Exhibit 10.1


 


Execution
Copy


 


STOCK
PURCHASE AGREEMENT


 


by and
among


 


INSOURCE
HOLDINGS, INC.,


 


VIRTUSA
CORPORATION,


 


DAVID
SHALABY,


 


AND


 


MICHELE
SHALABY


 

















 


TABLE
OF CONTENTS


 


	
   

  	
   

  	
  Page

  
	
   

  	
   

  	
   

  
	
  ARTICLE 1
  PURCHASE AND SALE OF PURCHASED SECURITIES

  	
  1

  
	
  1.1

  	
  Purchase
  and Sale

  	
  1

  
	
  1.2

  	
  The
  Closing

  	
  1

  
	
  1.3

  	
  Working
  Capital Adjustment

  	
  3

  
	
  1.4

  	
  The
  Post-Closing Adjustment Payments

  	
  4

  
	
  1.5

  	
  Post-Closing
  Contingent Purchase Price Adjustments

  	
  4

  
	
  1.6

  	
  Holdback
  Amount Adjustments

  	
  5

  
	
   

  	
   

  	
   

  
	
  ARTICLE
  2 REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND THE SELLER SHAREHOLDERS

  	
  5

  
	
  2.1

  	
  Organization;
  Corporate Power and Licenses of the Company

  	
  5

  
	
  2.2

  	
  Capitalization
  and Related Matters

  	
  5

  
	
  2.3

  	
  Subsidiaries:
  Investments

  	
  6

  
	
  2.4

  	
  Authorization:
  No Breach

  	
  6

  
	
  2.5

  	
  Financial
  Statements

  	
  6

  
	
  2.6

  	
  Absence
  of Undisclosed Liabilities

  	
  7

  
	
  2.7

  	
  Assets

  	
  7

  
	
  2.8

  	
  Tax
  Matters

  	
  7

  
	
  2.9

  	
  Contracts
  and Commitments

  	
  9

  
	
  2.10

  	
  Intellectual
  Property Rights

  	
  11

  
	
  2.11

  	
  Litigation,
  Etc.

  	
  13

  
	
  2.12

  	
  Brokers

  	
  13

  
	
  2.13

  	
  Insurance

  	
  13

  
	
  2.14

  	
  Employees

  	
  14

  
	
  2.15

  	
  ERISA

  	
  15

  
	
  2.16

  	
  Compliance
  with Laws

  	
  17

  
	
  2.17

  	
  Affiliated
  Transactions

  	
  17

  
	
  2.18

  	
  Customers
  and Suppliers

  	
  17

  
	
  2.19

  	
  Real
  Property

  	
  17

  
	
  2.20

  	
  Environmental
  and Safety Matters

  	
  18

  
	
  2.21

  	
  Legal
  Compliance

  	
  18

  
	
  2.22

  	
  Absence
  of Certain Developments

  	
  18

  
	
  2.23

  	
  Bank
  Accounts

  	
  20

  
	
  2.24

  	
  Privacy
  of Individually Identifiable Personal Information

  	
  20

  
	
  2.25

  	
  Investment
  Company Status

  	
  20

  
	
  2.26

  	
  State
  Takeover Laws

  	
  20

  
	
  2.27

  	
  Statements
  True and Correct

  	
  20

  
	
   

  	
   

  	
   

  
	
  ARTICLE 3
  REPRESENTATIONS AND WARRANTIES OF BUYER

  	
  20

  
	
  3.1

  	
  Organization
  of Buyer

  	
  20

  
	
  3.2

  	
  Authorization
  of Transaction

  	
  20

  
	
  3.3

  	
  Noncontravention

  	
  21

  
	
  3.4

  	
  Brokers

  	
  21

  
	
  3.5

  	
  Statements
  True and Correct

  	
  21

  
	
   

  	
   

  	
   

  
	
  ARTICLE 4
  ADDITIONAL AGREEMENTS

  	
  21

  



 


i

















 


	
  4.1

  	
  Expenses

  	
  21

  
	
  4.2

  	
  Tax
  Matters

  	
  21

  
	
  4.3

  	
  Confidentiality; Non-Compete: Non-Solicitation;
  Non-Disparagement

  	
  23

  
	
  4.4

  	
  Litigation
  Support

  	
  25

  
	
  4.5

  	
  Transition
  Services

  	
  26

  
	
  4.6

  	
  Proceeds
  from Purchase Price

  	
  26

  
	
   

  	
   

  	
   

  
	
  ARTICLE 5
  DELIVERABLES

  	
  26

  
	
  5.1

  	
  Company
  Deliverables

  	
  26

  
	
  5.2

  	
  Buyer Deliverables

  	
  27

  
	
   

  	
   

  	
   

  
	
  ARTICLE 6
  REMEDIES FOR BREACHES OF THIS AGREEMENT AND OTHER MATTERS

  	
  27

  
	
  6.1

  	
  Survival
  of Representations and Warranties

  	
  27

  
	
  6.2

  	
  Indemnification
  of Buyer

  	
  28

  
	
  6.3

  	
  Indemnification
  Provisions for Benefit of the Company and the Seller Shareholders

  	
  29

  
	
  6.4

  	
  Matters
  Involving Third Parties

  	
  30

  
	
  6.5

  	
  Manner
  of Payment

  	
  31

  
	
  6.6

  	
  Insurance
  and Third Party Recovery

  	
  31

  
	
  6.7

  	
  Offset

  	
  32

  
	
  6.8

  	
  Delivery
  and Release of Holdback Fund

  	
  32

  
	
   

  	
   

  	
   

  
	
  ARTICLE 7
  CERTAIN DEFINITIONS

  	
  32

  
	
  7.1

  	
  Additional
  Definitions

  	
  37

  
	
   

  	
   

  	
   

  
	
  ARTICLE 8
  MISCELLANEOUS

  	
  38

  
	
  8.1

  	
  No
  Third Party Beneficiaries

  	
  38

  
	
  8.2

  	
  Entire
  Agreement

  	
  39

  
	
  8.3

  	
  Successors
  and Assigns

  	
  39

  
	
  8.4

  	
  Counterparts

  	
  39

  
	
  8.5

  	
  Headings

  	
  39

  
	
  8.6

  	
  Notices

  	
  39

  
	
  8.7

  	
  Governing
  Law

  	
  40

  
	
  8.8

  	
  Amendments
  and Waivers

  	
  40

  
	
  8.9

  	
  Incorporation
  of Schedules

  	
  41

  
	
  8.10

  	
  Construction

  	
  41

  
	
  8.11

  	
  Severability
  of Provisions

  	
  41

  
	
  8.12

  	
  Specific
  Performance

  	
  41

  
	
  8.13

  	
  Successor
  Laws

  	
  41

  
	
  8.14

  	
  Release
  of the Company

  	
  41

  
	
  8.15

  	
  Delivery
  by Facsimile

  	
  41

  
	
  8.16

  	
  Disagreements
  and Disputes

  	
  42

  



 


ii

















 


STOCK PURCHASE AGREEMENT


 


THIS STOCK PURCHASE AGREEMENT (this “Agreement”) is made as of November 4,
2009, by and among Insource Holdings, Inc., a Connecticut corporation, and
each of its Subsidiaries (collectively, except with respect to Section 2.1
herein, the “Company”), Virtusa Corporation, a Delaware corporation (“Buyer”),
and David Shalaby and Michele Shalaby (collectively, the “Seller
Shareholders”).  Terms used herein
and not otherwise defined herein shall have the meaning given such terms in Article 7
hereof.


 


WHEREAS, as described on Schedule 2.2,
the Seller Shareholders own beneficially and of record all of the issued and
outstanding ownership interests in Insource Holdings, Inc. (the “Securities”).


 


WHEREAS, this Agreement contemplates a transaction in which,
pursuant to the terms and subject to the conditions set forth herein, Buyer
will purchase from the Seller Shareholders, and the Seller Shareholders will
sell to Buyer, 80,000 shares of common stock of Insource Holdings, Inc.
(the “Purchased Securities”) for the consideration and on the terms and
conditions, as set forth below.


 


NOW, THEREFORE, in consideration of the mutual covenants and
agreements herein contained and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the Parties hereto,
intending to be legally bound, hereby agree as follows:


 


ARTICLE 1


PURCHASE AND SALE OF PURCHASED SECURITIES


 


1.1                                 Purchase and
Sale.  Pursuant to the terms and
subject to the conditions set forth herein, at the Closing (as defined below)
and in the amounts and for an aggregate purchase price as determined pursuant
to this Article 1, the Seller Shareholders shall sell, assign,
transfer, convey and deliver to Buyer, and Buyer shall accept and purchase from
the Seller Shareholders, the Purchased Securities free and clear of all Liens
as set forth on the attached Schedule 2.2 in exchange for the
Purchase Price (as defined below).  For
the avoidance of doubt, in connection with such purchase and sale, Buyer and
the Seller Shareholders shall collectively own, upon the consummation of the
transactions contemplated by the Transaction Documents, all of the outstanding
Securities free and clean of all Liens.


 


1.2                                 The Closing.


 


(a)                                  The closing of the purchase and sale of
the Purchased Securities (the “Closing”) shall take place at the offices
of Goodwin Procter LLP, 53 State Street, Exchange Place, Boston, MA 02109, at
10:00 a.m. local time on the Business Day following the satisfaction or
waiver of all conditions set forth in Article 5 hereof, or at such
other place or on such other date as is mutually acceptable to Buyer and the
Seller Shareholders.  The date of the
Closing hereunder is referred to herein as the “Closing Date” and the
Closing Date will be deemed to be 11:59 p.m. on the date upon which the
Closing occurs.


 


(b)                                 Subject to the terms and conditions set
forth herein, and on the basis of the representations, warranties, covenants
and agreements set forth herein, and in the following order:


 


(i)                                     at the Closing, the initial purchase
price (the “Purchase Price”) to be paid by Buyer for the Purchased
Securities shall be $7,300,000, plus
(x) an amount equal to the Estimated Working Capital Adjustment (which may
be negative), less (y) any Indebtedness in existence as of the
Closing (after giving effect to any fees, premiums, penalties and other amounts
to be incurred assuming repayment of all Indebtedness in full on such date), as
set forth on 


 

















 


Schedule 1.2(b)(i)(y) (the “Debt Payoff Amounts”).  The Purchase Price shall be paid as provided
in Section 1.2(b)(ii).


 


(ii)                                  at the Closing, Buyer shall deliver, in
exchange for the Purchased Securities, the Purchase Price to the Seller
Shareholders in the amounts as set forth on Schedule 2.2 in
immediately available funds by wire transfer to the account of the Seller
Shareholders, designated by the Seller Shareholders by notice to Buyer, which
notice shall be delivered not later than two Business Days prior to the Closing
Date (or if not so designated, then by certified or official bank check payable
in immediately available funds to the order of the Seller Shareholders in such
amount).


 


For purposes of this agreement, “Estimated Working
Capital Adjustment” shall be equal to an amount, which may be negative,
obtained by subtracting the Target Working Capital from the Estimated Working Capital
(as defined below), and “Estimated Working Capital” shall be equal to
the anticipated Working Capital of the Company as of the Closing Date, as
determined in accordance with Section 1.3.


 


(iii)                               at the Closing, Buyer shall deliver to
the payees of all Debt Payoff Amounts which are required to be paid by the
Company as of the Closing Date and which has reduced the Purchase Price (as
specified in a payoff letter or similar letters delivered by the Company to
Buyer before the Closing Date) an amount to pay all such Debt Payoff Amounts,
if any, with the result that following the Closing there will be no further
monetary obligations of the Company with respect to any Debt Payoff
Amounts.  All amounts payable in cash to
the Seller Shareholders at Closing shall be paid in immediately available
funds, either by wire transfer to one or more accounts designated in writing by
the Company or by bank check issued by a bank approved by the Company, at the
Company’s election.  For the
avoidance of any doubt, payments made with respect to all Debt Payoff Amounts
to the extent paid in accordance with Section 1.2 of this Agreement
shall be treated as a reduction in the Purchase Price to the Seller
Shareholders for Tax purposes.


 


(c)                                  In addition to the foregoing, as applicable,
the Seller Shareholders shall deliver to Buyer or one or more of its designees
such deeds, bills of sale, endorsements, Consents, assignments and other good
and sufficient instruments of conveyance and assignment as Buyer shall deem
reasonably necessary to vest in Buyer or one or more of their designees all
right, title and interest in, to and under the Purchased Securities in the
manner described herein free and clear of all Liens and in form and substance
reasonably satisfactory to Buyer.


 


(d)                                 On the date of Closing, Buyer shall
withhold from the Purchase Price the amount of seven hundred and thirty
thousand dollars ($730,000.00) (the “Holdback Amount”) subject to
adjustment pursuant to Section 1.5 and in accordance with the terms
of this Agreement. The Holdback Amount shall be held for the purpose of the payment to Buyer of the Final Working Capital
adjustment amount and post-closing Purchase Price adjustments, if any such
payments are required by Sections 1.4 and 1.5, and will
serve as one source, but not the exclusive source, for the satisfaction of any
indemnification or other claims of any Buyer Party pursuant to Article 6
(the “Holdback Fund”).  On the
date that is twelve (12) months following the Closing date, provided that no
Buyer Party has any claim for indemnification pursuant to Article 6
hereof, any remaining Holdback Amount shall be released to the Seller
Shareholders from the Holdback Fund.


 


(e)                                  Closing Deliveries. 
At the Closing, subject to and on the terms and conditions set forth in this
Agreement: (a) the Buyer shall deliver to the Company or Seller
Shareholders, as appropriate, each of the documents required to be delivered by
the Buyer pursuant to Section 5.2 that has 


 


2

















 


not been delivered prior to the Closing Date; and (b) the
Company and the Seller Shareholders shall deliver to the Buyer each of the
documents required to be delivered by such Parties pursuant to Section 5.1
that has not been delivered prior to the Closing Date.


 


1.3                                 Working Capital Adjustment.


 


(a)                                  Not more than five (5) Business
Days, but at least one (1) Business Day, prior to the Closing Date, the
Seller Shareholders shall in good faith cause to be prepared a balance sheet of
the Company as of the Closing Date, in form and substance reasonably
satisfactory to Buyer (the “Closing Date Balance Sheet”), which shall be
prepared in a manner consistent with the Latest Balance Sheet and shall include
a statement of the amount of Working Capital which it estimates will exist as
of the close of business on the day immediately preceding the Closing Date
determined for accounting and tax purposes as if such date were the end of the
fiscal year together with a representation that such amount was determined in
accordance with GAAP (the “Estimated Working Capital”).


 


(b)                                 As promptly as practicable, but no later
than 60 days following the last day of the month in which the Closing Date
falls, Buyer will cause to be prepared and delivered to the Seller Shareholders
a certificate setting forth Buyer’s calculation of each component of Closing
Working Capital.  “Closing Working
Capital” means the Working Capital as of the close of business on the day
preceding the Closing Date be prepared in accordance with GAAP.  Buyer will make available to the Seller
Shareholders and their accountant all records and work papers used in preparing
the calculation of Closing Working Capital.


 


(c)                                  If the Seller Shareholders disagree with
Buyer’s calculation of Closing Working Capital delivered pursuant to Section 1.3(b),
the Seller Shareholders may, within 10 days after delivery of the documents
referred to in Section 1.3(b), deliver a written notice (the “Objection
Notice”) to Buyer disagreeing with such calculation and setting forth the
Seller Shareholders’ calculation of such amount.  Any such Objection Notice shall specify those
items or amounts as to which the Seller Shareholders disagree, and the Seller
Shareholders shall be deemed to have agreed with all other items and amounts
contained in Buyer’s calculation of Closing Working Capital delivered pursuant
to Section 1.3(b).  If the
Seller Shareholders do not deliver an Objection Notice within such 10 day
period, then the amount of Closing Working Capital shall be deemed to be
finally determined as set forth on Buyer’s calculation thereof.


 


(d)                                 If an Objection Notice shall be delivered
pursuant to Section 1.3(c), the Seller Shareholders and Buyer
shall, during the 15 days following such delivery, use their reasonable best
efforts to reach agreement on the disputed items or amounts in order to
determine, as may be required, the amount of Closing Working Capital, which
amount shall not be less than the amount thereof shown in Buyer’s calculations
delivered pursuant to Section 1.3(b), nor more than the amount
thereof shown in the Seller Shareholders’ calculation delivered pursuant to Section 1.3(c).  If, during such period, the Seller
Shareholders and Buyer are unable to reach such agreement, they shall promptly
thereafter cause Ernst & Young
or another “big four” independent accounting firm of nationally recognized
standing reasonably satisfactory to the Seller Shareholders and Buyer (who
shall not have any material relationship with the Company, the Seller
Shareholders or Buyer) promptly to review this Agreement and the disputed items
or amounts for the purpose of calculating Closing Working Capital.  In making such calculation, such independent
accountants shall consider only those items or amounts in the Closing Date
Balance Sheet or Buyer’s calculation of Closing Working Capital as to which the
Seller Shareholders have disagreed.  The
independent accountant’s determination will be based solely on presentations by
the Seller Shareholders and Buyer and such independent accountants shall
deliver to the Seller Shareholders and Buyer as promptly as practicable (but in
any event within thirty (30) days of its retention) a report setting forth such
calculation (such date, the “Final Resolution Date”).  Such report shall be final and binding upon
the 


 


3

















 


Seller Shareholders and Buyer.  The cost of such review and report shall be
borne by the Seller Shareholders if the difference between Final Working
Capital (as defined in Section 1.4(c) below) and the Seller
Shareholders’ calculation of Closing Working Capital delivered pursuant to Section 1.3(c) is
greater than the difference between Final Working Capital and Buyer’s
calculation of Closing Working Capital delivered pursuant to Section 1.3(b),
and by Buyer if the first such difference is less than the second such
difference.


