Exhibit 10.32

Execution Copy

 

 

 

STOCK PURCHASE AND SALE AGREEMENT

BY AND AMONG

ORCHID CELLMARK INC.

AND

THE STOCKHOLDERS OF

RELIAGENE TECHNOLOGIES, INC.

October 19, 2007

 

 

 

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TABLE OF CONTENTS

 

          Page

ARTICLE I DEFINITIONS

   1

ARTICLE II PURCHASE AND SALE

   11

2.1.

  

Purchase and Sale of the Shares

   11

2.2.

  

Purchase Price

   11

2.3.

  

Closing

   11

2.4.

  

Payment of Purchase Price; Escrow Fund; Delivery of Shares

   11

2.5.

  

Purchase Price Adjustment

   12

2.6.

  

Preparation and Delivery of Post-Closing Revenue Report

   14

2.7.

  

Sellers’ Representative

   16

ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE SELLERS

   18

3.1.

  

Title to Shares

   18

3.2.

  

Seller’s Authority to Execute and Perform Agreement

   18

3.3.

  

Purchase for Investment; Residence

   19

ARTICLE IV REPRESENTATIONS AND WARRANTIES OF THE SELLERS WITH RESPECT TO THE
COMPANY

   19

4.1.

  

Organization and Qualification

   19

4.2.

  

Subsidiaries

   19

4.3.

  

Charter, By-Laws and Corporate Records

   20

4.4.

  

Capitalization

   20

4.5.

  

Authorization; Enforceability

   20

4.6.

  

No Violation or Conflict

   21

4.7.

  

Compliance with Law

   21

4.8.

  

Governmental Consents and Approvals

   21

4.9.

  

Financial Statements

   22

4.10.

  

Absence of Undisclosed Liabilities

   22

4.11.

  

Conduct in the Ordinary Course; Absence of Changes

   22

4.12.

  

Contracts

   25

4.13.

  

Governmental Permits

   27

4.14.

  

Taxes

   27

4.15.

  

Litigation

   29

4.16.

  

Insurance

   29

4.17.

  

Receivables

   29

4.18.

  

Inventory

   30

4.19.

  

Significant Customers

   30

4.20.

  

Significant Suppliers

   30

4.21.

  

Real Property

   30

4.22.

  

Intellectual Property

   32

4.23.

  

Personal Property

   36

 

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4.24.

  

Employment Matters; Labor Relations

   37

4.25.

  

Employee Benefit Plans

   38

4.26.

  

Environmental Matters

   40

4.27.

  

Internal Controls

   41

4.28.

  

Brokers

   41

4.29.

  

Certain Practices

   41

4.30.

  

Certain Interests

   41

4.31.

  

Products

   42

4.32.

  

Disclosure

   42

ARTICLE V REPRESENTATIONS AND WARRANTIES OF THE PURCHASER

   42

5.1.

  

Organization and Qualification

   42

5.2.

  

Authorization; Enforceability

   43

5.3.

  

No Violation or Conflict

   43

5.4.

  

Governmental Consents and Approvals

   43

5.5.

  

Brokers

   43

5.6.

  

Filings with Securities and Exchange Commission

   43

5.7.

  

Investment Intent

   44

ARTICLE VI DOCUMENTS DELIVERED AND ACTIONS TAKEN AT THE CLOSING; PRE-CLOSING
COVENANTS

   44

6.1.

  

Documents to be Delivered by the Sellers; Actions to be Taken by the Sellers

   44

6.2.

  

Documents to be Delivered by the Purchaser; Actions to be Taken by the Purchaser

   47

6.3.

  

Pre-Closing Covenants

   48

ARTICLE VII INDEMNIFICATION

   49

7.1.

  

Survival of Representations, Warranties and Covenants

   49

7.2.

  

Investigation

   50

7.3.

  

Sellers’ Indemnification of the Buyer

   50

7.4.

  

Purchaser’s Indemnification of the Sellers

   50

7.5.

  

Limitation on Indemnification

   51

7.6.

  

Assertion of Claims

   51

7.7.

  

Notice and Defense of Third Party Claims

   52

ARTICLE VIII MISCELLANEOUS

   53

8.1.

  

Notices

   53

8.2.

  

Entire Agreement

   54

8.3.

  

Binding Effect

   54

8.4.

  

Assignment

   54

8.5.

  

Modifications and Amendments

   55

8.6.

  

Waivers and Consents

   55

8.7.

  

No Third Party Beneficiary

   55

 

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8.8.

  

Severability

   55

8.9.

  

Publicity

   55

8.10.

  

Governing Law

   56

8.11.

  

Arbitration

   56

8.12.

  

Counterparts

   56

8.13.

  

Headings

   56

8.14.

  

Expenses

   56

8.15.

  

Further Assurances

   57

SCHEDULES

 

Schedule 1.11

   Company Indebtedness

Schedule 1.27

   Excluded Intellectual Property

Schedule 1.56

   Reference Balance Sheet

Schedule 1.59

   Selected Accounts

Schedule 1.60

   Selected Contracts

Schedule 2.4(a)(i)

   Sellers’ Representative Wire Transfer Instructions

Schedule 2.4(a)(ii)

   Escrow Agent’s Wire Transfer Instructions

Schedule 3.1

   List of Sellers and Stock Ownership

Schedule 6.2(f)

   Personal Guaranties    DISCLOSURE SCHEDULES

Schedule 3.1

   Title to Shares

Schedule 3.3

   Purchase for Investment; Residence

Schedule 4.1

   Organization and Qualification

Schedule 4.4

   Capitalization

Schedule 4.6

   No Violation or Conflict

Schedule 4.8

   Governmental Consents and Approvals

Schedule 4.9

   Financial Statements

Schedule 4.10

   Absence of Undisclosed Liabilities

Schedule 4.11

   Conduct in the Ordinary Course; Absence of Changes

Schedule 4.12

   Contracts

Schedule 4.13

   Governmental Permits

Schedule 4.14

   Taxes

Schedule 4.14(e)

   States and Localities

Schedule 4.15

   Litigation

Schedule 4.16

   Insurance

Schedule 4.17

   Receivables

Schedule 4.18

   Inventory

Schedule 4.19

   Significant Customers

Schedule 4.20

   Significant Suppliers

Schedule 4.21

   Real Property

Schedule 4.22

   Intellectual Property

Schedule 4.23

   Personal Property

Schedule 4.24

   Employment Matters; Labor Relations

Schedule 4.25

   Employee Benefit Plans

Schedule 4.26

   Environmental Matters

Schedule 4.27

   Internal Controls

Schedule 4.28

   Brokers

Schedule 4.30

   Certain Interests

 

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STOCK PURCHASE AND SALE AGREEMENT

This Stock Purchase and Sale Agreement (this “Agreement”) is entered into as of
October 19, 2007 by and among Orchid Cellmark Inc., a Delaware corporation (the
“Purchaser”), and each of the Persons identified on Schedule 3.1 attached hereto
(each, a “Seller” and collectively, the “Sellers”).

WHEREAS, the Sellers are the owners of all of the issued and outstanding shares
of the capital stock of every kind and description (each, a “Share” and
collectively, the “Shares”) of ReliaGene Technologies, Inc., a Louisiana
corporation (the “Company”); and

WHEREAS, the Sellers desire to sell to the Purchaser, and the Purchaser desires
to purchase from the Sellers, all of the Shares upon the terms and subject to
the conditions set forth herein.

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

ARTICLE I

DEFINITIONS

In addition to terms defined elsewhere in this Agreement, the following terms
when used in this Agreement shall have the respective meanings set forth below:

1.1 “Action” means any claim, demand, action, cause of action, right of
recovery, suit, arbitration, inquiry, proceeding or investigation (whether
civil, criminal, administrative, investigative or informal) commenced, brought
or conducted by, or otherwise involving, any Governmental Authority or
arbitrator.

1.2 “Affiliate” means, with respect to a specified Person, any other Person
which, directly or indirectly through one or more intermediaries, controls, is
controlled by or is under common control with, such Person. For purposes of this
definition, (a) the terms “controls,” “controlled by” and “under common control
with” means the possession, directly or indirectly or as a trustee or executor,
of the power to direct or cause the direction of the affairs of management of a
Person, whether through the ownership of voting securities, as trustee or
executor, by contract or otherwise, including, without limitation, the
ownership, directly or indirectly, of securities having the power to elect a
majority of the board of directors or similar body governing the affairs of such
Person; and (b) any Person that beneficially owns or holds fifty percent
(50%) or more of the outstanding voting securities or other securities
convertible into voting securities of such Person shall be deemed to be an
Affiliate of such Person; and (c) with respect to a specified Person, any other
Person of which the specified Person beneficially owns or holds fifty percent
(50%) or more of the outstanding voting securities or other securities
convertible into voting securities shall be deemed to be an Affiliate of such
specified Person.

1.3 “Ancillary Agreements” means the Escrow Agreement, the Sellers’ Releases,
the Non-Competition and Non-Solicitation Agreement, the Employment Agreement,
the Assignment of Inventions Agreement and the Consulting Agreement.

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1.4 “Business” means the business being conducted by the Company as of the
Closing Date involving, among other things, the conduct of human genetic
identification services for forensic and parentage testing applications.

1.5 “Business Day” means any day other than a Saturday, Sunday or other day on
which banks are required or authorized to be closed in the city of New York, New
York or New Orleans, Louisiana.

1.6 “CERCLA” means the Comprehensive Environmental Response, Compensation and
Liability Act of 1980, as amended through the date hereof and any regulations
promulgated thereunder.

1.7 “Change of Control Payment” means the payment that is due and payable to
Siddhartha Sinha upon consummation of the transactions contemplated by this
Agreement pursuant to the terms of the Amended and Restated Employment Agreement
by and between the Company and Mr. Sinha dated as of June 8, 2007, in the amount
of Four Hundred Twenty Thousand Dollars ($420,000).

1.8 “Closing Date Balance Sheet” means the balance sheet (including the related
notes and schedules thereto) of the Company as at the Closing Date, prepared by
the Purchaser in accordance with GAAP, consistently applied, except as to stock
options, which have been accounted for in accordance with historical practices,
and delivered by the Purchaser to the Company in accordance with
Section 2.5(b)(i).

1.9 “COBRA” means the Consolidated Omnibus Budget Reconciliation Act of 1985 and
any applicable state Law counterpart.

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

1.11 “Company Indebtedness” means the Indebtedness of the Company listed on
Schedule 1.11 attached hereto.

1.12 “Consent” means any consent or approval of, or notice to, any third party
required under any Material Contract or Governmental Permit as a result of the
transactions contemplated by this Agreement.

1.13 “Contract” means any contract, agreement, purchase order, invoice, sales
order, obligation, undertaking, understanding, license, lease, note, mortgage or
other binding commitment, whether written or oral and whether expressed or
implied.

1.14 “Copyrights” mean all copyrights (registered or otherwise) and
registrations and applications for registration thereof, and all rights therein
provided by multinational treaties or conventions.

1.15 “Court” means any court or arbitration tribunal of the United States, any
domestic state, or any foreign country, and any political subdivision thereof.

 

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1.16 “Current Assets” means the current assets of the Company as of the
Reference Date determined in accordance with GAAP.

1.17 “Current Liabilities” means the current liabilities of the Company as of
the Reference Date determined in accordance with GAAP.

1.18 “Disclosure Schedules” means the schedules dated the date hereof delivered
by the Sellers to the Purchaser on the date hereof with disclosures in any
section or paragraph of the Disclosure Schedules shall qualify only (a) the
corresponding section or paragraph in Article III or IV of the Agreement and
(b) other sections or paragraphs in Article III or IV of the Agreement to the
extent that it is reasonably apparent, with the inclusion of a specific cross
reference, from a reading of the disclosure that such disclosure is applicable
to such other sections or paragraphs.

1.19 “Documents” means this Agreement together with the Ancillary Agreements,
the Schedules and Exhibits hereto and thereto (including the Disclosure
Schedules) and all agreements, documents, certificates and instruments executed
in connection with this Agreement.

1.20 “Employee Plans” means all “employee plans” of the Company (as defined in
Section 3(3) of ERISA) and all bonus, stock or other security option, stock or
other security purchase, stock or other security appreciation rights, incentive,
deferred compensation, retirement or supplemental retirement, severance, golden
parachute, vacation, cafeteria, dependent care, medical care, employee
assistance program, education or tuition assistance programs, insurance and
other similar fringe or employee benefit plans, programs or arrangements, and
any current or former employment or executive compensation or severance
agreements, written or otherwise, which are or have ever been sponsored or
maintained or entered into for the benefit of, or relating to, an ERISA
Affiliate, whether or not such plan is terminated.

1.21 “Environmental Condition” means a condition relating to, or arising or
resulting from a failure to comply with any applicable Environmental Law or
Environmental Permit, or any release of a Hazardous Substance into the
environment.

1.22 “Environmental Law” means any Law or Regulation (including any restriction,
condition, standard, requirement or schedule) pertaining to: (a) the protection
of health, safety and the indoor or outdoor environment; (b) the conservation,
management or use of natural resources and wildlife; (c) the protection or use
of surface water and ground water; (d) the management, manufacture, possession,
presence, use, generation, transportation, treatment, storage, disposal,
emission, discharge, release, threatened release, abatement, removal,
remediation or handling of, or exposure to, any Hazardous Substance; or
(e) pollution (including any emission, discharge or release to air, land,
surface water and ground water of any material). For purposes of clarity, the
term Environment Law shall include, without limitation, CERCLA, the Solid Waste
Disposal Act, as amended 42 U.S.C. § 6901 et seq.; the Resource Conservation and
Recovery Act, 42 U.S.C. § § 6901 et seq.; the Hazardous Materials Transportation
Act, 49 U.S.C. §§ 6901 et seq.; the Clean Water Act, 33 U.S.C. §§ 1251 et seq.;
the Toxic Substances Control Act, 15 U.S.C. §§ 2601 et seq.; the Clean Air Act,
42 U.S.C. §§ 7401 et seq.; the Safe

 

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Drinking Water Act, 42 U.S.C. §§ 300f et seq.; the Atomic Energy Act, 42 U.S.C.
§§ 2011 et seq.; the Federal Insecticide, Fungicide and Rodenticide Act, 7
U.S.C. §§ 136 et seq.; the Occupational Safety and Health Act, 29 U.S.C. §§ 651
et seq. and all analogous state, provincial and foreign Laws.

1.23 “Environmental Permits” means any Governmental Permits required under any
Environmental Law.

1.24 “ERISA” means the Employee Retirement Income Security Act of 1974, as
amended, and any successor Law, and all Regulations issued pursuant thereto.

1.25 “ERISA Affiliate” means any present or former employee or director of the
Company, or any trade or business (whether or not incorporated) which is a
member of a controlled group or which is under common control with the Company
within the meaning of Section 414 of the Code.

1.26 “Exchange Act” shall mean the Securities Exchange Act of 1934, as amended.

1.27 “Excluded Intellectual Property” means the Intellectual Property described
on Schedule 1.27 attached hereto.

1.28 “GAAP” means United States generally accepted accounting principles and
practices in effect from time to time consistently applied.

1.29 “Governmental Authority” means (a) any nation, state, city, town, village,
district or other jurisdiction; (b) any federal, state, local, municipal,
foreign or other government; (c) any governmental, regulatory or legislative
agency or authority (other than a Court) of the United States, any domestic
state, or any foreign country and any political subdivision or agency thereof,
including any authority having governmental or quasi-governmental powers
(including any administrative agency or commission, branch or department).

1.30 “Governmental Permit” means any license, permit, application, consent,
certificate, registration, approval and authorization pending before, issued,
granted, given or otherwise made available by, or under the authority of, any
Governmental Authority.

1.31 “Hazardous Substance” means any “hazardous substance,” as defined in
CERCLA, and any other chemical, compound, product, solid, gas, liquid,
pollutant, contaminant, waste or material which is regulated under any
Environmental Law, including without limitation, asbestos or any substance
containing asbestos, polychlorinated biphenyls, pesticides, medical and
infectious waste, radioactive materials, lead-based paint and petroleum
(including crude oil or any fraction thereof).

1.32 “Indebtedness” means, with respect to any Person, (a) all indebtedness of
such Person, whether or not contingent, for borrowed money; (b) all obligations
of such Person for the deferred purchase price of property or services; (c) all
obligations of such Person evidenced by notes, bonds, debentures or other
similar instruments; (d) all indebtedness created or arising under any
conditional sale or other title retention agreement with respect to property
acquired by such Person (even though the rights and remedies of the Company or
lender under such

 

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agreement in the event of default are limited to repossession or sale of such
property); (e) all obligations of such Person as lessee under leases that have
been or should be, in accordance with GAAP, recorded as capital leases; (f) all
obligations, contingent or otherwise, of such Person under acceptance, letter of
credit or similar facilities; (g) all obligations of such Person to purchase,
redeem, retire, decease or otherwise acquire for value any capital stock of such
Person or any warrants, rights or options to acquire such capital stock, valued,
in the case of redeemable preferred stock, at the greater of its voluntary or
involuntary liquidation preference plus accrued and unpaid dividends; (h) all
indebtedness of any third party referred to in clauses (a) through (f) above
that is (i) guaranteed directly or indirectly in any manner by such Person, or
in effect guaranteed directly or indirectly by such Person through an agreement
(A) to pay or purchase such indebtedness or to advance or supply funds for the
payment or purchase of such indebtedness, (B) to purchase, sell or lease (as
lessee or lessor) property, or to purchase or sell services, primarily for the
purpose of enabling the debtor to make payment of such indebtedness or to assure
the holder of such Indebtedness against loss, (C) to supply funds to or in any
other manner invest in the debtor (including any agreement to pay for property
or services irrespective of whether such property is received or such services
are rendered) or (D) otherwise to assure a creditor against loss or (ii) secured
by any Lien on property (including, without limitation, accounts and contract
rights) owned by such Person, even though such Person has not assumed or become
liable for the payment of such indebtedness.

1.33 “Indemnified Person” means any party entitled to indemnification upon the
occurrence of an indemnifiable event pursuant to Article VII which, with respect
to the Purchaser, means the Purchaser Indemnified Persons and, with respect to
the Sellers, means the Sellers Indemnified Persons.

1.34 “Indemnifying Person” means any party obligated to provide indemnification
upon the occurrence of an indemnifiable event pursuant to Article VII.

1.35 “Information System” means any combination of hardware, Software and/or
database(s) employed primarily for the creation, manipulation, storage,
retrieval, display and use of information in electronic form or media.

1.36 “Intellectual Property” means all (a) Trade Secrets (including all
inventions, technology, ideas and conceptions of potentially patentable subject
matter and patent disclosures, whether or not reduced to practice and whether or
not yet made the subject of a pending Patent application or applications),
(b) Patents, (c) Trademarks, (d) Copyrights, (e) Software, (f) copies and
tangible embodiments of all the foregoing, in whatever form or medium,
(g) rights to obtain and rights to apply for Patents, and to register Trademarks
and Copyrights, (h) rights under the License Agreements and under any licenses,
registered user agreements, technology or materials, transfer agreements, and
other agreements or instruments with respect to items in (a) through (g) above;
and (i) rights to sue and recover and retain damages and costs and attorneys’
fees for present and past infringement of any of the rights described above.

1.37 “Inventory” means all inventory, including, without limitation,
merchandise, raw materials, work-in-process, finished goods, replacement parts,
and packaging, related to the Business, and maintained, held or stored by or for
the Company at any location and any prepaid deposits for any of the same.

 

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1.38 “IRS” means the United States Internal Revenue Service.

1.39 “Knowledge” means (a) in the case an individual, such individual will be
deemed to have knowledge of a particular fact or other matter if such individual
is actually aware of such fact or other matter; and (b) in the case of the
Company, the actual knowledge possessed, and the knowledge which should have
been possessed after due inquiry, by the following individuals: Sudhir Sinha and
Siddhartha Sinha.

1.40 “Law” means (a) all laws, statutes, ordinances, Regulations, decisions and
Orders of any Governmental Authority and (b) all decisions and Orders of Courts
having the effect of law in each applicable jurisdiction.

