth on Schedule 3.8 and (ii) those that
may be required solely by reason of Purchaser’s and/or Parent’s (as opposed to
other Person’s) participation in the transactions contemplated hereby.

3.9. Consents. The Contracts listed on Schedule 3.9 are the only agreements,
commitments, arrangements, contracts or other instruments binding upon the
Company, any Subsidiary or any of their respective properties requiring a
consent, approval, authorization, order or other action of or filing with any
Person as a result of the execution, delivery or performance of this Agreement
or the consummation of the transactions contemplated hereby, except for such
consents, approvals, authorizations, orders or other actions or filings, the
absence of which would not reasonably be expected to have, individually or in
the aggregate, a Material Adverse Effect (each of the foregoing, a “Company
Consent”).

3.10. Financial Statements; Undisclosed Liabilities.

(a) Attached hereto as Schedule 3.10(a) are (i) audited balance sheets of the
Company as of December 31, 2005 and the related statements of operations and
cash flows for the year ended December 31, 2005, and (ii) draft balance sheets
of the Company as of December 31, 2006 and December 31, 2007, and the related
statements of operations and cash flows for the years ended December 31, 2006
and December 31, 2007, respectively (the financial statements as of and for the
fiscal years ended December 31, 2006 and December 31, 2007 described in this
clause (ii) shall be collectively referred to herein as the “Draft Financial
Statements”). The balance sheet as at December 31, 2007 is referred to herein as
the “December 2007 Balance Sheet.” The Draft Financial Statements (i) were
prepared from the Books and Records; (ii) except as set forth on
Schedule 3.10(a), were prepared in accordance

 

 

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with GAAP, except as may be indicated in the notes thereto and except for the
absence of footnotes and subject to normal year-end adjustments; and (iii)
fairly and accurately present in all material respects the Company’s financial
condition and the results of its operations as of their respective dates and for
the periods then ended (subject to the absence of footnotes and subject to
normal year-end adjustments).

(b) Except (i) as specifically disclosed, reflected or fully reserved against on
the December 2007 Balance Sheet, (ii) liabilities and obligations incurred in
the ordinary course of business since the date of the December 2007 Balance
Sheet, (iii) liabilities and obligations, the existence of which would not
reasonably be expected to result in a Material Adverse Effect and (iv)
liabilities and obligations set forth on Schedule 3.10(b), there are no
liabilities or obligations of any nature (whether accrued, absolute, contingent,
liquidated or unliquidated, unasserted or otherwise) required to be disclosed on
a balance sheet (or the notes thereto) that has been prepared in accordance with
GAAP, that have not been disclosed therein.

3.11. Accounts Receivable. Except as set forth in Schedule 3.11, all of the
accounts receivable of the Company and its Subsidiaries set forth on the
December 2007 Balance Sheet are valid receivables and, to the Knowledge of the
Company, are not subject to valid rights of counterclaim or setoff by any
account debtor in excess of the reserve for bad debts set forth on the December
2007 Balance Sheet, as adjusted for operations and transactions through the
Closing Date.

3.12. Books and Records.

(a) All Books and Records of the Company and each Subsidiary have been properly
and accurately kept and completed in all material respects and there are no
material inaccuracies or discrepancies of any kind contained or reflected
therein. The Company and each Subsidiary has none of its records, systems
controls, data or information recorded, stored, maintained, operated or
otherwise wholly or partly dependent on or held by any means (including any
mechanical, electronic or photographic process, whether computerized or not)
which (including all means of access thereto and therefrom) is not under the
exclusive ownership (excluding licensed software programs) and direct control of
the Company or a Subsidiary and which is not located at the Offices.

(b) Schedule 3.12(b) is a complete and correct list of all savings, checking,
brokerage or other accounts pursuant to which the Company or any Subsidiary has
cash or securities on deposit and such list indicates the signatories on each
account.

3.13. Absence of Certain Changes. Except as set forth in Schedule 3.13, since
December 31, 2007, the Company and each of its Subsidiaries has conducted its
respective business in all material respects in the ordinary course of business
consistent with past practices, and with respect to the Company and each such
Subsidiary there has not been:

(i) any Material Adverse Change or any event, occurrence or development that
would constitute a Material Adverse Effect on the Company’s ability to
consummate the transactions contemplated herein;

 

 

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(ii) any increase of bonus, salary or other compensation paid of more than 10%
for any employee making an annual salary of greater than $50,000, or change in
the bonus or profit sharing policies of the Company, other than in the ordinary
course of business;

(iii) any capital expenditure except in the ordinary course of business
consistent with past practice (including with respect to kind and amount);

(iv) any sale, lease, license or other disposition of any of its assets except
(i) pursuant to existing Contracts or commitments disclosed herein, (ii) sales
of products or inventory or licenses of Intellectual Property in the ordinary
course of business consistent with past practice, and (iii) sales, assignments,
or other dispositions of any Intellectual Property that are not material to the
conduct of the business of the Company or any of its Subsidiaries, either
individually or in the aggregate;

(v) the incurrence of Liens on any of its assets outside of the ordinary course
of business, other than Permitted Liens;

(vi) any material damage, destruction or loss of property related to any of its
assets not covered by insurance;

(vii) any merger or consolidation with any other Person or acquisition of the
stock or business of any other Person;

(viii) the lapse of any insurance policy protecting its assets;

(ix) any material change in its accounting principles or methods or write down
in the value of any inventory or assets;

(x) any extension of any loans other than travel or other expense advances to
employees in the ordinary course of business consistent with past practice (and
in any event not in excess of $15,000 to any individual employee);

(xi) any material increase or reduction in the prices of products sold, except
in the ordinary course of business consistent with past practice (including with
respect to amount); or

(xii) any agreement to do any of the foregoing.

3.14. Real Property.

(a) The Real Property owned by the Company or any Subsidiary is listed on
Schedule 3.14(a). The leases, together with all amendments thereto, pursuant to
which the Company or any Subsidiary is the lessee of any Real Property
(collectively, the “Leases”) are listed in Schedule 3.14(a) and are valid and
enforceable by the Company or the Subsidiary which is a party to such Lease
against the other parties thereto. Neither the Company nor any Subsidiary has
breached or violated and is not in default under any of the Leases or any local
zoning ordinance, the breach or violation of which could individually or in the
aggregate have a Material Adverse Effect, and no notice from any Person has been
received by the Company,

 

 

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any Subsidiary or the Seller claiming any violation of any Lease or any local
zoning ordinance. Neither the Company nor any Subsidiary has other leases for
Real Property except as set forth on Schedule 3.14(a).

(b) Neither the Company nor any Subsidiary has experienced any material
interruption in the delivery of adequate quantities of any utilities (including
electricity, natural gas, potable water, water for cooling or similar purposes
and fuel oil) or other public services (including sanitary and industrial sewer
service) required by the Company or any Subsidiary in the operation of the
Business.

3.15. Tangible Personal Property.

(a) Each Tangible Asset is in operating condition and repair and functions in
accordance with its intended use (ordinary wear and tear excepted), has been
properly maintained, and is suitable for its present uses.

(b) Except as set forth on Schedule 3.15, the Company and its Subsidiaries have
good title to, or a valid leasehold or license interest in, all their respective
properties and assets (whether tangible or intangible), free and clear of all
Liens (other than Permitted Liens).

3.16. Intellectual Property.

(a) Schedule 3.16(a) sets forth a true and complete list of all registrations or
applications for registration of Intellectual Property owned by the Company or
any Subsidiary and used or held for use by or otherwise material to the Business
(the “Owned Intellectual Property”).

(b) Schedule 3.16(b) sets forth a true and complete list of all material
computer software developed in whole or in part by or on behalf of the Company
or any Subsidiary, including such developed computer software and databases that
are operated or used by the Company or any Subsidiary on its Websites and used
or held for use by and otherwise material to the Business (collectively,
“Software”).

(c) Schedule 3.16(c) sets forth a true and complete list of all licenses,
sublicenses and other agreements pertaining to Intellectual Property or Software
(other than “shrink wrap” or “click wrap” software) to which the Company is a
party in each case which are valid and used or held for use by and otherwise
material to the Business (collectively, “Licensed Intellectual Property”).

(d) To the Knowledge of the Company, neither the Company’s nor any Subsidiary’s
ownership and use in the ordinary course of the Owned Intellectual Property
infringes upon or misappropriates, and the use of the Software and Licensed
Intellectual Property does not infringe upon or misappropriate, the valid
Intellectual Property rights of any third party.

(e) Except as set forth in Schedule 3.16(e), the Company or a Subsidiary is the
owner of the entire and unencumbered right, title and interest in and to each
item of Owned Intellectual Property, and the Company or a Subsidiary is entitled
to use the Owned Intellectual Property as it is presently used in the Business.

 

 

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(f) The Owned Intellectual Property is subsisting, valid and enforceable, and
has not been adjudged invalid or unenforceable in whole or in part.

(g) To the Knowledge of the Company, no Person is engaged in any activity that
infringes upon the Owned Intellectual Property, the Licensed Intellectual
Property or the Software. Neither the Company nor any Subsidiary has granted any
license or other right currently outstanding to any third party with respect to
the Owned Intellectual Property, Licensed Intellectual Property or Software,
except for (i) licenses comprising invoices incurred in the ordinary course, and
(ii) those licenses set forth in Schedule 3.16(g). The consummation of the
transactions contemplated by this Agreement will not result in the termination
or impairment of any of the Owned Intellectual Property, Licensed Intellectual
Property or Software.

(h) Neither the Company nor any Subsidiary has exported the Software outside the
United States, Canada or France. No rights in the Software have been transferred
by the Company to any third party except to the customers of the Company to whom
the Company has licensed such Software in the ordinary course.

(i) To the Knowledge of the Company, the Company or a Subsidiary has the right
to use all software development tools, library functions, compilers and other
third party software that is material to the Business or that is required to
operate or modify the Software.

(j) The Company and each Subsidiary has taken reasonable steps to maintain the
confidentiality of its trade secrets and other confidential Intellectual
Property and, to the Knowledge of the Company, (i) there has been no
misappropriation of any material trade secrets or other material confidential
Intellectual Property of the Company or any Subsidiary by any Person; (ii) no
employee, independent contractor or agent of the Company or any Subsidiary has
misappropriated any trade secrets of any other Person in the course of his
performance as an employee, independent contractor or agent; and (iii) no
employee, independent contractor or agent of the Company or any Subsidiary is in
default or breach of any term of any employment agreement, non-disclosure
agreement, non-compete obligation, assignment of invention agreement or similar
agreement or contract relating in any way to the protection, ownership,
development, use or transfer of Intellectual Property, other than those which
individually or in the aggregate would not have a Material Adverse Effect.

3.17. Relationships With Customers, Suppliers, Etc.

(a) Schedule 3.17(a) identifies during the fiscal year ended December 31, 2007
(i) the 10 largest customers of the Company and the Subsidiaries on a
consolidated basis (the “Customers”) and the amount of sales to such Customer
during such period and (ii) the 10 largest suppliers (other than attorneys,
accountants and office leases) of the Company and the Subsidiaries on a
consolidated basis (the “Suppliers”) and the amount of purchases from such
Supplier during such period.

 

 

 

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(b) Schedule 3.17(b) sets forth (i) all prepayments, pre-billed invoices and
deposits that have been received by the Company or any Subsidiary as of the date
hereof from the Customers for products to be shipped, or services to be
performed, after the Closing Date, and (ii) with respect to each such
prepayment, pre-billed invoice or deposit, (A) the party and contract credited,
(B) the date received or invoiced, (C) the products and/or services to be
delivered, and (D) the conditions for the return of such prepayment, pre-billed
invoice or deposit.

(c) Except as set forth on Schedule 3.17(c), since December 31, 2007: (i) there
has not been any termination of the business relationship of the Company or any
Subsidiary with any Customer or Supplier, other than in the ordinary course of
business where a contract has been concluded with such Customer without
subsequent follow-on business or where a Supplier’s products are either no
longer available or applicable to the ongoing business; (ii) the Company has not
received any written notice regarding the termination or withholding of payments
by, or any material dispute with, any Customer or Supplier; and (iii) neither
the Company nor any Subsidiary has received any written notice that such
Customer or Supplier will materially decrease such Person’s purchase of the
Company’s products or such Person’s supply of products to the Company, as
applicable. Except as set forth on Schedule 3.17(c), neither the Company nor any
Subsidiary is currently in any dispute over any terms of any contract or
agreement to which the Company or any Subsidiary and any Customer or Supplier is
a party.

3.18. Litigation. Except as set forth in Schedule 3.18, as of the date hereof
there is no Action pending against, or to the Knowledge of the Company,
threatened against the Company or any of its Subsidiaries, any of their
respective officers or directors (in their capacity as such) or the Seller
before any court or arbitrator or any Authority or which in any manner
challenges or seeks to prevent, enjoin, alter or delay the transactions
contemplated hereby or that would reasonably be expected to have a Material
Adverse Effect. There are no outstanding judgments against the Company or any
Subsidiary that would reasonably be expected to cause a Material Adverse Effect.

3.19. Contracts.

(a) Each Material Contract to which the Company or any Subsidiary is a party is
a valid and binding agreement, and is in full force and effect in all material
respects (subject to applicable bankruptcy, insolvency, reorganization,
moratorium or other laws affecting generally the enforcement of creditors’
rights and subject to general principles of equity), and neither the Company nor
any Subsidiary, as applicable, nor, to the Knowledge of the Company, any other
party thereto, is in material breach or default (whether with or without the
passage of time or the giving of notice or both) under the terms of any such
Material Contract. Neither the Company nor any Subsidiary has assigned,
delegated, or otherwise transferred any of its rights or obligations with
respect to any Material Contracts. The Company and each Subsidiary has made
available to Parent and Purchaser a true and correct copy of each Material
Contract listed on Schedule 3.19(b).

(b) Schedule 3.19(b) lists each Contract of the Company and its Subsidiaries of
the type described below (collectively, the “Material Contracts”):

 

 

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(i) any Contract pursuant to which the Company or any Subsidiary is required to
pay, has paid or is entitled to receive or has received an amount in excess of
$100,000 during the current fiscal year (other than purchase orders for
Inventory entered into in the ordinary course of business);

(ii) all employment contracts and sales representatives contracts pursuant to
which an employee or a sales representative is entitle to receive annual
compensation in excess of $100,000;

(iii) all sales, agency, factoring, commission and distribution contracts in
excess of $100,000 annually;

(iv) all joint venture, strategic alliance and partnership agreements;

(v) all licensing agreements, including agreements licensing Intellectual
Property rights, other than “shrink wrap” or “click wrap” software licenses;

(vi) all secrecy, confidentiality and nondisclosure agreements restricting the
ability of the Company or any Subsidiary to freely engage in the Business in any
respect;

(vii) all Contracts relating to patents, trademarks, service marks, trade names,
brands, copyrights, trade secrets and other Intellectual Property rights;

(viii) all guarantees, privacy policies and indemnification arrangements made or
provided by the Company or any Subsidiary (other than Contracts entered into in
the ordinary course of business);

(ix) all Website hosting contracts or agreements;

(x) all agreements relating to real property, including any real property lease,
sublease, or space sharing, license or occupancy agreement, whether the Company
is granted or is granting rights thereunder to occupy or use any premises; and

(xi) all agreements relating to outstanding Indebtedness.

3.20. Licenses and Permits. Schedule 3.20 is a complete and correct list of the
material licenses, franchises, permits, or other similar authorizations (other
than with respect to Intellectual Property) issued to the Company and it
Subsidiaries, together with the name of the Government Authority issuing the
same (the “Permits”). Except as would not reasonably be expected to cause a
Material Adverse Effect, such Permits are valid and in full force and effect.
The Company or any Subsidiary has all Permits necessary to operate the Business
as currently conducted and as proposed to be conducted other than those Permits
whose absence individually or in the aggregate would not reasonably be likely to
have a Material Adverse Effect.

3.21. Compliance with Laws. Except as set forth on Schedule 3.21, (a) as of the
date hereof, the Company is in material compliance with all applicable Laws and
(b) to the

 

 

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Knowledge of the Company, the Company or any of its Subsidiaries is not under
investigation with respect to, nor has been threatened in writing to be charged
with or given written notice of, any violation or alleged violation of any
applicable Law. This Section 3.21 does not relate to matters with respect to
Taxes (which are the subject of Section 3.26), Employee Matters (which are the
subject of Section 3.23), Pension and Benefit Plans (which are the subject of
Section 3.25), and Environmental Compliance (which is the subject of Section
3.32).