 


1.4                                 The Post-Closing Adjustment Payments.


 


(a)                                  Buyer and the Seller Shareholders agree
that they will, and agree to cause their respective independent accountants to
cooperate and assist in the preparation of the Closing Date Balance Sheet and
the calculation of Closing Working Capital and in the conduct of the reviews
referred to in Section 1.3 including without limitation, the making
available to the extent necessary of books, written and electronic records,
work papers and personnel.


 


(b)                                 If the Final Working Capital is less than
the Target Working Capital, the Seller Shareholders shall, within 5 days
after the Final Resolution Date, deliver to Buyer a notice of the aggregate
amount by which the Final Working Capital is less than the Target Working
Capital with a request to release the aggregate amount from the Holdback Fund.


 


(c)                                  If the Final Working Capital exceeds the
Target Working Capital, Buyer shall, within 5 days after the Final Resolution
Date, deliver to the Seller Shareholders a cashier’s or certified check, or
wire transfer of immediately available funds to the account designated by the
Seller Shareholders, in an aggregate amount by which the Final Working Capital
exceeds the Target Working Capital.  “Final
Working Capital” means Closing Working Capital as shown in Buyer’s
calculation delivered pursuant to Section 1.3(b), if no Objection
Notice with respect thereto is duly delivered pursuant to Section 1.3(c);
or, if an Objection Notice is delivered, as agreed by Buyer and the Seller
Shareholders pursuant to Section 1.3(d) or in the absence of
such agreement, as shown in the independent accountants’ calculation delivered
pursuant to Section 1.3(d); provided that, in no event shall Final
Working Capital be less than Buyer’s calculation of Closing Working Capital
delivered pursuant to Section 1.3(b), or more than the Seller
Shareholders’ calculation of Closing Working Capital delivered pursuant to Section 1.3(c).


 


1.5                                 Post-Closing Contingent Purchase Price
Adjustments.


 


(a)                                  Within sixty (60) days after December 31,
2009, Buyer shall prepare and deliver to the Seller Shareholders Buyer’s
calculation of the Company’s and its Subsidiaries’ consolidated actual calendar
year 2009 GAAP revenue (the “CY2009 Revenue”) as prepared in compliance
with Schedule 1.5(a).


 


(b)                                 The Purchase Price shall be adjusted
upward by up to $500,000.00 in the event that the Company’s CY2009 Revenue and
GAAP operating margin meet or exceed the thresholds set forth on Schedule
1.5(b), or downward if the CY2009 Revenue is below the threshold set forth
on Schedule 1.5(b).


 


(c)                                  The post-closing adjustment to the
Purchase Price, if any, payable by Seller Shareholders to Buyer, pursuant to
this Section 1.5 shall be subject to notice to the Buyer to release
such amounts from the Holdback Amount. 
In addition, the post-closing adjustment to the Purchase Price, if any,
payable by Buyer to Seller Shareholders shall be paid in cash to the Seller
Shareholders in accordance with their pro rata portion, as set forth on
Schedule 2.2.  For the avoidance
of doubt, any payments made to the Seller Shareholders pursuant to this Section 1.5
are not intended to be deemed 


 


4

















 


compensation. 
Such payments shall be made in immediately available funds by wire
transfer within twenty (20) Business Days of delivery of the CY2009 Revenue
statement, but in no event later than seventy-five (75) calendar days from December 31,
2009, unless Seller Shareholders dispute any items on the CY2009 Revenue
statement, in which case (i) any payments that are not subject to dispute
shall be made in immediately available funds by wire transfer within twenty
(20) Business Days of delivery of the CY2009 Revenue statement and (ii) any
payments that are subject to dispute shall be paid within twenty (20) Business
Days after Buyer and the Seller Shareholders have resolved such disputed items
to their mutual satisfaction.


 


1.6                                 Holdback Amount Adjustments.  To the extent
that Buyer is required to make payments to the Seller Shareholders pursuant to Sections
1.4 or 1.5 above, then the Holdback Amount shall be proportionately
adjusted by Buyer in connection with any post-closing adjustments to the
Purchase Price made pursuant to Sections 1.4 or 1.5 hereof, such
that following any such payments the Holdback Amount shall equal ten percent
(10%) of the Purchase Price as adjusted pursuant to Sections 1.4 and 1.5
of this Agreement.


 


ARTICLE 2


REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND
THE SELLER SHAREHOLDERS


 


As a material inducement
to Buyer to enter into and perform its obligations under this Agreement, the
Company and the Seller Shareholders jointly and severally represent and warrant
to Buyer that the statements contained in this Article 2 are true
and correct as of the Closing Date.


 


2.1                                 Organization; Corporate Power and
Licenses of the Company.  Insource Holdings, Inc.
is a corporation duly organized, validly existing and in good standing under
the laws of the State of Connecticut, which is the only jurisdiction in which
its ownership of property or conduct of business requires it to be
qualified.  Insource Holdings, Inc.
is and has been since its inception a holding company without employees,
operations, real property or other assets other than (i) minimal cash and (ii) equity
of InSource, LLC and AlfaSource, LLC. 
The Company possesses all requisite corporate power and authority and
all licenses, permits and authorizations necessary to own and operate its
properties, to carry on its businesses as now conducted and to carry out the
transactions contemplated by this Agreement and the Transaction Documents.  Copies of the Company’s certificate of
formation and organizational documents, previously provided to Buyer, reflect
all amendments made thereto at any time prior to the Closing Date and are
correct and complete.


 


2.2                                 Capitalization and Related Matters. 
As of the Closing, the Securities shall consist of the number of
authorized shares of common stock and the number of issued and outstanding
shares of common stock held beneficially and of record by the Seller
Shareholders as set out on Schedule 2.2 hereto.  Except for the Securities, Insource Holdings, Inc.
shall not have outstanding any common stock or preferred stock or other equity
securities or securities convertible or exchangeable for any Securities or
containing any profit participation features, nor shall it have outstanding any
rights or options to subscribe for or to purchase any Securities or any
securities convertible into or exchangeable for any Securities or any equity
appreciation rights or phantom equity plans. 
As of the Closing, all of the Securities shall be validly issued, fully
paid and nonassessable and free and clear of any Liens.  Immediately after the Closing, Buyer shall
own such amount of the outstanding Securities, free and clear of any Liens, as
set out on Schedule 2.2 hereto. 
There are no statutory or contractual equityholder preemptive rights or
rights of refusal with respect to the Securities.  The Company has not violated any applicable
federal or state securities laws in connection with the offer, sale or issuance
of any of its equity securities.  There
are no agreements with respect to the voting or transfer of the
Securities.  All of the Securities are
owned 


 


5

















 


(beneficially and
of record) by the Seller Shareholders. 
No former shareholder of the Company has any claim or rights against the
Company that remains unresolved or to which the Company has or may have (now or
in the future) any Liability.


 


2.3                                 Subsidiaries: Investments. 
All of Insource Holdings, Inc.’s Subsidiaries and investments in
other Persons of any kind are listed on Schedule 2.3.  Except as set forth on Schedule 2.3,
Insource Holdings, Inc. owns directly each of the outstanding shares of
capital stock or other equity interest of each Subsidiary, free and clear of
any encumbrances.  Each Subsidiary is a
corporation or limited liability company duly incorporated or organized,
validly existing and in good standing under the laws of its jurisdiction of
incorporation or organization.  Each
Subsidiary does not own directly or indirectly any interest or investments in
any Person of any kind.  Each Subsidiary
is duly qualified to do business and is in good standing as a foreign
corporation in the jurisdictions listed on Schedule 2.3.


 


2.4                                 Authorization: No Breach. 
Each Seller Shareholder has the power and authority to enter into this
Agreement and to carry out his, her or its obligations hereunder.  The execution and delivery of this Agreement
and the performance by such Seller Shareholder of his, her or its obligations
hereunder have been duly authorized, and no other proceedings on the part of
such Seller Shareholder are necessary to authorize such execution, delivery and
performance.  This Agreement has been
duly executed by such Seller Shareholder and constitutes the valid and legally
binding obligation of such Seller Shareholder enforceable against such Seller
Shareholder in accordance with its terms. 
The execution, delivery and performance of the Transaction Documents to
which the Company and the Seller Shareholders are a party have been duly
authorized by the Company and the Seller Shareholders, as the case may be.  Each Transaction Document to which the
Company or the Seller Shareholders are a party constitutes a valid and binding
obligation of such Person, enforceable in accordance with its terms.  Except as set forth on the attached Schedule 2.21,
the execution and delivery by the Company and the Seller Shareholders of this
Agreement, and all other Transaction Documents to which such Person is a party,
and the fulfillment of and compliance with the respective terms hereof and
thereof, do not and shall not (i) conflict with or result in a breach of
the terms, conditions or provisions of, (ii) constitute a default under, (iii) result
in the creation of any Lien upon the Securities or any asset or property of the
Company pursuant to, (iv) give any third party the right to modify,
terminate or accelerate any obligation under, (v) result in a violation
of, or (vi) require any exemption or other action by or notice or
declaration to, or filing with, or other Consent from, any Governmental Entity
pursuant to, the charter or bylaws or equivalent governing document of the
Company or any Legal Requirement to which the Company or the Seller
Shareholders or any of their Affiliates or any of their assets or properties is
subject, or any Contract, order, judgment or decree to which the Company or the
Seller Shareholders or any of their Affiliates or any of their assets or
properties is subject.


 


2.5                                 Financial Statements. 
Attached hereto as Schedule 2.5 are copies of InSource, LLC’s
(i) unaudited consolidated balance sheet as of September 30, 2009
(the “Latest Balance Sheet”) and the related statements of income and
cash flows for the 9-month period then ended and (ii) reviewed
consolidated balance sheets and related statements of income and cash flows for
the fiscal years ended December 31,
2008, 2007 and 2006.  Each of the
foregoing financial statements (including in all cases the notes thereto, if
any) is accurate and complete in all respects, is consistent with the books and
records of the Company (which, in turn, are accurate and complete in all respects)
and has been prepared in accordance with GAAP, and presents fairly the
financial condition, results of operations, shareholders’ equity and cash flows
of the Company as of the dates and for the periods referred to therein in
accordance with GAAP.  Since the date of
the Latest Balance Sheet, there has not been any adverse change in the
business, financial condition, operating results, assets, Liabilities,
operations, applicable regulations, customer, supplier, employee or sales
representative or distributor relations or business prospects of the Company.


 


6

















 


(a)                                  The accounts receivable of the Company as
set forth on the Latest Balance Sheet or arising since the date thereof are
valid and genuine; and have arisen solely out of bona fide sales and deliveries
of goods, performance of services and other business transactions in the
ordinary course of business.


 


(b)                                 The Company has designed and
maintains such internal accounting controls and procedures as are reasonably
necessary to provide assurance regarding the reliability of the consolidated
financial statements of InSource, LLC, including controls and procedures that
provide reasonable assurance that (i) the financial records and financial
statements are complete and accurate in all respects; (ii) transactions
are executed in accordance with management’s specific authorization where such
authorization is required; (iii) transactions are recorded as necessary to
permit preparation of the consolidated financial statements of the Company and
to maintain accountability for assets and liabilities of the Company; (iv) access
to the assets of the Company is permitted only in accordance with management’s
authorization; (v) the reporting of the assets and liabilities of the
Company is compared with the existing assets and liabilities of the Company at
regular intervals; and (vi) accounts, notes and other receivables are
recorded accurately and proper and adequate procedures are implemented to
effect the collection thereof on a current and timely basis.


 


2.6                                 Absence of Undisclosed Liabilities. 
The Company has no Liability and, to the Seller Parties’ Knowledge,
there is no basis for any proceeding, hearing, investigation, charge, complaint
or claim with respect to any Liability, except for (i) Liabilities
reflected on the face of the Latest Balance Sheet and (ii) Liabilities of
the type reflected on the face of the Latest Balance Sheet which have arisen
since the date of the Latest Balance Sheet in the ordinary course of business
(none of which relates to breach of Contract, breach of warranty, tort,
infringement, violation of or Liability under any Legal Requirements, or any
action, suit or proceeding and all of which will be reflected in Closing
Working Capital).  Except as set forth on
the attached Schedule 2.6, the Company has no outstanding
Indebtedness.


 


2.7                                 Assets.  All of the
Company’s assets are located at the premises disclosed on Schedule 2.19(b).
Except as set forth on the attached Schedule 2.7(a), the Company has
good and marketable title to, or a valid leasehold interest in, the properties
and assets, tangible or intangible, used by it, located on its premises or, if
applicable, shown on the Latest Balance Sheet or acquired thereafter, free and
clear of all Liens, except for Liens for current property taxes not yet due and
payable (“Permitted Liens”). 
Except as described on the attached Schedule 2.7(b), the
Company’s equipment and other tangible assets are in good operating condition
(normal wear and tear excepted) and are fit in all respects for use in the
ordinary course of business.  Except as
described on the attached Schedule 2.7(c), the Company owns, or has
a valid leasehold interest in, all properties and assets necessary or desirable
for the conduct of its businesses as presently conducted and as previously
proposed to be conducted.


 


2.8                                 Tax Matters.


 


(a)                                  The Company has timely filed all Tax
Returns required to be filed by it, each such Tax Return has been prepared in
compliance with all Legal Requirements, and all such Tax Returns are complete
and accurate in all respects.  All Taxes
due and payable by the Company (whether or not shown on any tax return) have
been paid.  The unpaid Taxes of the
Company (A) did not, as of the end of the most recent fiscal month, exceed
the reserve for Tax Liability (rather than any reserve for deferred Taxes
established to reflect timing differences between book and Tax income) set
forth on the face of the Latest Balance Sheet (rather than in any notes
thereto) and (B) do not exceed that reserve as adjusted for the passage of
time through the Closing Date in accordance with the past custom and practice
of Company in filing its Tax Returns. Since the date of the Latest Balance
Sheet, neither the Company nor any of its Subsidiaries has incurred any
liability for Taxes arising from extraordinary gains or losses, as


 


7
















 


that term is used in GAAP, outside the ordinary course
of business consistent with past custom and practice.


 


(i)                                     The Company has complied in all respects
with all statutory provisions, rules, regulations, orders and directions in
respect of valued added or similar tax on consumption, has promptly submitted
accurate returns, maintains full and accurate records and has not been subject
to any interest, forfeiture, surcharge or penalty.


 


(ii)                                  There have been and are no circumstances
or transactions to which the Company has or has been a party such that a
Liability to Tax on any documents or instruments of transfer on which the
Company must rely on to enforce any right is or could become payable by the
Company and all Taxes due and payable by the Company have been paid and all
sums which the Company or its Subsidiary was liable to withhold have been
withheld.


 


(b)                                 Except as set forth in Schedule 2.8(b) attached
hereto:


 


(i)                                     neither the Company nor any member of its
Affiliated Group has consented to extend the time in which any Tax may be
assessed or collected by any taxing authority;


 


(ii)                                  the Company has not paid or become liable
to pay any penalty, fine, or surcharge in relation to Tax;


 


(iii)                               no deficiency or proposed adjustment, which has not
been settled or otherwise resolved, for any amount of Tax has been proposed,
asserted or assessed by any taxing authority against the Company;


 


(iv)                              there is no action, suit, taxing
authority proceeding or audit now in progress; pending or threatened against or
with respect to the Company;


 


(v)                                 the Company will not be required to
include any amount in taxable income or exclude any item of deduction or loss
from taxable income for any taxable period (or portion thereof) ending after
the Closing Date (A) as a result of a change in method of accounting for a
taxable period ending on or prior to the Closing Date, (B) as a result of
any “closing agreement,” as described in Code Section 7121 (or any
corresponding provision of state, local or foreign income Tax law) entered into
on or prior to the Closing Date, (C) as a result of any sale reported on
the installment method where such sale occurred on or prior to the Closing
Date, (D) as a result of any prepaid amount received on or prior to the
Closing Date, (E) as a result of any intercompany
transaction or excess loss account described in Treasury Regulations under Code
§1502 (or any corresponding or similar provision of state, local, or non-U.S.
income Tax law), and (F) as a result of any election under Code Section 108(i).


 


(vi)                              the Company has no Liability for the
payment of Taxes of any other Person, including a Liability of the Company for
the payment of any Tax arising (A) as a result of any expressed or implied
obligation to indemnify another Person, and (B) as a result of the Company
assuming or succeeding to the Tax Liability of any other Person as a successor,
transferee or otherwise;


 


(vii)                           there are no Liens for Taxes (other than for current
Taxes not yet due and payable) upon the assets of the Company;


 


8

















 


(viii)                        the Company does not expect any taxing authority to
claim or assess any amount of additional Taxes against the Company;


 


(ix)                                no claim has ever been made by a taxing
authority in a jurisdiction where the Company does not file Tax Returns that
the Company is or may be subject to Taxes assessed by such jurisdiction;


 


(x)                                   the Company has not made any payment, and
is not and will not become obligated (under any contract entered into on or
before the Closing Date) to make any payment, that will be non-deductible under
Section 280G of the Code (or any corresponding provision of state, local
or foreign income Tax law);


 


(xi)                                Buyer will not be required to deduct and
withhold any amount pursuant to Section 1445(a) of the Code upon the
transfer of any cash or property pursuant to this Agreement;


 


(xii)                             the Company has been a validly electing S corporation
within the meaning of Code Sections 1361 and 1362 at all times during its
existence and the Company will be an S corporation up to and including the
Closing Date.


 


(xiii)                          Schedule 2.8(b) identifies each
Subsidiary of the Company that is a “qualified subchapter S subsidiary” within
the meaning of Code Section 1361(b)(3)(B). 
Each Subsidiary of the Company so identified has been a qualified
subchapter S subsidiary at all times since the date shown on such schedule up
to and including the Closing Date.