1.41 “Leased Real Property” means the real property leased by the Company as
tenant, together with, to the extent leased by the Company, all buildings and
other structures, facilities or improvements currently or hereafter located
thereon, all fixtures, systems, equipment and items of personal property of the
Company attached or appurtenant thereto, and all easements, licenses, rights and
appurtenances relating to the foregoing.

1.42 “Liabilities” means any and all debts, liabilities and obligations, whether
accrued or fixed, absolute or contingent, matured or unmatured or determined or
determinable, including, without limitation, those arising under any Law
(including, without limitation, any Environmental Law), Action or Order,
liabilities for Taxes and liabilities arising under any Contract.

1.43 “Licensed Intellectual Property” means all Intellectual Property licensed
or sublicensed by the Company from a third party, including pursuant to the
License Agreements.

1.44 “Lien” means any claim, mortgage, pledge, security interest, attachment,
encumbrance, lien (statutory or otherwise), option, conditional sale agreement,
right of first refusal, first offer, termination, participation or purchase, and
any other restriction or charge of any kind (including any restriction on
voting, transfer, receipt of income and any agreement to grant any of the
foregoing).

1.45 “Litigation” means any suit, action, arbitration, cause of action, claim,
complaint, criminal prosecution, investigation, inquiry, demand letter,
governmental or other administrative proceeding, whether at law or at equity,
before or by any Court, Governmental Authority, arbitrator or other tribunal.

1.46 “Losses” means any and all losses, claims, shortages, damages, liabilities,
expenses (including reasonable attorneys’, accountants’ fees and costs incurred
in connection with any appeal), assessments (including interest or penalties
thereon) or diminution of value sustained, suffered or incurred by any
Indemnified Person arising from or in connection with any matter that is the
subject of indemnification under Sections 7.3 or 7.4 hereof.

 

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1.47 “Material Adverse Effect” means (a) with respect to the Company, any
circumstance, change in, or effect on, the Business or the Company that,
individually or together with any other circumstances with respect to, changes
in or effects on, the Company or the Business (i) is, or could reasonably be
expected to be, materially adverse to the operations, assets or Liabilities
(including, without limitation, contingent liabilities), employee relationships,
customer or supplier relationships, prospects, results of operations or the
condition (financial or otherwise) of the Business, or (ii) materially and
adversely effects, or could reasonably be expected to materially and adversely
effect, the ability of the Purchaser to operate or conduct the Business in the
manner in which it is currently operated and conducted, or contemplated to be
conducted, by the Company; and (b) with respect to the Purchaser, any
circumstance, change in, or effect on, the Purchaser or the Purchaser’s business
that, individually or together with any other circumstances with respect to,
changes in or effect on, the Purchaser’s business (i) is, or could reasonably be
expected to be, materially adverse to the operations, assets or liabilities,
results of operations or the condition (financial or otherwise) of the
Purchaser’s business or (ii) materially and adversely effects, or could
reasonably be expected to materially and adversely effect, the ability of the
Purchaser to operate or conduct its business in the manner in which it is
currently operated and conducted.

1.48 “Order” means any judgment, order, writ, injunction, ruling, stipulation,
determination, award or decree entered, issued, made or rendered, or any
settlement under the jurisdiction of, any Court or Governmental Authority.

1.49 “Ordinary Course of Business” means, with respect to the Company, any
action that (a) is consistent with the past practices of the Company and is
taken in the ordinary course of the normal day-to-day operations of the Company
and (b) is not required to be authorized by the Board of Directors of the
Company.

1.50 “Owned Intellectual Property” means all Intellectual Property in and to
which the Company has, or has a right to hold, all right, title and interest.

1.51 “Patents” means all national (including the United States) and
multinational statutory invention registrations, patents, patent registrations,
patent applications (including all reissues, divisions, continuations,
continuations-in-part, extensions and reexaminations with respect thereto), and
all inventions disclosed therein and rights with respect thereto provided by
multinational treaties or conventions and all improvements to all inventions
disclosed in each such registration, patent or application or pursuant to any
Law.

1.52 “Person” means any natural person, corporation, limited liability company,
unincorporated organization, partnership, association, joint stock company,
joint venture, trust or any other entity.

1.53 “Purchaser Common Stock” means the common stock, par value $.001 per share,
of the Purchaser.

1.54 “Purchaser Common Stock Price” means the average of the closing prices per
share of Purchaser Common Stock on The NASDAQ Global Market for the ten
(10) Trading Day period ending on the Trading Day that is one (1) Trading Day
prior to the date of public

 

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announcement by the Purchaser of the transactions contemplated by this Agreement
(or, to the extent applicable, the date any notice of claim is delivered
pursuant to the Escrow Agreement).

1.55 “Receivables” means any and all accounts receivable, notes, book debts and
other amounts due or accruing due to the Company from any third party, arising
in connection with the Business, whether or not in the Ordinary Course of
Business, together with any unpaid financing charges accrued thereon and the
benefit of all security for such accounts, notes and debts.

1.56 “Reference Balance Sheet” means the unaudited balance sheet of the Company
dated as of June 30, 2007, and its supplemental schedule of current and long
term liabilities associated therewith, attached hereto as Schedule 1.56.

1.57 “Regulation” means any rule, regulation or code of any Governmental
Authority.

1.58 “Securities Act” means the Securities Act of 1933, as amended or any
successor Law, and all Regulations and rules issued pursuant thereto.

1.59 “Selected Accounts” means the accounts of the Company listed on Schedule
1.59 attached hereto.

1.60 “Selected Contracts” means the agreements by and between the Company and
certain third parties, as listed on Schedule 1.60 attached hereto.

1.61 “Software” means any and all (a) computer programs, including any and all
software implementations of algorithms, models and methodologies, whether in
source code or object code; (b) databases and compilations, including any and
all data and collections of data, whether machine readable or otherwise;
(c) descriptions, flow-charts and other work product used to design, plan,
organize and develop any of the foregoing; (d) the technology supporting any
Internet site(s) operated by or on behalf of Company and (e) all documentation,
including user manuals and training materials, relating to any of the foregoing.

1.62 “Subsidiary” or “Subsidiaries” means, with respect to a Person, any other
Person of which such Person owns, directly or indirectly, more than fifty
percent (50%) of the outstanding voting securities or other securities
convertible into voting securities, or otherwise which may effectively be
controlled, directly or indirectly, by such Person.

1.63 “Tax” or “Taxes” means any and all federal, state, local, or foreign taxes,
fees, levies, duties, tariffs, imposts, and other charges of any kind (together
with any and all interest, penalties, additions to tax and additional amounts
imposed with respect thereto) imposed or assessed by any Governmental Authority
or other taxing authority or payable pursuant to any tax sharing agreement or
any other Contract relating to the sharing of any such tax, fee, levy, duty,
tariff or other charge, including, without limitation: (a) taxes or other
charges on or with respect to income, franchises, windfall or other profits,
gross receipts, property, sales, use, capital stock, payroll, employment,
disability, social security, workers’ compensation, unemployment compensation,
or net worth; (b) taxes or other charges in the nature of excise, withholding,
ad valorem, stamp, transfer, value added, or gains taxes; (c) license,
registration and documentation fees; and (d) customs’ duties, tariffs, and
similar charges, whether computed

 

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on a separate or consolidated, unitary or combined basis or in any other manner,
whether disputed or not and including any obligation to indemnify or otherwise
assume or succeed to the Tax liability of any other Person.

1.64 “Tax Return” means any return (including any information return), report or
statement, including any schedule or attachment thereto, with respect to Taxes
required to be filed or submitted to the IRS or any other Governmental Authority
or taxing authority or agency, domestic or foreign, in connection with the
determination, assessment, collection or payment of any Tax, or in connection
with the administration, implementation of, enforcement of, or compliance with,
any Law relating to Tax (including consolidated, combined and unitary tax
returns).

1.65 “Trading Day” means a day on which securities are traded on The NASDAQ
Global Market.

1.66 “Trademarks” means all trademarks, service marks, trade dress, logos, trade
names and corporate names, whether or not registered, including all common law
rights, and registrations and applications for registration thereof, including,
but not limited to, all marks registered in the United States Patent and
Trademark Office, the Trademark Offices of the States and Territories of the
United States of America, and the Trademark Offices of any other Governmental
Authority, and all rights therein provided by multinational treaties or
conventions.

1.67 “Trade Secrets” means all inventions, technology, know-how, trade secrets,
confidential information, customer lists, Software, technical information, data
and plans, manufacturing and production processes and techniques, research and
development information, drawings, specifications, proposals, copyrightable
works, financial, marketing and business data, pricing and cost information,
business and marketing plans and customer and supplier lists and information,
whether or not patentable, whether or not reduced to practice and whether or not
made the subject of a pending Patent application or applications.

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

1.69 “Working Capital” means, with respect to the Company, the difference
between (a) the Current Assets and (b) the Current Liabilities.

Additional Definitions. In addition, each of the following definitions shall
have the respective meanings set forth in the section of the Agreement indicated
below:

 

Definition

  

Section

AAA

   2.5(b)(iii)

Actual 2008 Revenues

   2.6(a)(ii)

Acquisition Proposal

   6.3(d)

Affiliated Indebtedness

   4.30(a)(iii)

Agreement

   Recitals

Arbitrator

   2.5(b)(iii)

Assignment of Inventions Agreement

   6.1(o)

Cash Escrow

   2.4(a)(ii)

 

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Closing   

2.3

Closing Date

  

2.3

Closing Date Working Capital

  

2.5(b)(i)

COBRA Coverage

  

4.25(d)

Company Tax Returns

  

4.14(a)

Company

  

Recitals

Consulting Agreement

  

6.1(l)

Employment Agreement

  

6.1(k)

Escrow Agent

  

Escrow Agreement

Escrow Agent’s Wire Transfer Instructions

  

2.4(a)(ii)

Escrow Agreement

  

2.4(c)

Escrow Shares

  

2.4(a)(ii)

Estimated 2008 Revenues

  

2.6(a)(i)

Final Post-Closing Revenue Report

  

2.6(a)(iii)

Financial Statements

  

4.9

Leases

  

4.21(e)

License Agreements

  

4.22(g)

Material Contract(s)

  

4.12(a)

Non-Competition and Non-Solicitation Agreement

  

6.1(j)

Non-Disclosure Agreement

  

8.2

Post-Closing Revenue Report

  

2.6(a)(ii)

Products

  

4.31

Purchase Price

  

2.2

Purchaser

  

Recitals

Purchaser’s Accountants

  

2.6(a)(ii)

Purchaser Indemnified Persons

  

7.3

Reference Balance Sheet Date

  

4.9

Reference Working Capital

  

2.5(a)

Release(s)

  

2.4(b)(ii)

Revenue Dispute Notice Period

  

2.6(a)(iii)

Revenue Disputed Matters

  

2.6(a)(iv)

Revenue Dispute Resolution Period

  

2.6(a)(iii)

Revenue Notice of Disagreement

  

2.6(a)(iii)

Revenue-Related Adjustment

  

2.6(a)(v)(A)

Revenue-Related Adjustment Reduction

  

2.6(a)(v)(A)

SEC

  

5.6

Seller and Sellers

  

Recitals

Sellers’ Accountant

  

2.5(b)(ii)

Sellers’ Indemnified Persons

  

7.4

Sellers’ Representative

  

2.7(a)

Seller Wire Transfer Instructions

  

2.4(a)(i)

Share(s)s

  

Recitals

Survival Date

  

7.1(b)

Upfront Payment

  

8.14

Tangible Personal Property

  

4.23(a)

Third Party Claim

  

7.7

 

10

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Working Capital Dispute Notice Period

   2.5(b)(ii)

Working Capital Dispute Resolution Period

  

2.5(b)(ii)

Working Capital Disputed Matters

  

2.5(b)(iii)

Working Capital Notice of Disagreement

  

2.5(b)(ii)

ARTICLE II

PURCHASE AND SALE

2.1. Purchase and Sale of the Shares. On the basis of the representations,
warranties and covenants, and on the terms and subject to the conditions, set
forth in this Agreement, at the Closing, the Sellers shall sell the Shares to
the Purchaser, and the Purchaser shall purchase the Shares from the Sellers,
free and clear of all Liens.

2.2. Purchase Price. As consideration for the purchase of the Shares and on the
terms and subject to the conditions set forth in this Agreement, the Purchaser
will pay the Sellers an aggregate purchase price of Eight Million Six Hundred
Thousand Dollars ($8,600,000) for all Shares (the “Purchase Price”), payable in
accordance with Section 2.4 and subject to adjustment in accordance with
Section 2.5.

2.3. Closing. Subject to the terms and conditions of this Agreement, the closing
of the transactions contemplated by this Agreement (the “Closing”) shall take
place at the offices of Milling Benson Woodward L.L.P., 909 Poydras Street, New
Orleans, Louisiana at 10:00 A.M. on October 31, 2007, or at such other place or
time or on such other date as the Company and the Purchaser may mutually agree
upon in writing (the day on which the Closing takes place being referred to as
the “Closing Date”).

2.4. Payment of Purchase Price; Escrow Fund; Delivery of Shares.

(a) At the Closing, the Purchaser shall (i) deliver to the Sellers the documents
and agreements set forth in Section 6.2 and (ii) pay the Purchase Price as
follows:

(i) Five Million Dollars ($5,000,000) in cash, less the Upfront Payment made
under Section 8.14, if any, shall be delivered by wire transfer in accordance
with the wire transfer instruction of the Sellers’ Representative set forth in
Schedule 2.4(a)(i) (the “Sellers’ Wire Transfer Instructions”);

(ii) Six Hundred Thousand Dollars ($600,000) in cash (the “Cash Escrow”) shall
be delivered by wire transfer to the Escrow Agent in cash (such amount to
constitute a part of the Escrow Fund) by wire transfer of immediately available
funds in accordance with the wire transfer instructions of the Escrow Agent set
forth in Schedule 2.4(a)(ii) (the “Escrow Agent’s Wire Transfer Instructions”)
to be held in escrow by the Escrow Agent pursuant to the terms of the Escrow
Agreement in order to provide the source for the payment of any adjustment to
the Purchase Price that is made in accordance with Section 2.5(d)(i); and

(iii) a number of shares of the Purchaser Common Stock, equal to (1) Three
Million Dollars ($3,000,000), divided by (2) the Purchaser Common Stock Price
(the “Escrow Shares”), rounded up to the nearest number of whole shares, shall
be delivered to the Escrow Agent.

 

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(b) At the Closing, the Sellers shall deliver to the Company:

(i) certificates representing all of the Shares, duly endorsed (or accompanied
by duly executed stock powers) for transfer to the Purchaser;

(ii) releases in the form agreed to by the parties, executed by each Seller
(each, a “Release” and collectively, the “Releases”); and

(iii) the other documents and agreements set forth in Section 6.1.

(c) The Escrow Shares and the Cash Escrow shall be held in escrow by the Escrow
Agent pursuant to the terms of an escrow agreement in the form agreed to by the
parties (the “Escrow Agreement”) in order to provide a source for the payment of
any indemnification of the Purchaser pursuant to Article VII and for payment of
any Purchase Price adjustment pursuant to Section 2.5.

2.5. Purchase Price Adjustment. The Purchase Price shall be subject to
adjustment after the Closing as follows:

(a) Reference Working Capital. The parties acknowledge and agree that (i) the
Working Capital of the Company reflected on the Reference Balance Sheet
delivered by the Sellers to the Purchaser, is $605,456.07 (the “Reference
Working Capital”), (ii) the Purchase Price has been established in part with
reference to the Reference Working Capital of the Company, and (iii) the
delivery by the Sellers, and receipt by the Purchaser, of the Reference Balance
Sheet shall not affect in any way the representations of the Sellers with
respect to the Financial Statements of the Company set forth in Section 4.9.

(b) Closing Date Balance Sheet.

(i) Preparation of Closing Balance Sheet. Within forty-five (45) Business Days
following the Closing Date, the Purchaser shall prepare and deliver to the
Sellers’ Representative (as defined below) (A) the Closing Date Balance Sheet,
prepared by the Purchaser in accordance with GAAP; and (B) a schedule verified
by the Purchaser setting forth (1) the computation of the Working Capital of the
Company as an S corporation immediately following the closing (the “Closing Date
Working Capital”) and (2) the adjustment to be made to the Purchase Price as a
result of the difference, if any, between the Reference Working Capital and the
Closing Date Working Capital, determined in accordance with Section 2.5(d).

(ii) Review and Dispute by the Sellers. The Sellers’ Representative shall have a
period of twenty (20) Business Days from the date of receipt of the Closing Date
Balance Sheet and the schedule of the Closing Date Working Capital in which to
review the same. For the purpose of such review, the Purchaser agrees to permit
the Sellers’ Representative and a firm of independent certified public
accountants chosen by the Sellers’ Representative (the “Sellers’ Accountant”) to
examine all working papers, schedules and other documentation used or prepared
by the Purchaser. The Sellers’ Representative may dispute any amounts reflected
on

 

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the Closing Date Balance Sheet and/or the schedule of the Closing Date Working
Capital, but only on the basis that the amounts reflected on the Closing Date
Balance Sheet and/or the computation of the Closing Date Working Capital were
not arrived at in accordance with GAAP applied on a basis consistent with the
preparation of the Reference Balance Sheet. The Closing Date Balance Sheet and
the schedule of the Closing Date Working Capital shall be final and binding upon
the parties unless the Sellers’ Representative gives a written notice of
disagreement (the “Working Capital Notice of Disagreement”) to the Purchaser
within twenty (20) Business Days following receipt thereof (the “Working Capital
Dispute Notice Period”). In connection therewith, the parties hereby agree that
(A) any such Working Capital Notice of Disagreement shall specify in reasonable
detail the nature of and basis for any disagreement so asserted and (B) any and
all matters with respect to the Closing Date Balance Sheet, the Closing Date
Working Capital and the adjustment to the Purchase Price not set forth in the
Working Capital Notice of Disagreement shall be deemed final and binding upon
the parties. During the twenty (20) Business Day period following delivery of
the Working Capital Notice of Disagreement (the “Working Capital Dispute
Resolution Period”), the Purchaser and the Sellers’ Representative shall use
reasonable good faith efforts to resolve the disagreement.

(iii) Resolution by Arbitrator. If, at the end of the Working Capital Dispute
Resolution Period, the Purchaser and the Sellers’ Representative have failed to
resolve the matters specified in the Working Capital Notice of Disagreement,
then such matters as to which such resolution has not been reached (the “Working
Capital Disputed Matters”) shall be submitted to and reviewed by a regionally
recognized accounting firm reasonably acceptable to the Purchaser and the
Sellers’ Representative (other than the Sellers’ Accountants) (the “Arbitrator”)
to be selected by the American Arbitration Association (the “AAA”), with
preference being given by the AAA in making such selection to any regionally
recognized accounting firm (other than the Sellers’ Accountants) that is willing
to perform such services. Promptly following the appointment of the Arbitrator,
each party shall submit to the Arbitrator such work papers and other documents
and information relating to the Working Capital Disputed Matters as such party
reasonably believes supports its position or as the Arbitrator may otherwise
request. The Arbitrator shall consider only such materials that relates to the
Working Capital Disputed Matters and shall use reasonable commercial efforts to
resolve the Working Capital Disputed Matters within thirty (30) business days of
its appointment. Upon resolution by the Arbitrator of the Working Capital
Disputed Matters, the Arbitrator shall (A) confirm in writing that the Closing
Date Balance Sheet and the schedule of the Closing Date Working Capital prepared
by the Purchaser was correct or (B) cause to be prepared and shall deliver to
the Purchaser and the Sellers’ Representative a revised version of the Closing
Date Balance Sheet and a revised schedule of the Closing Date Working Capital
reflecting the Arbitrator’s resolution of the Working Capital Disputed Matters.
The Closing Date Balance Sheet and the schedule of the Closing Date Working
Capital shall each be deemed to be final, and shall be binding upon the
Purchaser and the Sellers, upon the Arbitrator’s delivery of such written
confirmation in accordance with subsection (A) above or such confirmed version
of Closing Date Balance Sheet and the schedule of the Closing Date Working
Capital in accordance with subsection (B) above, as the case may be, as
described in this Section 2.5(b)(iii).