3.22. Intentionally omitted.

3.23. Employees. Schedule 3.23 sets forth a true and complete list of the names
and titles of all employees of the Company and its Subsidiaries, indicating for
which entity the employee is employed, and whether such employee has part-time
or full-time employment. Schedule 3.23 sets forth a true and complete list of
the names and titles of the directors and officers of the Company and its
Subsidiaries.

3.24. Compliance with Labor Laws and Agreements. The Company and each Subsidiary
has complied with all applicable Laws and Orders relating to employment or labor
other than those Laws and Orders with which it could fail to comply, either
individually or in the aggregate, without causing a Material Adverse Effect. To
the Knowledge of the Company, there is no:

(a) unfair labor practice complaint against the Company or any Subsidiary
pending before the National Labor Relations Board or any state or local agency;

(b) pending labor strike or other labor trouble affecting the Company or any
Subsidiary;

(c) except as disclosed in Schedule 3.24(c), labor grievance pending against the
Company or any Subsidiary;

(d) pending representation question respecting the employees of the Company or
any Subsidiary; or

(e) pending arbitration proceeding arising out of or under any collective
bargaining agreement to which the Company or any Subsidiary is a party.

In addition, to the Knowledge of the Company: (i) none of the matters specified
in clauses (a) through (e) above is threatened against the Company or any
Subsidiary; (ii) no union organizing activities have taken place with respect to
the Company or any Subsidiary; and (iii) no basis exists for which a claim may
be made under any collective bargaining agreement to which the Company or any
Subsidiary is a party.

3.25. Pension and Benefit Plans.

(a) Each “employee benefit plan” (as defined in Section 3(3) of ERISA), bonus,
deferred compensation, equity-based, severance or other plan or written
agreement relating to employment, compensation or fringe benefits for employees,
maintained or contributed to by the Company or any Subsidiary or with respect to
which the Company or any

 

 

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Subsidiary could incur or could have incurred any direct or indirect, fixed or
contingent liability (collectively, the “Plans”) is listed in Schedule 3.25, is
and has been maintained in substantial compliance with all material applicable
laws and has been administered and operated in all material respects in
accordance with its terms.

(b) Each Plan which is intended to be “qualified” within the meaning of Section
401(a) of the Code, has received a favorable determination letter from the IRS
and, to the Knowledge of the Company, no event has occurred and no condition
exists which could reasonably be expected to result in the revocation of any
such determination. No event which constitutes a “reportable event” (as defined
in Section 4043(c) of ERISA) for which the 30-day notice requirement has not
been waived by the Pension Benefit Guaranty Corporation (the “PBGC”) or for
which a material liability could be incurred by the Company has occurred with
respect to any Plan. No Plan subject to Title IV of ERISA has been terminated or
is or has been the subject of termination proceedings pursuant to Title IV of
ERISA. Full payment has been made of all amounts which the Company was required
under the terms of the Plans to have paid as contributions to such Plans on or
prior to the date hereof (excluding any amounts not yet due) and no Plan which
is subject to Part 3 of Subtitle B of Title I of ERISA has incurred an
“accumulated funding deficiency” (within the meaning of Section 302 of ERISA or
Section 412 of the Code), whether or not waived.

(c) None of the Company, any Subsidiary nor, to the Knowledge of the Company,
any other “disqualified person” or “party in interest” (as defined in Section
4975(e)(2) of the Code and Section 3(14) of ERISA, respectively), has engaged in
any transaction in connection with any Plan that could reasonably be expected to
result in the imposition of a material penalty pursuant to Section 502(i) of
ERISA, damages pursuant to Section 409 of ERISA or a tax pursuant to Section
4975(a) of the Code. Neither the Company nor any Subsidiary has maintained any
Plan (other than a Plan which is intended to be “qualified” within the meaning
of Section 401(a) of the Code) which provides benefits with respect to employees
or former employees following their termination of service with the Company or
Subsidiary (other than as required pursuant to Section 601 of ERISA). Each Plan
subject to the requirements of Section 601 of ERISA has been operated in
substantial compliance therewith in all material respects.

(d) Except as disclosed in Schedule 3.25, no individual shall accrue or receive
additional benefits, service or accelerated rights to payment of benefits as a
direct result of the transaction contemplated by this Agreement. No material
claim, investigation, audit, action or litigation has been made, commenced or
threatened, by or against any Plan, the Company or any Subsidiary with respect
to any Plan (other than for benefits payable in the ordinary course and PBGC
insurance premiums).

(e) No Plan is a “multiemployer plan” (as defined in Section 4001(a)(3) of
ERISA) and neither the Company nor any Subsidiary has been obligated to
contribute to any multiemployer plan. No liability against the Company or any
Subsidiary has been, or could reasonably be expected to be, incurred under Title
IV of ERISA (other than for PBGC insurance premiums payable in the ordinary
course) or Section 412(f) or (n) of the Code, by the Company or any entity
required to be aggregated with the Company pursuant to Section 4001(b) of ERISA
and/or Section 414 (b), (c), (m) or (o) of the Code (and the regulations
promulgated thereunder) with respect to any “employee pension benefit plan” (as
defined in Section 3(2) of ERISA).

 

 

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(f) With respect to each Plan, the Seller has delivered or caused to be
delivered to Purchaser and its counsel true and complete copies of the following
documents, as applicable, for each respective Plan: (i) all Plan documents, with
all amendments thereto; (ii) the current summary plan description with any
applicable summaries of material modifications thereto; (iii) all current trust
agreements and/or other documents establishing Plan funding arrangements; (iv)
the most recent IRS determination letter and, if a request for such a letter has
been filed and is currently pending with the IRS, a copy of such filing; (v) the
most recently prepared IRS Form 5500; and (vi) the most recently prepared
financial statement.

3.26. Tax Matters.

(a) Compliance Generally. Except as set forth on Schedule 3.26(a), the Company
and each of its Subsidiaries has (A) duly and timely filed all material Tax
Returns required to be filed by the Company or such Subsidiary on or prior to
the Closing Date, which Tax Returns are true, correct and complete in all
material respects, and (B) duly and timely paid all Taxes due and payable in
respect of all periods up to and including the date which includes the Closing
Date, and has made adequate provision on its books and records and in the
December 2007 Balance Sheet in accordance with the Company’s tax accounting
principles, consistent with past practice, for any such Tax which is not due and
payable on or before such time. The Company and each Subsidiary has complied
with all applicable law relating to the reporting, payment, collection and
withholding of Taxes and has duly and timely withheld or collected, paid over
and reported all Taxes required to be withheld or collected by the Company or
any Subsidiary on or before the Closing Date.

(b) No Audit. Except as set forth on Schedule 3.26(b), (A) no Authority has
asserted any adjustment that could result in an additional Tax for which the
Company or any Subsidiary is or may be liable or that could result in a Lien on
any of its assets which has not been fully paid or adequately provided for on
the December 2007 Balance Sheet (collectively, “Tax Liability”), or which
adjustment, if asserted in another period, would result in any Tax Liability,
(B) there is not pending any audit, examination, investigation, dispute,
proceeding or claim (collectively, “Proceeding”) relating to any Tax Liability
and, to the Knowledge of the Company, no Authority is contemplating such a
Proceeding, (C) no statute of limitations with respect to any Tax of the Company
or any Subsidiary has been waived or extended (unless the period to which it has
been waived or extended has expired), (D) there is no outstanding power of
attorney authorizing any Person to act on behalf of the Company or any
Subsidiary in connection with any Tax Liability, Tax Return or Proceeding
relating to any Tax, (E) there is not outstanding any closing agreement, ruling
request, request to consent to change a method of accounting, subpoena or
request for information with or by any Authority with respect to the Company or
any Subsidiary, or any of their income, assets or business, or any Tax
Liability, (F) neither the Company nor any Subsidiary is required to include any
adjustment under Section 481 of the Code (or any corresponding provision of
applicable law) in income for any period ending after the Closing Date,
(G) neither the Company nor any Subsidiary is, nor has ever been, a party to any
Tax sharing or Tax allocation agreement, arrangement or understanding,
(H) neither the Company nor any Subsidiary has ever been included in any
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combined or unitary Tax Return, (I) all Taxable periods for the assessment or
collection of any Tax Liability are closed by agreement or by operation of the
normal statute of limitations (without extension) or will close by operation of
the normal statute of limitations for such Taxes (in each case determined
without regard to any omission, fraud or other special circumstance in writing
other than the timely filing of the Tax Return), and (J) no Authority has ever
asserted that the Company or any Subsidiary should file a Tax Return in a
jurisdiction where it does not file.

(c) Taxes. Neither the Company nor any Subsidiary is a party to any agreement,
contract or arrangement for services that would result, individually or in the
aggregate, in the payment of any amount that would not be deductible by the
Company or such Subsidiary by reason of Section 162, 280G or 404 of the Code.
Neither the Company nor any Subsidiary is a “consenting corporation” within the
meaning of Section 341(f) of the Code (as in effect prior to the repeal of such
provision). Neither the Company nor any Subsidiary has any plan, arrangement or
agreement providing for deferred compensation that is subject to Section 409A(a)
of the Code or any asset, plan, arrangement or agreement that is subject to
Section 409A(b) of the Code. Neither the Company nor any Subsidiary has any
“tax-exempt bond financed property” or “tax-exempt use property” within the
meaning of Section 168(g) or (h), respectively, of the Code. None of the assets
of the Company or any Subsidiary is required to be treated as being owned by any
other person pursuant to the “safe harbor” leasing provisions of Section
168(f)(8) of the Internal Revenue Code of 1986, as in effect prior to the repeal
of said leasing provisions. Neither the Company nor any Subsidiary has ever made
or been required to make an election under Section 338 of the Code. During the
last two years, neither the Company nor any Subsidiary has engaged in any
exchange under which gain realized on the exchange was not recognized under
Section 1031 of the Code. Neither the Company nor any Subsidiary has constituted
a “distributing corporation” or a “controlled corporation” under Section 355 of
the Code in any distribution in the last two years or pursuant to a plan or
series of related transactions (within the meaning of Code Section 355(e)) with
the transactions contemplated by this Agreement. Except as set forth on Schedule
3.26(c), neither the Company nor any Subsidiary has or ever had a fixed place of
business or permanent establishment in any foreign country. The Company is not a
“United States real property holding corporation” (within the meaning of Code
Section 897(c)(2)) at any time during the applicable period specified in Section
897(c)(1)(A)(ii) of the Code. Neither the Company nor any Subsidiary has entered
into any “reportable transaction” (within the meaning of Section 6707A of the
Code or Treasury Regulations Section 1.6011-4 or any predecessor thereof).

(d) Taxes and Tax Return Defined. For purposes of this Agreement, “Tax” shall
mean all federal, state, local and foreign tax, charge, fee, levy, deficiency or
other assessment of whatever kind or nature (including any net income, gross
income, gross receipts, sales, use, ad valorem, transfer, franchise, profits,
license, withholding, payroll, employment, unemployment, excise, estimated,
severance, stamp, occupation, real property, personal property, intangible
property, occupancy, recording, minimum, environmental and windfall profits
tax), including any liability therefor as a transferee (including under Section
6901 of the Code or any similar provision of applicable Law), as a result of
Treasury Regulation Section 1.1502-6 or any similar provision of applicable Law,
or as a result of any Tax sharing or similar agreement, together with any
interest, penalty, addition to tax or additional amount imposed by any federal,
state, local or foreign Authority. For purposes of this Agreement, “Tax Return”

 

 

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includes any return, declaration, report, claim for refund or credit,
information return or statement, and any amendment thereto, including any
consolidated, combined or unitary return or other document (including any
related or supporting information or schedule), filed or required to be filed
with any federal, state, local or foreign Authority in connection with the
determination, assessment, collection or payment of Taxes or the administration
of any Laws or administrative requirements relating to Taxes or ERISA.

3.27. Fees. Except as set forth on Schedule 3.27, there is no investment banker,
broker, finder, restructuring or other intermediary that has been retained by or
is authorized to act on behalf of the Company, any Subsidiary, the Seller or any
of their respective Affiliates in connection with this Agreement or any of the
transactions contemplated hereby, who is or will be entitled to any fee or
commission from either Purchaser, Parent or any of its Affiliates upon
consummation of the transactions contemplated by this Agreement. The amount of
any fee owed to any Person listed on Schedule 3.27 is listed opposite such
Person’s name.

3.28. Business Operations; Servers.

(a) The Company and each Subsidiary owns or otherwise has the right to use all
of its servers and other computer equipment (other than webservers) necessary to
operate its Business as conducted as of the date hereof and as such Business
will be conducted as of the Closing.

(b) The Company does not make any express warranty or guaranty of any kind with
respect to any services or products provided by the Company.

(c) Except in the ordinary course of business or as set forth on
Schedule 3.28(c), neither the Company nor any Subsidiary has entered into, or
offered to enter into, any written Contract with respect to the Business
pursuant to which the Company or any Subsidiary is or will be obligated to make
any rebates, discounts, promotional allowances or similar payments or
arrangements to any customer (“Rebate Obligations”). All Rebate Obligations
listed on Schedule 3.28(c) and all ordinary course Rebate Obligations are
reflected, in all material respects, in the December 2007 Balance Sheet in
accordance with the Company’s accounting principles, consistent with past
practice.

(d) Except as set forth in Schedule 3.28(d), neither the Company nor any
Subsidiary has experienced any returns of its products since January 1, 2007
other than returns in the ordinary course of business consistent with past
experience, including with respect to kind and amount.

3.29. Powers of Attorney. Neither the Company nor any Subsidiary has any general
or special powers of attorney outstanding as of the date of this Agreement
(whether as grantor or grantee thereof), or any obligation or liability (whether
actual, accrued or contingent) as guarantor, surety, co-signer, endorser,
co-maker, indemnitor or otherwise in respect of the obligation of any Person.

3.30. Certain Business Practices. Neither the Company, nor any Subsidiary, nor,
to the Knowledge of the Company, any director, officer, agent or employee of the

 

 

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Company or any Subsidiary (in their capacities as such) has on behalf of the
Company or any of its Subsidiaries, (i) used any funds for unlawful
contributions, gifts, entertainment or other unlawful expenses relating to
political activity, or (ii) made any unlawful payment to foreign or domestic
government officials or employees, to foreign or domestic political parties or
campaigns or violated any provision of the Foreign Corrupt Practices Act of
1977. None of the Company, its Subsidiaries or, to the Knowledge of the Company,
any director, officer, agent or employee of the Company or any Subsidiary (in
their capacity as such) has on behalf of the Company and its Subsidiaries,
directly or indirectly, given or agreed to give any unlawful gift or similar
benefit in any amount to any customer, supplier, or governmental employee that
would be reasonably expected to subject the Company or any Subsidiary to suit or
penalty.

3.31. Money Laundering Laws. To the Knowledge of the Company, the operations of
the Company and each Subsidiary are, and since January 31, 2006 have been, in
compliance with applicable money laundering Laws in all applicable jurisdictions
(collectively, the “Money Laundering Laws”). There is no Action pending, or to
the Knowledge of the Company, threatened against the Company or any Subsidiary
with respect to any Money Laundering Laws.

3.32. Environmental Compliance. Except as set forth on Schedule 3.32 and except
for such matters as would not reasonably be expected to have a Material Adverse
Effect:

(a) To the Knowledge of the Company (i) the Company has not generated, used,
transported, treated, stored, released or disposed of, and has not suffered or
permitted anyone else to generate, use, transport, treat, store, release or
dispose of any “Hazardous Substance” (as hereinafter defined) in violation of
any “Environmental Laws” (as hereinafter defined); (ii) there has not been any
generation, use, transportation, treatment, storage, release or disposal of any
Hazardous Substance resulting from the conduct of the Company or the use of any
property or facility by the Company or, to the Company’s Knowledge, any nearby
or adjacent properties or facilities, that has created or would reasonably be
expected to create any liability on the part of the Company under the
Environmental Laws or that would require reporting to or notification by the
Company to any governmental entity; (iii) no asbestos that is now or is
reasonably likely to become friable or polychlorinated biphenal or underground
storage tank is contained in or located at any facility owned, leased or used by
the Company; and (iv) any Hazardous Substance handled or dealt with in any way
in connection with the Business of the Company, whether before or during the
ownership of the Company, has been and is being handled or dealt with in all
respects in compliance with the Environmental Laws in effect at the time such
activities were being conducted.