 


(xiv)                         the Company shall
not be liable for any Tax under Section 1374 of the Code in connection
with the deemed sale of the Company’s assets (including the assets of any
qualified subchapter S subsidiary) caused by the Section 338(h)(10) Election.  Neither the Company nor any qualified
subchapter S Subsidiary of the Company has, in the past 7 years (A) acquired
assets from another corporation in a transaction in which the Company’s Tax
basis for the acquired assets was determined, in whole or in part, by reference
to the Tax basis of the acquired assets (or any other property) in the hands of
the transferor or (B) acquired the stock of any corporation that is a
qualified subchapter S subsidiary.


 


2.9                                 Contracts and Commitments.


 


(a)                                  Except as set forth on the attached Schedule 2.9(a),
the Company is not a party to or bound by any written or oral:


 


(i)                                     collective bargaining agreement or other
Contract with any labor union;


 


(ii)                                  management agreement or other Contract
for the employment of any officer, individual employee or other Person on a
full time, part-time or consulting basis or providing for the payment of any
cash or other compensation or benefits in connection with the sale of all or a
material portion of its assets or a change of control (other than at-will
employment agreements with its employees which do not commit the Company or its
Subsidiaries to severance, termination or other similar payments);


 


(iii)                               Contract relating to Indebtedness (including any
letter of credit arrangements and guarantees of any obligations) or to the
mortgaging, pledging or otherwise placing a Lien on any of its assets or any of
its equity securities;


 


9

















 


(iv)                              Contract, including, but not limited to,
purchase orders, for the purchase, sale, distribution or marketing of raw
materials, commodities, supplies, products or other personal property or for
the furnishing or receipt of services which either calls for performance over a
period of more than one year or involves consideration in excess of $50,000  per year or $100,000 in the aggregate;


 


(v)                                 Contract which prohibits it from freely
engaging in business anywhere in the world without any limitation or adverse
consequences;


 


(vi)                              Contract under which it has advanced or
loaned any other Person any amounts;


 


(vii)                           Contract under which it is lessee of or holds or
operates any property, real or personal, owned by any other party which
involves annual rental payments of greater than $50,000 or group of such
Contracts with the same Person which involve consideration in excess of
$100,000 in the aggregate;


 


(viii)                        Contract under which it is lessor of or permits any
third party to hold or operate any property, real or personal, owned or
controlled by it which involves consideration in excess of $50,000;


 


(ix)                                license, indemnification or other
Contract with respect to any intangible property (including any Intellectual
Property), other than (A) licenses to the Company or its Subsidiaries of
unmodified, mass-marketed, executable desktop software applications with a
total license fee of less than $2,000 in
the aggregate for any such license or group of related licenses, and (B) customer
Contracts entered into in the ordinary course of business and containing terms
and conditions substantially similar to the terms and conditions of the Company’s
standard customer agreement, copies of which have been previously provided to
the Buyer;


 


(x)                                   any Contract that provides for a warranty
or indemnification with respect to its services rendered or its products sold,
leased or licensed;


 


(xi)                                any Contract with the Company or its
Affiliates;


 


(xii)                             any profit sharing, stock option, stock purchase,
stock appreciation, deferred compensation, severance, incentive compensation or
other plan, program or arrangement for the benefit of its current or former
directors, officers or employees;


 


(xiii)                          Contract that provides any customer with pricing,
discounts or benefits that change based on the pricing, discounts or benefits
offered to other customers of the Company or its Subsidiaries, including,
without limitation, Contracts containing “most favored nation” provisions;


 


(xiv)                         Contract which contains performance guarantees;


 


(xv)                            Contract involving the settlement of any
Action or threatened Action with respect to which, as of the date of this
Agreement, (A) any unpaid amount exceeds $50,000 or (B) conditions
precedent to the settlement have not been satisfied;


 


(xvi)                         Contract appointing any agent to act on its or their
behalf;


 


10

















 


(xvii)                      power of attorney;


 


(xviii)                   Contract relating to the acquisition or sale of the business (or any
material portion thereof), whether or not consummated and including any
confidentiality agreements entered into with respect thereto; or


 


(xix)                           other Contract (or group of related Contracts) the
performance of which involves consideration in excess of $50,000 per year or
$100,000 in the aggregate or which cannot be canceled by the Company or its
Subsidiaries within 30 days notice without premium or penalty or any other
Contract material to the Company, whether or not entered into in the ordinary
course of business.


 


(b)                                 With respect to the Company’s obligations
thereunder and, with respect to the obligations of the other parties thereto,
all of the Contracts set forth or required to be set forth on Schedule 2.9(a) (each
a “Material Contract”) hereto are valid, binding and enforceable against
the Company and enforceable by the Company against the other parties thereto,
in accordance with their respective terms. 
The Company has performed all obligations required to be performed by it
under such Contract and the Company has not received any notice that it is in
default under or in breach of nor in receipt of any claim of default or breach
under any such Contract; no event has occurred which with the passage of time
or the giving of notice or both would result in a default, breach or event of
noncompliance by the Company under any such Contract.  The Company shall have the benefit of each
Material Contract and shall be entitled to enforce each such Contract
immediately following the Closing.


 


(c)                                  A true, correct and complete copy of each
of the written Contracts and an accurate description of each of the oral
Contracts which are referred to on the attached Schedule 2.9(a), have
been delivered to Buyer.


 


(d)                                 Except as set forth on the attached Schedule 2.9(d) during
the preceding five-year period, the Company has not used any name or names
under which it invoiced account debtors, maintained records concerning their
assets or otherwise conducted their business, other than the exact names under
which it has executed this Agreement or the Transaction Documents.


 


2.10                           Intellectual Property Rights.


 


(a)                                  The attached Schedule 2.10(a) sets
forth true and complete lists of (i) all registered and unregistered
marks, patents and copyrights owned by the Company or its Subsidiaries
(each, a “Company Entity”) or used or held for use by a Company Entity
in the business of such Company Entity as currently conducted or as proposed to
be conducted (the “Business”) (such Marks, Patents and Copyrights,
together with all other Intellectual Property owned by a Company Entity or used
or held for use by a Company Entity in the Business, the “Company
Intellectual Property”), (ii) products and/or services
currently or previously researched, designed, developed, manufactured,
performed, licensed, sold, distributed and/or otherwise made commercially
available by a Company Entity (the “Products”), (iii) all licenses or other
agreements under which a Company Entity is granted rights by others in Company Intellectual Property, other than
licenses to a Company Entity of unmodified, mass-marketed, executable desktop
software applications with a total license fee of less than $2,000  in the aggregate for any such license or
group of related licenses, and (iv) all licenses or other agreements under which a
Company Entity has granted rights to others in Company Intellectual Property,
other than customer
Contracts entered into in the ordinary course of business and containing terms
and conditions substantially similar to the terms and conditions of such
Company Entity’s standard customer agreement, copies of which have been
provided to Buyer.


 


11

















 


(b)                                 Each Company Entity exclusively owns and
possesses all right, title and interest in and to all Company Intellectual
Property purported to be owned by such Company Entity and has valid and
enforceable licenses to use all other Intellectual Property necessary or
desirable for the conduct of its Business, in each case without any conflict
with or infringement of the rights of any Person and free and clear of all
Liens, except as disclosed on the attached Schedule 2.10(b).  The Company Entities are and always have been
in full compliance with all licenses set forth or required to be set forth on Schedule 2.10(a) including,
without limitation, all licenses for Open Source Software.


 


(c)                                  All Patents, Marks and Copyrights owned
by any Company Entity that have been issued by, or registered or the subject of
an application filed with, as applicable, the U.S. Patent and Trademark Office,
the U.S. Copyright Office or any similar office or agency anywhere in the
world, have been duly maintained (including the payment of maintenance fees)
and are not expired, cancelled or abandoned and are valid and enforceable.


 


(d)                                 Except as disclosed on Schedule 2.10(d),
there are no pending or threatened claims against any Company Entity alleging
that the operation of the Business or any activity of such Company Entity has
infringed, misappropriated or otherwise conflicted with, or that such Company
Entity, by conducting its Business, would infringe, misappropriate or otherwise
conflict with, any rights of any other Person in Intellectual Property, or that
any Company Intellectual Property is invalid or unenforceable.  To the Knowledge of the Seller Parties, neither the
operation of the Business, nor any activity by the Company, infringes,
misappropriates or violates (or in the past infringed, misappropriated or
violated) any rights of any other Person in Intellectual Property.


 


(e)                                  To the Knowledge of the Seller Parties,
except as set forth on Schedule 2.10(e), no third party is
infringing, misappropriating or violating, or has infringed, misappropriated or
violated, any of the Company Intellectual Property.


 


(f)                                    Except as set forth on Schedule 2.10(f),
no compensation or other consideration is owed to or claimed to be owed to any
third party by any Company Entity due to such Company Entity’s ownership,
license (as licensor or licensee) or use (directly or indirectly via another
party) of the Company Intellectual Property.


 


(g)                                 No loss of Intellectual Property by any
Company Entity (other than by expiration in the ordinary course) is threatened,
pending or reasonably foreseeable and the Company Entities are not aware of any
Intellectual Property owned or used by any third party which reasonably could
be expected to supersede or make obsolete any product or process of the Company
Entities, or to limit the Business.  All
of the computer firmware, computer hardware, and computer software (whether
general or special purpose) and other similar or related items of automated,
computerized, and/or software system(s) used or relied upon by the Company
Entities and in the conduct of its business are in good operating condition,
repair, subject only to the provision of usual and customary maintenance, and
sufficient for the conduct of the Business.


 


(h)                                 All Company Intellectual Property owned
by each of the Company Entities has been (i) developed by employees of
such Company Entity, (ii) developed by independent contractors to such
Company Entity,  (iii) acquired from a third party under a Contract
listed on Schedule 2.10(a) and/or (iv) created as works
made for hire.  Every current and former
officer, director, consultant, independent contractor and employee of the
Company Entities has executed a Contract that assigns to such Company Entity
all of their interests in any and all inventions, improvements,
discoveries, writings and other works of authorship, and information relating
to the Business or any of the products or services being researched, developed,
manufactured or sold by such Company Entity or that may be used with any such
products or services, and all rights in Intellectual Property relating
thereto.  No such Person is in breach of 


 


12

















 


his or her obligations under such Contracts, and no
such Person is party to any conflicting Contract, including any Contract that
restricts them from engaging in activities for the Company Entities.


 


(i)                                     The Company
Entities have not (except in the
ordinary course of business under obligations of confidentiality) disclosed or
permitted to be disclosed or undertaken or arranged to disclose to any Person
other than Buyer any trade secrets owned by any Company Entity or used or held
for use by any Company Entity in the Business (the “Company Trade Secrets”).  The Company Entities have
taken all reasonable security measures to protect the secrecy, confidentiality
and value of the Company Trade Secrets, including, without limitation,
requiring each employee and consultant of the Company Entities and any other
person with access to Company Trade Secrets to execute a binding
confidentiality agreement, copies or forms of which have been provided to the
Buyer and there has not been any breach by any party to such confidentiality
agreements.


 


(j)                                     None of the
Products contain, incorporate, link or call to or otherwise use Open Source
Software, and the incorporation, linking, calling or other use in or by any
such Product of any such Open Source Software does not obligate any Company
Entity to disclose, make available, offer or deliver any portion of the source
code of such Product or component thereof to any third party other than the applicable Open Source
Software.


 


2.11                           Litigation, Etc. 
Except as set forth on Schedule 2.11, there are no Actions
pending or threatened against or affecting the Company or its Subsidiaries (or
pending or threatened against or affecting any of the officers, directors or
employees of the Company or its Subsidiaries with respect to the Company’s or
Subsidiaries’ business or proposed business activities), or pending or
threatened by the Company or its Subsidiaries against any third party, at law
or in equity, or before or by any Governmental Entity (including any actions,
suits, proceedings or investigations with respect to the transactions
contemplated by the Transaction Documents). 
The Company and its Subsidiaries are not subject to any arbitration
proceedings under collective bargaining Contracts or any governmental investigations
or inquiries; and there is no valid basis for any of the foregoing.  The Company and its Subsidiaries are not
subject to any judgment, order or decree of any court or other Governmental
Entity, or have received any opinion or memorandum or legal advice from legal
counsel to the effect that it is exposed, from a legal standpoint, to any
Liability or disadvantage which may be material to their business.  The Company and its Subsidiaries are fully
insured with respect to each of the matters set forth on Schedule 2.11.


 


2.12                           Brokers.  There are no
claims for brokerage commissions, finders’ fees or similar compensation in
connection with the transactions contemplated by this Agreement or any of the
Transaction Documents based on any Contract to which the Company is a party or
otherwise binding upon the Company. 
Except as set forth in Schedule 2.12, the Company has not
made, and the Company is not obligated to make, any payment to any Person in
connection with the transactions contemplated by the Transaction
Documents.  The Company shall pay, and
hold Buyer harmless against, any Liability (including reasonable attorneys’
fees and out-of-pocket expenses) arising in connection with any such claim or
payment.  No rights or benefits of any
Person have been (or will be) accelerated or increased as a result of the
consummation of the transactions contemplated by the Transaction Documents.


 


2.13                           Insurance.  The attached Schedule 2.13
lists and briefly describes each insurance policy maintained for or on behalf
of the Company with respect to its properties, assets and business.  All of such insurance policies are in full
force and effect, and no default exists with respect to the obligations of the
Company under any such insurance policies and the Company has not received any
notification of cancellation of any of such insurance policies.  All
premiums with respect to such insurance policies have been paid through the
date hereof.  There are no pending claims
against such insurance with respect to the Company as to which the insurers
have denied coverage or otherwise reserved rights.  Except as set forth on Schedule 2.13, the
Company has no self-insurance or co-insurance programs.


 


13

















 


2.14                           Employees.  With
respect to the Company: (i) there is no collective bargaining agreement or
relationship with any labor organization; (ii) to the Knowledge of the
Seller Parties, no executive or key employee has any present intention to
terminate their employment; (iii) no labor organization or group of
employees has filed any representation petition or made any written or oral
demand for recognition; (iv) no union organizing efforts are underway or,
to the Knowledge of the Seller Parties, threatened, and no other question
concerning representation exists; (v) no labor strike, work stoppage,
slowdown, or other labor dispute has occurred, and none is underway or, to the
Knowledge of the Seller Parties, threatened; (vi) there is no workman’s
compensation liability, experience or matter pending or, to the Knowledge of
the Seller Parties, threatened; (vii) there is no employment-related
charge, complaint, grievance, investigation, inquiry or Liability of any kind,
pending or, to the Knowledge of the Seller Parties, threatened in any forum,
relating to an alleged violation or breach by the Company of any Legal
Requirements relating to the employment of labor; and, (viii)  no employee
or agent of the Company has committed any act or omission giving rise to any
Liability for any violation identified in subsection (vii) above.  Except as set forth on Schedule 2.14,
neither the Company nor any of the Company’s employees is subject to any
noncompete, nondisclosure, confidentiality, employment, consulting or similar
Contracts relating to, affecting or in conflict with the present or proposed
business activities of the Company.  Schedule 2.14
contains a correct and complete list of all employees and independent
contractors of the Company as of the date hereof, including a list of all
officers and directors of the Company, and whether or not they have executed
and delivered to either of them any (i) Contract providing for the
nondisclosure by such Person of any confidential information of the Company, (ii) Contract
providing for the assignment or license by such Person to the Company of any
Intellectual Property, (iii) any Contract preventing such Person from
competing with the Company during and/or following termination of employment, (iv) any
Contract preventing such Person from soliciting and hiring employees of the
Company during and/or following termination of employment and (v) any
Contract preventing such Person from soliciting and servicing any customers of
the Company.  The classification of each
employee as exempt or nonexempt or an independent contractor, the base salary
or wage rates and any incentive or other form of compensation (including
bonuses thereto) for the employees and independent contractors of the Company
is set forth on Schedule 2.14 and has been accurately furnished in
a letter delivered by the Company to Buyer prior to the execution and delivery
of this Agreement.  All amounts of
bonuses accrued by employees and independent contractors of the Company up to
and including the Closing Date have been properly accrued for.  No current employee or independent contractor
of the Company has advised the Company that he or she has excluded works or
inventions made prior to his or her employment with the Company or its
Subsidiaries from any inventions agreement between the Company and such Person.  All individuals employed by the Company
devote all of their business time and attention to the businesses of the
Company.  The Company is in compliance in
all respects with all applicable laws respecting employment and employment
practices, terms and conditions of employment, 
classification of employees, wages and hours, occupational safety and
health, including, but not limited to, the National Labor Relations Act, the
Immigration Reform and Control Act of 1986, Title VII of the Civil Rights Act
of 1964, the Civil Rights Act of 1991, the Age Discrimination in Employment
Act, the Older Workers Benefit Protection Act, 42 U.S.C. Section 1981, the
Americans With Disabilities Act, the Fair Labor Standards Act, ERISA, the
Occupational Safety and Health Act, the Family Medical Leave Act, and any other
law respecting employment, including, but not limited to, authorization to work
in the United States, equal employment opportunity (including prohibitions
against discrimination, harassment, and retaliation), payment of wages, hours
of work, occupational safety and health, and labor practices.  In the last three years, (i) the Company
has not effected a “plant closing” (as defined in the Worker Adjustment and
Retraining Notification Act (the “WARN Act”)), affecting any site of
employment or one or more facilities or operating units within any site of
employment or facility, (ii) there has not occurred a “mass layoff” (as
defined in the WARN Act) affecting any site of employment or facility of the
Company and its Subsidiaries, (iii) the Company has not engaged in layoffs
or employment terminations sufficient in number to trigger application of, and
notification requirements under, any state, local or foreign law or regulation
similar to the WARN Act and (iii) during the ninety (90) day period
immediately preceding the 


 


14

















 


date
of this Agreement, the Company has not terminated involuntarily the employment
of more than five (5) individuals from employment in positions, excluding
individuals who were “part-time employees” of the Company or its Subsidiaries
within the meaning of the WARN Act, 29 U.S.C. § 2101(a)(8) and applicable
regulations at 20 C.F.R. § 639.3(h).  The
Company shall be responsible for any failure to provide any notice required by
the WARN Act or any state law counterpart. 
Buyer may, but is not obligated to, retain the Company’s employees.  The Company shall use its commercially
reasonable efforts to assist Buyer in determining which employees to retain.  Upon the Closing and effective as of the
Closing Date, the Company shall, at the Company’s cost, terminate the
employment of all employees that are not being retained by Buyer.  Employees retained by Buyer shall, unless
otherwise provided by the Buyer, (i) be employed on an “at-will” basis, (ii) be
subject to the Buyer’s standard policies and procedures applicable to the Buyer’s
employees, and (iii) be required to enter into confidentiality, assignment
of inventions and non-solicitation agreements in a form acceptable to the
Buyer.  In addition, the Seller
Shareholders and those members of the Company’s management team designated by
the Buyer shall be required to enter into non competition agreements in a form
acceptable to the Buyer.