(c) Fees and Expenses. The fees and expenses of the Sellers’ Accountants
incurred in connection with its examination of the Closing Date Balance Sheet
and the schedule of the Closing Date Working Capital shall be borne by the
Sellers. The fees and expenses of the Arbitrator incurred in connection with its
review and determination of any Working Capital Disputed Matters shall be borne
fifty percent (50%) by the Purchaser and fifty percent (50%) by the Sellers.

 

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(d) Determination and Payment of Post-Closing Adjustments. Promptly following
the expiration of the Working Capital Dispute Notice Period, if no Working
Capital Notice of Disagreement is properly given in accordance with
Section 2.5(b)(ii), or promptly following the resolution of all Working Capital
Disputed Matters in accordance with Section 2.5(b)(iii) above, if the Working
Capital Notice of Disagreement is properly given in accordance with
Section 2.5(b)(ii), the Purchase Price shall be adjusted as follows:

(i) In the event that the Reference Working Capital exceeds the Closing Date
Working Capital, then (A) the Purchase Price shall be adjusted downward in an
amount equal to such excess, (B) the Purchaser and the Sellers’ Representative
shall deliver a joint written notice to the Escrow Agent specifying the amount
of such downward adjustment of the Purchase Price, (C) the Escrow Agent shall
pay to the Purchaser from the Cash Escrow within five (5) days, by wire transfer
of immediately available funds, an amount equal to such downward adjustment in
accordance with the percentage interests of the respective Sellers set forth in
Schedule 3.1, and (D) the Escrow Agent shall pay to the Sellers by wire transfer
of immediately available funds the balance, if any, of the Cash Escrow in
accordance with the percentage interests of the respective Sellers set forth in
Schedule 3.1.

(ii) In the event that the Closing Date Working Capital exceeds the Reference
Working Capital, then (A) the Purchase Price shall be adjusted upward in an
amount equal to such excess, (B) the Purchaser shall promptly pay the amount of
such excess to the Sellers by wire transfer of immediately available funds in
accordance with the Sellers’ Wire Transfer Instructions, and (C) the Escrow
Agent shall pay to the Sellers by wire transfer of immediately available funds
the balance, if any, of the Cash Escrow in accordance with the percentage
interests of the respective Sellers set forth in Schedule 3.1.

2.6. Preparation and Delivery of Post-Closing Revenue Report.

(a) Post-Closing Revenue Reports.

(i) The parties acknowledge and agree that the estimated revenues applicable to
the Selected Contracts and the Selected Accounts (A) is $5,750,000 in the
aggregate (the “Estimated 2008 Revenues”), (B) the Purchase Price has been
established in part with reference to the Estimated 2008 Revenues of the
Company, and (C) the delivery by the Sellers, and receipt by the Purchaser, of
the Estimated 2008 Revenues shall not affect in any way the representations of
the Sellers with respect to the Financial Statements of the Company set forth in
Section 4.9.

(ii) On or before December 31, 2008, the Purchaser shall deliver to the Sellers’
Representative a revenue report for the twelve (12) month period commencing on
the Closing Date and continuing until the twelve (12) month anniversary thereof
(the “Post-Closing Revenue Report”). The Post-Closing Revenue Report shall be
prepared by the Purchaser’s independent certified public accountants (the
“Purchaser’s Accountants”), shall provide a

 

14

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detailed calculation of the actual Revenues as defined below, prepared in
accordance with GAAP for the applicable period (the “Actual 2008 Revenues”) and
shall be delivered by the Purchaser to the Sellers’ Representative. For purposes
of this Section 2.6, the term “Revenues” shall mean the actual revenues received
by the Purchaser that are allocable to the Selected Contracts and the Selected
Accounts during the period commencing on the Closing Date and continuing until
the twelve (12) month anniversary thereof, each less the following amounts
incurred or paid by Sellers’ Representative, the Purchaser or their respective
Affiliates, to the extent included as part of such revenues: (A) trade, cash and
quantity discounts or rebates actually allowed or taken, including discounts or
rebates to governmental or managed care organizations; (B) credits or allowances
actually given or made for rejection of, and for uncollectible amounts on, or
return of, previously sold products and product components; (C) any charges for
insurance, freight, and other transportation costs directly related to the
delivery of products and product components; (D) any tax, tariff, duty or
governmental charge levied on the sales, transfer, transportation or delivery of
products and product components (including any tax such as a value added or
similar tax or government charge) borne by the seller thereof, other than
franchise or income tax; and (E) any import or export duties or their
equivalent.

(iii) Review and Dispute by Sellers’ Representative. The Sellers’ Representative
shall have a period of thirty (30) Business Days from the date it receives the
Post-Closing Revenue Report in which to review the same. For the purpose of such
review, the Purchaser agrees to cause the Purchaser’s Accountants to permit the
Sellers’ Representative and the Sellers’ Accountants to examine all working
papers, schedules and other documentation used or prepared by the Purchaser’s
Accountants. The Post-Closing Revenue Report shall be final and binding upon the
parties unless the Sellers’ Representative gives written notice of its
disagreement (a “Revenue Notice of Disagreement”) to the Purchaser within thirty
(30) Business Days following receipt thereof (the “Revenue Dispute Notice
Period”). Any such Revenue Notice of Disagreement shall specify in reasonable
detail the nature of any disagreement so asserted. During the thirty
(30) Business Day period following delivery of the Revenue Notice of
Disagreement (the “Revenue Dispute Resolution Period”), the Purchaser and the
Sellers’ Representative shall make a reasonable good faith effort to resolve
their differences. The Post-Closing Revenue Report shall be deemed to be final
(the “Final Post-Closing Revenue Report”) upon (A) the failure of the Sellers’
Representative to deliver a Revenue Notice of Disagreement within the Revenue
Dispute Notice Period, (B) the mutual resolution of disagreement during the
Revenue Dispute Resolution Period, or (C) the Arbitrator’s delivery of a final
version of the Post-Closing Revenue Report that is the subject of the Revenue
Disputed Matter (as described below).

(iv) Resolution by Arbitrator. If, at the end of the Revenue Dispute Resolution
Period, the Purchaser and the Sellers’ Representative have failed to reach
written agreement with respect to all of such matters, then the matters
specified in the Revenue Notice of Disagreement as to which such written
agreement has not been reached (the “Revenue Disputed Matters”) shall be
submitted to and reviewed by an Arbitrator to be selected by the AAA, with
preference being given by the AAA in making such selection to any regionally
recognized accounting firm (other than the Sellers’ Accountants) that may be
agreeable to perform such services. The Arbitrator shall consider only the
Revenue Disputed Matters. The Arbitrator shall act promptly to resolve all
Revenue Disputed Matters and its decision with respect to the Revenue Disputed
Matters shall be final and binding upon the Sellers’ Representative and the

 

15

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Purchaser. Upon resolution by the Arbitrator of all Revenue Disputed Matters,
the Arbitrator shall cause to be prepared and shall deliver to the Purchaser and
the Sellers’ Representative a revised version of the Post-Closing Revenue Report
that is the subject of the Revenue Disputed Matters reflecting the Arbitrator’s
resolution of all Revenue Disputed Matters. The fees and expenses of the
Purchaser’s Accountants incurred in connection with their examination of and
report with respect to the Post Closing Revenue Report shall be borne by the
Purchaser. The fees and expenses of the Sellers’ Representative incurred in
connection with its examination of the Post-Closing Revenue Report shall be
borne by the Sellers’ Representative. The fees and expenses of the Arbitrator
incurred in connection with its review and determination of any Revenue Disputed
Matter shall be borne (a) solely by the Purchaser to the extent the Final
Post-Closing Revenue Report prepared by the Arbitrator exceeds the Post-Closing
Revenue Report prepared by the Purchaser under Section 2.6(a)(ii) by more than
ten percent (10%) and (b) solely by the Sellers’ Representative in all other
cases.

(v) Adjustment to Purchase Price. Promptly following the expiration of the
Revenue Dispute Notice Period, if no Revenue Notice of Disagreement is properly
given in accordance with Section 2.6(a)(ii) above, or promptly following the
resolution of all Revenue Disputed Matters in accordance with Section 2.6(a)(iv)
above, if the Revenue Notice of Disagreement is properly given in accordance
with Section 2.6(a)(ii), the Purchase Price shall be adjusted as follows:

(A) In the event that the Estimated 2008 Revenues exceed the Actual 2008
Revenues, then (i) the Purchase Price shall be adjusted downward in an amount
equal to the lesser of (1) thirty-three percent (33%) of such excess and
(2) $400,000 (the “Revenue-Related Adjustment”); provided, however, if the
Purchaser terminates the Consulting Agreement without Cause (as defined in the
Consulting Agreement) before the twelve (12) month anniversary of the Closing
Date, the Revenue-Related Adjustment shall be reduced by the Revenue-Related
Adjustment Reduction (as defined below), (ii) the Purchaser and the Sellers’
Representative shall deliver written notice to the Escrow Agent specifying the
amount of such Revenue-Related Adjustment, and (iii) the Escrow Agent shall
release to the Purchaser within five (5) days, a number of Escrow Shares having
a Fair Market Value equal to such Revenue-Related Adjustment, determined in
accordance with the Escrow Agreement. “Revenue-Related Adjustment Reduction”
means the amount obtained by dividing (i) (a) 365, minus, (b) the number of days
in the period between the Closing Date and the effective date of the termination
of the Consulting Agreement, to the extent terminated as described above, by
(ii) 365 and multiplying the result by the Revenue-Related Adjustment.

(B) In all other cases and/or this Section 2.6, no adjustment shall be made to
the Purchase Price.

2.7. Sellers’ Representative.

(a) In order to efficiently administer the activities of the parties under this
Agreement and the other Documents on and after the Closing Date, the Sellers
hereby designate Sudhir K. Sinha as their representative (the “Sellers’
Representative”) and hereby authorize the Sellers’ Representative (i) to make
all decisions relating to the preparation of the Closing Date Balance Sheet and
the determination of the Closing Date Working Capital, the Actual 2008

 

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Revenues and any adjustment to the Purchase Price (including the resolution of
all disputed matters in accordance with Sections 2.5 and 2.6); (ii) to take all
actions necessary in connection with the defense and/or settlement of any claims
for which the Sellers may be required to indemnify the Purchaser pursuant to
Article VII hereof; (iii) to give and receive all notices required to be given
under this Agreement and under any other Documents (as defined below); (iv) to
object to, or authorize delivery to the Purchaser of the Escrow Shares in
satisfaction of Claims by the Purchaser, to negotiate and enter into settlements
and compromises of, and demand arbitration and comply with orders of courts and
awards of arbitrators with respect to, such Claims, and (v) to take any and all
additional actions as is necessary or appropriate in the judgment of the
Sellers’ Representative for the accomplishment of the foregoing or as
contemplated to be taken by or on behalf of the Sellers by the terms of this
Agreement and any other Documents.

(b) No bond shall be required of the Sellers’ Representative, and the Sellers’
Representative shall receive no compensation for his or her services. Notices or
communications to or from the Sellers’ Representative for all purposes under
this Agreement or in any other Document shall constitute notice to or from each
of the Sellers. In the event that the Sellers’ Representative dies, becomes
unable to perform his or her responsibilities hereunder or resigns from such
position, Siddhartha Sinha shall be deemed to be the Sellers’ Representative for
purposes of this Agreement and any other Documents.

(c) By their execution of this Agreement, the Sellers acknowledge and agree
that:

(i) all decisions and actions by the Sellers’ Representative, including, without
limitation, any agreement between the Sellers’ Representative and the Purchaser
relating to the preparation of the Closing Date Balance Sheet and the
determination of the Closing Date Working Capital, the Post-Closing Revenue
Report and/or the Adjusted Purchase Price, or the defense or settlement of any
claims for which the Sellers may be required to indemnify the Purchaser pursuant
to Article VII hereof, shall be binding upon all of the Sellers; no Seller shall
have (A) the right to object, dissent, protest or otherwise contest the same or
(B) any cause of action against the Sellers’ Representative for any action
taken, decision made or instruction given by the Sellers’ Representative under
this Agreement while acting in good faith, except for fraud or willful breach of
this Agreement by the Sellers’ Representative; and each Seller hereby agrees to
indemnify the Sellers’ Representative with respect to all decisions and actions
by the Sellers’ Representative made in good faith, except for fraud or willful
breach of this Agreement;

(ii) the Purchaser shall be able to rely conclusively on the instructions and
decisions of the Sellers’ Representative as to the preparation of the Closing
Date Balance Sheet and the determination of the Closing Date Working Capital,
the Post-Closing Revenue Report and/or any adjustment to the Purchase Price, or
the settlement of any claims for indemnification by the Purchaser pursuant to
Article VII hereof or any other actions taken by the Sellers’ Representative
hereunder, and no Seller shall have any cause of action against the Purchaser
for any action taken by the Purchaser in reliance upon the instructions or
decisions of the Sellers’ Representative;

 

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(iii) the provisions of this Section 2.7 are independent and severable,
irrevocable and coupled with an interest and shall be enforceable
notwithstanding any rights or remedies that any Seller may have in connection
with the transactions contemplated by this Agreement;

(iv) since remedies available at law for any breach of the provisions of this
Section 2.7 are inadequate, the Purchaser and the Company shall be entitled to
temporary and permanent injunctive relief without the necessity of proving
damages if either the Purchaser or Company brings an action to enforce the
provisions of this Section 2.7; and

(v) the provisions of this Section 2.7 shall be binding upon the executors,
heirs, legal representatives and successors of each Seller, and any references
in this Agreement to a Seller or the Sellers shall mean and include the
successors to Seller’s rights hereunder, whether pursuant to testamentary
disposition, the laws of descent and distribution or otherwise.

ARTICLE III

REPRESENTATIONS AND WARRANTIES OF THE SELLERS

As an inducement to the Purchaser to enter into this Agreement and to consummate
the transactions contemplated hereby, each Seller, severally, and not jointly
and severally, hereby represents and warrants to the Purchaser with respect to
the Shares listed next to the name of such Seller on Schedule 3.1 attached
hereto as follows:

3.1. Title to Shares. Such Seller owns the Shares beneficially and of record,
free and clear of all Liens, in the manner specified on Schedule 3.1 attached
hereto. There is no restriction affecting the ability of such Seller to transfer
the legal and beneficial title and ownership of such Shares to the Purchaser
pursuant to the terms of this Agreement and, upon delivery of the certificates
representing the Shares to the Purchaser and the payment of the Purchase Price
by the Purchaser at the Closing, the Purchaser will acquire record and
beneficial title to the Shares, free and clear of all Liens.

3.2. Seller’s Authority to Execute and Perform Agreement. Such Seller has the
full legal right and power and all authority and approval required by Law to
enter into this Agreement and to perform his, her or its obligations hereunder.
Such Seller has duly executed and delivered this Agreement, and this Agreement
is the legal, valid and binding obligation of such Seller, enforceable in
accordance with its terms, except as such enforcement may be limited by
bankruptcy, insolvency or other similar laws affecting the enforcement of
creditors rights generally and except that the availability of equitable
remedies is subject to the discretion of the court before which any proceeding
therefore may be brought. Neither the execution and delivery by the Seller of
this Agreement, the consummation by the Seller of the transactions contemplated
hereby, nor the performance by the Seller of this Agreement in compliance with
its terms and conditions will (a) conflict with or result in any violation of
any trust agreement, certificate of incorporation, By-law or Action applicable
to such Seller or to the Shares of such Seller, or result in any breach of, or
constitute a default under, any agreement to which such Seller is a party or by
which such Seller or his, her or its Shares is bound, or result in the creation
of any Lien on, or with respect to, his, her or its Shares, or (b) result in any
violation of, or be in conflict with, or constitute a default under, any
Contract, Order or Law applicable to such Seller or to the Shares.

 

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3.3. Purchase for Investment; Residence. Such Seller is acquiring the shares of
Purchaser Common Stock pursuant to Section 2.4 for investment for his, her or
its own account and not with a view to the distribution or public offering
thereof within the meaning of the Securities Act. Each Seller understands that
the shares of Purchaser Common Stock have not been registered under the
Securities Act and may not be sold or transferred without such registration or
an exemption therefrom. Each Seller (a) is sufficiently knowledgeable and
experienced in financial and business matters to be capable of evaluating the
risk of investment in Purchaser Common Stock and to make an informed decision
relating thereto; (b) has the financial capability for making the investment,
can afford a complete loss of the investment, and has determined that the
investment is a suitable one for such Seller; and (c) except as set forth in
Schedule 3.3 of the Disclosure Schedules, is an Accredited Investor as defined
in Regulation D under the Securities Act. Prior to the execution and delivery of
this Agreement, such Seller has had the opportunity to ask questions of and
receive answers from representatives of the Purchaser concerning the finances,
operations, business and prospects of the Purchaser. Without limiting the
generality of the foregoing, each Seller acknowledges (a) having received and
reviewed a copy of the Purchaser’s Annual Report on Form 10-K for the period
ended December 31, 2006, quarterly report on Form 10-Q for the period ended
June 30, 2007 and all Form 8-Ks filed or furnished by or on behalf of the
Purchaser since January 1, 2007 and (b) that an investment in the shares of
Purchaser Common Stock involves substantial risks, including the Risk Factors
set forth in the Purchaser’s Annual Report on Form 10-K for the period ended
December 31, 2006. Each Seller hereby confirms that such Seller has not
purchased, acquired, sold, disposed or traded, or conducted any other
transaction in, any securities of the Purchaser based upon material non-public
information with respect to the Purchaser (including information regarding the
transaction contemplated by this Agreement). Such Seller is a resident of the
state set forth opposite such Seller’s name on Schedule 3.1 attached hereto.

ARTICLE IV

REPRESENTATIONS AND WARRANTIES OF THE SELLERS WITH RESPECT TO

THE COMPANY

As an inducement to the Purchaser to enter into this Agreement and to consummate
the transactions contemplated hereby, the Sellers, jointly and severally, hereby
represent and warrant to the Purchaser as follows:

4.1. Organization and Qualification. The Company is (a) a corporation duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its organization, and (b) duly licensed or qualified to transact
business as a foreign corporation and is in good standing in each of the
jurisdictions listed in Schedule 4.1 of the Disclosure Schedules. There are no
other jurisdictions in which the conduct of the Business or the Company’s
ownership or lease of any assets requires such qualification under applicable
Law, other than where such failure to qualify would not have a Material Adverse
Effect on the Company.

4.2. Subsidiaries. The Company does not (a) own of record or beneficially,
directly or indirectly, (i) any shares of capital stock or securities
convertible into capital stock of any other corporation or (ii) any
participating interest in any partnership, joint venture or other non-corporate
business enterprise or (b) control, directly or indirectly, any other Person.

 

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4.3. Charter, By-Laws and Corporate Records. The Company has previously
delivered to the Purchaser true, correct and complete copies of each of (a) the
Articles of Incorporation of the Company, as amended and in effect on the date
hereof, (b) the By-Laws of the Company, as amended and in effect on the date
hereof, and (c) the minute books and stock record books of the Company, which
minute books and stock record books are complete and correct and which minute
books (i) contain complete and accurate records of all meetings and other
corporate actions of the Board of Directors, committees of the Board of
Directors, incorporators and stockholders of the Company from the date of its
incorporation to the date hereof and (ii) have been maintained in a manner
consistent with good business practices. The Company is in compliance with, and
not in default under or violation of, its Articles of Incorporation and By-Laws.