(b) For purposes of this Agreement, the term “Hazardous Substance” shall mean
substances that are defined or listed in, or otherwise classified pursuant to,
any applicable Environmental Laws as “hazardous substances,” “hazardous
materials,” “hazardous wastes” or “toxic substances,” or any other formulation
intended to define, list or classify substances by reason of deleterious
properties such as ignitability, corrosivity, reactivity, radioactivity,
carcinogenicity, reproductive toxicity or “EP toxicity,” and petroleum.

(c) For purposes of this Agreement, the term “Environmental Laws” shall mean the
Comprehensive Environmental Response, Compensation and Liability Act of 1980, as

 

 

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amended, the Resources Conservation and Recovery Act of 1976, as amended, and
any applicable statutes, regulations, rules, ordinances, codes, licenses,
permits, orders, approvals, plans, authorizations, concessions, and similar
legally binding requirements of all governmental authorities and all applicable
judicial, administrative and regulatory decrees, judgments and orders, any of
which relate to the protection of human health or the environment from the
effects of Hazardous Substances, including, but not limited to, those pertaining
to reporting, licensing, permitting, investigating and remediating emissions,
discharges, releases or threatened releases of Hazardous Substances into the
air, surface water, groundwater or land, or relating to the processing,
distribution, use, treatment, storage, disposal, transport or handling of
Hazardous Substances.

(d) This Section 3.32 sets forth the sole representations and warranties of
Seller with respect to environmental, health and safety matters, including
without limitation all matters arising under Environmental Laws.

3.33. No Other Representations or Warranties. Except for the representations and
warranties contained in this Agreement, none of the Company, the Seller or any
other Person makes any other express or implied representation or warranty with
respect to the Company, the Seller or the transactions contemplated by this
Agreement, and the Company and the Seller disclaim any other representations or
warranties, whether made by the Company, the Seller or any of their Affiliates,
officers, directors, employees, agents or representatives.

ARTICLE IV

REPRESENTATIONS AND WARRANTIES OF THE SELLER

The Seller represents to the Purchaser and the Parent as follows:

4.1. Ownership of Stock; Authority.

(a) The Seller has good and marketable title to the Shares, free and clear of
any and all Liens (other than Permitted Liens).

(b) The Seller has the corporate power and authority to execute and deliver this
Agreement to perform its obligations hereunder and to consummate the
transactions contemplated hereby. This Agreement has been duly executed and
delivered by the Seller and is a valid and legally binding obligation of the
Seller, enforceable against the Seller in accordance with its terms, except as
the enforceability hereof may be limited by (i) applicable bankruptcy,
insolvency, reorganization, moratorium or other similar Laws affecting the
enforcement of creditors’ rights generally or (ii) rules of law governing
specific performance, injunctive relief or other equitable remedies.

(c) Neither the execution and delivery by the Seller of the Agreement nor the
consummation by the Seller of the transactions contemplated hereby will (i)
conflict with, result in a breach of, constitute (with or without due notice or
lapse of time or both) a default under, or require any Contract to which the
Seller is a party or by which the Seller is bound, or (ii) result in the
imposition of any Lien upon the Shares, except, in each case, as would not have
a material adverse effect on the ability of the Seller to perform its
obligations under this Agreement.

 

 

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4.2. Approvals. Except as contemplated by this Agreement and as may be required
solely by reason of Purchaser’s and/or Parent’s (as opposed to other Person’s)
participation in the transactions contemplated hereby, no consent, approval,
waiver or authorization is required to be obtained by the Seller from, and no
notice or filing is required to be given by the Seller to or made by the Seller
with, any Authority in connection with the execution, delivery and performance
by the Seller of this Agreement and the sale and transfer of the Shares.

4.3. Non-Contravention. The execution, delivery and performance by the Seller of
this Agreement and the consummation of the transactions contemplated hereby do
not and will not (a) violate any provision of the certificate of formation, the
operating agreement or other organizational documents of the Seller, or (b)
violate or result in a breach of or constitute a default under any Law,
judgment, injunction, Order, decree or other restriction of any Authority to
which the Seller, or the Shares, are subject.

4.4. Litigation and Claims. Except as set forth on Schedule 4.4, there is no
Action pending or, to the knowledge of the Seller, threatened, against the
Seller before any Authority and the Seller is not subject to any Order of any
Authority of competent jurisdiction or any arbitrator that would prevent
consummation of the transactions contemplated hereby or materially impair the
ability of the Seller to perform its obligations hereunder.

4.5. Investment Representations. Each Member will make the representations in
either Section 4.5(a) or 4.5(b):

(a) Accredited Investor.

(i) Each Member is an “accredited investor” as such term is defined in Rule 501
of Regulation D (“Reg. D”) promulgated under the Securities Act. Each Member
agrees that it shall provide evidence of its status as an accredited investor,
if necessary.

(ii) Each Member acknowledges that it has prior investment experience, including
investments in non-listed and non-registered securities, or has employed the
services of an investment advisor, attorney or accountant to evaluate the merits
and risks of such an investment on its behalf, and each Member represents that
it or he, as the case may be, understands the highly speculative nature of an
investment in Parent Common Stock, which may result in the loss of the total
amount of such investment.

(iii) Each Member has adequate means of providing for such Member’s current
needs and possible personal contingencies, and each Member anticipates no
current need for liquidity in such Member’s investment in the Parent Common
Stock. Each Member is able to bear the economic risks of this investment and,
consequently, without limiting the generality of the foregoing, each Member is
able to hold the Parent Common Stock for an indefinite period of time and is
able to sustain a loss of the entire investment in the event such loss should
occur.

 

 

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(iv) Except as otherwise set forth in ARTICLE V, Parent has not and is not
making any representations or warranties to the Members or providing any advice
or information to the Members. Each Member acknowledges that it has retained its
own professional advisors to evaluate the tax and other consequences of an
investment in the Parent Common Stock.

(v) Each Member acknowledges that this offering of Parent Common Stock has not
been reviewed by the SEC and that this offering is intended to be a non-public
offering pursuant to Section 4(2) of the Securities Act and Rule 506 under Reg.
D. Each Member acknowledges that it is not acquiring the Parent Common Stock as
a result of any general solicitation or advertising. The Parent Common Stock
will be received by each Member for the Member’s own account, for investment and
not for distribution or resale to others.

(vi) Each Member understands and consents to the placement of a legend on any
certificate or other document evidencing Parent Common Stock stating that such
Parent Common Stock has not been registered under the Securities Act and setting
forth or referring to the restrictions on transferability and sale thereof. Each
certificate evidencing the Parent Common Stock shall bear the legends set forth
below, or legends substantially equivalent thereto, together with any other
legends that may be required by federal or state securities laws at the time of
the issuance of the Parent Common Stock:

THE SHARES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE UNITED STATES
SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”), AND MAY NOT BE OFFERED, SOLD OR
OTHERWISE TRANSFERRED, PLEDGED OR HYPOTHECATED UNLESS AND UNTIL (I) REGISTERED
UNDER THE ACT OR (II) THE ISSUER OF THE SHARES (THE “ISSUER”) HAS RECEIVED AN
OPINION OF COUNSEL IN FORM AND SUBSTANCE SATISFACTORY TO THE ISSUER THAT SUCH
OFFER, SALE OR TRANSFER, PLEDGE OR HYPOTHECATION IS IN COMPLIANCE WITH THE ACT.

(b) Non-Accredited Investor.

(i) Each Member acknowledges that it has prior investment experience, including
investments in non-listed and non-registered securities, or has employed the
services of an investment advisor, attorney or accountant to evaluate the merits
and risks of such an investment on its behalf, and each Member represents that
it or he, as the case may be, understands the highly speculative nature of an
investment in Parent Common Stock, which may result in the loss of the total
amount of such investment.

(ii) Each Member has adequate means of providing for such Member’s current needs
and possible personal contingencies, and each Member anticipates no current need
for liquidity in such Member’s investment in the Parent Common Stock. Each
Member is able to bear the economic risks of this investment and, consequently,
without

 

 

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limiting the generality of the foregoing, each Member is able to hold the Parent
Common Stock for an indefinite period of time and is able to sustain a loss of
the entire investment in the event such loss should occur.

(iii) Each Member has not made an overall commitment to investments which are
not readily marketable that are disproportionate to such Member’s net worth, and
such Member’s investment in the Parent Common Stock will not cause such overall
commitment to become excessive.

(iv) Each Member acknowledges and agrees that, as of the Closing Date, such
Member has the opportunity to review (and, if requested by such Member, to
obtain) a copy of the following materials to the extent available: (i) Parent’s
Annual Report on Form 10-K for the year ended December 31, 2007; (ii) the
Parent’s Quarterly Reports on Form 10-Q for the quarters ended March 31, 2008;
and (iii) the proxy statement distributed to the Parent’s stockholders relating
to the Special Meeting to be held in connection with the approval of the
transactions contemplated by this Agreement.

(v) Each Member had the opportunity to (i) ask questions and receive answers
from the management of the Parent concerning the Parent and an investment in the
Parent Common Stock, and (ii) obtain additional information as necessary to
verify the accuracy of the information furnished to the Member by the Parent.

(vi) Except as otherwise set forth in ARTICLE V, Parent has not and is not
making any representations or warranties to the Members or providing any advice
or information to the Members. Each Member acknowledges that it has retained its
own professional advisors to evaluate the tax and other consequences of an
investment in the Parent Common Stock.

(vii) Each Member acknowledges that this offering of Parent Common Stock has not
been reviewed by the SEC and that this offering is intended to be a non-public
offering pursuant to Section 4(2) of the Securities Act and Rule 506 under Reg.
D. Each Member acknowledges that it is not acquiring the Parent Common Stock as
a result of any general solicitation or advertising. The Parent Common Stock
will be received by each Member for the Member’s own account, for investment and
not for distribution or resale to others.

(viii) Each Member understands and consents to the placement of a legend on any
certificate or other document evidencing Parent Common Stock stating that such
Parent Common Stock has not been registered under the Securities Act and setting
forth or referring to the restrictions on transferability and sale thereof. Each
certificate evidencing the Parent Common Stock shall bear the legends set forth
below, or legends substantially equivalent thereto, together with any other
legends that may be required by federal or state securities laws at the time of
the issuance of the Parent Common Stock:

THE SHARES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE UNITED STATES
SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”), AND MAY NOT

 

 

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BE OFFERED, SOLD OR OTHERWISE TRANSFERRED, PLEDGED OR HYPOTHECATED UNLESS AND
UNTIL (I) REGISTERED UNDER THE ACT OR (II) THE ISSUER OF THE SHARES (THE
“ISSUER”) HAS RECEIVED AN OPINION OF COUNSEL IN FORM AND SUBSTANCE SATISFACTORY
TO THE ISSUER THAT SUCH OFFER, SALE OR TRANSFER, PLEDGE OR HYPOTHECATION IS IN
COMPLIANCE WITH THE ACT.

4.6. Tax. The Seller will not be required to file any transfer Tax Return or pay
any transfer Tax to any Authority with respect to any transaction contemplated
by this Agreement.

4.7. No Additional Representations. Except for the representations and
warranties contained in this Agreement, none of the Company, the Seller or any
other Person makes any other express or implied representation or warranty with
respect to the Company, the Seller or the transactions contemplated by this
Agreement, and the Company and the Seller disclaim any other representations or
warranties, whether made by the Company, the Seller or any of their Affiliates,
officers, directors, employees, agents or representatives.

ARTICLE V

REPRESENTATIONS AND WARRANTIES OF PARENT AND PURCHASER

Parent and Purchaser represent and warrant to the Company and the Seller as
follows:

5.1. Due Incorporation. Parent is a corporation duly organized, validly existing
and in good standing under the Laws of the State of Delaware. Purchaser is a
corporation duly organized, validly existing and in good standing under the Laws
of the State of Delaware. Except as set forth on Schedule 5.1, each of the
Parent the Purchaser is qualified to do business as a foreign corporation in any
jurisdiction in which the character of the property owned or leased by it or the
nature of its activities make qualification of the Parent or the Purchaser in
any such jurisdiction necessary, except where the failure to so qualify would
have a Material Adverse Effect. Each of the Parent and the Purchaser has all
requisite power and authority, corporate and otherwise, and all material
governmental licenses, franchises, permits, authorizations, consents and
approvals required to own, lease, and operate its assets, properties and
businesses and to carry on its business as currently conducted. The Purchaser
has not conducted any business to date and has only engaged in certain
activities relating to its organization. Neither the Parent nor the Purchaser
has entered into an agreement in respect of any merger, consolidation, sale of
all or substantially all of its respective assets, reorganization,
recapitalization, dissolution or liquidation, except as explicitly set forth in
this Agreement. Since its organization, Parent has not conducted any business
activities directed toward the accomplishment of a business combination (other
than with respect to transactions contemplated by this Agreement or other
similar transactions).

5.2. Corporate Authorization. Except for a vote of the stockholders of the
Parent to approve the transaction contemplated by this Agreement, and provided
that fewer than

 

 

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20% of Parent’s public stockholders exercise their redemption rights (as
specified in the Parent’s Certificate of Incorporation), the execution, delivery
and performance by Parent and the Purchaser of this Agreement and the
consummation by Parent and the Purchaser of the transactions contemplated hereby
are within the corporate powers of Parent and the Purchaser and have been duly
authorized by all necessary corporate action on the part of Parent and the
Purchaser. This Agreement constitutes a valid and legally binding agreement of
Parent or the Purchaser, as applicable, enforceable against each in accordance
with its terms.

5.3. Governmental Authorization. None of the execution, delivery or performance
by Parent or the Purchaser of this Agreement requires any consent, approval,
license or other action by or in respect of, or registration, declaration or
filing with, any Authority by Parent or the Purchaser, except for the filing of
a Form D with the SEC and applicable state authorities and a registration
statement upon exercise of the Members of their registration rights pursuant to
the terms of this Agreement.

5.4. No Violation. Provided that Parent presents the transactions contemplated
by this Agreement to its stockholders for approval and such stockholders approve
the transaction and fewer than 20% of Parent’s public stockholders exercise
their redemption rights with respect to such transaction (as specified in the
Parent’s Certificate of Incorporation), neither the execution and delivery of
this Agreement nor the consummation of the transactions contemplated herein will
(a) violate any provision of Parent’s or the Purchaser’s Certificate of
Incorporation, By-laws or other charter documents; (b) violate any Laws or
Orders to which either Parent or the Purchaser or their property is subject; or
(c) violate the provisions of any material Contract binding upon or benefiting
Parent or the Purchaser.

5.5. Consents. Except for a vote of the stockholders of the Parent to approve
the transaction contemplated by this Agreement and so long as fewer than 20% of
Parent’s public stockholders exercise their redemption rights (as specified in
the Parent’s Certificate of Incorporation), there are no Contracts or other
instruments binding upon Parent or the Purchaser or any of their properties
requiring a consent, approval, authorization, order or other action of or filing
with any Person as a result of the execution, delivery and performance of this
Agreement or the consummation of the transactions contemplated hereby, except
for such consents, approvals, authorizations, orders or other actions or
filings, the absence of which would not have, individually or in the aggregate,
a material adverse effect on the ability of the Parent to consummate the
Transaction.

5.6. Litigation.

(a) There is no action, suit, investigation, hearing or proceeding pending
against, or to the knowledge of Parent, threatened against or affecting, Parent,
any of its officers or directors (in their capacity as such), or the business of
Parent, before any court or arbitrator or any governmental body, agency or
official or which in any manner challenges or seeks to prevent, enjoin, alter or
delay the transactions contemplated hereby. There are no material outstanding
judgments against Parent.

(b) There is no action, suit, investigation, hearing or proceeding pending
against, or to the knowledge of Purchaser, threatened against or affecting,
Purchaser, any of its

 

 

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officers or directors (in their capacity as such), or the business of Purchaser,
before any court or arbitrator or any governmental body, agency or official or
which in any manner challenges or seeks to prevent, enjoin, alter or delay the
transactions contemplated hereby. There are no outstanding judgments against
Purchaser.

5.7. Fees. Except as set forth on Schedule 5.7, there is no investment banker,
broker, finder, restructuring or other intermediary that has been retained by or
is authorized to act on behalf of the Parent or the Purchaser or any of their
respective Affiliates in connection with this Agreement or any of the
transactions contemplated hereby, who is or will be entitled to any fee or
commission from any of the Purchaser, the Company, Parent or any of its
Affiliates upon consummation of the transactions contemplated by this Agreement.
The amount of any fee owed to any Person listed on Schedule 5.7 is listed
opposite such Person’s name.