 


2.15                           ERISA.


 


(a)                                  Except as disclosed and set forth on the
attached Schedule 2.15(a), the Company does not maintain, sponsor,
contribute to, provide benefits under or have any actual or potential Liability
with respect to any Employee Benefit Plan.


 


(b)                                 (i) The Employee Benefit Plans have
been and shall be through the Closing Date maintained in compliance in all
respects with their terms and with the requirements of the Code and ERISA and
all other applicable laws and regulations, and the Company has not received
notification to the contrary from the Internal Revenue Service, Department of
Labor, or the PBGC.  (ii) Except as
set forth on the attached Schedule 2.15(b), each Employee Benefit
Plan that is intended to qualify under Section 401(a) or 501(c)(9) of
the Code is so qualified and has received a favorable determination or approval
letter from the Internal Revenue Service with respect to such qualification, or
may rely on an opinion letter issued by the Internal Revenue Service with
respect to a prototype plan adopted in accordance with the requirements for
such reliance, or has time remaining for application to the Internal Revenue
Service for a determination of the qualified status of such Employee Benefit
Plan for any period for which such Employee Benefit Plan would not otherwise be
covered by an Internal Revenue Service determination and no event or omission
has occurred that would cause any Employee Benefit Plan to lose such
qualification.  (iii) No asset of
the Company is subject to any lien under ERISA or the Code, and the Company and
its Subsidiaries have not incurred any Liability under Title IV of ERISA or to
the PBGC.  (iv) No litigation or
governmental administrative proceeding, audit or other proceeding (other than
those relating to routine claims for benefits) is pending or threatened with
respect to any Employee Benefit Plan or any fiduciary or service provider
thereof, and there is no reasonable basis for any such litigation or
proceeding.


 


(c)                                  The Company has never: (i) maintained,
contributed to or had any actual or potential Liability with respect to any
active or terminated, funded or unfunded, Multiemployer Plan or employee
benefit plan subject to Section 302 of Title I of ERISA, Title IV of ERISA
or Section 412 of the Code; (ii) failed to satisfy any minimum
funding requirement, if any, under Section 412 of the Code or Section 302
of ERISA; (iii) failed to make a required contribution or payment to a
Multiemployer Plan (as described in Section 4001 (a)(3) of ERISA); or
(iv) made a complete or partial withdrawal under Sections 4203 or
4205 of ERISA from a Multiemployer Plan.


 


(d)                                 With respect to each Employee Benefit
Plan, all required or recommended (in accordance with historical practices,
including any discretionary matching or profit sharing contributions) 


 


15

















 


payments, premiums, contributions, reimbursements or
accruals for all periods (or partial periods) ending prior to or as of the
Closing Date shall have been made or properly accrued on the Latest Balance
Sheet.


 


(e)                                  The Company does not, and as of the
Closing Date, the Company will not maintain or contribute to any Employee
Welfare Benefit Plan which provides benefits to employees after termination of
employment (other than as required under Section 601 of ERISA or
applicable state law).  The Company has
complied in all respects with the health care continuation requirements of Part 6
of Subtitle B of Title I of ERISA and Section 4980B of the Code.  Each Employee Benefit Plan that provides
health or welfare benefits is fully insured.


 


(f)                                    Attached hereto as Schedule 2.15(f) are
true, complete and correct copies, to the extent applicable of (i) all
documents pursuant to which the Employee Benefit Plans are maintained, funded
and administered, (ii) the two most recent annual reports (Form 5500
series) filed with the Internal Revenue Service (with attachments), (iii) the
two most recent actuarial valuation reports, (iv) the two most recent
financial statements, (v) all governmental rulings, determinations and opinions
(and pending requests for governmental rulings, determinations and opinions), (vi) the
most recent valuation (but in any case at least one that has been completed
within the last calendar year) of the present and future benefit obligations
under each Employee Benefit Plan that provides post-retirement or
post-employment, health, life insurance, accident or other “welfare-type”
benefits, and (vii) all non-routine correspondence to and from any state
or federal agency.


 


(g)                                 Neither the execution and delivery of
this Agreement, the shareholder approval of this Agreement, nor the
consummation of the transactions contemplated hereby could (either alone or in
conjunction with any other event) (i) result in, or cause the accelerated
vesting payment, funding or delivery of, or increase the amount or value of,
any payment or benefit to any employee, officer, director or other service
provider of the Company or any of its Affiliates; (ii) limit the right of
the Company or any of its Affiliates to amend, merge, terminate or receive a
reversion of assets from any Employee Benefit Plan or related trust; (iii) result
in any “parachute payment” as defined in Section 280G(b)(2) of the
Code (whether or not such payment is considered to be reasonable compensation
for services rendered); or (iv) result in a requirement to pay any tax “gross-up”
or similar “make-whole” payments to any employee, director or independent
contractor of the Company or an Affiliate.


 


(h)                                 Neither the Company nor any other “disqualified
person” (within the meaning of Section 4975 of the Code) or “party in
interest” (within the meaning of Section 3(14) of ERISA) has taken any
action with respect to any of the Employee Benefit Plans which could subject
any such Employee Benefit Plan (or its related trust) or the Company or any
officer, director or employee of any of the foregoing to any penalty or tax
under Section 502(i) of ERISA or Section 4975 of the Code.


 


(i)                                     The Company has no Liability (potential
or otherwise) with respect to any “employee benefit plan” (as defined in Section 3(3) of
ERISA) solely by reason of being treated as a single employer under Section 414
of the Code with any other entity.


 


(j)                                     (i) Each Employee Benefit Plan may
be amended, terminated, or otherwise modified by the Company to the greatest
extent permitted by applicable law, including the elimination of any and all
future benefit accruals thereunder and no employee communications or provision
of any Employee Benefit Plan has failed to effectively reserve the right of the
Company or the Affiliate to so amend, terminate or otherwise modify such
Employee Benefit Plan.  (ii) Neither
the Company nor any of its Affiliates has announced its intention to modify or
terminate any Employee Benefit Plan or adopt any arrangement or program which,
once established, would come within the definition of an Employee Benefit
Plan.  (iii) Each asset held under
each Employee Benefit Plan may be liquidated or terminated without the
imposition of any redemption fee, surrender charge or comparable liability.


 


16

















 


(k)                                  Since December 31, 2004 and through December 31,
2008, each Employee Benefit Plan that constitutes in any part a nonqualified
deferred compensation plan within the meaning of Section 409A of the Code
(each, a “NQDC Plan”) has been operated and maintained in accordance
with a good faith, reasonable interpretation of Section 409A of the Code
with respect to amounts deferred (within the meaning of Section 409A of
the Code) after December 31, 2004. 
From and after January 1, 2009, each NQDC Plan has been operated
and maintained in operational and documentary compliance with Section 409A
of the Code and applicable guidance thereunder. 
No payment to be made under any Employee Benefit Plan is, or will be,
subject to the penalties of Section 409A(a)(1) of the Code.


 


(l)                                     No Employee Benefit Plan is subject to
the laws of any jurisdiction outside the United States.


 


2.16                           Compliance with Laws. 
The Company has complied in all respects with, and are currently in
compliance in all respects with, all applicable laws, ordinances, codes, rules,
requirements, regulations and other Legal Requirements of all Governmental
Entities relating to the operation and conduct of its businesses or any of its
properties or facilities, including all laws, ordinances, codes,
rules, requirements, regulations and other Legal Requirements concerning trade
practices, advertising, antitrust or competition or relating to employment of labor and the Company has
not received written notice (whether material or not) of any violation, and/or
non-written notice of a violation, of any of the foregoing.


 


2.17                           Affiliated Transactions. 
Except as set forth on the attached Schedule 2.17, no
officer, director, employee, shareholder or Affiliate of the Company or any
individual related by blood, marriage or adoption to any such individual or any
entity in which any such Person or individual owns any beneficial interest (an “Insider”),
is a party to any Contract with the Company or has any interest in any
property, asset or right used by the Company or necessary or desirable for its
business or has received any funds from the Company since the date of the
Latest Balance Sheet.


 


2.18                           Customers and Suppliers.


 


(a)                                  The attached Schedule 2.18(a) lists
each customer of the Company (including distributors) accounting for more than
2% of the gross revenues of the Company for each of the two most recent fiscal
years (and the revenues generated from such customer).  Schedule 2.18(a) also lists
any additional current customers (including distributors) which the Company
reasonably anticipates shall account for more than 2%  of
the gross revenues of the Company for the current fiscal year.


 


(b)                                 The attached Schedule 2.18(b) lists
each vendor, supplier, service provider and other similar business relation of
the Company from whom the Company purchased greater than $50,000 in goods
and/or services over the course of the 12 months ending December 31, 2008 or the 9-months ended September 30,
2009 the amounts owing to each such Person, and whether such amounts are past
due.  The Company has not received any
indication from any such Person to the effect that, and the Company has no
reason to believe that, such customer or supplier will stop, decrease the rate
of, or change the terms (whether related to payment, price or otherwise) with
respect to, supplying materials, products or services to the Company (whether
as a result of the consummation of the transactions contemplated by this
Agreement or the other Transaction Documents or otherwise).


 


2.19                           Real Property.


 


(a)                                  The Company does not own any real
property.


 


17
















 


(b)                                 Schedule 2.19(b) attached hereto contains a complete
list of all real property leased or subleased by the Company (the “Leased
Real Property”).  The Company has a
valid leasehold interest in each Leased Real Property, subject only to
Permitted Liens.  The Company has
previously delivered to Buyer complete and accurate copies of each of the
leases for the Leased Real Property (the “Leases”).  With respect to each Lease: (i) the
Lease is legal, valid, binding, enforceable and in full force and effect; (ii) neither
the Company, nor any other party to the Lease is in breach or default and no
event has occurred which, with notice or lapse of time or both, would
constitute such a breach or default or permit termination, modification or
acceleration under the Lease; (iii) no party to the Lease has repudiated
any provision thereof; (iv) there are no disputes, oral agreements or
forbearance programs in effect as to the Lease; (v) the Lease has not been
modified in any respect, except to the extent that such modifications are
disclosed by the documents delivered to Buyer; and (vi) the Company and
its Subsidiaries have not assigned, transferred, conveyed, mortgaged, deeded in
trust or encumbered any interest in the Lease.


 


(c)                                  With respect to the Leased Real Property:  (i) the current use of such property and
the operation of the Company’s business does not violate the Lease and (ii) except
for the Lease, there are no leases, subleases, licenses, concessions or other
Contracts, written or oral, granting to any party or parties the right of use
or occupancy of any portion of the Leased Real Property except in favor of the
Company.


 


2.20                           Environmental and Safety Matters. 
The Company has complied in all respects and is in compliance with all
Environmental and Safety Requirements (including all permits and licenses
required thereunder) without any fines or monetary Liabilities attached.  The Company has not received any oral or
written notice of any violation of, or any Liability under, any Environmental
and Safety Requirements.  No facts or
circumstances with respect to the operations through the Closing Date or
facilities of the Company or any predecessor or Affiliate (including any onsite
or offsite disposal or release of, or contamination by, hazardous materials,
substances or wastes) owned or operated by the Company or any predecessor or
Affiliate on or prior to the Closing Date or disposed of prior to such time
will hinder or prevent continued compliance with, or give rise to any Liability
(including any corrective or remedial obligation) under any Environmental and
Safety Requirements.


 


2.21                           Legal Compliance. 
The items described on Schedule 2.21 constitute all of the
permits, filings, notices, licenses, consents, authorizations, accreditation,
waivers, approvals and the like of, to or with any Governmental Entity or any
other Person (collectively, the “Consents”) which are required for the
consummation of the transactions contemplated by the Transaction Documents or
the ownership of the assets or the conduct of the business of the Company and
its Subsidiaries.  All such Consents have
been obtained by the Company, as applicable, as of the Closing and shall remain
in full force and effect after the Closing.


 


2.22                           Absence of Certain Developments. 
Except as set forth in Schedule 2.22 attached hereto, since December 31,
2008, the Company has not:


 


(a)                                  redeemed or repurchased, directly or
indirectly, any shares of capital stock (or other equity securities);


 


(b)                                 issued, sold or transferred any notes,
bonds or other debt securities or any equity securities, securities
convertible, exchangeable or exercisable into equity securities, or warrants,
options or other rights to acquire equity securities, of the Company or its
Subsidiaries;


 


(c)                                  borrowed any amount or incurred or become
subject to any Indebtedness or other Liabilities, except trade payables and
accrued liabilities incurred in the ordinary course of business;


 


18





















 


(d)                                 mortgaged, pledged or subjected to any
Lien any portion of its properties or assets;


 


(e)                                  sold, leased, licensed (as licensor),
assigned, disposed of or transferred (including transfers to the Company or any
employees or Affiliates of the Company) any of its assets (whether tangible or
intangible), except for sales of inventory in the ordinary course of business
and sales of other assets not in excess of $50,000 in the aggregate and other
than licenses granted to customers in the ordinary course of business pursuant
to Contracts containing terms and conditions substantially similar to the terms
and conditions of the Company’s standard customer agreement, copies of which
have been previously provided to the Buyer;


 


(f)                                    disclosed any proprietary confidential
information to any Person that is not subject to any confidentiality agreement;


 


(g)                                 suffered any extraordinary losses or
waived any rights of material value, whether or not in the ordinary course of
business;


 


(h)                                 suffered any theft, damage, destruction
or casualty loss in excess of $50,000, to its assets, whether or not covered by
insurance;


 


(i)                                     entered into, amended, accelerated or
terminated any Contract, taken any other action or entered into any other
transaction involving more than $50,000 or otherwise outside the ordinary
course of business, or entered into any transaction with any Insider;


 


(j)                                     (i) made or granted any bonus or
increase in the compensation or benefits of any employee or officer of the
Company (other than in the ordinary course of business, and not in
contemplation of this transaction or other similar transactions) or (ii) entered
into, amended, modified or terminated any Employee Benefit Plan;


 


(k)                                  conducted its billing and collection of
receivables and inventory purchases other than in the ordinary course of
business or changed its pricing structure;


 


(l)                                     made any capital expenditures or
commitments therefor (other than in the ordinary course of business and in
amounts sufficient to support ongoing business operations);


 


(m)                               delayed or postponed the repair and
maintenance of its properties or the payment of accounts payable, accrued
liabilities and other obligations and Liabilities;


 


(n)                                 made loans or advances to, guarantees for
the benefit of, or any investments in, any Persons in excess of $50,000  in the aggregate;


 


(o)                                 instituted or settled any claim or
lawsuit involving equitable or injunctive relief or the payment by or on behalf
of the Company of more than $50,000 in the aggregate;


 


(p)                                 granted any performance guarantees to its
customers other than in the ordinary course of business and consistent with the
policies and practices disclosed to Buyer;


 


(q)                                 instituted or permitted any change in the
conduct of its business, or any change in its method of purchase, sale, lease,
management, marketing, promotion or operation;


 


19





















 


(r)                                    declared, set aside or paid any dividend
or made any similar distribution, redeemed, purchased or otherwise acquired,
directly or indirectly, any shares of its capital stock (or other equity
securities), or made any loan or entered into any transaction with or
distributed any assets or property to any of its officers, directors,
shareholders, Affiliates or other Insiders, except for compensation paid to
Insiders in the ordinary course of business;


 


(s)                                  acquired any other business or entity (or
any significant portion or division thereof), whether by merger, consolidation
or reorganization or by the purchase of its assets or stock; or


 


(t)                                    committed to do any of the foregoing.


 


2.23                           Bank Accounts.  Schedule 2.23
lists all of the Company’s bank accounts.


 


2.24                           Privacy of
Individually Identifiable Personal Information.  The Company’s collection and use of
individually identifiable personal information complies in all respects with
the Company’s privacy policies, any Contract relating to privacy and all
applicable state, federal and foreign privacy laws.


 


2.25                           Investment
Company Status.  The Company
is not or have not been at any time, nor is the Company controlled by (or has
ever been controlled by) any Person who is (or was at such time), an “investment
company” as such term is defined in the Investment Company Act of 1940, as
amended.  As of the Closing, the Company
will not be an investment company or will not be controlled by a Person who is
an investment company.


 


2.26                           State Takeover
Laws.  The Company is not subject to
any “moratorium,” “fair price,” “business combination,” “control share” or
other anti-takeover laws under the laws of the State of Connecticut.


 


2.27                           Statements True
and Correct.  No
representation, warranty or disclosure made by the Company in any Transaction
Document contains any untrue statement of fact or omits to state any fact
necessary in order to make statements contained herein or therein not
misleading in light of circumstances under which they were made.