4.4. Capitalization. The authorized capital stock of the Company consists of
4,000,000 shares of Common Stock, $.005 par value per share, of which 2,982,403
shares are issued and outstanding and constitute all of the Shares and options
to purchase 154,000 Shares at $.50 per Share are outstanding (which will be
exercised immediately before the Closing). The Sellers are the record and
beneficial owners of the Shares, free and clear of all Liens, as set forth on
Schedule 3.1 of the Disclosure Schedules in each case with no personal liability
attaching to the ownership thereof. All such Shares are duly authorized, validly
issued, fully paid and non-assessable and there are no claims that can currently
be made that the manner of their respective issuance were in violation of Laws.
The designations, powers, preferences, rights, qualifications, limitations and
restrictions in respect of each class and series of authorized capital stock of
the Company are as set forth in the Company’s Articles of Incorporation, as
amended, a copy of which has been provided to the Purchaser, and all such
designations, powers, preferences, rights, qualifications, limitations and
restrictions are valid, binding, and enforceable in accordance with all Laws.
There are no shares of capital stock of the Company held in the corporate
treasury of the Company and no shares of the capital stock of the Company
reserved for issuance. Except as set forth on Schedule 4.4 of the Disclosure
Schedules, there are no outstanding subscriptions, options, warrants, rights,
calls or convertible securities, stock appreciation rights (phantom or
otherwise), joint venture, partnership or other commitments of any nature
relating to the issuance, sale of transfer of any shares of the capital stock or
other securities of the Company. The Company has no obligation (contingent or
other) to purchase, redeem or otherwise acquire any of its equity securities or
any interest therein or to pay any dividend or make any other distribution in
respect thereof.

4.5. Authorization; Enforceability. The Company has the corporate power and
authority to (a) own, hold, lease and operate its properties and assets and to
carry on the Business as currently conducted and contemplated to be conducted
and to perform all of its obligations under the Material Contracts (as defined
below) and (b) execute, deliver and perform the Documents to which the Company
is a party. The execution, delivery and performance of this Agreement and the
other Documents to which the Company or any of the Sellers is a party and the
consummation of the transactions contemplated herein and therein have been duly
authorized and approved by the Company and the Sellers, and no other no other
action on the part of the Company or the Sellers is necessary in order to give
effect thereto. This Agreement, and each of

 

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the other Documents to be executed and delivered by the Company and/or the
Sellers, have been duly executed and delivered by, and constitute the legal,
valid and binding obligations of, the Company and/or the Sellers, as the case
may be, enforceable against the Company and the Sellers, as the case may be, in
accordance with their respective terms, except as such enforcement may be
limited by bankruptcy, insolvency or other similar laws affecting the
enforcement of creditors’ rights generally and except that the availability of
equitable remedies is subject to the discretion of the court before which any
proceeding therefor may be brought.

4.6. No Violation or Conflict. Except as set forth in Schedule 4.6 of the
Disclosure Schedules, none of (a) the execution and delivery by the Company
and/or the Sellers of this Agreement and the other Documents to be executed and
delivered by the Company and/or the Sellers, (b) the consummation by the Company
and/or the Sellers of the transactions contemplated by this Agreement and the
other Documents, or (c) the performance of this Agreement and the other
Documents to be executed and delivered by the Company and/or the Sellers, will
(i) conflict with or violate the Articles of Incorporation or By-Laws of the
Company or any resolutions adopted by the Board of Directors or stockholders of
the Company; (ii) conflict with or violate any Law, Order or Governmental Permit
applicable to the Company or the Sellers or to which the Company or any Seller,
or any of the Company’s assets, may be subject; (iii) require any consent,
approval, authorization or Governmental Permit of, or filing with, or
notification to, any Governmental Authority or other Person; (iv) result in any
breach or violation of, or, constitute a default (or an event that with notice
and/or lapse of time would become a default) under, or impair the Company’s
rights or alter the rights or obligations of any third party under, or give rise
to any right of termination, amendment, acceleration or cancellation of, any
Material Contract or other instrument or obligation to which the Company is a
party or by which the Company or its assets are bound or affected; (v) result in
the imposition or creation of any Lien on the Shares or on any of the properties
or assets of the Company; or (vi) cause the Purchaser or the Company to become
subject to, or become liable for, the payment of any Tax.

4.7. Compliance with Law. The Company is in compliance with, and is not in
default under, or in violation of, any Law or Order applicable to the Company or
to the conduct of the Business or the ownership or use of any of the Company’s
assets or properties. The Company (a) is not subject to any Order that has had,
or could reasonably be expected to have, a Material Adverse Effect and (b) has
not received, at any time, any notice or other communication (whether written or
oral) from any Governmental Authority or other Person regarding any actual,
alleged, or potential breach or violation of, or non-compliance with, any Order
or Law to which the Company or the Business is or has at any time been subject.
There is no existing Law or Order, and the Company is not aware of any proposed
Law or Order, which would prohibit or materially restrict the Purchaser from, or
otherwise materially adversely affect the Purchaser in, conducting the Business
in any jurisdiction in which such Business is now conducted.

4.8. Governmental Consents and Approvals. Except as set forth in Schedule 4.8 of
the Disclosure Schedules, the execution, delivery and performance by the Company
and/or the Sellers of this Agreement and the other Documents to be executed and
delivered by the Company and/or the Sellers do not and will not require any
consent, approval, authorization, Governmental Permit or other order of, action
by, filing with or notification to, any Governmental Authority.

 

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4.9. Financial Statements. The Sellers have delivered to the Purchaser the
Reference Balance Sheet and the related statements of income and cash flow for
the six (6) month period ended June 30, 2007 and the unaudited balance sheet of
the Company as at December 31, 2006 and the related statements of income and
cash flow and notes thereto for the fiscal year ended December 31, 2006
(collectively, the “Financial Statements”). Except as set forth in Schedule 4.9
of the Disclosure Schedules, all of the Financial Statements (a) are complete
and correct in all material respects, (b) accurately reflect all transactions of
the Business, (c) fairly present the financial position of the Company as of the
dates thereof, and the results of its operations and cash flows of the Company
for the periods ended on the dates thereof and (d) reflect reserves appropriate
and adequate for all known material liabilities and reasonably anticipated
losses. Since June 30, 2007 (the “Reference Balance Sheet Date”), (a) there has
been no change in the assets, liabilities or financial condition of the Business
from that reflected in the Reference Balance Sheet, except as set forth in
Schedule 4.9 of the Disclosure Schedules and for changes in the Ordinary Course
of Business which have not had a Material Adverse Effect, and (b) there has been
no occurrence or development, individually or in the aggregate, whether or not
insured against, with respect to the business, prospects, condition (financial
or otherwise), operations, property or affairs of the Business which has had a
Material Adverse Effect. The Sellers have disclosed to the Purchaser all
material facts relating to the preparation of the Financial Statements,
including the basis of accounting for affiliated transactions.

4.10. Absence of Undisclosed Liabilities. The Company has no Liabilities other
than Liabilities (a) reflected or reserved against on the Reference Balance
Sheet, (b) disclosed in Schedule 4.10 of the Disclosure Schedules, or
(c) incurred since the Reference Balance Sheet Date in the Ordinary Course of
Business. Except as expressly contemplated in the preceding sentence, the
Company does not know of, and has no reason to know of, any basis for the
assertion of any Liability against the Company with respect to the Business.

4.11. Conduct in the Ordinary Course; Absence of Changes. Since the Reference
Balance Sheet Date, except as disclosed in Schedule 4.11 of the Disclosure
Schedules, the Company has conducted the Business in the Ordinary Course of
Business, and there has been no change in any assets of the Company or the
Business which has had, or could reasonably be expected to have, a Material
Adverse Effect. For purposes of clarity and not in limitation of the foregoing,
except as disclosed in Schedule 4.11 of the Disclosure Schedules, since the
Reference Balance Sheet Date, the Company has not:

(a) permitted or allowed any of the assets of the Company to be subjected to any
Lien, other than (i) Liens securing the Company Indebtedness, and (ii) Liens
that will be released at or prior to the Closing;

(b) except in the Ordinary Course of Business, discharged or otherwise obtained
the release of any Lien or paid or otherwise discharged any Liability, other
than Liabilities reflected on the Balance Sheet and Liabilities incurred in the
Ordinary Course of Business since the Reference Balance Sheet Date;

(c) written off, written down or written up (or failed to write off, write down
or write up in accordance with GAAP consistent with past practice) the value of
any Inventory or Receivables or revalued any assets of the Company, other than
in the Ordinary Course of Business and in accordance with GAAP;

 

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(d) made any change in any method of accounting or accounting practice or policy
other than such changes required by GAAP and disclosed in Schedule 4.11 of the
Disclosure Schedules;

(e) amended, terminated, cancelled or compromised any material claim of the
Company or waived any other rights of substantial value to the Company;

(f) sold, transferred, leased, subleased, licensed or otherwise disposed of any
of the assets of the Company, other than the sale of Inventory in the Ordinary
Course of Business;

(g) suffered any loss of a major customer or cancellation of any material order
or the threat thereof or failed to pay any creditor any amount owed when due;

(h) made any material change in the Business or operations of the Business or in
the manner of conducting the Business, or suffered any Material Adverse Effect;

(i) taken any of the following actions: (i) entered into, adopted or amended any
Employee Plan; (ii) made any grant of any severance or termination pay to any
director, officer, employee or individual providing services to the Company;
(iii) entered into any employment, deferred compensation, change in control or
other similar agreement (or any amendment to any such existing agreement) with
any director, officer, employee or individual providing services to the Company;
(iv) increased or promised to increase any benefits payable under any existing
severance or termination pay policies or employment agreements; or (v) increased
or promised to increase any compensation, bonus or other benefits payable to
directors, officers, employees or individuals providing services to the Company,
other than, in the case of clause (v), in the Ordinary Course of Business;

(j) made any loan, advance or capital contribution to, or investment in, or
guaranteed any Indebtedness of or otherwise incurred any Indebtedness on behalf
of, any Person, other than loans or advances to employees of the Company made in
the Ordinary Course of Business;

(k) borrowed any amount or incurred or become subject to any Liabilities, except
Liabilities incurred in the Ordinary Course of Business;

(l) instituted or settled any Litigation;

(m) disclosed any proprietary or confidential information of the Company to any
Person not associated with the Company, unless such Person, prior to such
disclosure, executed and delivered a non-disclosure agreement in favor of the
Company;

(n) made any single capital expenditure or commitment therefor in excess of
$2,500, or aggregate capital expenditures or commitments therefor in excess of
$5,000;

 

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(o) entered into any joint venture, partnership or similar arrangement;

(p) made or changed any Tax election, changed an annual accounting period,
adopted or changed any accounting method, filed any amended Tax Returns, entered
into any closing agreement, settled or consented to any claims with respect to
Taxes, surrendered any right to claim a refund of Taxes, settled or compromised
any Tax liability or consented to any extension or waiver of the limitation
period applicable to any claims with respect to Taxes;

(q) entered into any agreement, arrangement or transaction with any of its
directors, officers, employees or stockholders (or with any relative,
beneficiary, spouse or Affiliate of any such Person);

(r) terminated, discontinued, closed or disposed of any plant, facility or other
business operation, or laid off any employees (other than layoffs of less than
fifty (50) employees in any six month period) or implemented any early
retirement, separation or program providing early retirement benefits or
announced or planned any such action or program for the future;

(s) granted any assignment, license, transfer or termination of any Intellectual
Property or permitted to lapse or abandoned any Intellectual Property (or any
registration or grant therefor or any application relating thereto), in which
the Company has any right, title, interest or license;

(t) allowed any Governmental Permit or Environmental Permit that was issued or
relates to the Company or otherwise relates to the Business to lapse or
terminate, or failed to renew any insurance policy or Governmental Permit or
Environmental Permit that is scheduled to terminate or expire within thirty
(30) days after the Closing Date;

(u) failed to maintain the property and equipment used in the Business in good
repair and operating condition, ordinary wear and tear excepted;

(v) suffered any casualty loss or damage with respect to any of the assets of
the Company (whether or not covered by insurance) which in the aggregate have a
replacement cost of more than $5,000, whether or not such losses or damage shall
have been covered by insurance;

(w) amended, modified or consented to the termination of any Material Contract
or the Company’s rights thereunder;

(x) amended or restated its Articles of Incorporation or By-Laws;

(y) changed the amount of the Company’s authorized or issued capital stock;
granted any stock option or right to purchase shares of the capital stock of the
Company or issued any security convertible into such capital stock; or granted
any registration rights, or disclosed or paid any dividend, in respect of any
shares of the capital stock of the Company;

(z) taken, or failed to take, any action which could reasonably be expected to
prevent, hinder or materially delay the ability of the Company or the Sellers to
consummate the

 

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transactions contemplated by this Agreement; or agreed, whether in writing or
otherwise, to take any of the actions specified in this Section 4.11 or entered
into any commitment to effect any of the actions specified in this Section 4.11,
except as expressly contemplated by this Agreement and the Ancillary Agreements.

4.12. Contracts.

(a) Schedule 4.12(a) contains a complete and accurate list of each of the
Contracts to which the Company is a party or by which it or any of its
properties or assets may be bound which is, or could reasonably be expected to
be, material to the Company or the Business (each of such Contracts, a “Material
Contract” and, collectively, the “Material Contracts”). For purposes of clarity,
Material Contracts shall include without limitation:

(i) each Contract for the purchase of Inventory, spare parts, other materials or
personal property with any supplier or for the furnishing of services to the
Company or otherwise related to the Business (A) under the terms of which the
Company: (1) is obligated to pay or otherwise give consideration of more than
$10,000 in the aggregate during the calendar year ended December 31, 2007;
(2) is obligated to pay or otherwise give consideration of more than $10,000 in
the aggregate over the remaining term of such Contract; or (3) cannot terminate
without penalty or payment on less than thirty (30) days’ notice; or (B) not
entered into in the Ordinary Course of Business;

(ii) each Contract for the sale of Inventory or other personal property of the
Company or for the furnishing of services by the Company which: (A) involves, or
is reasonably likely to involve, consideration of more than $10,000 in the
aggregate during the calendar year ended December 31, 2007; (B) involves, or is
reasonably likely to involve, consideration of more than $10,000 in the
aggregate over the remaining term of such Contract; (C) cannot be cancelled by
the Company without penalty or further payment and without more than thirty
(30) days’ notice; or (D) was not entered into in the Ordinary Course of
Business;

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

(iv) all Contracts with any independent contractor, consultant, director,
officer or employee of the Company, to which the Company is a party, and which
is not cancelable without penalty or further payment on less than thirty
(30) days’ notice;

(v) all Contracts relating to Indebtedness of the Company, including, without
limitation, any Contracts relating to the guarantee, support, indemnification,
assumption, endorsement of, or any other similar commitment with respect to, the
Liabilities or Indebtedness of any other Person;

(vi) all Contracts with any Governmental Authority to which the Company is a
party;

(vii) all Contracts that limit the ability of the Company to compete in any line
of business or with any Person or in any geographic area or during any period of
time;

 

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(viii) all Contracts involving the Company relating to confidentiality, secrecy
or non-disclosure (whether the Company is an obligor or beneficiary thereunder);

(ix) all Contracts between the Company and any Affiliate of the Company;

(x) all Contracts of the Company involving capital expenditures in excess of
$10,000;

(xi) all Contracts pursuant to which the Company is a lessor of any machinery,
equipment, motor vehicle, office equipment, furniture or fixtures, other
personal property;

(xii) all Contracts of the Company which relate, in whole or in part, to any
Intellectual Property;

(xiii) all Contracts of the Company which expire or, if renewed pursuant to the
terms thereof, would expire, more than one (1) year after the date hereof;

(xiv) all Contracts of the Company which relate to any partnership, joint
venture or other similar arrangement;

(xv) all Contracts pertaining to collective bargaining agreements and any other
Contract between the Company and any labor union;

(xvi) all Contracts involving the providing of benefits under any Employee Plan;
and

(xvii) all other Contracts, whether or not made in the Ordinary Course of
Business, which (A) are material to the Company or the conduct of the Business,
or (B) the absence of which would have, or would reasonably be expected to have,
a Material Adverse Effect.

For purposes of clarity, each disclosure in Schedule 4.12(a) of the Disclosure
Schedules includes the parties to the Material Contract, the date of execution
of the Material Contract, the term of the Material Contract and amount of the
remaining financial commitment of the Company under the Material Contract.

(b) The Sellers have delivered or made available to the Purchaser true, correct
and complete copies of all Material Contracts that are in writing, and Schedule
4.12(b) of the Disclosure Schedules contains an accurate summary of all Material
Contracts that are not in writing. The Company has paid in full, or set aside
adequate reserves for, all amounts due as of the Closing Date under each
Material Contract. None of the Material Contracts (i) was entered into outside
the Ordinary Course of Business and (ii) contains any unusual, onerous or
burdensome provisions that could impair or adversely affect the operations of
the Business.

(c) All of the Material Contracts are in full force and effect and are valid and
binding obligations of the Company and the other parties thereto, enforceable in
accordance with

 

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their respective terms, subject only to bankruptcy, insolvency or similar laws
affecting the rights of creditors generally and to general equitable principles.
The Company is, and at all times has been, in full compliance with the
applicable terms of each such Material Contract. The Company has not received
any notice of default under any of the Material Contracts and no event has
occurred which, with the passage of time or the giving of notice or both, would
constitute a default by the Company thereunder. To the Knowledge of the Company,
none of the other parties to any of the Material Contracts is in default
thereunder, nor has an event occurred which, with the passage of time or the
giving of notice or both would constitute a default by such other party
thereunder. The Company has not received any notice of the pending or threatened
cancellation, revocation or termination of any of the Material Contracts, nor,
to the Knowledge of the Company, are there any facts or circumstances that could
reasonably be expected to lead to any such cancellation, revocation or
termination.

(d) Except as set forth on Schedule 4.12(d) of the Disclosure Schedules, the
continuation, validity and effectiveness of the Material Contracts under the
current terms thereof will not be affected, and no payment will be required to
be made or Consent will be required to be issued or obtained, as a result of the
execution of this Agreement and the other Documents or the consummation of the
transactions contemplated herein and therein.

4.13. Governmental Permits.

(a) Schedule 4.13 contains a complete and accurate list of all Governmental
Permits that are held by the Company, relate to any asset owned or used by the
Company or that are otherwise used in or necessary for the conduct of the
Business (which list includes, without limitation, the Governmental Authority
issuing such Governmental Permit and the expiration date of such Governmental
Permit). The Company (i) is, and at all times has been, in compliance with all
conditions and requirements imposed by the Governmental Permits; and (ii) has
not received any notice of cancellation or termination of any such Governmental
Permit, and has no reason to believe that any appropriate Governmental Authority
intends to or has valid grounds to cancel or terminate any such Governmental
Permits. Except as set forth in Schedule 4.13 of the Disclosure Schedules,
(i) each of the Governmental Permits is valid and in full force and effect;
(ii) none of the Governmental Permits will be terminated or adversely affected,
and no payment or Consent will be required with respect to such Governmental
Permits, as a result of the transactions contemplated hereby; and (iii) the
Company owns or has the right to use the Governmental Permits in accordance with
the terms thereof without any conflict or alleged conflict or infringement with
the rights of any other Person.

(b) The Governmental Permits listed in Schedule 4.13 of the Disclosure Schedules
collectively constitute all of the Governmental Permits necessary to permit the
Company to lawfully conduct and operate the Business in the manner in which it
is currently conducted and operated and to permit the Company to own and use its
assets in the manner in which they are currently owned and used.

4.14. Taxes.

(a) All Tax Returns required to be filed with respect to the Company or the
Business (collectively, the “Company Tax Returns”) have been timely filed
pursuant to

 

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applicable Law. The Company has paid, or made provision for the payment of, all
Taxes that have or may become due pursuant to the Company Tax Returns or
otherwise. Except as set forth in Schedule 4.14(a) of the Disclosure Schedules,
(i) the Company Tax Returns are true, correct and complete; (ii) no adjustment
to the Company Tax Returns has been proposed formally or informally by any
Governmental Authority and, to the Knowledge of the Company, no basis exists for
any such adjustment; and (iii) there are no Tax Liens on any assets of the
Company or of the Business. There are no pending or, to the Knowledge of the
Company, threatened actions or proceedings for the assessment or collection of
any Taxes against the Company or (insofar as either relates to the activities or
income of the Company or the Business or could result in Liability of the
Company on the basis of joint and/or several liability) any corporation that was
includible in the filing of a Company Tax Return with the Company on a
consolidated or combined basis. No consent under Section 341(f) of the Code with
respect to collapsible corporations has been filed with respect to the Company.
The Company has withheld and paid to the proper Governmental Authority all Taxes
required by Law to have been withheld and paid, including in connection with any
amounts paid or owing to any employee, independent contractor or third party,
and all Forms W-2 and 1099 required with respect thereto have been properly
completed and timely filed.