5.8. Charter Documents; Legality. Parent has previously delivered to the Company
true and complete copies of its Certificate of Incorporation and By-Laws (the
“Parent Charter Documents”), as in effect or constituted on the date hereof.
Provided that Parent presents the transactions contemplated by this Agreement to
its stockholders for approval and such stockholders approve the transaction and
fewer than 20% of Parent’s public stockholders exercise their redemption rights
with respect to such transaction (as specified in the Parent’s Certificate of
Incorporation), the execution, delivery, and performance by Parent and the
Purchaser of this Agreement and any Additional Agreement to which Parent or the
Purchaser is to be a party has not violated and will not violate, and the
consummation by Parent or the Purchaser of the transactions contemplated hereby
or thereby will not violate, any of the Parent Charter Documents or any Law.

5.9. Capitalization and Ownership of the Parent. Schedule 5.9 sets forth, with
respect to the Parent, (i) Parent’s authorized capital, (ii) the number of
Parent’s securities that are outstanding, (iii) the number of securities
convertible into or exercisable or exchangeable for the Parent’s securities and
(iv) the number of Parent’s securities held in treasury. Except as set forth on
Schedule 5.9, there are no options, warrants, or other rights agreements,
commitments (contingent or otherwise) or any Contract that requires or under any
circumstance would require the Parent to issue, or grant any right to acquire,
any securities of the Parent, or any security or instrument exercisable or
exchangeable for or convertible into, the capital stock of the Parent or to
merge, consolidate, dissolve, liquidate, restructure, or recapitalize the
Parent. Except for rights of holders of Parent Common Stock to convert their
shares of Parent Common Stock into cash held in the Trust Fund (all of which
rights will expire upon consummation of the transactions contemplated hereby),
there are no outstanding contractual obligations of the Parent and/or any of its
Subsidiaries to repurchase, redeem or otherwise acquire any capital stock or
other equity interests in the Parent and/or any of its Subsidiaries. The
warrants issued by the Parent (the “Parent Warrants”) are, and after giving
effect to the consummation of the transactions contemplated hereby will be,
exercisable for 7,312,500 shares of Parent Common Stock at an exercise price of
$5.00 per share. No Parent Warrants are exercisable until consummation of the
transactions contemplated hereby.

 

 

 

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5.10. SEC Filings; Financial Statements.

(a) As of their respective dates, the Parent SEC Reports: (i) were prepared in
accordance and complied in all material respects with the requirements of the
Securities Act or the Exchange Act, as the case may be, and the rules and
regulations of the SEC thereunder applicable to such Parent SEC Reports, and
(ii) did not at the time they were filed (and, in the case of registration
statements and proxy statements, on the dates of effectiveness and the dates of
mailing, respectively, and if amended or superseded by a filing prior to the
date of this Agreement, then on the date of such filing and as so amended or
superseded) contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they were made,
not misleading. Except to the extent set forth in the preceding sentence, Parent
makes no representation or warranty whatsoever concerning the Parent SEC Reports
as of any time other than the time they were filed. As of the date hereof, there
are no outstanding or unresolved comments in comment letters received from the
Staff of the SEC with respect to any of the Parent SEC Reports.

(b) Parent has filed with the SEC true and correct copies of the audited
consolidated balance sheets of Parent and its consolidated subsidiaries as of
December 31, 2006, and the related consolidated statements of operations, cash
flows and stockholders’ equity and cash flows for the year then ended, including
footnotes thereto, audited by Rothstein Cass (“RC”), registered independent
public accountants and an unaudited interim balance sheet of Parent as of
September 30, 2007, and the related consolidated statements of operations, cash
flow and stockholders’ equity and cash flows for the year then ended, including
footnotes thereto, reviewed by RC (the “Parent Financial Statements”). The
Parent Financial Statements (i) were prepared in accordance with GAAP applied on
a consistent basis throughout the periods involved (except as may be indicated
in the notes thereto or, in the case of unaudited statements, do not contain
footnotes as permitted by Form 10-Q of the Exchange Act); (ii) complied or will
comply as to form in all material respects with the published rules and
regulations of the SEC with respect thereto, (iii) fairly and accurately present
the Parent’s financial condition and the results of its operations as of their
respective dates and for the periods then ended, in all material respects; (iv)
contain and reflect all necessary adjustments and accruals for a fair
presentation of the Parent’s financial condition as of their dates, in all
material respects; and (v) contain and reflect adequate provisions for all
reasonably anticipated liabilities for all material income, property, sales,
payroll or other Taxes applicable to the Parent with respect to the periods then
ended. The Parent has heretofore delivered to the Company complete and accurate
copies of all “management letters” received by it from the Parent’s accountants
and all responses during the last three years by lawyers engaged by the Parent
to inquiries from the Parent’s accountant or any predecessor accountants.

(c) Except as specifically disclosed or as reflected in the Exchange Act
Filings, reflected or fully reserved against in the Parent Financial Statements
and for liabilities and obligations of a similar nature and in similar amounts
incurred in the ordinary course of business since the date of the Parent
Financial Statements, there are no liabilities, debts or obligations of any
nature (whether accrued, absolute, contingent, liquidated or unliquidated,
unasserted or otherwise) relating to the Parent. All debts and liabilities,
fixed or contingent, which should be included under GAAP on an accrual basis on
the Parent Financial Statements are included therein.

 

 

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5.11. SEC Compliance. Immediately prior to Closing, Parent shall be in
compliance with the reporting requirements under the Exchange Act.

5.12. Compliance with Laws. The Parent is not in violation of, has not violated,
and to the knowledge of Parent, is not under investigation with respect to nor
has the Parent been threatened to be charged with or given notice of, any
violation or alleged violation of, any Law or Order, nor is there any basis for
any such charge.

5.13. Money Laundering Laws. To the Parent’s knowledge after due inquiry, the
operations of the Parent are and have been conducted at all times in compliance
with Money Laundering Laws and no Action involving the Parent with respect to
the Money Laundering Laws is pending or, to the knowledge of the Parent,
threatened.

5.14. Issuance and Ownership of Parent Common Stock. Upon issuance and delivery
of the Parent Common Stock to each Member (as directed by the Seller) pursuant
to this Agreement against payment of the consideration therefor, the Parent
Common Stock will be duly authorized and validly issued, fully paid and
nonassessable, free and clear of all Liens, other than (i) restrictions arising
from applicable securities laws, and (ii) any Lien created by or through such
Member. The issuance and sale of the Parent Common Stock pursuant hereto will
not be issued in violation of applicable securities laws or in violation of any
purchase option, call option, right of first refusal, preemptive right,
subscription right or any similar right under any provision of the Delaware
Corporation Law, Parent’s certificate of incorporation or bylaws or any other
agreement to which Parent is a party or otherwise bound.

5.15. Purchaser. Purchaser was incorporated in the State of Delaware on
February 7, 2008. Purchaser has no liabilities, debts or obligations of any
nature (whether accrued, absolute, contingent, liquidated or unliquidated,
unasserted or otherwise) except those incurred in connection with this Agreement
and all of the transactions contemplated hereby. Parent owns all of the
outstanding equity securities of Purchaser.

5.16. Financial Ability to Perform. As of the Closing Date, Parent shall have
immediately available cash funds or available borrowing capacity under existing
credit facilities that in the aggregate is sufficient for Parent and Purchaser
to perform each of their respective obligations hereunder. There shall be no
conditions to such borrowing, if any, that will not be fulfilled as of the
Closing Date.

5.17. Absence of Certain Changes or Events. Since December 31, 2007 through the
date of this Agreement, there has not occurred any Material Adverse Change (as
such definition relates to the Purchaser or the Parent) in the Purchaser’s or
Parent’s business, financial condition, results of operations, or assets other
than as disclosed in reports filed by Parent with the SEC.

5.18. Due Diligence Investigation. Each of the Parent and the Purchaser has had
an opportunity to discuss the business, management, operations and finances of
the Company with its officers, directors, employees, agents, representatives and
affiliates, and has

 

 

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had an opportunity to inspect the facilities of the Company. Each of the Parent
and the Purchaser has conducted its own independent investigation of the
Company. In making its decision to execute and deliver this Agreement and to
consummate the transactions contemplated by this Agreement, each of the Parent
and the Purchaser has relied solely upon the representations and warranties of
the Company and the Seller set forth in ARTICLE III and ARTICLE IV of this
Agreement. Each of the Parent and the Purchaser has entered into the
transactions contemplated by this Agreement with the understanding,
acknowledgement and agreement that no representations or warranties, express or
implied, are made with respect to any projection or forecast regarding future
results or activities or the probable success or profitability of the Company.

5.19. Board Approval.

(a) The Board of Directors of Parent (including any required committee or
subgroup of the Board of Directors of Parent) has, as of the date of this
Agreement, unanimously (i) declared the advisability of the transactions
contemplated by this Agreement and approved this Agreement and the transactions
contemplated hereby, (ii) determined that the transactions contemplated by this
Agreement are in the best interests of the stockholders of Parent, and (iii)
determined that the fair market value of the Company is equal to at least 80% of
Parent’s net assets.

(b) Parent in its capacity as sole equityholder of Purchaser has, as of the date
of this Agreement (i) determined that this Agreement and the transactions
contemplated hereby are advisable and in the best interest of Purchaser and (ii)
approved this Agreement and the transactions contemplated hereby. No other
corporate proceedings on the part of Purchaser are necessary to authorize the
transactions contemplated by this Agreement.

5.20. Trust Fund. As of the date hereof and at the Closing Date, Parent has and
will have no less than $58.3 million invested in United States Government
securities within the meaning of Section 2(a)(16) of the Investment Company Act
of 1940 with a maturity of 180 days or less, or in money market funds meeting
certain conditions under Rule 2a-7 promulgated under the Investment Company Act
of 1940 in a trust account administered by American Stock Transfer & Trust
Company (the “Trust Fund”), less such amounts, if any, as Parent is required to
pay to stockholders who elect to have their shares converted to cash in
accordance with the provisions of Parent’s Certificate of Incorporation and
other expenses incurred by Parent that Parent is entitled to pay from the Trust
Fund upon the consummation of the transactions contemplated by this Agreement.
There are no claims or proceedings pending with respect to the Trust Fund.
Neither the Parent nor the Purchaser is, and the Members and their respective
Subsidiaries will not be as a result of consummation of the transactions
contemplated hereby, subject to registration or regulation under the Investment
Company Act of 1940, as amended. Notwithstanding any of the foregoing, the Trust
Fund is subject to all of the terms, conditions and restrictions contained in
the Investment Management and Trust Agreement (the “Trust Agreement”), dated as
of April 25, 2007, between the Parent and American Stock Transfer & Trust
Company.

5.21. No Other Representations or Warranties. Except for the representations and
warranties contained in this Agreement, neither the Parent nor the

 

 

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Purchaser nor any other Person makes any other express or implied representation
or warranty with respect to the Parent, the Purchaser or the transactions
contemplated by this Agreement, and the Parent and the Purchaser disclaim any
other representations or warranties, whether made by the Parent, the Purchaser
or any of their Affiliates, officers, directors, employees, agents or
representatives.

ARTICLE VI

COVENANTS OF THE COMPANY AND THE SELLER PENDING CLOSING

The Company and the Seller covenant and agree that:

6.1. Conduct of the Business. From the date hereof through the Closing Date, the
Company and each Subsidiary shall, except as otherwise expressly provided herein
or as otherwise required by applicable Law or consented in writing by the
Parent, conduct the Business only in the ordinary course (including the payment
of accounts payable and the collection of accounts receivable), consistent with
past practices. Without limiting the generality of the foregoing, from the date
hereof until the Closing Date, without Parent’s prior written consent (which
consent shall not be unreasonably withheld, delayed or conditioned and which
consent, if it is to be given, shall be provided promptly, but in no event later
than (5) Business Days following the Company’s request, except as otherwise
agreed to by the Company), neither the Company nor any Subsidiary shall:

(a) except in the ordinary course of business, amend, waive any provision of,
terminate prior to its scheduled expiration date, or otherwise compromise in any
way, any Material Contract, or any other material right or asset;

(b) except as contemplated by this Agreement, enter into any Contract which (i)
is with respect to real property, or (ii) outside the ordinary course of
business;

(c) make any capital expenditures in excess of $75,000 (individually or in the
aggregate), except as set forth on Schedule 6.1(c);

(d) sell, lease, license or otherwise dispose of any assets or assets covered by
any Material Contract except (i) pursuant to existing Material Contracts
disclosed herein, (ii) sales of inventory in the ordinary course consistent with
past practice, (iii) sales, assignments, or other dispositions of any
Intellectual Property that are not material to the conduct of the business of
the Company or any Subsidiary, and (iv) dispositions of obsolete, uneconomic,
damaged, excess, no longer useful, unmerchantable, defective or worn out assets;

(e) pay, declare or promise to pay any dividends or other distributions with
respect to its capital stock, other than dividends or distributions paid by any
Subsidiary to the Company;

(f) except as disclosed in Schedule 3.25, authorize any salary increase of more
than 10% for any employee making an annual salary of greater than $75,000 or
change the bonus or profit sharing policies of the Company or any Subsidiary,
other than in the ordinary course of business consistent with past practice
(with respect to type, timing and amount);

 

 

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(g) delay, accelerate or cancel any receivables or Indebtedness owed to the
Company or its Subsidiaries or write-off or make further reserves against the
same, except in the ordinary course of business consistent with past practice
(with respect to type, timing and amount);

(h) merge or consolidate with or acquire any other Person or be acquired by any
other Person;

(i) make any material change in the accounting principles or methods used in the
preparation of the Company’s financial statements for the fiscal year ended
December 31, 2005;

(j) extend any loans to any Person, other than travel or other expense advances
to employees in the ordinary course of business consistent with past practice
(with respect to type, timing and amount);

(k) make, amend, revoke, terminate or rescind any election related to Taxes or
file any amended income Tax Return, other than Tax Returns for fiscal years
2005, 2006 and 2007;

(l) cause or permit any insurance policy protecting assets that are material to
the Business to lapse;

(m) change the place of Business of the Company or any Subsidiary;

(n) issue, redeem or repurchase any shares of its capital stock; or

(o) agree to do any of the foregoing.

Nothing in this Agreement shall prevent, or be construed to prevent, Seller or
the Company from using cash and/or cash equivalents of the Company or any of its
Subsidiaries as Seller or the Company deems fit (including by causing the
distribution by any of the foregoing Persons of such cash and/or cash
equivalents to Seller or to any other Person or the repayment of Indebtedness of
the Company or its Subsidiaries); provided, that (i) the parties hereto
acknowledge and agree that, if (and only to the extent) there is any cash of the
Company and its Subsidiaries immediately prior to the Closing, an amount up to
$2,000,000 of such cash will be for the benefit of the Purchaser and the Parent,
and to the extent such cash on such date is in excess of $2,000,000, such excess
shall be for the benefit of Seller (to be distributed, subject to Section
2.3(c), to the Members who held Common Units as of the Closing Date on a pro
rata basis (based on the number of Common Units held by each Member as of the
Closing Date)); it being understood that if such cash on such date is less than
$2,000,000, such cash will be for the benefit of the Purchaser and the Parent,
and neither the Purchaser nor the Parent shall have any claim to receive any
additional amounts from the Company, the Seller or the Members (other than (1)
indemnification for any Losses pursuant to the provisions of Article XI hereof,
and (2) the Net Working Capital Adjustment, if any) and (ii) any such use of the
cash or cash

 

 

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equivalents by Seller or the Company shall not affect the Company’s and the
Seller’s obligations hereunder with respect to, and such use of cash and cash
equivalents shall be deemed to occur immediately prior to Closing for purposes
of calculating, the Net Working Capital Adjustment, if any.

6.2. Access to Information.

(a) From the date hereof until and including the Closing Date, the Company and
the Seller shall, and shall cause their respective Subsidiaries to, (a) continue
to give Parent, its counsel and other representatives reasonable access during
normal business hours and with prior written notice to the Offices, properties
and Books and Records of the Company, (b) furnish to Parent, its counsel and
other representatives such information relating to the Business as such Persons
may reasonably request and (c) cause the employees, counsel, accountants and
representatives of the Company and each Subsidiary to cooperate with Parent in
its investigation of the Business; provided that no investigation pursuant to
this Section 6.2 (or any investigation prior to the date hereof) shall affect
any representation or warranty given by the Company or the Seller hereunder.
Parent and Purchaser shall comply with, and shall cause its representatives to
comply with, all of their obligations under the Confidentiality Agreement dated
November 5, 2007 (the “Confidentiality Agreement”) by and between the Company
and the Parent with respect to the terms and conditions of this Agreement and
the information disclosed pursuant to this Agreement. Notwithstanding anything
herein to the contrary, this Section 6.2 shall not require the Company or any of
its Affiliates to provide Parent, Purchaser or their respective representatives
with access to any document or other information that the Company believes in
good faith may (i) conflict with any binding agreement entered into by the
Company prior to the date hereof, (ii) be covered by any attorney-client
privilege or the work product doctrine or (iii) be subject to restrictions under
any applicable Laws (including antitrust, privacy or similar Laws).