 


ARTICLE 3

REPRESENTATIONS AND WARRANTIES OF BUYER


 


As a material inducement
to the Seller Shareholders and the Company to enter into and perform their
respective obligations under this Agreement, Buyer represents and warrants that
the statements contained in this Article 3 are true and correct as
of the Closing Date.


 


3.1                                 Organization of Buyer. 
Buyer is a corporation duly organized, validly existing and in good
standing under the laws of the State of Delaware, which is the only
jurisdiction in which its ownership of property or conduct of business requires
it to be qualified.  The Company
possesses all requisite corporate power and authority and all licenses, permits
and authorizations necessary to own and operate its properties, to carry on its
businesses as now conducted and to carry out the transactions contemplated by
this Agreement and the Transaction Documents.


 


3.2                                 Authorization of Transaction. 
Buyer has full corporate power and authority to execute and deliver the
Transaction Documents and to perform its obligations thereunder.  The execution, delivery and performance of
the Transaction Documents to which Buyer is a party have been duly authorized
by Buyer.  Each of the Transaction
Documents to which Buyer is a party constitutes the valid and legally binding
obligation of Buyer, enforceable in accordance with its terms and conditions.


 


20

















 


3.3                                 Noncontravention.  The execution and delivery by Buyer of this
Agreement, and all other Transaction Documents to which it is a party, and the
fulfillment of and compliance with the respective terms hereof and thereof, do
not and shall not (i) conflict with or result in a breach of the terms,
conditions or provisions of, (ii) constitute a default under, (iii) result
in the creation of any Lien upon the securities or any asset or property of
Buyer pursuant to, (iv) give any third party the right to modify,
terminate or accelerate any obligation under, (v) result in a violation
of, or (vi) require any exemption or other action by or notice or
declaration to, or filing with, or other Consent from, any Governmental Entity
pursuant to, the charter or bylaws or equivalent governing document of Buyer,
or any Legal Requirement to which Buyer or any of its Affiliates or any of
their assets or properties is subject, or any Contract, order, judgment or
decree to which Buyer or any of its Affiliates or any of their assets or
properties is subject.


 


3.4                                 Brokers.  There are no claims for brokerage
commissions, finders’ fees or similar compensation in connection with the
transactions contemplated by this Agreement or any of the Transaction Documents
based on any Contract to which Buyer is a party or otherwise binding upon
Buyer.  Except as set forth in Schedule 3.4,
Buyer has not made, and Buyer is not obligated to make, any payment to any
Person in connection with the transactions contemplated by the Transaction
Documents.  No rights or benefits of any
Person have been (or will be) accelerated or increased as a result of the
consummation of the transactions contemplated by the Transaction
Documents.  Buyer shall pay, and hold the
Company harmless against, any Liability (including reasonable attorneys’ fees
and out-of-pocket expenses) arising in connection with any such claim.


 


3.5                                 Statements True
and Correct.  No
representation, warranty or disclosure made by Buyer in any Transaction
Document contains any untrue statement of fact or omits to state any fact
necessary in order to make statements contained herein or therein not
misleading in light of circumstances under which they were made.


 


ARTICLE 4

ADDITIONAL AGREEMENTS


 


4.1                                 Expenses.  Except as
otherwise provided herein, each Party hereto shall pay all of its own fees,
costs and expenses (including, without limitation, fees, costs and expenses of
legal counsel, investment bankers, brokers or other representatives and
consultants and appraisal fees, costs and expenses) incurred in connection with
the negotiation of this Agreement and the Transaction Documents, the performance
of its obligations hereunder and thereunder and the consummation of the
transactions contemplated hereby and thereby (whether consummated or not).


 


4.2                                 Tax Matters.


 


(a)                                  All transfer, documentary, sales, use,
stamp, registration, notaries fees and other such Taxes and fees (including any
penalties and interest) incurred in connection with this Agreement (including
any gains tax, transfer tax and any similar tax imposed in any state or
subdivisions), shall be paid by the Company. 
The Company will file all necessary Tax Returns and other documentation
with respect to all such transfer, documentary, sales, use, stamp, registration
and other Taxes and fees, and, if required by applicable law, the Company and
Buyer will, and will cause their respective Affiliates to, join in the
execution of any such Tax Returns and other documentation; provided that any expenses of the Company
pursuant to this Section 4.2(a) shall be paid by the Company.


 


21





















 


(b)                                 After the Closing, the Buyer shall
prepare or cause to be prepared and file or cause to be filed all Tax Returns
for the Company for all periods ending on or prior to the Closing Date which
are required to be filed after the Closing Date.  The Buyer shall prepare such Tax Returns in a
manner consistent with past Tax Returns except as required by applicable law or
change in circumstance.


 


(c)                                  Buyer shall file or cause to be filed all
Tax returns that are required to be filed, and, subject to Section 6.2(a)(iv),
pay or cause to be paid, all Taxes that are required to be paid by or with
respect to the income, assets or operations of the Company for any Tax period
beginning and ending after the Closing Date (the “Post-Closing Tax Period”)
..


 


(d)                                 The Company and Buyer shall cooperate fully, as and
to the extent reasonably requested by the other party, in connection with the
filing of Tax Returns pursuant to this Section 4.2and any audit,
litigation, or other proceeding with respect to Taxes.  Such cooperation shall include the retention
and (upon the other party’s request) the provision of records and information
which are reasonably relevant to any such audit, litigation, or other
proceeding, and making employees reasonably available on a mutually convenient
basis to provide additional information and explanation of any material
provided hereunder.


 


(e)                                  At the sole option of the Buyer at any
time following the Closing, the Company and the Seller Shareholders shall join
with Buyer in making an election under Code Section 338(h)(10) (and
any corresponding election under state, local, and non-U.S. tax law) with
respect to the purchase and sale of the Company’s stock hereunder (collectively
a “Section 338(h)(10) Election”).  The Seller Shareholders shall cooperate fully
with the Buyer in making the Section 338(h)(10) Election, including
executing and filing IRS Form 8023 and all other forms, returns,
elections, schedules, and documents required to effect the Section 338(h)(10) Election
(the “Forms”) and delivering the Forms to the Buyer promptly upon
request.  The Buyer shall be authorized
to complete the Forms in accordance with the provisions of this Agreement and
file the Forms with the applicable Governmental Entities.  If the Buyer opts to make the Section 338(h)(10) Election,
the Parties agree that, except as required by a final determination with any
Tax or applicable judicial authority, they will not take, or cause or permit to
be taken, any action in connection with the filing of any Tax Return or
election on behalf of the Seller Shareholders, Buyer, or Company, which would
be inconsistent with, prejudice, or adversely affect the Section 338(h)(10) Election.  The Seller Shareholders shall include any
income, gain, loss, deduction, or other tax item resulting from the Section 338(h)(10) Election
on their Tax Returns to the extent required by applicable law.  The Seller Shareholders shall also pay any
Tax imposed on the Company attributable to the making of the Section 338(h)(10) Election,
including (i) any Tax imposed under Code Section 1374, (ii) any
Tax imposed under Reg. Section 1.338(h)(10)-1(d)(2), or (iii) any
state, local, or non-U.S. Tax imposed on the Company’s gain, and Seller
Shareholders shall indemnify Buyer and Company against any Adverse Consequences
arising out of any failure to pay any such Taxes.


 


(f)                                    If the Buyer elects to make a Section 338(h)(10) Election,
the Buyer, Company, and Seller Shareholders agree that the Purchase Price and
the liabilities of the Company and its qualified subchapter S Subsidiaries
(plus other relevant items) will be allocated to the assets of the Company and
its qualified subchapter S Subsidiaries for all purposes (including Tax and
financial accounting) in a manner consistent with Code Sections 338 and 1060
and the regulations thereunder, based on an allocation schedule that will be
prepared by the Buyer within 30 days of the Closing Date.  The Buyer, Company, and Seller Shareholders
shall file all Tax Returns (including amended returns and claims for refund)
and information reports in a manner consistent with such values.


 


(g)                                 The Company and Seller Shareholders shall
not revoke the Company’s election to be taxed as an S corporation within the
meaning of Code Sections 1361 and 1362. 
The Company and 


 


22





















 


Seller Shareholders shall not take or allow any action
that would result in the termination of the Company’s status as a validly
electing S corporation within the meaning of Code Sections 1361 and 1362.


 


(h)                                 If the Buyer
elects to make a Section 338(h)(10) Election and such election
reduces the after-Tax net proceeds that the Seller Shareholders would have
received had the Section 338(h)(10) Election not been made by more
than $120,000.00, then the
Buyer shall pay, in cash,  to the Seller Shareholders (x) the amount of additional
consideration necessary to cause the Seller Shareholders after-Tax net proceeds
from the sale of the Company’s stock with the Section 338(h)(10) Election
to be equal to the after-Tax net proceeds that Seller Shareholders would have
received had the Section 338(h)(10) Election not been made minus
(y) $120,000.00, taking into account all appropriate state, federal, and
local Tax implications (the “Tax Adjustment”).  The aggregate amount of the Tax Adjustment
shall be paid to the Seller Shareholders at the time that the Seller
Shareholder’s Tax Returns are due.  The
Seller Shareholders will provide the Company with a schedule computing the
amount of the Tax Adjustment and such other documents as may be reasonably
necessary to evidence the amount of such Tax Adjustment for the taxable year of
the Seller Shareholders in which the Closing occurs and an estimate of such Tax
Adjustment for the 2010 taxable year of the Seller Shareholders within 30 days
after the Parties have agreed to the allocation of the Purchase Price.  For Tax purposes, the Parties agree to treat
the Tax Adjustment as an adjustment to the Purchase Price.


 


(i)                                     If and to the
extent that the Buyer receives any tax benefit in a Post-Closing Tax Period
attributable to the payments in respect of the LTIP Obligations made at
Closing, the Company will make a payment equal to fifty percent (50%) of such
tax benefits to the Seller Shareholders at the time such tax benefits are
actually realized.  For Tax purposes, the
Parties agree to treat any such payments as an adjustment to the Purchase
Price.


 


4.3                                 Confidentiality; Non-Compete: Non-Solicitation;
Non-Disparagement. In further consideration for the payment of the
purchase price hereunder and in order to protect the value of the Purchased
Securities purchased by Buyer (including, without limitation, the goodwill
inherent in the Company as of the Closing Date), upon the Closing of the
transactions contemplated by this Agreement, each Seller Shareholder agrees as
follows:


 


(a)                                  As an owner of the Securities, and an
employee of the Company or the Company’s Subsidiary, each Seller Shareholder
has had access to and contributed to information and materials of a highly
sensitive nature (including Confidential Information, as defined below) of the
Company, its current and future, direct and indirect, Subsidiaries, parent
(including, without limitation, Buyer), and related entities (each of the
foregoing, an “INSOURCE Entity,” and collectively, the “INSOURCE
Group”).  Each Seller Shareholder
agrees that unless such Seller Shareholder first secures the written consent of
an authorized representative of the Company and Buyer, such Seller Shareholder
shall not use for his or herself or anyone else, and shall not disclose to
others, any Confidential Information, except as may be necessary for him or her
to carry out his or her duties or except to the extent such use or disclosure
is required by law or order of any governmental authority (in which event each
Seller Shareholder shall, to the extent practicable, inform the Company in
advance of any such required disclosure, shall cooperate with the Company in
all reasonable ways in obtaining a protective order or other protection in
respect of such required disclosure, and shall limit such disclosure to the
extent reasonably possible while still complying with such requirements).  Each Seller Shareholder shall use reasonable
care to safeguard Confidential Information and to protect it against
disclosure, misuse, espionage, loss and theft.


 


(b)                                 (i) Each Seller Shareholder further
agrees that, at any time requested, such Seller Shareholder shall promptly
deliver to the Company all Confidential Information and other Intellectual
Property of the INSOURCE Group in such Seller Shareholder’s possession and
control and all copies 


 


23





















 


thereof, in whatever form or medium, including,
without limitation, written records, optical and magnetic media, and all other
materials containing or embodying any such Intellectual Property.  If the Company requests, each Seller
Shareholder shall promptly provide written confirmation that such Seller
Shareholder has returned all such materials.


 


(c)                                  Each Seller Shareholder agrees that the
Company and its Subsidiaries have received from third parties their
confidential or proprietary information subject to a duty on the Company’s and
its Subsidiaries’ part to maintain the confidentiality of such information and
to use it only for certain limited purposes. 
Each Seller Shareholder agrees that he or she owes the Company, its
Subsidiaries and such third parties a duty to hold all such confidential or
proprietary information in the strictest confidence and not to disclose it to
any person, firm, or corporation (except as necessary in carrying out such
Seller Shareholder’s future work for the Company or its Subsidiaries consistent
with the Company’s or Subsidiaries’ agreement with such third party) or to use
it for the benefit of anyone other than for the Company, its Subsidiaries or
such third party (consistent with the Company’s or Subsidiaries’ agreement with
such third party) without the express authorization of the Company or its
Subsidiaries.


 


(d)                                 Each Seller Shareholder acknowledges that
he or she shall become familiar with Confidential Information concerning the
INSOURCE Group and that his or her services have been and shall be of special,
unique and extraordinary value to the INSOURCE Group.  Therefore, each Seller Shareholder agrees that
during the period beginning on the date hereof and ending on the three (3) year
anniversary of the Closing (the “Noncompete Period”), he or she shall
not (and shall not take any steps toward or preparations in respect of),
directly or indirectly, either for himself or herself or for any other person,
partner, officer, director, consultant, agent, employee, or stockholder of any
company or other commercial enterprise (i) engage in any business or
accept employment with any Competitor or (ii) provide any services whether
directly or indirectly and whether on such Seller Shareholder’s own or on
behalf of any InSource Competitor to any person or entity that was either a
Company Customer during the term of such Seller Shareholder’s term of
employment with the Company or Buyer (as the case may be), or a Prospective
Customer.  For purposes of this
Agreement, the term “participate” includes any direct or indirect interest in
any enterprise, whether as an officer, director, employee, partner, sole
proprietor, agent, representative, independent contractor, seller, franchisor,
franchisee, creditor, or owner; provided
that the foregoing activities shall not include passive ownership of less than
3% of the stock of a publicly-held corporation whose stock is traded on a
national securities exchange or in the over-the-counter market by each Seller
Shareholder.  Each Seller Shareholder
agrees that this covenant is reasonable with respect to its duration,
geographical area and scope.


 


(e)                                  During the Noncompete Period, each Seller
Shareholder shall not directly or indirectly through another entity (i) induce
or attempt to induce any employee of the INSOURCE Group to leave the employ of
the INSOURCE Group, (ii) hire or employ any person who was an employee of
the INSOURCE Group at any time during the six month period immediately prior to
the date hereof, (iii) call on, solicit, or service any customer,
supplier, licensee, licensor or other business relation or prospective client
of the INSOURCE Group with respect to products and/or services that have been
provided by the INSOURCE Group, are currently being provided by the INSOURCE
Group or which the INSOURCE Group is currently in the process of developing or (iv) induce
or attempt to induce any customer, supplier, licensee, licensor or other
business relation of the INSOURCE Group to cease doing business with the
INSOURCE Group.


 


(f)                                    Each Seller Shareholder acknowledges
that, in the course of his or her employment with the INSOURCE Group, he or she
has and will become familiar with the Confidential Information of the INSOURCE
Group.  Each Seller Shareholder further
acknowledges that the scope of the business of the INSOURCE Group is
independent of location (such that is not practical to limit the restrictions
contained in this Section 4.3 to a specified country, city, or part
thereof) and, that such Seller 


 


24





















 


Shareholder has had direct or indirect responsibility,
oversight or duties with respect to all of the businesses of the INSOURCE Group
and its and their current and prospective employees, vendors, customers,
clients and other business relations, and that, accordingly, the restrictions
contained in this Section 4.3 are reasonable in all respects and
necessary to protect the goodwill and Confidential Information of the INSOURCE
Group and that, without such protection, the INSOURCE Group customer and client
relationship and competitive advantage would be materially adversely
affected.  It is specifically recognized
by each Seller Shareholder that his or her services to the INSOURCE Group are
special, unique, and of extraordinary value, that the Company and the other
members of the INSOURCE Group have a protectable interest in prohibiting each
Seller Shareholder as provided in this Section 4.3, that such
Seller Shareholder was significantly responsible for the creation and
preservation of the INSOURCE Group goodwill, and that money damages are
insufficient to protect such interest, and that such prohibitions would be
necessary and appropriate without regard to payments being made to each Seller
Shareholder hereunder.  Each Seller
Shareholder further acknowledges that the restrictions contained in this Section 4.3
do not impose an undue hardship on him or her and, since he or she has general
business skills which may be used in industries other than that in which each
INSOURCE Entity conducts its business and do not deprive either Seller
Shareholder of his or her livelihood.


 


(g)                                 If, at the time of enforcement of this
Agreement, a court or arbitrator’s award holds that the restrictions stated in
this Section 4.3 are unreasonable under circumstances then
existing, the Parties hereto agree that the maximum period, scope or
geographical area reasonable under such circumstances shall be substituted for
the stated period, scope or area.  The
Parties hereto agree that money damages would not be an adequate remedy for any
breach of this Agreement.  Therefore, in
the event of a breach or threatened breach of any provisions of this Section 4.3
that is continuing, the Company, its successors and assigns and any third party
beneficiary to this Agreement may, in addition to other rights and remedies
existing in their favor, apply to any court of competent jurisdiction for
specific performance and/or injunctive or other relief in order to enforce, or
prevent any violations of, the provisions hereof (without posting a bond or
other security).  In addition, in the
event of a breach of violation by each Seller Shareholder of this Section 4.3,
the Noncompete Period shall be tolled until such breach or violation has been
duly cured.  Each Seller Shareholder
agrees that the restrictions contained in this Section 4.3 are
reasonable.