(b) Except as disclosed in Schedule 4.14(b) of the Disclosure Schedules, there
are no outstanding: (i) waivers or agreements extending the statute of
limitations for any period with respect to any Tax to which the Company or the
Business may be subject; (ii) requests for information currently outstanding
that could affect the Taxes of the Company or the Business; and (iii) proposed
reassessments of any assets owned by the Company or other proposals that could
increase the amount of any Tax to which the Company or the Business would be
subject.

(c) Reserves and allowances have been provided for on the Reference Balance
Sheet that are adequate to satisfy all Liabilities for Taxes relating to the
Business for periods through the Closing Date (without regard to the materiality
thereof).

(d) The Company (i) is not a party to any Tax allocation or sharing agreement or
other agreement with respect to Taxes that will require any payment by the
Company; (ii) has not been a member of an affiliated group within the meaning of
Code Sec. 1504(a) filing a consolidated federal income Tax return; (iii) has no
Liability for the Taxes of any Person under Reg. §1.1502-6 (or any similar
provision of applicable Law), as a transferee or successor, by contract, or
otherwise; (iv) has not made any payments, is not obligated to make any
payments, and is not a party to any agreement that under certain circumstances
could obligate it to make any payments that constitute an “excess parachute
payment” under Code Sec. 280G; (v) has not been a United States real property
holding corporation within the meaning of Code Sec. 897 (c)(2) during the
applicable period specified in Code Sec. 897 (c)(1)(A)(ii); (vi) has disclosed
on the federal Company Tax Returns all positions taken therein that could give
rise to a substantial understatement of federal income tax within the meaning of
Code Sec. 6661 and (vii) is not a party to any tax allocation or sharing
agreement.

(e) The Company is an S corporation as defined in Code Sec. 1361. Except as set
forth in Schedule 4.14(e) of the Disclosure Schedules, the Company is not and
has not been subject to the tax on passive income under Code Sec. 1375 or the
built-in-gains tax under Code Sec. 1374. Schedule 4.14(e) of the Disclosure
Schedules lists all the states and localities with

 

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respect to which the Company is required to file any corporate, income or
franchise tax returns and describes whether the Company is treated as the
equivalent of an S corporation by or with respect to each such state or
locality. The Company has properly filed Company Tax Returns, with and paid and
discharged any liabilities for taxes in, any states or localities in which it is
subject to Tax.

4.15. Litigation. Except as set forth on Schedule 4.15 of the Disclosure
Schedules, (a) there is no Litigation pending or, to the Knowledge of the
Company, threatened by or before any Court or Governmental Authority
(i) involving or otherwise affecting the Company or the Business or any of the
property, assets or rights owned or used by the Company, or (ii) that challenges
or calls into question the validity of this Agreement or any of the other
Documents or that may have the effect of preventing or delaying any action taken
or to be taken pursuant hereto or thereto nor, to the Knowledge of the Company
does there exist any reasonable basis for any Litigation described in (i) and
(ii) above; (b) the Company has not received any written complaint from any
customer of or supplier to the Company which, if true, would have, or could
reasonably be expected to have, a Material Adverse Effect; (c) there is no
Action by the Company pending or threatened against any third party and
(d) there is no outstanding Order involving or affecting the Company. For
purposes of clarity, to the extent any Litigation is disclosed on Schedule 4.15
of the Disclosure Schedules, each such disclosure includes the parties thereto,
the nature and location of the proceeding, the date commenced, the amount of
damages or other relief sought and, if applicable, paid or granted and a
statement as to whether the matter is insured and, if so, the insurance policy
applicable to such matter. None of the Litigation matters disclosed on Schedule
4.15 of the Disclosure Schedules, if any, has had, or could reasonably be
expected to have, a Material Adverse Effect.

4.16. Insurance.

(a) The Company has delivered to the Purchaser true and complete copies of all
insurance policies and fidelity bonds covering the assets, business, equipment,
properties and operations of the Company or otherwise relating to the Business,
a list of which (by type, carrier, policy number, limits, premium and expiration
date) is set forth in Schedule 4.16 of the Disclosure Schedules. The Company has
paid all premiums due, and has otherwise performed its obligations under, each
such policy and bond and all such insurance policies and bonds are in full force
and effect and will remain in full force and effect following the Closing. Such
policies of insurance and bonds are sufficient in order for the Company to
comply with the requirements of all applicable Laws and under all Contracts to
which the Company is a party or by which it is bound.

(b) Schedule 4.16(b) of the Disclosure Schedules sets forth a summary of the
loss experience of the Company under each insurance policy, including a
description of each claim under each such insurance policy, the name of the
claimant and the date of the claim.

4.17. Receivables. Schedule 4.17 contains an aged list of the Receivables as of
the Reference Balance Sheet Date and during the period from the Reference
Balance Sheet Date through the Closing Date. Except as set forth on Schedule
4.17 of the Disclosure Schedules, all Receivables of the Company arose from
sales actually made or services actually performed in the Ordinary Course of
Business to Persons not affiliated with the Company and, except as reserved

 

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against on the Reference Balance Sheet, constitute or will constitute, as the
case may be, valid, undisputed claims of the Company not subject to valid claims
of set-off or other defenses or counterclaims other than normal cash discounts
accrued in the Ordinary Course of Business. Each of the Receivables reflected on
the Reference Balance Sheet (subject to the reserve for bad debts, if any,
reflected on the Reference Balance Sheet) are owned by Company free and clear of
any Liens, except with respect to the Company Indebtedness, and has been
collected or will be collectible in full, without setoff or resort to litigation
or extraordinary collection activity, within one hundred eighty (180) days of
the Closing Date.

4.18. Inventory. The Inventory of the Company consists only of items of a
quality and quantity usable or saleable in the Ordinary Course of Business. All
Inventory is valued at the lower of cost, determined by specific identification
or the first in, first out method of accounting, or market value, determined in
accordance with GAAP. The Company has good and marketable title to the
Inventory, free and clear of all Liens, except with respect to the Company
Indebtedness. The Inventory does not consist of, in any material amount, items
that are obsolete or damaged. The Inventory is at normal and adequate levels for
the continuation of the Business in the Ordinary Course of Business. The Company
is not under any obligation or Liability with respect to accepting returns of
items of Inventory or merchandise in the possession of its customers other than
in the Ordinary Course of Business. Schedule 4.18 of the Disclosure Schedules
contains a complete list of the addresses of all warehouses and other facilities
in which the Inventory is stored.

4.19. Significant Customers. Schedule 4.19 of the Disclosure Schedules lists the
names and addresses of the fifteen (15) most significant customers (by revenue)
of the Business for the fifteen (15) month period ended on the Reference Balance
Sheet Date and the amount for which each such customer was invoiced during such
period. Except as set forth in Schedule 4.19 of the Disclosure Schedules, the
Company has not received any notice indicating, and has no reason to believe,
that any significant customer of the Company has ceased, or will cease, to use
the products, equipment, goods or services of the Company or has substantially
reduced, or intends to substantially reduce, the use of such products,
equipment, goods or services at any time.

4.20. Significant Suppliers. Schedule 4.20 of the Disclosure Schedules lists the
names and addresses of the six (6) most significant suppliers of raw materials,
supplies, merchandise and other goods for the Business for the fifteen
(15) month period ended on the Reference Balance Sheet Date and the amount for
which each such supplier invoiced the Company during such period. Except as
disclosed in Schedule 4.20 of the Disclosure Schedules, the Company has not
received any notice indicating, and has no reason to believe, that any such
supplier will not sell raw materials, supplies, merchandise and other goods to
the Company or the Purchaser at any time after the Closing Date on terms and
conditions similar to those imposed on current sales to the Business, subject to
general and customary price increases.

4.21. Real Property.

(a) The Company does not own, directly or indirectly, any real property.

(b) Schedule 4.21(b) of the Disclosure Schedules lists (i) the street address of
each parcel of Leased Real Property; (ii) the identity of the lessor, lessee and
current occupant

 

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(if different from lessee) of each such parcel of Leased Real Property;
(iii) the term (referencing applicable renewal periods, options to extend,
options to purchase or rights of first refusal) and rental payment terms of the
leases (and any subleases) pertaining to each such parcel of Leased Real
Property and (iv) the current and permitted use of each such parcel of Leased
Real Property.

(c) Except as set forth in Schedule 4.21(c) of the Disclosure Schedules, to the
Knowledge of the Company (i) there is no material violation of any municipal,
state or federal Law (including, without limitation, any environmental,
building, planning or zoning Law) relating to any of the Leased Real Property;
(ii) the Company is in peaceful and undisturbed possession of each parcel of
Leased Real Property and there are no contractual or legal restrictions that
preclude or restrict the ability to use the premises for the purposes for which
they are currently being used; (iii) all existing water, sewer, steam, gas,
electricity, telephone and other utilities required for the construction, use,
occupancy, operation and maintenance of the Leased Real Property are adequate
for the conduct of the Business as it has been and currently is conducted;
(iv) all utilities required for the operation of the Leased Real Property either
run through adjoining public streets, or if they pass through adjoining private
land, do so in accordance with valid public or private easements, which will
inure to the benefit of the Purchaser; and (v) there are no material latent
defects or material adverse physical conditions affecting the Leased Real
Property or any of the facilities, buildings, structures, erections,
improvements, fixtures, fixed assets and personality of a permanent nature
annexed, affixed or attached to, located on or forming part of the Leased Real
Property.

(d) Except as set forth in Schedule 4.21(d) of the Disclosure Schedules, the
Company has not subleased any parcel or any portion of any parcel of Leased Real
Property to any other Person, nor has the Company assigned its interest under
any lease or sublease to any third party.

(e) The Company has delivered to the Purchaser correct and complete copies of
all material leases and subleases listed in Schedule 4.21(b) and Schedule
4.21(d) of the Disclosure Schedules and any and all ancillary documents
pertaining thereto (including, but not limited to, all amendments, consents for
alterations and documents recording variations and evidence of commencement
dates and expiration dates) (the “Leases”). For purposes of clarity, a material
lease or sublease includes only those contracts, for lease or sublease under the
terms of which the Company is obligated to pay or otherwise give consideration
of more than $10,000 in the aggregate during a lease year. With respect to each
such Lease:

(i) such Lease is legal, valid, binding, enforceable and in full force and
effect and represents the entire agreement between the respective landlord and
tenant with respect to such property; (ii) such Lease will not cease to be
legal, valid, binding, enforceable and in full force and effect on terms
identical to those currently in effect as a result of the consummation of the
transactions contemplated by this Agreement, nor will the consummation of the
transactions contemplated by this Agreement constitute a breach or default under
such Lease or otherwise give the landlord a right to terminate such Lease;
(iii) with respect to each such Lease (A) the Company has not received any
notice of cancellation or termination under such Lease and no lessor has any
right of termination or cancellation under such Lease except in connection with
the default of the Company thereunder, (B) the Company has not any notice of a

 

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breach or default under such Lease, which breach or default has not been cured
and (C) the Company has not granted to any other Person any rights, adverse or
otherwise, under such Lease; (iv) neither the Company, nor, to the Knowledge of
the Company, any other party to such Lease, is in breach or default in any
material respect, and, to the Knowledge of the Company, no event has occurred
that, with notice or lapse of time would constitute such a breach or default or
permit termination, modification or acceleration under such Lease; and (v) the
rental payments set forth in each Lease is the actual rental being paid, and
there are no separate agreements or understandings with respect to the same.

(f) To the Knowledge of the Company, there are no present, pending or threatened
special assessments, tax takings, condemnation proceedings or eminent domain
proceedings of any kind pending or threatened against any of the Leased Real
Property.

(g) All the Leased Real Property is occupied under a valid and current
certificate of occupancy or similar permit, the transactions contemplated by
this Agreement will not require the issuance of any new or amended certificate
of occupancy and there are no facts that would prevent the Leased Real Property
from being occupied after the Closing in the same manner as immediately prior to
the Closing.

(h) To the Knowledge of the Company, no improvements on the Leased Real Property
and none of the current uses and conditions thereof violate any applicable deed
restrictions or other applicable covenants, restrictions, agreements, existing
site plan approvals, zoning or subdivision regulations or urban redevelopment
plans as modified by any duly issued variances, and no approvals pertaining to
the ownership or operation of all improvements on the Leased Real Property,
other than those which are transferable with the Leased Real Property, are
required by any Governmental Authority having jurisdiction over the Leased Real
Property.

(i) The Company has the full right to exercise any renewal options contained in
the Leases pertaining to the Leased Real Property on the terms and conditions
contained therein and upon due exercise would be entitled to enjoy the use of
each Leased Real Property for the full term of such renewal options.

(j) The Company has received no notice of, and has no reason to believe that,
any change is contemplated, with respect to the zoning of the Leased Real
Property, the availability of utility services to the Leased Real Property, or
any other matter that would affect the operations or use of the Leased Real
Property.

(k) To the Knowledge of the Company, all of the mechanical systems in the
buildings upon the Leased Real Property, including the water, sewer, plumbing,
heating, ventilation, electrical, air conditioning and sprinkler systems, if
any, are in good working order, and the roof is in good condition and free from
leakage.

4.22. Intellectual Property.

(a) Schedule 4.22(a) of the Disclosure Schedules sets forth a complete and
accurate list of all Patents, Trademarks, domain name registrations and
Copyrights included in the Owned Intellectual Property, and/or Licensed
Intellectual Property, indicating for each item, to the extent applicable, the
jurisdiction of registration (or application), registration number (or
application number) and date issued (or date filed).

 

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(b) The Company is, or at Closing, will be, the owner of all right, title and
interest in and to each of the Patents included in the Owned Intellectual
Property, free and clear of all Liens, except with respect to the Company
Indebtedness. All Patents listed in Schedule 4.22(a) of the Disclosure Schedules
(i) are in compliance with all legal requirements required to maintain such
Patents in full force and effect (including the payment of filing, examination
and annuity and maintenance fees and proof of working or use), (ii) are valid
and enforceable and (iii) are not subject to any maintenance fees or Taxes or
actions falling due within ninety (90) days after the Closing Date. No such
Patent is involved in any interference, reissue, re-examination or opposition
proceeding and, to the Knowledge of the Company, no such action has been
threatened with respect to any such Patent.

(c) The Company is the owner of all right, title and interest in and to each of
the Trademarks included in the Owned Intellectual Property, free and clear of
all Liens, except with respect to the Company Indebtedness. All Trademarks
listed in Schedule 4.22(a) of the Disclosure Schedules that have been registered
with the United States Patent and Trademark Office are currently in compliance
with all formal legal requirements (including the timely post-registration
filing of affidavits of use and incontestability and renewal applications), are
valid and enforceable and are not subject to any maintenance fees or Taxes or
actions falling due within ninety (90) days after the Closing Date. No such
Trademark is currently involved in any opposition or cancellation proceeding and
to the Knowledge of the Company no such action has been threatened with respect
to any of the Trademarks or any registration applications with respect thereto.
To the Knowledge of the Company, there are no Trademarks of any third party
which interfere, or could reasonably be expected to interfere, with the
Trademarks of the Company. All Trademarks of the Company have been in continuous
use by the Company. The Company has taken all reasonable steps to protect the
Trademarks of the Company against third party infringement.

(d) The Copyrights included within the Owned Intellectual Property relate to
works of authorship (i) created by (A) employees of the Company within the scope
of their employment, or (B) independent contractors who have assigned their
rights to the Company pursuant to enforceable written agreements, or
(ii) acquired from the original author(s) or subsequent assignees. To the
Knowledge of the Company, the works covered by the Copyrights were not copies of
nor derived from any work for which the Company does not own the Copyrights, and
no third party has any claim to authorship or ownership of any part thereof.

(e) Schedule 4.22(e) of the Disclosure Schedules lists (i) all Software (other
than off-the-shelf software applications programs having an acquisition price of
less than $5,000) which is owned, licensed to or by the Company, leased to or by
the Company, or otherwise used by the Company, and identifies which Software is
owned, licensed, leased or otherwise used, as the case may be and (ii) lists all
Software sold, licensed, leased or otherwise distributed by the Company to any
third party, and identifies which Software is sold, licensed, leased, or
otherwise distributed as the case may be. The Software listed in Schedule
4.22(e) of the Disclosure Schedules which the Company owns was either developed
(i) by employees of the Company or any of its Subsidiaries within the scope of
their employment, or (ii) by

 

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independent contractors who have assigned their rights to the Company pursuant
to enforceable written agreements. All Software owned by the Company, and all
Software licensed from third parties by the Company, is free from any
significant defect or programming or documentation error, operates and runs in a
reasonable and efficient business manner, conforms to the specifications
thereof, if applicable, and, with respect to the Software owned by the Company,
the applications can be compiled from their associated source code without undue
burden. The Company has furnished the Purchaser with all required documentation
relating to use, maintenance and operation of the Software.

(f) The Company has valid registrations for each of the domain names set forth
in Schedule 4.22(a) of the Disclosure Schedule. The Company’s registration of
each of the domain names is free and clear of any Liens, except with respect to
the Company Indebtedness, and is in full force and effect. The Company has paid
all fees required to maintain each registration. None of the Company’s
registrations or use of the domain names has been disturbed or placed “on hold”
and no claim (oral or written) has been asserted against the Company adverse to
its rights to such domain names.

(g) Schedule 4.22(g) of the Disclosure Schedules sets forth a complete and
accurate list of all license agreements granting any right or license to use or
practice any rights under any Intellectual Property to which the Company is a
party or otherwise bound and all assignments, consents, term, forbearances to
sue, Orders, or similar obligations relating to any Intellectual Property to
which the Company is a party or otherwise bound (collectively, the “License
Agreements”), indicating for each the title, the parties, date executed, whether
or not it is exclusive and a description of the Intellectual Property covered
thereby. The License Agreements are valid and binding obligations of the
Company, enforceable in accordance with their respective terms, and to the
Knowledge of the Company, there exists no event or condition that will result in
a violation or breach of, or constitute (with or without due notice or lapse of
time or both) a default by the Company under any such License Agreement. None of
the execution, delivery or performance of this Agreement by the Sellers, the
consummation by the Sellers of their obligations hereunder, or compliance by the
Sellers with any of the provisions of this Agreement will conflict with or
result in any breach of or any payment due under any provision contained in any
of the License Agreements. No royalties, honoraria or other fees are payable to
any third parties for the use of or right to use by the Company of any Licensed
Intellectual Property except pursuant to the License Agreements.

(h) Except as set forth in Schedule 4.22(i) of the Disclosure Schedules, the
Owned Intellectual Property and the Licensed Intellectual Property constitute
all of the Intellectual Property used in or necessary for the conduct of the
Business as currently conducted and as currently contemplated to be conducted.
None of the Excluded Intellectual Property is used in or necessary for the
conduct of the Business as currently conducted and/or currently contemplated to
be conducted. To the Knowledge of the Company, no third party is
misappropriating, infringing, diluting, or violating any Owned Intellectual
Property or Licensed Intellectual Property and, except as set forth in Schedule
4.22(h) of the Disclosure Schedules, no such claims have been brought against
any third party by the Company.

 

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(i) To the Knowledge of the Company, the conduct of the Business as currently
conducted and as contemplated to be conducted does not infringe upon any
Intellectual Property of any third party. Without limiting the foregoing, no
third party has notified the Company alleging that (i) the Company’s activities
or the conduct of the Business infringes upon, violates or constitutes the
unauthorized use of the Intellectual Property of any third party, (ii) the
Company infringes any of such third party’s Intellectual Property rights in the
conduct of the Business or (iii) such third party requires the Company to obtain
a license to any of such third party’s Intellectual Property. Except as set
forth in Schedule 4.22(i) of the Disclosure Schedules, there is no Litigation
pending or, to the Knowledge of the Seller, threatened alleging that the
Company’s conduct of the Business infringes upon, violates, or constitutes the
unauthorized use of the Intellectual Property rights of any third party nor has
any third party brought or threatened any Litigation challenging the ownership,
use, validity or enforceability of any Owned Intellectual Property or Licensed
Intellectual Property.