(b) The Company shall schedule conference calls between representatives of
Parent and the three (3) largest Customers based on Schedule 3.17(a) (the
“Customer Calls”); provided, that prior to any such Customer Call, (i) Parent
shall have delivered to Seller and the Company a reasonably detailed draft of
any questions to be discussed on such Customer Calls, (ii) Seller and the
Company shall have the opportunity to comment thereon and (iii) Parent, Seller
and the Company shall have agreed on the questions to be discussed with such
Customer on the Customer Calls; provided further, that a representative of
Seller or the Company shall be entitled to participate in each such Customer
Call. All costs relating to the actions described in this Section 6.2(b) shall
be borne solely by the Parent.

6.3. SEC Filings.

(a) The Company and the Seller acknowledge that:

(i) the Parent’s stockholders must approve the transactions contemplated by this
Agreement prior to the transactions contemplated hereby being consummated and
that, in connection with such approval, the Parent must call a special meeting
of its stockholders requiring Parent to prepare and file with the SEC a proxy
statement and proxy card;

 

 

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(ii) the Parent will be required to file Quarterly and Annual reports that may
be required to contain information about the transactions contemplated by this
Agreement; and

(iii) the Parent will be required to file Current Reports on Form 8-K to
announce the transactions contemplated hereby and other significant events that
may occur in connection with such transaction.

(b) In connection with any filing the Parent makes with the SEC that requires
information about the transactions contemplated by this Agreement to be
included, the Company and the Seller will, in connection with the disclosure
included in any such filing or the responses provided to the SEC in connection
with the SEC’s comments to a filing, use their commercially reasonable efforts
to (i) cooperate with the Parent, (ii) respond to questions about the Company or
the Seller required in any filing with, or requested by, the SEC, and (iii)
provide any information requested by Parent or Parent’s representatives and
required by the SEC in connection with any filing with the SEC.

6.4. Exclusivity. During the period between the date of this Agreement and the
Closing Date or the termination of this Agreement in accordance with ARTICLE
XIII hereof, neither the Company nor the Seller shall, nor shall the Company or
Seller permit anyone acting on their behalf to, directly or indirectly, (i)
knowingly encourage, solicit, initiate or participate in discussions or
negotiations with, or provide any information to or cooperate in any manner with
any Person (an “Excluded Person”), other than Parent, Purchaser or their
Affiliates or representatives, concerning the sale of all or any part of the
Business or the capital stock or other securities of the Company, whether such
transaction takes the form of a sale of stock or assets, merger, consolidation
or otherwise or any joint venture or partnership (“Acquisition Proposal”), (ii)
otherwise solicit, initiate or knowingly encourage the submission of any
Acquisition Proposal or (iii) consummate any such Acquisition Proposal or accept
any offer or agree to engage in any such Acquisition Proposal. Upon the receipt
by the Company and the Seller of an Acquisition Proposal, the Company and the
Seller shall promptly notify the Parent and the Purchaser of the receipt of such
Acquisition Proposal.

6.5. Reporting and Compliance With Law. From the date hereof through the Closing
Date, the Company and each Subsidiary shall duly and timely file all Tax Returns
required to be filed with Authorities, pay any and all Taxes required by any
Authority and duly observe and conform, in all material respects, to all
applicable Laws and Orders.

ARTICLE VII

CONFIDENTIALITY AND NON-SOLICITATION COVENANTS

7.1. Confidentiality. Each of the parties hereto covenant and agree that the
parties hereto shall not, without the prior written consent of the other parties
hereto, disclose to any other Person or use (whether for its own account or the
account of any other party) any confidential information or proprietary work
product of Parent, Purchaser, the Company or any Subsidiary or any client of
Parent, Purchaser, the Company or any Subsidiary disclosed or uncovered in
connection with this Agreement and the transactions contemplated hereby except

 

 

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(i) as may be required under applicable Law, (ii) to the extent that such
information is or becomes generally available to the public other than as a
result of disclosure by such party, (iii) to such Person’s financing sources or
(iv) to such Person’s Affiliates, directors, officers, employees or advisors. In
the event any party hereto believes that it is required to disclose any such
confidential information pursuant to applicable Laws, such party shall give
timely written notice to the other parties hereto so that such other parties may
have an opportunity to obtain a protective order or other appropriate relief.
All parties hereto shall cooperate fully in any such action by any other party.

7.2. Non-Solicitation. Cova may not, during the period beginning on the Closing
Date and ending two (2) years after the Closing Date (the “Restriction Period”),
directly or indirectly through any other individual, person or entity, employ,
solicit or induce any of Michael Bielonko, Earl Cranor, Tom McCarthy or Nathalie
Rizzo to terminate or refrain from renewing or extending his or her employment
by or consulting relationship with the Company or any Subsidiary or to become
employed by or enter into a consulting relationship with the Seller or any of
its Affiliates or any other individual, person or entity, unless (i) such Person
has resigned voluntarily (without any solicitation from Cova or its
representatives), (ii) such Person has been terminated by the Company or its
Subsidiary (as applicable), (iii) Cova has received Parent’s prior written
consent to seek to employ such Person or (iv) such Person is responding to a
general solicitation not targeted at the Company’s employees.

7.3. Injunctive Relief. If (i) any party breaches, or threatens to commit a
breach of, Section 7.1 or Section 14.4 hereof or (ii) Cova breaches, or
threatens to commit a breach of, Section 7.2 (collectively, the “Restrictive
Covenants”), each other party (with respect to Section 7.1 or Section 14.4) and
the Parent (with respect to Section 7.2) shall have, in addition to, and not in
lieu of, any other rights and remedies available to such party by agreement
(including those set forth in Section 11.1 hereof), under law or in equity, the
right and remedy to have the Restrictive Covenants specifically enforced by any
court having equity jurisdiction, all without the need to post a bond or any
other security or to prove any amount of actual damage or that money damages
would not provide an adequate remedy, it being acknowledged and agreed that any
such breach or threatened breach will cause irreparable injury to such party
(with respect to Section 7.1 and Section 14.4) or the Parent (with respect to
Section 7.2) and that monetary damages will not provide an adequate remedy.

ARTICLE VIII

COVENANTS OF ALL PARTIES HERETO

The parties hereto, as applicable, covenant and agree that:

8.1. Best Efforts; Further Assurances. Subject to the terms and conditions of
this Agreement, each party shall use its best efforts to take, or cause to be
taken, all actions and to do, or cause to be done, all things necessary or
desirable under applicable Laws to consummate and implement expeditiously the
transactions contemplated by this Agreement. The parties hereto shall execute
and deliver such other documents, certificates, agreements and other writings
and take such other actions as may be reasonably necessary or desirable in order
to consummate the transactions contemplated by this Agreement. Each of the
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Parent and Purchaser shall use its reasonable best efforts to obtain all
consents, approvals and agreements of, and make all notices and filings with,
any Authority necessary to permit the consummation of the transactions
contemplated by this Agreement. In the event any claim, action, suit,
investigation or other proceeding by any Authority or other Person is commenced
which questions the validity or legality of the transactions contemplated hereby
or seeks damages in connection therewith, the parties hereto agree to cooperate
and use best efforts to defend against such claim, action, suit, investigation
or other proceeding and, if an injunction or other order is issued in any such
action, suit or other proceeding, to use best efforts to have such injunction or
other order lifted, and to cooperate reasonably regarding any other impediment
to the consummation of the transactions contemplated hereby.

8.2. Reasonable Efforts to Obtain Consents. The Company hereby agrees to use its
reasonable efforts to obtain the Company Consents on a timely manner prior to
the Closing Date.

8.3. Tax Matters.

(a) The Seller shall prepare or cause to be prepared and duly and timely file or
cause to be duly and timely filed on a timely basis all Tax Returns with respect
to the Company and each of the Subsidiaries for taxable periods ending on or
prior to the Closing Date. Such Tax Returns shall be true, correct and complete
in all material respects, shall be prepared on a basis consistent with the
similar Tax Returns for the immediately preceding periods and shall not make,
amend, revoke, terminate or rescind any election or change any accounting
practice or procedure without Parent’s consent (which will not be unreasonably
withheld or delayed). The Seller shall give a copy of each such Tax Return to
Parent with sufficient time for its review and comment prior to filing. The
Seller shall pay or cause to be paid the Taxes shown due and owing on such Tax
Returns. Parent’s receipt or review of or giving comments on any Tax Return does
not affect the obligations of the Seller pursuant to ARTICLE XI of this
Agreement. The Company and each Subsidiary will permit the Seller and its
representatives to have reasonable access to the Company’s and each Subsidiary’s
respective officers, directors, employees, agents, assets and properties and all
relevant Books and Records relating to the Business and assets of the Company or
any Subsidiary during normal business hours and will furnish to the Seller and
its representatives such information, financial records and other documents
relating to the Company and each Subsidiary and the Business as may reasonably
be requested; provided, however, that such access and information is reasonably
related to the completion of the Tax Returns the Seller is required to file
pursuant to this Section 8.3(a). Any such information, financial records and
other documents relating to the Company, any Subsidiary and the Business
provided to the Seller and its representatives shall be subject to the
provisions of Section 7.1, but such information may be incorporated into any
such Tax Return.

(b) To the extent permitted by applicable Law, the parties shall elect to treat
the period that includes the Closing Date with respect to any Tax as ending on
the Closing Date and shall take such steps as may be necessary therefor. For
purposes of this Agreement, any Taxes for a period which includes but does not
end on the Closing Date shall be allocated between the period through and
including the Closing Date and the balance of the period based on an interim
closing of the books as of the close of the Closing Date, provided, however,
that

 

 

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any real property or personal property taxes and any annual exemption amounts
shall be allocated based on the relative number of days in the Pre-Closing
Period and the balance of the period.

8.4. Proxy Statement; Special Meeting.

(a) As soon as is reasonably practicable after receipt by the Parent from the
Company of all financial and other information relating to the Company as the
Parent may reasonably request for its preparation, the Parent shall prepare and
file with the SEC under the Exchange Act, and with all other applicable
regulatory bodies, proxy materials for the purpose of soliciting proxies from
holders of Parent Common Stock to vote in favor of the adoption of this
Agreement and the approval of the transactions contemplated hereby (“Parent
Stockholder Approval”) at a meeting of holders of Parent Common Stock to be
called and held for such purpose (the “Special Meeting”). Such proxy materials
shall be in the form of a proxy statement to be used for the purpose of
soliciting proxies from holders of Parent Common Stock for the matters to be
acted upon at the Special Meeting (the “Proxy Statement”). The Company shall
furnish to the Parent all information concerning the Company as the Parent may
reasonably request in connection with the preparation of the Proxy Statement.
The Company and its counsel shall be given an opportunity to review and comment
on the preliminary Proxy Statement prior to its filing with the SEC. The Parent,
with the assistance of the Company, shall promptly respond to any SEC comments
on the Proxy Statement and shall otherwise use reasonable best efforts to cause
the Proxy Statement to be approved by the SEC as promptly as practicable. The
Parent shall also take any and all actions required to satisfy the requirements
of the Securities Act and the Exchange Act. Prior to the Closing Date, the
Parent shall use its reasonable best efforts to cause the shares of Parent
Common Stock to be issued pursuant to this Agreement to be registered or
qualified under all applicable blue sky laws of each of the states and
territories of the United States in which it is believed, based on information
furnished by the Company, the Members reside and in which such registration or
qualification is required and to take any other such actions that may be
reasonably necessary to enable the Parent Common Stock to be issued pursuant to
this Agreement in each such jurisdiction.

(b) As soon as practicable (but in no event later than ten (10) Business Days)
following the approval of the Proxy Statement by the SEC, the Parent shall
distribute the Proxy Statement to the holders of Parent Common Stock and,
pursuant thereto, shall call, give notice of, convene and hold the Special
Meeting in accordance with the DGCL not more than 25 days after mailing the
Proxy Statement to the holders of Parent Common Stock and, subject to the other
provisions of this Agreement, solicit proxies from such holders to vote in favor
of the adoption of this Agreement and the approval of the transactions
contemplated hereby and the other matters presented to the stockholders of
Parent for approval or adoption at the Special Meeting.

(c) The Parent shall comply with all applicable provisions of and rules under
the Exchange Act and all applicable provisions of the DGCL in the preparation,
filing and distribution of the Proxy Statement, the solicitation of proxies
thereunder, and the calling and holding of the Special Meeting. Without limiting
the foregoing, the Parent shall use its reasonable best efforts to ensure that
the Proxy Statement does not, as of the date on which it is first distributed to
stockholders of the Parent, and as of the date of the Special Meeting, contain

 

 

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any untrue statement of a material fact or omit to state a material fact
necessary in order to make the statements made, in light of the circumstances
under which they were made, not misleading. The Parent shall promptly correct
any information provided by it for use in the Proxy Statement if and to the
extent that such information becomes false or misleading and the Parent shall
take all steps necessary to cause the Proxy Statement as so corrected to be
filed with the SEC and disseminated to the stockholders of the Parent (as and to
the extent required by the Securities Act or the Exchange Act) and to the
Seller. The Parent will provide to the Seller and its counsel any comments that
the Parent or its counsel may receive from the SEC or its staff, whether written
or oral, with respect to the Proxy Statement promptly after receipt of any such
comments. The Parent will use its reasonable best efforts to respond promptly to
any comments received from the SEC or its staff, in each case (if necessary)
after consultation with the Seller and compliance with the terms hereof with
respect to the preparation of the Proxy Statement and any amendments or
supplements thereto.

(d) The Parent, acting through its board of directors, shall include in the
Proxy Statement the recommendation of its board of directors that the holders of
Parent Common Stock vote in favor of the adoption of this Agreement and the
approval of the transactions contemplated hereby and shall not withdraw or
modify its recommendation. The Parent shall use commercially reasonable efforts
to obtain the Parent Stockholder Approval.

8.5. Other Actions.

(a) As promptly as practicable after execution of this Agreement, the Parent
will prepare and file a Current Report on Form 8-K pursuant to the Exchange Act
to report the execution of this Agreement (“Signing Form 8-K”), which the
Company shall be entitled to review and comment upon prior to filing. Promptly
after the execution of this Agreement, Parent and the Company shall also issue a
press release announcing the execution of this Agreement (the “Signing Press
Release”).

(b) At least five (5) days prior to Closing, the Parent shall prepare a draft
Form 8-K announcing the Closing, together with, or incorporating by reference,
the financial statements prepared by the Company and its accountant, and such
other information that may be required to be disclosed with respect to the
transactions contemplated by this Agreement in any report or form to be filed
with the SEC (“Closing Form 8-K”), which shall be in a form reasonably
acceptable to the Company. Prior to Closing, the Parent and the Company shall
jointly prepare a press release announcing the consummation of the transactions
hereunder (“Closing Press Release”). Concurrently with the Closing, Parent shall
distribute the Closing Press Release. Concurrently with the Closing, or as soon
as practicable thereafter, Parent shall file the Closing Form 8-K with the SEC.

8.6. Access to Information. From the date hereof until and including the Closing
Date, the Parent and the Purchaser shall (i) provide the Company, the Seller and
their counsel and other representatives reasonable access to the Offices,
personnel, properties and books and records of the Parent and the Purchaser,
(ii) furnish to the Company, the Seller and their counsel and other
representatives such information relating to the business of the Parent and the
Purchaser as such Persons may reasonably request and (iii) cause the employees,
counsel, accountants and representatives of the Parent and the Purchaser to
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Company, the Seller and their counsel in their investigation of the business and
operations of the Parent and the Purchaser; provided that no investigation
pursuant to this Section 8.6 (or any investigation prior to the date hereof)
shall affect any representation or warranty given by the Parent or the Company
hereunder.