 


(h)                                 Each Seller Shareholder acknowledges and
represents that: (i) sufficient consideration has been given by each party
to this Agreement to the other as it relates hereto; (ii) he or she has
consulted with independent legal counsel regarding his or her rights and
obligations under this Section 4.3, (iii) that he or she fully
understands the terms and conditions contained herein, and (iv) that the
agreements in this Section 4.3 are reasonable and necessary for the
protection of the Company and the other members of the INSOURCE Group and are
an essential inducement to Buyer to enter into this Agreement.


 


(i)                                     Each Seller Shareholder further
represents and warrants that: (i) the execution, delivery and performance
of this Agreement does not and will not conflict with, breach, violate or cause
a default under any contract, agreement, instrument, order, judgment or decree
to which either Seller Shareholder is a party or by which he or she is bound; (ii) this
Agreement is a valid and binding obligation on each Seller Shareholder and is
enforceable in accordance with its terms; and (iii) each Seller
Shareholder is not a party to or bound by any employment agreement, noncompete
agreement or confidentiality agreement with any Person or entity other than the
Company.


 


4.4                                 Litigation Support. 
In the event that, and for so long as, any Party is actively contesting
or defending against any charge, audit, complaint, action, suit, proceeding,
hearing, investigation, claim, or demand in connection with (i) any
transaction contemplated by any of the Transaction Documents or (ii) any
fact, situation, circumstance, status, condition, activity, practice, plan,
occurrence, event, incident, 


 


25

















 


action, failure to
act, or transaction on or prior to the Closing Date involving the Company, each
of the other Parties will reasonably cooperate with such contesting or
defending Party and its counsel in the contest or defense, make available their
personnel, and provide such testimony and access to their books and records as
shall be reasonably necessary in connection with the contest or defense, all at
the sole cost and expense of the contesting or defending Party (unless the
contesting or defending Party is entitled to indemnification therefor under the
provisions of this Agreement).


 


4.5                                 Transition Services. 
The Seller Shareholders will not in any manner take any action which is
designed, intended or might reasonably be anticipated to have the effect of
discouraging customers, suppliers, vendors, employees (other than as
contemplated hereby), service providers, lessors, licensors and other business
associates from maintaining the same business relationships with the Company
and its Subsidiaries after the date of this Agreement.


 


4.6                                 Proceeds from Purchase Price. 
From and after the Closing, Seller Shareholders agree not to use any of
the proceeds from the Purchase Price to make any payments to the employees of
the Company.


 


ARTICLE 5

DELIVERABLES


 


5.1                                 Company Deliverables.  At
the Closing, the Seller Shareholders and Company shall deliver the following
documents to the Buyer:


 


(a)                                  Evidence that all filings, notices,
licenses, permits and other Consents of, to or with, any Governmental Entity or
any other Person that are required by the Company (i) for the consummation
of the transactions contemplated by the Transaction Documents; (ii) in
order to prevent a breach of or default under or a right of termination or
modification of any Contract to which the Company is a party or to which any
portion of the property of the Company is subject; or (iii) for the
conduct of the business of the Company as heretofore conducted following the
Closing.


 


(b)                                 All payoff letters and releases relating
to any Debt Payoff Amounts as set forth on Schedule 5.1(b) and
releases from third parties of any and all Liens relating to the assets and
property of the Company, as set forth on Schedule 5.1(b).


 


(c)                                  The employment agreement set forth on Exhibit A
hereto executed by Mr. Shalaby.


 


(d)                                 The agreements in the forms set forth on Exhibit B
attached hereto executed by the key employees, the Company and the Seller
Shareholders.


 


(e)                                  Certified copies of the Company’s
Certificate of Formation as filed with the Secretary of State of Connecticut;
certified copies of the resolutions duly adopted by the Company’s Board and its
shareholders authorizing the Company’s execution, delivery and performance of
this Agreement and the Transaction Documents, the Company’s corporate records,
stock ledgers and minute books and such other documents or instruments as Buyer
may reasonably request or may be required to effect the transactions
contemplated hereby.


 


(f)                                    The opinion, dated as of the Closing
Date, from Nicolai Law Group, P.C., counsel for the Company, covering matters
pertaining to this Agreement and the other Transaction Documents as set forth
on Exhibit C attached hereto.


 


26





















 


(g)                                 A certificate, dated as of the Closing
Date, executed by an authorized officer of the Company certifying that there
are no other expenses owed by the Company with respect to the transactions
contemplated by this Agreement.


 


(h)                                 A certificate, dated of the Closing Date,
executed by an authorized officer of the Company establishing an exemption from
withholding Tax under Section 1445 of the Code in accordance with the
Treasury Regulations promulgated thereunder, as set forth on Exhibit D
hereto.


 


(i)                                     Executed acknowledgements from all
employees who participated in the Long Term Incentive Plan that they have
received all required payments due to such employees pursuant to such Employee
Benefit Plan, as set forth on Exhibit E hereto and satisfactory
evidence, in the Buyer’s discretion, that the Long Term Incentive Plan has been
terminated and is no longer in force or effect.


 


(j)                                     The duly executed stock powers from the
Seller Shareholders, free and clear of all Liens, together with any stock
transfer stamps or receipts for any transfer taxes required to be paid thereon.


 


(k)                                  The resignations of each director of the
Company, effective as of the Closing Date.


 


5.2                                 Buyer Deliverables.  At the Closing, the Buyer shall deliver the
following documents and payments to the Company and the Seller Shareholders:


 


(a)                                  Evidence that the Board of Directors of Buyer has adopted and
approved this Agreement, any other Transaction Documents and the consummation
of the Transaction to the extent and as required by the General Corporation Law
of the State of Delaware and the Buyer’s organizational documents.


 


(b)                                 Evidence that all filings, notices,
licenses, permits and other Consents of, to or with, any Governmental Entity or
any other Person that are required by Buyer (i) for the consummation of
the transactions contemplated by the Transaction Documents; (ii) in order
to prevent a breach of or default under or a right of termination or
modification of any Contract to which the Company is a party or to which any
portion of the property of Buyer is subject; or (iii) for the conduct of
the business of Buyer as heretofore conducted following the Closing.


 


(c)                                  The employee bonus plan as set forth on Exhibit F
hereto duly adopted by the Buyer.


 


(d)                                 Evidence of payment to the Seller
Shareholders by wire transfer of immediately available funds to an account or
accounts to be designated by the Seller Shareholders and evidence that the
Buyer has opened a separate account for the Holdback Amount in accordance with
the terms of this Agreement.


 


ARTICLE 6

REMEDIES FOR BREACHES OF THIS AGREEMENT AND OTHER
MATTERS


 


6.1                                 Survival of Representations and
Warranties.  All of the representations and warranties set
forth in this Agreement, in any other Transaction Document or in any writing
delivered by Buyer or the Company in connection herewith or therewith shall
survive the execution and delivery of this Agreement and the consummation of
the transactions contemplated hereby (regardless of any investigation, inquiry
or examination made by or on behalf of, or any knowledge of, or the acceptance
of any certificate or opinion


 


27
















 


by or on behalf
of, any Party and irrespective of the knowledge of any of the Company’s
officers, directors, shareholders, employees or agents, or the acceptance of
any of the disclosure schedules attached hereto or any certificate or opinion).


 


6.2                                 Indemnification of Buyer.


 


(a)                                  Subject to the limitations set forth in Sections 6.2(b) and
6.2(d), the Seller Shareholders shall, jointly and severally, indemnify
Buyer and each of its respective Affiliates (including, after the Closing, the
Company), officers, directors, employees, agents, representatives, successors
and assigns (each a “Buyer Party”), and save and hold each of them
harmless from and against, and pay on behalf of or reimburse any Buyer Party as
and when incurred for, all losses which any Buyer Party may suffer, sustain or
become subject to as a result of:


 


(i)                                     any breach of any representation or
warranty made by the Company or a Seller Shareholder and contained in this
Agreement, any other Transaction Document or in any schedule or exhibit attached
to this Agreement, any other Transaction Document or in any certificate
delivered by the Company in connection with the Closing;


 


(ii)                                  any breach of any covenant made by or in
respect of the Company or a Seller Shareholder under this Agreement or any other
Transaction Document;


 


(iii)                               any claim by any Person with respect to any refund
payments or warranties arising from any services provided by the Company or
employees thereof on or before the Closing Date pursuant to any Contracts;


 


(iv)                              any Liability of
the Company, or a Seller Shareholder, or any of their respective Affiliates for
(i) Taxes with respect to any Tax period ending on or before the Closing
Date (or for any Tax period beginning before and ending after the Closing Date
(a “Straddle Period”) to the extent such Taxes are allocable to the
portion of such period beginning before and ending on the Closing Date in
accordance with Section 6.2 hereof), (ii) all
Taxes of any member of an affiliated, consolidated, combined or unitary group
of which Company (or any predecessor of any of the foregoing) is or was a
member on or prior to the Closing Date, including pursuant to Treasury
Regulation §1.1502-6 or any analogous or similar state, local, or non-U.S. law
or regulation, and (iii) any and all Taxes of any person (other than the
Company) imposed on Company as a transferee or successor, by contract or
pursuant to any law, rule, or regulation, which Taxes relate to an event or
transaction occurring before the Closing; provided, however, that in the case
of clauses (i), (ii), and (iii) above, Seller Shareholders shall be liable
only to the extent that such Taxes exceed the amount, if any, reserved for such
Taxes (excluding any reserve for deferred Taxes established to reflect timing
differences between book and Tax income) on the face of the Closing Date
Balance Sheet (rather than in any notes thereto) and taken into account in
determining the adjustment to the Purchase Price. Seller Shareholders shall
reimburse Buyer for any Taxes of the Company that are the responsibility of the
Seller Shareholders pursuant to this Section 6.2(a)(iv) within
fifteen (15) Business Days after payment of such Taxes by Buyer or Company by
first deducting such Taxes from the Holdback Fund; and


 


(v)                                 any claim by any Person or Persons
related to, or arising out of, any of the foregoing.


 


(b)                                 Survival Date. 
The Seller Shareholders will not be liable with respect to any claim
made pursuant to Section 6.2(a)(i) above for the breach of any
representation or warranty contained 


 


28





















 


in Article 2 of this Agreement unless
written notice of a possible claim for indemnification with respect to such
breach is given by a Buyer Party to the Company:


 


(i)                                     on or before the date which is 90 days
after the expiration of the applicable statute of limitations (including any
extension or waivers thereof) with respect to claims arising under Section 2.15
(ERISA);


 


(ii)                                  at any time with respect to claims
arising under Sections 2.1 (Organization; Corporate Power), 2.2
(Capitalization), 2.4 (Authorization; No Breach), and/or 2.8 (Tax), as
applicable (the representations and warranties contained in the Sections
referenced in this clause (ii) are collectively referred to herein as the “Buyer
Fundamental Representations” and, individually, as a “Buyer Fundamental
Representation”); and


 


(iii)                               on or before the first anniversary of the Closing Date
with respect to claims arising under any other Section of Article 2
(such date, with respect to each Section, is referred to herein as its “Survival
Date”).


 


(c)                                  it being understood that, subject to the
limitations set forth in Section 6.2(d) below, so long as
written notice is given on or prior to the applicable Survival Date with
respect to any claim, the Seller Shareholders shall be required to indemnify
any Buyer Party for all Losses that any Buyer Party may suffer with respect to
such claim through the date of the claim, the end of the survival period and
beyond.


 


(d)                                 The indemnification provided for in Section 6.2(a)(i) shall
be subject to the following limitations:


 


(i)                                     The Seller Shareholders will not be
liable to any Buyer Party for any Adverse Consequences under Section 6.2(a)(i) unless
and until the aggregate amount of Adverse Consequences relating to all such
breaches, excluding Adverse Consequences related breaches of Buyer Fundamental
Representations exceeds $50,000.00
(the “Threshold”), at which time the Company and the Seller Shareholders
shall be liable for the amount of all such Adverse Consequences from the first
dollar in accordance with the terms hereof.


 


6.3                                 Indemnification Provisions for Benefit of
the Company and the Seller Shareholders.


 


(a)                                  Subject to the limitations set forth in Sections 6.3(b) and
6.3(c), Buyer shall indemnify the Seller Shareholders and the Company
and each of its respective Affiliates, officers, directors, employees, agents,
representatives, successors and assigns (each a “Company Party”) and
save and hold each of them harmless from and against, and pay on behalf of or
reimburse any Company Party as and when incurred for, all Losses which any
Company Party may suffer, sustain or become subject to as a result of:


 


(i)                                     any breach of any representation or
warranty made by Buyer and contained in this Agreement, any other Transaction
Document or in any schedule or exhibit attached to this Agreement, any other
Transaction Document or in any certificate delivered by Buyer in connection
with the Closing;


 


(ii)                                  any breach of any covenant or agreement
of Buyer in any of the Transaction Documents; and


 


29





















 


(iii)                               any claim by any Person or Persons related to, or
arising out of, (y) any of the foregoing or (z) the operation of the
Company by a Buyer Party after the Closing; provided, however, that with
respect to this subsection (z), any such claim does not relate to or arise from
any of the matters set forth in Section 6.2(a)(i)6.2(a)(v).


 


(b)                                 Survival Date. 
Buyer will not be liable with respect to any claim made pursuant to Section 6.3(a)(i) above
for the breach of any representation or warranty contained in Article 3
of this Agreement unless written notice of a possible claim for indemnification
with respect to such breach is given by a Company Party to the Company:


 


(i)                                     at any time with respect to claims
arising under Sections 3.1  (Organization of Buyer), 3.2
(Authorization of Transaction) and 3.3 (Noncontravention), as applicable
(the representations and warranties contained in the Sections referenced in
this clause (i) are collectively referred to herein as the “Company
Fundamental Representations” and, individually, as a “Company
Fundamental Representation”); and


 


(ii)                                  on or before the first anniversary of the
Closing Date with respect to claims arising under any other Sections of Article 3;


 


it being understood that, subject to the limitations
set forth in Section 6.3(c) below, so long as written notice
is given on or prior to the applicable Survival Date with respect to any claim,
Buyer shall be required to indemnify any Company Party for all Losses that any
Company Party may suffer with respect to such claim through the date of the
claim, the end of the survival period and beyond.


 


(c)                                  The indemnification provided for in Section 6.3(a)(i) shall
be subject to the following limitations:


 


(i)                                     Buyer will not be liable to any Company
Party for any Adverse Consequences under Section 6.3(a)(i) unless
and until the aggregate amount of Adverse Consequences relating to all such
breaches, excluding Adverse Consequences related breaches of the Company Fundamental
Representations exceeds the Threshold at which time Buyer shall be liable for
the amount of all such Adverse Consequences from the first dollar in accordance
with the terms hereof.


 


6.4                                 Matters Involving Third Parties.


 


(a)                                  If any Company Party or any Buyer Party
seeks indemnification under this Section 6.4, such Person (the “Indemnified
Party”) shall give written notice to the other Person (the “Indemnifying
Party”). In that regard, if any Liability shall be brought or asserted by
any third party which, if adversely determined, may entitle the Indemnified
Party to indemnity pursuant to this Section 6.4 (a “Third Party
Claim”), the Indemnified Party shall promptly notify the Indemnifying Party
of the same in writing, specifying in detail the basis of such Liability and
the facts pertaining thereto; provided,
however, that no delay on the
part of the Indemnified Party in notifying any Indemnifying Party shall relieve
the Indemnifying Party from any Liability or Adverse Consequences hereunder
unless the delay in notice has a material adverse effect on the Indemnifying
Party’s ability to successfully defend such claim.


 


(b)                                 Any Indemnifying Party will have the
right to defend the Indemnified Party against the Third Party Claim with
counsel of its choice reasonably satisfactory to the Indemnified Party so long
as (i) the Indemnifying Party notifies the Indemnified Party in writing
within fifteen (15) days after the Indemnified Party has given notice of
the Third Party Claim that the Indemnifying Party will 


 


30





















 


indemnify the Indemnified Party from and against the
entirety of any Adverse Consequences (without any limitations) the Indemnified
Party may suffer resulting from, arising out of, relating to, in the nature of,
or caused by the Third Party Claim, (ii) the Indemnifying Party provides
the Indemnified Party with evidence reasonably acceptable to the Indemnified
Party that the Indemnifying Party will have the financial resources to defend
against the Third Party Claim and fulfill its indemnification obligations
hereunder, (iii) the Third Party Claim involves only money damages and
does not seek an injunction or other equitable relief, (iv) settlement of,
or an adverse judgment with respect to, the Third Party Claim is not, in the
good faith judgment of the Indemnified Party, likely to establish a precedent,
custom or practice materially adverse to the continuing business interests of
the Indemnified Party, and (v) the Indemnifying Party conducts the defense
of the Third Party Claim actively and diligently.


 


(c)                                  So long as the Indemnifying Party is
conducting the defense of the Third Party Claim in accordance with Section 6.4(b) above,
(i) the Indemnified Party may retain separate co-counsel at its sole cost
and expense and participate in the defense of the Third Party Claim, (ii) the
Indemnified Party will not consent to the entry of any judgment or enter into
any settlement with respect to the Third Party Claim without the prior written
consent of the Indemnifying Party (which consent shall not be withheld
unreasonably) and (iii) the Indemnifying Party will not consent to the
entry or any judgment or enter into any settlement with respect to the Third
Party Claim without the prior written consent of the Indemnified Party (which
consent shall not be withheld unreasonably).