(j) None of the execution, delivery or performance of this Agreement by the
Sellers, the consummation by the Sellers of their obligations hereunder, or
compliance by the Sellers any of the provisions of this Agreement will result in
the loss or impairment of the Company’s or the Purchaser’s right to own or use
any of the Owned Intellectual Property or Licensed Intellectual Property, nor
will the approval of any Governmental Authority or third party be required in
respect of any such Owned Intellectual Property or Licensed Intellectual
Property.

(k) The Company has taken all necessary steps in accordance with normal industry
practice to protect the Company’s rights in all Trade Secrets of the Company.
Without limiting the foregoing, the Company has and enforces a policy of
requiring each employee, consultant, contractor and potential business partner
or investor to execute proprietary information, confidentiality and assignment
agreements substantially consistent with the Company’s standard forms thereof
(complete and current copies of which have been delivered to the Purchaser).
There has been no disclosure of any Trade Secrets of the Company except for any
such disclosure pursuant to confidentiality obligations and any such disclosure
that has not had, and would not reasonably be expected to have, a Material
Adverse Effect.

(l) No third party has claimed that any person employed by or affiliated with
the Company or the Business has (i) violated or may be violating any of the
terms or conditions of such person’s employment, non-competition or
non-disclosure agreement with such third party; (ii) disclosed or may be
disclosing or utilized or may be utilizing any Trade Secret of such third party;
or (iii) interfered or may be interfering in the employment relationship between
such third party and any of its present of former employees. To the Knowledge of
the Company, no person employed by or affiliated with the Company or the
Business has employed or proposes to employ any Trade Secret of former employer
and no person employed by or affiliated with the Company or the Business has
violated any confidential relationship which such person may have had with any
third party, in connection with the development, manufacture or sale of any
Product or proposed Product or the development or sale of any service or
proposed service of the Company or the Business, and the Sellers have no reason
to believe there will be any such employment or violation. To the Knowledge of
the Company, none of the execution of delivery of this Agreement, or the
carrying on of the Business or proposed conduct of the Business, will conflict
with or result in a breach of the terms, conditions, or provisions of, or
constitute a default under, any Contract under which any such person is
obligated.

 

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4.23. Personal Property.

(a) Schedule 4.23 of the Disclosure Schedules sets forth a complete and accurate
list of all machinery, equipment, tools, supplies, furniture, fixtures,
vehicles, rolling stock and other tangible personal property used in the
Business and owned by or leased to the Company (the “Tangible Personal
Property”), and the location thereof. Except as shown on Schedule 4.23 of the
Disclosure Schedules, the Company has good and marketable title, free and clear
of all Liens, except with respect to the Company Indebtedness, to all Tangible
Personal Property owned by the Company.

(b) The Company has delivered to the Purchaser correct and complete copies of
all material leases for Tangible Personal Property and any and all material
ancillary documents pertaining thereto (including, but not limited to, all
amendments, consents and evidence of commencement dates and expiration dates).
For purposes of clarity, a material lease includes only those contracts of lease
under the terms of which the Company is obligated to pay or otherwise give
consideration of more than $10,000 in the aggregate during a lease year. With
respect to each such lease:

(i) such lease is the legal, valid and binding obligation of the Company
enforceable against the Company in accordance with its terms and in full force
and effect and represents the entire agreement between the respective lessor and
the Company lessee with respect to such property; (ii) except as set forth in
Schedule 4.23 of the Disclosure Schedules, such lease will not cease to be
legal, valid, binding, enforceable and in full force and effect on terms
identical to those currently in effect as a result of the consummation of the
transactions contemplated by this Agreement, nor will the consummation of the
transactions contemplated by this Agreement constitute a breach or default under
such lease or otherwise give the lessor a right to terminate such lease;
(iii)except as otherwise set forth in Schedule 4.23 of the Disclosure Schedules,
with respect to each such lease, (A) the Company has not received any notice of
cancellation or termination under such lease and no lessor has any right of
termination or cancellation under such lease or sublease except in connection
with the default of the Company thereunder, (B) the Company has not received any
notice of a breach or default under such lease, which breach or default has not
been cured and (C) the Company has not granted to any other Person any rights,
adverse or otherwise, under such lease; (iv) neither the Company, nor, to the
Knowledge of the Company, any other party to such lease, is in breach or default
in any material respect, and no event has occurred that, with notice or lapse of
time would constitute such a breach or default or permit termination,
modification or acceleration under, such lease; and (v) the Company has the full
right to exercise any renewal options contained in the leases pertaining to the
Tangible Personal Property on the terms and conditions therein and upon due
exercise would be entitled to enjoy the use of each item of leased Tangible
Personal Property for the full term of such renewal options.

(c) All Tangible Personal Property actively used in the Business is usable for
the use and purposes for which it is currently used, is in good operating
condition, and has been maintained and repaired in accordance with good business
practice.

 

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4.24. Employment Matters; Labor Relations.

(a) Schedule 4.24(a) of the Disclosure Schedules contains a complete and
accurate list of the following information for each employee or director of, or
consultant to, the Company: (i) name; (ii) all compensation (including all
salary, bonuses, deferred or contingent compensation, pension, “golden
parachute” and other similar benefits paid or payable (in cash or otherwise))
during each of the last two (2) fiscal years and for the current fiscal year,
(iii) accrued vacation, (iv) date of hire and (v) a description of position and
job function.

(b) Schedule 4.24(b) of the Disclosure Schedules contains a complete and
accurate list of all employment, consulting, severance, termination,
indemnification or other similar agreements of any nature (whether in writing or
not) between the Company and any current or former stockholder, officer,
director, employee or consultant of or to the Company. Except as set forth in
Schedule 4.24(b) of the Disclosure Schedules, no individual will accrue or
receive additional benefits, service or accelerated rights to payments under any
Employee Plan or any of the agreements set forth in Schedule 4.24(b) of the
Disclosure Schedules, including the right to receive any parachute payment, as
defined in Section 280G of the Code, or become entitled to severance,
termination allowance or similar payments as a result of the transactions
contemplated by this Agreement and the other Documents.

(c) Schedule 4.24(c) of the Disclosure Schedules sets forth a true and complete
list of (i) each current or former employee, officer, director or investor of
the Company who holds, any option, warrant or other right to purchase shares of
capital stock of the Company, together with the number of shares subject to such
option, warrant or right, the date of grant or issuance of such option, warrant
or right, the extent to which such option, warrant or right is vested and/or
exercisable, the exercise price of such option, warrant or right, whether such
option is intended to qualify as an incentive stock option within the meaning of
Section 422(b) of the Code, and the expiration date of each such option, warrant
and right and (ii) the total number of such options, warrants and rights. True,
complete and correct copies of each agreement (including all amendments and
modifications thereto) between the Company and each holder of such options,
warrants and rights relating to the same have been furnished to the Purchaser
and are listed in Schedule 4.24(c) of the Disclosure Schedules.

(d) Except as set forth in Schedule 4.24(d) of the Disclosure Schedules (i) all
directors, officers, management employees, and technical and professional
employees of the Company are under written obligation to the Company to maintain
in confidence all confidential or proprietary information acquired by them in
the course of their employment and to assign to the Company all inventions made
by them within the scope of their employment during such employment and for a
reasonable period thereafter; (ii) no employee or director of the Company is a
party to, or otherwise bound by, any agreement or arrangement, including any
confidentiality, noncompetition or proprietary rights agreement between such
employee or director and any other person that in any way adversely affects the
performance of his duties as an employee of the Company or the ability of the
Company to conduct the Business; and (iii) to the Knowledge of the Company, no
employee of the Company intends to terminate his or her employment with the
Company.

 

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(e) Except as set forth in Schedule 4.24(e) of the Disclosure Schedules:

(i) the Company is not a party to or bound by any collective bargaining
agreement or other labor union contract applicable to any persons employed by
the Company, and currently there are no organizational campaigns, petitions or
other unionization activities seeking recognition of a collective bargaining
unit which could affect the Company; (ii) there are no pending or, to Sellers’
Knowledge, threatened charges (by employees, their representatives or
governmental authorities) of unfair labor practices or of employment
discrimination or of any other wrongful action with respect to any aspect of
employment of any person employed or formerly employed by the Company; (iii) the
Company is currently in compliance with all applicable Laws relating to the
employment of labor, including those related to wages, hours, and the payment
and withholding of taxes and other sums as required by the appropriate
Governmental Authority and has withheld and paid to the appropriate Governmental
Authority or is holding for payment not yet due to such Governmental Authority
all amounts required to be withheld from employees of the Company and is not
liable for any arrears of wages, taxes, penalties or other sums for failure to
comply with any of the foregoing; (iv) the Company has paid in full to all their
respective employees or adequately accrued for in accordance with GAAP
consistently applied all wages, salaries, commissions, bonuses, benefits and
other compensation due to or on behalf of such employees or former employees;
(v) there is no claim with respect to payment of wages, salary or overtime pay
that has been asserted or is now pending or threatened before any Governmental
Authority with respect to any Persons currently or formerly employed by the
Company; (vi) the Company is not a party to, or otherwise bound by, any consent
decree with, or citation by, any Governmental Authority relating to employees or
employment practices; (vii) there is no charge or proceeding with respect to a
violation of any occupational safety or health standards that has been asserted
or is now pending or threatened with respect to the Company; (viii) there is no
charge of discrimination in employment or employment practices, for any reason,
including, without limitation, age, gender, race, religion or other legally
protected category, which has been asserted or is now pending or threatened
before the United States Equal Employment Opportunity Commission, or any other
Governmental Authority in any jurisdiction in which the Company has employed or
currently employs any Person; (ix) none of the Company’s employment policies or
practices with respect to the Business is currently being audited or
investigated by any Governmental Authority; and (x) the Company does not have,
nor at the Closing will the Company have, any obligation under the WARN Act.

4.25. Employee Benefit Plans.

(a) Schedule 4.25(a) of the Disclosure Schedules contains a true and complete
list of all Employee Plans. The Company has provided to the Purchaser correct
and complete copies (where applicable) of the following: (i) all plan documents,
summary plan descriptions, summaries of material modifications, amendments,
resolutions, trust agreements, employee handbooks, material written employee
communications, and all material correspondence between the Company or ERISA
Affiliates and any government agency or regulatory body related to the Employee
Plans; (ii) the most recent determination letters received from the IRS with
respect to any Employee Plan; (iii) the three most recent Form 5500 Annual
Reports and summary annual report; (iv) the most recent audited financial
statement and actuarial valuation with respect to any Employee Plan; (v) all
nondiscrimination testing for the past three (3) years; and (vi) all related
agreements, collective bargaining agreements, insurance contracts and other
agreements which implement each such Employee Plan. There are no restrictions on
the ability of the sponsor of each Employee Plan to amend or terminate any
Employee Plan and each Employee Plan may be transferred by the Company or ERISA
Affiliate to the Purchaser.

 

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(b) Except as described in Schedule 4.25(b) of the Disclosure Schedules:
(i) there has been no “prohibited transaction,” as such term is defined in
Section 406 of ERISA and Section 4975 of the Code, with respect to any Employee
Plan; (ii) there are no claims pending (other than routine claims for benefits)
or threatened against any Employee Plan or against the assets of any Employee
Plan, nor are there any current or threatened Liens on the assets of any
Employee Plan; (iii) all Employee Plans conform to, and in their operation and
administration are in all respects in compliance with, the terms thereof and
requirements prescribed by any and all applicable Laws (including ERISA and the
Code), currently in effect with respect thereto (including without limitation
all applicable requirements for notification, reporting and disclosure to
participants or the Department of Labor, IRS or Secretary of the Treasury);
(iv) the Company and ERISA Affiliates have performed all obligations required to
be performed by them under, are not in default under or violation of, and the
Company has no Knowledge of any default or violation by any other party with
respect to, any of the Employee Plans, including under Section 4069 of ERISA;
(v) each Employee Plan intended to qualify under Section 401(a) of the Code and
each corresponding trust exempt under Section 501 of the Code has received or is
the subject of a favorable determination or opinion letter from the IRS, and
nothing has occurred which may be expected to cause the loss of such
qualification or exemption; (vi) all contributions required to be made to any
Employee Plan pursuant to Section 412 of the Code, the terms of the Employee
Plan or any collective bargaining agreement, have been made on or before their
due dates and an adequate amount has been accrued for contributions to each
Employee Plan for the current plan years or as of the Closing Date, whichever is
later; (vii) the transaction contemplated by this Agreement will not, directly
or indirectly, result in an increase of benefits, acceleration of vesting or
acceleration of timing for payment of any benefit to any participant in or
beneficiary of, any Employee Plan; (viii) each Employee Plan, if any, which is
maintained outside of the United States has been operated in all material
respects in conformance with the applicable Laws relating to such Employee Plan
in the jurisdictions in which such Employee Plan is present or operates and, to
the extent relevant, the United States; (ix) neither the Company nor any ERISA
Affiliate has ever made a complete or partial withdrawal from a Multiemployer
Plan (as such term is defined in Section 3(37) of ERISA) resulting in
“withdrawal liability” (as such term is defined in Section 4201 of ERISA),
without regard to any subsequent waiver or reduction under Section 4207 or 4208
of ERISA; and (x) neither the Company nor any ERISA Affiliate has any commitment
or formal plan, whether or not legally binding to create any additional employee
benefit plan or modify any existing Employee Plan.

(c) No Employee Plan is an “employee pension benefit plan” (within the meaning
of Section 3(2) of ERISA) subject to Title IV of ERISA, and neither the Company
nor ERISA Affiliate has ever partially or fully withdrawn from any such plan. No
Employee Plan is a Multiemployer Plan or “single-employer plan under multiple
controlled groups” as described in Section 4063 of ERISA, and neither the
Company nor ERISA Affiliate has ever contributed to or had an obligation to
contribute, or incurred any liability in respect of a contribution, to any
Multiemployer Plan. No Employee Plan is a “multiple employer plan” within the
meaning of Section 210(a) of ERISA or Section 413(c) of the Code.

 

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(d) Each Employee Plan that is a “group health plan” (within the meaning of Code
Section 5000(b)(1)) has been operated in compliance with all applicable Laws,
and with the group health plan continuation coverage requirements of
Section 4980B of the Code and Sections 601 through 608 of ERISA (“COBRA
Coverage”), Section 4980D of the Code and Sections 701 through 707 of ERISA,
Title XXII of the Public Health Service Act and the provisions of the Social
Security Act, to the extent such requirements are applicable. No Employee Plan
or written or oral agreement exists which obligates the Company any Subsidiary
or any ERISA Affiliate to provide health care coverage, medical, surgical,
hospitalization, death or similar benefits (whether or not insured) to any
employee, former employee or director of the Company or any ERISA Affiliate
following such employee’s, former employee’s or director’s termination of
employment with the Company, any Subsidiary or any ERISA Affiliate, other than
COBRA Coverage. All Employee Plans have been and are administered in all
respects in accordance with the Privacy and Security Standards under the Health
Insurance Portability and Accountability Act of 1996. No Employee Plan is a
multiple employer welfare arrangement subject to Section 3(40) of ERISA.

(e) No Employee Plan, excluding any short term disability, non-qualified
deferred compensation or health flexible spending account plan or program, is
self-funded, self-insured or funded through the general assets of the Company or
an ERISA Affiliate, and no Employee Plan that is an employee welfare benefit
plan under Section 3(1) of ERISA is funded by a trust or is subject to
Section 419, 419A or 501(c)(9) of the Code.

(f) Except as set forth in Schedule 4.25(f) of the Disclosure Schedules, no
Employee Plan provides for nonqualified deferred compensation subject to
Section 409A of the Code.

4.26. Environmental Matters. Except as disclosed in Schedule 4.26 of the
Disclosure Schedules, (a) the Company has obtained and holds all Environmental
Permits which are, or could reasonably be expected to be, required under any
Environmental Laws; (b) the Company is in full compliance with the terms and
conditions of all such Environmental Permits; (c) the Company is, and at all
times has been, in full compliance with, and has not been and is not in
violation of or liable under, any Environmental Law; (d) there is not and has
not been any Environmental Condition or any other circumstance, activity,
practice, incident, action or plan which will interfere with or prevent
continued compliance with the terms of such Environmental Permits or which would
give rise to any liability under any Environmental Law or give rise to any
common law or statutory liability; (e) neither the Company nor any agent of the
Company has processed, distributed, used, treated, stored, disposed,
transported, handled, emitted, discharged, or released into the environment, any
Hazardous Substance in violation of Environmental Law; (f) the Company has taken
all actions necessary under the applicable requirements of any Environmental Law
to register any products or materials required to be registered by the Company
(or any of its agents) thereunder; and (g) no underground storage tanks or
surface impoundments exist on any property currently owned or leased or, to the
Knowledge of the Company, formerly owned or leased by the Company. Except as set
forth in Schedule 4.15 of the Disclosure Schedules, there is no Action, Order,
notice, demand letter, action, suit, proceeding, hearing or investigation
instituted by any Person pending or, to the Knowledge of the Company, threatened
against the Company relating in any way to any Environmental Law. The Company
has furnished to the Purchaser all environmental reports, audits, permits,
licenses and registrations relating to the Company, its operation or facilities.

 

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4.27. Internal Controls. Except as set forth in Schedule 4.27 of the Disclosure
Schedules, the Company maintains a system of internal accounting controls
sufficient to provide reasonable assurance that: (a) transactions are executed
in accordance with management’s general or specific authorizations;
(b) transactions are recorded as necessary to permit preparation of financial
statements in accordance with GAAP and to maintain asset accountability;
(c) access to assets is permitted only in accordance with management’s general
or specific authorization; and (d) the recorded accountability for assets is
compared with the existing assets at reasonable intervals and appropriate
actions are taken with respect to any differences. The Company has not been
informed of, and to its Knowledge it does not have, any material weakness or
significant deficiency (as such terms are used by the U.S. Public Company
Accounting Oversight Board) or any important shortcoming in its process for
evaluation of internal controls.

4.28. Brokers. Except as set forth on Schedule 4.28 of the Disclosure Schedules,
neither the Company nor the Sellers has employed any financial advisor, broker
or finder, and neither the Company nor the Sellers has incurred any broker’s,
finder’s, investment banking or similar fees, commissions or expenses in
connection with the transactions contemplated by this Agreement. For purposes of
clarity, the Sellers shall be solely responsible for payment of all such fees,
commissions and expenses if incurred in connection with this transaction.

4.29. Certain Practices. Neither the Company, nor any of its directors,
officers, employees or agents has, directly or indirectly, given or agreed to
give any material rebate, gift or similar benefit to any supplier, customer,
governmental employee or other Person who was, is, or may be in a position to
help or hinder the Company or assist the Company in connection with any actual
or proposed transaction by the Company.

4.30. Certain Interests.

(a) Except as disclosed in Schedule 4.30(a) of the Disclosure Schedule, no
shareholder, officer or director of the Company, and no relative or spouse (or
relative of such spouse) who resides with, or is a dependent of, any such
shareholder, officer or director:

(i) has any direct or indirect financial interest in any competitor, supplier or
customer of the Company or any other Person that has had business dealings or
had any financial interest in any transaction, with the Company; provided,
however, that the ownership of securities representing not more than one percent
(1%) of the outstanding voting power of any competitor, supplier or customer,
and which are also listed on any national securities exchange or traded actively
in the national over-the-counter market, shall not be deemed to be a “financial
interest” so long as the Person owning such securities has no other connection
or relationship with such competitor, supplier or customer;

(ii) owns, directly or indirectly, in whole or in part, or has any other
interest in any tangible or intangible property owned or used by the Company in
the conduct of the Business or otherwise; or

 

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(iii) has outstanding any Indebtedness to the Company (such indebtedness, the
“Affiliated Indebtedness”).

(b) Except as disclosed in Schedule 4.30(b) of the Disclosure Schedules, the
Company has no Liability or any other obligation of any nature whatsoever to,
any officer, director or shareholder of the Company or to any relative or spouse
(or relative of such spouse) who resides with, or is a dependent of, any such
officer, director or shareholder.