8.7. Notices of Certain Events; Updated Disclosure Schedules.

(a) Between the date hereof and the Closing Date, each party hereto will give
prompt notice to the other parties hereto of:

(i) any notice or other communication from any Person alleging or raising the
possibility that the consent of such Person is or may be required in connection
with the transactions contemplated by this Agreement or that the consummation of
the transactions contemplated by this Agreement would result in the loss of any
rights or privileges of such notifying person to any such Person;

(ii) any notice or other communication from any Authority that may adversely
affect the consummation of the transactions contemplated by this Agreement;

(iii) any Actions commenced or, to such notifying party’s knowledge, threatened
against, relating to or involving such notifying party or otherwise affecting
the notifying party or that relate to the consummation of the transactions
contemplated by this Agreement; and

(iv) the occurrence of any fact or circumstance which would likely cause any
representation or warranty made by such notifying party in this Agreement to be
untrue or inaccurate in any material respect.

(b) At any time prior to the Closing, Seller and the Company may deliver to the
Purchaser and the Parent a supplement or amendment to the disclosure schedules
to this Agreement (the “Updated Schedules”); provided, that such Updated
Schedules shall not relate to, and shall only be effective with respect to, any
occurrence or state of facts that, to the Knowledge of the Company, existed
prior to the date of this Agreement; provided, further, that following written
notice thereof from the Company and/or Seller (as applicable) to Parent and
Purchaser, Parent and Purchaser shall have the right to terminate this Agreement
within seven (7) days following their receipt of the Updated Schedules to the
extent that, in the absence of the changes to such Updated Schedules, the
condition set forth in Section 9.2(a) would not be capable of being satisfied.
Unless Parent or Purchaser exercises its right to terminate this Agreement
pursuant to the foregoing, the Updated Schedules will be deemed to have amended
the disclosure schedules to this Agreement, to have qualified the
representations and warranties contained herein with respect to such events or
circumstances set forth in the Updated Schedules, and to have cured any
misrepresentation or breach of warranty that otherwise might have existed
hereunder by reason of the event or circumstance set forth in such Updated
Schedules (including for purposes of ARTICLE XI hereof).

8.8. Securities Law Compliance. Prior to the Closing, the Parent shall use its
best efforts to ensure that the issuance of Parent Common Stock hereunder will
be conducted in compliance with Regulation D under the Securities Act.

 

 

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8.9. Employee Matters.

(a) For a period of one year following the Closing, Purchaser shall provide or
cause to be provided, to each individual who is a current employee of the
Company as of the Closing (“Company Employees”) total compensation and benefits
that are substantially comparable in the aggregate to the total compensation and
benefits provided to Company Employees immediately before the Closing (excluding
any equity based compensation); provided, however, that nothing herein shall be
construed to establish or amend any benefit plan, program, agreement or
arrangement or to prevent the amendment or termination of any Company Plan or
interfere with Purchaser’s or any of its subsidiaries’ right or obligation to
make such changes as are necessary to conform with applicable Law or shall cause
or require the extension, renewal or amendment of, or prevent the expiration of,
any employment agreement which shall expire, terminate or fail to renew pursuant
to its terms during such period. Notwithstanding any other provision of this
Agreement, nothing in this Section 8.9 shall limit the right of the Purchaser or
Parent to terminate the employment of any employee at any time and for any or no
reason.

(b) For purposes of determining eligibility to participate, vesting and
entitlement to benefits where length of service is relevant under any benefit
plan or arrangement of Purchaser, or any of its subsidiaries, Company Employees
as of the Closing shall receive service credit for service with the Company to
the same extent such service credit was granted under the Employee Benefits
Plans, subject to offsets for previously accrued benefits and no duplication of
benefits and not for purposes of benefit accrual under a defined benefit plan.
The Purchaser shall (i) waive all limitations as to preexisting conditions,
exclusions and waiting periods with respect to participation and coverage
requirements applicable to the Company Employees under any welfare benefit plans
that such employees may be eligible to participate in after the Closing, other
than limitations or waiting periods that are already in effect with respect to
such employees and that have not been satisfied as of the Closing under any
welfare benefit plan maintained for the Company Employees immediately prior to
the Closing and (ii) provide each Company Employee with credit for any
co-payments and deductibles paid prior to the Closing in satisfying any
applicable deductible or out-of-pocket requirements under any welfare plans
(other than a Company Benefit Plan) that such employees are eligible to
participate in after the Closing.

(c) From and after the Closing, the Purchaser shall comply in all respects with
the WARN Act and any other applicable Law relating to employee terminations or
plant or facilities closings (or other similar events requiring similar notice
to employees), including providing any required notices and complying with any
required waiting periods.

(d) The Purchaser shall be solely responsible for satisfying the continuation
coverage requirements under COBRA for all qualified beneficiaries as such term
in defined in Treasury Regulation §54.4980B-9.

8.10. Indemnification; Directors’ and Officers’ Insurance.

(a) From and after the Closing, Purchaser shall (i) indemnify and hold harmless
each present and former director and officer of the Company (collectively, the
“D&O

 

 

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Indemnified Parties”), against any and all damages incurred or suffered by any
of the D&O Indemnified Parties in connection with any liabilities or any action,
whether civil, criminal, administrative or investigative, arising out of or
pertaining to matters existing or occurring at or prior to the Closing, whether
asserted or claimed prior to, at or after the Closing, to the fullest extent
that the Company would have been permitted under applicable Law and under the
Company’s certificate of incorporation and bylaws, as the case may be, in each
case as in effect on the date of this Agreement, to indemnify such D&O
Indemnified Parties and (ii) advance expenses as incurred by any D&O Indemnified
Party in connection with any matters for which such D&O Indemnified Party is
entitled to indemnification from Purchaser pursuant to this Section 8.10 to the
fullest extent permitted under applicable Law or, if greater, under the
Company’s certificate of incorporation and bylaws; provided, however, that the
D&O Indemnified Party to whom expenses are advanced provides an undertaking to
repay such advances if it is ultimately and finally determined by a court of
competent jurisdiction and all rights of appeal have lapsed that such D&O
Indemnified Party is not entitled to indemnification under applicable Law, the
Company certificate of incorporation and Company bylaws, and pursuant to this
Section 8.10(a).

(b) For a period of six (6) years following the Closing, Purchaser shall
maintain in effect a directors’ and officers’ liability insurance policy
covering those persons who are currently covered by the Company’s directors’ and
officers’ liability insurance policy (copies of which have been heretofore
delivered by the Company to Purchaser and its agents and representatives) with
coverage in amount and scope at least as favorable as the Company’s existing
coverage; provided, however, that in no event shall Purchaser be required to
expend in the aggregate in excess of two hundred percent (200%) of the annual
premium currently paid by the Company for such coverage, and if such premium
would at any time exceed two hundred percent (200%) of such amount, then
Purchaser shall maintain insurance policies which provide the maximum and best
coverage available at an annual premium equal to two hundred percent (200%) of
such amount; and provided, further, that this Section 8.10(b) shall be deemed to
have been satisfied if a prepaid policy or policies (i.e., “tail coverage”) have
been obtained by the Company which policy or policies provide such directors and
officers with the coverage described in this Section 8.10(b) for an aggregate
period of not less than six (6) years with respect to claims arising from facts
or events that occurred on or before the Closing Date, including with respect to
the transactions contemplated by this Agreement.

(c) The terms and provisions of this Section 8.10 are intended to be in addition
to the rights otherwise available to the D&O Indemnified Parties by applicable
Law, charter, bylaw or agreement, and shall operate for the benefit of, and
shall be enforceable by, the D&O Indemnified Parties and their respective heirs
and representatives, each of whom is an intended third party beneficiary of this
Section 8.10.

(d) Nothing contained herein shall be interpreted to require the Purchaser or
the Parent to indemnify or provide for the indemnification of any D&O
Indemnified Party in connection with any damages incurred or loss suffered by
any D&O Indemnified Party as a result of such party’s gross negligence or
willful or unlawful conduct.

8.11. Trust Fund Disbursement. Parent shall cause the Trust Fund to be dispersed
to Parent in accordance with the documents or agreements governing the Trust
Fund

 

 

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upon the Closing. All liabilities of Parent due and owing or incurred at or
prior to the Closing Date shall be paid as and when due, including all Parent
Tax liabilities and the payment at Closing of professional fees related to these
transactions, and adequate reserves shall be made against amounts distributed
from the Trust Fund therefor. Promptly following such disbursement of the Trust
Fund, Parent shall contribute the Trust Fund to Purchaser.

8.12. Settlement of Prior Dispute. In the event that the Company recovers
(whether before, on or after the Closing Date) any amounts in the lawsuits
styled (a) Randye M. Holland, et al. v. Emil Jachmann and Cyalume Technologies,
Inc., Civil Action No. 06-706 (Mass. Super. Ct.) or (b) Cyalume Technologies,
Inc. v. Ira Leemon, et al., Index No. 603512/06 (N.Y. Sup.Ct.), the Parent and
the Purchaser agree that such amounts shall be paid to the Members in the manner
directed in writing by the Seller. Notwithstanding any other provision contained
in this Agreement to the contrary, in the event that, following the Closing, the
Company or any Subsidiary is subjected to any loss, liability or expense as a
result of the foregoing actions and proceedings, all such losses, liabilities
and expenses shall be for the account of the Seller. This covenant shall survive
the Closing.

8.13. Exclusivity. During the period between the date of this Agreement and the
Closing Date or the termination of this Agreement in accordance with ARTICLE
XIII hereof, neither the Parent nor the Purchaser shall, nor shall the Parent or
Purchaser permit any one acting on their behalf to, directly or indirectly, (a)
knowingly encourage, solicit, initiate or participate in discussions or
negotiations with, or provide any information to or cooperate in any manner with
any Person, other than the Company, the Seller or their Affiliates or
representatives, concerning any acquisition (other than the Transaction), or (b)
consummate any such acquisition or accept any offer or agree to engage in any
such acquisition, other than the Transaction.

8.14. Ordinary Conduct of the Parent and the Purchaser. During the period from
the date of this Agreement to the earlier of (1) immediately prior to the
Closing and (2) the date on which this Agreement is terminated in accordance
with its terms, except as otherwise consented to by the Seller in writing or as
otherwise contemplated by this Agreement, each of the Parent and the Purchaser
shall not:

(a) fail to comply with any applicable Laws or regulations;

(b) issue, sell, split, combine or reclassify any of its capital stock or equity
securities, securities convertible into its capital stock or equity securities,
or warrants, options or other rights to purchase its capital stock or equity
securities;

(c) grant any material Lien in respect of any portion of its material properties
or assets (including any cash in the Trust Fund), other than Liens to be
incurred at or prior to the Closing in accordance with the terms of the debt
financing obtained in connection with the Transaction;

(d) incur any indebtedness for borrowed money or issue or sell any debt
securities or rights to acquire any debt securities of the Parent and/or the
Purchaser or guarantee any such indebtedness or debt securities (other than debt
financing incurred by Parent and/or Purchaser to finance the Transaction);

 

 

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(e) spend any cash in the Trust Fund or spend any other cash available to it
(other than for payment of liabilities incurred in the ordinary course of
business) or declare or pay any dividends on or make any distributions in
respect of any of its capital stock or other equity securities or amend or
otherwise modify the Trust Agreement;

(f) acquire by merging or consolidating with, or agreeing to merge or
consolidate with, or purchase substantially all the assets of, or otherwise
acquire any business or any corporation, partnership, association or other
business organization or division thereof; or

(g) agree to do any of the foregoing.

8.15. Member Acknowledgements. Seller shall use commercially reasonable efforts
to provide to Parent and Purchaser letters executed by each Member (other than
the Affiliated Members), pursuant to which such Member acknowledges (a) the
representations and warranties being made by such Member in Section 4.5, and (b)
such Member’s indemnification obligations under Article XI.

ARTICLE IX

CONDITIONS TO CLOSING

9.1. Condition to the Obligations of Parent, the Purchaser, the Seller and the
Company. The obligations of Parent, the Purchaser, the Seller and the Company to
consummate the Closing are subject to the satisfaction of all the following
conditions:

(a) At the Closing, there shall be no Order issued by any Authority of competent
jurisdiction to the effect that the transactions contemplated by this Agreement
may not be consummated as herein provided, no proceeding or lawsuit shall have
been commenced by any Authority or other Person for the purpose of obtaining any
such Order and no written notice shall have been received from any such
Authority indicating an intent to restrain, prevent, materially delay or
restructure the transactions contemplated hereby.

(b) The Parent Stockholder Approval shall have been obtained and fewer than 20%
of the issued and outstanding shares of Parent Common Stock owned by Parent’s
public stockholders will have exercised their redemption rights (as specified in
the Parent’s Certificate of Incorporation).

(c) The Parent Common Stock at the Closing will be quoted on the OTC BB, and
there will be no action or proceeding pending or threatened against Parent by
the NASD to prohibit or terminate the quotation of Parent Common Stock on the
OTC BB.

9.2. Conditions to Obligations of Parent and the Purchaser. The obligation of
Parent and the Purchaser to consummate the transactions contemplated by this
Agreement is subject to the satisfaction, or the waiver at Parent’s and the
Purchaser’s sole and absolute discretion, of all the following conditions:

 

 

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(a) (i) Each of the Company and the Seller shall have duly performed in all
material respects all of their respective obligations hereunder required to be
performed by them at or prior to the Closing Date, (ii) the representations and
warranties of the Company and the Seller contained in this Agreement and in any
certificate or other writing delivered by the Company or the Seller pursuant
hereto, disregarding all qualifications and exceptions contained therein
relating to materiality or Material Adverse Effect, shall be true and correct at
and as of the Closing Date, as if made at and as of such date with only such
exceptions as would not in the aggregate reasonably be expected to have a
Material Adverse Effect, (iii) since the date of this Agreement, there shall
have been no event, change or occurrence which individually or together with any
other event, change or occurrence, that has caused a Material Adverse Change or
had a Material Adverse Effect, and (iv) Parent and the Purchaser shall have
received a certificate signed by an authorized officer of the Company to the
effect set forth in clauses (i), (ii) and (iii) of this Section 9.2(a).

(b) Parent shall have received (i) a certified copy of the certificate of
incorporation of the Company and each Subsidiary, (ii) copies of the By-Laws of
the Company and each Subsidiary as effective on the date hereof; (iii) copies of
resolutions duly adopted by (a) the Board of Directors of the Company and (b)
the Managers or Members of the Seller, authorizing this Agreement and the
transactions contemplated hereby, (iv) a certificate of the Secretary or
Assistant Secretary of the Company certifying each of the foregoing and
including an incumbency certificate, and (v) a recent good standing certificate
regarding the Company from the office of the Secretary of State of the State of
Delaware and each other jurisdiction in which the Company is qualified to do
business.

(c) The Company shall have delivered to Parent executed payoff letters from the
holders of 1st Lien Secured Debt , 2nd Lien Secured Debt and the Senior
Subordinated Notes and UCC-3 Termination Statements necessary to terminate,
release or assign, as the case may be, all Liens (other than Permitted Liens) on
the assets of the Company.

(d) The Company shall have provided to Parent copies of (i) the final audited
balance sheets for the fiscal years ended December 31, 2006 and 2007 (the “Final
Financial Statements”) and (ii) the unaudited balance sheets of the Company for
any subsequent interim period that would be required by GAAP at the time of the
Closing.

(e) The financial condition and the results of operations of the Company set
forth in the Final Financial Statements shall not be materially different, in
the aggregate, from the financial condition and the results of operations of the
Company set forth in the Draft Financial Statements.

(f) The Company shall have delivered to Parent documents satisfactory to Parent
to effect the release of all Liens (except for Permitted Liens) on any portion
of the assets of the Company and to effect the filing of appropriate UCC-3
Termination Statements.

(g) Purchaser has received a certificate of non-foreign status from the Seller
under Section 1445(b)(2) of the Code.

 

 

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(h) The Investor Rights Agreement shall have been executed by the Members.

(i) The Escrow Agreement shall have been executed by Seller and the Escrow
Agent.

(j) All Indebtedness of the Company (other than the Indebtedness referred to in
Section 9.2(c), to be repaid at Closing) shall have been repaid in full.

(k) Certificates representing all of the Shares shall be available at the
Closing, together with the original stock ledgers and minute books of the
Company.

(l) The Seller shall have provided to the Parent and the Purchaser letters
signed by each of Cova, Stephen Weinroth, Kline Hawkes Pacific, L.P., Kline
Hawkes Pacific Friends Fund, LLC and Paul Lipari Living Trust (collectively, the
“Affiliated Members”), pursuant to which each Affiliated Member acknowledges (i)
the representations and warranties being made by such Affiliated Member in
Section 4.5, and (ii) such Affiliate Member’s indemnification obligations under
Article XI.