 


(d)                                 In the event that any of the conditions
in Section 6.4(b) above is or becomes unsatisfied, however, (i) the
Indemnified Party may defend against, and consent to the entry of any judgment
or enter into any settlement with respect to, the Third Party Claim in any
manner it may deem appropriate (and the Indemnified Party need not consult
with, or obtain any consent from, any Indemnifying Party in connection
therewith), (ii) the Indemnifying Party will reimburse the Indemnified
Party promptly and periodically for the costs of defending against the Third
Party Claim (including attorneys’ fees and expenses), and (iii) the
Indemnifying Party will remain responsible for any Adverse Consequences the
Indemnified Party may suffer resulting from, arising out of, relating to, in
the nature of, or caused by the Third Party Claim to the fullest extent
provided in this Section 6.4.


 


6.5                                 Manner of Payment.


 


(a)                                  Any indemnification payment of Buyer
Parties or the Company Parties pursuant to this Article 6 shall be
effected by notice to the Buyer under the Holdback Fund and, if the Holdback
Fund is depleted, by cashier’s or certified check or by wire transfer of
immediately available funds to an account designated by the Company or Buyer,
as the case may be, within five (5) days after the determination of
indemnification amounts.


 


(b)                                 Any indemnification payment to the Seller
Shareholders pursuant to this Article 6 shall be effected by
cashier’s or certified check or by wire transfer of immediately available funds
to an account designated by the Seller Shareholders, as the case may be, within
five (5) days after the determination of indemnification amounts.


 


(c)                                  Any indemnification payments made
pursuant to this Agreement shall be deemed to be adjustments to the Purchase
Price for tax purposes.


 


6.6                                 Insurance and Third Party Recovery. 
In determining the liability of a Party for any Adverse Consequence
pursuant to this Article 6, no loss, liability, damage or expense
shall be deemed to have been sustained by such Party to the extent of any
proceeds previously received by such Party from any insurance recovery (net of
all out-of-pocket costs directly related to such recovery) with respect to
insurance coverage in place as of the date hereof or other recovery from a
third party (net of all 


 


31

















 


out-of-pocket
costs directly related to such recovery). 
If an amount is actually recovered from an insurance carrier or other
third party after damages have been paid by the Indemnifying Party pursuant to Article 6
hereof, then the party receiving such amount shall promptly remit such amount
to the Indemnifying Party.


 


6.7                                 Offset.  The Adverse
Consequences which any Buyer Party suffers, sustains or becomes subject to
pursuant to this Article 6 (it being understood that such Adverse
Consequences must be determined in accordance with the terms and conditions set
forth in this Agreement) may, at the option of such Buyer Party, be satisfied
by setting off all or any portion of such Adverse Consequences against any
amounts which such Buyer Party owes to the Company or its Affiliates at such
time.


 


6.8                                 Delivery and Release of Holdback Fund.


 


(a)                                  To the extent that any Buyer Party is entitled
to indemnification for any Adverse Consequences pursuant to this Article ARTICLE
6, such Buyer Party shall be entitled to reimbursement out of the Holdback
Fund; provided, however, to the extent that the Adverse Consequences exceed the
amount remaining in the Holdback Fund or arise after the Survival Date, the
Buyer Party may collect such Adverse Consequences directly from the Seller
Shareholders subject to the limitations and terms and conditions of this Article ARTICLE
6.


 


(b)                                 The Company and the Seller Shareholders
shall give joint written instructions to Buyer to release from the Holdback
Fund and pay to the Seller Shareholders the amounts set forth below at the
following times and subject to the following conditions:


 


(i)                                     On the one year anniversary of the
Closing Date, the Holdback Amount remaining in the Holdback Fund minus the
aggregate amount of any Good Faith Damages Estimate;


 


(ii)                                  Within one (1) Business Day after
the final resolution of a particular indemnity claim for which a Good Faith Damages
Estimate is retained in the Holdback Fund pursuant to clause (b)(i) above,
the amount, if any, by which such Good Faith Damages Estimate in respect of
such claim exceeded the final determination of Adverse Consequences in respect
of such claim.


 


ARTICLE 7

CERTAIN DEFINITIONS


 


“Action” means any
action, suit, proceeding, order, investigation, claim, grievance, arbitration,
or complaint.


 


“Adverse Consequences”
means, with respect to any Person, damage or other Liability whether or not
arising out of a third party claim, including all amounts paid or incurred in
connection with any action, demand, proceeding, investigation or claim by any
third party (including any Governmental Entity) against or affecting such
Person or which, if determined adversely to such Person, would give rise to,
evidence the existence of, or relate to, any other Adverse Consequences and the
investigation, defense or settlement of any of the foregoing, except that any
attorney fees paid shall be reasonable.


 


“Affiliate” means,
with respect to any Person, any other Person directly or indirectly
controlling, (including, but not limited to, all directors and officers of such
Person) controlled by, or under common control with, such Person.


 


32

















 


“Affiliated Group”
means an affiliated group as defined in Section 1504 of the Code (or any
analogous combined, consolidated or unitary group defined under state, local or
foreign income Tax law) of which the Company is or has been a member.


 


“Business Day”
means each day of the week except Saturdays, Sundays and days on which banking
institutions are authorized by law to close in the State of Delaware.


 


“Code” means the
Internal Revenue Code of 1986, as amended from time to time and the regulations
promulgated and rulings issued thereunder, as amended, supplemented or
substituted therefor from time to time.


 


“Company Customer(s)”
means any of the customers of the Company (including InSource, LLC) and Buyer
and any of their subsidiaries, subdivisions, or affiliates.


 


“Company Transaction
Expenses” means (i) the legal fees and disbursements payable to legal
counsel and accountants of the Company in connection with the transactions
contemplated by the Transaction Documents and (ii) all other fees and expenses
incurred by the Company in connection with the transactions contemplated by the
Transaction Documents as determined on the Closing Date and excludes, without
limitation, the Debt Payoff Amounts to be paid at Closing pursuant to Section 1.2
of this Agreement; provided, however, that Company Transaction Expenses
shall also exclude any fees and expenses incurred or payable by the Seller
Shareholders in connection with the transactions contemplated by this Agreement
and the Transaction Documents.


 


“Competitor” means any person or company whose principal business, or any business
unit, division or subsidiary of a company whose principal business, is the
providing of global engineering and information technology services using an
off-shore model where at least a majority of the company’s (or in the case of a
business unit, division or subsidiary, majority of its employees, as the case
may be) employees are located in non-US locations (i.e., India, Sri Lanka,
China, etc.).


 


“Confidential
Information” means all information (whether or not specifically identified
as confidential), in any form or medium, that is disclosed to, or developed or
learned by, the Company or a Seller Shareholder as an owner of equity
securities of the Company, as the case may be, in the performance of duties
for, or on behalf of, an INSOURCE Entity or that relates to the business,
products, services or research of an INSOURCE Entity or any of their investors,
partners, affiliates, strategic alliance participants, officers, directors, employees
or stockholders or their respective Affiliates, including, without limitation: (i) internal
business information (including, without limitation, information relating to
strategic plans and practices, business, accounting, financial or marketing
plans, practices or programs, training practices and programs, salaries,
bonuses, incentive plans and other compensation and benefits information and
accounting and business methods); (ii) identities of, individual
requirements of, specific contractual arrangements with, and information about,
an INSOURCE Entity, its Affiliates, their customers and their confidential
information; (iii) industry research compiled by, or on behalf of an
INSOURCE Entity, including, without limitation, identities of potential target
companies, management teams, and transaction sources identified by, or on
behalf of, an INSOURCE Entity; (iv) compilations of data and analyses,
processes, methods, track and performance records, data and data bases relating
thereto; and (v) information related to the Company’s Intellectual
Property and updates of any of the foregoing, provided,
however, “Confidential Information” shall not include any
information that can be demonstrated has become generally known to and widely
available for use within the industry other than as a result of the acts or
omissions of the Company or a person that the Company has direct control over
to the extent such acts or omissions are not authorized by the Company in the
performance of such person’s assigned duties for the Company.


 


33

















 


“Contract” means
any agreement, contract, instrument, commitment, lease, guaranty, indenture,
license, or other arrangement or understanding between parties or by one party
in favor of another party, whether written or oral.


 


“Employee Benefit Plan”
means any Employee Pension Benefit Plan (including any Multiemployer Plan),
Employee Welfare Benefit Plan, fringe benefit, bonus, deferred compensation,
retirement, vacation, sick leave, severance, employment, executive
compensation, change in control, incentive or other plan, program policy or
arrangement, whether or not subject to ERlSA and any plans, programs or
arrangements providing compensation to employee and non-employee directors.


 


“Employee Pension
Benefit Plan” shall have the meaning set forth in Section 3(2) of
ERlSA.


 


“Employee Welfare
Benefit Plan” shall have the meaning set forth in Section 3(1) of
ERISA.


 


“Environmental and
Safety Requirements” means all federal, state, local and foreign statutes,
regulations, ordinances, guidelines and similar provisions whether or not
having the force or effect of law, all judicial and administrative orders and
determinations, all contractual obligations and all common law concerning
public health and safety, worker health and safety, and pollution or protection
of the environment, including all those relating to the presence, use,
production, generation, handling, transportation, treatment, storage, disposal,
distribution, labeling, testing, processing, discharge, release, threatened
release, control, or cleanup of any hazardous materials, substances or wastes,
chemical substances or mixtures, pesticides, pollutants, contaminants, toxic
chemicals, petroleum products or byproducts, asbestos, polychlorinated
biphenyls, noise or radiation, as the foregoing are enacted or in effect prior
to, on or after the Closing Date.


 


“ERISA” means the
Employee Retirement Income Security Act of 1974, as amended from time to time,
and the regulations promulgated and rulings issued thereunder, as amended,
supplemented or substituted therefor from time to time.


 


“GAAP” means (for
the purposes of this Agreement and any Schedules thereto) United States
generally accepted accounting principles, consistently applied.


 


“Governmental Entity”
means the (a) any province, region, state, county, city, town, village,
district or other jurisdiction, (b) federal, provincial, regional, state,
local, municipal, foreign or other government, (c) governmental or
quasi-governmental authority of any nature (including any governmental agency,
branch, bureau, department or other entity and any court or other tribunal), (d) multinational
organization, (e) body exercising, or entitled to exercise any
administrative, executive, judicial, legislative, police, regulatory or taxing
authority or power of any nature, or (f) official of any of the foregoing.


 


“Good Faith Damages
Estimate” means, with respect to any pending or unresolved claim asserted
by a Buyer Party that is reasonably expected to result in indemnification
pursuant to Article 6, an amount equal to the good faith estimate
by Buyer Party of its indemnifiable Adverse Consequences in respect of such
claim provided in writing to the Party from whom indemnification is claimed and
including a reasonably detailed listing of the various elements included in the
Good Faith Damages Estimate together with the projected individual elements and
the assumptions used in making said estimates.


 


“Indebtedness”
means any of the following indebtedness of the Company, whether or not
contingent: (i) indebtedness for borrowed money (including any principal,
premium, accrued and unpaid interest, related expenses, prepayment penalties,
commitment and other fees, sale or liquidity participation amounts,
reimbursements, indemnities and all other amounts payable in connection
therewith), 


 


34

















 


(ii) Liabilities
evidenced by bonds, debentures, notes, or other similar instruments or debt
securities, (iii) Liabilities of the Company under or in connection with
letters of credit or bankers’ acceptances or similar items, (iv) Liabilities
to pay the deferred purchase price of property or services other than those
trade payables incurred in the ordinary course of business, (v) all Liabilities
arising from cash/book overdrafts, (vi) all Liabilities under capitalized
leases, (vii) all Liabilities of the Company under conditional sale or
other title retention agreements, (viii) all Liabilities with respect to
vendor advances or any other advances made to the Company, (ix) all
Liabilities of the Company arising out of interest rate and currency swap
arrangements and any other arrangements designed to provide protection against
fluctuations in interest or currency rates, (x) any deferred purchase
price Liabilities related to past acquisitions, (xi) all Liabilities of the Company arising from any breach of
any of the foregoing and (xii) all
indebtedness of others guaranteed or secured by any lien or security interest
on the assets of the Company.


 


“InSource Competitor”
shall mean any business that provides business and technology management
consulting in the area of financial services, healthcare and/or government
sectors.


 


“Intellectual Property”
means trademarks, service marks, trade dress, trade names, corporate names,
logos, slogans and Internet domain names, together with all goodwill associated
with each of the foregoing, patents and patent applications, inventions,
invention disclosures, trade secrets, technology, technical data, know how,
methods and processes, copyrights and copyrightable works (including, without
limitation, computer software, Open Source Software, source code, executable
code, data, databases and documentation), proprietary information and data, all
other intellectual property and registrations and applications for any of the
foregoing.


 


“Knowledge” or “knowledge”
means with respect to any Person the actual knowledge after reasonable inquiry
of any director, governing body member or executive officer of such Person; provided that in the case of the Seller
Parties’ or the Company’s “Knowledge” or “knowledge” means the actual knowledge
after reasonable inquiry of each Seller Shareholder and senior executives of
the Company or its Subsidiaries.


 


“Legal Requirement”
means any requirement arising under (i) any constitution, law, statute,
code, treaty, decree, rule, ordinance or regulation, including any
Environmental and Safety Requirements and including any of the foregoing that
relate to data use, privacy or protection applicable to the Company or the
Seller Shareholders, or (ii) any determination or direction of any
arbitrator or any Governmental Entity directed to the Company or the Seller
Shareholders.


 


“Liability” or “Liabilities”
means any liability, debt, obligation, deficiency, interest, Tax, penalty,
fine, claim, demand, judgment, cause of action or other loss (including,
without limitation, loss of benefit or relief), cost or expense of any kind or
nature whatsoever, whether asserted or unasserted, absolute or contingent,
accrued or unaccrued, liquidated or unliquidated, and whether due or become due
and regardless of when asserted.


 


“Lien” means any
security interest, pledge, bailment (in the nature of a pledge or for purposes
of security), mortgage, deed of trust, the grant of a power to confess
judgment, conditional sales and title retention agreement (including any lease
in the nature thereof), charge, encumbrance or other similar arrangement or
interest in real or personal property.


 


“Long Term
Incentive Plan” means the long term incentive plan for senior management
employees of InSource, LLC, as previously provided to Buyer.


 


“Loss”
or “Losses” means any and all Liabilities, damages, fines, dues, Taxes,
penalties, charges, 


 


35

















 


assessments, deficiencies, judgments, defaults, settlements and other
losses (including diminution in value) and fees, costs and expenses (including
interest, expenses of investigation, defense, prosecution and settlement of
claims, court costs, reasonable fees and expenses of attorneys, accountants and
other experts, and all other fees and expenses) as the same are incurred in
connection with any Action, Third Party Claim or any other claim, default or
assessment (including any claim asserting or disputing any right under this
Agreement or any Transaction Documents against any party hereto or otherwise),
plus any interest that may accrue on any of the foregoing.


 


“LTIP
Obligations” means the payments to be made by the Company to certain of its
employees pursuant to the Long Term Incentive Plan, as set
forth on Exhibit G.


 


“Multiemployer Plan”
shall have the meaning set forth in Section 3(37) of ERISA (Code Section 29
USC Section 1002(37)).


 


“Open Source Software”
means computer software (including, without limitation, source code, object
code, libraries and middleware) subject to the GNU General Public License
(GPL), the Lesser GNU Public License (LGPL) or other similar licensing regimes
commonly called “open source.”


 


“ordinary course of
business” means the ordinary course of the Company’s business consistent
with past custom and practice, including as to frequency and amount.


 


“Party” or “Parties”
means any party hereto.


 


“PBGC” means the
Pension Benefit Guaranty Corporation or any successor thereto.


 


“Person” means an
individual, a partnership, a corporation, an association, a limited liability
company a joint stock company, a trust, a joint venture, an unincorporated
organization, or a Governmental Entity.


 


“Prospective Customer”
shall mean any proposed or prospective customer of the Company (including
InSource, LLC) and Buyer and any of their subsidiaries, subdivisions, or
affiliates that (i) has had any correspondence with the Company (including
InSource, LLC), Buyer or any of their subsidiaries, subdivisions, or
affiliates, (ii) is listed on any of the Company’s, Buyer’s or any of
their subsidiaries’, subdivisions’, or affiliates’ internal pipeline
discussions or related memoranda, (iii) is engaged in active negotiations
with the Company (including InSource, LLC), Buyer or any of their subsidiaries,
subdivisions, or affiliates at the time of termination or cessation of such
Seller Shareholder’s employment with the Company (including InSource, LLC),
Buyer or any of their subsidiaries, subdivisions, or affiliates or (iv) is
otherwise being solicited by the Company (including InSource, LLC) or Buyer or
any of their subsidiaries, subdivisions, or affiliates, in each case within six
months prior to the termination or cessation of such Seller Shareholder’s
employment with the Company, Buyer or any of their subsidiaries, subdivision,
or affiliates and such Seller Shareholder has participated, directly or
indirectly, in any of those activities or been made aware of, or had knowledge
of, any of these activities with regard to any such prospective or proposed
customer.


 


“Seller Parties”
means the Company, its Subsidiaries and the Seller Shareholders.


 


“Subsidiary(ies)”
means any corporation or other Person which is an entity with respect to which
another specified entity either (i) has the power to vote or direct the
voting of sufficient securities to elect a majority of the directors or
managers of such Person, or (ii) owns a majority of the ownership
interests of such entity, and with respect to Insource Holdings, Inc.,
shall include, without limitation, InSource LLC and AlfaSource, LLC.


 


36

















 


“Target Working
Capital” means $1,750,000.00.


 


“Tax” or “Taxes”
means any federal, state, local, or foreign income, gross receipts, license;
payroll, employment, excise, severance, stamp, occupation, premium, windfall
profits, environmental, customs duties, capital stock, branch, franchise,
profits, withholding, social security, unemployment, disability, real property,
personal property, sales, use, transfer, registration, value added, goods and
services, alternative or add-on minimum, estimated, or other tax of any kind
whatsoever, including any interest, penalty, or addition thereto, whether
disputed or not, and including any obligation to indemnify or otherwise assume
or succeed to the Tax Liability of any other Person.