4.31. Products. Each of the products produced or sold by the Company in the
conduct of the Business (the “Products”) (a) have been produced or sold, as the
case may be, in compliance in all material respects with all applicable Laws,
contractual commitments and express or implied warranties, (b) is, and at all
relevant times has been, fit for the ordinary purposes for which it is intended
to be used and (c) conforms to any promises or affirmations of fact made on the
container or label for such Product or in connection with its sale. There is no
known design defect with respect to any Products and each of such Products
contains adequate warnings, presented in a reasonably prominent manner, in
accordance with applicable Laws and current industry practice with respect to
its contents and use. The Company has no Product placed with its customers under
an understanding permitting their return to the Company other than pursuant to a
breach of warranty.

4.32. Disclosure. No representation or warranty of the Company or the Sellers
contained in this Agreement and the other Documents, and no statement, report,
or certificate furnished by or on behalf of the Company to the Purchaser or its
agents pursuant to this Agreement (including the Disclosure Schedules) or any of
the other Documents, (a) contains any untrue statement of a material fact or
omits to state a material fact necessary in order to make the statements
contained herein or therein not misleading or (b) omits to state a material fact
necessary in order to provide the Purchaser with full and proper information as
to the Business, financial condition, assets, results of operation or prospects
of the Company and the value of its properties and assets.

ARTICLE V

REPRESENTATIONS AND WARRANTIES OF THE PURCHASER

In order to induce the Sellers to enter into this Agreement and to consummate
the transactions contemplated hereby, the Purchaser represents and warrants to
the Sellers as follows:

5.1. Organization and Qualification. The Purchaser is a corporation duly
organized validly existing and in good standing under the laws of the State of
Delaware and is duly qualified to transact business as a foreign corporation in
each jurisdiction in which the failure to so qualify would have a material
adverse impact on the Purchaser’s ability to purchase the Shares.

 

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5.2. Authorization; Enforceability. The Purchaser has the corporate power and
authority to execute, deliver and perform this Agreement and the other
Documents. The execution, delivery and performance of this Agreement and the
other Documents and the consummation of the transactions contemplated herein and
therein have been duly authorized and approved by the Purchaser, and no other
action on the part of the Purchaser is necessary in order to give effect
thereto. This Agreement and each of the other Documents to be executed and
delivered by the Purchaser have been duly executed and delivered by, and
constitute the legal, valid and binding obligations of, the Purchaser,
enforceable against the Purchaser in accordance with their respective terms,
except as such enforcement may be limited by bankruptcy, insolvency or other
similar laws affecting the enforcement of creditors’ rights generally and except
that the availability of equitable remedies is subject to the discretion of the
court before which any proceeding therefor may be brought.

5.3. No Violation or Conflict. None of (a) the execution and delivery by the
Purchaser of this Agreement and the other Documents to be executed and delivered
by the Purchaser, (b) the consummation by the Purchaser of the transactions
contemplated by this Agreement and the other Documents, or (c) the performance
of this Agreement and the other Documents required by this Agreement to be
executed and delivered by the Purchaser at the Closing, will (i) conflict with
or violate the Certificate of Incorporation or By-Laws of the Purchaser, or
(ii) conflict with or violate any Law, Order or Permit applicable to the
Purchaser.

5.4. Governmental Consents and Approvals. The execution, delivery and
performance of this Agreement and the other Documents by the Purchaser do not
and will not require any consent, approval, authorization, Permit or other order
of, action by, filing with, or notification to, any Governmental Authority.

5.5. Brokers. The Purchaser has not employed any financial advisor, broker or
finder, and has not incurred and will not incur any broker’s, finder’s,
investment banking or similar fees, commissions or expenses, in connection with
the transactions contemplated by this Agreement.

5.6. Filings with Securities and Exchange Commission. Each of the Forms 10-K and
10-Q filed by the Purchaser with the Securities and Exchange Commission (the
“SEC”) during calendar years ended 2005, 2006 and 2007 fairly present, in all
material respects, the financial condition and results of operation of the
Purchaser for the periods covered by such reports. No event has occurred or
developed during calendar years ended 2005, 2006 or 2007 resulting in a Material
Adverse Effect not required to be reported to the SEC. Since the expiration of
the most recent period for which a Form 10-K or 10-Q was prepared and filed by
Purchaser, (a) there has been no change in the assets, liabilities or financial
condition of the Business from that reflected in the Reference Balance Sheet,
except for changes in the Ordinary Course of Business which have not had a
Material Adverse Effect, and (b) there has been no occurrence or development,
individually or in the aggregate, whether or not insured against, with respect
to the business, prospects, condition (financial or otherwise), operations,
property or affairs of the Business which has had a Material Adverse Effect.

 

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5.7. Investment Intent.

(a) The Purchaser is acquiring the Shares solely for the purpose of investment,
for its own account, and not with a view to or for sale in connection with any
distribution thereof within the meaning of Section 2(11) of the Securities Act.
The Purchaser acknowledges that the Shares are being sold to the Purchaser by
each of the Sellers in reliance upon one or more exemptions from registration
contained in the Securities Act and applicable state securities laws. The
reliance by the Sellers upon such exemptions is based in part upon the
representations set forth in this Section 2.3(h).

(b) The Purchaser understands that the Shares have not been registered under the
Securities Act, that there is no established market for the Shares, and that the
Shares must be held indefinitely and cannot be transferred unless it is
subsequently registered under the Securities Act or an exemption from such
registration is available with respect to such transfer.

(c) The Purchaser has such knowledge and experience in financial and business
matters that it is capable of evaluating the merits and risks of an investment
in the Shares and of making an informed investment decision.

(d) The Purchaser is able to bear the economic risk of its investment in the
Shares, to hold the Shares for an indefinite period of time and to afford a
complete loss of its investment in the Shares.

(e) The Purchaser and its representatives, including such counsel, have been
given the opportunity to ask questions of, and receive answers from, the
officers of the Company and the Sellers concerning the terms of the transactions
contemplated by this Agreement and the affairs and the business and financial
condition of the Company.

5.8. Excluded Intellectual Property. Based solely on the Sellers’
representations and warranties set forth in Section 4.22(h) and the Principal
Stockholder’s (as defined in the Non-Competition and Non-Solicitation Agreement)
representation in Section 2(c) of the Non-Competition and Non-Solicitation
Agreement, the Purchaser acknowledges and understands that (a) it is not
acquiring the Excluded Intellectual Property under this Agreement; (b) the
Sellers would not have sold the business to the Purchaser for the Purchase Price
if the Excluded Intellectual Property was included in such sale; (c) the
Excluded Intellectual Property is owned by the Persons identified on Schedule A
to the Non-Competition and Non-Solicitation Agreement; and (d) the Principal
Stockholder may practice the Excluded Intellectual Property subject to the terms
of the Non-Competition and Non-Solicitation Agreement and the Consulting
Agreement.

ARTICLE VI

DOCUMENTS DELIVERED AND ACTIONS TAKEN AT THE CLOSING;

COVENANTS

6.1. Documents to be Delivered by the Sellers; Actions to be Taken by the
Sellers. The obligation of the Purchaser to pay the Purchase Price, purchase the
Shares and consummate the transactions described in this Agreement and any and
all liability of the Purchaser to the Company under this Agreement shall be
subject to the fulfillment on or before the Closing of each of the following,
any of which may be waived by the Purchaser in its sole discretion:

(a) Governmental Approvals. The Purchaser shall have received evidence, in each
instance in form and substance reasonably satisfactory to it, in its sole
discretion, that any and all approvals from Governmental Authorities required
for the lawful consummation of the transactions contemplated by this Agreement
and the other Documents shall have been obtained.

 

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(b) Consents. The Purchaser shall have received evidence, each in form and
substance reasonably satisfactory to the Purchaser, that any and all consents
and approvals from third parties which the Purchaser, in its sole discretion,
deems necessary or desirable for the consummation of the transactions
contemplated by this Agreement and the other Documents, shall have been
obtained.

(c) Company Options and Warrants. The Purchaser shall have received evidence in
form and substance reasonably satisfactory to the Purchaser that (a) all options
(whether vested or unvested), warrants, rights, calls, commitments or agreements
of any character to which the Company is a party or by which it is bound calling
for the issuance of shares of capital stock of the Company or any securities
convertible into or exercisable or exchangeable for, or representing the right
to purchase or otherwise receive, directly or indirectly, any such capital stock
of the Company outstanding immediately prior to the Closing Date have been
converted, exercised or terminated and cancelled immediately prior to the
Closing Date and (b) all stock option plans of the Company have been terminated
and all rights under any provision of any such plan providing for the issuance
or grant of any options or shares of capital stock of the Company have been
terminated.

(d) Opinion of Counsel. The Purchaser shall have received from Milling Benson
Woodward, counsel to the Company, an opinion dated the Closing Date, in
substantially the form agreed to by the parties.

(e) Closing Documents. The Company and the Sellers shall have delivered, either
physically or constructively, to the Purchaser the resolutions, certificates,
documents and instruments set forth below:

(i) each of the Ancillary Agreements to which it is a party;

(ii) a copy of the resolutions duly and validly adopted by the Board of
Directors of the Company and the Sellers, certified by the Secretary or
Assistant Secretary of the Company, authorizing and approving the execution and
delivery and performance of this Agreement, the Ancillary Agreements and the
other Documents and the transactions contemplated hereby and thereby and the
acts of the officers and employees of the Company in carrying out the terms and
provisions hereof;

(iii) all of the books, data, documents, instruments and other records relating
to the Business of the Company set forth in Section 4.3;

(iv) certificates issued by the Secretary of State or other similar appropriate
governmental department, as of a date not more than five (5) Business Days prior
to the Closing, as to the good standing of the Company in its jurisdiction of
incorporation and in each other jurisdiction in which it is qualified to do
business, and, as to its jurisdiction of incorporation, certifying as to its
Articles of Incorporation;

 

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(v) a certificate of the Secretary or an Assistant Secretary of the Company
certifying as to the names and signatures of the officers of the Company
authorized to sign this Agreement and the other Documents to which the Company
is a party; and

(vi) such other documents and instruments as the Purchaser or its counsel may
reasonably request.

(f) Approval of Counsel to the Purchaser. All actions and proceedings under this
Agreement and the other Documents, and all other related matters, shall have
been approved by the Purchaser and its counsel, as to their form and substance.

(g) Stock Certificates. The Sellers shall have delivered the certificates
representing the Shares, duly endorsed to the Purchaser or approved by share
transfer powers of attorney.

(h) Insurance. The Sellers shall have delivered to the Purchaser a certificate
of the respective insurers of the Company that the coverage under the insurance
policies maintained by the Company described in Schedule 4.16 are in full force
and effect.

(i) Releases. Each of the Sellers and such directors and officers of the Company
as the Purchaser may specify shall have executed and delivered the Release.

(j) Non-Competition, Right of First Refusal, Non-Solicitation and
Confidentiality Agreement. Sudhir K. Sinha shall have executed and delivered the
Non-Competition, Right of First Refusal, Non-Solicitation and Confidentiality
Agreement substantially in the form agreed to by the parties (the
“Non-Competition and Non-Solicitation Agreement”).

(k) Employment Agreement. Siddhartha Sinha shall have executed and delivered an
employment agreement with the Purchaser substantially in the form agreed to by
the parties (the “Employment Agreement”).

(l) Consulting Agreement. Sudhir K. Sinha shall have executed and delivered a
consulting agreement with the Purchaser, substantially in the form agreed to by
the parties (the “Consulting Agreement”).

(m) Resignations. The Company shall have delivered to the Purchaser evidence of
the resignations of the members of the Board of Directors of the Company as of
the Closing Date.

(n) Affiliated Indebtedness; Waiver of Change of Control Payment. The Purchaser
shall have received evidence reasonably satisfactory to the Purchaser that
(i) all Affiliated Indebtedness shall have been satisfied and paid in full and
(ii) the payment due and payable to Sudhir K. Sinha as a result of the
transaction contemplated by this Agreement pursuant to the terms of his
employment agreement with the Company shall have been waived.

 

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(o) Assignment of Inventions Agreement. Each of the Sellers (other than Sudhir
K. Sinha) who are employees of the Company shall have executed and delivered the
Purchaser’s form of Assignment of Inventions Agreement substantially in the form
provided by the Purchaser (the “Assignment of Inventions Agreement”).

6.2. Documents to be Delivered by the Purchaser; Actions to be Taken by the
Purchaser. The obligation of the Company and the Sellers to consummate the
transactions described in this Agreement and any and all liability of the
Company and the Sellers to the Purchaser under this Agreement shall be subject
to the fulfillment on or before the Closing Date of each of the following, any
of which may be waived by the Company and the Sellers in their sole respective
discretion:

(a) Opinion of the Purchaser’s Counsel. The Company and the Sellers shall have
received from Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C. an opinion
dated the Closing Date substantially in the form agreed to by the parties.

(b) Purchase Price. The Purchaser shall have delivered the Purchase Price as
provided in Section 2.4(a).

(c) Closing Documents. The Purchaser shall have delivered to the Sellers’
Representative the resolutions, certificates, documents and instruments set
forth below:

(i) each of the Ancillary Agreements to which it is a party;

(ii) a copy of the resolutions duly and validly adopted by the Board of
Directors of the Purchaser, certified by the Secretary of any Assistant
Secretary of the Purchaser, authorizing and approving the execution and delivery
and performance of this Agreement, the Ancillary Agreements and the other
Documents and the transactions contemplated hereby and thereby and the acts of
the officers and employees of the Purchaser in carrying out the terms and
provisions hereof;

(iii) certificates issued by the Secretary of State or other similar appropriate
governmental department, as of a date not more than five (5) Business Days prior
to the Closing Date, as to the good standing of the Purchaser in its
jurisdiction of incorporation and in each other jurisdiction in which it is
qualified to do business, and, as to its jurisdiction of incorporation,
certifying as to its Certificate of Incorporation;

(iv) a certificate of the Secretary or an Assistant Secretary of the Purchaser
certifying as to the names and signatures of the officers of the Purchaser
authorized to sign this Agreement and the other Documents; and

(v) such other documents and instruments as the Company or its counsel may
reasonably request.

(d) Employment Agreements. The Purchaser shall have entered into the Employment
Agreement with Siddhartha Sinha.

(e) Consulting Agreement. The Purchaser shall have entered into the Consulting
Agreement with Sudhir K. Sinha.

 

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(f) Release of Personal Guarantees. The individuals identified on Schedule
6.2(f) of the Disclosure Schedules shall have been released from all personal
guarantees of all Indebtedness of the Company, as identified on Schedule 6.2(f).

6.3. Pre-Closing Covenants.

(a) Performance. Subject to the terms and conditions provided in this Agreement,
each of the parties to this Agreement, including the Company, shall use its
respective reasonable best efforts in good faith to take or cause to be taken as
promptly as practicable all reasonable actions that are within its power to
cause to be performed and fulfilled those of the conditions precedent to its
obligations to consummate the transactions contemplated by this Agreement that
are dependent upon its actions, including obtaining all necessary approvals and
consents and providing all necessary notices, to the end that the transactions
contemplated hereby will be fully and timely consummated.

(b) Conduct of the Business Prior to the Closing. The Company and the Sellers
covenant and agree that, between the date hereof and the Closing, except as
expressly required or permitted by this Agreement or unless the Purchaser shall
otherwise agree in writing, the Company shall, and the Sellers shall cause the
Company to, conduct the Business only in the Ordinary Course of Business. By way
of elaboration, and without in any way limiting, the preceding sentence, the
Company shall, and the Sellers shall cause the Company to, use its best efforts
to: (i) preserve intact the business organization of the Company and the
business organization, properties, assets and rights of the Business,
(ii) operate the Business according to plans and budgets provided to the
Purchaser, (iii) keep available the services of the present officers, employees
and consultants of the Company, (iv) maintain in effect all Contracts and to
preserve the present relationships of the Company with advertisers, sponsors,
customers, licensees, suppliers and other Persons with which the Company has
business relations, (v) maintain, with financially sound and reputable insurers,
insurance for the Business and the Company’s assets against such casualties and
contingencies and of such types and in such amounts consistent with past
practice, (vi) collect outstanding Receivables in good faith in the ordinary
course of business consistent with past practices, and (vii) not engage in any
practice, take any action, fail to take any action or enter into any transaction
which could cause any representation or warranty of the Sellers to be untrue or
result in a breach of any covenant made by the Company or the Sellers in this
Agreement.

(c) Access. From the date hereof until the Closing, upon reasonable notice, the
Sellers shall cause the Company to, and the Company shall and shall cause each
of the Company’s officers, directors, employees, agents, accountants and counsel
to: (i) afford the officers, employees and authorized agents, accountants,
counsel, financing sources and representatives of the Purchaser reasonable
access, during normal business hours, to the offices, properties, plants, other
facilities, books and records of the Company and to those officers, directors,
employees, agents, accountants and counsel of the Company who have any knowledge
relating to the Company or the Business and (ii) furnish to the officers,
employees and authorized agents, accountants, counsel, financing sources and
representatives of the Purchaser such additional financial and operating data
and other information regarding the Business and the assets, properties and
goodwill of the Company as the Purchaser may from time to time reasonably
request.

 

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(d) Standstill. From the date hereof until the earlier of the Closing or the
termination of this Agreement in accordance with its terms, the Company and the
Sellers shall not, nor shall they permit any of their Affiliates to, nor shall
they authorize or permit any of their, officers, directors, employees,
representatives or agents, directly or indirectly, to (i) solicit, facilitate,
initiate, entertain, encourage or take any action to solicit, facilitate,
initiate, entertain or encourage, any inquiries or communications or the making
of any proposal or offer in connection with any acquisition (directly or
indirectly) of all or part of the Company, whether by sale of stock or assets or
by merger (an “Acquisition Proposal”), or (ii) participate or engage in any
discussions or negotiations with, or provide any information to or take any
other action with the intent to facilitate the efforts of, any Person concerning
any possible Acquisition Proposal or any inquiry or communication which might
reasonably be expected to result in an Acquisition Proposal.

6.4. Covenant of the Purchaser. On or before sixty (60) Business Days following
the Closing Date, the Purchaser shall cause the Company to make the Change of
Control Payment to Siddhartha Sinha.

ARTICLE VII

INDEMNIFICATION

7.1. Survival of Representations, Warranties and Covenants.

(a) The representations and warranties contained in this Agreement, shall
survive the Closing and continue in full force and effect for a period of
eighteen (18) months from the Closing Date; provided, that:

(i) the representations and warranties set forth in Sections 3.1, 3.2, 3.3 and
4.1, 4.2, 4.3, 4.4, 4.5 (and the corresponding representations and warranties
set forth in any of the Documents) shall survive the Closing and continue in
full force and effect indefinitely until resolved and satisfied in full;

(ii) the representations and warranties set forth in Section 4.14 shall survive
the Closing until the expiration of the period, if any, during which an
assessment, reassessment or other form of recognized document assessing
liability for Tax, interest or penalties under applicable Tax Laws in respect of
any taxation year to which such representations and warranties extend could be
issued under applicable Tax Laws to the Company or the Purchaser;

(iii) the representations and warranties set forth in Section 4.26 (and the
corresponding representations and warranties set forth in any of the Documents)
shall survive the Closing and continue in full force until expiration of the
limitation periods applicable thereto imposed by Law; and

(iv) a claim for any breach of a representation or warranty contained in this
Agreement or any of the other Documents involving fraud or fraudulent
misrepresentation shall survive indefinitely and may be made at any time
following the Closing Date, subject only to applicable limitation periods
imposed by Law.

 

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(b) Any claims for indemnification asserted in writing as provided for in this
Article VII prior to the expiration date, if any, applicable to the
representation, warranty or covenant with respect to which such claim for
indemnification is made shall survive until finally resolved and satisfied in
full. For convenience of reference, the date upon which any representation or
warranty contained herein shall terminate is referred to herein as the “Survival
Date.”

(c) No third party other than the Indemnified Persons (as defined above) shall
be a third party or other beneficiary of such representations and warranties and
no such third party shall have any rights of contribution with respect to such
representations or warranties or any matter subject to or resulting in
indemnification under this Article VII or otherwise.