9.3. Conditions to Obligations of the Company and the Seller. The obligation of
the Company and the Seller to consummate the transactions contemplated by this
Agreement is subject to the satisfaction, or the waiver at the Company’s and the
Seller’s sole and absolute discretion, of all the following conditions:

(a) (i) Each of the Parent and the Purchaser shall have performed in all
material respects all of their respective obligations hereunder required to be
performed by it at or prior to the Closing Date, (ii) the representations and
warranties of Parent contained in this Agreement and in any certificate or other
writing delivered by Parent or the Purchaser pursuant hereto, disregarding all
qualifications and exceptions contained therein relating to materiality, shall
be true and correct in all material respects at and as of the Closing Date, as
if made at and as of such date, (iii) since the date of this Agreement, there
shall have been no event, change or occurrence which individually or together
with any other event, change or occurrence, has had a material adverse effect on
the business, assets, condition (financial or otherwise), liabilities, results
of operations or prospects of the Parent, and (iv) the Seller and the Company
shall have received a certificate signed by an authorized officer of Parent and
the Purchaser to each of clause (i), (ii) and (iii) hereof.

(b) The Company and the Seller shall have received (i) a copy of the certificate
of incorporation of each of Parent and the Purchaser, (ii) copies of the By-laws
of each of Parent and the Purchaser as effective on the date hereof; (iii)
copies of resolutions duly adopted by the Boards of Directors of the Parent and
the Purchaser authorizing this Agreement and the transaction contemplated
hereby, (iv) a certificate of the Secretary or Assistant Secretary of Parent and
the Purchaser certifying each of the foregoing and as to signatures of the
officer(s) authorized to execute this Agreement and any certificate or document
to be delivered pursuant hereto, together with evidence of the incumbency of
such Secretary or Assistant Secretary, and (v) a recent good standing
certificate regarding Parent and the Purchaser from the office of the Secretary
of State of its respective jurisdiction of organization and each other
jurisdiction in which each of Parent and the Purchaser is qualified to do
business.

 

 

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(c) The Investor Rights Agreement shall have been executed by Parent.

(d) Parent shall have made appropriate arrangements to have the Trust Fund,
which shall contain no less than the amount referred to in Section 5.20,
dispersed to Parent as soon as is practicable upon the Closing.

(e) The Escrow Agreement shall have been executed by Purchaser and the Escrow
Agent.

ARTICLE X

RELIANCE ON REPRESENTATIONS AND WARRANTIES

10.1. Reliance on Representations and Warranties of the Company and the Seller.
Notwithstanding any right of Parent and the Purchaser to fully investigate the
affairs of the Company and notwithstanding any knowledge of facts determined or
determinable by Parent and the Purchaser pursuant to such investigation or right
of investigation, Parent and the Purchaser shall have the right to rely fully
upon the representations, warranties, covenants and agreements of the Company
and the Seller contained in this Agreement.

10.2. Reliance on Representations and Warranties of Parent and the Purchaser.
Notwithstanding any right of the Company or the Seller to fully investigate the
affairs of Parent and the Purchaser and notwithstanding any knowledge of facts
determined or determinable by the Company or the Seller pursuant to such
investigation or right of investigation, the Company and the Seller shall have
the right to rely fully upon the representations, warranties, covenants and
agreements of Parent and the Purchaser contained in this Agreement.

ARTICLE XI

INDEMNIFICATION

11.1. Indemnification of Parent, Purchaser. After the Closing, the Seller and
the Members hereby severally (but not jointly) agree to indemnify and hold
harmless Parent, Purchaser, and their respective Affiliates and each of their
respective directors, officers, employees, shareholders, attorneys and agents
and permitted assignees (collectively, the “Parent Indemnitees,” provided,
however, the term “Parent Indemnitees” shall not include any of the Members
regardless of their capacity), against and in respect of any and all loss,
payment, demand, penalty, liability, judgment, damage, diminution in value,
claim or out-of-pocket costs and expenses (including actual costs of
investigation and reasonable attorneys’ fees and other out-of-pocket costs and
expenses) (all of the foregoing collectively, “Losses”) incurred or sustained by
any Parent Indemnitee after the Closing as a result of (a) any breach of any of
the representations, warranties and covenants of the Company or the Seller
contained herein or any certificate or other writing delivered pursuant hereto;
provided, that with respect to any breach of any of the representations and
warranties set forth in Section 4.5,

 

 

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any indemnification obligation related thereto may only be made against the
applicable Member who had breached such representation or warranty in Section
4.5 or (b) Taxes of the Company, the Seller or any Subsidiary for any
Pre-Closing Period, and all costs in connection therewith or with enforcing
rights hereunder.

11.2. Indemnification of Seller. After the Closing, Parent and the Purchaser
hereby agree to indemnify and hold harmless the Seller and its respective
Affiliates, and each of their respective directors, officers, employees,
shareholders, attorneys, agents and permitted assignees (the “Company
Indemnitees”) against and in respect of any Losses incurred or sustained by the
Company Indemnitees after the Closing as a result of any breach of any of the
representations, warranties and covenants of Parent or the Purchaser contained
herein or any certificate or other writing delivered pursuant hereto.

11.3. Procedure. The following shall apply with respect to all claims by either
a Parent Indemnitee or a Company Indemnitee (each, an “Indemnified Party”) for
indemnification:

(a) An Indemnified Party shall give to the party obligated to indemnify such
Indemnified Party pursuant to this Agreement (the “Indemnifying Parties”),
prompt written notice (an “Indemnification Notice”) of any third-party claim,
investigation, action, suit, hearing or proceeding with respect to which such
Indemnified Party seeks indemnification pursuant to Section 11.1 or 11.2 (a
“Third Party Claim”), which shall describe in reasonable detail the Loss,
liability or damage that has been or may be suffered by the Indemnified Party.
The failure to give the Indemnification Notice shall not impair any of the
rights or benefits of such Indemnified Party under Section 11.1 or 11.2, except
to the extent that the Indemnifying Party is actually prejudiced thereby. The
Indemnification Notice shall identify specifically the basis in reasonable
detail under which indemnification is sought pursuant to ARTICLE XI and enclose
true and correct copies of any written document furnished to the Indemnified
Party by the Person that instituted the Third Party Claim.

(b) The Indemnifying Party shall have thirty (30) days after receipt of such
Indemnification Notice to assume the conduct and control, through counsel
reasonably acceptable to the Indemnified Party at the expense of the
Indemnifying Party, of the settlement or defense thereof (and by assuming such
control, the Indemnifying Party agrees that such Claim is an indemnifiable Claim
hereunder, subject to the terms, provisions and limitations contained in this
Agreement), and the Indemnified Party shall cooperate with the Indemnifying
Party and such counsel in connection therewith; provided, that the Indemnifying
Party shall permit the Indemnified Party to participate in such settlement or
defense through counsel chosen by such Indemnified Party at the Indemnified
Party’s expense (provided, however, that the Indemnifying Party shall pay the
fees for counsel of the Indemnified Party if (i) the employment of separate
counsel shall have been authorized in writing by any Indemnifying Party in
connection with the defense of such Third Party Claim or (ii) the Indemnified
Party’s counsel shall have advised the Indemnified Party in writing, with a copy
delivered to the Indemnifying Party, that there is a conflict of interest that
would make it inappropriate under applicable standards of professional conduct
to have common counsel). So long as the Indemnifying Party is actively and
diligently contesting any such claim in good faith, the Indemnified Party shall
not pay or settle any such claim without the prior written consent of the

 

 

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Indemnifying Party (not to be unreasonably withheld or delayed) unless the
Indemnified Party waives any right to indemnity therefor by the Indemnifying
Party for such claim. The Indemnifying Party shall not, without the prior
written consent of the Indemnified Party (which consent shall not be
unreasonably withheld or delayed), consent to any admission or the entry of any
judgment or enter into any settlement with respect to any Third Party Claim
which (x) imposes an injunction or other equitable relief upon the Indemnified
Party or (y) does not include an unconditional provision whereby the plaintiff
or claimant in the matter releases the Indemnified Party from all liability with
respect thereto.

(c) Notwithstanding the above, the Indemnifying Party shall not be entitled to
control (but shall be entitled to participate at its own expense in the defense
of), and the Indemnified Party shall be entitled to have sole control over, the
defense or settlement, compromise, admission, or acknowledgment of any Third
Party Claim (i) as to which the Indemnifying Party fails to assume the defense
within 30 days after the Indemnified Party gives notice thereof to the
Indemnifying Party, or (ii) that specifically seeks a monetary payment in an
amount that is less than the difference between the Deductible Amount and the
amount of Losses, if any, that the Parent Indemnitees have incurred as of the
date of such Third Party Claim; provided, however, that the Indemnified Party
shall make no settlement, compromise, admission, or acknowledgment that would
give rise to liability on the part of any Indemnifying Party without the prior
written consent of such Indemnifying Party (which consent shall not be
unreasonably withheld or delayed).

(d) The Indemnifying Party and the Indemnified Party shall cooperate in the
defense or prosecution of any Third Party Claim in respect of which indemnity
may be sought hereunder and shall furnish such records, information and
testimony, and attend such conferences, discovery proceedings, hearings, trials
and appeals, as may be reasonably requested in connection therewith.

11.4. Insurance; Tax Benefits. The amount of any Losses for which
indemnification is provided under this ARTICLE XI shall be reduced by any
amounts recoverable by the Indemnified Party or any of its Affiliates from any
third party (including under any insurance policy). If the amount with respect
to which any claim is made under this ARTICLE XI gives rise to a Tax Benefit to
the Indemnified Party that made the claim, such Indemnified Party shall refund
to the Indemnifying Party the amount of such Tax Benefit when, as and if
actually realized. “Tax Benefit” means, with respect to any Indemnified Party,
an amount by which the Tax liability of such Indemnified Party (or group of
Affiliates including such Indemnified Party) is actually reduced (including by
deduction, reduction of income by virtue of increased tax basis or otherwise,
entitlement to refund, credit or otherwise), net of any increase in such party’s
Tax liability, as a result of its receipt of payment for the applicable
indemnity claim (but in any case, not below zero).

11.5. Limitations on Indemnification. Notwithstanding anything to the contrary
in this ARTICLE XI,

(a) (i) no claim for indemnification shall be made by any Indemnified Party
unless the aggregate amount of Losses of the Indemnified Parties exceed
one million two hundred thousand dollars ($1,200,000) (the “Deductible Amount”)
and then only to the extent

 

 

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such Losses exceed the Deductible Amount; and (ii) in no event shall the
aggregate obligation of the Indemnifying Parties under this Article XI exceed
twelve million dollars ($12,000,000) (the “Cap”); provided, that the Deductible
Amount and the Cap shall not apply to: (1) Losses pursuant to Section 11.1(b);
and (2) Losses arising under Section 11.1(a) solely with respect to any breach
of the representations or warranties set forth in Sections 3.1 (Corporate
Existence and Power), Section 3.2 (Corporate Authorization), Section 3.4
(Subsidiaries), Section 3.5 (Capitalization and Ownership), Section 4.1
(Ownership of Stock; Authority), Section 0 (Due Incorporation), Section 5.2
(Corporate Authorization), Section 5.9 (Capitalization and Ownership of Parent),
and Section 5.14 (Issuance and Ownership of Parent Common Stock (such
representations and warranties shall be collectively referred to as the
“Fundamental Representations”); and

(b) no party hereto shall have any liability under any provision of this
Agreement or otherwise for any punitive, incidental, consequential, special or
indirect damages, including business interruption, loss of future revenue,
profits or income, or loss of business reputation or opportunity relating to the
breach or alleged breach of this Agreement or any of the agreements contemplated
hereby or any schedule, certificate or other document delivered pursuant hereto
or thereto or in connection with the transactions contemplated by this
Agreement.

11.6. Survival of Indemnification Rights. The representations and warranties of
the Company, the Seller, Parent and the Purchaser shall survive until the
eighteen (18) month anniversary of the Closing Date; provided, that the
Fundamental Representations shall survive until 30 days following the expiration
of the applicable statute of limitations. The indemnification to which any
Indemnified Party is entitled from the Indemnifying Parties pursuant to Section
11.1 or 11.2 for Losses shall be effective so long as it is asserted prior to
the time such representations, warranties or covenants cease to survive
hereunder.

11.7. Manner of Payment. Any indemnification to be paid by any Indemnifying
Party pursuant to this ARTICLE XI will be paid only in shares of Parent Common
Stock; provided, however, that the Seller and each Member shall have the option,
at their sole election, to pay any and all such amounts in cash.

(a) Except to the extent that any Member elects to satisfy any indemnification
obligation in cash, any indemnification obligation owing to the Parent
Indemnitees pursuant to this Article XI shall be effected (i) first by
offsetting such amount against the Escrowed Stock in the manner described below,
in which case the Seller, the Company and Parent shall promptly deliver joint
written instructions to the Escrow Agent to distribute the appropriate number of
shares of Parent Common Stock to the Parent Indemnitees within five (5) Business
Days after the determination thereof in accordance with the terms of this
Agreement, and (ii) thereafter, the Parent Indemnities shall have recourse, on a
several basis and in accordance with this ARTICLE XI, to the Parent Common Stock
then held by the Members in the manner described below. For purposes of
determining the portion of any indemnification obligation owing to the Parent
Indemnitees by each Member pursuant to this Section 11.7, such indemnification
obligation shall first be allocated to the Members on a pro rata basis (based on
the number of shares of the Parent Common Stock that the Parent was instructed
to deliver to such Member pursuant to the terms of this Agreement) and, to the
extent

 

 

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that the aggregate indemnification obligations owing to the Parent Indemnitees
in accordance with this ARTICLE XI exceeds the value (based on the Average
Trading Price as of the applicable date of determination) of the Parent Common
Stock that the Parent was instructed to deliver to such Member pursuant to the
terms of this Agreement, such indemnification obligation shall thereafter be
allocated to the Members on a pro rata basis (based on the number of shares of
the Parent Common Stock that the Parent was instructed to deliver to such Member
pursuant to the terms of this Agreement with respect to such Member’s Series A
Preferred Units).

(b) In the event that the Company Indemnitees are entitled to indemnification
pursuant to this ARTICLE XI, such indemnification shall be paid in the form of
Parent Common Stock. For purposes of this Section 11.7(b), the value of each
share of Parent Common Stock shall be equal to its Average Trading Price at such
time.

11.8. Mitigation of Loss. The Company, the Seller, the Purchaser and the Parent
shall cooperate with each other with respect to resolving any claim, liability
or Loss with respect to which one party is obligated to indemnify any Parent
Indemnitee or Company Indemnitee, as the case may be, including by making
commercially reasonable efforts to mitigate any such claim, liability or Loss.
In the event that the Company, the Seller, the Purchaser or the Parent shall
fail to make such commercially reasonably efforts to mitigate any such claim,
liability or Loss, then notwithstanding anything else to the contrary contained
herein, the other party shall not be required to indemnify any Person for that
portion of any claim, liability or Loss that could reasonably be expected to
have been avoided if the Company, the Seller, the Purchaser or the Parent, as
the case may be, had made such efforts. Without limiting the generality of the
foregoing, the Parent and Purchaser shall, and shall cause the Company and their
respective Affiliates to, use commercially reasonable efforts to seek full
recovery under all insurance policies covering any Loss to the same extent as
they would if such Loss were not subject to indemnification hereunder. Parent
and Purchaser shall, and shall cause the Company and their respective Affiliates
to, attempt to cause the party making a claim for indemnification under this
Agreement to realize as soon as possible the Tax Benefit available to such party
in connection with the accrual, incurrence or payment of any Loss.

11.9. Exclusive Remedy. Notwithstanding anything contained in this Agreement to
the contrary, after the Closing, indemnification pursuant to the provisions of
this ARTICLE XI shall be the sole and exclusive remedy for the parties hereto
for any misrepresentation or breach of any representation, warranty, covenant,
agreement or other provision contained in this Agreement or in any certificate
delivered pursuant hereto and for any claims with respect to the transactions
contemplated by this Agreement, other than for fraud. The Parent Common Stock
issued to the Members hereunder shall be the sole source of recovery for any
claim for indemnification made pursuant to Section 11.1 hereof.

11.10. Adjustment to Purchase Price. The parties agree that the payment of any
indemnity under this Article XI shall be treated as an adjustment to the
Purchase Price paid by the Parent and Purchaser hereunder for Tax purposes to
the extent that it may properly be so characterized under applicable law.