 


“Tax Return” means
any return, declaration, report, claim for refund, or information return or
statement relating to Taxes, including any schedule or attachment thereto, and
including any amendment thereof.


 


“Transaction Documents”
means this Agreement, the Contracts and other documents contemplated to be
delivered or executed in connection herewith.


 


“Working Capital”
means, as of any date of determination, the excess of the Company’s total
current assets on a consolidated basis as of such date over the Company’s total
current liabilities including, without limitation, the Company Transaction
Expenses, and solely to the extent not paid, the LTIP Obligations, and the
current portion of Indebtedness on a consolidated basis as of such date,
determined in accordance with GAAP and, solely to the extent consistent with
GAAP (except as otherwise provided in this definition and without regard to any
purchase accounting adjustments arising out of the transactions contemplated
hereby).  In determining total current
assets and total current liabilities hereunder, (i) all accounting entries
shall be taken into account regardless of their amount and all known errors and
omissions corrected, (ii) all proper adjustments shall be made, and (iii) appropriate
reserves for all liabilities and obligations for which reserves are appropriate
in accordance with GAAP shall be included, including, without limitation, tax
liabilities and accrued bonus payments.  For
these purposes, current assets and liabilities shall not include (i) deferred
tax assets and liabilities and (ii) the payments to be made with respect
to any Debt Payoff Amounts to the extent paid pursuant to Section 1.2
of this Agreement.  Without limiting the foregoing, all
accounts receivable and deferred revenue shall be presented on a net basis and
in accordance with GAAP.


 


7.1                                 Additional Definitions.


 




	
  Term

  	
   

  	
  Section

  
	
  Agreement

  	
   

  	
  Preface

  
	
  Business

  	
   

  	
  2.10(a)

  
	
  Buyer

  	
   

  	
  Preface

  
	
  Buyer Assignee

  	
   

  	
  8.3

  
	
  Buyer Fundamental
  Representation(s)

  	
   

  	
  6.2(b)(ii)

  
	
  Buyer Party

  	
   

  	
  6.2(a)

  
	
  Closing

  	
   

  	
  1.2(a)

  
	
  Closing Date

  	
   

  	
  1.2(a)

  
	
  Closing Date Balance
  Sheet

  	
   

  	
  1.3(a)

  
	
  Closing Working Capital

  	
   

  	
  1.3(b)

  
	
  Company

  	
   

  	
  Preface

  
	
  Company Entity

  	
   

  	
  2.10(a)

  
	
  Company Fundamental
  Representation(s)

  	
   

  	
  6.3(b)(i)

  
	
  Company Intellectual
  Property

  	
   

  	
  2.10(a)

  
	
  Company Party

  	
   

  	
  6.3(a)

  






 


37
















 




	
  Term

  	
   

  	
  Section

  
	
  Company Trade Secrets

  	
   

  	
  2.10(i)

  
	
  Consents

  	
   

  	
  2.21

  
	
  CY2009 Revenue

  	
   

  	
  1.5(a)

  
	
  Debt Payoff Amounts

  	
   

  	
  1.2(b)

  
	
  Estimated Working
  Capital

  	
   

  	
  1.2(b)(i)

  
	
  Estimated Working
  Capital Adjustment

  	
   

  	
  1.2(b)(i)

  
	
  Final Resolution Date

  	
   

  	
  1.3(d)

  
	
  Final Working Capital

  	
   

  	
  1.4(c)

  
	
  Forms

  	
   

  	
  4.2(e)

  
	
  Holdback Amount

  	
   

  	
  1.2(d)

  
	
  Holdback Fund

  	
   

  	
  1.2(d)

  
	
  Indemnified Party

  	
   

  	
  6.4(a)

  
	
  Indemnifying Party

  	
   

  	
  6.4(a)

  
	
  Insider

  	
   

  	
  2.17

  
	
  JAMS

  	
   

  	
  8.16

  
	
  JAMS Rules

  	
   

  	
  8.16

  
	
  Latest Balance Sheet

  	
   

  	
  2.5

  
	
  Leased Real Property

  	
   

  	
  2.19(b)

  
	
  Leases

  	
   

  	
  2.19(b)

  
	
  Material Contract

  	
   

  	
  2.9(b)

  
	
  Noncompete Period

  	
   

  	
  4.3(d)

  
	
  NQDC Plan

  	
   

  	
  2.15(k)

  
	
  Objection Notice

  	
   

  	
  1.3(c)

  
	
  Permitted Liens

  	
   

  	
  2.7

  
	
  Products

  	
   

  	
  2.10(a)

  
	
  Post-Closing Tax Period

  	
   

  	
  4.2(c)

  
	
  Purchase Price

  	
   

  	
  1.2(b)(i)

  
	
  Purchased Securities

  	
   

  	
  Preface

  
	
  INSOURCE Entity

  	
   

  	
  4.3(a)

  
	
  INSOURCE Group

  	
   

  	
  4.3(a)

  
	
  Section 338(h)(10) Election

  	
   

  	
  4.2(e)

  
	
  Securities

  	
   

  	
  Preface

  
	
  Seller Shareholders

  	
   

  	
  Preface

  
	
  Straddle Period

  	
   

  	
  6.2(a)(iv)

  
	
  Survival Date

  	
   

  	
  6.2(b)(iii)

  
	
  Tax Adjustment

  	
   

  	
  4.2(e)

  
	
  Third Party Claim

  	
   

  	
  6.4(a)

  
	
  Threshold

  	
   

  	
  6.2(d)(i)

  
	
  WARN Act

  	
   

  	
  2.14

  






 


ARTICLE 8

MISCELLANEOUS


 


8.1           No Third Party Beneficiaries.  This Agreement shall not confer any rights or
remedies upon any Person other than the Parties (and, where indicated herein,
with respect to Article 4, the Affiliates of the Parties and such
other Persons designated therein) and their respective successors and permitted
assigns.


 


38

















 


8.2           Entire Agreement.  This Agreement (including the documents
referred to herein) constitutes the entire agreement between the Parties and
supersedes any prior understandings, agreements or representations by or
between the Parties, written or oral, that may have related in any way to the
subject matter hereof.


 


8.3           Successors and Assigns.  This Agreement shall be binding upon and
inure to the benefit of the Parties named herein and their respective
successors and permitted assigns, but neither this Agreement nor any of the
rights or obligations hereunder may be assigned (whether by operation of law,
through a change in control or otherwise) by the Company or the Seller
Shareholders without the prior written consent of Buyer, or by Buyer without
the prior written consent of the Company; provided, however,
Buyer and its Affiliates shall have the right to assign (a) its right to
purchase hereunder in whole or in part to a wholly owned subsidiary or
Affiliate of Buyer (a “Buyer Assignee”), (b) all or any portion of
this Agreement and the other Transaction Documents (including rights hereunder
and thereunder), including its rights to indemnification, to any of its or its
Buyer Assignees’ (whether prior to or subsequent to the Closing) lenders as
collateral security, (c) after the Closing, all or any portion of this
Agreement and the other Transaction Documents and its rights and obligations
hereunder, including its rights to indemnification, in connection with a (i) merger
or consolidation involving Buyer or any of Buyer’s Assignees, (ii) a sale
of stock or assets (including any real estate) of Buyer or any Buyer Assignee
or (iii) dispositions of the business of the Company and their
Subsidiaries or any part thereof.


 


8.4           Counterparts.  This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original but all of which
together shall constitute one and the same instrument.


 


8.5           Headings.  The section headings contained in this
Agreement are inserted for convenience only and shall not affect in any way the
meaning or interpretation of this Agreement.


 


8.6           Notices.  All notices, requests, demands, claims, and
other communications hereunder shall be in writing.  Any notice, request, demand, claim or other
communication hereunder shall be deemed duly given when delivered personally to
the recipient or sent to the recipient by telecopy (receipt confirmed) or by
reputable express courier service (charges prepaid), and addressed to the
intended recipient as set forth below:


 


If to the Company:


 


Insource
Holdings, Inc.


100
Northfield Drive


Windsor,
CT 06095


Attention:          David
Shalaby


Facsimile
No.:  (860) 688-2290


 


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


 


Nicolai
Law Group, P.C.


Attn:
Paul P. Nicolai, Esq.


146
Chestnut Street


Springfield,
MA 01103


Facsimile
No:     (413) 272-2010


 


39

















 


If to the Seller Shareholders:


 


David
and Michele Shalaby


188
Hostkins Road


Simbury,
CT 06070


 


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


 


Nicolai
Law Group, P.C.


Attn:
Paul P. Nicolai, Esq.


146
Chestnut Street


Springfield,
MA 01103


Facsimile
No:   (413) 272-2010


 


If to Buyer:


 


Virtusa
Corporation


2000 West Park Drive,

Westborough, MA 01581

Attention: Ranjan Kalia


Paul Tutun


Facsimile No.:   (508) 366 9901


 


with a copy to (which shall not constitute notice):


 


Goodwin
Procter LLP


Exchange
Place


Boston,
MA  02109


Attention:           John
J. Egan


Edward
King


Facsimile
No.:   (617) 523-1231


 


Any Party may send any
notice, request, demand, claim or other communication hereunder to the intended
recipient at the address set forth above using any other means, but no such
notice, request, demand, claim or other communication shall be deemed to have
been duly given unless and until it actually is received by the intended
recipient.  Any Party may change the
address to which notices, requests, demands, claims, and other communications
hereunder are to be delivered by giving the other Party notice in the manner
herein set forth.


 


8.7           Governing Law.  This Agreement shall be governed by and
construed in accordance with the domestic laws of the State of Delaware without
giving effect to any choice or conflict of law provision or rule that
would cause the application of the laws of any jurisdiction other than the
State of Delaware.


 


8.8           Amendments and Waivers.  No amendment of any provision of this
Agreement shall be valid unless the same shall be in writing and signed by the
Parties hereto.  No waiver by any Party
of any default, misrepresentation, or breach of warranty or covenant hereunder,
whether intentional or not, shall be deemed to extend to any prior or
subsequent default, misrepresentation, or breach of warranty or covenant
hereunder or affect in any way any rights arising by virtue of any prior or
subsequent such occurrence.


 


40

















 


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


 


8.10         Construction.  Where specific language is used to clarify by
example a general statement contained herein (such as by using the word “including”),
such specific language shall not be deemed to modify, limit or restrict in any
manner the construction of the general statement to which it relates.  The language used in this Agreement shall be
deemed to be the language chosen by the Parties to express their mutual intent,
and no rule of strict construction shall be applied against any
Party.  Whenever required by the context,
any pronoun used in this Agreement shall include the corresponding masculine,
feminine or neuter forms, and the singular form of nouns, pronouns and verbs
shall include the plural and vice versa. 
Nothing in the Schedules hereto shall be deemed adequate to disclose an
exception to a representation or warranty made herein unless the Schedule
identifies the exception with reasonable particularity and describes the
relevant facts in reasonable detail.  The
disclosure of an item in one section of the Schedules shall be deemed to
modify the representations and warranties of the Party contained in the section
of this Agreement to which it corresponds in number but not any other
representation and warranty of the Party in this Agreement unless such
disclosure item is explicitly cross-referenced as applying to such other
representation and warranty of the Party. 
The Parties intend that each representation, warranty, and covenant
contained herein shall have independent significance.  If any Party has breached any representation,
warranty, or covenant contained herein (or is otherwise entitled to
indemnification) in any respect, the fact that there exists another
representation, warranty, or covenant (including any indemnification provision)
relating to the same subject matter (regardless of the relative levels of
specificity) which the Party has not breached (or is not otherwise entitled to
indemnification with respect thereto) shall not detract from or mitigate the
fact that the Party is in breach of the first representation, warranty, or
covenant (or is otherwise entitled to indemnification pursuant to a different
provision).


 


8.11         Severability of Provisions.  If any covenant, agreement, provision or term
of this Agreement is held to be invalid for any reason whatsoever, then such
covenant, agreement, provision or term will be deemed severable from the
remaining covenants, agreements, provisions and terms of this Agreement and
will in no way affect the validity or enforceability of any other provision of
this Agreement.


 


8.12         Specific Performance.  Each of the Parties acknowledges and agrees
that the other Parties would be damaged irreparably in the event any of the
provisions of this Agreement are not performed in accordance with their
specific terms or otherwise are breached. 
Accordingly, each of the Parties agrees that the other Parties shall be
entitled to an injunction or injunctions to prevent breaches of the provisions
of this Agreement and to enforce specifically this Agreement and the terms and
provisions hereof in any court of the United States or any state thereof having
jurisdiction over the Parties and the matter in addition to any other remedy to
which they may be entitled, at law or equity.


 


8.13         Successor Laws.  Any reference to any particular Code section
or any other Legal Requirement will be interpreted to include any revision of
or successor to that section regardless of how it is numbered or classified.


 


8.14         Release of the Company.  Effective upon the Closing, each of the
Seller Shareholders hereby irrevocably waives, releases and discharges forever
the Company from any and all Liabilities arising prior to the Closing Date and
each of the Seller Shareholders hereby covenants and agrees that such Seller
Shareholder will not seek to recover any amounts in connection therewith or
thereunder from the Company.


 


8.15         Delivery by Facsimile.  This Agreement and any signed Contract
entered into in connection herewith or contemplated hereby, and any amendments
hereto or thereto, to the extent signed 


 


41

















 


and delivered by means of
a facsimile machine, shall be treated in all manner and respects as an original
Contract and shall be considered to have the same binding legal effects as if
it were the original signed version thereof delivered in person.  At the request of any party hereto or to any
such Contract, each other party hereto or thereto shall re-execute original
forms thereof and deliver them to all other parties.  No party hereto or to any such Contract shall
raise the use of a facsimile machine to deliver a signature or the fact that
any signature or Contract was transmitted or communicated through the use of
facsimile machine as a defense to the formation of a Contract and each such
party forever waives any such defense.


 


8.16         Disagreements
and Disputes.  Any disagreement,
dispute or controversy arising under, this Agreement, any amendments thereof,
or the breach thereof shall be determined and settled in accordance with this
Section.  This Section shall be
limited to disputes arising out of this Agreement, but shall not apply to any
disputes arising out of, or relating to, the other Transaction Documents,
including but not limited to those documents attached as Exhibits hereto.


 


(a)           In the event of any dispute between
the parties to this Agreement, the Parties hereto first shall use their best
efforts to settle the dispute, claim, question, or disagreement through
negotiation. To this effect, they shall consult and negotiate with each other
in good faith and, recognizing their mutual interests, attempt to reach a just
and equitable solution satisfactory to all Parties. If they do not reach such
solution within a period of 30 days, then, upon notice by any Party to the
others, all disputes, claims, questions, or differences shall be subject to
mediation administered by the Judicial Arbitration and Mediation Service (“JAMS”).


 


(b)           In the event that a successful
resolution of the matter is not achieved within sixty (60) days of submission
to mediation or at any time after the forty (40) days has expired, any Party
may demand submission to arbitration.  The costs of any mediation shall be
equally borne by the Parties and each Party shall bear its own expenses and
attorney fees. All sessions and/or conferences will be held in the City of
Boston, Massachusetts.


 


(c)           Any matter that cannot be resolved by
negotiation or mediation shall be submitted to arbitration. The Parties agree
to hold the arbitration hearings in Boston, Massachusetts pursuant to the JAMS
Comprehensive Arbitration Rules and Procedures (“JAMS Rules”).  The arbitration shall be held before a single
arbitrator selected by the parties.  The
arbitrator shall be an attorney with no less than twenty (20) years experience
in mergers and acquisitions, except that no attorney who has represented any
Party to this agreement shall be appointed as an arbitrator and each Party to
this agreement reserves the right to object to the appointment of any such
arbitrator.  Each Party and the mediator or arbitrator shall be bound to
keep all information shared in the resolution of any dispute confidential. Any
final award rendered by an arbitrator shall be final and binding upon all
Parties and all Parties hereby consent to the finality of said award, agree to
comply therewith and agree that a judgment enforcing said award may be rendered
by any court of competent jurisdiction over any Party to the award or any
property subject to the award with the cost of any said enforcement action,
including all reasonable attorney fees incurred in the prosecution thereof, to
be added to the award.


 


(d)           Arbitration costs, arbitrators’ fees
and reasonable attorneys’ fees and costs shall be awarded to the prevailing
parties, if any, by the arbitrator.


 


(e)           This Section 8.16 shall
survive the cancellation, termination or expiration of this Agreement and shall
apply regardless whether a Closing occurs.


 


(f)            No failure on the part of any party
to this Agreement to exercise, and no delay in exercising, any right hereunder
shall operate as a waiver thereof nor shall any single or partial exercise of 


 


42





















 


any right hereunder preclude any other or further
exercise thereof or the exercise of any other right.  The remedies provided in this Agreement are
cumulative and not exclusive of any remedies provided by law.


 


*   *   *  
*   *


 


43

















 


IN WITNESS WHEREOF. the
Parties have executed this Stock Purchase Agreement as of the date first above
written.


 


	
   

  	
  INSOURCE
  HOLDINGS, INC.,

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ David Shalaby

  
	
   

  	
  Name:

  	
  David Shalaby

  
	
   

  	
  Its:

  	
  President

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  VIRTUSA
  CORPORATION

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Thomas R. Holler

  
	
   

  	
  Name:

  	
  Thomas R. Holler

  
	
   

  	
  Its:

  	
  Chief Operating Officer

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  DAVID
  SHALABY

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ David Shalaby

  
	
   

  	
   

  	
  David Shalaby

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  MICHELE
  SHALABY

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Michele Shalaby

  
	
   

  	
   

  	
  Michele Shalaby

  



 


 


Signature
Page to the Stock Purchase Agreement