(d) All covenants and agreements contained in this Agreement (and in the
corresponding covenants and agreements set forth in any of the Documents) shall
survive the Closing and continue in full force in accordance with their terms.

7.2. Investigation. The representations, warranties, covenants and agreements
set forth in this Agreement and the other Documents shall not be affected or
diminished in any way by any investigation (or failure to investigate) at any
time by or on behalf of, or Knowledge acquired by, the party for whose benefit
such representations, warranties, covenants and agreements were made.

7.3. Sellers’ Indemnification of the Buyer. Each of the Sellers shall,
severally, and not jointly and severally, indemnify and hold harmless the
Purchaser, the Company and their respective Affiliates and respective officers,
directors, employees and shareholders (other than any Seller and their
successors in interest), and their successors and assigns (collectively, the
“Purchaser Indemnified Persons”) from, against and with respect to any and all
Losses arising out of or in any manner incident, relating or attributable to:

(a) any inaccuracy in, or breach of, any representation or warranty of any
Seller contained in this Agreement or in any Schedule attached hereto or in any
other Document delivered by the Company or any of the Sellers pursuant to this
Agreement;

(b) any breach of, or failure by any of the Sellers or the Company to perform or
observe, or to have performed or observed, in full, any covenant, agreement or
condition to be performed or observed by any of them under this Agreement or
under any other Document delivered by the Company or the Sellers pursuant to
this Agreement; or

(c) the generation, manufacture, processing, distribution, use, presence,
treatment, handling, storage, use, transportation, emission, discharge, release,
disposal or arrangement for disposal of any Hazardous Substance (A) in, on,
under or from any Leased Real Property, whether by the Sellers, the Company, any
agent, employee or contractor of the Sellers or the Company, or (B) in, on,
under or from any other property by the Company, or any agent, employee or
contractor of the Company, at any time prior to the Closing Date.

7.4. Purchaser’s Indemnification of the Sellers. The Purchaser hereby agrees to
indemnify and hold harmless the Sellers and the Sellers’ respective officers,
directors, employees and shareholders and their successors and assigns
(collectively, the “Sellers Indemnified Persons”)

 

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from, against and with respect to any and all Losses arising out of or in any
manner, incident, relating or attributable to: (a) any inaccuracy in, or breach
of, any representation or warranty of the Purchaser contained in the Agreement
or in any other Document delivered by the Purchaser pursuant to this Agreement;
(b) any breach of, or any failure by the Purchaser to perform or observe, in
full, any covenant, agreement or condition to be performed by the Purchaser
under this Agreement or under any other Document delivered by the Purchaser
pursuant to this Agreement; and (c) the Company’s post-Closing failure to pay or
discharge any Indebtedness or Liability which, by the terms of this Agreement,
is to be paid or discharged by the Company.

7.5. Limitation on Indemnification. Notwithstanding anything to the contrary in
Section 7.3 or 7.4 (a) no Indemnifying Person shall have any liability to the
corresponding Indemnified Person until the aggregate Losses of such Indemnified
Person exceed $50,000, after which the Indemnified Persons shall be entitled to
all such Losses; and (b) the indemnity provided in this Section 7.3 shall be the
sole and exclusive remedy of the Purchaser Indemnified Persons for Losses
relating to any breach by the Sellers of any representation or warranty,
covenant or other provision contained in this Agreement, and any such remedies
or Losses shall be limited to the Escrow Fund; provided, however, that nothing
contained in this Section 7.5 shall in any way limit, impair, modify or
otherwise affect the rights of the Purchaser Indemnified Persons (including
rights available under the Securities Act or the Exchange Act) nor shall there
be any limitation of liability of the Indemnifying Persons in connection with
any of such rights of the Purchaser Indemnified Persons (A) to bring any claim,
demand, suit or cause of action otherwise available to the Purchaser Indemnified
Persons based upon an allegation or allegations that the Indemnifying Persons,
or any of them, had an intent to defraud or made a willful, intentional or
reckless misrepresentation or willful omission of a material fact in connection
with this Agreement and the transactions contemplated hereby or (B) to enforce
any Order of a Court of competent jurisdiction which finds or determines that
the Indemnifying Persons, or any of them, had an intent to defraud or made a
willful misrepresentation or omission of a material fact in connection with this
Agreement and the transactions contemplated hereby.

7.6. Assertion of Claims. No claim shall be brought under Sections 7.3 or 7.4
hereof unless the Indemnified Persons, or any of them, at any time prior to the
applicable Survival Date, provide the Indemnifying Persons with (a) written
notice of the existence of any such claim, specifying the nature and basis of
such claim and the amount thereof, to the extent known, or (b) written notice
pursuant to Section 7.7 of any Third Party Claim, the existence of which might
give rise to such a claim; provided, that, the failure so to provide such notice
to the Indemnifying Persons will not relieve the Indemnifying Persons from any
liability which they may have to the Indemnified Persons under this Agreement or
otherwise, except to the extent that the Indemnifying Person reasonably
demonstrates that such failure results in the loss or compromise of any rights
or defenses of the Indemnifying Persons and that the Indemnifying Persons were
not otherwise aware of such action or claim. Upon the giving of such written
notice as aforesaid, the Indemnified Persons, or any of them, shall have the
right to commence legal proceedings prior or subsequent to the Survival Date for
the enforcement of their rights under Sections 7.3 or 7.4 hereof, as the case
may be.

 

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7.7. Notice and Defense of Third Party Claims. Losses resulting from the
assertion of liability by third parties (each, a “Third Party Claim”) shall be
subject to the following terms and conditions:

(a) The Indemnified Persons shall promptly give written notice to the
Indemnifying Persons of any Third Party Claim that might give rise to any Loss
by the Indemnified Persons, stating the nature and basis of such Third Party
Claim, and the amount thereof to the extent known. Such notice shall be
accompanied by copies of all relevant documentation with respect to such Third
Party Claim, including, without limitation, any summons, complaint or other
pleading that may have been served, any written demand or any other document or
instrument. Notwithstanding the foregoing, the failure to provide notice as
aforesaid to the Indemnifying Persons will not relieve the Indemnifying Persons
from any liability which they may have to the Indemnified Persons under this
Agreement or otherwise, except to the extent that the Indemnifying Person
reasonably demonstrates that such failure directly results in the loss or
compromise of any rights or defenses of the Indemnifying Persons and that the
Indemnifying Persons were not otherwise aware of such action or claim.

(b) If an Indemnified Person gives notice to the Indemnifying Person pursuant to
Section 7.7(a) of the assertion of a Third Party Claim, the Indemnifying Person
shall be entitled to participate in and assume the defense of such Third Party
Claim using counsel reasonably satisfactory to the Indemnified Person; provided,
that, the Indemnifying Person shall not be entitled to so participate in or
assume the defense of such Third Party Claim if (i) the Indemnifying Person is
also a Person against whom the Third Party Claim is made and the Indemnified
Person determines in good faith that (A) joint representation would be
inappropriate, or present a conflict of interest, or (B) there are legal
defenses available to the Indemnified Party that are different from or in
addition to those available to the Indemnifying Person; (ii) the Indemnifying
Person fails to provide reasonable assurance to the Indemnified Person of its
financial capacity to defend such Third Party Claim and provide indemnification
with respect to such Third Party Claim; or (iii) the Third Party Claim seeks, or
is reasonably likely to seek or result in, the imprisonment of, the imposition
of a criminal penalty or fine against, or the imposition of an equitable remedy
with respect to, the Indemnified Persons. Subject to the foregoing, after notice
from the Indemnifying Person to the Indemnified Person of its election to assume
the defense of such Third Party Claim, the Indemnifying Person shall, so long as
it diligently conducts such defense, (i) not be liable to the Indemnified Person
under this Section 7.7 for any fees of other counsel or any other expenses with
respect to the defense of such Third Party Claim subsequently incurred by the
Indemnified Person in connection with the defense of such Third Party Claim and
(ii) have full control over the conduct of such proceeding. If the Indemnifying
Person assumes the defense of a Third Party Claim, (i) such assumption will
conclusively establish for purposes of this Agreement that the claims made in
that Third Party Claim are within the scope of and subject to indemnification,
and (ii) no compromise or settlement of such Third Party Claim may be effected
by the Indemnifying Person without the Indemnified Person’s written consent
unless (A) there is no finding or admission of any violation of Law or any
violation of the rights of any Person; (B) the sole relief provided is monetary
damages that are paid in full by the Indemnifying Person; and (C) the
Indemnified Person shall have no liability or obligation (including without
limitation any obligation to take or to refrain from taking any action) with
respect thereto. If notice is given to an Indemnifying Person of the assertion
of any Third Party Claim and the Indemnifying Person

 

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does not, within ten (10) days after such notice is given, give notice to the
Indemnified Person of its election to assume the defense of such Third Party
Claim, the Indemnifying Person will be deemed to have waived the right to defend
such Third Party Claim and shall be bound by any determination made in such
Third Party Claim or any compromise or settlement effected by the Indemnified
Person.

(c) Notwithstanding the foregoing, if an Indemnified Person determines in good
faith that there is a reasonable probability that a Third Party Claim may
adversely affect it or its Affiliates other than as a result of monetary damages
for which it would be entitled to indemnification under this Agreement, the
Indemnified Person may, by notice to the Indemnifying Person, assume the
exclusive right to defend, compromise or settle such Third Party Claim, but the
Indemnifying Person will not be bound by any determination of any Third Party
Claim so defended for the purposes of this Agreement or any compromise or
settlement effected without its consent (which shall not be unreasonably
withheld).

(d) Notwithstanding the provisions of Section 8.11, the Sellers hereby consent
to the non-exclusive jurisdiction of any court in which a proceeding in respect
of a Third Party Claim is brought against any Purchaser Indemnified Person for
purposes of any claim that a Purchaser Indemnified Person may have under this
Agreement with respect to such proceeding or the matters alleged therein and
agree that process may be served on the Sellers with respect to such a claim
anywhere in the world.

(e) With respect to any Third Party Claim subject to indemnification under this
Section 7.7: (i) both the Indemnified Person and the Indemnifying Person, as the
case may be, shall keep the other Person fully informed of the status of such
Third Party Claim and any related proceedings at all stages thereof where such
Person is not represented by its own counsel, (ii) the parties agree (each at
its own expense) to render to each other such assistance as they may reasonably
require of each other and to cooperate in good faith with each other in order to
ensure the proper and adequate defense of any Third Party Claim and (iii) the
parties agree to cooperate in such a manner as to preserve in full (to the
extent possible) the confidentiality of all Confidential Information and the
attorney-client and work-product privileges.

ARTICLE VIII

MISCELLANEOUS

8.1. Notices. All notices, requests, consents and other communications hereunder
shall be in writing, shall be addressed to the receiving party’s address set
forth below or to such other address as a party may designate by notice
hereunder, and shall be either (a) delivered by hand, (b) made by facsimile
transmission, (c) sent by recognized overnight courier, or (iv) sent by
certified mail, return receipt requested, postage prepaid.

 

If to the Purchaser to:   

Orchid Cellmark Inc.

4390 U.S. Route One North

Princeton, NJ 08540

Attn: Chief Executive Officer

 

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With copies to:   

Orchid Cellmark Inc.

4390 U.S. Route One North

Princeton, NJ 08540

Attn: Chief Financial Officer

  

Mintz, Levin, Cohn, Ferris,

Glovsky and Popeo, P.C.

One Financial Center

Boston, MA 02111

Attn: John J. Cheney, Esq.

If to the Sellers to:   

Sudhir K. Sinha

c/o ReliaGene Technologies, Inc.

5525 Mounes Street, Suite 101

New Orleans, LA 70123

With a copy to:   

Milling Benson Woodward

909 Poydras Street

Suite 2300

New Orleans, Louisiana 70112

Attn: Charles Snyder, Esq.

All notices, requests, consents and other communications hereunder shall be
deemed to have been (a) if by hand, at the time of the delivery thereof to the
receiving party at the address of such party set forth above, (b) if sent by
facsimile transmission, at the time receipt has been acknowledged by electronic
confirmation or otherwise, (c) if sent by overnight courier, on the next
business day following the day such notice is delivered to the courier service,
or (d) if sent by certified mail, on the 5th business day following the day such
mailing is made.

8.2. Entire Agreement. The Documents and the Non-Disclosure Agreement by and
between the Purchaser and the Company (the “Non-Disclosure Agreement”) embody
the entire agreement and understanding between the parties hereto with respect
to the subject matter hereof and supersedes all prior oral or written agreements
and understandings relating to the subject matter hereof, including without
limitation the Letter of Intent by and between the parties dated as of
September 7, 2007, except as provided in Seciton 8.14. No statement,
representation, warranty, covenant or agreement of any kind not expressly set
forth in the Documents shall affect, or be used to interpret, change or
restrict, the express terms and provisions of this Agreement.

8.3. Binding Effect. This Agreement shall be binding upon and inure to the
benefit of the parties hereto and their respective successors, heirs, personal
representatives, legal representatives, and permitted assigns.

8.4. Assignment. Neither this Agreement, nor any right hereunder, may be
assigned by any of the parties hereto without the prior written consent of the
other parties, except that the Purchaser may assign all or part of its rights
and obligations under this Agreement to one or more direct or indirect
Subsidiaries or Affiliates (in which event, representations and warranties
relating to the Purchaser shall be appropriately modified).

 

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8.5. Modifications and Amendments. The terms and provisions of this Agreement
may be modified or amended only by written agreement executed by all parties
hereto.

8.6. Waivers and Consents. The terms and provisions of this Agreement may be
waived, or consent for the departure therefrom granted, only by written document
executed by the party entitled to the benefits of such terms or provisions. No
such waiver or consent shall be deemed to be or shall constitute a waiver or
consent with respect to any other terms or provisions of this Agreement, whether
or not similar. Each such waiver or consent shall be effective only in the
specific instance and for the purpose for which it was given, and shall not
constitute a continuing waiver or consent. No failure or delay by a party hereto
in exercising any right, power or remedy under this Agreement, and no course of
dealing between the parties hereto, shall operate as a waiver of any such right,
power or remedy of the party. No single or partial exercise of any right, power
or remedy under this Agreement by a party hereto, nor any abandonment or
discontinuance of steps to enforce any such right, power or remedy, shall
preclude such party from any other or further exercise thereof or the exercise
of any other right, power or remedy hereunder. The election of any remedy by a
party hereto shall not constitute a waiver of the right of such party to pursue
other available remedies. No notice to or demand on a party not expressly
required under this Agreement shall entitle the party receiving such notice or
demand to any other or further notice or demand in similar or other
circumstances or constitute a waiver of the rights of the party giving such
notice or demand to any other or further action in any circumstances without
such notice or demand.

8.7. No Third Party Beneficiary. Except as provided in Sections 7.3 or 7.4,
nothing expressed or implied in this Agreement is intended, or shall be
construed, to confer upon or give any Person other than the parties hereto and
their respective heirs, personal representatives, legal representatives,
successors and permitted assigns, any rights or remedies under or by reason of
this Agreement.

8.8. Severability. If any term or other provision of this Agreement is invalid,
illegal or incapable of being enforced by any rule of law, or public policy, all
other conditions and provisions of this Agreement shall nevertheless remain in
full force and effect so long as the economic or legal substance of the
transactions contemplated hereby is not affected in any manner adverse to any
party. Upon such determination that any term or other provision is invalid,
illegal or incapable of being enforced, the parties hereto shall negotiate in
good faith to modify this Agreement so as to effect the original intent of the
parties as closely as possible in an acceptable manner to the end that
transactions contemplated hereby are fulfilled to the extent possible.

8.9. Publicity. No party to this Agreement shall make, or cause to be made, any
press release or public announcement in respect of this Agreement or the
transactions contemplated hereby or otherwise communicate with any news media
without the prior written consent of the Purchaser and the Company, except as
may be required by Law or the requirements of any national securities exchange
or national automated quotation system, in which case the party proposing to
issue such press release or make such public announcement shall use reasonable
efforts to consult in good faith with the other party before issuing any such
press release or making any such public announcement. The parties shall
cooperate as to the timing and contents of any such press release or public
announcement.

 

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8.10. Governing Law. This Agreement and the rights and obligations of the
parties hereunder shall be construed in accordance with and governed by the Law
of the State of Delaware without giving effect to the conflict of law principles
thereof.

8.11. Arbitration.

(a) Any controversy or claim arising out of or relating to this Agreement or the
transactions contemplated hereby after Closing, shall be submitted to and be
finally resolved by arbitration pursuant to the provisions of the United States
Arbitration Act (9 U.S.C. §1 et seq.), to be conducted by the AAA, with such
arbitration to be held in Chicago, Illinois in accordance with the AAA’s
Commercial Arbitration Rules then in effect. Each party hereby irrevocably
agrees that service of process, summons, notices or other communications related
to the arbitration procedure shall be deemed served and accepted by the other
party if given in accordance with Section 8.1. The arbitrators shall render a
judgment of default against any party who fails to appear in a properly noticed
arbitration proceeding. The arbitration shall be conducted by a panel of three
(3) arbitrators selected pursuant to AAA Rules. Any award or decision rendered
in such arbitration shall be final and binding on both parties, and judgment may
be entered thereon in any court of competent jurisdiction if necessary.

(b) Notwithstanding anything to the contrary contained in Section 8.11(a) above,
pending the outcome of any arbitration proceeding, any party hereto shall be
entitled to temporary or preliminary injunctive relief against the other party
in any court of proper jurisdiction with respect to any and all preliminary
injunctive or restraining procedures pertaining to this Agreement or the breach
hereof.

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

8.13. Headings. The descriptive headings contained in this Agreement are for
convenience of reference only and shall not affect in any way the meaning or
interpretation of this Agreement.

8.14. Expenses. Except for the payment by the Purchaser to the Company of a
portion of its legal fees and expenses in connection with this transaction in an
amount equal to $20,000 and the payment by the Purchaser of $100,000 (the
“Upfront Payment”) in accordance with the terms of the letter agreement dated as
of September 7, 2007 by and between the Purchaser and the Company, as amended,
and as otherwise specified in this Agreement, all costs and expenses, including,
without limitation, fees and disbursements of counsel, financial advisors and
accountants, incurred in connection with this Agreement and the transactions
contemplated hereby shall be paid by the party incurring such costs and
expenses, whether or not the Closing shall have occurred.

 

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8.15. Further Assurances. At any time and from time to time after the Closing
Date, at the request of the Purchaser and without further consideration, the
Company shall execute and deliver such other instruments of sale, transfer,
conveyance, assignment and confirmation as may be reasonably requested in order
to more effectively transfer, convey and assign to the Purchaser, and to confirm
the Purchaser’s title to, the Shares.

[Remainder of page intentionally left blank.]

 

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

 

ORCHID CELLMARK INC. By:   /s/ Thomas A. Bologna Name:   Thomas A. Bologna
Title:   President and Chief Executive Officer SELLERS: By:   /s/ Sudhir K.
Sinha Name:   Sudhir K. Sinha By:   /s/ Siddhartha Sinha Name:   Siddhartha
Sinha By:   /s/ Philip Nimmo Name:   Philip Nimmo By:   /s/ Anne Montgomery
Name:   Anne Montgomery By:   /s/ Craig Kelly Name:   Craig Kelly By:   /s/
James Hochadel Name:   James Hochadel By:   /s/ Leontina Kelly Gallagher Name:  
Leontina Kelly Gallagher By:   /s/ Jennifer Kelly White Name:   Jennifer Kelly
White

 

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By:   /s/ Tilak Mallik Name:   Tilak Mallik By:   /s/ Luther and Necia Kelly
Name:   Luther and Necia Kelly By:   /s/ Ramesh Gupta Name:   Ramesh Gupta By:  
/s/ Vimal Kishore Name:   Vimal Kishore By:   /s/ Vinod Thukral Name:   Vinod
Thukral By:   /s/ George Hasseltine Name:   George Hasseltine By:   /s/ Tejas
Godiwala Name:   Tejas Godiwala By:   /s/ George Sins Name:   George Sins
RELIAGENE TECHNOLOGIES, INC,
(with respect to Section 6.3 only) By:   /s/ Sudhir K. Sinha Name:   Sudhir K.
Sinha Title:   President

 

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