 

 

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ARTICLE XII

DISPUTE RESOLUTION

12.1. Arbitration.

(a) In the event a dispute arises relating to this Agreement, the parties agree
to meet to resolve their disputes in good faith. Any party may seek injunctive
relief, without the need to post a bond, pending the completion of arbitration
under this Agreement for any breach or threatened breach of any covenant
contained herein.

(b) If after good faith negotiations the dispute is not resolved, the parties
shall promptly submit any dispute, claim, or controversy arising out of or
relating to this Agreement, or any Additional Agreement (including with respect
to the meaning, effect, validity, termination, interpretation, performance, or
enforcement of this Agreement or any Additional Agreement) or any alleged breach
thereof (including any action in tort, contract, equity, or otherwise), to
binding arbitration before one arbitrator that is familiar with the Business and
not an Affiliate of any party to this Agreement (“Arbitrator”). The parties
agree that binding arbitration shall be the sole means of resolving any dispute,
claim, or controversy arising out of or relating to this Agreement or any
Additional Agreement (including with respect to the meaning, effect, validity,
termination, interpretation, performance or enforcement of this Agreement or any
Additional Agreement) or any alleged breach thereof (including any claim in
tort, contract, equity, or otherwise).

(c) If the parties cannot agree upon the Arbitrator, the Arbitrator shall be
selected by the New York chapter head of the American Arbitration Association
upon the request of either side. The Arbitrator shall be selected within 30 days
of request.

(d) The laws of the State of New York shall apply to any arbitration hereunder.
In any arbitration hereunder, this Agreement and any agreement contemplated
hereby shall be governed by the laws of the State of New York applicable to a
contract negotiated, signed, and wholly to be performed in the State of New
York, which laws the Arbitrator shall apply in rendering his decision. The
Arbitrator shall issue a written decision, setting forth findings of fact and
conclusions of law, within sixty (60) days after he shall have been selected.
The Arbitrator shall have no authority to award punitive or other exemplary
damages.

(e) The arbitration shall be held in the City of New York, New York in
accordance with and under the then-current provisions of the rules of the
American Arbitration Association, except as otherwise provided herein.

(f) On application to the Arbitrator, any party shall have rights to discovery
to the same extent as would be provided under the Federal Rules of Civil
Procedure, and the Federal Rules of Evidence shall apply to any arbitration
under this Agreement; provided, however, that the Arbitrator shall limit any
discovery or evidence such that his decision shall be rendered within the period
referred to in Section 12.1(d).

 

 

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(g) The Arbitrator may, at his discretion and at the expense of the party who
will bear the cost of the arbitration, employ experts to assist him in his
determinations.

(h) The costs of the arbitration proceeding and any proceeding in court to
confirm any arbitration award or to obtain relief as provided in Section 12.1,
as applicable (including actual attorneys’ fees and costs), shall be borne by
the unsuccessful party and shall be awarded as part of the Arbitrator’s
decision, unless the Arbitrator shall otherwise allocate such costs for the
reasons set forth in such decision. The determination of the Arbitrator shall be
final and binding upon the parties and not subject to appeal.

(i) Any judgment upon any award rendered by the Arbitrator may be entered in and
enforced by any court of competent jurisdiction. The parties expressly consent
to the exclusive jurisdiction of the courts (Federal and state) in New York, New
York to enforce any award of the Arbitrator or to render any provisional,
temporary, or injunctive relief in connection with or in aid of the Arbitration.
The parties expressly consent to the personal and subject matter jurisdiction of
the Arbitrator to arbitrate any and all matters to be submitted to arbitration
hereunder. None of the parties hereto shall challenge any arbitration hereunder
on the grounds that any party necessary to such arbitration (including the
parties hereto) shall have been absent from such arbitration for any reason,
including that such party shall have been the subject of any bankruptcy,
reorganization, or insolvency proceeding.

(j) The parties shall indemnify the Arbitrator and any experts employed by the
Arbitrator and hold them harmless from and against any claim or demand arising
out of any arbitration under this Agreement or any agreement contemplated
hereby, unless resulting from the willful misconduct of the person indemnified.

(k) This arbitration clause shall survive the termination of this Agreement and
any agreement contemplated hereby.

12.2. Waiver of Jury Trial; Exemplary Damages. ALL PARTIES HEREBY WAIVE THEIR
RIGHTS TO TRIAL BY JURY WITH RESPECT TO ANY DISPUTE ARISING UNDER THIS AGREEMENT
OR ANY ADDITIONAL AGREEMENT. No party shall be awarded punitive or other
exemplary damages respecting any dispute arising under this Agreement or any
Additional Agreement.

12.3. Attorneys’ Fees. The unsuccessful party to any court or other proceeding
arising out of this Agreement that is not resolved by arbitration under Section
12.1 shall pay to the prevailing party all actual attorneys’ fees and costs
incurred by the prevailing party, in addition to any other relief to which it
may be entitled. As used in this Section 12.3 and elsewhere in this Agreement,
“actual attorneys’ fees” means the full and actual cost of any legal services
actually performed in connection with the matter for which such fees are sought,
calculated on the basis on the usual fees charged by the attorneys performing
such services, and shall not be limited to “reasonable attorneys’ fees” as that
term may be defined in statutory or decisional law.

 

 

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ARTICLE XIII

TERMINATION

13.1. Termination Without Default. In the event that the Closing of the
transactions contemplated hereunder has not occurred by the later of (i) six
months after the delivery to the Parent of the audited Financial Statements as
of and for the fiscal year ended December 31, 2006 and December 31, 2007,
respectively, and (ii) December 31, 2008 (the “Outside Closing Date”) and no
material breach of this Agreement by the party seeking to terminate this
Agreement shall have occurred or have been made (as provided in Section 13.2
hereof), Parent and the Purchaser and the Company and the Seller shall have the
right, at its or their sole option, to terminate this Agreement without
liability to the other side. Such right may be exercised by Parent and the
Purchaser, on the one hand, or the Company and the Seller, on the other, as the
case may be, giving written notice to the other at any time after the Outside
Closing Date.

13.2. Termination Upon Default.

(a) Parent and the Purchaser may terminate this Agreement by giving notice to
the Company and the Seller on or prior to the Closing Date, without prejudice to
any rights or obligations Parent and Purchaser may have, if the Company or the
Seller shall have breached any representation or warranty or breached any
agreement or covenant contained herein to be performed prior to Closing such
that the conditions set forth in Section 9.2(a) would not be satisfied and such
breach shall not be cured within the earlier of the Outside Closing Date and
thirty (30) days following receipt by the Company or the Seller of a notice
describing in reasonable detail the nature of such breach.

(b) The Company and the Seller may terminate this Agreement by giving prior
written notice to Parent on or prior to the Closing, without prejudice to any
rights or obligations the Company or the Seller may have, if Parent or the
Purchaser shall have breached any of its covenants, agreements, representations,
and warranties contained herein to be performed prior to Closing such that the
conditions set forth in Section 9.3(a) would not be satisfied and such breach
shall not be cured within the earlier of the Outside Closing Date and thirty
(30) days following receipt by Parent of a notice describing in reasonable
detail the nature of such breach.

(c) The Company may terminate this Agreement if, at the Special Meeting
(including any adjournments thereof), this Agreement and the transactions
contemplated thereby shall fail to be approved and adopted by the affirmative
vote of the holders of Parent Common Stock required under Parent’s certificate
of incorporation, or the holders of 20% or more of the number of shares of
Parent Common Stock issued in Parent’s initial public offering and outstanding
as of the record date of the Special Meeting exercise their rights to redeem the
shares of Parent Common Stock held by them for cash in accordance with Parent’s
certificate of incorporation.

(d) In the event that this Agreement is terminated by any Person, in accordance
with the provisions of this Agreement, for any reason other than as a result of
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breach or nonfulfillment by Seller or the Company of any of its representations,
warranties or covenants contained in this Agreement or (ii) the failure to
obtain the Parent Stockholder Approval at the Special Meeting or otherwise
(unless the failure to obtain such approval resulted from a breach by Parent or
Purchaser of any of its representations, warranties or covenants contained in
this Agreement), Parent shall promptly (but in no event more than 60 days
following such termination) pay the Company the amount of $200,000.

13.3. Effect of Termination. If this Agreement is terminated pursuant to Section
13.1 or 13.2, all rights and obligations of the parties hereunder shall
terminate and no party shall have any liability to the other party, except for
obligations of the parties hereto in Sections 7.1, 7.3, 12.1, 12.2, 12.3,
13.2(d), 13.3, 14.1, 14.4, 14.5 and 14.7, which shall survive the termination of
this Agreement. Notwithstanding anything to the contrary contained herein,
termination of this Agreement pursuant to Section 13.1 or 13.2 shall not release
any party from any liability for any breach by such party of the terms and
provisions of this Agreement prior to such termination or impact the right of
any party to compel specific performance by another party of its obligations
under this Agreement.

ARTICLE XIV

MISCELLANEOUS

14.1. Notices. All notices, requests, demands and other communications to any
party hereunder shall be in writing and shall be given to such party at its
address or telecopier number set forth below, or such other address or
telecopier number as such party may hereinafter specify by notice to each other
party hereto:

if to Parent, Purchaser or the Company (following the Closing), to:

c/o Vector Intersect Security Acquisition Corp.

65 Challenger Road

Ridgefield Park, New Jersey

Attn: Derek Dunaway

Telecopy: (201) 712-9498

with a copy to:

Loeb & Loeb LLP

345 Park Avenue

New York, New York 10154

Attention: Mitchell N. Nussbaum and Robert B. Lachenauer

Telecopy: (212) 407-4990

 

 

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if to the Company (prior to Closing) or the Seller:

Cyalume Technologies, Inc.

c/o Columbus Nova

153 East 53rd Street

New York, New York 10022

Attention: Jason Epstein, Steven Flyer and Stephen Weinroth

Telecopy: (212) 308-6623

with a copy to:

Kirkland & Ellis LLP

153 East 53rd Street

New York, New York 10022

Attention: Fredrick Tanne and Jai Agrawal

Telecopy: (212) 446-6460

Each such notice, request or other communication shall be effective (i) if given
by telecopy, when such telecopy is transmitted to the telecopy number specified
herein and the appropriate answer back is received or, (ii) if given by
certified mail, 72 hours after such communication is deposited in the mails with
first class postage prepaid, properly addressed or, (iii) if given by any other
means, when delivered at the address specified herein.

14.2. Amendments; No Waivers.

(a) Any provision of this Agreement may be amended or waived if, and only if,
such amendment or waiver is in writing and signed, in the case of an amendment,
by each party hereto, or in the case of a waiver, by the party against whom the
waiver is to be effective.

(b) No failure or delay by any party hereto in exercising any right, power or
privilege hereunder shall operate as a waiver thereof nor shall any single or
partial exercise thereof preclude any other or further exercise thereof or the
exercise of any other right, power or privilege.

14.3. Ambiguities. The parties acknowledge that each party and its counsel has
materially participated in the drafting of this Agreement and consequently the
rule of contract interpretation that any ambiguities in the writing be construed
against the drafter shall not apply.

14.4. Publicity. Except as required by law and under Section 8.5, the parties
agree that neither they nor their agents shall issue any press release or make
any other public disclosure concerning the transactions contemplated hereunder
without the prior approval of the other party hereto.

14.5. Expenses. Except as specifically provided in this Agreement (including
Section 13.3 hereof), all costs and expenses incurred in connection with this
Agreement and the transactions contemplated hereby shall be paid by the party
incurring such cost or expense.

 

 

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14.6. Successors and Assigns. The provisions of this Agreement shall be binding
upon and inure to the benefit of the parties hereto and their respective
successors and assigns; provided, that (i) neither the Company nor the Seller
may assign, delegate or otherwise transfer any of its rights or obligations
under this Agreement without the prior written consent of Parent; and (ii) in
the event Parent assigns its rights and obligations under this Agreement to an
Affiliate, Parent shall continue to remain liable for its obligations hereunder.
Except as specifically set forth in clause (ii) above, neither Parent nor the
Purchaser may assign, delegate or otherwise transfer any of its rights or
obligations under this Agreement without the prior written consent of the
Company.

14.7. Governing Law; Jurisdiction. This Agreement has been entered into in the
State of New York. This Agreement shall be construed in accordance with and
governed by the laws of the State of New York, without giving effect to the
conflict of laws principles thereof. The parties hereto hereby irrevocably
consent to the exclusive jurisdiction of the state or federal courts sitting in
the City of New York, State of New York in connection with any controversy or
claim arising out of or relating to this Agreement, or the negotiation or breach
thereof, and hereby waive any claim or defense that such forum is inconvenient
or otherwise improper. Each party hereby agrees that any such court shall have
in personam jurisdiction over it and consents to service of process in any
manner authorized by New York law.

14.8. Counterparts; Effectiveness. This Agreement may be signed by facsimile
signatures and in any number of counterparts, each of which shall be an original
and all of which shall be deemed to be one and the same instrument, with the
same effect as if the signatures thereto and hereto were upon the same
instrument.

14.9. Entire Agreement. This Agreement constitutes the entire agreement among
the parties with respect to the subject matter hereof and supersedes all prior
agreements, understandings and negotiations, both written and oral, among the
parties with respect to the subject matter of this Agreement. No representation,
inducement, promise, understanding, condition or warranty not set forth herein
has been made or relied upon by any party hereto. Neither this Agreement nor any
provision hereof is intended to confer upon any Person other than the parties
hereto any rights or remedies hereunder other than Indemnified Parties as set
forth in Section 11.1 and 11.2 hereof, which shall be third party beneficiaries
hereof.

14.10. Severability. If any one or more provisions of this Agreement shall, for
any reasons, be held to be invalid, illegal or unenforceable in any respect,
such invalidity, illegality or unenforceability shall not affect any other
provision of this Agreement, but this Agreement shall be construed as if such
invalid, illegal or unenforceable provision had never been contained herein.

14.11. Captions. The captions herein are included for convenience of reference
only and shall be ignored in the construction or interpretation hereof.

14.12. Construction. References in this Agreement to “Articles,” “Sections,”
“Schedules” and “Exhibits” shall be to the Articles, Sections, Schedules and
Exhibits of this Agreement, unless otherwise specifically provided; all
Schedules to this Agreement are incorporated herein by reference; any use in
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masculine, feminine or neuter gender, shall be deemed to include the others,
unless the context otherwise requires; the words “herein”, “hereof” and
“hereunder” and words of similar import, when used in this Agreement, shall
refer to this Agreement as a whole and not to any particular provision of this
Agreement; the word “including” when used in this Agreement shall mean
“including without limitation”; and except as otherwise specified in this
Agreement, all references in this Agreement (a) to any agreement, document,
certificate or other written instrument shall be a reference to such agreement,
document, certificate or instrument, in each case together with all exhibits,
schedules, attachments and appendices thereto, and as amended, restated,
supplemented or otherwise modified from time to time in accordance with the
terms thereof; and (b) to any law, statute or regulation shall be deemed
references to such law, statute or regulation as the same may be supplemented,
amended, consolidated, superseded or modified from time to time.

14.13. Enforcement of Certain Rights. Nothing expressed or implied herein is
intended, or shall be construed, to confer upon or give any Person other than
the parties hereto, and their successors or permitted assigns, any right,
remedy, obligation or liability under or by reason of this Agreement, or result
in such Person being deemed a third-party beneficiary hereof, except to the
extent that the D&O Indemnified Parties shall be express third-party
beneficiaries of Section 8.10 hereof.

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IN WITNESS WHEREOF, Parent, Purchaser, Seller and the Company have caused this
Agreement to be duly executed by their respective authorized officers as of the
day and year first above written.

 

 

 

 

VECTOR INTERSECT ACQUISITION CORP.

 

 

 

 

 

 

 

 

By: 

/s/ Yaron Eitan

 

 

 

 

Name: 

Yaron Eitan

 

 

 

 

Title: 

Chief Executive Officer

 

 

 

 

CYALUME ACQUISITION CORP.

 

 

 

 

 

 

 

 

By: 

/s/ Yaron Eitan

 

 

 

 

Name: 

Yaron Eitan

 

 

 

 

Title: 

Director

 

 

 

 

CYALUME TECHNOLOGIES, INC.

 

 

 

 

 

 

 

 

By: 

/s/ Jason Epstein

 

 

 

 

Name: 

Jason Epstein

 

 

 

 

Title: 

Director

 

 

 

 

GMS ACQUISITION PARTNERS HOLDINGS, LLC

 

 

 

 

 

 

 

 

By: 

/s/ Frank P. Kline

 

 

 

 

Name: 

Frank P. Kline

 

 

 

 

Title: 

Director

 

 

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